tv Bloomberg Best Bloomberg September 3, 2016 8:00am-9:01am EDT
coming up on "bloomberg best," the stories that shaped the weekend business around the world. with anlapped apple immense tax bill, drawing reaction from all corners. >> we do not expect that they did anything improper. >> you criticize europe, but we should look at ourselves. japan hints atof more stimulus while things are looking up and china, and the u.s. jobs report could be critical for the fed. >> i do think there is enough here to raise rates by the end of the year. central banks are a topic
of conversation with prominent banks that pull no punches. >> the work is never done, and i do not think you can say one and done and that is it. inbrazing by 25 basis points , and then doing it again in december. nejra: plus, a one-on-one with russian president vladimir putin. pres. putin: we will work with it. nejra: it is all straight ahead on "bloomberg best." hello and welcome. imf nejra cehic. youris "bloomberg best," weekly review of the most important interviews, analysis from bloomberg television around the world. the market is so buzzing from friday when remarks from federal reserve chair janet yellen
signaled that the case for higher rates is strengthening. if markets were worried, monday's trading did not show it. is on pace500 index for its best day since august 5, rebounding from a three-day slide. right after yellen spoke, we saw the big rally -- everything, stocks, bonds, treasury at the same time, then it reversed. today, we're seeing a reversal of that. everything is flying from treasuries to stocks, sort of trading as if the fed is not really in the picture or a problem. what you make of the market action recently and what we learned from the fed speakers and jackson hole last week? >> the short answer is not much, know, today,- you the market is moving higher on good economic data, which is probably the right thing. but i thought it was confusing. it is confusing because on the one hand, we know september is in play. we will probably get a hike later this year. at the same time, this is a
comment by janet and other members of the fed. this is going to be a shorter, shallower spike than what we've seen in the past, which means the fun rate is lower, which confirms that in the cycle, we are still a woeful environment. we have a combination of better economic data, people are not overly worried about the fed. competitionean commissioner has ordered apple to pay a record tax bill. how has apple responded? >> there is massive shock here today. reports were saying as low as 100 million euros, yesterday afternoon, the sentiment has changed. it might be in the billions, but i do not think anybody was prepared for over 13 billion euros, so it was a huge shock here.
that number sports and intense debate about what they should do next. apple is not very happy, pointed out that corporate environments have paid its taxes and everything right, and it is not fair that it should be treated this way. k: there is disappointment from both parties as well as the u.s. treasury. why did you feel the need to act unilaterally when the only cb has made so much progress over the last three years? >> the case here is specific because we have a long-standing provision of member states handing out benefits or advantages to specific companies. this is the case here, more than it is the case of taxation because these benefits, they can call in all forms. they can come in a form of cheap land, a generous loan, or a tax benefit.
that is the case much more than the interfering of the work done in the rain of g-20. >> is apple putting pressure on you? no, apple is doing is separately, and the irish decision will -- and the irish will make a decision tomorrow. we do not accept that the irish encourages acting improperly, secondly, we think that combatants under european law is with sovereign governments. we think the commission in europe is trying to get through a back door to influence matches and portray them as state issues. >> apple insists it did nothing wrong. tim cook says, "apple follows the law and pays all of the taxes wherever we operate.
" >> this is a small hint to them, even if they are forced to pay it. longer-term, how they think about dealing with europe, doesn't impact of other companies impact europe? the ceo of germany's largest lender, john kline, shooting .own a merger with verizon saying he would like to see his bank actually shrink. >> part of the world we are doing is to make our banks smaller in order to make it a bit simpler. set higher standards for control, but we want to make more successful. caroline: this news, this report, isn't really news? >> is certainly was, and it comes on the backlog. bankingseen european coming under a lot of pressure. banks, italian banks finding a
solution, but there has been a great deal of focus on the power of the banks, managed, restructuring, very difficult market positions, negative rates, squeezing further. it is on the back of that, it is all focused on -- and might have been on the table at some stage as a means to grapple with these long-term difficulties that the bank has. there still seems to because for consolidation in the german banking market. commerzbank's sayings ackley that. elisa: yes, that is right. ofy should've gone with one the smaller players, not the large players. the larger the banks become, the more capital, and the regulations set aside, this is what deutsche bank is up against -- commerzbank is up against. it is hard to see what they
would solve an immediate term. a bit of optimism, you could say, from chinese operators. what did he numbers tell us? >> they tell us it was a surprisingly robust number four manufacturing pmi out of china, coming at 50.4, and that signifies a beat over the median accident, a reading of 49.8. this is the highest reading since october 2014, and it shows as you can see, here, may have been a bit of an aberration caused by severe flooding we had in southeast china that affected about 1/5 of chinese economic output. mgu is thisy -- guy: is this just a blip? >> you are correct to question it, guy. in this case, you can be a
little bit reassured, is basically this is a slightly longer term trend here secondly, it is broad-based. we have not just seen an improvement in the official pmi. we have also seen no range of different measures from an index based on satellite images of chinese industrial zones, to the flash meeting on korea's exports, which tends to move closely in line with china's exports, all improving slightly in august. 151,000 jobs. that is the increase in nonfarm payrolls last week. unemployment rate steady at 4.9%, annual rate growth slower, it adds up to a disappointing jobs report for the month of august. far from a disaster, of course, but falling short of expectations by enough to throw a rate hike at the fed's next meeting into doubt. bill: i think september is on dirt i do not think it is 100%
on, but i think it is close to 100%. i think janet yellen told us not just in jackson hole but in other places that she looks at jobs, jobs, jobs, and that gdp is not at the top of the list. if these types of jobs don't do it, i am not quite sure what does. flags inot see alarm this report. i suspect it is less likely that the fed will act in such ember, which i always thought was a low probability to start with you i do think there is enough here to keep them on a path to raise rates by the end of the year. >> this is going to ultimately fundamental one issue -- how worried are fed officials about the collateral damage and the unintended consequences of a protracted period of low interest rates. if they are as worried as i am, then this report is a green light to height. -- two hike. if they are not worried, then they will wait. >> the august jobs report gives
with the prospect of more central-bank easing from japan. >> the bank of japan has reiterated that it will reduce stimulus. kuroda says he has ample room for additional raising when he addressed central bankers at jackson hole. what clue does is give us to this meeting next month? >> governor kuroda, as you mentioned, is signaling with again, as he has before, that increase to foreign policy is possible. we know negative interest rates could be cut further. it also could mean an increase in asset purchases. he is certainly pushing back on the view from some that he is running out of ammunition -- .ro a limit on the bond purchases, that negative rates have to much damage, but we do have some other analysts starting to question the idea about whether the bank of japan could move in
to learn -- local government bonds or corporations, and we can see the effects on the infrastructure project. a look attake i home prices, up 5%, personal income up more than 2% cured how much housing appreciation can we see without income rising just as much? ofthere has been a lot momentum in home prices. there are different from the stock market. they have been going up since 2012, but at a slower pace. it was more like 10%. now i am kind of worried that it will slow further. seasonally adjusted, we are just .bout flat, no change so have the cities are down slightly. it seems to be a weakening mark. it was still an apparent uptrend. >> and london, the minute we see a cooling down, panic strikes. we focus so much on what that
makes us feel from a consumer point of view. does this spell doom and gloom going forward for the u.s. economy? shiller: doom and gloom is too strong a word. housing is a very strong-willed effect because housing is held more broadly than stocks are, and it is not held in a retirement portfolio. verye see it, and they are aware of these house price movements, so i think it is possible that there could be weakness coming this fall. when the seasonal pattern no longer posts home prices. if the fed should raise interest rates, it might be a kind of a signal that the market is headed down, and so there could be a change in confidence. we have not seen it yet, though. >> this morning, we have gotten fresh data out of the european area. ever ofo signs that the
economic outlook has deteriorated. lackluster. a surprise? >> not massively. oil prices lingering on. the important point about inflation, when we are looking at inflation is and should not be sort of dazzled by the decline in the energy price. look at the underlying trend. in some countries in europe, and germany, for example, we have got some signs coming through there. core inflation was not great, but do remember that core inflation still includes energy. says itugh it i excludes energy, do not believe it. so i am not too worried about this sort of level. if it were coming in a 0, i would be a bit more concerned, but it is ok for now. caroline: it gives you more bruising -- breathing room for mario draghi to ask next week.
paul: i do not think he is going to act. er, ia serial eas think even he will have to admit additional action over and above is not required at the moment. is economy is not -- europe not exactly a dynamic economy on a good day, and it is performing reasonably ok in most parts of the euro empire. the sport of oil means you must be with edward morris of citigroup. we speak to dr. morris about the certitude that he sees wit, whih is an either/or world. what you mean by that? the market is receiving a lot of reasons to be short and a lot of reasons to be wrong. which is going to be right? a lot of this is whether your , or on the opec
rebound that u.s. wildcat or skin half. -- can have. am: i usually do not do 200-day, but it works here. massively range bound. what is the citigroup call? edward: 48 for this quarter. , $52 for next quarter. to so it works higher. m: edward: it should work higher. francine: is that a false analysis, or should it change ? edward: it is really a moving target. the moving target has to do with one of the things we cannot really talk about all the time, and that is -- how much does it cost to produce oil in the united states? that price gives going down. how much does it cost to produce oil in deepwater? here and is going down
we are in a constant deflationary environment, and that models the picture. we have not really been in a position where we are in a cost deflationary era, and we have u.s. shale. it is a big experiment. bill: i think central banks are addicted to low and negative interest rates now and are addicted to quantitative easing, so let's call it what it is. how you move from heroin to methadone in perhaps a normal economy going forward? there are two ways. one, to gradually raise interest rates. if you need to pay yourself -- or hurt the economy now or hurt it later, which i think they are trying to do, in terms of the addiction. the second way is sort of conceptual, but out there in terms of standard deviations. if you keep on doing what you are doing, talking about central
banks, the bank of japan as the lead dog here, you basically keep on keeping on by buying up government debt, and ultimately down the road, the central bank basically says to the authority that they do not have to pay any more. that is the longshot way out. shot, if you not a will, that you are arguing for, though. bill: no. i would say, "come on, let's raise interest rates in september, and six to nine months, let's do it again." capitalism cannot really do well -- it can survive -- but it cannot do well with 0% interest rates or negative interest rates because, as i pointed out, it is an interesting concept, $11
nejra: you are watching "bloomberg best." i am their achievements. the federal open market committee will meet, and fed officials insist they will continue to be data driven and that decision. in an exclusive interview on bloomberg television this week, tom keene asked stanley fischer how that will affect policies in both the short-term and long-term. ouran you do one and done even to and done, or do you have to go to a measured set of rate increases like we saw a decade ago?
stanley: well, the work of the central bank is never done, and i do not think you can say one and done and that is it. choose the pace, but if we choose the pace on the basis sodata that are coming in -- i do not think we know at the time we start whether it is one and done or several. it depends entirely on what is happening in the economy. in your speech, you stated, "i am an optimist." you are surrounded by pessimists. we stick to them everyday on bloomberg. i want you to redefine margaret's, that jackson hole, per se -- pervasive pessimism is out there. it exists today. how do you push back against that? stanley: what is the pessimism about? it is not about unemployment.
it is about growth. and that is largely about productivity growth. which is verying hard to control by policymakers. it depends enormously on what private individuals are doing in their companies. it is very slow at the moment. it changes from time to time. we do not know when it will change. i expect it will change somewhere down the road. there are remarkable things going on on the technological front, but they are not yet in the data. tom: you mentioned also the unmitigated blessings. certainly you and chair yellen are running a central bank that stems from a challenge that other central banks have. the december meeting, do you feel that you are the central bankers to the world, can you be discreet and only look at the united states'economics?
stanley: well, the world is becoming increasingly interconnected, particularly in the capital markets of the world, so what we do affects many other countries. that was always so. it is also true that what they do affects us, so we're dealing with interconnectedness, and we are probably the most important of the central banks, but the isopean central bank operating in an area of about the same level of gdp, and what it does matters a great deal and so on. within the debate that you are having for september and december, are you sensitive and aware of global financing global banking having to do with negative interest rates, just as one example? stanley: well, we are sensitive to what is going on. -- hears about it tom: you just have to look at the stock prices in europe. stanley: yes, we take all of
that into account. the united states is fortunate where interest rates are negative or have to be negative, and we are not planning to do anything in that direction. but we certainly follow the debates, and we certainly follow the theory of negative interest rates. reservehat was federal former chairman stanley fischer in an exclusive interview with bloomberg's tom keene. still ahead, john speaks with vladimirpresident putin. one-on-one with one of the world pose the most powerful leaders. this is bloomberg. ♪
editor-in-chief sat down to an exclusive interview with russian president vladimir putin, a rare opportunity to directly engage with one of the world's foremost political leaders who exerts a vast influence on the global economy. here is a portion of that conversation. at ho would you rather have the other end of the telephone if there is a geo political situation, donald trump or hillary clinton? >> i would like to work with a person who can make responsible decisions and implement any agreement we reach. the last name doesn't matter. of course it's necessary for that to include the trust of american people. the political will to field all those agreements. therefore we never intervene, do not intervene and try not to intervene in domestic political processes. we will closely monitor what
happens and wait for the election results and then we will be ready to work with the administration if they want that. back in 2011 you just accused hillary clinton of seeking to trigger the protests you were facing in russia at the time. i am just looking at some of the things donald trupp please said about you. back in 2007 he said putin is doing a great job. in 2011 he praised you for your no nonsense way. next year he said you are his new best friend. next year that you were out smarting the americans. are you really telling me if you have a choice between a woman who you think may have been trying to get rid of you and a man who seems to have a great affection for you, you're really not going to make a decision between those two? one of them would seem to be a lot more favorable toward you.
>> i essentially already answered the question. i'll say it again in different words. we are ready to work with any president of course. if someone says they want to work with russia we will welcome it. if someone wants to get rid of us that will be a completely different approach but we will survive it. it is not clear who has more to lose with that approach. i have repeatedly seen the antirussian card laid during domestic campaigns but i think this is a very short-sighted approach. at the same time, they send up all sorts of signals from all
sides. in previous administrations that's the way it was, too, during the campaign. we will restore everything later. there is a level of responsibility that lies on the shoulders of the u.s. i think that all this should be more dignified, calm, and more alanced. someone -- act that you know, for example, one of the members said that russia allegedly paid money to the foundations. what's that? does that mean we control the clinton family?
of course i don't even know which funds. both one side and the other side are using it as a tool in the political struggle and that's bad in my opinion. if someone says they want to work with russia, we will welcome it regardless of what last name that person has. >> the other accusation you've faced, or they've said a lot is that people connected with russia or backed by russia were the people who hacked into the democratic party's data base. that you would also say is completely untrue. >> no, i don't know anything about that. you know how many hackers there are today. there are hackers from a series f countries.
it is an extremely difficult thing to check, impossible to check. at any rate we did not do it at the state level. >> isn't it time that we all -- >> is that really important? does it matter who hacked the data from the campaign headquarters of hillary clinton? the important thing is the content that was given to the public. there should be discussion about this. and there is no need to distract public atext from that by raising some side issue with the search for who did it. i want to tell you again i know nothing about this and on a state level russia would never have done this. couldn't imagine.
the campaign headquarters works in the interests of one, in this case mrs. clinton so even from this point of view we couldn't have officially penetrated it. ou understand to do that --. you understand to do that you need to have a finger on the specifics of the domestic policy in the u.s. >> do you not think this is sort of a time when everyone should sort of come clean about this if russia tries to hack america, america tries to hack russia. china tries to hack america. china tries to hack russia. everyone tries to hack each other. one of the purposes of the g20 is to come up with a new set of rules so this can become a more
ordered version of foreign policy when everybody is doing it? allegedly. >> i think that would be better this. get involved with she is mainly concerned with he global economy. if we have squabbles or even not squabbles but very serious issues as relate to world politics then we were overwhelmed with the g20 agenda. instead of working on issues of changes to the economy, taxation, and so on, in place of that we'll endlessly argue about serious problems or some other world problems and there plenty and we'll talk about the middle east. it is better to find other venues and other forums.
>> you're watching "bloomberg best." let's return to a story that sparked discussion and debate throughout the week on bloomberg television. the european commission ruling that apple must pay ireland more than $14 billion in back taxes. the impact of the decision clearly extends far beyond the interest of a single company or a single country. >> has come out and said, don't appeal. accept the money. why don't you just accept the money and shut up?
13 billion euros plus interest. that's a lot of money. >> because as minister for finance i have a responsibility for advising the government on these matters. this is the government that rescued irish -- ireland from the verge of bankruptcy from 2011 on and foreign direct investment and the creation of high level jobs is fundamental to our economic policies. we stand by our economic policies and we're going to protect our economic policies. we're not going to get into a situation of short-term gain for long-term dooge the economy. >> what have we heard from other tech companies? >> this is as we have yesterday i think some analysts, people were saying it's on the scale of one to 10, 10 being extremely damaging, the lower end about 2 to 3. the thing is ireland has 140,000 people employed by u.s. largely tech companies. the risk is those jobs start to be put at risk and it ceases to
be the automatic place american companies might go if they go to europe. on the flip side if you are any other country in europe ireland is like 180 billion in debt from when the bavenlgs were bailed out so this 14.5 billion will go toward paying that off. as a german citizen you're thinking why should i subsidize apple to have jobs in ireland? >> a lot of companies make use of ireland. we kind of consider it like the austin, texas of europe. there is a tech community built up there. ireland has developed favorable tax laws. a big contingent of life science pharmaceutical companies in significant operations in ireland because it is a good place to be. there are favorable tax laws and also favorable treatment in how the taxation system treats these transfer pricing agreements. this is a little bit of a warning shot from the european and may cause some companies to take a look at
whether they negotiated maybe too sweet a deal with ireland and at corporate structures and how the overall multi national setup is working for them. i've located s, in ireland. many companies have done that in belgium and ireland. it's just that apple has been smacked. >> exactly right. they went in the early 1990's when they weren't making any money. steve jobs in pictures from the mid 1990's kept turning up there. that is the reality. it's just the legislation. it is a much wider debate about the global tax structure and whether it's acceptable. which it isn't. it is ridiculous. american companies in ireland, all over the place. not just american. everyone is doing it. >> is this to the united kingdom's benefit? did the united kingdom with brexit become the new ireland? >> they certainly seemed in a good position to do that. if they're out of the eu and out of the reach of the
european commission and its tax regulators they can certainly say come on, guys. we're a much nicer place to be. e welcome your investment. we welcome the jobs. it looks like the e.u. is pushing back against that. >> your job is to talk to them and encourage them. give me a sense of the scale of how big a shock wave this is causing. >> i think companies are taking stock but i think it's the and it is a is really dangerous precedent. foreign investment could not rely on the statutory tax basis of each member state's taxes. it would open up to the commission at any point in time. retrofitting -- it's very damaging. i think that is the most worrying thing from yesterday in the short term is the commission who on the one hand should be promoting job creation, enterprise
development within the european union that desperately needs this, on the other hand has undermined the ability to attract foreign investment. >> an unusual moment here. we're seeing the u.s. saying it doesn't want to collect. ireland saying it doesn't want to collect. the eu telling them they better do it. does the u.s. want the tech companies to be lured back to home? >> that is part of it. on the one hand the u.s. like apple tim cook says it is over reach by the eu to go after this money. on the other hand part of what's going on here is clear the u.s. is saying wait a minute. there's almost $2 trillion in money offshore from u.s. companies. they've done it deliberately to keep their process of being taxed at u.s. rates. now they're thinking, hum. if the eu collects some of that money there may not be so much for us to go around. it is really putting up the pressure for the u.s. to address its corporate tax system. part of that might be what people have talked about as a repatriation holiday where companies are allowed to bring some of that money back to the u.s. at a very low tax rate. >> we have clearly, clearly
articulated our concerns and i think that the way forward with this is we continue to make clear the concerns we have. it is also important to emphasize along a parallel track we've been engaged in a constructive effort which we see as being more policy led forward in the g20. over the last year a fair amount of work has been done but on exactly this issue of how do we optimally and appropriately tax multi national firms? and take steps to ensure that they're paying their fair share. >> there will be those who say in light of that, multi lateralism is a good thing. but if one of those parties isn't doing anything, why wouldn't the european commission just go out and do this on its own? there has to be some frustration with how glacially tax reform has been moving here in the u.s. yes, treasury has done some things on its own but congress has not thus far.
we at the treasury and administration have been clear about the tax reform to shift incentives. as you say it takes a broader effort including congressional action to actually make that happen. i think clearly that would be the first best outcome. >> the statement, congressman levin of michigan wrote, "in criticizing the european commission's decision treasury and everyone else must totally avoid legitimizing the practices of multi nationals in some nations rigging the tax system so the companies pay little or no taxes for their operations." >> we criticized europe but we really should look at ourselves and when we criticize europe and some of the retroactive part of what was done may be questionable. what we have to be clear we don't condone a system that allows companies to shift and eas often in name only essentially avoid paying taxes
almost anywhere. >> representative levin, what are your thoughts on retroactively taxing a company because the tax benefit would go to ireland since it is already headquartered there. >> i think it's an issue. you know, there was a deal between ireland and apple. it involved what's called technically transfer pricing. there were some real issues as to whether apple was going to end up paying a fair share of taxes anywhere. and they keep all of their profits in europe. they don't bring them back here. so the typical citizen, this is what i hear, we pay our fair share. we want multi nationals to pay their fair share. and we should not say anything that condones when that doesn't happen. >> representative levin, is the answer potentially a lower corporation tax in the united states? >> i think we have to lower it, but it has to be done in a responsible way. we have to do it in a way so
that everybody is paying their air share. and that isn't happening today. >> apple c.e.o. tim cook is confident the company will win the battle over taxes with the european union. he spoke with the irish forecaster about the eu decision. >> it's maddening. it's disappointing. it is clear that this comes from a political place. it has no basis in fact or in law. i have faith that eventually what is just and right will occur. >> is it in line with what we have from tim cook in public opinion? >> i think it is split. you have people in the streets saying hold on this is the world's richest company and we're trying to help them save 13 billion euros that could be used for hospitals, roads, and paying on national debt. we shouldn't really help them. those other hand we have
>> i'm looking at a function here that i hope will get even bigger than it is for bloomberg clients. that's whis go. his allows you to be competitive not only with colleagues at your own company but with colleagues at other companies and place gentlemens bets or gentle ladies' bets i guess. i don't know the term for that. on various things. >> there are about 30,000 functions on the bloomberg and we always enjoy showing you our
favorites on bloomberg television. maybe they'll become your favorite. here is another function you'll find useful. quic go. it'll take you to our quick takes where you can get important contacts and fast insight on timely topics. here is a quick take from this week with another angle on apple. apple has the most cash, strongest brand, and world's best performing retail stores but a recent sales take off underscores questions about whether apple's business model can endure. here is the situation. apple's number one seller the iphone accounted for two-thirds of the company's 2015 revenue. right now it is the biggest source of concern. earlier this year the company reported its first year on year decline in quarterly sales in more than a decade. now apple has been ordered to pay a record $14.5 billion plus interest after the european commission said ireland illegally slashed apple's tax bill. apple said it would appeal but certainly could afford to pay
with more than $231 billion in cash and equivalents on hand. here's the background. after founder steve jobs was ousted in 1995 apple stopped coming out with new hit products and was days from declaring bankruptcy when jobs returned as c.e.o. in 1997. jobs slashed 75% of the company's existing product to focus on just four. market share slipped below 2% in 2003. but then came a windows compatible version of apple's itunes music store which turned the 2-year-old ipod into a sensation. sales ballooned from $6 billion in 2003 to more than $24 billion in 2007 for the iphone. here is the argument. since jobs' death in 2011 c.e.o. tim cook hasn't strayed from the one blockbuster at a time model even in a saturated phone market. the company shifts 1.6 million apple watches between april and june. that was less than half as many during the same period last
year according to i.d.c. perhaps bigger growth potential is in services. that could be customers ever more tightly into the web of apple products. apple's long-term prospects look good enough to warren buffet. he bought out the shares worth about a billion dollars earlier this year. >> that was just one of the many quick takes you can find on the bloomberg. you can also find them at bloomberg.com. along with all the latest business news and analysis 24 hours a day. that'll be all for "bloomberg best" this week. thanks for watching. this is bloomberg. ♪