tv Bloomberg Surveillance Bloomberg October 9, 2015 6:00am-8:01am EDT
kevin mccarthy could not and has now shaken the republican party to its foundation. in this hour, phil mattingly, paul ryan, and the gop. crisis over. a massive debate. is this the commodity bottom? we speak with david haro on glencoe -- we speak with david herro on glencore. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. it is friday, october 9. i'm tom keene. with me, vonnie quinn. jon ferro is with us from london. let's go to oil, above 50 per barrel. whichever wayou look at it, that is really good. let's go to copper at 4% and, let's call it what it is, a huge squeeze.
tom: and then you see the parsing of debate between ed morse of citigroup and dennis gartman of "the gartman letter code right now we need to get to our news from our desk. here is vonnie quinn. vonnie: it is chaos for house republicans. they now have no clear leader and they have to raise the debt ceiling within four weeks. kevin mccarthy took himself out of the running yesterday. kevin mccarthy: if we are going to unite to be strong, we need a new face to help do that. the conservative caucus did not want him to become speaker. john boehner was planning to leave at the end of the month, but he will stay on as speaker until a successor is chosen. russian says some missiles are not reaching their targets in syria.
rockets fired from russian ships in the caspian sea hit iran. insident obama will be oregon today to meet with survivors and relatives of those killed in the campus shooting last week. not everyone is pleased about the visit. the region is rural and conservatives. -- the region is rural and conservative. and an organization that pushed for democracy is honored by the nobel committee. quartetonal dialogue led the first of the arab spring movement four years ago. the quartet is made up of four civil organizations. nobel panelists say they brought tunisia back from the civil war. tom: love, love, love this selection away from world leaders, who clearly have consideration and deserve to be considered. this is particularly led by
institutions of tunisia from multiple generations ago to come to their national ballot, including the union. thate: the committee said they were propping up an organization whose power -- tom: absolutely fabulous. the nobel prize for economics coming up here in a bit. we will be in london next week. how about a data check. we are not going to do a british data check because i cannot figure out which frequent flyer miles to use. -- wow -- 17.42 on the vix. nymex crude, everybody over $50 a barrel, pretty much. euro-yen is what the pros are looking at. paper, a global litmus showing stronger euro against weaker yen. one of the nuances that we do
here on "surveillance." i will sw this 47 more times. vonnie hates me for this already. commodity deflation -- we rollover. joins us.id herro he consider this that she considers this of value right now. this is the commodities -- he considers this of value right now. the commodity to rollover, a little bit of about this week. jon ferro, on this friday, we have to go back to the research report. it changed the world this week. stephen major, great work at ,sbc, with a stunning lagarde gary shilling call. that still reverberates, doesn't it? jon: it does. the markets that are doing well
were the worst performs of 2015. that is the real story. the bad news/good news dynamic. fromook at the call stephemajor at hsbc, it is a al flow, a te flow for longer. koesterich is with us this morni, om black rock. he can synthesize what we have seen. for anybody watching or listening, there is almost a cacophony sense now. make order of i you are talking to larryink monday morning, 8:00 a.m.. you go, larry. what do you say? spoke about this reversal we have seen over the past couple of weeks. why has this been happening? part of the reason is we have had a break in the momentum trade. one of the most successful strategies in the last several board, buy what
is going up, and it works until you see a spike in volatility. i was at ben bernanke possible party earlier this week. there was a pushing of this new terminal value idea. how does the noise of the markets adjust to for rowley or a longeran's push for view of? it is a new paradigm, isn't it? russ: it is back to the future a little bit. people are starting to think about a environment that may reflect 2013. a strange market where defensive yield plays you lead -- where defensive yield plays led. tom: here is the investment 101 question. did we switch from clipping
coupons and making the coupons actually having a potential total return play in bonds? russ: it is possible. we have all been overestimating the rates for years. the key is going to be what happens to inflation expectations. this drop in yield has happened because inflation expectations has collapsed. vonnie: and not everybody is convinced, russ. there is a barrier sent in the air. russ: the challenge with bonds right now is you had better be right. with coupons as low as they are, durations are extended. even a small back in yield is enough to wipe out interest. what has been the safe haven, seeballast, you have to liquidity higher. jon: we see the rebound this week. a simple question -- do you
salvage rally? russ: i do not think you do. you are getting a little bit of a sugar high in the form of investors going back to an environment where it is all about the fed, central banks. but that could last a while longer, particularly if the economic data stabilizes and we have no more bad news out of china. vonnie: changer allocation in the fixed income space. are you staying away -- change your allocation in the fixed income space. are you staying away? the place we shifted of it is not in the fixed income space but in the equities space for yield. sectors like utilities, which we were cautious on all year, we became a bit less cautious on because any long for low environment, those valuations can maintain that heightened level if the comparisons at 10-year treasury are at 2%. tom: i look at the bond market and the language -- and the
linkage into the commodity play. what is blackrock doing? is there is against or belief given the movement in bonds, given the delay in central banks? russ: there are couple of things. you have a lot of assets during the selloffs -- i will go back to high-yield as an example -- were pricing starts to reflect a greater probability of a recession. clearly the economy is slowing, but that is not the base case scenario. tom: the base case an arrow is not willem buiter's recession. russ: in that environment, some of those asset classes, you are talking about high-yield bonds, beta mlp names, though start to look more interesting. tom: we will continue the discussion. on the same desk as russ .oesterich, david herro
tom: good morning, everyone. "bloomberg surveillance." tom keene and vonnie quinn in new york, jon ferro in london. we need to look at the news of the day. latest smoke signals showing the fed is in no hurry to raise interest rates. the policymakers are concerned about setbacks in the u.s. job market and the possibility of a global slowdown. rates probably will not be raised this year. the meeting was in mid-september, and they will meet again this month. a third quarter earnings report
's manufacturing unit fell from year ago. pay can keep hunger away. three big restaurant chains say they will accept mobile payment service. apple pay is off to a slow start and now accounts for just 1% of u.s. retail transactions. that is the latest. tom: paul ryan has said no twice in 24 hours. vonnie: do you imagine anyone got any sleep last night in washington, d.c.? tom: you heard the murmur across the floor when that bombshell headline came through. the whole floor shook. vonnie: no one is willing to open gophe current leadership position. all the gop need to
point a 15-month caretaker echo phil mattingly is in washington? are there any other options on the table? phil: all eyes are on paul ryan right now. i have talked to his people pretty much on a regular basis since this all happened. within 15 minutes yesterday after the announcement, he put out a statement saying he was not going to run. he reiterated it multiple times. people on his staff were returning calls last night and making clear nothing had changed , even when other some publications -- what some other publications were saying he is in. pretty much the entire conference is suggesting everyone would coalesce around him and he is pretty much the only one left. they also believe at some point between the current 247 members of the republican conference and the elders of the republican party, paul ryan will decide it is time to do what is best for the party
and will say yes. the big moment now will be the 9:00 a.m. closed-door meeting with the republican conference. there is a suggestion he would sleep on this. what he says during that meeting really will dictate what happens not just over the next several weeks but possibly the next several years. vonnie: that meeting is at 9:00. let's turn to hillary clinton there it she wrote that, "as president i will seek to increase the statute of limitations for financial crimes . we should also hold financial executives accountable for a great just misconduct by their subordinates." is is causing anyways in d.c. phil: i think this is what is expected. this was considered a huge weakness of the obama administration's justice department.
for hillary, this is almost low hundred and -- this is almost low-hanging fruit. you talk about restructuring how the sec work and operates when it comes to settlements here. you have seen this across the democratic party with bernie sanders, martin o'malley, and other candidates. you are probably going to see issues like this coming out of the republican side as well. enforcement for breaking the law is not going out on a limb. that is something that works well, particularly in an area where people are still angry and do n believe they got their pound of flesh to what happened in 2007 and 2008. tom: everybody from mr. clinton -- from mrs. clinton to mr. trump -- after what we observed yesterday -- and i saw a headline on cnn that donald trump takes credit for mccarthy's withdrawal, whatever the zaniness is of the moment -- what does the republican party do? i don't mean the house.
what does the old guard in the establishment do as they try to get to a convention? phil: it is a big frustration right now. the big thing the republican establishment wants to do is to make sure that what is going on in the house does not spill over on the national scene. how they separate the two is anybody's best guess. that is why paul ryan is getting so much pressure right now. the big question is, does this become something that the national electorate holds onto and says republicans cannot govern and if they cannot govern their own chamber where they conference --ber that is the big question that they need an answer to quickly. tom: can anybody beat the los angeles dodgers? vonnie: the mets can. i can answer that. phil: not with that pitching. up, in minutes, david herro will join us.
is, thanks to francine lacqua today, she had an in-depth conversation with christine lagarde. inflation was first mode -- was first and foremost on the agenda. it's hear what she had to say when francine posed the question. christine lagarde: it would be helpful to see inflation pickup and be based on solid data so that the signal would be strong and the monetary policy could evolve in due course. i am more concerned about the lack of investment, and i hope confidence factors will actually encourage a bit more investment going forward. francine lacqua joins us from lima, peru. you returned to the question later, but is it too much of a
hot potato for her to give us her true answer? a verye: i think it is difficult question to answer from people here because they link it to policy makers and they say at the moment global inflation is weak so we should wait. when do you think inflation will pick up? that is difficult to answer because it has to do with commodity prices and ultimately china. she did weigh in about when she sees inflation pickup. christine lagarde: inflation numbers have to be solid. we have to see them. for the moment, there is not much on that horizon, neither on inflation nor on wages. vonnie: and then i had a similar -- francine: and i had a similar conversation with joseph stiglitz. this is one of the main discussions here. we talk about geopolitics. i will speak with the un's secretary-general. we will ask about vladimir putin's new role in the middle east. we also speak to another central
banker. it will be interesting to get his thoughts on qe in europe. tom: is the managing director going to re-up? are we going to see another x number of years of christine lagarde? francine: we understand that she would be up for it if the board reappoint her. a lot of people would like to see a french president, and she might be the woman. at the end, she could not answer. but she is up for it. she is up for another term at the imf. tom: in lima, peru, francine lacqua. which institution matters right now besides the central banker of the world? russ: not sure. i think the question is -- actually, what is probably maybe different was this week's
announcement that you will probably get a tpp. this is the one thing you can do right now, the government out of fiscal bullets, monetary policy out of bullets. think of structural things like trade that are of long-term growth. if they can get through the political swirl and it leads you to normalized gdp -- what level is that? is a global 4%? global 5%? russ: you have to admit that global gdp is arguably lower than -- tom: below 3%? russ: the slope -- the challenge in the u.s. is that you have slower roads and the less productivity picks up, that alone will be a drag on growth. tom: we need a stimulus. i have talked about this a couple of times this week. is it out there?
its: you were talking about is not clear the house can elect a speaker. are you throwing your hat into the ring? russ: if called on, i will serve. how is that? i wonder if ben bernanke will consider running as a politician. tom: there is skepticism about really where we are. we have to come back. russ koesterich is with us. david herro will join us to stay with us. "bloomberg surveillance." ♪
francie votto and myself. we are really looking forward to that. and myself.lacqua we are really looking forward to that. now news from the desk. here is vonnie quinn. open warfare among house republicans. they are careening into chaos at the favorite -- after the favorite to become house speaker opt out of the race. kevin mccarthy's suggestion is that politics are driving the investigation of benghazi. this benghazi: committee was only created for one purpose -- to find the truth on behalf of the families for the four that americans. i should not be a distraction from that, and that is part of the decision as well. vonnie: house conservatives opposed to carthy also had their say. house republicans have no clear leader, and they must raise the nation's debt ceiling in a month
or risk default. an american defense official says some russ and fit -- some russian missiles are missing the targets in syria. some fired from the caspian sea landed in iran. it is all texas so far in the american league playoffs. in kansas city, the infield tarp nearly devoured a groundskeeper. it is not funny. toronto fans got their first .aste of the baseball playoffs the national league series opens -- i cannot wait. tom: can i add an editorial and say that this is the best part of the baseball year? the red sox were great. us with russs with koesterich.
he is a claimed -- an acclaimed international investor. , you are associated with republican politics in the north of chicago and in your land, the green bay packers. should paul ryan step up and take a position? david: i know the man and he is a good person. he really does not want to do it. he is concerned about his family and his kids, but for the country it would be the best option. tom: why would conservatives being outraged by john boehner david:paul ryan instead? they view him as someone farther to the right, more dedicated to the economic conservative causes. he will probably not hit their wish list on some of the more social issues, but generally speaking he is not john boehner and he is not coming from what they view as the center.
they are having quite an impact, 20 or 30 people. tom: why did you buy glencore originally? was your average cost of little bit higher? price ise average probably getting to where the stock is today. the stock had dropped aggressively, and we viewed glencore as one of the mining businesses that was involved in key commodities -- copper -- and had a good cost sector -- a good cost structure. strong in trading and that provides a foundation for earnings. when you combine their involvement and the right commodities, with the exception their strong trading operation and a management team that thinks about returns on capital and has a lot of skin in the game, to us -- by the way, it is the first time i have owned western mining
, from 15 or 20 years ago. tom: wall street wants to know how you parse the glencore balance sheet as a value play given the assets of goodwill and bad will against the trading operation? can you really need those two on the balance sheet? david: there was too much debt on that balance sheet, given what is happening with the price of copper. you literally got cut in half over the last 18 or 24 months. clearly there was too much debt. when you look at what would happen if copper went from 5000 to 4000. at 5000 it was ok. at 4500, probably ok. given the pace of the decline of copper, management thought it was important to bolster the balance sheet. when i look at this, do you want to see as an activist or a
large shareholder a change in management, board structure, a change in the initiative forward by glencore? david: we really do not invest as activists. that is not our ammo. -- that is not our m.o. we are probably three or four on the registry now. we do not believe a management change is warranted at all. of it.fully in support we do not want to shake up management. that is the farthest thing of the truth. vonnie: we talk a lot about commodities here in lima, peru. did you buy or share sales in the two weeks that there was volatility on glencore? david: we determine what we believe it is worth, and as the price leads head south from that
valuation, we buy more. as it gets closer to the target or exceeds, we sell. aggressively left the point of where we thought it was worth, so i guess common sense would tell you what we were doing. francine: would you still want to be involved in the agricultural business in some way he echo david: they have all kinds of options, what to do with assets. as long as those decisions that are made are reflective of meeting long-term value creation, we are all for it. especially if they can sell a minority position at a big price, we think that would be a distinct positive. as long as it leads to mid and long-term value creation, we are happy to absorb short-term volatility for long-term value investors. we are able to take advantage of the situation when something goes from 130 to 70. to -- itcore decided
has had a big impact on the commodity market. do you want to see a lot more of these kinds of decisions from the leadership and glencore? umag: they cannot cut recalls him. the whole industry has to look .t cost structures metal to decent be involved in. high-cost production needs to come out. when that happens, that is the beginning of the healing process in terms of price. it is also apply and demand. in mining -- this is one of the reasons why we never touch the -- because recently the supply curve moves so slowly. they want to increase time and -- tom: can you tell me you are going to buy the glencore patch as well?
you are not an on mobile guy. what is the name? domestic side, they own a lot of apache, for example. tom: are you going to go someplace else? two really good producers. herro-likefer the persistent cache stream. we do not own anything yet. -- re looking for tom we spent a whole hour debating the whole oil thing. tom: what was the distinction in that debate? what was the distinction of the harris debate. all, what should we base the normal price on? tom: thank you. russ koesterich says this is the heart of the matter. russ: it seems like a moving
target. a few years ago we were talking about having to give up 80, then 50, then 45. where do you see a sustainable level where you are comfortable with these names? david: you know what is funny? we are not far from where we were three or four years ago, at $70, $80 a barrel. now it is at $50. i guess we think it is worth $70 or $80. in particular, i was doubtful of this because i see what is happening in the supply in the unit states and places like iraq, etc. the depletion rates are something you cannot ignore. tom: is credit suisse still your biggest holding? david: yes. it is between that and how allianz. and note.ake a
tom: we love to take credit where it is not do. glencoreines you saw, doubling off the bottom. david herro single-handedly moved the shares of glencore. of course, i am kidding. but we are thrilled to have him on the set as we talk about that mining disaster. pence, which are think it about $1.98. we are into farthings next week when i am in london. right now. chart this is a russ koesterich chart as we go to a single-digit 20 minutes for you.
there is the 10-year yield coming down through the financial crisis, august of 20,007 -- of 2007. 1.50 10-year, the blue circle out there right now. russ koesterich, that is to gain -- that is game changing if we get there. --s: i go back to the fact it had to be real rates. you had this precipitous drop in inflation expectations. , there is aadmit lot of this inflationary pressure in the economy. technology, prices going down and down. and your excuse is to see david herro. you walk into david herro's office and you say you will be in a single-digit world. 1.5%, whereyear at
is your return? russ: you are getting it in other places. look at what is happening in the last few weeks on rate-sensitive assets. everyone has changed the discount rates and people are saying i will pay a slight discount for utility, because if you stay in an environment of 2%, it ends up being more. tom: i can go from london directly to chicago to get the cubs seats with david herro as well. i would have to wear a brewers hat if i did that, for david. are playinghe cubs in october. get with it. come on. jon: you have to fly me out there, then, tom. this call of 1.5 percent, as i look to the bond market next year, inflation and what may or may not happen with the commodity market, we know the base effect is going to be dramatic. is this a bond market that could get caught wrongfooted?
i keep asking this question. what is the answer? russ: it is certainly possible. i agree that when you look at what is driving the drop in inflation expectations, it has been a spiral. months, the correlation between 10-year breakevens and wti has been 15%. i would say that you back up two to 2.5. to get to three, you have to have faster nominal gdp. we are not seeing that anywhere in the world right now. vonnie: david herro, with the likes of credit suisse and glencore, do you care when the federal reserve makes its interest rate increase? david: not really. our view is inevitable -- our view it is -- our view is it is inevitable over time.
vonnie: it must impact your view on banks, especially if you are involved in a big way with the likes of credit suisse and allianz. david: if the rate increases came sooner than later -- we are not just ranking ahead. i met with some government officials a couple weeks ago, and they asked, when is the fed going to raise rates? i am not with the federal reserve. -- everybodyyou else is looking at hedge funds right now barely trying to get to zero. they are barely making it. what did you do? david: we keep our nose to the ground looking for stocks, investing in the way that a long-term investor should, finding the long-term low in the business, and buying and selling
it. it is better for us. value does not change anywhere near as quickly or rapidly, and if at all, even correlated price in the short-term. when you have these rapid swings -- it is almost like it is all coming to us. is it an international or global play? david: it is a global play. they are growing in places like asia and latin america. tom: i have a killer chart on credit suisse. we will come back with this on -- with david herro on credit suisse. in the next hour, one of the most interesting americans, david rubenstein, joining "bloomberg ." maybe he will talk about the magna carta, maybe he will talk about lincoln's ford museum. of carlylestein
tom: i will travel from new york. francine lacqua will travel from lima, peru. we will meet next week in london. "surveillance" all next week from london, england. and seeo a forex report if i can afford anything in the united kingdom with 1.50 three sterling. i liked it better at 1.51. 1.53 sterling. i liked it better at 1.51. euro-yen, the posted to stick. take out the dollar and look at euro-yen. all in all a stronger euro and a weaker yen. once again out west, very difficult news. here is vonnie quinn. vonnie: news just in that officials are saying one person is dead and three others wounded following early morning
shooting. this happened at northern arizona university. campuses in flagstaff, the -- the campus is in flagstaff. . custody.er is in the shooting occurred in a parking lot outside a dormitory. no details about the suspect or conditions, their or whether they are students. in other businesses, pimm: says -- in other business, pimm: ban -- his lawyer says gross will give the money to charity if he wins the case. is ending his endorsement deal with rebels to be a grand ambassador for an upstart chain, blaze pizza. .laze has 110 restaurants he has been an investor since 2012. is it more healthy than mcdonald's?
tom: absolutely. they are gluten-free. vonnie: let's get back to -- tom: let's get back to a little bit of international investment. i want to make 20% per year, 12% per year. many are suggesting it is a lower single-digit return. russ koesterich is with us from blackrock, and david herro. my, things have changed. talking to ben bernanke yesterday at length, it is a whole new and different world. russ, are central banks adapting to a single-digital world? russ: i think central banks are wrestling with what is normal. if you look at the lower inflation numbers, they have been grinding lower for several years. this is something that not only investors are trying to get their arms around, the fed is trying to get their arms around
it as well, which is making it difficult for investors right now. it is not clear what conditions the fed will need to see to lift off. credit suisse, of course, is in the news. banks have to adapt to a single-digital world. are you enthusiastic about a cash call by credit suisse? 1-800-herro and say we need $122 million? david: they are restructuring, still, their investment bank. they are trying to increase their presence in others and focus on the private banks. the swiss regulator has been kind of topsy-turvy on what they should be doing. tom: is that good or bad? david: it is not consistent. that has been the problem. regulation should be clear, transparent, and consistent. the swiss regulator has been inconsistent.
tom: is it a single digit cap counting -- is it a single digit accounting for banking? david: when you have to have a higher required rate of capital that is going to dilute your return on equity over time -- on the other hand, that higher theoretically, more consistency and less chance of default, then you would have a lower risk premium. vonnie: where are the upper -- where are the other opportunities? in the debt markets or elsewhere? david: we just look at stocks, we just look at companies. oil, there areng a couple of things that look interesting. it is not hand pounding. tom: gentlemen, thank you so much. russ koesterich. thank you. oncontinue with david herro
it is said that china's relation to lead to terminal it's. and bill gross' big bombshell. he sues the company that he founded and he wants pimco to pay him hundreds of millions of dollars. vonnie: -- stephanie: welcome. i almost said grand finale. friday, the last day on our first week of bloomberg . i am stephanie ruhle. david: i am david weston. not that we have been looking forward to friday at all. haveck things off, would cofounder and co-ceo of carlyle group david rubenstein. thank you for joining us. let's go first to news from vonnie quinn.
vonnie: breaking news this morning from arizona. one person is dead and three others have been wounded in a shooting at northern arizona university in five staff suspect has been arrested. no word on whether those involved are students. it is chaos for house republicans. they now have no clear leader and they have to raise the debt ceiling or risk default. the favorite to become speaker of the house pulled out yesterday minutes before a scheduled vote. i will stay on as majority leader but if we are going to unite and be strong, we need a new face to help do that. vonnie: house speaker john boehner said he would leave a fan of the month. now he says he would stay until a new speaker is chosen. the nobel peace prize has been awarded to the tunisian national dialogue quartet. the nobel committee made the announcement this morning, noting that the quartet helped
after the arab spring left tunisia on the rink of civil war. here is matt miller with news on the market. certain markets are literally off the hook. oil is about $50 for the first time since july. stephanie: literally? matt: off the hook. you do not see this coming through in u.s. futures. we had small gains on the s&p and the nasdaq has been a little bit negative this morning. you see playing out in europe big gains and one of the big reasons is that the likelihood of a fed rate hike is even lower than it was yesterday. lower than it was the last time they met. , 39% inlikelihood december. in january, less than 50%. markets do not see a fed rate hike until, at the earliest margin probably by the time we get there we will push it back more. the dow yesterday was up 100 points.
it was its fifth day in a row of gains. the s&p broke 2000 for the first time since august 21. vix is down for the eighth straight day. today's glencore news is insane. they are going to cut sink. that set sink up for its biggest gain as a metal for all time. for itsset zinc up biggest gain as a medal for all time. stephanie: the dancing that is happening -- it is clearly friday and matt miller is here. we need to move on. david co -- david: let's go back to david rubenstein, the cofounder and co-ceo of carlisle. you are a recovering lawyer. and the second thing is, you are a real history buff and you own four copies ----
a copy of the magna carta, a copy of the declaration of independence. we woke up this morning to rally in $2.5 trillion equity markets. oil is up, all good news. let me go to the dark side. as you look around the world, what are you most concerned about. one of the weak points as you ?ook out gekk david: we have not had a recession in six years. we tend to have recessions every seven years, ever since world war ii. so you can expect a recession. i do not think we are there now. expect some slowdown after good growth the last couple of years. i do nothing where likely to grow more than 2% in the united states this year. europe will be about 1%. china is slowing down to about 6%. i do nothing we are going into
the precipice where it will be a recession. i think it will be modest growth for a while. stephanie: are you a buyer or a seller right now? david: we are always a buyer and a seller. prices have been relatively high. the average cash flow multiple in the united states has been almost 10 times the last couple of years. now it is going down a little bit. it will be better to buy things in a year or so than it has been. david: but with the possibility of a recession, are you concerned about what tools or weapons central banks, governments have to address that? not want to say that i am predicting recession, i am just saying that there will be one. the government does not have the tools that it normally does. normally with a recession you lower interest rates. now you cannot lower them any longer. stephanie: they put themselves
in this position, though. this --hey anticipated i do not think they anticipated this. the federal reserve wanted to raise interest rates this year, but the recent employment numbers made it more difficult for that to happen. stephanie: the fed has always been data dependent, but it is a fact of it happening. should they have acted? there were many moments that, really? we are going to wait because of this, as of that. at some point you have to step in. david: i do not want to step in and second-guess the fed. maybe you should have been part of the fed. stephanie: no, no. david: generally i think the fed has done a pretty good job. on this been bernanke week, -- you had been bernanke on this week. i would recommend his book.
along with others that were involved with it, i think janet yellen has done it good job in a difficult situation. ben bernanke has a terrific book out. one of the things i took away from it was there is a limit to what monetary policy can do. given the situation in this country and largely around the world with central banks, at some point you have to look at fiscal policy, don't you? and we had larry summers on who said there should be a lot of investment in infrastructure. made ai think larry has big impact with his concept of secular stagnation. congress has been unable to move on anything. the federal reserve has done a very good job of being the catalyst for the economy because congress is doing nothing. real fiscal policy is not likely to come out of this congress.
david: would you be in favor of a copperheads of tax reform? david: copperheads of tax reform -- imprehensive tax reform think it is not going to happen right now. david: i know you do not want to have a negotiation right now, but would you be supportive of -- david: i would be in favor of putting everything on the table and figuring out what makes the most sense for the american people. you should not just pick one thing at a time. comprehensive tax reform is the best policy. stephanie: when you look at the credit markets and seeing credit back up so much in the last few weeks -- does this make you rethink was the lbo market is going to be like? david: clearly lbo's do a good
job in making companies more efficient. there is credit out there. it is not going to be difficult to get credit for good deals. but ist rates may go up do not think that is a big problem. the people lending money to us are not just traditional banks, they are sources from all over the world. i am not that worried about it. stephanie: do you want to stay in the hedge fund space? not being able to have long-term investments like you are used to is a very different climate. some hedgeave funds, we are comfortable with what we have, and i think hedge funds play an important role in our society by giving liquidity to kinds of investments that we need. david: are you concerned at all about dodd-frank, in the way that it does not regulate things like hedge funds? there are alternatives to traditional banks providing liquidity. david: i do not want to say that
dodd-frank was too loose, but they thought the most important things were the banks. whether they overreacted, i will not say right now. right now i do not think there is a gigantic regulatory problem in hedge funds. the market is regularly quite well. david: when interest rates go up, is that helped you because the prices go down? david: when interest rates go up, interest -- when interest make it up, it will not difficult to finance things. if prices go up for interest from money that we have to borrow, we would lower the price of things we pay and sellers will lower their expectations. i am not that worried about it. stephanie: how about your sharepoint? do you think about shareholders and how you should have your company structure? before you went public, you just had to focus on you and your partners and your investors. you are in a different situation now. david: we have a different set of investors, and we are not happy with our stock rice.
ours has -- with our stock price. the price has gone down. but we know what we're doing. i do not think the market quite recognizes it, but we are telling people how cheap our stock is and eventually the market will figure it out. stephanie: doesn't want you -- does it make you want to change course in any way? david: i do not want to do anything dramatic that will take us out of the public markets. stephanie: we will have more with david rubenstein, without bank rules are affecting private equity. david was not here last year during the holiday video. it had an effect on this guy and on society, really. what are your questions for carlisle and associates -- for carlyle group? you are watching "bloomberg ." ♪
welcome back to "bloomberg ." merit tos there is no the lawsuit by bill gross. his lawyer says if he wins the case, he will donate the money to charity. job cuts are on the way and one of you k's biggest banks. bloomberg report standard chartered will cut a quarter of its senior employees worldwide. assetsk will also sell and cut clients. there has been a two year slide in -- by the end of the are, customers will be a will to use apple pay at select starbucks. year after its debut, apple pay accounts for about 1% of
retail transactions in the u.s. stephanie: we are back with carlisle co-ceo -- carlyle group co-ceo evan rubenstein. hillary clinton wrote in a recent op-ed, "my plans would also give regulators the authority they need to reorganize, downsize, or even break apart any financial institution that is too large and risky to be managed effectively. we got into the weeds yesterday as we tried to understand hillary's new planter chi was getting into high-frequency again, to double down on dodd-frank. are you that concerned? do you have a view on her plan or is this politics? doesn't everyone loved to take a swipe at wall street? avid: it is easy to take swipe at wall street. it is difficult to run for president and not take a swipe at wall street. thatyou have dodd-frank,
was a complicated piece of legislation that you cannot just summarize in one sentence or so. i think it did a reasonably good job for certain purposes, and in some cases might have overreacted. if you are running for president, you're likely to say something negative about wall street, so the devils are in -- the devil is in the details. stephanie: is that going to be the second chapter of the donald trump? he has had huge success because people love his claims, his shouting, his jabs, but once we get into the details, will there be much there, in your opinion? david: when people talk about tax legislation, presidents no longer send tax bills to congress. congress writes the tax bills. the president might say here are the ways andut means committee really decides. presidents really have limited impact on tax legislation.
i think it will be a couple of years before we have it, but it will really be written in congress and not probably at the white house. david: you worked in jimmy carter's administration. you have been an observer. as somebody involved in business and markets and in investing, how much do you want washington to do, and how much do you want them to stay out of the way? what would you just as soon have been not do? david: the truth is you need to have regulation. that is what government is about, to make sure you do certain things appropriately. i just think government should not over regulate. is notow the congress probably as functional as we would like. stephanie: that is an understatement. us what thetell rules are and we will try to comply with them and we will comply with them. right now it is unclear what the congress of the united states wants to do to help the economy. it would be better if we had a
more effective congress. david: even this morning, in the face of john boehner stepping down and kevin mccarthy saying he does not want to leave the house -- what can be done? -- does not want to leave the house -- what can -- does not want to lead the house? what can be done? david: i think money is too influential in congress. sometimes they worry about reelection more than they should, but it is a complicated issue that we will not solve this morning. it would be good for the country of someone would emerge as a republican leader soon who is well respected, and give this country the sense that congress knows what it is doing. stephanie: is there someone who you believe that could be? david: clearly republican leaders are trying to convince paul ryan that he could do it. he has the credibility and the intelligence and experience to do it. considering it.
-- let's takel us a much closer look in china. this time last year, people were riled up talking about the size of the consumer there and what could be done. how do you see things there? david: china grew 10% on average for 30 years in a row. no economy has ever done that. when richard nixon went to china in the 72, that economy was at about $110 billion. now it is the second biggest economy in the world. it is unrealistic to seeing a growing at 10% per year on a consistent basis. if the u.s. could do that we would love it, but for china that is modest. china is going through a transformation, and it will take some time for that transformation to be felt. stephanie: you set at the big table, the state dinner two
weeks ago. president xi and president obama, that is a hot ticket. when you see all these prominent people invited, it is a good thing. my wife and i enjoyed being there. the president was very happy the way the dinner had gone and the way the meetings with the chinese leader had gone, so it was an impressive group of people. stephanie: what did you talk about? david: i talked about the relationship between the u.s. and china, how things could be improved. there were a lot of americans at the table that i talked with other americans about. stephanie: on the car ride home, did you say, i cannot believe -- x? i think i know how you got invited. david: i was honored to be there. steve schwarzman, one of your earlier guests, was at the dinner as well. david cap going back --
david: going back to china -- there is a very important thing that strikes me as very different about china. as we have watched over the last few months, their willingness to intervene in the equity markets, something that even in the worst of the days of 2008 we did not have the government do, does that give you concern or increase the risk premium as you go into china? david: the central government is really controlled by the government. clearly the premier controls the economy. obviously an economy that moves quickly when it wants to because of central control. sometimes you wish in our country we could move more quickly when you want to get things done. stephanie: assuming we trust the government. chinese realized that trying to prop up and we market
does not work. david: do you think the chinese realized they made a mistake? david: i do. i do not think they will be doing that again. stephanie: you mentioned steve schwarzman. i am going to step in. he said that he actually believes the chinese economy is better than has been represented. they own shopping malls there. he says the chinese consumers are out there shopping. david: the economy is good when you compare it to our economy in the sense that we are growing at 2% and they are growing at 6% or 6.5%. they are also transforming their economy into a consumer-oriented economy. they also have an anticorruption effort going on. that is dampening the economy a bit. it is slowing the economy down a little bit. david: to continue the tour around the world -- even though
they are growing at 6.5%, it is still less than what it was. talk about india. there is a lot of talk about india coming on. david: in 2001, the phrase "brick" was invented. .t meant russia, china now it seems to be india. while india is a small economy a china, that while india is smaller economy than china, it will probably grow this year. prime minister moni -- prime minister modi has convinced a lot of people that india is a place to invest. we are increasing our investments there as well. stephanie: we have spoken to many investors who said they do not want to be in places where they do not understand or trust the will of law. what is your take? david: we were in russia twice and pulled out twice. theid not think there was opportunity for investors to get a fair deal, so we pulled out
and have no intention of going back. david: brazil is struggling is struggling badly. any of his opportunities there? david: the prices low. we have made big investments there recently, and we think the bottoms have probably been hit. we are still bullish on the long-term prospects for brazil. is there a region or an investment or a project right now that you are most excited about? david: the united states is still the best place in which to invest. buyouts are still an attractive way to make money on a consistent basis. i am attracted to the buyouts lately in the united states. stephanie: has it become harder for you because more people are investing, where five or six years ago you were not the only game in town but it has become less crowded? to recognizeve competition is what it is.
there is a lot of competition out there, but there are pretty good opportunities for people who know what they are doing. stephanie: you have been doing this for many years. do you still love it, or are you ready for the next chapter? what do you think it will be? david: i love what i am doing. when you love what you are doing, you do not want to change. will years old, probably i not be doing this for another 30 years. but i do look up to people like warren buffett. he is 85 and still going strong. say itie: or you could is time to get into politics again. david, please stay with us. you are watching "bloomberg ." ♪ the only way to get better is to challenge yourself,
rubenstein, and also tom keene. tom: david rubenstein sneaks up on you. he has major commitments to american history and the fabric of our society. so i am at the ford theater, very emotional to see where the 16th president was assassinated. miracle,ormed a modern deeply emotional. david and others have invested in explaining to children why it is important. the spiral staircase is really something. how did that come about? david: when the country was formed, it was designed that we would have a national theater in washington, but we ran out of money. so ultimately entrepreneurs built theaters there. the most famous is mr. ford. he took a church and converted it into a theater. lincoln, that very night, had not planned to go and then
decided to go. he was supposed to go with ulysses s grant and his wife. they decided not to go. so he went with one of his aides. he was feeling ill that they and was not wanting to go. he did not want to disappoint people after he had advertised it. he went there, the assassination occurred. he could not, with modern technology, have been saved. a bullet went into the back of his head, and it is unlikely anybody could have saved him. david: it is a fairly small and intimate theater, and they have preserved the box. a photo of abraham lincoln's there. you realize how close it was to the stage. tom: i urge everyone to go and withthe commitment" business leaders across the street. -- wouldham lincoln abraham lincoln and jefferson davis have shared the nobel peace prize back then? it is interesting to ask, with
1864 or 1865. it was so twisted, you wonder -- stephanie: wait a minute. there is another money question. think about the film profit commitment you have made, not just here but around the country. other business leaders in other cities -- earlier in the show you said it is easy for swipe atns to take a wall street, the financial industry. does it not frustrate you, given the commitment you have made to this country, to history, that popular opinion remains so anti-your industry? david: obviously you want to be loved and not hated. i would love for people to say when you grow up i hope you will be a private equity professional. you can spend your life saying that people should like you more or you can go ahead and do what
you think you should do. i am not going to worry about it. let's go back to your nobel peace prize. it took me a moment to figure out where you were going. lincoln would have won it. this year, it is merkel, the pope, merkel, the pope. must-read, a wonderful announcement out of tunisia, to remind everyone that the arab spring really began out of tunisia. western analysts and donor agencies may be placing too much weight on civil society as personified by small upstart ngo's or nesson's political parties. such groups, and disorganized popular movements, can apply generalize pressure and help topple governments." tunisia was pieced back together by traditional institutions,
their national quartet, including labor unions. they do not get a credit for a sizable coalescence, do they? david: they do not. tunisia has some issues, for sure. peace,dy is in favor of and the nobel prize has been around for a hundred 25 years or so. decidedemies in sweden who is going to get the awards. it is very unpredictable. predictednobody who who would win the prize got it right. encourageds really because we think about the arab after thegoing wrong, initial euphoria about how democracy was coming to africa. we never hear about tunisia. we hear about all the ones that went wrong. stephanie: no one likes good news.
david: it was also an employer's union, a human rights group, and the lawyers. there is a stereotype in america of chaos. you know that is not true. david: after the arab spring, we closed down our office in cairo. it was difficult to find anything that was going to be stable, so we are not looking at that now. no doubt that if mr. nobel were around today, he would say there should be a nobel prize for private equities. more time.wait, one i want to make sure that did not get lost. if he was alive, he would want there to be a prize for private equity. andd: people were stunned, his family challenged the will because they did not think the money should go for those purposes. the swedish academy' was not convinced they should give out that kind of an award.
no nobel prizes about the most distinguished thing that you could win. about theel prize is most if they wish thing that you could win. stephanie: your must-read. what is it? david: in my capacity, i am the chairman of the madison free counsel. i will interview and man named edward larson, and he wrote a book about george washington in the period of time between when he gave up his generalship and when he became president. david: there it comes. "about 10:00 i bade a due to mount vernon, to private life, and to domestic felicity and set out for new york." david: he is the only president who gave up power.
up -- he said he gave really did not want to do it. he was happy at mount vernon. the lesson is, when your country calls and you are the only person who can do something, you really should give that to the country. stephanie: who is your favorite figure in american history? david: there is nobody comparable to abraham lincoln. theham lincoln saved country. anybody else in his position would probably have said to the south goodbye. stephanie: today in lima, the imf world bank meetings are taking place. here is christine lagarde with our own francine lacqua, talking a's desire to have more market stability. christine lagarde: an
enormous change which is difficult to absorb, difficult to manage, and difficult to communicate. but i believe the chinese authorities understand that they want to play by the rules, want to monitor expectations as much as they can. but it is draining. francine? francine: start, stephanie, go ahead. stephanie: what has been your big takeaway? francine: we spoke to almost everyone here that matters. we had many newsmakers, we were just from christine lagarde, the head of the imf. we spoke to the european commissioner for monetary affairs. to josephoke stiglitz. people are trying to figure out exactly what monetary policy will look like and whether at the moment they are really at the cusp of possibly making a
mistake. this was certainly the view of the noble economist joseph stiglitz. he was telling me the fed cannot raise rates this year because he is worried about u.s. growth. joseph stiglitz: the fact is that america's recovery is anemic. if you look beyond the unemploymentatever rate -- the people who cannot get a full-time job, it is well over 11% or 12%. it is reflected in the wage stagnation we have seen. they did the right thing not raising interest rates. of people here in lima, peru, are saying the fed has no reason to hike this year, no reason to start normalizing. but then you state to someone
who is expert is bank, who says if you wait to normalize, -- lacqua in francine peru. do not miss her interview with you and secretary-general ban today. -- ban ki-moon how important is the rate hike to you, david? not as important to me as it is to the whole country, but the world's attention has been focused on the fact that the fed has been saying that we are going to increase interest rates and do it before the end of the end, and now it looks less likely that will happen. there is uncertainty in the markets. what the markets really want is certainty. just tell us what the rules are, tell us what the gain is -- tell us what the game is and tell us what interest rates are going to be. unfortunately they cannot be that definitive for quite some time. toid: it is hard for them
make a change without the data indicating the reason for the change. at thestan fischer jackson hole meetings made it clear that the fed is likely to raise interest rates this year. then the unemployment rates came out and it became less likely. think the fed increasing interest rates by 25 basis points in december or january or march will not make a big difference. point -- whatthis would you give janet yellen? david: larry summers says she is doing a good job. david: she was succeeding a hero, a person who did a terrific job, ben bernanke. following in his wake is difficult. she has been a good job as she can.
if you have the same data, what would you do? stephanie: you know what? you put me on the fed earlier. aon not -- i am not running for the chair just yet. i would raise it. the window was open. at this point the unintended consequence of racing -- of having rates where they are -- but you know what? david: one of my side jobs is i am the president of the economic club of washington. stephanie: he is interviewing someone this weekend, he booked somebody -- we could use you as a producer. david: for two years i was trying to get her to come, but she resisted, but now i hope there will be some news. david: how many boards are you on? do you know? david: i am on a fair number. david: what was the never be?
i am on more than 20 nonprofit boards. but i juggle a lot of things and i do a lot of things on the weekends and sleep is overrated. huffington,rianna do you hear that? sleep is overrated. if she were here, she would say, ."avid, unplug david, thank you. good luck this weekend, duke. duke plays army. talk about week will volkswagen, on "bloomberg surveillance." -- on "bloomberg ." ♪
last week workers rejected another proposed contract. personal computer sales keep falling. pc's were down 8% in the third quarter. in market researcher says that is because slower desktop sales and higher dollar-based prices. has given up the big mac for a slice of pizza. he is ending his endorsement with mcdonald's so he can be a grand ambassador at upstart chain lays pizza. blaze has 110 restaurants and plans on having a lot more. lebron has been an investor since 2012. david: both wagon tops u.s. -- volkswagen's top u.s. executive was grilled yesterday on capitol hill over the emissions scandal. >> on behalf of my company, my colleagues in germany, and me personally, i would like to offer a sincere apology for
volkswagen's use of a software program that serves to defeat the regular in missions testing regime. by marshaare joined blackburn, who has served congress from her home state of tennessee since 2002. she is a member of the energy and commerce committee. she joins us from washington. thank you for joining us. marsha blackburn: good to be with you. thank you. david: it appears the problem is a very large one. we are not sure how large. what are your goals as a congresswoman? goal is tokburn: our find out exactly why this happened, when it happened. it is just the w models? .e are also looking at audi we want to know if it is into other european makes of cars.
part of the reason of knowing why they did this is you look at the stringent environmental controls that the e.u. has been up against -- after rio and after kyoto -- and those go into effect. let'sgineers say, reengineer this because we cannot make the car any lighter? we have standards we have to meet. we can engineer into the software a way to turn this on and off at the appropriate time. so that a vehicle passes its does not test but then compromise with miles per gallon or miles per liter. so we want to delve a little deeper into that engineering. i will tell you this. we were very disappointed yesterday that mr. horn did not have more specifics for us. we would like to have known that they were beginning to isolate
some of who carry this out and the reasoning why. david: i just wanted to ask you -- you were not directly responsible for regulating emissions as a congresswoman. your committee has oversight. are you also disappointed in the regulars -- are you also disappointed in the regulators? the problem was discovered not by regulators but by an outside organization. this was one of the questions i had yesterday. does the epa have so much on their plate that they cannot see the forest for the trees? and they are not focusing on regulations that matter? has there been so much put on there, or is there a coziness between regulators and third-party testing to say this is fine and that is fine, and then they are not doing their jobs? absolutely, the regulatory body
bears some fault in this, and we are going to hear more from the regulators about how they are carrying out their jobs. what they consider to be the most important regulations and what they kind of pushed to the side or take somebody else's word for. stephanie: i know you were disappointed with the amount of information given yesterday, but given what you know, do you believe it was a handful of isolated engineers responsible for this, or with senior management involve? congresswoman blackburn: we do not know. basis, you can tell that we kind of got two different stories going. either they knew about it in 2014 when the west virginia university report came out, or they did not know about it until september 3, 2015. and there was a lack of clarity around that timeline. so we do not know what the yes, thereas with,
is an awareness, there is some type of problem here, and how far that went up the food chain. as i asked for more specificity on the timeline, the answer i got from mr. horn was that they were investigating. is this is september 3 and it was a systemic problem and we have u.s.-based dealers who have lots full of product that they now have money out and they cannot sell the product, i would think i would have a little bit more of a timeline on what we are going to do to make the consumers that own the cars hold , how we are going to handle the emissions tests and how we are going to fix this problem. david: do you expect this to lead to legislation? what do you expect to come out of all of this? congresswoman blackburn: yes,
indeed, we can go the appropriations route or go in and recall some of these regulations, reposition things they have done through the rulemaking process. but bear in mind that we have road, 500,000 cars on the and there are consumers that are going to have to take an emissions test. they are trying to figure out, is this a car that they can drive or not, or how they are going to be made whole in this situation. just before i let you go, i want to clarify -- i am calling you congressman, but that is how you prefer to be called. i am not show you any disrespect. congressman blackburn: that is the proper title for the job. it is not a gender specific job. david: thank you. stephanie: there are a lot of
fun facts about david westin. "disrespectful" is not one of them. legendary investor bill gross is suing his former employer, the company he founded, for hundreds of millions of dollars. erik, what do you make of this? pimco fors talk about a moment. the moment the lawsuit dropped yesterday, people were left wondering why. gross, more than a year after leaving pimco, filing a scorched-earth lawsuit like this? to shore upld like his tattered reputation. much of the narrative about his departure played out in the media and not some --
secondly, this is unquestionably about exacting revenge from his former colleagues, mom at el-erian, brett harris -- mohamed el-erian, brett harris, and the list goes on. raising questions about the way motives,pimco, their and whether they are the right people to manage trillions of dollars in assets. stephanie: but by waiting a year, did he set the stage for himself so that he would not be leaving the company and then exacting revenge? here i am, i am focus on the markets. now that he has that going, you?oooom, i am going to sue clearing the reputation by giving you a nasty legal fight -- remember what he is trying to do here. that is part of it. pimm: bank -- pimco is a wounded
animal. -- and, david, this cuts to your expertise, your one-time expertise as a lawyer -- the attorney representing him , who has worked successfully for keith olbermann, for example. she has also represented doug charney. stephanie: what? doug charney, you know who he is, of american apparel. you never need to say i know nothing about it. i never say that. come on, now. build powers will be with us in the next hour. he is the former pimco pm. ♪