Transcripts For BLOOMBERG Bloomberg Surveillance 20170713

Getting some news from the International Energy agency. This is the balancing of Global Oil Markets has become less certain with opec production rising and little evidence that bloated stockpiles are shrinking as expected, while world of demand is climbing faster than initially estimated. Opecs implementation of the supply cutbacks of the implementation 30 come opecs implementation of the supply cutbacks needed to clear the inventory surplus has faulted to the lowest levels since january. That is according to the iea. That is a change from two months ago, when it said the rebalancing is here and was the shorting in term. Crude oil down by 0. 6 , 47. 44. Check out what is happening in the markets the day after that yellen testimony. The stoxx 600, as you can see, is up by 0. 25 . A big increase yesterday of 1. 5 , the most since april. The dollar spot index is down by 0. 1 , the lowest in september. Those comments on f inflation comes bring investors to lower their expectations. That narrative is driving the yield on the u. S. 10 year yield, down to 2. 31 . Gold gaining for a fourth day, yellen citing uncertainty about how much utilization will respond to tightening resource utilization. Gold in june, a a reminder, had its worst month of the year. Reporter president has insisted he was unaware of his sons meeting with the russian lawyer until a couple days ago. Say thatfter emails trump jr. Was willing and eager for campaign help from moscow. The president said putin actually wanted Hillary Clinton to win. If hillary had won, our military would be decimated. Our energy would be much more expensive. That is what putin does not like about me. That is where i say, why would he want me because rmb day one i wanted a Strong Military and from day one, i wanted fracking and Everything Else to get Energy Prices low and create Tremendous Energy . Reporter meanwhile, President Trump will get a chance to reset his awkward relationship with french leader Emmanuel Macron today after trumps rejection of the Paris Climate Accord last month. He is visiting paris today. Theresa may, the u. K. Prime minister, will unveil the draf law that will take britain out of the eu, but it is likely to be a lengthy battle with lawmakers from both parties. Vince cable told Bloomberg Government divisions could see brexit talks failing. I suspect that is a plausible scenario. The point at which they collapse, i dont know. I suspect probably a year down the track before something catastrophic of cars, but unless the something catastrophic occurs, but unless the British Government gets its act together. Banksr Qatar National expansion is helping offset the Saudi Campaign to offset the gasrich state. The ceo spoke exclusively to bloomberg. Diversifiedery well institution. We have institutions in various countries. Our diversification is really helping and helping to overcome the crisis. Reporter brazils former president has been convicted of corruption and sentenced to 10 found guilty of taking more than 1 million of benefits from a construction company. The verdict deals a huge blow to his hopes of returning to power next year. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Mark the hawkish run of centralbank rhetoric took a dovish turn yesterday during Janet Yellens first day of testimony. The fed chair sounding slightly more cautious on the inflation outlook, hinting that what is happening might be more than transitory. Chair yellen we have seen n theasing strength and wilin labor market that continues. I believe that is something that overtime will put upward pressure on both wages and prices. Theirtraders winding back expectations for a rate hike in september or december. We hear from the fed chair at 2 30 london time. Joining us now is bob michele, head of Global Fixed Income at jpmorgan as a management. Have you changed your assessment, given the suppose it more dovish fed chair yesterday . Well, i think that is the big debate. Was it she more dovish are not . I think she is seeing the same things all of us are seeing, there are plenty of signs a reasonable growth in the u. S. And globally, but there are virtually no signs of problematic inflation, or inflation reaching their target. I think she is moderating expectations. I dont think they will change what they have planned. We expect they begin the Balance Sheet runoff in september and that takes the place of what would have been an increase in rates. But that is still coming in december. And then she goes out the door with policy normalization on both tracks heading down. Guy enough time to go back to our word function, and the probability of looking at december has come down a few percentage points. Theres time to move up expectations between now and december. I think so and again, the key has to be the labor market, right . And seeing the improvement that we have in job gains actually feeding through two wages. So, whether it is average hourly earnings, or some of the other which data, we need to see that move up. Mark so, you still believe the 10 year yield will move to between 2. 5 and 3 at the end of the year . Is that still your forecast, given yesterday . I believe all the Central Banks realize that the Global Economy is doing pretty well. They are miles away from anything that looks normal. Theyve got to start that journey now and for the markets to try to rationalize why these levels make sense is just ludicrous to me. I think that journey is underway. It may be gradual, but i expect by the and of next year the fed will be at 2 . Mark is that the neutral rate, then . That is the first stopping point. Its the first reasonable place they could get to. Becuse if they are targeting because if they are targeting 2 to have zero real rate is a good place to pause, he would is going on with Balance Sheet runoff. Im open to the fact they might have to bring rates back to 1. 5 , or they might have to start the journey to 3 . Mark how can the market gauge, or how will the market fair during the Balance Sheet runoff . What sort of challenging 12 to 18 month period are Bond Investors and other Asset Classes facing . In my view, raising rates is the easiest thing the fed has to do over the next couple of years. Dealing with the Balance Sheet runoff is the most difficult thing because it is just not the feds Balance Sheet. It is every other central bank and already the bank of japan is a starting to taper its qe. We expect the ecb will begin to taper. So, the growth of Balance Sheets, which had gone from 5 trillion precrisis to closing in on 20 trillion is inflating asset prices. How you start to normalize and moderately deflate asset prices without creating a bigger problem, i think is the great challenge. What do you do between now and aggregatece sheets in go from expansion to contraction . We expect that in the Third Quarter of next year. Thats the difficult question because you want to get out of the way of that now, but the Central Banks are still printing money and buying bonds on a monthly basis. That is grading that upward trajectory in asset prices. Will stay withle us on surveillance. Trading begins following german retail giant metros split. Were going to speak live to the companys chairman and chief executive. Plus, theresa may finally unveils the landmark bill that will take britain out of the eu. We are going to focus on brexit. And what does the Trump White House mean for iran . We speak to the chief executive for the company that manages 90 of all foreign Portfolio Investment in irans capital market. This is bloomberg. Mark lets get the Bloomberg Business flash with nejra cehic. Reporter daimler is facing allegations that it sold cars emissions it is for almost a decade. More than one million cars could be affected. Daimler says it is fully cooperating with authorities. The royal bank of scotland is to pay 5. 5 billion to resolve the second of three major u. S. Fact mortgage security investigations. The federal Housing Agency has set of claims that rbs. The mortgage bonds that rbs sold faulty mortgage bonds. The after the negative ceo the aztrazeneco was given the top spot. The report suggest he would get double the salary of the current ceo. Mark shares began trading in frankfurt this morning in two ne wlistiw listings, following thet of metro. Lets speak to the chief , joining us now on the phone from the frankfurt stock exchange. Good morning and thank you for joining us. What sort of value is going to be unleashed for shareholders as a result of this demerger . Good morning. I think that the main value is clarity. We are going to dismantle a conglomerate that has been in place for quite a number of years, diversified in retail and fulfill performance. And wholesale performance. It is a business for business platform. The consumer business will be separate and independent as well. Investors can now make a choice on either one or both, but they are not forced by conglomerates. Mark houston do you think it is going to be before your company has the majority of sales in the catering segment, which is the preferred choice . It is already the case, we 41 of our sales in hospitality and we are growing that sector. And the introduction of digital, too, 41 of our for the small ad mediumsized enterprises, which makes them competitive. Mark who are the big competitors in catering. Why does metro have an advantage . The biggest advantage is we have tailored models by country. We are in 25 countries and we are serving those countries with very customized solutions, both ofthe sovereign Side Services and innovation. The International Presence we have, you cannot find. We are running four independent trading offices that give us direct reach to the source. We are accessing fish on a quality level you cannot find anywhere else. Mark what about the levers you possess to improve profitability . What are they . First of all, we are committed to growth. On ant to grow 3 plus basis of 37 billion. We want to keep the eba margin, which is 4. 9 today, 1. 8 billion stable. No special items, nothing that will be deducted anymore. And we are going to lift they cash conversion, which has been in the 40s. We want to get it up above 60 . Mark do you need more presence in asia to achieve your longterm growth target . That is a good question and one i am happy to answer because we are doing well in asia these days. We are doing nicely in china, where we are the authority of the food safety. We are growing doubledigit these days in india on a smaller basis. Actually, we are growing quite well these days in pakistan. Mark and in domestic germany, what about the german markets . How can you improve that profitability to release the significant tax losses, which according to your perspective, is at least 2 billion euros. Exactly. That is the reinvention. We are the only pharma that offers that wide range of products. There is nobody else that has what we have. The old format was a selfservice format. The new way, people want to access quality of food and diverse food. Traffic. Joy 30 more that is the proof of our hypothesis. Germans actually aspire for more diversity. And thats why we are fully committed. Mark thank you for joining us today and good luck to you this day. The chief executive officer of metro. Up next, theresa may is about to unveil the landmark bill that will take britain out of the eu. Full details, next. This is bloomberg. Mark President Trump will get a chance to reset his awkward relationship with french leader macron after their White Knuckle d handshake in may and trumps rejection of the pairs climate accord. He is in paris for two days, marking bastille day. Joining us now from paris, the chief economist. For peace out of france today, inflation showing one, putting it in a euroz context, inflation does nothing to be moving to that b elow 2 target for the ecb. No, i think we saw that the reflation expected by many at the beginning of the year is very moderate. And in a sense, it is quite good that the ecb remains accommodative for quite some time. It is not over yet when it comes to the recovery phase for some countries in the eurozone, especially the southern european countries. It will be a very slow exit from accommodative Monetary Policy from the ecb, just like the fed is exiting in a sluggish way. Mark very slow, but investors still jumping on every utterance from mario draghi. Is the market over interpreting those comments . Are we approaching a key point in september when the ecb is going to announce something significant . No, i definitely think that theres nothing very significant. People like us follow the ecb on a weekly abasis. There was nothing new that was said. Wasmaybe a journalist different. We do think the ecb will remain accommodative until next year. Of course, their announcements are in the pipeline, on the side of quantitative easing. The ecb is fighting to find a bond to buy at the majority they normally buy, which are slightly shorter maturities. The signals, when it comes to for guidance, but also the fact that there will be no increasing the rates before reducing the Balance Sheets, or their will be no major change because the signals are not there yet and there should be less fragmentation in the eurozone. Nothing new when it comes to the ecb. Mark you are in paris. Trump arrives today to meet with macron. The big move, reforming the labor laws. Will he achieve it . What with the impact be if macron was able to achieve what has been elusive for his predecessors . Well, i think we have to make sure we dont overpromise. The type of reform macron is doing is holistic. There are the labour laws, but there is also the Unemployment Benefits and the pension. It is only one piece of the megajungle he is trying to solve. Hes trying to reduce the hiring and firing costs when it comes to the private sector making more decisive moves and being less afraid down the road with a very rigid labor market. Hes also trying to make sure have anork, which could impact on the investment, especially from the domestic companies. What he is trying to do also is to make sure he does it while including that union. I think hes doing the right thing. He has the right method. The problem is indeed, whether this will have a massive impact on the attractiveness of france. There are so many other things to change that it could be slightly disappointing when it comes to the direct impact. Ludovic subran, thanks a lot. Up next, diplomacy continues. Qatars biggest bank is dealing with a crisis. Our exclusive interview, next. This is bloomberg. Mark youre watching bloomberg surveillance. Lets get the first word news. Here is nejra cehic. Nejra President Trump said he was unaware of his sons meeting with a russian leader. The president said Vladimir Putin actually wanted his rival if hillary had won, our military would be decimated. Our energy would be much more expensive. Thats what putin doesnt like about me. Why would he want me . From day one, i wanted a Strong Military. He doesnt want to see that. I want fracking and Everything Else to get Energy Prices low and create Tremendous Energy. Mark meanwhile President Trump will get a chance to reset his relationship with french leader mackon later today. Macon today. They are marking the 100th anniversary of the u. S. Intervention in world war i. The fed share slightly more cautious on the inflation outlook hinting that the recent slowdown may be more than transitory. The process, i believe that is something that over time will put upward pressure on wages and prices. Nejra traders wound back their expectations for a fed rate hike in september or december after yellens testimony. We hear from her later today at 3 30 p. M. U. K. Time. The u. K. Trade secretary said the only threat to a good brexit deal is if politics get in the way. The government will do all it can to assure a smooth exit from the e. U. If we have to have some kind of bridging mechanism that allows us greater time to get it right, were leaving the European Union but we want to do so in a way that causes minimal instability and were going o do what we need to do to ensure that. Nejra and the International Energy agency said the rebalancing of Global Oil Markets has become less certain as opec production rises. They suggest Oil Stockpiles should have declined at a rate of 700,000 Barrels Per Day in the Second Quarter but it is uncertain whether that happened. The agency said it needs to wait longer to consider whether the process started in the Second Quarter. Powered by more than 2700 journalists and analysts. Im nejra cehic and this is bloomberg. Mark . Mark the gulfs largest lender said it is optimistic the company can still continue to grow despite the situation. We n exclusive interview, asked how he is going to refine his strategy to adjust to the situation. 5 of our Balance Sheet. The impact we see is very little if any. Our strategy ongoing forward. Were going to be pushing more in asia, but as we see the situation continues, you know, so, so easy. What are your funding or financing plans for the year . Will it see bank rates move higher . How does that change the funding strategy for the bank . The cost of funding was a hike out of the fed rate increase which happened this year. Actually it started last year and then this year. Ing back to our numbers, income, growth of 5 , the delusion of the egyptian currency. Repricing our asset at the same speed as our liabilities. Again, we are diversified. We dont have concentration of our funding anywhere. We get it from qatar and from u. S. , from europe, from asia, from middle east. We are very diversified. We dont have a concentration. Let me remind you in this, it is a highly rated institution. Investors love the qatar story. They continue to do so. Im going to jump in here. You dont have any plans to tap the International Debt market. Is that correct . Program, 17. 5 million. It is the biggest lender in this part of the world. I want to capitalize on that d get how confident you this crisis will be resolved any time soon . This is not for me to comment on. Q. N. B. Is very strong. We will continue to work even on a standalone basis. Qatar is a strong economy. Huge reserves. 340 billion of foreign reserves. Qatar on one side and diversified on other side. We have a very strong and bright future. Mark u. S. Secretary of state so far unson said successful. Tillerson in his latest attempt to find a solution. Are we close to a solution or not . As you pointed out, expect this to be in doha today, Rex Tillerson. That wasnt part of the onlyal plan. An additional slot in his schedule. Ard to find solution really. Airport ee him at an terminal. Typing away on their phones. We didnt get much from that. The conclusion here, a key point to make, mark, is that there is a glimmer of hope. Clearly Rex Tillerson was able to get something out of those meetings and say i need to go back to doha and have more conversations because there is hope and the possibility. There is a lot at stake here for Rex Tillerson. He could use a big win as americas top diplomat. How easy that will be to do remains to be seen. They are pricing in a scenario where youre going to see a resolution. Traders say the u. S. Reconciliation trade is full on. The risk of that is if negative headlines start hitting, you could see a quick turnaround across Asset Classes and sovereign bonds. Mark . Mark thank you. Live from dubai. Lets have a quick chat about oil in the wake of what is going on in qatar. Bob, thank you for staying with us. A couple of months ago, it said the rebalancing is here and accelerating in the shortterm. A bit of a different story, bob. Now the balancing has become ess opec reduction rising. Stockpiles are shrinking as expect. How soon are you thinking the rebalancing is going to happen . I wonder if it will ever happen. Ironicallies the not opec output. It is nonopec output that is the problem. Hey pointed out nonopec 700,000 l increase barrels a day. Thats a lot coming into the market. If youre opec and youre holding back production, why are you doing that anymore . Im not so sure were going to get into the optimal rebalancing. Mark what does etc. Mean for the price . Back in march we were almost 55. We have been as low as 42 and change this year. Stuck in that range . I think were in a range that is drifting lower. I wonder if we have to again focus on what the cost of shale production is. If you can isolate what the cost of shale production is and as that comes down, i think that is where oil is going to trade roughly around that level. Mark what is the cost of shale . Well, it is ernl under 50. Mid 40s. It has come down every year. I think by this time next year, well be down around 40 a barrel. Mark one year after becoming Prime Minister, theresa may will finally unveil the landmark repeal bill that will take britain out of the e. U. Vince cable said a lack of preparation from a divide government could see the brexit talks collapse. The idea that the government is blundering and making it up as it goes along is absolutely horrifying. There clearly are major divisions at the top of the government. That takes me back to the proposition i started with. I cant see brexit happening when it has been pursued in such a chaotic way. Mark i spoke to victor cable yesterday. Former business secretary. Uld the brexit talks collapse . What are the probabilities of brexit not happening . They are quite low. The vote has been had. I dont know how you disinfranchise voters from a year ago. Mark the economy could turn i can see that. Clearly, in fact yesterday we talked about the broader u and the u. K. And while the rest of europe is doing extremely well, youre not seeing that in the u. K. So i guess there could come a point where it could trigger another vote but i dont think you can plan for that. I think you have to plan for the brexit as it has been announced and how that will unfold. I think it will have an economic impact. Mark what does that mean for the bank of england . The talk has been the bank of england heightening. Retail sales, confidence, wages yesterday. Well, i think you got ahead of the bank a head of the bank that is a pretty bright may go mark carney. He has to feel uncomfortable with the level of unconventional tools in the market. Does that mean he is going to go to something that is obviously tight policy . I dont think so will he look for an opportunity to move from something that is unconventional that looks a bit normal . I think so. Mark what do your assets look like from where youre standing . Looking at the bond market, i think there is pretty good value in there. As we said, you dont see the economy getting away to the upside or inflation getting away to the upside. With all the other Central Banks clearly telegraphing that they are raising rates and running down their Balance Sheet. You have to see upward movements there. The u. K. Is one place. Japan could be the other. Mark we spoke o to a chief economist in paris. I know you were listening. Was the e. C. B. On that path . The guest said we misinterpreted draghis remarks. A journalist made them more hawkish than they were. Clearly the e. C. B. Is moving to where the stance will be less accommodative. Yes. If you look at the c. P. I. Cross the e. U. That was eleased today, it is 1. 5 . Germany is 1. 6 . Youre running a negative 1 real yield. That is way too accommodative. Again, moving to something that is around a zero real yield makes sense for this point in time. By the way, the e. U. Economy is doing great. When we look at all the companies that we invest in, earnings look terrific. So i mark how real is it . I dont think anyone misinterpreted draghi. I think he meant what he said. These unconventional tools are a thing of the past. Lets figure out how to get rid of them and mover to something that looks more normal without being too disruptive. Mark up next, what does a Trump White House mean for iran . Were going to speak to the chief executive of a company at values 90 of Portfolio Investments. This is bloomberg. Mark youre watching bloomberg surveillance. Lets take a look at the markets. We saw a high in local stocks. Nejra it is a bit of a goldilocks situation for the markets the msci all country world index at a record high. Hang seng a twoyear high. The dow hit a record high yesterday. European stocks are higher today. Not quite as high as the 1 gains yesterday. Now what we have seen post yellen is dollar weakness. The bloomberg dollar index hitting a september low. The lowest since september. Looking at dollaryen here, bullish trends that we have seen in dollaryen have snapped somewhat. How much downside is there really when we have the bodily b. O. J. Eeting next meeting next week. Yes, we have seen a little bit of a favor towards the dollar but that has come off a little bit today. Dollaryen 1. 13. What the market has taken to heart is yellens comment on inflation. That could explain what we have seen in the dollar. Take a look at the treasury curve. We see that rolling off there. Were seeing some curve flattening. He 10year treasury yields move lower yesterday. This is the 10year treasury yield. Were looking at the strangle angle. This strangle options trade hinging of volatility rising over the next two weeks. One trader betting on a tuesday well see moves one way or the other in the 10year treasury yield. Betting 10 million on that trade. To make back the premium, we have to see a 10 basis point in either direction from where the trade put on. Were at 2. 3 now. It looked promising yesterday but we are not there yet. Volatility is something lacking in the treasury market over the past few months. Mark . Mark strangle angle. Tomorrow marks the twoyear creation of the iran nuclear deal. Shortly before the election of the president in may, the white house announced new sanctions and donald trump has been outspoken on the need for a tougher line against tehran. Joining us now is the a chief executive. Thanks very much for joining us. In the wake of the trump presidency, what has been the change of Foreign Investments flowing into the Iranian Stock Exchange . Overall, post agreement, there has been a lot of hype and interest in iran. The first month or two after trumps election, there was a bit of uncertainty. It wasnt clear what he was going to do with the nuclear agreement. Right now after three months into his administration, it is clear there is no alternative. Europeans are moving forward. He has been respecting the deal. The positive sign is that he signed a waiver of the sanction that must get a president ial signature every quarter and boeing to sell planes to iran. Mark iran being an export market, there is very little investment in iran. Most companies are looking at it as an export market. Is that true or not . That is no not the policy of the government. We are very much in the need of new technologies and management. The way it is structured now, corporates that are looking into iran, they have to look into actual investment and corporate exporting from iran if they want to survive longterm. It is not just the markets that they can sell their good to. In some cases like the airplane, that may be the case. But in most products, they are an exporting country. For a lot of european Companies Looking into iran, iran could become the hub of export for the whole region. If you look at the export numbers of iran last year for the first time irans nonoil exports surpassed its total imports in its history. The nonexporter of good. 2 billion of food and beverage, 2 billion of engineering. 500 million of exports of chocolates. They need to look into the vem. Mark what is the interest from u. S. Funds . U. S. Investors. Is that appetite still there . The appetite is there. But iran is still close to u. S. Investors. We have never had a u. S. Investor in any of our products although they come as visitors. They see the country. They are excited about it. Unfortunately, because of the that predates the nuclear issue, u. S. And american investors cannot invest in iran. But europeans are quite active. Mark tell us about that. A lot of asian investors are active on a government level, on a more infrastructure project. Uropeans, when we look at post sanctioniran, it has been slower than we hoped for and anticipated. Large global banks have custody issues. Having said that, corporates are coming. European corporates are either setting up offices in teheran, looking into acquisitions and potentially partners and were seeing more activity on the corporate side rather than the Financial Investor side. One of the very positive recent developments was the investment by total into the iranian gas field which was a very positive once you have this by ibillion dollar deal european corporates then you need to have bankers backing them. Mark how are you accessing banks overseas . Tell us how you execute the action . Have you faced any problems since sanctions . We have found a way to send money back and forth through banking channel without any problem. But the banks we are use arrange mostly smaller swiss and italian banks. The corporates tend to use the small r banks. Im talking about larger multinational banks that are not coming. Have we faced any problems . Yes. The bankers which are large banks, swiss banks, a lot of them refuse to invest into our product not because of the legality because it is 100 legal, but because the compliance of it, the internal compliance dont allow them to yet. That hasnt been an issue. We are trying to resolve that through making it easier for foreigners to invest. For the first time, we have actually listed the product in london with exposure to iran. Mark great to see you. Thanks for joining us. Thank you for having me. Mark thank you for joining us giving us a great look at iran. The awkward relationship started with a White Knuckle handshake and the rejection of the Paris Climate Accord but still french president make ron get onald may cron will chance reset their relationship. They will head to the eiffel tower. What is on the agenda for todays meeting . As you mentioned, they are going to try reset that awkward relationship. They are going to try to talk about areas where they have places of common interests, specifically the issue of syria. The ceasefire that is currently ongoing in syria as well as how to govern that country in the future now that the Islamic State militants are on the run. They are also going to talk about counterterrorism. You can also expect some of the issues, some of the reasons why there is awkwardness in the relationship come up as well. The paris climate deal which the president pulled out of and was criticized by the french president as well and the issue of trade. The president said the u. S. Needs to rip up and start new trade deals because of trade deficits. The french president has pushed back in the area of protection itch. You can expect some of these thorny issues and disagreements to come up during the twohour meeting they are going to have later today. Mark thank you. Thanks for joining us in paris today. Bloomberg continues in the next hour. Guy johnson and tom keene. Lucks bourques finance minute luxembourgs finance minister. Ll of that and more to come. 1. 5 in the wake of testimony from fed chair janet yell pnl day two of her testimony today. This is bloomberg. Om it is the European Union aren these withdraw. Continuity and control. The United Kingdom repeals its way to march 2019. Janet yellen drives equities to record highs. The president of the United States storms the bastille in france. It is a parade tomorrow. A party. Putin and russia wont come up in conversation. Im tom keene in new york. Guy johnson, repeeling in london. What is who is repealing what . Guy e. U. Legislation and turning it into u. K. Legislation on the statute books. Tom, this is going to be an arduous battle for the british Prime Minister. We wont see votes on this one until autumn. A lot can change between now and then. Tom a lot of global activity now. Here is taylor rigs. Taylor President Trump and the first lady are in paris. They are going to meet with president mack ron. They macron. Leaders plan to hold a News Conference after their talks. Before he left for paris, the president defended his son despite emails reporting that trump jr. Was willing to get campaign help from moscow. The president spoke about the election with the christian broadcasting network. If hillary had won, our military would be decimated. Our energy would be much more expensive. Thats what putin doesnt like about me. Why would we want me . From day one, i wanted a Strong Military. He doesnt want to see that. From day one, i want fracking and Everything Else to get Energy Prices low and create Tremendous Energy. That was the president speaking with the christian broadcasting network. In london, mays government ll have a lengthy battle lawmakers on parts of the brexit bill. Lula has been convicted of corruption and is sentenced to over nine years in prison. He was bral brazils president rom 20032010. This is bloomberg. Guy . Tom . Tom thanks so much. Equities with a further lift this morning. The yield curve came in yesterday. A flattened yield curve. Next screen, please. The mix my greating, getting down to that nine level. We finally got it. 10. 0. There is an elevated dow. I put up canada and mexico there, both are very strong today against the dollar. Guy . Guy what you saw, what you have seen is a did he have United Nation move. The bank of canada talking about maybe moving further and more aggressively which is interesting. Hints in that story. Eurosterling. Keep an eye on that. Were seeing euro weakening this morning. There it is. The msci all world Index Trading at a fresh record high. Tom this is a u. S. Chart, guy. This is the kind of chart like where are we . Where we are not is the late 1990s. This is the comfort index. We were way more comfortable in the late 1990s period. We are back to 2006. Thats the headline. We are back to the enthusiasm just before the crisis but nowhere near the glory times of the 1998199 period. Guy i want to talk about what the market is seeing coming up next. Somebody believes we are going to be seeing volatility in the treasury market. They have been out and buying aggressively. On either side of the recent range. This is a strangle effectively in the Options Market rather than a straddle which implies low volatility. The straddle has been working. The strangle hasnt. Somebody paid around 10 million for this positioning which is a lot of money in the Options Market. They are expecting a big move either up or down in the treasury market. This is only out until the 21st of this month. Shortterm story potentially somebody believes were going to be seeing some big moves. Lets talk about the european story this morning. The german chancellor Angela Merkel and macron meet in paris. They will get a chance to exchange wish lists in a joint cabinet meeting. They are holding a press conference at 8 00 a. M. Eastern time later today. The meeting comes after the german, french and italian Prime Ministers met in brussels. With us is the luxembourg finance minister. Good morning. Good morning. Guy thank you for taking the time. There is momentum in europe now. Mr. Macron wants to see the europe yaian project driven forward. For the moment he seems to have merkels ear. Do you share that enthusiasm that now is the time to strike and take a big step forward . It is welcome news. There is a fresh wind blowing in favor of europe. In the past years, a lot of hail winds. Now we have headwinds. Growth is back in europe. Close to 2 , in my own country, lucky to have it at 4 in the last couple of years. Investment is finally picking up although it is still lower than prior to crisis. The elections in the netherlands and france have proved after the brexit, all countries would be reluctant to vote in favor of europe, the contrary happened. So president macron was the most favorable for integration or more integration in europe and he is pushing this agenda right now and i can say that you can feel it also in the meetings of the euro group which i attended on monday and tuesday. It is really taking up that mission to say we have to do more together in europe. Guy do you want to be europes next finance minister . The First Finance minister . Would you throw your hat into the ring . I think the idea of having a European Finance minister is not for tomorrow in the sense that we would have probably to change the treaty to do that. So one step after the other. But lets face it, the euro group has been working very well in the last couple of surmounted have all the crisis. It went a little bit unnoticed that yesterday the commission announced that greece would go out of the excess i ever deficit procedure after so many years. Now when we know how much hype there was around greece two years ago in july 2015, because wrongly, it was portrayed as if the whole eurozone was in danger and at risk. We can see that finally, even for greece, many other countries overcame the crisis thanks to the help of europe are now getting out of the doll developments. Tom minister, good morning from new york. With a trump meeting mackon. Eframe for us where they fit now together after the president in warsaw and some of the populism we have seen this year . Obviously since the beginning of the European Union history, back in the 1950s, it has been germany and france, who have been the engine of the european integration and the countries that have been the oil in the engine and these five countries together with italy are the founding members and this energy, you can still feel it today, especially because now the economy is back in most countries, if not all countries of europe. Now germany has grown a lot since the 1950s, has managed to have a successful unionification and its economy is the driving force of europe. They are the World Champion of exports. Now on the french side, we have had many years of stagnation both economically and politically. And the first measures that president macron is announcing are all meant to boost the economy and increase confidence. So what we are all expecting from this germanfrench corporation is that it will drive the political agenda and the economic one. Tom well, very good, minister. We will continue today. Second day. The janet yellen moved markets yesterday. Again, q a will be the driving force. Chair yellen on the second day of testimony. Stay with us. This is bloomberg. This is bloomberg surveillance. Lets get the Bloomberg Business flash. The International Agency said the rebalancing of Global Oil Markets has become less certain. World demand is climbing slower that estimated. It has faltered to the lowest level since january. Oil prices have lost about 16 this year. In the u. K. , growth in housing prices cooled in june. The Royal Institution said the inconclusive election weighed on demand. The index declined to its lowest level in almost a year. A measure of predicted sales over the next year fell to its lowest level in the aftermath of britains e. U. Referendum. Tom thank you so much. What to do at Bloomberg News if you dont like muggy, saltry washington, you take a twoday vacation to paris. The president of the United States and the first lady will stop by here for the next number of days. Mr. Macron joining them. We are all jealous this morning. He opera house is behind you there. How will they greet the president of the United States . It is interesting because he has an even lower approval level in france than he does in the United States. About 14 . Ctually most people support mc macrons decision to bring him to chance. Youre not seeing in part because this is a visit that is supposed to highlight the Long Standing Partnership between the u. S. And france, the military relationship that goes back more than 100 years. The bastille day parade tomorrow, President Trump will be highlighting that. This is not about a lot of the issues of contention between the u. S. And france, from Climate Change to trade. Those things will be discussed but it is not the main purpose of the meeting. Tom how will the body language be different than what we witnessed in warsaw the other day. I would suggest that the president wanted to make a separation between Central Europe and france and germany. How will the message be different than what we saw in warsaw . That will be watched very closely. The body language, the language that President Trump uses to talk about france and talk about whether he talks about the populist and nationalist themes that he talked about in warsaw and whether macron responds. He had a rough and stern hand change with President Trump when he first met him. People will be watching for cues. Ody language tom what body language has he brought with him . The issue of contention between much of europe. Climate change and trade. Those issues have caused a fish ou are between the u. S. And fissurebetween the u. S. And france. President trump said he was sent to represent pittsburgh, not france. Esident macron calling for scientist to find a second home in france. Tom well leave it there. Thank you very much. Indeed continuing coverage hroughout the day. Were joined on the set by the deputy fixed income c. I. O. At blackrock. Gentlemen, thank you very much indeed for still being with us. Scott, lets welcome you into the conversation. The president of the United States arrives in europe, europe that seems very much on the front at the moment politically and economically in a way it hasnt been since the financial crisis. Just in terms of the symbolism of this trip, he is turning up, it is bastille day. Europe seems to be reemerging on to the world stage in a way it hasnt been in the past. Does that affect sentiment and u. S. Investor sentiment as they look at whats happening here today . I think it is certainly true that the economic fundamentals have improved dramatically and have upside surprise. So i would say are we entering the golden age for europe again . Obviously the economic fundamentals are very strong. The political situation, the volatility associated with politics has in many cases faded behind us. Perhaps those two components, are what is causing this conversation at the e. C. B. Which i think is very important for european investors. Guy is that what you feel . I think as a luxembourger, we have believed that the european project was the right answer if you look at the weight of the e. U. 28 compared to the g. D. P. Of the United States United States or asia. We are losing weight. So the only answer is to be unite and the e. U. Single market proves to be a good success. You feel it took the brexit vote to understand how important it is. Today there is lots of regrets because you realize you cannot guarantee total automatica access if you walk out of the e. U. I think the rest my is a very special one. We have a safety net in terms of Social Security and Health Protection that is the best in the world and at the same time we need to be competitive. Were the only area in the world where this equation is being drafteded this way. So we have to prove that we can and also open to world. Which is values were standing for and on the other hand be also very socially driven. Tom whats the value for going after google . One of the mist advice the way you guys are tarring and feathering google. Do you agree that europe should go after google . Well, you know, just as one of the big discussions over the atlantic. W do you deal with state aid and antitrust issues . The americans have that rule. The europeans have theirs. I have to trust that what is being done on both sides is fair because if we believe in open trade and competitiveness, we also have to have rules against state aid. This is how the whole thing is being sets up. Also in the world trade organization, there are rules there. Tom stay with us, please. We have a real treat for you in the next hour. Will talk ur guest value. I can round it up. Im rounding up. Value in the 200. Ive never said that before. This is bloomberg. Stay with us. We have seen an increasing strength in the labor market that continues and although they were lax in this process, i believe that is something that over time will put upward pressure on both wages and prices. Guy the fed chair. The market believes she was a little bit more dovish on the first day of testimony. I have to say im struggling slightly with that. Well come to that later on the program. Lets talk about central banking from a different angle. Luxembourgs Prime Minister. Janet yellen has been quite trarpte in many ways. You can say the same thing for the e. C. B. One of the new pieces that they are digesting is they had a deal with the q. E. Program. If we go back to meet previously in the year, there was little indication there was discussion about adjusting the q. E. Program. The rise that we have seen in bond yields, pretty dramatically underperforming treasuries over the course of the year is in many ways a response to this new Information Set that the q. E. Program is being discussed and had to deal with tapering it or decreasing it or modifying it. Something that they are talking about. That is new information. It depends probably on the country. Guy your voters . In luxembourg, with higher rates, yes. Were a country that is reasonably wealthy and people have money in the banks. They want like to have more Interest Rates. Obviously from the government perspective, you need to find the right balance between increasing investment on one side and making depositors happy. We have record low Interest Rates. We know that policy is going to end one day. Guy does it undermine the credibility of the Banking Union . We had quite good discussions in the euro group about this. We are in a learning process after start of the Banking Union. We have the first Bank Resolutions and unwinding taking place. We learn by doing. What we find out is that there are certainly still some loopholes. Tom a little bit of technical difficulty there. We froze with london as we did. Well come back with guy johnson and our team in london here in a moment. Tomorrow, a very important interview for you. I just spoke to him at the council on foreign relations. Robert caplain, the dall Federal Reserve president. A very important conversation about rates and the Balance Sheet and the unique experience of robert katlan. Stay with us. This is bloomberg. Welcome. Youre looking at london. A big focus today on what is happening surrounding brexit. Tom keene is in new york. Guy johnson in london. First word news with taylor riggs. Taylor co. Trump is in paris to begin a twoday trip. He is meeting with macron and well talk about syria and the fight on the Islamic State. Trumps choice to lead the fbi says he does not believe a special counsel and to possible coordinations between trumppence the russia Election Campaign is a witchhunt. He also said he doesnt let politics get way with politics get in the way of the mission. Earlier plans to appeal a series of obamacare taxes on the wealthy which would free up to enter 3000 he could spend over the next 10 years. From vince cable. Failys brexit talks could due to a lack of preparation. The idea that the government is blundering into this and makes it up as it goes along is horrifying. I just cant see brexit happening when it is being pursued in such a chaotic way. Taylor he is currently the only person to leave the opposition with the democratic party. Global news, 24 hours a day. Powered by our more than 2700 journalists and analysts, in more than 120 countries. I am taylor riggs. This is bloomberg. The theme. Stay with theresa may unveiled a draft law eutake britain out of the and it will be a long battle. Our u. K. International trade and iary told matt miller earlier on with the government aims to attain with this bill. If we have to have some kind of bridging mechanism that allows us to take the time to get it right that we will look at that. We are leaving the European Union but we want to do so in a way that causes minimal instability. Causes market continuity. And we will do what we need to do to ensure that. Was liam fox talking to us earlier. Europe, do they have the regulatory capacity to take business away from the city of london . When you sit down and think about the logistics and the mechanics of taking some the business that london does now and redistributing it . The answer is clearly yes. But what worries me most is how these talks between the united the and the eu 2007 eu 27 are not falling head. Is a guillotine. In 2019, the United Kingdom will be out. So we need to find an agreement in the best interest of both sides. And the situation is being over dramatized and it is happening with the media but it should be happening quietly and and negotiation room. Guy what we were told in brussels is that this will be a transparent discussion. Rre i think both sides are trying to raise the stakes to make it so complicated that it would be extremely efficient that the proposals that are put discussedle and beforehand between negotiators instead of being played out in the public. I dont the get helps the process under dont think it helps the credibility. Tom scott thiel, how many people are you moving to luxembourg . Scott it depends on what kind of deal i can make here. [laughter] scott it is important to look at the regulatory framework. The Money Management industry in general, it is a little less impactful. Evaluating our stance, going forward. And are looking for clarity over how this will play out. Tom you see Continental Finance . As represented by the Prime Minister of luxembourg . You see that grinding towards the angloamerican model . Distinctive be too will this be two distinctive systems . In 1020 years chanel . In 1020 years from now . Scott it is difficult to tell. There is no example in history where a quick truncation has worked where two different hats diverging quickly has worked. So my sense is that it will be a gradual process. It will be a gradual sub virgins. Is what a lotal of people around here would like to see. But i get the impression from you that we are heading for something more sudden. Thatu get the impression we are heading toward something that will point us in the a guillotine . That is what the treaty says. The 28 countries do have to tackle together this. Thewhat is clear that after exit, there will be trade between the u. K. And in europe and you can organize that. Think of what has been done with canada. A very modern Free Trade Agreement with provisions on environment. Very sophisticated. There is life after brexit. Lets be reasonable on both sides and think about the next step. Guy do you think we are heading for a hard brexit . Pierre i think the negotiations have not really started. I dont think it is good for business or at the eu 20. Say guy, did you just guillotine . I didnt start it. Tom the president of the United States is in paris and you just brought that up. Guy fortunately we have the English Channel in the way. What youu see see from Angela Merkel . L us about your respect to tell us about your perspective . Is a long serving chancellor. She is heading for reelection. She is very popular. She has taken courage in decisions. She has decided to leave Nuclear Energy and has opened the borders for refugees and we know how difficult the decisions were. She is very courageous and she takes responsibility and she will do that in europe and we are all looking at her and france now but the endeavor in europe is to convince the 27 countries to move ahead so it isnt enough to concentrate on one single person. But it is clear that she is a powerful and influential person. I think she was elected the most powerful woman in the world for many years in a row. Guy lets talk about one final question. Should a german be the next head of the ecb . Do you think it should be a Northern European now . Should it be a german . Who would you back . That is a tough question, i must say. Is someone who has a lot of credibility. We have seen the difference that mario draghi has made. That is not because he is italian but it is because he said the right thing at the right time. My country would back any candidate that is credible and committed. That is where we will leave it. Thank you for your time. Tom we will continue with scott thiel from scott black rock. This will be a must listen. We have a double announcement. Andific insight perspective. First of all, bloomberg insight takes a look at the relationship of brussels and london. Brussels and europe. An important article by our editor. And for those of you on mobile wall street, the first read of the weekend. Bloomberg businessweek. This is bloomberg. Gary i am guy johnson. Tom keene is in new york. Lets talk about what is happening in latin america. The brazilian president has the the 2 3defeat would have to vote against him to put them on trial before the supreme court. This case comes as the former was sentenced yesterday for money laundering. Lets talk to our reporter. Ets stick with lula the market reacted positively to this news. Is that because investors now dont expect them to run in 2018 . Exactly. A very good point. We are talking about someone with a very Strong Political influence in brazil. And any indication that he may not be able to run for president next year or that he may not chances of winning an election is a good indication for the market. As someoneis known who is against all of the reforms that have been implemented in brazil. Markets have given a clear message here. Any bad news for lula is good news for investment. The goodny bad news news for the current incumbent . Because at the moment, it seems to suggest that maybe he had more longevity but my understanding is that the markets want everything to happen quickly. And his staying in authority could be a problem. Exactly. That is also very important for the markets at this moment. Probe, notion knows the timeframe for that. It is hard to say that this will be solved within a month or a year. So what markets want is to have clear indication that all the reforms that he has been implementing and that has been approved, that they are still on track. Is it him or someone else in the presidency . Tomko to more questions. Tom two more questions. Is he really going to go to jail . That is what Everyone Wants to see right now. Respond. Llowed to with freedom. Right now, most people think itt this will not happen but is brazil so anything could happen. That it guy is so big is almost like we put fdr in jail. What is the response of a huge body of resilient people who are not part of brazilian capitalism . Also veryat is important in brazil. Lula is an extremely popular figure. Thes tied to all of programs over the last 20 years. He has a lot of support. We saw people going to the streets in rio to show the support for lula. A souls case. This is not the end of it. And we should expect a lot more in terms of headlines and news in terms of currency and the bond Market Going Forward on the back of this. Guy thank you very that was a reporter joining us out of the dubai on the story. Scott thiel is still with us. Money continues to pour in. Thet yellen is what is prime drivers of that. How much longer do you anticipate this will come . Two things are happening. The fed is keeping the pace of monetary tightening slow. The same time, the fundamentals of emerging markets that is a broad word conceptually you are seeing lower inflation and high real rates. Owningnvestor looking at when it isond at 8 evolving positively, that is attract it. So we like the idea of investing in local markets because the inflation profile is falling. And because Monetary Policy is not being too restrictive. In localgood investments. Guy scott thiel will stick around. , you get the video screen so you can watch what, and i are doing on the screen but you also get the fantastic sidebar here. And you can use the blue button to open a channel. Many more still to come. This is bloomberg. Taylor co. This is bloomberg surveillance. A new treatment is on the brink of approval. In a. S. Fda passed it unanimous vote. Their cancert saw go into remission. Of daimler falling on reports that the diesel emission control may involve more than one million vehicles. The criminal probe focuses on cars that were equipped with two Vehicle Engine types and sold between 20082016. Daimler is cooperating fully with the investigation. That is the Bloomberg Business flash. Tom if you are part of global you are around the world, this is an important conversation. Scott thiel is here. With the phrase smart beta. All i think about is dumb out alpha. We have to realize that effectively every Investment Decision that you make, it vehicle youf what use, is an Investment Decision. So you take cash and you do something with it. And that the quiddity has been provided at the diversity and attractedit has been it has been attractive. Here, one ofthing our staff is taken level one 14 times. And with that, there is a basic idea that, what does the cfa do . Is that where we are heading . Antt you have to make active decision with your money as to what you invest in. The same Due Diligence that you go through with any investment needs to be part of that process. You need to understand whether it is a smart index or a generic index. What comprises the index . Yous the same thing is when have an active manager . So i think there is a tremendous amount of Due Diligence. Doesnt mean you shouldnt go through the two children set to go through in an active decision. Guy and want to get your thoughts on a number of things that are happening. We have done the fed from a monetary point of view. We have regulatory questions being asked. We dow have a new regulatory vice chair. Beley think this will altered . You mentioned a while ago that you worked at goldman sachs. Do you think would make a good fed chair . Scott im not going to comment on the succession plan. At janete made yellens testimony in that form. The credibility of the candidate is paramount. It is critical to the market. , weobviously, each chair have god on the academic route. But if you go back through history, further back through the earlier days, it was commercial bankers that let the Federal Reserve. So i dont think it matters so personactly what type of we have but the credibility of that person. For me, a transparent transition is the one. Tom scott thiel, dont be a changer dont be a stranger. Scott thiel is with blackrock and we thank him for being with us today. I have bad news. Showed up with his yellow legal pads. Downtered the market at 220. Now, Mario Gabelli on your facts. We do that next. This is bloomberg. Tom this morning, the day after , stocks rise and we rejoined with Mario Gabelli. Bill. The European Union this morning, the Prime Minister reveals her way to march 2019. At the president of the united eights storms that the steel in france. It is a party. Good morning, this is bloomberg surveillance. I am tom keene. And in for francine, guy johnson. What is Prime Minister may trying to repeal . Guy eu legislation. Be and it may end up being effectively a vote of confidence in brexit and the government. Political be a lot of warfare. Tom lets get to the clarity of our first word news. Taylor trump and the first lady are in paris. He is meeting with macron. Leaders do plan to hold a News Conference after their talk. Defend hissident did son. He also spoke about the election with the broadcasting network. If my clinch our military would be decimated. Our energy would be more expensive. Vladimir putin doesnt like about me. He doesnt want that. To keep one i want Energy Prices low. Beenove to sell the has sentenced of corruption. His lawyer will says hustler says he will appeal. Global news, 24 hours a day. Powered by our more than 2700 journalists and analysts, in more than 120 countries. I am taylor riggs. This is bloomberg. Taylor co. Tom we are green on the screen. The oil isat churning here. The next screen here please. The vix is down. The dow, an amazing number. We do see canada and mexico. Guy two standard deviation moves. And we are back as well in the market. Sterling, this may have got a little too far. Up. Stocks are a solid day yesterday. And global stocks, the all world index are trading at record highs. Tom this is the correct time to speak to Mario Gabelli. You are in cash but Mario Gabelli is not. The shop going back to his studies. Mario gabelli this morning. Bull marketlen your clean . Issue driving record highs and equities . Mario i know that mario draghi is doing the same thing. Doing the same thing in japan and corrode up. We do have to take money out and raise rates. Tom is your day to day the same thing that you do that you would do with or roger murphy . Mario nothing is changed. If you are a cfa, what do you do . Is it worthwhile to pursue that . You raise the data and you gather the data and in my point of view, you do learn how businesses work. Yesterday we spoke with a Japanese Company that we happen to own shares of. Like thisa product which is a probiotic. Never had that. It sounds healthy. Mario dont change those habits. So we talked with them and me of a visit in tokyo. We did in the beginning was organic and natural. Tom we just spoke with scott thiel from blackrock. All of these have in common . Mario we always have new ideas in the market. About the fact that in 1969, you had an economic traction. The bank came up with the notion of the messy 50. You buy a stock and you hold it forever and then you go through the different cycles and different fashions. By the basket of stocks today, what do you are . If you take the study from 1928, you made 5. 5 . And over the next 10 years you make 8 with inflation starting to rise. Is noting an index fund bad. Guy do they make enough money to validate current earnings . Mario it is the outlook for earnings and it is the outlook for earnings within the framework of a higher inflation rate. And the second question is, what is the multiple . That is a function of Interest Rates. A function of inflation psychology. When you put all of that 2. 5, i dont think the market will have a big concern. There are other elements that could create a pullback. And they are always looking for something that would create that. The actions have actually been at an index value of late. Top line, we keep pushing higher. But the rotation story is where the juice is. Im confused by how the market figures out what it will buy and what it will not buy. Yesterday it bought tech stock in reaction from janet yellen. I dont get it. Do you get the nuances . Mario go back to the election in the United States and we had an individual who came in and said, you know, business is not bad and he signed a paycheck. So basically, what is happening yesterday we had a meeting with the securities and exchange commission, you can see there was a practical side and a hechological side to the way did approach creating businesses. How did we get Capital Formation . So that is a lot of the dynamics. A tailwind offsetting part of the concern over the withdrawal of monetary stimulation. And then you have the expectation of factor of less regulation and the spending of a fiscal nature. Tom i want to show this. This is the secret of Mario Gabelli. This bag is embarrassing. It looks like the pan am bag that Leonardo Dicaprio had in that movie. This is oldstyle with legal papers. Is there anything in there on jamie dimon . Mario first of all, jamie dimon is brilliant. I found a manual report of a company that is a tiny bank in Southern California that has been in business for 100 years. Shares of by three month of that because it doesnt trade much but those are the heirlooms that you want. Jamie dimon understood the world and the future. My clients, the trust banks. Bank of new york and northern trust. Why . What happened in the way the allocated capital, they would going to do that again. Tom gary cohn is chair of the fed, does that work for Mario Gabelli . Mario it doesnt matter. We have a political system and we get new people in all the time. Tom we will listen to chair yellen today. The second day of testimony. Look for that later this morning at 9 30 or 10 00. Michael mckee had great coverage of that yesterday. We continue with Mario Gabelli. This is bloomberg. Taylor this is a bloomberg surveillance. The keys toing over its business in russia. They are merging a ride hailing this is in russia and uber will than aand will take more third of the stake in the new venture which will be valued at more than 3. 7 billion. The deal is uber second retreat from the major markets. That is the Bloomberg Business flash. Guy President Trump and the first lady are in paris. Theyre are looking to find Common Ground as they had to the day events tomorrow. Why is the president in paris . Tothe president is in paris try to smooth over some of the relationships between the u. S. And france by focusing on areas of common interest. Specifically areas of national defense. The president will mark the 100th anniversary of the u. S. , partnering with the french in world war ii and the partnership that has gone on since then with the u. S. And france on the same side. , fighting isis alongside one another in syria. At the president will try to work with the new president of france on how to move forward in those specific areas. Of contentions and disagreement Climate Change and trade but they will most likely steer clear of those issues and focus on the areas where they do agree. Guy is the russia scandal traveling with him . Do you think it will wind up dominating over the proceedings . The president has said it is a cloud hanging over his administration. And it is definitely a cloud that has grown larger in the last few days. Will bemething that focused on. Tom telling about the press conference. Will it the as fiery as the one in warsaw . X we have heard even more optional since then about the russia scandal and we are told the president didnt want to say that russia definitely interfered but now we have emails showing a definitely try to into the camp the campaign. It will be interesting to see. Tom thank you very much. We continue with Mario Gabelli. You and i remember small matter in the early 1970s, i believe it was called watergate. Are there parallels . Mario the markets will do well and this is background noise. To the middle of this country, the notion of attacking the son of a president , im not sure it plays well. Independent of that, how do we invest in the market . New maybe we do that with a tax bill . Here is George Wilson today. I thought this was good about senator wyden. Talking about the democratic response. The 1986 reform, the Gold Standard of by artisan standard of bipartisan tax legislation was on the senate floor more than 100 hours spread over 20 days. After seven days of hearings and 16 days of markup, the good senator described to tax code as a rushing economic carcass. His wife asked him to stop scaring the children. If the president scaring the children . Mario what you need to do is get mcconnell and Chuck Schumer to have a beer together. And basically, you have to reach over and say, it is good for the country . What is good for is this . How do we create jobs . And how to make get the people who are working more money . That is what the dynamic should be. Tax reform and challenges, you read about the french complaining because they are avoiding taxes. But we can solve the problem by we a qs Corporate Tax are the only country in the world where the corporate rate drops down and we can make it more competitive. Lets move on. Guy mario when trump was at school in paris, you probably realize that lafayette helped in a skirmish that they had. The u. S. Economic surprise index. It bottomed out but it is starting to rise again. What kind of have expectations gone as low as they are going to go . Mario for my view as a business person, i have held things because i have been waiting for the effect of this tax change. As a result we have had a slight impart. I said ok, it is over. I cant wait for them to act in washington. Im not answering your question. Try another one. Guy do you think anything will come out of washington over the remaining time . You think anything to happen that will help the u. S. Economy . The question really is, doesnt matter either way . Is 80the Global Economy trillion next year. The u. S. Is 25 of that. Are 22 . Japan the u. S. Has a problem. We have 20 trillion in debt and we have to focus on that. We have a deficit of 500 billion in terms of economic dynamics. So you have a lot of moving parts. We are not exactly healthy. But on the other side of the coin, jobs are rising and wealth is at an alltime high and confidence is good. What is going on with technology . What is going on in the Digital World . What henry ford stood years ago is happening now with the framework of compressing the review. So there is always change. So we have a margin of safety in the markets. Tothe Interest Rates go three, we would have a challenge. Will work a lot more to make sure people can afford his cars. Mario gabelli, plenty more to come from you. He will stick around. Up next, we continue to can position we continue the conversation. Trump is in paris with macron. Later, a News Conference. We will review that live. In paris. N, 6 45 this is bloomberg. Tom this is bloomberg surveillance. We are with Mario Gabelli. He loves to talk about individual stocks. I would suggest a little bit of the beverage of your choice with the portfolio. Why do you like alcohol . Mario lets put it this way. In 19 d5, i did pick that year for the small reason. We china, they love to do simple things in a Global Economy. Gambling and drinking is a certain part of the economy. The United States, the same thing. I was in paris for a couple of weeks. And i saw another company with the infrastructure that was attractive. And there are companies that can make Irish Whiskey like jamison. I go and see them cause this is a company that i like. I like woodford reserve. And in addition to that, there are companies that i like. Tom i think of jay clayton yesterday where we talked about short term is him. You are the opposite of that. Brownforman into your belly longterm . You just buy it and you are patient . Mario with new money from a client, i say where is it reluctant and where is it as a margin of safety. Have goingmpanies around the whole lose business. Constellation brands knocked on the door of brownforman and said hey, what we get together . So there is an underlying dynamic. Grand marnier. Keene, whou have tom will have a gene, in your name and you will do like George Clooney did and you will make a lot of money. Tom i can see it. I can see it. Mario it is the notion of having pricing power. And it will get delivered by amazon because there is a ball as to how young people deliver. It is a challenge. Guy i am into triple distilled or double distilled and we can that road another time. Do you worry about the stories surrounding this . Could alcohol be the new tobacco . Howo the notion as to people consume particular product now and how it is legal, just look at amsterdam over the last 20 years. What has happened there in terms of consumption . Get a handle on what may happen globally. Independent of that, we like to own a piece of business that will do well. Tom we will come back. That is Mario Gabelli. Tomorrow, from dallas, robert kaplan. Stay with us. This is bloomberg. York. 29 a. M. In new 12 29 in paris where the president is. Guy johnson in london. Tom keene in new york. ,aylor we are starting President Trump is in paris beginning a two day trip. He is meeting with president macron. The talk will likely be about the turmoil in syria. He will be the steel they guest of honor President Trump will be the bastille day guest of honor. Told senatorsay at his confirmation hearing he would never let politics get in the way of the bureaus mission. Another run at the Health Care Bill from mitch mcconnell. Global news, 24hours a day, powered by 27 hundred journalists and analysts in 120 countries, i am taylor riggs, this is bloomberg. Tom this is what bloomberg surveillance is about. You get lucky. For years covering media and making a lot of money in media. And pivotal research. Nor latest note intrigues me. It is my single best chart. Olopy of facebook in white. Ogle anin amazon has been seen as the Sleeping Giant for a long time. They are not the most friendly to deal with from an advertisers perspective. They dont want to let you out let data out, which is understandable. There is a lot of spending that will go there. A fun accounting fact, a lot of the revenue looked for that day will not be booked as revenue, but a deduction cost. Tom are they so rich . Mario the u. S. Capitol, the u. S. Is 40 of the. These companies are 2. 8 trillion dollars, five companies. I own a little bit of facebook. We own other companies. The good news about america is that google and facebook destroyed something. Will facebook destroy that monopoly . Will jeff bezos be able to destroy that monopoly . Guy where is apple in this . Used to start conversations tears ago in tech with apple. Now you dont. Apple is playing along game that is interesting. Theyre focused on this crazy thing called the consumer, not the advertiser. That might be helpful in the long run, but not fighting against jeff bezos and google, which are advertising based. Guy do think they will let go of alphabet . Brian no. I think theyre focused on the Data Protection policies that will come into effect in 2018. If theres such a thing where you are not allowed to use browserusing the chrome in exchange for googles right to use information for targeting, that could be negative for google, as well as facebook. Guy how big of an impact does it have . The you go, there is number, you figure a way out of dealing with this problem, we will they do you figure this one out. How do you work your numbers on that, and how big of a down drop will it be in terms of future ability to make money, future i will get something out of this for the shareholder . Brian 30 of the revenues are coming from europe. Im making crude assumptions around the shopping settlement. It may cause a percentage point of growth, way. , for yearsgabelli and thepeted Comcast Roberts family. Finally, shifting to giving it to shareholders, one of your date things. Counsel us in how you wait out. Comcast went nowhere for years, then it clicked and just like you thought it would. 1955, there were seven movie theaters. Fairmont is owned by viacom. Sony owns one. Spiderman, you saw they are turning around that studio. I was in paris a couple of weeks ago, and they are thinking about taking the company public. Is a king. Gabelli to see this culture in your world, brian, the advertising in Silicon Valley and facebook . Will they have the fabric that mario sees in the comcasts of the world . Brian . For a very long time. I dont think it is cultural. That they need to hold onto the cash because they dont know what they need to do with it. Mario the allocation of capital the capitalistic system. It has been one of the best ways for meritocracy in this world. They will do whatever is right for their shareholders, but there is a controlled flock in these companies. While they allocate it to buy back stock willll Zuckerberg Zuckerberg give money back . Mario his charity is going in the wrong direction, but that is a different issue. Will he buy back stock . 20 of the capitalization is cashgenerators. A medialove to have conference in sun valley look at disney and say a belief should merge. Buying a company with scale and interesting dynamic, would i be better off doing that . Omcast did that how do we get into the Wireless World . That is a good question. Cash. Ets talk about is cash going to be repatriated . Brian i dont think so. Mario i am in a different camp. The only reason it is offshore is you dont pay a tax. There is no reason why the business cant follow the rules and keep cash offshore. If we lower the tax rate and have a tax holiday to repatriate it, it will come back. Independent of that the market is is fungible is the spongable in some way. Increasingly, i think the market is going in that direction. The more money that these companies make, the bigger footprint they have, i they becoming they are in every part of our lives now. You wonder where the results are become akom have greater target for governments around the world to raise money from. When you look five to 10 years trying to put a tax rate in for , what arefor facebook your expectations 10 years down the road . Will they be paying more than they are now . Forn i see a 25 tax rate many companies. The reality is they say no one pays that. Of the 18 companies i cover the average tax rate has been 20 . It is not aggressive to assume 25 Global Tax Rate in five years. Tom a new cfo at twitter. Bring up the chart, the failure of twitter. Who is going to take this dog on . Twitter is less a failure than they had far too aggressive tom fair. Who will take them out . Brian i dont know that anyone does. They are fine. They are a niche, they are distinct. They will live. Tom do you own twitter . Anything dont exclude from a particular product we manage. To the degree we might even recommend to a client to buy and etf. That would require me consuming a lot of the products that i had before. Tom thank you for joining us with Mario Gabelli this morning. Discussiontinue this on Bloomberg Radio as well. With 2erg businessweek important issues on the European Union and brussels. His weeks issue and over to global wall street, this is the article Mario Gabelli will read on mr. Blankfein on a small Startup Company named goldman sachs. This is bloomberg. Taylor this is bloomberg surveillance. Lets get to Bloomberg Business flash. Uber is merging the ridesharing businesses in russia. 220 5 million and taking more than one third of its stake. It will be valued at 3. 7 billion. It is ubers second retreat from a major market. Last year uber lost china. A new chief executive officer down the street from mr. Trumps home. This is tiffanys. Out of diesel, and entirely different world. He will take over tiffanys. Do you own tiffanys . Mario i bought a couple of gifts for my wife. We have an office in greenwich and downstairs is a tiffanys. That works. View i would of rather buy an American Baseball Team like the atlanta braves, which i can buy for less than jeter paying for the marlins. There are lots of ways to make money in the market because they are undervalued in infrastructures and other ways. Tom i want you to defend active management against the passive onslaught. What do your tell your family when they ask about buying the vanguard s p 500 . Mario anyone owning business on a global basis will do well compared to other alternatives in the next 20 years. On monday this week Cincinnati Bell was owned by larry fink and vanguard. Larry fink is blackrock. And acquisition that had to be had toudgment, telecom be examined and say what is really going on here . How can a company in cincinnati by a company in hawaii . They dont do anything. How does that impact Corporate Governance when you have organizations you heard yesterday like iss and class lewis monitoring and providing a cover for these guys to make their political decision . Does this mean we go down greater and greater momentum when the bull market breaks . The passive focus, does it mean we will go down bigger and deeper . Of 2010, thenamics market went down 300 points to 400 points, couldnt care less. When Procter Gamble dropped 30 to 40 i paid attention. You have no stress test on his products in a challenging environment. O uptick rule no capital from a world that used provide capital for a buffer. That didnt happen in 1987 either. What outperforms . Does the answer is what your client want . Over the last 20 to 40 years i have been in business we try to generate an absolute return of 10 real with compounded at 60 , diversified. Yesterday, we probably did not match the market. In the american baseball system williams made out three out of five times. I am sure someone said he was in a slump if he went over eight. Zero for eight. Larry fink is phenomenal the way he has been marketing that. The sec, the irs should level the Playing Field by changing the tax structure. In the u. K. You dont pay a tax if you run a closedend fund on capital gains. You dont distribute it. In the u. S. You distribute it. There are ways to level the Playing Field. Guy Research Shows the relevance. Mohamed elerian has written stuff, plenty of people have written stuff on this. Mario a lot of academics have written about how google is good but they are paid by it and dont disclose it. Larry fink never bought for his funds sparkling water. He doesnt understand pet parents. They are phenomenal and the United States buying what they are buying. Havewhat do we do when we two thirds of active managers underperforming . Gabelliooked at the active trust, but you are the exception. Mario the answer is theres a methodology that if i were to Charter Financial analysts, do i deal with robots . Robotic investing is interesting. Everything is interesting. We have to test the products. Etfs r. O. K. Are ok. The etfs tom well talk about the leverage of etfs as well. We will be back with Mario Gabelli, i will run off to radio. That me show you tv. You can get Mario Gabelli on your trading desk. A bonus round, you can steal the chart. That is normalized amazon, facebook, google you can take that home with you tonight. This is bloomberg. Stay with us. Guy you are watching bloomberg surveillance. Left. E a few minutes coming up shortly, bloomberg daybreak. David equity markets move up on the dovish talk of janet yellen before the congress. Great people talk about what is going on, why its going on, where it will lead us. Jeffries. They will give us their perspective on what is happening. Guy david westin. Lets see what is happening in the u. K. British may revealing a law that the u. K. At of the European Union. Is this effectively something that could turn into a vote of confidence on brexit . Aymara derivative term would be confidence in the government. Hey all actively want brexit it was in their manifestoes. They want different forms of brexit. Leader,orbyn, the labor this is a way to get him to go with the government by drawing tory rebels over to the amendments theyre planning to add to the bill. Guy what would he have to say to get those tory rebels . We thoughtf them as being euro skeptics, now they are proeuropean skeptics. Themu have to persuade there are ways that he can be tweaked to give parliament more power over brexit. The what will the clips in conservative party promised them to keep them on board . Is it water down, and is it a less hard brexit . You associate yourself with the labour party of Jeremy Corbyn . Do you want to risk a leadership battle that could lead to another general election in which your jobs are not necessarily safe. If im one of those mps, my constituents voted for me. I will side with the people that voted for me not you. And you are really going to make a call with the british people vote for in another election . I heard someone made that argument. They dont feel the current track the government on is the right one. Be in theuld not government is Jeremy Corbyn was to win a general election. You would be a brave tory that would leave the tory ranks to vote with Jeremy Corbyn. Perhaps you are braver now, theresa may, one year on is not powerful Prime Minister she was a couple of months ago. This is politics front and center. How tougher it be for theresa may . For her as an individual, does she have the capacity to make this happen . If she doesnt, what happens . Reporting overnight how much the government is operating for a battle. It is a litmus test, not just of brexit, but theresa mays ability to push legislation through. Theresa may wasnt there, it wouldnt take up. The same pressure in pushing the repeal bill through. The brexit negotiator, how do you think that meeting will go . He saying that i will not negotiate with anyone but the British Government. Im sure the government are not particularly happy about that. You have a Group Overnight saying how it reflects Jeremy Corbyns newfound importance within the british political system. That he is willing to meet with him. That is not the case, perhaps on a is a generous man at this time. If provides corbyn with an insight into brexit. Be the primerather minister and stick to my guns when it comes to brexit. Made overnight is that if he was Prime Minister he might soften his own approach to brexit. Talking aboutnedy the brexit story. The president of the United States has touched down in france and will meet with president macron. We will bring that to you live on bloomberg. 12 25 new york. 6 25 in paris. It is going to be a conversation that i think could be dominated by what is happening in washington, but im sure mr. Macron doesnt want that to happen. This is bloomberg. Whoooo. I enjoy the fresher things in life. Fresh towels. Fresh soaps. And of course, tripadvisors freshest, lowest prices. So if youre anything like me. Youll want to check tripadvisor. We now instantly compare prices from over 200 booking sites. To find you the lowest price. On the hotel you want. Go on, try something fresh. Tripadvisor. The latest reviews. The lowest prices. Jonathan chair yellen goes low fed lights of fuse. President trump lands in paris president d emboldened macron. Unveiling a landmark law taking britain out of the European Union. I am Jonathan Ferro alongside david westin. We get you up to speed. ons up a by 1 10 of the s p 500 after a high on yesterdays session. Eurodollar retreating down. 2 . Yields up on the 10 year. At 8 30 a. M. We will get u. S. Economic data for jobless claims in the Consumer Price index