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tv   Bloomberg Best  Bloomberg  September 17, 2016 12:00pm-1:01pm EDT

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ramy: coming up on bloomberg best -- the stories that shaped the weekend business around the world. a report on oil says the glut will persist. a smartphone giant dials up damage control. the boe keeps rates on hold for now. >> i liked that they got the retaliation in ramy: frank talk first. about serious challenges. >> we need ports. energy. >> it goes in the category of you can't win them all. ramy: leaders gear up for the next phrase of brexit.
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>> the negotiation, when it will start, will be global. >> i don't mind the government spending a few months getting their ducks in a row. >> we will reserve our right to oppose. ramy: decision day approaches for the fed. everyone has an opinion. >> i can't see a case for a tightening. >> this has been a topic of almost numbing boredom to me. ramy: it's all straight ahead on "bloomberg best." hello and welcome. i'm ramy inocencio. this is "bloomberg best," from -- your weekly review of the most important interviews and analysis from bloomberg television around the world. let's look at the top headlines. when fed it governors speak, people listen. she had the financial world on
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the edge of its seat. >> said board member lael brainard keeping a dovish tone in her remarks today. she says economic progress continues in the u.s. but the bank would be wise to continue to keep politics lives. she has a dovish reputation. she is concerned about the labor market and international concerns. what do you make of her speech and where we stand in regard to the upcoming meetings? >> i would say her comments were in line with our expectations even more dovish. for patientsase and caution, in light of what other fomc members have said. we think that the data has cleared the hurdle for us for a -- for september hike. there is a strengthening consumer spending and large rebound in the labor market momentum. the concern is inflation.
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among some corners of the committee. it has evolved, along with their forecast. the data has cleared the hurdle. the problem is, the markets don't have it priced in. historically, the fed doesn't move unless the markets have been priced in. the slate of communications in recent weeks against a softer data backdrop. -- backdrop has not been enough to move probabilities higher. >> it's just to move the market to the prospect of a rate hike? >> it may seem odd to say they are fine with surprising markets with a speech, but they are not fine with surprising on the decision. in reality nearly all of their , rate hikes of happened when market probability has been 70% or higher. they would have to want to surprise markets at this point in time. >> the international agency of course on an oil glut. says the oil glut will
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persist into late next year. they predicted the market would return to equilibrium this year. mark: at one moment, it ins this year. now it is pushed back into late 2017. what changed? >> what has changed is the outlook for global oil demand. that has cut back quite significantly for the current quarter. they revised growth down from about 1.2, 1.3 million barrels a day to as little as 800,000 a day. that's based on preliminary data from july and that has august. pushed the market back into oversupply at least until the middle of 2017. mark: and it comes after opec flipped its forecast for next year, predicting this increase in output from outside the group. both the bearish -- >> both of them have actually
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flipped their forecast. one showed balance returning in the current quarter to one that shows balance now being put off for 12 months. interestingly they come at it , from different directions. the ia comes at it from lowering the demand forecast. opec came at it in the opposite direction by raising the forecast of non-opec output. vonnie: it took 4 bids, but bayer clinched a deal to take over monsanto. the deal is for $56 billion. it's the largest foreign takeover by a german company. it will create the largest supplier of seeds and pesticides. >> you feel confident you will do what's needed to get this deal through? >> as you may assume, regulatory challenges have been discussed intensively as part of our negotiations. we have both had a very large teams of our own people and a
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counsel looking into it, to assess -- we looked at a jointly to assess how big the regulatory challenges might be. in a way, we are blessed because this combination is one that is highly complementary and has for the size of the transaction a very low overlap. that is our assessment. we are looking forward to engaging with the regulatory agencies. we are going to have to file. we are preparing ourselves in order to address regulatory concerns. so we can serve up what is needed to get our transaction and the combination of our business to the finish line. >> happy thursday. we begin with breaking news from the bank of england. john rates remain unchanged. 4.25%.-time low of
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line with expectations of everyone. the key line here is the majority of the monetary policy committee is expecting a rate cut if the august outlook is confirmed. do you think the august outlook will be confirmed? >> obviously that is a tough one. we see some resilience in the last few days. the early surveys done by the bank agents and others say they expect to start to cut back on investment and jobs. probably we will start to see stuff coming in the hard data. i like the fact that the mpc got his retaliation in first. it did not do anything until october 08 in the great recession. the economy entered recession in april 08. this is good news. part of the good news is people see the bank active.
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the concern is we will see slowing of the data. it's early days yet. it takes a while to measure it. my suspicion is we will see some weakening in the data, as the majority of members on the committee are saying. >> deutsche bank says it won't pay the $14 billion sought by the u.s. justice department to settle an investigation into the conn's sale of residential mortgage-backed securities. that is more than triple what some analysts said it could be. >> the $14 billion they are being asked to pay -- they are rebuffing for the time being. we are not going to be certain of an outcome until we are there. i guess investors will be looking at the kind of metrics that were applied to other banks in similar cases. those would indicate a much smaller fine. at this juncture -- but of
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course we won't know that until , they reach that agreement. >> if the settlement is close to the $14 billion, that's not great for deutsche's capital position. anything over $4 billion would the meeting additional litigation and capital. >> does the amount go down from here? they start negotiating with deutsche bank? >> they are taking a hard stance. the other banks have not had to do this in public. the other banks of had these -- have had these negotiations. they have not had to put up public statements saying we will not be anywhere close to there. it will be interesting to see how that changes the dynamic. i think you will definitely see it lower than 14. anything above for being an -- anything above 4 being an issue, that's a big gap. ramy: we will have much more in european politics later in the
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show, including exclusive interviews with the eu and u.k. leaders on the path ahead and what that bodes for business. plus, more fed talk in the next week's critical meeting. but more of the biggest stories first, and we dive into tech nology. samsung is taking a lot of heat over its exploding phones. now they are taking big steps to defend their brand. this is bloomberg. ♪
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ramy: this is "bloomberg best . i ramy inocencio. our global tour of the news keeps going. two big stories for very different reasons -- one came together and one fell apart. mark: add another megamerger to the m&a graveyard.
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linde has called off a deal. why have these talks fall apart? >> it's funny. on paper, they are saying there were issues of governance. the game behind the scenes sources are saying there were a , variety of issues. one of them was what nde havebility would li in munich? there are always these political back-and-forth. it sounds like some of the labor reps were pushing back because they wanted to secure more operations in munich. vonnie: is this overall good for the industry? does this mean we are facing more years of downtrodden prices? >> it's good for the companies. by combining these two players, they will cut out costs and get more purchasing power. they save up $500 million year. that's why people like this
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deal. >> far from perfect. that is how the volkswagen ceo described their position before the emissions cheating scandal. >> he told bloomberg there were profitability issues and overinvestment. >> there is still some a skepticism, and certainly delivering results is critical, even without the crisis. there were strong results in the past. we were far from perfect. we had profitability issues. even without diesel, we are very honest about the shortcomings. >> how are they planning to get out of this crisis? >> there are two main initiatives. one is a reorganization of the company. they have already started to shift responsibilities from the headquarters to the individual brands and regions. the other is the point he referred to in the interview.
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it's the issue of overspending. especially the volkswagen brand. >> let's take a look at samsung recouping some of their losses on the market there in seoul. and of course, the biggest plunge in years. they are trying to regain control of the phone recall crisis by giving the error apparent a bigger role. >> co. vice chairman has been nominated to the board and will become more involved in the to strategic decision-making. he is been helping run samsung since his father had a heart attack. he is considered more globally minded and has been credited with partnerships with apple and google. they are surging today. they suffer the biggest two-day decline since 2008. regulators and the company cautioned users to power down their note sevens. the batteries catch fire.
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the losses need to be put into perspective. samsung makes $175 billion a year. even after the loss in market value, samsung was still worth more than several korean firms can bind. >> china is speaking $8 billion in hong kong. -- seeking more than a billion dollars in a hong kong ipo. it would make it the biggest this year. but the we know so far? >> first of all this is not a , household name to you and i. it is huge. it services half of the chinese population. they have 505 million clients in china. if the largest bank in china. there are over 40,000 branches. the details, they are looking to raise $8.1 billion. it could be the largest ipo of
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the year. investors are trying to buy some of the stock. that is about 76% of the total. in terms of the schedule, we're looking at pricing by september 20 and trading by september 28. >> wells fargo and fired 5300 people in pain $185 million in fines. employees were meeting sales goals by creating over 2 million fake accounts. the aftermath has grabbed its ceo in front of congress next week. jpmorgan is now the largest u.s. bank. this is not the first time there has been this sort of scandal in a large american bank.
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>> the thing investors are thinking about is this is the first time for him. it has really been described to us as a preeminent retail maker in the u.s., someone who effect around him and this is the first time he is joining ranks with his wall street colleagues. people like jamie dimon, this is the first time he is been caught in the same sort of water. >> has he accepted responsibility for this? >> not exactly. he did immediate tour yesterday. he cups they we. that she kept saying we. the was very much of a we involved. i'm not sure he is there. we've seen jamie dimon say this was my fault. i'm not sure he will do that. >> there is good news and bad news when you look at investors in italy's indebted bank.
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you know it well now. there is a new chief executive, a new cfo of the bank. the bad news, they are now without a chairman. >> it's a revolving door. we have mr. morelli on his way in. that was a bit of a surprise. -- and the chairman on his way out. that was a bit of a surprise. if you remember, he was a strong supporter of the previous ceo. he came out with a strong defense when he came under fire and said basically he should remain in that position. the rest as we know, things change. he was forced out. the former cfo at the bank is now in charge with the rescue plan for this bank.
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>> apple is headed for its first weekly gain of 10% or more in three years. the share continues to rise in thursday trading it. the iphone 7 is off to a faster sales start them usual. samsung's review is recalling galaxy note 7s. >> they handed apple a gift as the new iphone was launching. they are in development like united states. they trade-off market share. you have to think that the iphone 7 line is going to pick up some market share from samsung because of the hangover from this battery issue and from the recall. that's coming from the perfect time for apple, coming off this nine months of unprecedented decline in iphone sales.
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ramy: welcome back. i'm ramy inocencio. under the new president, argentina has instituted ambitious financial reforms. the government invited business leaders to buenos aires to see the impact of those changes. erik schatzker was there. he asked how he plans to solve the chronic economic problems. >> you have accomplished much. you have settled with the holdouts. you removed some trade barriers. you have liberalized the foreign exchange regime.
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as you point out, it's not quite enough. i want to know what more you can do practically, realistically. what is within sight? >> we are working hard to reduce taxes. we have launched the most important infrastructure program in our history. there is another opportunity there for the most important companies around the world. we need energy, pipelines. we are starting to build them. in order to increase our production, we have to connect such a huge country. we are working close with the leaders of the country, political leaders, unions, companies to work for productivity programs. how can we reduce cost? how can we be competitive?
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we are all working in that idea. improving our ways of production. improving our education system. >> what is your top priority? what is at the top of her list? >> the top of my list is three main objectives. reduce poverty. >> what can you do. you can't eliminate poverty in six months. >> that will take decades. that's an ambitious goal. let's go back to the six months. >> we are working hard to continue building strategic alliance with different countries around the world. we have one with china. we are working with japan,
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korea. we are working with the european union. we have exchanged our first proposals. we are working with brazil. they are our principal partner. this is another priority. >> one critical test of your credibility and your ability to execute is the budget. argentina's deficit last year was 5.4% of gdp. it's enormous. you promised to lower it. >> 4.8 this year. >> what about next year? >> we want to go around 4%. socially, we cannot assume to go another way. we have to accept that this has
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been a disaster in terms of increasing the deficit in the last 10 years. everybody has to understand that. we have to do it step by step. we are committed and we are going to fulfill that commitment of reducing every year. we are cutting down inflation. we are reducing it to half of what it used to be. we will cut the deficit. ramy: more compelling conversations with leaders in business and politics, including bob dudley and mark any off. big names take on the week's hottest topics. this is bloomberg. ♪
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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. >> there is a wonderful phrase. you and i were talking about ticking time bombs in europe. from the broader perspective where are the ticking time , bombs? is it banks? is it leverage? >> right, when i said this i was , referring to the companies that have been piling lot of debt on the balance sheet on the back of financially engineered statements. that is still the case. i think one of the major issues in europe, what made it
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interesting to us and still remains, is investors in europe aren't doing the hard work of trying to dig into those financial statements and understand the economic reality that lie beneath. companies are borrowing at extremely cheap rates. these pressures build up until one day, they become a problem. ramy: that was carson block speaking his mind to manus cranny. that was at the ubs family office summit in zürich. some prominent ceos also spoke frankly with us this week. let's begin with marc benioff of salesforce. he sat down with brad stone for an exclusive interview. brad: you've made $4 billion in acquisitions recently. why has salesforce been so acquisitive? how are you trying to position the company for the future?
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marc: we only by a company when -- we only come bro -- we only buy a company when two things happen. it has to be a great company with great tech allergy and the price has to be right. coming into this fiscal year, i did not think we would buy any companies at all. it wasn't part of our business plan. a series of things happen that opened the door. the biggest thing is we got a phone call that demand where had a offer from another company. were we going to be part of that process? and we said yes. we love those guys. we love the e-commerce cloud. this is an amazing product used by so many of our customers already. the technology is incredible. we knew that was the right fit for us. about oneant to talk of the deals you didn't do, which was linked in. microsoft acquired the company. would you do anything differently? marc: that goes in the category
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of you can't win them all. that's especially true we are going up against microsoft which is all the power and all the money in all the resources and that monopolistic control. we gave it our best shot. we did not win and we wish them the best. brad: i want to bring up oracle. what does that deal due to them? are they a stronger competitor now? marc: i don't think so. i think they are making a desperation move to boost their cloud revenue. now they're going to boost cloud revenue and make their $10 billion goal. he still may not be able to make it. you know. erik: you've been among the most active among oil majors in green lighting new projects this year. are you done? or are you considering anything else? >> no, we have some more.
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erik: what are you thinking about? >> there is a big project in the gulf of mexico we are looking at. there is potential for gas offshore in india. we are going to move more to natural gas and away from oil. part of that is the long transition. we've got a lot of opportunities any time is right. the cycles have been very low. the costs of some of these projects have come down the wide half. now is the time to sanction them. erik: will you greenlight mexico in india this year? >> very possible for india. we will have to evaluate mexico. it's a great company that's looking for partners. we have sanctioned a very big project in indonesia. for gas in asia. we have a whole series of these this year. we have to be very selective about our capital. we're not spending on things we don't think are really highly prospective. k: drilling activity is picking up in the united states.
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what impact is that going to have on oil prices? >> look at the supply and demand balances. the highjust about at tide mark now. the price is a little volatile. i think we are in balance. i can see the price of 50 for the rest of the year. then in 2017, a little above that, in the 50's. there have been more than a trillion dollars of projects in the industry. we will see if that catches up. the key is demand and there is demand growth of over one million barrels a day in china and europe and north america. as long as that demand continues, you will see a tightening of the markets. ramy: regulation has been a burning issue since european officials through a huge penalty at apple for its tax dealings in ireland. spokeeek, francine lacqua with the regulator whose commission made the decision. she asked about u.s. tech companies that could be under scrutiny.
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francine: the commissioner is looking at online platforms. do you see problems in the way google or uber operate? >> have three cases. -- >> we have a number of google cases. three by now. in europe you are more than welcome to be successful and we will applaud you all the way. if you start to misuse your dominant position to prevent others from having the same flight to success, then we get concerned. that is the example of the google case. we think google is misusing the dominant position to promote itself, to stay where they are, and not to allow other people to compete with them in a fair way. uber?ne: what about >> we are looking at that with
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my colleague for transportation. and my colleague for single market. on the one hand, it's great innovation. it is a better use of resources. on the other hand, there are issues comparing with traditional transportation, taxis, that kind of thing. francine: you're looking at the facebook whatsapp merger. our social platforms concern? >> our concern is if competition is being closed down. that is the important point. i think one of the things the german authorities are looking at is in the gray zone between competition and privacy. they are so dominant. is this being used to minimize your rights when it comes to privacy? i think it will be very interesting for everyone to follow and get the results of this inquiry. this is a gray zone.
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the germans are looking at it. both to germanize and european eyes. so it will be valuable for everyone. ♪
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ramy: you're watching "bloomberg best." i'm ramy inocencio. britain's future was a conversation for investors and it was a central topic of discussion at the meetings of the european parliament and the eu council. when will negotiations begin? it's all uncharted territory. we spoke with several key players in the exit process. francine lacqua caught up with nigel farage. francine: you managed to push
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brexit through. any regrets? nigel: how can you regret taking nine. back control of your own life. what we signed up to 40 years ago was to work closely with our neighbors. to have tera free -- tariff free trade. that all makes sense. that'll make sense. this has evolved into a full political union. what we have said is very clear. neighbors. we are not against europe. we do believe in making our own parliament. the key thing, we have voted to leave this political union. that is the key. francine: it could take five or six years, maybe 10 years to leave the eu. that's a lot of uncertainty for the market. nigel: well, there is no reason why it should do that. establishedeaties, here in the eu, we give notice to leave -- francine: you don't have
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lawmakers in the u.k. that can deal with it. they are still recruiting. nigel: i'm afraid that's right. all of our talent has been stressed out. we've got to recruit people i -- recruit people. i don't mind the government spending a few months getting ready to start this process. what you will see is article 50 triggered and we will be out of this probably in tw. >> can you see a situation where you could see yourself voting against article 50 if you thought parliament did not know enough about what you are stepping into? >> we will reserve our right to oppose, not that we don't respect the result of the referendum. obviously we do. but i want to set out those lines that we maintain, crucially, market access and rights, which i did not say the first part -- membership in the european investment bank we , think that is important. these things are all quite possible. hence we are looking very closely at the norwegian model as well as other countries. because there are many who want
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to have a relationship with the who may be are not members, but still want to develop it. there is still a big possibility. >> there won't be an off-the-shelf solution. it will be something that spoke -- it will be something bespoke. you were talking about using somebody else's model. >> it's learning the lessons from norway, not using the model and maybe we can learn a great , deal from norway. there is a successful situation. they have a strong democratic tradition. they have a huge and very effective welfare state and health service. the model of their socially-based economy is not that different from what we talk about. >> we are waiting for the british government to form its own opinion, to raise article 50 and and start this negotiation.
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which in a positive spirit we , regret the british people chose that. we know great britain will be important as a european partner. great britain will be a european country. no more in the you, but european. what we've got to do for defense, we have to have that cooperation. >> would you be open to a transactional deal, for the banks between the u.k. and eu to bridge that gap between when they leave and when a trade deal is in place? >> we have some the agreements of all kinds that create that union, to get out of it will be very complex. it will be very difficult. and for us, it makes a package. >> how easy will you try to make it for the u.k.? i speak to ceo's on a daily
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basis in london about how to make choices. >> this negotiation will go on for, i don't know how long. maybe two years. it should last two years at most, which is quite a long time already. but is also necessary because of the complexity of the challenges. what must be clear is as these negotiations have not ended, they are a member of the european union with full rights and duties. ramy: next week, the federal open market committee will hold its september meeting. there is a low probability of a rate hike. passions are high when economists and financial professionals debate the next move. this is a taste of the conversation to get you ready for next week. >> i think the fomc keeps looking for excuses not to raise rates. they did that at every meeting
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all year. stan fischer had the same message. the time has come to start tightening. the people who don't want to tighten don't see the adverse consequences of ready with zero rates along the curve. >> let's talk about the consequences. where do you stand on that? where are they right now? >> there are two things. there is inflation pressure. no doubt it is rising. , if you look at core cpi, if you look at the core cpi, it's up 2.2%. a year ago, it was something like 1.7%. it's starting to tighten because the labor markets are tight and the product markets are tight. >> as a practical matter, you are the fomc, it's been a long
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time where you have really low rates. 2.2% inflation historically is not a problem. isn't it rational they see that as an asymmetric risk? if they raise and harm the economy they will be blamed for it. >> absolutely. so they don't want to take the risk. that is a political risk for them. at some they have to do with point, they are there to do. i think their strategy is to keep rates very low. even if they raised rates by 75 basis points, rates are still going to be exceptionally low. there is going to be upward pression or on inflation. i think they are heading intentionally for a higher rate of inflation so once they've gotten to 3% or 3.5%, that's when they can jack up the short-term rates. why do they want to do that? so if the economy turns down it, -- if the economy turns down they can cut those rates. ,right now they've got no
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, ability to lower rates if the economy goes soft. >> there's no compelling case of any kind for a rate increase in september. we are looking at an economy where the number of hours people have worked has basically shrunk in the last six months. measures of medium-term and inflation are stable or declining. actual inflation is below the fed target. i can't see any case at all for a tightening. i worry that the framework the fed is using really isn't a consistent one. they speak of a 2% target. not a 2% ceiling, a 2% in target.
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if you're going to have a 2% target, sometimes you will be above it and sometimes you will be below it. if you're in your ninth year of recovery and the employment rate is in the fours, if that's not the time to be above 2%, i can't imagine when that time would ever be. >> the problem is the fed is managing the entire yield curve. we will have rates in the long end that are 300 basis points. use all manner of problems in the world. >> we hear people talk about bond scarcity. do you feel that? do you see that? has your company actually witnessed that in this market? there are not securities out there for you to buy? >> we have $45 billion in assets. the scarcity issue isn't so
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important to us. what's important for us is the level of interest rate. when i talk about the level of interest rate it's not about insurance. it's the entire economy. the fed has a policy for the past seven years of zero or near zero interest rates. it hasn't worked. we have the lowest interest rates in the united states and around the world that we have ever had in the past thousand years. the economy isn't the worst it's been those past thousands of years. the fed has gotten themselves into a world of zero interest rates and they don't know how to get out. will increase interest rates at some this is point. been a topic of almost numbing
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boredom to me. [laughter] >> for years. >> for years? >> for years. it's going to keep going on for years. you have one small increase in three years. it occupies more head space than almost anything i've heard about. >> do you try not to think about it then? >> i don't think about it much. i know the u.s. economy is not particularly strong. central banks are aware there is no fiscal cooperation in the united states for years. they are the only port of call. they are the only people who can do anything. they know if they miss play their hand and accidentally throw the u.s. into recession, this is a disastrous outcome for them. we are going to have a new president. for going to have a new congress and there may be some room to do some things fiscally to stimulate the economy.
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if there are, the fed will have more comfort it can raise rates. anyway it goes, i think. doesrobability be fed anything aggressive -- 25 basis points, 50 basis points is going to affect markets. but it's not going to affect the u.s. economy. ramy: of course, bloomberg will bring you live coverage and analysis of fed chair janet yellen's press conference on this is bloomberg. wednesday. ♪
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>> let's quickly wrap up what's happening in the bond market. >> i am looking at the sbs -- svs function.
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>> there are about 30,000 functions on the bloomberg and we enjoy showing you our favorites on bloomberg television. maybe they will become your favorites, too. this is another function you will find useful. quic which will take you to our quick takes were you can get to important context. this is a quick take from this week that explains the complicated political situation in brazil. >> in recent years, brazil has gone through a roller coaster of turmoil. economic woes, corruption scandals, and an impeachment. brazil is in a deep crisis. a new president stepped into the spotlight and promised austerity measures. the question is, will be slow unraveling come to a stop? this is the situation. by a vote in the senate, the president was found guilty of bypassing congress to finance government spending.
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this paved the way for the price president to serve out her term. let's take a step back. in order to understand the situation now, you have to understand how it got here. that can't be done without talking about da silva. a rags to riches story she was , wildly popular and became a symbol of brazil's assent. for one of the top exporters of commodities such as corn, oil, soybeans. , recep became first woman to be elected president of brazil in 2010. during her presidency, the low prices began dropping. a corruption scandal paralyzed many infrastructure projects. how bad did it get? brazil's economy shrunk 3.8%. that's the most in a quarter-century. with doma recep's ouster the
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, president is promising physical austerity to try to right the ship. but everything hasn't been smooth sailing. the presidency is trained by the -- strained by the massive corruption scandal involving oilobras, the state run company. an investigation revealed a deeply corrupt organization. it unearthed a scheme started a decade ago involving bribery, collusion, and kickbacks. looking at big picture, that aren't many good guys here. 594gered due to of brazil's 594 membersazil's of congress are currently under investigation for serious crimes. brazil's future is uncertain. ramy: that was one of the many quick takes you can find on the bloomberg. you can also find it at with all the latest business news and analysis. that will be all for "bloomberg
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best." thanks for watching. i'm ramy inocencio. this is bloomberg. ♪
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