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tv   Bloomberg Markets  Bloomberg  January 21, 2016 11:00am-12:01pm EST

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we wrap up trade. mark, a pretty big rebound thanks to draghi. mark: you said it, betty. still bouncing back from that biggest drop in august yesterday with a little help from the president, mario draghi. the european close starts right now. betty: before we get back on the market, we need to break the oil inventory numbers. a build up in invan hollen tore, ramy with more. ramy: the number right now is 3.9 million barrels. that's against a bloomberg survey estimate of 2.2 million barrels. little bit closer with the american petroleum institute number that came out yesterday of 4.6 million barrels. right now we are seeing this come off nymx crude, had seen session highs past hour. now you can see closer to the
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flat line. $28.39. i'm going to throw it back to you. 3.9 above estimates. betty: expect that oil price to continue to fall based on this build up. thank you, ramy. with more on oil get back to davos. john is joined by the nigerian oil minister. john. john: thank you very much, betty. right on cue i'm joined by the admin str for petroleum resources in nigeria. you and i were having a joke. things are better. not pretty. >> not good enough. john: last time you spoke we talked about an opec meeting in march. is that realistic? >> we are working on it. lot of members want it. almost an absolute majority calls for it. it's looking unsettling. the june meeting which is
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already fixed. john: what are they saying to you? >> they are sticking to their position. we are not a problem. we are trying to -- an active player here. sit and talk. they do have a point in terms of hat. any perception of opec inactivity, as it were, that's blocking the market. john: what do you say one minute it's march and realistically it will be june. >> it's been worked. i can't say to you we'll have a meeting in march. unless a march meeting has been fixed. john: let' say you have a meeting. are producing cuts realist lick? >> for me i think it's more a meeting for us to sit down and talk. talk and say what is the future of oil? price is really not the issue. john: what is the issue? >> future of the oil industry. that is the issue. future of the oil stock. oil business.
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it's more than price. even if you correct the price today, you look at what, for example, -- a lot of diverse in the sector. five to 10 years to bring back stock into the market. whatever you see, downward turn, is going to show up tomorrow as a major movement. it also affects the economy. everybody's agreed to one thing. prices today are not good enough. no doubt about it. there's a lot of stock in the market. opec cannot do this alone. -- we need to do is bring opec members to begin to talk. john: what are the consumptions for crude? on the screen 28 for w.t.i. the curve. the whole crude curve has shifted lower all the way out to 2020. you have to see optimistic to see $50 a barrel. what are your basic asuppingses? >> in terms of numbers? all, in the year you'll
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see the impact of production out of top shale. you'll see the iranian oil eventually bringing into the market. you're going to see the natural decline of almost two million barrels by virtue of money invest. -- investment. but again, i think the second half of the year holds more promise in terms of favor markets. john: going back to production targets. there will be a large majority of viewers watching this program right now saying, opec can never get together and make a decision on targets ever again. they had a target before for 18 straight months they exceeded the target. it was hardly binding. the political situation between saudi and iran. can they get together and become
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relevant again? >> everybody wants to talk to opec. in terms of revel vancy, what relevance is different all together. the relevance is for fixing prices, that's not going to play anymore. they have to play their role. the relevance of opec will be more in determining cooperation, direction. that's what you'll see. john: what does that mean? >> what is means the members are going to look after them. we may not determine what prices are going to be, eventually when will regroup and have the conversations. at the end of it, the excess ill have to get out. it good two pl barrels. even if we are 1.5, there will be clbbration that is needed.
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everybody's getting to the point. where everybody understands that quite frankly the price today is not reflect an investment to make it work. i don't seehow much going later than that. frankly, the way the price gs in terms of the value point is not as important as what we need to do to get it up. john: you say things have to get worse before we get bretter. surely things will get worse for saudi aabea. -- arabia. why would saudi want to make a move soon? these y expected numbers. hould understand that. that's the issue. the russians are pumping.
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they are also suffering. at some point realize country don't make investments in oil. at the end they make investments in the company. and what level, what prices will make investments. already we are seeing projections are a loss of investment in this sector in the next five years. john: what do you think in terms of investment in nigeria given the security concerns. what are you seeing in terms of investment? >> we haven't suffered too badly in terms of investments. the projects were put on hold. you want to file the returns. t a lot of huge potential in 00 barrel oil situation, $00 -- $100 oil situation. very expensive exploration. very expensive productions.
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everybody is coming back on land. this tends to put a lot of investment on ground, make a come back. we need to work more on that one. ring those numbers down. john: one final question. $30 oil, sub $30 crude. how much pain is nigeria in right now and the nigerian economy? >> everybody's in pain. no matter where you are. the western countries, they are all seeing pain. for us this is an opportunity. we are lucky to have a very visionary leader at this time. it could have been worse. he's very focused, diverse filing economy. wiping out corruption. and nigerian economy, the more you look at it, the more
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resilient. we focus on oil. john: the final question. can the currency stand the economy market? >> i'm not a minister of finance. john: i'm sure you speak with each other. >> we do. i'm not going to answer for her. i think we are doing the best we can to manage efforts currency movements. we'll look at it. watch it. the minister of finance is watching it. we are not taking a position on this. we'll see what we have currently. john: crystal ball, let's face it, most analysts out there it's a guessing game. hardly anyone saw it going down in the 20's when we were up around $11018 months ago. how do we end the year? come on. >> we had that question in the conference. everybody says not going to put my opinion on it. my feeling is that definitely going to be better than what it was in the first half. in the 40's. john: we'll leave it there.
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thank you very much. the nigerian oil minister. from davos, switzerland. betty: you pinned him on a number range, at least. thank you so much. speaking with the nigerian oil minister. you heard it from him, likely the 40's by the end of this year in oil prices. turning nowle to some company news, another company that is affected by oil cries, a belle wether -- well wether -- bellwether of the economy. lowest level since 2013. the railroads fall short of profit estimates for the third time in a year. union pacific earned 131 a share of revenue. 15%, $5.21 billion during the fourth quarter. biggest revenue miss in 10 years for the company. dig into these results now with the union pacific chairman and c.e.o., lance fritz. thank you so much for joining us this morning. some your colleagues have called this a freight recession.
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based on what we have seen around -- in the economy, with oil pricings, the stronger dollar, are we in a freight recession? >> certainly it looks like a pretty difficult environment to us. whether it's energy related, coal, or anything in the shale energy fields, or the strength of the dollar that's retarding exports, or consumer behavior. certainly freight shipment the -- shipments, they are a significant headwind right now to our business. betty: they are significant head winds. where do you see volumes? where do you see freight volumes this year? are they going to get much worse? >> we talked on our call this morning about the first quarter and some of the specific head winds we face there in coal. the continued head winds on shale energy related frack sand and pipe. it's harder to call as you look further out in the year.
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certainly there's a number of head winds, strong dollar will apparently remain coal with an inventory overhang and relatively warm weather and very low natural gas prices is also struggling a bit. there are a couple of bright spots. the automotive finish vehicle sales is a bright spot. betty: is it going to get -- >> we need the consumer to show up more. betty: there is a balance of negative and some positive factors. is it going to get worse before it gets better? >> that's hard to call. we've made some guidance on coal. we said that was likely to be down something like 20% in the first quarter. but other than that we just said it's -- there's a bunch of head winds and hard to call. boip do you see the u.s. flipping into a recession? >> that's another binge that's hard for me to call. i can share with you what we are
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seeing in the freight rail industry. which is a difficult environment. but whether or not that translates into a full-blown economic recession, that's for economists to call. betty: does any of the conditions that you're seeing right now, lance, do any of those conditions remind you of hat we saw back in 2007, 2008? >> certainly volume declines of the magnitude we are seeing right now are unusual. and consistent with that kind of environment. they are less so than they were in the 2008, 2009 time frame which was historic by any measure. but clearly we have had to adjust costs aggressively. we have had to pursue productivity opportunities aggressively. all the while generating an excellent customer experience, which is the foundation of our business. betty: service. the service side of your business. you mentioned cutting the costs. the industry also and yourself
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included are looking at raising freight prices. are you going to be able to do that, though, in the face of these head winds you just mentioned? >> we generated positive price in 2015. 3 1/2%. we expect to generate price again in 2016. we talk about pricing above inflation. and pricing to recognize the value that we represent to our customers. and to be able to invest back in the business. i expect all that to continue in 2016. betty: how is that, though? how does that -- economically, how does that work if you are seeing declines in volume? you're seeing these big head winds. how are you able to raise freight prices? >> like in any other market, our pricing is predicated on the value that we represent to our customers. so presuming we continue to generate an excellent service product and a service experience for our customers broader than
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the service product itself, that generates value for them and helps them win in their marketplace. that's the basis for pricing. betty: lance, i know you have opposed a canadian pacific-norfolk southern merger, it's going through review right now. what are you doing specifically to block this merger? >> thank you for bringing that up. specifically we say mergers in this environment at this time are not in the best interest of the industry. we oppose them. that's because of the regulatory outcomes we see. the service transportation board has been clear that consolidation will have to enhance competition, not just maintain it. it's going to have to provide a better operating environment for customers. they have to consider down stream impacts. our focus as we talked about on an excellent customer experience, we think is negatively impacted by consolidation.
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it doesn't help that. it doesn't help our ability to invest capital for safety service and efishency. betty: lance, let's say the regulators allow that merger to go through. will you feel pressured to follow up with a merger of your own? >> the valuation, of course, is solely he at the authority of the s.t.b. as they -- if they were to get an application in front of them and as that were to progress, we are keeping they close tabs on it. monitoring the situation. whatever the situation, we'll do what's in the best interest of our shareholders and stakeholders. betty: what does that mean? >> that means we'll do the best interests of our shareholders and stakeholders. we keep tabs on what's happening in the marketplace. betty: all right, lance. thank you so much. good to talk with you. lance fritz, chairman and c.e.o. of union pacific, the railroad giant. still ahead on bloomberg television, my counterpart, mark barton, will be sitting down exclusively with the c.e.o. john
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mark: well dom back to bloomberg markets. this is european close, i'm mark barton with betty. big story today. pearson, brettish education company, pushing high today. company planning to cut about 4,000 jobs, a thent of its worker force and -- tenth of its work force and reducing costs. struggleling demand for textbooks and dwindling college enrollments. the c.e.o., john fallon, joins us. you barely finished the last reorganization, and announced another one. why should we have faith in you that this will be a success? >> the last restructuring was a success in that it delivered very significant cost savings. enabled us to increase
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investment in the digital transformation of the company. but as you said college enrollments have come down more sharply than we thought they would. cyclical factor that's lasted longer than we thought. those college enrollments will stabilize and start to grow again. the long-term trend is for more people to go to college. we are investing 300 million pounds in a program that will deliver 350 million pounds of productivity savings and improvements which will flow through the profits of the company. by 2018 we are confident we can -- mark: that confidence rests on six assumptions. winning market share in the u.s., successful new products launched in brazil and china. is success assured in any of those? >> i think the important thing is by the end of this year the profitablity of the company will be 00 million pounds with 100 million pounds of further cost savings to come through.
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i don't think we need every single one of those assumptions to happen to get to 00 million. if we are successful with all of those, the prospects would be brighter. one of the things we are trying to do is listen to the shareholders who wanted deteriorate greater transparency and visibility what the underlying factors to drive the growth of the company were. that's what we tried to share. mark: why did you keep the dividends? shareholders are happy. they are up 20%. that's the biggest gain for pearson shares. some say you got better uses for the money. you spent 400 million in dividends in 2014. is the dividends sustainable or not? >> first of all, yes, we have had a good day today. we have had more than our fair share of bad days recently. we still have a lot to do mark: down 40% -- >> a lot to do to reward the patience of our shareholders. everyone in the company is focused on that. i think our view would be the first and most important source of our cash is to invest in new
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products and services. we are increasing investment. we have new products coming to markets. some of which you talked about. we are very confident there. second, we are investing in the productivity improvements that i talked about today. having done those two things, can we sustain the can i have dend? as you know following the sale of the f.t. we have a strong balanced sheet. mark: after the money you're going to put into the reorganization. you have 750 million pounds. what are you spending it on? acquisitions? >> i think the priority at the moment as we have announced a big program we have to get done. the focus is on delivering on this plan. then we'll see where we get to in nine to 12 months' time knowing we have a strong balance sheet. plenty of options. mark: you're wordry about your job. you have been in the job since january 1, 2013. for-profit warnings. this is your second
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reorganization. you have the reassurance i gather of the chairman. where the chairman supports you. end is nye. it isn't nye, is it? nighs ob is just all the and lead the company through a period of great change, great transformation. pearson is a fantastic company. i have been there 17 years. incredible mix of doing something really important, helping to create more education. deliver greater -- mark: you are underestimating as a company these changes technology is having on your business and ill-equipped to manage a sprawling operation that spans 80 countries. ? at's your report >> first of all we have very significantly reduced the geographical complexity of pearson. we have drawn from 20 countries.
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just in the last couple years. and actually i am incredibly excited about the disruption of education through technology and that's a fundamental part of our strategy. to give you an example, we signed a partnership with king's college london, just down the road, to have them run online degree programs. building on the great success we have had that with partners like arizona state university in america. we are the leader in digital education. in higher education with a leader in digital education. in schools across america and leader in digital education in china. these are fantastic growth opportunities for pearson. we are embracing that change. we are leading that disruption and the prospect for pierson are strong. mark: 60% of our profit is the u.s. do you have a prefeared outcome? >> what i think you see is there is bipartisan support for the idea that education needs to
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lead to employment. we have to translate learning into earning to make it work for more people. that's something where there's widespread support across the political spectrum. i will leave others to decide on that. we'll focus on providing better education to more americans and more young people. mark: it's upcoming. it could be this year. do you want britain, the u.k., to stay in the e.u.? how important is it for you? >> i think the biggest markets for pearson are north america, the u.k., brazil, china, india, south aftera. europe is a relatively small part of what we do. from a pearson point of view, we are agnostic and don't have a view. my own personal view is on balance i think it would be better for the u.k. to stay in europe. that's where i'm hopeful mr. cameron can do a good job of negotiating those terms and persuade the british public of his case. mark: great to see you.
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share price heading for the highest close since the inception in 1988. there you go, betty, john fallon, chief executive of pearson. betty: in the meantime we are holding on to our gains here in stocks. we are coming off a little bit from our high of the session, still up over 130 points, 140 points now on the dow. despite that buildup in inventory, oil inventories, crude oil prices are also keeping to their highs of the session. mark? mark: coming up on the european close, petty, stocks close in matter ever minutes. stay with us.
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betty: welcome back to bloomberg markets i'm betty liu with mark barton. the markets are just finishing the day in europe powered by mario draghi.
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mark: like powdered by cure cell. the stocks up 600. could be the biggest rise since december. what a change since wednesday when the stock 600 had the biggest fall since august 24. lowest close in 15 months. it wasn't a straight line. we'll talk about draghi in a second. post-draghi rose by 2.5%. came down rising towards the finish. at the start we do down by about a fifth of one percent. the big gainer in europe today, it looks like it could be a record high, record gain for the day. not a record high. pearson just spoke to the chief executive, cutting 4,000 jobs. second reorganization in a matter of years. betty: it is, indeed. back, though, mark, to mario draghi and what he said today in his press conference that caused this rally. mark: betty, have you circled march 10 in your diary? betty: i have indeed. yes. mark: there you go.
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it's live. i tell you why it's live draghi essentially today signaled more struss could be necessary. the deterioration we witnessed in emerging markets this year could see through into the tepid eurozone economic recovery. he's had to contend with lower oil prices which is pushing down on inflation expectations which, betty, have fallen to their lowest level since february of last year before the e.c.b. started in bond buying program. the strong euro has been pushing down on inflation as well. guess what? it fell today after draghi spoke. march 10, that's the big day, betty, for the next two months. betty: all right, mark. as you know there is a lot more ahead, though, before that. and especially in davos. they'll be talking, europe as well. private equity that is a big, big topic for them. eric is in davos there with roberto quarta.
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eric. eric: thanks very much. you said it, one of the oldest buyout firms in the world, started in 1978. doing private equity for a long time. dave, roberto, thank you very much, it has a reputation for avoiding the excesses of the buyout business. i would like to know what do you see as today's excesses and how are you avoiding them? >> we think it's important to be focused on what you know versus what you don't he know. don't follow trends just because at a moment in time people think that's where you want to invest. for almost 40 years now we have only focused on businesses that we understand well. have operating partners in house who knew how to manage those businesses better. we are going to stick to that. eric: what runs the risk of being overly fashionable today? robert yes: i think it is changing. -- roberto: i think it is changing. fashions come in and go out. it's difficult -- we had the big
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tech fashion. and the luxury sector that was sort of strengthening. what we try to do we are focused n how we invest. we do three to five deals a year. and we do it in such a way, we have experience and expertise. we do not invest in areas we don't have the expertise. both on the financial side and operating side, which you know is very much the way we operate. eric: one of the things that is consistently fashionable in private equity is leverage. how much leverage do you feel comfortable putting on a transaction today? how many turns? david: it varies on the transaction and company. as you know different companies and different industries have very different cash flow characteristics. so we have done deals in businesses in which we had a traditional highly leverage package, five, six times leverage. there have been other businesses
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we invested in which have been much lower because the company and/or the deal didn't -- eric: is your inclination today be more or less than you might have been in the past? david: slightly less without a doubt. importantly it's the amount of leverage is one thing. but the terms of that leverage. eric: how easy is to to get? we can see what's happening in the high yield market. we hear that bank lending is beginning to freeze up. particularly on the leverage side. what do you see? roberto: that's only the case in the u.s. at the moment. that mostly has to do with the significant reduction in fund flows coming in because of oil and gas. revenue has come down significantly. europe is still opened. dave, you can comment on that. david: we can still get leverage in europe. it's tighter than it was. eric: some firms have had trouble. they have had to sell finance the credit side of the transaction. roberto: they have some deals in the states, with bankers, they can't offload. they'll come over to europe
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because they think there is a market -- eric: european investors. robert yes: some of the bankers have told us. eric: we live in a world of lower returns. europe it's negative. does that make buying at the right price more important? roberto: i think we learned that lesson over the years. you buy it right makes it easier on exits. if you overpay -- at times people do stretch. they think this is strategic, this is going to be something that makes an awful lot of sense. let's pay a bit more. but that bit more causes you to do a lot of work to get the returns you're trying to get. eric: you're still investing in funds you raised in 2013. we haven't seen a lot of public market leverage buyouts over the past couple years. with the decline in stock prices and reduction in valuations, will that get easier? david: we think that's a trend
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that will he grow. a lot of bankers now are freshening up their analysis what are the right premiums you need and mup tillles. -- multiples. for us, we follow lots of companies in our specific industries, both public and private. eric: what's attractive by industry right now? david: in europe we tip to like the european consumer. early days in the recovery, supported by low interest rates, low energy prices. they have more money in their pocket, for example. eric: thank you very much. betty, that is roberto quarta and david novak. here at the world economic forum in davos. betty: thank you so much. don't get out of that seat because i know in just a few moments you're going to be sitting down with the chairman and c.e.o. of banc of america, brian moynihan joins eric in a few minutes.
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>> welcome back to bloom berk markets. i'm eric, this is david. we are he clited to welcome brian moynihan. good to see you. brian: good to see you. good to be here. eric: we have had interesting experiences at the forum. once again we are in the midst of a sellout. it teams like 2009 -- feels like 2009. i hope not. what does it feel like you? brian: a little bit planned. i think it reflects the tug of war about the economy growing, can they sustain that growth versus commodities down draft and expectation. i think that tug of war thing played out in the markets. eric: you think it's sensible?
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brian: it's sensible. i think at the end of the day companies like our have to keep driving. the consumers of america continue to spend. the question is how does it play out? >> are the markets sending us a message we are not getting about the underlying economy within the united states or globally? do you see that? brian: expectation that may. if they push up the interest rates are saying the economy won't be strong enough to keep raising rates. if you look at the real data we see for january, consumers are spending more than last january. fourth quarter. you're seeing delinquencies at an all-time low. you don't see it yet because it's just not there. are they projecting a different future than the current activity? that's probably the reason why the market is down. eric: some things are holding up as you point out. of the economic and financial conditions that you and your company face, what concerns you most right now?
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brian: at the end of the day, a company like ours is going to -- because we are big in the u.s., about 80% u.s., 20% outside, we'll respect the u.s. economy which right now is a good thing relative to some other economies. the number one risk for us is -- as a company if the u.s. economy, were not to grow as expected around 2% as we expect, that would change our business plan. we keep producing expenses -- reducing expense, they went down this year. the economic environment is slower, we'll make other adjustments. >> is there a feedback loop between the markets and household or boardroom? do people look nervous about spending money? brian: tend of the day we are on about 25 quarters. constantly reducing expenses. that's by applying technology. the big mystery going on here is how much technology enables you to do the same or more with less people. we just are very conscious about
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that. so we had a time when we had to go from $80 billion expenses down quickly. now it's more just grinding it out. we'll be down expenses this year and working at it. it gets to the boardroom because they look at the price and say is there something more we can do? we are doing everything we can. we'll continue the best long-term health of the business. that's one of the debates that goes on in the world as davos, short-term, long-term. eric: thanks to the volcker rule, basil, some of the things that you have done on your own, banc of america can't and doesn't take the kinds of risk in markets like these it once did. that being said do you find yourself making or losing money at a time like this? brian: we made money every day except for one if the fourth quarter. eric: first quarter? brian: is it as robust as it would be, but we are making money. the reason why, the risk is down. and the businesses across the
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industry. if you look across the last few years our fixed income trading has ranged from a little over nine billion. our equity business is four to four-three, very stable. a lot of that risk came out two or three years ago u you have been running a business constantly adjusting to scenarios. we are not low. a lot of companies in the industry. is it not providing the liquidity you want? no. we are half a trillion dollars smaller in the markets business than banc of america would have been. think about that's less stuff going through. >> that that can be contributing to some of the models we see? brian: there is a hueman behavior thing. not to be tedious, it's down to the individual trying to decide can i buy this? do i have a seller waiting or have an expectation a buyer would be there? that matching come down to individual behavior. think about 1,000 people and a company making that decision
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with no up side if you're wrong. it tends to be a conservativizing influence. that was the intention. he market will have to adjust. individual activity and human behavior, if i'm going to intercede and take this on and be criticized after i didn't do it against a demand, i'm not going to find out until the other side of it. it tends to be more sure that you're going to be right. that tends to slow down the process. that being said, that's a technical question, technical argument. it does have a dampening effect. eric: you talk about the consistency of your fixed income revenue. morgan stanley is shrinking in fixed income. goldman sachs. what do you see? brian: i'm probably in the middle in the sense i come out of it a different way. why? to support our client base which we have the issuer of our clients and investor of our clients. and a lot comes from matching
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those people every day. high yield issuance, high grade. hedging for middle market companies, large companies. commodities. all that type stuff. the business you have is not really a fixed income business -- >> as you see competitors like morgan stanley, for example, or the europeans backing away, fixed income, and you have the opportunity to reprise, is that going to make it more profitable? brian: it should. in our markets business last year we earned 8% return on equity. on pure markets. when you combine it with what most people call global markets, we were up about 12%. we are comfortable with what we are doing there. we keep shaping it. if the markets don't return to where they want to be, they'll continue to reduce expenses. the real big repositioning to place in the nine, 10, 11 range where we were in the mod its business. we got out of the trading business, fixed income. what we have now is core to that
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integrated customer base. that's why we have a relatively stable set even though we didn't have massive gyrations from different competitors. should have played to our benefit like competitors should. right now ucks talk about what will happen next. going on as we think. not to be critical, but just be the fact of life is now the adjustments are being made. >> issue mortgageages, good earnings -- mortgages, returning equity is something people look. you have return of equity something over 5%. which is not where you want to be. what's your plan? what do you have to do? brian: our return on common equity, in our industry was a little over nine. we have to do three things to get it up. we have to keep taking expenses down relative to the revenue. we'll get there faster because it will help rates. rates help us. we have to grow the core loans. so we are taking expenses down. i think as i said before, we
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took down head count by 2,000 in the fourth quarter. it's not pleasant, but we use attrition. the pattern to get there is those three things. what we saw in the fourth quarter of 14 to fourth quarter of 15. revenue grew four percent. we have to keep grinding it. all four quarters last year we had rising profits. eric: the easiest way to improve profitablity and boost returns is by reducing head count. you're at 213,000 people now. you were at 284 six years ago. where will you be at 2016? brian: i don't know if we'll be that lie. it drifts down because-- let's back up and say in that head count reduction we have also deployed more and more salespeople. you're making a double switch. one you are taking down expenses from the legacy issues. two, you are taking down expenses by the application of technology. most importantly you are reinvesting in the business.
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in the fourth quarter we had five or six percent more salespeople. 3%, 4% in wealth manage. the adjustment we'll make if the economy is not as strong, we may moderate those investment. would you we cannot not make those investments. this is the moment of truth for the company to keep driving the core franchise through. i don't think -- i won't give you a head count projection. it will be lower than it is now because those two fundamental things. applied technology to activity. and secondly, legacy issue's still coming down. don't take that as we are not investing in the business and the judgment we'll have to make with the board is if the economy really went south, those adjustments right now, those investments are paying back. eric: brian, thank you very much for spending time with us. here at the world economic forum. brian moynihan, chairman and c.e.o. at banc of america. bloomberg markets will return. stay with us.
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mark: european close, get back to davos, david is standing by with andrew liveris. chief executive and chairman of the world's biggest chemical company, or at least one of them. dow chemical. david, over to you. david: thanks very much, mark. thank you very much for joining us, andrew. even though it's chilly. andrew: yes. breath coming. david: last time we spoke, it was the day you announced dupont. bring us up to date on that merger. where does it stand now? andrew: look, we had 30 or so days. the team's are working very much to put together sninnering programs. things we are allowed to do until we close. we call them program management offices. we are putting people to those. and i -- he and i co-chair. remember, this is a pretty
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specialty on many respects because of the spins that will occur. we are also working the teams on getting these companies ready for spins. there is a limited amount we can do now. that amount of work probably will accelerate after day one. if everything goes to plan, lots of variables out there, but back half of the year close. kicks, 12, 18 months after that we can spin these companies. new dow, dupont, and specialty company. the devil is in the detail and people. getting the people together to get this program moving. i have been to wilmington. we have been to the facilities in indianapolis, des moines, iowa. it's the beginning of a very large program. david: any surprises so far on the up side or down side? andrew: it's got, his team, dupont, has a lot of work to
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work out. they announced their own job cuts program which was ahead of the merger deal. that's a lot of heavy lifting. we have been very respect youful and appropriately helpful. they have to do what they have to do. that's obviously very much in the center of graphity -- gravity in williamington and elsewhere -- wilmington and else where. you have to lay the groundwork for the positives to come out. positive surprises, i always knew the dupont pioneer franchise was a great ag business. meeting the people, this is cliche, but it is the people. when you do meet the people and see this tremendous science capability that dupont has, up close and personal, i think they would say the same about ours, you get excited about this ag company that will be the new dupont. on the materials side, you have the dow materials businesses. that one dupont business. we toured their labs last week. i was excited about what we saw there.
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the capability of their people. positive surprises. david: how are the shareholders -- some question because the two companies are quite different. 50-50 deal. andrew: the deal is the deal, the value of the marketplace. it looks at future of the dow. markets do what markets do. one of might argue sometimes their irrational. over a 10-year time frame, the market catch of these two companies are equal. if you want to look at it, 92% of the time dupont had a higher market cap than dow. this particular year or so we have been higher. roughly equal. they have a different type of business with a different multiple attached to it, the ag business. the deal is put them together with a 50-50 level. but in essence the shareholders who asked about that were answering the questions. there were other questions. now of course the noise going on , a lot of what we are doing is taking a back seat while people recalibrate what they see as the
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world rate. the middle of these deal, the portfolio, actually showing the synergies and the detail and why it takes sense on a tax-free efficient basis and the 50-50 answer we'll be providing those as soon as our earnings calls come up the next couple weeks. david: one person who seems displeased is your activist friend, mr. lowe. is that a real problem for you? andrew: look, they have been very much involved in the industry and the industry has seen a lot of activists. i have always taken the way forward as listen and learn. if there's something to be incorporated into what we are going to do. i must say did think about this ag combination way back early in our conversation. you know they do take some credit for that. they should. i also would like our company to take credit because we started working on this deal 10 years ago. to use the adage, it takes two
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to tango. the two companies, industrial logic, others seeing t. including the activists, that's been around a while, to pull it off it takes two c.e.o.s to come together like we did. check your egos at the door. david: full steam ahead. thank you very much, andrew liveris, chairman and c.e.o. of dow. back to mark in london. mark: thank you. dow chemical chief executive. just want to show you how the european equity boards has finished the day. a day teated by mario draghi who said the e.c.b. may need to bolster stimulus as soon as march. see you tomorrow.
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alix: welcome to bloomberg markets. ♪ ♪
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scarlet: from bloomberg world according to new york, welcome. alix: here is what we're watching -- >> we have the power, the willingness, and a determination to act. mario warning from draghi says the economic wrists are growing more stimulus might be necessary. scarlet: stocks and oil are bouncing higher at this hour as markets recover after yesterday. will this rally last? alix: emerging markets are feeling the turmoil this year. governor willxico join us from davos to see what he will do to prepare mexico to weather the storm. scarlet: we want to get a snapshot of today's market activity at go to the markets desk. green hours for now? ramy: au


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