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tv   Bloomberg Best  Bloomberg  August 20, 2016 8:00am-9:01am EDT

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>> coming up, the stories that shape the week of business around the world. japan is stuck in neutral. the quests to produce a self driving car accelerates. the minutes reveal what appear to be a growing and increasingly frustrated scarlet: another week of earnings. companies release their quarterly results. we are working on how we evolve our offerings to our customers. scarlet: provocative insights on the best interviews. >> the market with the euro is
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not adjusting well. >> i don't think there are any winners. >> it is an accumulation of evidence that monetary policy is ineffective. >> helicopter money practicality is zero. scarlet: it is straight-ahead on bloomberg best. welcome. i am scarlet fu. this is "bloomberg best." start with a look at the top headlines. monday began with a dose of disappointing data from japan. the company -- the economy grew less than expected.
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it contracted a second straight quarter. well shy of the analyst thinking. what other standouts are there here? >> these numbers will not help. the take away, net exports were a drag on growth. x fell.cap the strong yen is hurting demand from overseas. fromemocratic drag coming a shrinking population is sapping demand. we are getting hit on both fronts. it puts the onus on prime minister abe to prevent a recession later. how might he respond to these numbers? he could accentuate the positive . even that does not get him out of his hole. >> think about the potential growth rate. it is low.
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to have two consecutive quarters of any kind of growth is not the worst thing. there is some talk of mr. abe looking at a wage increase, we will look to see if he puts his money where his mouth is and comes up with some sort of tax incentive to motivate japanese companies to lift wages by some meaningful amount. >> post brexit hard data, input cost surgeon, import cost jumping. surging, import cost jumping. given what we are seeing that we are getting these inflation reads. the bank of england expects inflation to reach its 2% target. will the banks look through this number?
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if the pound gets stabilization, many predict it will decline, the bank could look through it as a one-off hit. a base effect story comes through and the bank can look through it and may cut rate further from here. maybe the pound goes down more. i put the -- among the pigeon, ending a 32 months period of decline. what does this tell us about inflation prospects? >> experts are sometimes right. on is textbook economics. we have depreciation of currency. both input and output, actually, through imports. the bank of england would
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extend that. to >> a battle of rates inside the federal reserve. that is the take away from the minutes of the open market committee meeting just released here moments ago. appearstes reveal what to be an increasingly frustrated contingent. fed officials who believe banks need to raise rates now or soon. >> before taking another step in removing monetary accommodation, it was prudent to get more data. what would you say is the number one thing we learn? the most interesting thing was there is a lot of
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disagreement at the fed over rather -- over whether to raise rates are not. there is little risk inflation is about to run away. over whetherplit to raise the rates because we are getting closer to employment. even most talks agree -- most will not putt upward pressure on inflation. he gives credence to the ideas that we should wait longer until we see inflation rising on a sustained basis. that reduces the urgency to feel like you need to hike at this past meeting or the next meeting. wal-mart reporting earnings estimates.igher than it is boosting its earnings forecast. a stable consumer on that end. the comp sale numbers, 1.6%.
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this is the eighth straight quarter of comp sales moving higher. >> same-store sales are up, up in revenue, what jumped out? a solid quarter for walmart. expectations have been low for over a year. good increase in traffic to their stores. a good increase in online sales. on line, in u.s., and international, there are only two markets out the u.s. that did not do well. the u.k., a lot of issues with the pound and competition. relatively weak because of cutbacks in government spending. efforts they have made in store with labor and technology, they are helping drive traffic. it is working.
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you have evidence. you have a competitor, target, not doing as well. it makes an easy contrast. on the walmart has been increasing price investment. that is driving pressure in all discounters now. to the u.k. economy. we have seen data on consumer prices and jobs. we got retail sales surging 1.24% as british consumers shrugged off brexit anxiety. we saw inflation higher than expected. data betterployment than expected. the start of the week, this expectation that it would be a poor week has gotten into the that brexit will be
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some of the data gives light of that and we see the pound going up as a response. >> oil is on a trend up. it had been a bear market three weeks ago. we have had two different viewpoints about why oil is enable market. the saudi's are talking about freezes and the other is fundamentalist. what is your reporting indicate? >> it is a little bit of both. the market is short. we were in a bear market three weeks ago. we have had a complete turnaround. lots of people have started talking about a production freeze. that shows a degree of unity within opec. is unified, they can move the oil market. we have this rapid rise up and we are in able market.
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like onead something trillion dollars worth of trade in futures on brent and wci. this is happening with heavy trading. we are still around $50 a barrel. nowhere near where we were previously. to come. more carl icahn explains how he is seeing eye to eye with aig's management. why central bank policies seem to fall short. highlights from another week of earnings reports. dreamprogress towards the of a self driving car. this is bloomberg. ♪
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scarlet: this is "bloomberg best." bloomberg scoop from monday.
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a tech company may be preparing to go public. dropbox is considering making the leap into the public markets. executives met to discuss the possibility of going public. the file storage company wanted to discuss the feasibility of a sense of theet a evaluation it could fetch from investors. >> valuation is going to be top of mind here. when it comes to whether or not they want to move forward. management brought advisors and to say if we did this in 2017, what would it look like and what would public market investors want to give us? we haves this year, seen a pullback and how much investors are willing to give these companies when it comes to valuation. if the company is not profitable, these are things that have prompted public market
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investors to push down on what they are willing to give in an ipo. >> our morning must-read. us a lookout at one big investments bought and sold. a few things jumped out. one of them was financials. in morgan a stake $1.25y, valued about billion. activist ino see an a bank because banks are so big and regulated and you have to approval.ment >> netflix has been hot for some time. tiger people coming out of it. >> chase coleman is out.
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so is julianso is julian robert. they cut about a $2 billion stake in it. in amazon andost facebook. is doublingffett down on apple. >> he is. 55% boost in his stake. shares fell 12%. he took advantage of a dip. revenue is supposed to decline for the first time the first time this year since 2001. at the same time, they are coming out with a new phone in the fall. -- thatnvestment banks is according to people briefed on the plans. is frustration with top anchors and top ceos that the u.k. negotiators still think
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they have access to the single market without giving in to a free movement of people. the u.k. government needed to take this time to convince the --k they had a plan to keep and a reasonable one. the banks don't feel like that has happened. there still seems to be a feeling from the government that they don't have to give up much of anything. banks are concerned by that. because of the process of moving people will take between 18 months and two years, all of the logistics, they need to act quickly once brexit is triggered. talking thousands of jobs across the sector. that is a meaningful amount. ford putting more fuel behind
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its technology. they will make additional investments in ridesharing and autonomous vehicles. ford hopes to have a fully autonomous vehicle by 2021. >> you are doubling your workforce, investing in technology companies to get you there. it suggest a go it alone approach. why take that route? we asked three questions when it comes to the development of a taunus questions. -- to the development of autonomous vehicles. when you look at autonomous vehicles, we have been at this for over 10 years. from some partnering we are doing with these technical partners, we have said we cannot do it all ourselves. we are partnering with companies to allow us to realize the vision of getting autonomous vehicles on the road. >> bloomberg is taking a step
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forward on the race for self -- uber is taking a step forward on the race for self driving cars. tell us what is going on. >> uber has embarked on this crazy research project everybody thought would take decades. they are trying to launch it now. it is exciting and leaps them ahead of google and tesla. google is still seen as the leader in terms of technology. >> how did they get there so fast? it is important to know cars in pittsburgh will have safety drivers and copilots. in one and it is interesting. someone is taking notes while you are driving around. thing they have done that is interesting as they bought a company. driverless trucking
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company. it sounds weird, but it may be the biggest deal that has happened in the space. about $680 was million and there are still incentives, so it could get bigger. >> china losing the grip on domestic stock markets. they have signed up on the stock --, will remove -- through its tooling's with hong kong. about fourstart in months and give investors access to any stock in the composite, as well as small and mid-cap technology shares. an regulator will not impose aggregate total. limited access to the domestic market for foreigners was a key did not addsci shares to its indices.
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the opening of the shenzhen stock link takes request for inclusion a step forward. -- in touch for the equivalent of 1.8 billion dollars. tell us more about these deals. >> they announced it would acquire a bigger stake in in aboutand it would spin $1.8 billion on the transaction. that, it hopes to increase its presence in both thailand, india, and africa, where it has a presence. >> are they about to disrupt the market? clear when it will come into the market, but it is imminent. they have spent about $22 billion.
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go in with four generation services. they are spending so much money, everyone is expecting a big price war. t-mobile is moving to shake up the wireless industry, announcing it is switching to an unlimited and plan for new customers. >> how are you going to make this unique? >> we are going to eliminate data plans and going all in on unlimited. a family of four gets that for $40 a line. we want to eliminate data plans. outomeone else has figured how to join us, bring it in. is sprint.eone else they announced today they will offer pretty much the same thing for a family of 4, 100 $60.
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will this come down to a price war? has their own issues with their balance sheet and their network not being invested in. the group you want to talk about as it relates to this is a rise in. that is probably who sprint is thinking about as well. only neverld not give customers unlimited, they cannot. their network was built six calls.go, and it is for they are not capable. we have twice the capacity per customer they do and a more modern, twice as new network. we have been building for three years. ♪
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scarlet: you are watching
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"bloomberg best." earnings season is in the home stretch. let's look at the most significant quarterly reports. starting with a record loss for a commodities giant. >> the largest mining company has reported an 81% drop in profit. is this as bad as it gets? >> that is the consensus. it could represent the trough. a rebound in the share prices, up 40%. there is optimism in some pockets. it seems a dark two to three years for these companies. >> is the worst over from an earning and dividends perspective? >> for a while. we live in an uncertain world. it is important to put the numbers in perspective. the majority of the loss was called by the -- we had to take
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thethe disaster, for valuations of our u.s. business and some taxation matters. the confidential year, we are looking at a 12% reduction volume,, a 4% uptick in combined will release further operational productivity gains of $1.8 billion. we are in a place where we are accelerating in our cost-cutting while our prices have stabilized and kicked up a bit. 1.4 $5 billion is the revenue number. a dividend of 3.1 cent if you are a shareholder. production for the year going into the second half, down. in the face of what is a tough market, are you seeing light at
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the end of the copper tunnel? >> i think we are. prices have been down for a while. we have been making a significant improvement in terms of rebasing our cost and focusing on profit. we are seeing that reflected in the numbers we have released. we have a good set of numbers. a few percentage points over last year, prices down almost 20%. that is the result of the hard work on the cost side. >> home depot earnings matched analyst estimates as profits rose while americans spend more money fixing their homes. the company boosted its earnings forecast by four cents. in-line quarter. it did slow, but that was expected. the first quarter was benefited from some warm weather in the
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spring. this is more typical of what you will find at this state of the cycle. we are in the middle stages of the home improvement cycle and it will last. five point 4% growth based in the u.s. is a good number. have the earnings report from target. it was a mixed bag. they were able to beat expectations because of cost-cutting. when you look at same-store were down 1.1%. this is the first time same-store sales have all in at target in about two years. told investors, don't expect it to get better in the second half of the year. he expects sales down as much as 2%. feelingumer might be more confident, but when it comes to true brick-and-mortar
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retail and companies like target, we are not seeing it come up in the numbers. >> what do numbers from lowe's tell us about where the consumer is now? had great numbers yesterday, up about 9%. they see consumers investing in their home. comes out today, a disappointment. they are not able to capture that tailwind of spending coming from consumers. of winnerse market and losers. not every retailer will be succeeding. the consumer's spending and targeted ways. posted profits that plunged 82%. battered bywas losses from jet fuel hedges. yields fell from competition from chinese airlines. >> jet fuel hedges are mounting.
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how do you reverse this massive slide in earnings? facing a -- environment. we see the the economic environment is a bit challenging. not just for the u.s. and europe. demand -- travel demands relate to the gdp growth. i think we will see short growth here. have an rather improvement story. the situation is we're seeing less demand for fine -- trouble. we are seeing customers trading down from a long-haul flights to short-haul flights. the demand for travel is slowing down a little bit. we hope it's a short-term issue rather than a long-term one. ge paid offcent sur
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in the second quarter with a wave of new users and record rockets. it's all about entertainment? big moneye spending on premium content and games. comics,ike anime, graphic novels. games,ings like the nba game of thrones in china. are attracting ad revenue. gaming remains an area of strength. mobile gaming more than doubled its focus on this area. it has to spend. it is buying a lot of its content. it almost doubled in the quarter. the question is how long they can continue spending like this. they've beaten expectations for product -- profit and revenue in all but one of the last six quarters. >> one other move is cisco.
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the report fourth-quarter sales the declined 2% from a year earlier in a "challenging macro environment." they will cut 5500 jobs which is about 7% of its workforce as it transitions from hardware to software. given the sense of where you are on the transition and how this potential layoff fits into that? thef you normalize out set-top box business we sold back about six or seven years our just months ago, revenues were up 2% and we record earnings and share up 9%. as we look at the transition we are going through as a company, the first thing we have to remember is am a 5% of the engineering resources at cisco our software engineers and happen for a long time. we are working on how do we evolve our offers to our customers? how do we evolve the way we package our innovation, the way we presented to them in a way they would like to procure it? more as a service, more is a
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prescription -- subscription. the quote i gave that we provided this information, our deferred revenue balance from software and subscription services was up 33%. we are making that transition. i am pleased with where we are. straight ahead on "bloomberg best," the week of the top interviews including sandel, steve went and carl icahn. this is bloomberg. ♪
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a ♪ "bloomberg best this is"bloomberg best." bloomberg television caught up with some of the world's most prominent investors this week. you will hear sam zell's nn's was, steve wy
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casinos and let's start with carl icahn, and outspoken activist on aig's board of directors. erik schatzker asked him how he felt about the latest vote. erik: you have gone to battle with many a ceo over the years. i've taking a last year when you call for the breakup of aig. aig came back with another plan. today they continue to execute on the plan, selling united guaranty for $3.5 billion. carl: i am proud of them for that. he and i see i die about they should be doing it aig and i supported the recently when a few people were really wanting me to really go to battle. i think he takes it very seriously that he will do a lot more of this. and now there is a company, erik , that should do buybacks.
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thehey have more cash, stock is related to what they can buy it for. they do with that money around. there is no machinery they can buy. aig does not by machinery. there is a company that should do buybacks. each one is unique. i can't say every company should do it. that is a good one you just mentioned. i just do believe hopefully that peter should do buybacks. i'm not saying when and how is an investor. rates, youive me low get a minor of dollars any continue a whole -- and he can dig you a hole. >> i think it was confucius beset a builder will build when money is available. all the other factors are secondary to is the money available?
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we are seeing very significant additions on the commercial property side. they are likely to have a significant impact. certainly we have seen significant increase in the amount of family housing under construction and being delivered in some markets like san francisco and new york. we see that in fact significantly. that was where the first new supply occurred. i suspect we are likely to see it across the country as more supply in family housing becomes available. i think when you talk about office space, i have been bear on office space for some time. i see a lot of movement in the office rina. -- arena, but i don't see a lot of growth.
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i see users becoming more and more clever in needing less space, therefore less demand. >> talk to us about europe at the moment. the post brexit of britain. have you exited a lot of your investments? >> we sold one of our larger ones. we have the largest railcar leasing company in europe? a company called vtg. we think the eu in britain will be hurt by the brexit. we don't think there are any winners in but will be the world's most expensive divorce proceeding. >> does a 10% drop in sterling since brexit offers some opportunity for you or not? we don'tersonal basis speculate and currency in the fund. the funds always has back to
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dollars. our investors gave us dollars and we want to give them dollars back. on a personal basis and a sterling tv getting a little overdone. i don't quite agree. you apply for 280 new gaming tables at the wynn palace and you got wanted to 50 altogether. what was your reaction? >> we thought 100 was the minimum every plan accordingly and we hired accordingly. if you ask a fellow, an executive that has a hotel benefits gaming rooms, they would say it's much better to be under spread in games than overspread. no one likes to see a bunch of vital tables. >> it seems that times have changed. the messaging has changed. coming from the government and the regular, they want to clamp down a little more. they do want to see the vip players as much as they did.
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the vip sector shrunk because the demand went away. the customers went away. i don't think the government took aim at the junket operators, at least that is not my opinion. that is not the impression i have. policies of central government in beijing had an effect of reducing consumer spending at the high end. louis vuitton, chanel. gaming fell into that category. >> are we seeing signs of a recovery in the mass-market? steve: good question. i don't know. it is hard to answer that. i think everybody is waiting to see what impact this has on the market. the last two places that opened the not cause the market to grow, did they? no.
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will this one? the question. we will get an answer in september and october. ♪
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♪ scarlet: you are watching "bloomberg best." several renowned economist brought some provocative opinions to the table. whol laureate paul krugman spoke frankly about what he sees as the limited effectiveness of monetary policy. not does the federal reserve when it comes down to monetary policy in a low growth, low rate environment? i have seenexcept any chelation of evidence that monetary policy is effective.
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we came into this thinking monetary policy at zero rates was ineffective. then along came qe, then can negative rates. i didn't think that was possible. there are other things that the central banks can do but it's not doing much. you have negative rates in europe. you can't move inflation off. you have massive qe. how much good in that do? it looks as if the things -- we may be going back to square one, which is where we started the discussion 18 years ago. dealing thing you can do was to hire -- promise higher inflation in the longer run. changing and creating the impression of a regime change, even after recovery, that was the only way monetary policy would get traction. we are most of the way back to that the right now. >> we got this note from john
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williams who lit up the possibility for what is rethinking. commits a higher inflation or maybe we need more impressive fiscal stabilizers. this is stuff people have been talking about for years. the real story is it's coming from someone so central. at the fed >> that's right. a lot of it is history. blood, sweat,see tears and toil to get inflation down from 10% to 2%. they settled on this 2% target. it's very hard to say maybe that was set too low. maybe we need to change this. that is something they've been really reluctant to rethink even now. it is news that anybody at the fed is willing to entertain the notion. these are not new ideas. it is just who is saying it, not what he saying. >> do you think that helicopter money can help in any way across the world? this is one of the
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silliest ideas journalists have come up with. >> whoa. whoa. >> there are no central bankers in the world -- there are no central bankers -- i'm not doing a donald trump. this is a fact. no central banker is talking about this. when i asked mario and drug -- mario draghi they said they had not talked about it. hello. that youle reminder probably were saying this about negative rates in january. three days before he went, he said negative rates? we are not doing negative rates. the problem is the more central bankers say, the less efficient it is on the start using it. >> we can blame the central bankers were a lot of miscommunication. we can blame them for negative interest rates. the practicality of helicopter money is zero. say it's a failure,
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what is the alternative at the moment? we don't have an alternative until we break it up. witness the is systemic and dangerous thing to do? continuingtter than in the current path. in other words if you look at what's happened as a result of the euro, the rigidities input and, and took away the exchange rate mechanism for adjusting and didn't put anything in its place, the output, the gdp of below evenbeen well the united states. we were the country where -- from wednesday crisis began. we have done a better job in recovery. basically, .3%, .4%, that is not a good performance.
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when you have the contrast is ,ontinuing that dismal outcome depressions in spain and greece, and an alternative. of course a divorce is not going to be easy. but it can be done in a way that is better than the current system. it would still be better if they put in place the institutions that would make it work. the question is will he do that. >> but if the euro breaks apart, something happens, they go to a party that wants out of the euro and france does the same, how many years of pain do we see before we get into this new world you're talking about? >> the crisis began in 2008-2010. we're at 2016. the market with the euro is not adjusting well.
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i think the example of countries that have a fight civil exchange rate like iceland respond to the crisis, one of the countries with the deepest crisis responded very quickly. i think we are not talking about six years. we are talking about a couple of years. ♪
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>> i want to draw viewers attention to a function of the bloomberg. adgo allows you to get plethora of information about the fed. you can see the fomc forecast. you can see minutes. >> there is a function of bloomberg argues. it shows the s&p 500 fa. it shows where the valuations are in the fa market.
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you and yields are relative to what we are paying for rates. there are roughly 30,000 functions on the bloomberg. we enjoy showing you are favorites. maybe they will become your favorites. here is what function do will find useful. quicgo. you can get important information about it timely topics. this one examines the recent turmoil in turkey. president is using a failed military to to tighten his grip on power. more than 250 people died in the night of street battles and aerial bombardment's on the 15th of july, 2016. but for turks reveled is nothing new. in country experience coups 1960, 1971, 1980 and in 1997. the prime minister step down under pressure from the military. he has been encouraged by the up
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-- boston uprising. one and 18,000 soldiers, judges, academic and other officials have been rounded up. a division that is tearing the country apart. here is the situation. turkey's political identity echoes his younger feet. straddling the middle east and europe, east meets west. the father of modern turkey is a military officer who led the nation at the founding of the post-ottoman state in 1923. since then the turkish armed forces have played a central role in maintaining the secular western looking society. the ak party was first elected in 2002 and he became prime minister the following year. as turkey's most powerful ruler, he is molding turkey back into an islamic world power by giving a voice to the underclass and islamic conservatives. many turks love him. the economy nearly tripled in a decade. over the last few years he has
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stifle political debate while fighting accusations of corruption. in 2014 he began purging the police and judiciary, they tank journalists and tighten control of the internet. he says those responsible for the latest who attempt are followers of gulan, and islamic cleric exile in the u.s. who is been denied by gulan was once an ally but then became a critic of the government, accusing them of corruption. been shy about his ambitions, building a 150 room presidential palace in over 30 times larger than the white house. here is the argument. while he has announced being autocratic, he is admired. his party's rule is the longest ability since the second world war. he has built hospitals and schools. turks it seemed living standards rise under his control.
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that people have been divided on what they think about the man in charge. turkey has been a member of nato since 1952, but it has been able to join the eu which is a critical of their track record on civil liberties and lack of democratic reform. heed and loathed by many, doesn't have plans lee power anytime soon. that was just one of the many quick takes you can find on the bloomberg. you can find in that along with all the latest business news and analysis 24 hours a day. that does it for "bloomberg best ." thanks for watching. i am scarlet fu. this is bloomberg. ♪
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