tv Bloomberg Daybreak Americas Bloomberg December 6, 2016 7:00am-10:01am EST
welcome to bloomberg daybreak. i'm jonathan ferro david westin and alix steel. a single digit on the s&p 500. some outperformance on the d ax. onto bti.own .9% -- on wti. alix: can the bank raise the capital it means to cover -- it needs to cover its bad loans? increased tensions. paper weregship's urging citizens to remain calm. oil slipping from a 16 month high. aluminum and copy of leading
metals lower. ceo of rio tinto joins us later. is coming liefgreen to us from milan today. if the meeting with ecb officials goes forward to a what can we expect to come out of it? ecb has been pressuring the bank for some time to get a recapitalization plan together and get it off the ground before the end of the year. they started out in the last week. monte pasche was able to send one -- sell one billion euros of debt equity. the rest of that is selling nonperforming loans.
the problem is it only had a referendum on sunday and the wase minister mr. renzi defeated by a wide margin and is expected to step down very soon. all of which is contributing to volatility. monte dei paschi's search has been slowed by this. pasche's search has been slowed by this. let's assume for the most part that private recapitalization doesn't work. government might have to step in to fix the problem. where does the reporting stand on what that might look like? >> we are trying to confirm
press reports that say they include plan b that would see the italian government -- it already has a 4% stake. speculation this they would be leaving a bailout. their stake would rise. you could see potential burden sharing. and investorsrs would have to suffer some losses by contributed to this. david: thank you, dan liefgreen. jonathan: more on the political fallout globally and the impact on markets. the ceo ofring in the largest publicly traded hedge fund. he joins us from london and it excuses -- in an exclusive interview.
to theok you back beginning of this year and told you that the u.k. would vote to leave the european union, the united states would elect donald no in and italy would say this referendum, would you have been able to make money? i think i probably would have had the wrong positions at the beginning of the year. markets are looking for what happens next. looking forward quite aggressively at this point. wonder what that means given that that has been the lesson of 2016. the lucid in the market were perhaps the most surprising thing. weree moves in the market perhaps the most surprising thing. what does that mean for 2017? >> i think you've got two big
effects. a lot of people have forgotten what big moves due to market. it's been a long time since we have had significant fx moves. we are sitting here today and we are still in a state of guessing what trump is actually going to do. there has been a lot of talk about fixing the cabinet. it's only going to be january when we start to get an idea of his initial ideas of what he's focusing on. know whateally happens to the markets until we have some sense of an agenda. sitting here today the best that the last five or six years has been characterized by a complete governmentstween and central banks within countries and across the globe.
been following the same playbook and set of policies. mixture of first brexit, now trump, maybe italy suggests that we might see a situation where the concessions -- consensus breaks down. it will be good for some markets and bad for other markets. get breakdowns in correlations we have had and we might get an interesting environment. which asset classes would benefit from that kind of scenario? i think you have to look at it regionally rather than by asset class. clearly if trump does come up with a set of policies which are cutting tax rates aggressively about increasing
tariffs into the u.s., getting people to repatriate cash in the for, making it easier private-sector infrastructure building. --ould say public sister sector infrastructure takes too long for the next year. here in europe we have the opposite policies. italy is just another round of the same exercise. stuck in a very deflationary environment in europe and there is no great sense that there is the political will or ability to build the right degree of consensus to get through the processes required in europe to actually do something different. with a veryd up different outcome in europe where it's tough to make a bullish equities story.
you get a wider differential in interest rates within europe. it's really a question of how china responds to trump's maneuvers. are they going to fight? or are they going to turn their energies into the asian region locally and turn their buying power and trade power into look countries around asia? the first version would be bad for a lot of markets. the second version would be very interesting for some of the local markets in asia. long u.s. equities, maybe short. asia you are not sure about with trade. before this all happened the fundamentals were improving in
those countries. now we have the strengthening of the dollar. how do you handle that trade? you have to be very selective about individual markets and countries. it's going to depend very much on where the trade policies go and where the commodities go related to those trade policies. you look at mexico. policy endss if the a position on tariffs for sale in america and assuming it is done on one time value rather than the product. then the currency devaluation we have already had maine's mexico is a great buying opportunity. it ends up being a very aggressive constraint on trade across the border than mexico's different situation.
we could see a few emerging-market countries where defaults are not far away. jonathan: what does this mean for man group? active management could make a little bit of a comeback. how is man group set up to take care of that? is that something you can do organically? the things that you can absolutely see the performance correlate is cross market correlation for the macro strategy. lower cross market correlations is exactly what we look for. do anythinge to different. we just take advantage of it across the stock picking. the less correlation you've got
between individual stocks the more dispersion you've got between sectors the better it is. if we get a breakdown in the consensus that would from an investing point of view be ideal for us. it may now be perfect for the world economy. pure can you generate alpha that looks like a pretty attractive environment. everybody reverts back to the same thing we're in a different game plan. david: man group ceo luke ellis, thank you for joining us today. alix: dow futures are record highs. we have some movers in europe. german utilities up by almost 6%. that theyourt ruled are entitled for compensation for new nuclear policy. germany passed that policy after the fukushima disaster.
we have a potential merger battle. so no fee offering a counter bid to j&j. the biggest biotech company in europe. there is bidding war that goes on. bristol-myers coming in here. bristol up by over 1%. this has to do with an immunotherapy drug used in cancer treatments. primary trials for the drug have not done well. now it is actually doing quite well at treating hodgkins lymphoma. a much-needed win when it comes to bristol-myers. david: how one of the world's largest metals and mining
david: this is bloomberg. i'm david weston. we're going to germany. angela merkel completed her remarks at the conference. she's going for fourth term as chancellor of germany. coveriller is there to it. she called for a ban on fullface veils in germany among other things. matt: a seemingly hard pushed to the right in order to set up for what she says will be the most
difficult election of her career. you can hear the party members still applauding. been almost 12 minutes since she finished speaking but note saying that this would be a very difficult election but she wants to serve germany and she would do all that it takes to win. the fullface veil will be the top headline of news around the world. the problem for angela merkel and the cdu will really be on the left. david: one of the biggest issues has been her position on immigration. what did she have to say? said something like , thatappened in 2015 opening of the floodgates and letting in hundreds of thousands
of refugees cannot be allowed to happen again. 2016 was not a year of stabilization or strengthening for europe but really weakening. most importantly because of donald trump's election and she mentioned him by name as well as brexit, she's trying to pose ,erself as the anti-populist anti-right-wing candidate. a pro-europe candidate, pro-stability candidate after having led germany for 11 years. jonathan: she's trying to fend off the afd with her approach to the refugee crisis. the threat to her is not from the right in germany. yeareal threat to her next is going to come from the left.
thathe say anything addresses that issue? matt: absolutely. she did make a lot of noise about how they need to continue to support an older generation as the demographics change just like they are changing in the u.s. and in japan. she talked a lot about the social market economy. obviously germany is a social democracy. not a socialist democracy. this is a multiparty system. the real threat is from the social democrats, the left party , the formerly communist east german party and the green party. they could form a red green coalition that could pose a real .hreat to the current coalition
jonathan: thank you, matt miller. the cdu party convention in germany. a huge year for basic resources. miners in europe have rallied. pleased to say that joining us from london for a bloomberg exclusive is rio tinto cdu jean-sebastien jacques -- ceo jean-sebastien jacques. coppers have a big presents over here. the prospect of president-elect trump, what does that mean from you guys and what do you want to see from the election next year? >> it's a very good question. i was in the u.s. last week. i spent a couple of days in new
york and boston. it's early days. we can see some positive impact of the trump administration in relation to the u.s. and i will give you a couple examples. any investment in infrastructure would be a good element for us. infrastructure is good for copper. the other potential positive is in relation to permitting. projects series of crowley being permitted. anything the trump administration can do to improve the process. the process in the u.s. can be very slow. any improvement could be very good for us. we don't do politics. we will be working with the trump administration as soon as they are seated. wonder how you have recalibrated the situation for next year.
what value means for us is about being very selective. improving the quality of our assets. what we target is to be able to pay superior cap -- cash returns to shareholders. driver today is about cash returns for shareholders. we believe we have a good driver. alix: you not only have oil but many analysts wind up thinking the cost we see in the last few
years has really bottomed. what do you see and how will that affect your production capacity? >> so far we have not seen much inflation coming in to the system. to $250rices go back per barrel at some point the inflation would come back. it is so important to work on our probability improvement. whatever cost inflation may happen at some stage. like the feel incremental supply comes with a higher breakeven at the end of the day? >> it varies. meane very clear what we in value versus volume.
what we mean here is volume is an outcome. optimize cashto flow for the next 10 years. put upume will be an out or down. it's not the primary driver for us. how does that shape your portfolio going forward? can you walk us through your portfolio and the things you may look to spin off? what we want is to improve the quality of our portfolio. large low-cost expendable assets. i can give you a few examples. in canada on the back of hydro energy.
some of the copper assets. in california has been producing for hundreds of years. i would love to have more diamond to be very explicit. that's a priority area. we have already disposed $1.3 billion of assets. jonathan: delicate issue. several investigations around rio tinto recently. we don't have to go into the deep tales -- details. as a new ceo is this something you are worried about? i have been in the role for
five years. everywhere we go i have met some outstanding people. i can't say much more than what is included in the press release because the investigation is underway. fact is theay for a following. i take integrity and our code of conduct very seriously. it's nonnegotiable. and we will do the right thing. we are cooperating with andorities in the u.s. europe and australia. the main game in town is about trading value for shareholders. jonathan: we have to leave it there. thank you very much.
monte paschi. can it raise the capital to cover its bad loans? their meeting with the ecb officials. china's flagship newspaper urging its country's leaders to calmn caught among -- among donald trump's unpredictable foreign policy. oil falling from a 16 month high. aluminum and copper leaving metals lower after a group called the rally irrational. that's what you need to know. jonathan: under performance of basic resources in the european equities. one of the biggest gaining sectors in europe. the dow at all time highs yesterday. earlier on it was about dollar weakness. we had this dollar strength. the cable rate did kiss a two month high.
treasuries go nowhere. more on the story out of italy we've got francine lacqua out of rome standing by with an important guest. good morning. morning. good i think the situation for now has moved on to politics. sources told me that monte paschi officials are meeting with the ecb. was one of the ecb boardned to members. he joins us now on the phone. the referendum result and the political limbo that italy is in now will force the ecb hand? or will it force the italian governments hand in recapping monte paschi? >> the decision is in the hands
of the italian government. if the private solution is not available being engineered by ,he bank to increase capital then the government will have to step in probably and contribute to strengthen the capital by public money. inncine: if they do step will be bailing rules apply? you could argue this is a systemic risk and they can guarantee laws of subordinate debt. if it is done within certain conditions in a preventive way this is why we need a strong government in italy to negotiate that. i think it can happen without a major disruption of the
bondholders which have both subordinated debt. francine: do you believe the ecb first of all? there's the deadline on where the ecb wants monte paschi to raise capital. does that need to be extended or does it not really make a difference? >> frankly the deadline was already extended. another decide to give month or two i don't think this will change dramatically. at this point unless a solution few daysithin the next what needs to be done is to avoid contagion to all the banks in the system. you need to address these problems as quickly as possible
and contagion to other parts of the italian banking system. the quicker the better i think the solution is found. francine: what do you think the solution is? are you worried about some of the larger banks looking to raise capital? are you worried about a run on the banks? is that what you are worried about in the medium? i worry that people don't understand what's going on. by people i mean investors, depositors, citizen journal. this procrastination is just creating a series of uncertainty which leads to -- irrational behavior. the government needs to step in and say there is somebody who is in charge here and we need to do that quickly.
if we do have an italian banking situation which will it infect other european banks including french banks and your own bank? the situation right now is pretty limited. there are some good italian banks and some worse italian banks. solve the problem of a few banks in italy and the sooner we solve this problem the better it is for the system. i think we shouldn't talk about contagion right now to other parts of europe because that's not the case. do you see consolidation among the smaller italian banks? >> that's the way to go. if you look at the other parts of europe in most countries there are only three or four banks.
in an environment with low interest rates when you need to fees-- or you charge rather than interest rates. you need to have some size. you need to have market power. italy there are simply too many banks. it's the same situation as in germany. consolidation is not easy to put forward. that's what the government needs to do. do you think the italian referendum forces the hand of mario draghi that he has to say on thursday that he will extend the qe program? i don't think the decision of mario draghi will defend on that situation. he certainly doesn't want to be in that position. the ecb conducts policy for the euro area as a whole.
he wants to make a decision for the good of the euro area not based on what is happening over the next few days and weeks in italy. i guess the good of the euro area that the spreads on italian yields did not go as crazy as the spreads on the german yields. how worried were they about the referendum? there is some uncertainty that affects part of the eurozone. the ecb has to address whether to extend the next year or not. to be taken this week. markets are expecting it and this is independent of what happens in italy. the quantity of the purchases will be decided this week or
three months from now. that the market is expecting is whether qe is going to be extended. i think the ecb will provide a positive answer this week. smaghi,: lorenzo bini thank you for joining us. former ecb board member. we will have plenty more coverage here throughout the day on the referendum. he's keeping a very close eye on the bank. he sounded very much like a former ecb official. what strikes me the most is the significant lack of urgency. a lot of people looking into italy. it doesn't look like anything is going to happen quickly. is there a sense of urgency or is the perception correct? francine: i think there is a
sense of urgency. if you look at what the officials have been saying and some of the leaks in the italian press they talk about a plan b. i don't know if this is a good thing or not. paschiat mean that monte don't think they will get this capital raising. i think behind the wings a lot of people are talking about what they can do. renzi is staying on does not mean they are not looking for a cake taker. for the moment we have continuity. great to have you with us, francine lacqua. this was meant to be a three-pronged recount. another one was the capital raising stock offering. the others are in the hands of other people.
alix: i'm looking at the credit default swaps of the bank. they are nowhere near the levels we saw earlier in the year. there's a little bit of stress increased since october alone. look where we were back in february or even in june. likewise in the bond market. there's a lot of insulation. the ecb is always there to bail him out. we will return to the aftermath of the election right here in the united states. president donald trump made no secret of his disdain for the mainstream media in general and the new york times in particular. it was surprising to hear that donald trump has turned out to be particularly good for the business of the new york times. that gives us our morning must watch. 20% up since election day. the biggest thing by far is we have seen a really astonishing
surge in subscriptions. principally digital subscriptions. audiences butine also people's willingness to pay. we like to think of it as being accurate, thoughtful, living without fear or favor. it would appear the public's appetite for that kind of news has grown. we have seen 10 times as many net subscribers than in previous years. .e guided the market so 100,000 it will be more than twice as many as q4 last year. we are nowhere near the end of the corridor. very big surge. >> this comes in the midst of an overall trend. >> and the rate has been
accelerating. normally there is an initial growth spurt followed by plateauing. we have seen a rather attractive curve where it has been accelerating essentially for two years now and our belief now knowing what we know and thinking about our opportunity in america and around the world is we can grow very successfully further. i don't inc. it's unrealistic to imagine 10 million digital subscribers or more. of course we look very closely at average revenue per user. our desire is to go very big base. i'm interested in total revenue. later on in the model we may
welcome a price increase. at the moment we want to encourage people to get to know and love the new york times. we want to grow the base. we are focused as getting as many people into the tent as we can. a gooddigital story is story. advertising revenue has been declining. rate maintaining where it is now? i've learned that trying to predict what the needle is going to be is worse than on election night. it's all over the place in terms of what's going on. -3%.nternational newspaper the big thing to say about the new york times, print
advertising was a part of the company's revenue in our most recent quarter. having -19% is painful. now it's of 22% of our revenue. frome slowly on gearing print advertising. our digital advertising is already a lot bigger than print advertising. it isgh it is important not critical. wouldint business generate cash for the company simply on its subscription business even if it wasn't advertising at all. have a very stable print subscription business and
rapidly growing digital business. -- of the things we have to david: that was mark thompson. mr. trump andt his dealings with mr. trump and how he's very different behind the scenes where he is -- then where he is publicly jonathan:. the price a prize. i wonder if those two are actually best friends in a way that you keep. president-elect trump gets to bash the sky and at the same time he gets the biggest ad campaign the new york times has ever had for free. his base is loving the bashing of the new york times. and by the way, their stock is well off. alix: it has soared since the election.
time warner and new york times saw huge jump. line is new york times normalized from when the election took place and the white line is time warner. you had the at&t merger hanging in the balance. be pretty ironic if donald trump saved new york times. of thet could be one largest and most influential offices in his administration. former congressional budget office director on that next. this is bloomberg. ♪
emma: this is bloomberg daybreak. coming up in the next hour, tim harper. ♪ breaking news. verizon is telling its data centers -- selling its data centers. the headline of data centers. as it has transitioned its business it is now offloading some of those. for $2 billion. verizon stock is up by .4% in the premarket. will turn back to the trunk transition. there were some eyebrows raised over the weekend when we learned goldman sachsf would be back for a second round of interviews about a possible
senior position on his economic team. one of theone of the jobs under consideration is director of the office of management and budget. to discuss where economic policy may be headed is doug eakin. welcome back to the program. good to have you. oft's a position a lot americans don't know much about. explain what the omb director does and why it is so pivotal. >> traditionally one of the first things the administration does is put out the framework budget for its first year. that comes in january. it shows how all of the things mr. trump has been talking about , how do they fit together. it's the omb that puts that together. it's the omb director who pulls
it together and coordinates the policy of the administration. an important position to fill early. it has management responsibilities. really important and little recognized function. it coordinates the implementation of what the president wants. is easy,rategy execution is hard. the omb director is the person responsible for executing the policies of the president in the administration. what are the principal elements of that strategy that the new director would need to execute under trump? if you think about the signature policies it would be the infrastructure he proposes to build. that would go straight through the omb. they would be coordinating with the new head of the
transportation department. she is an experienced and talented washington veteran. surewill have to make those budget dollars lineup with their other initiative and things go smoothly. david: one of the priorities of the incoming president is to cut back on regulation across the board. they need congressional action to cut back on regulation? >> three different things will probably go on. donetive orders, things via government purchasing. do a lot of things. the second is the so-called congressional review act which permits congress to repeal regulations that were put in place in the final 60 legislative days of the obama administration. the third would be changing the basic regulatory state.
different benefit cost analysis thresholds. i expect all three to come up sometime during 2017. legislation to roll back obama regulation across the board. how realistic is that? the congressional review act has been used to repeal exactly one regulation that the clinton administration had put into place and the bush administration rolled back. i think that tells you how hard it is to get it done. there's talk of doing five or six of those in 2017. that would be an extraordinary regulatory rollback. david: thank you, doug holtz-eakin. germany, the cdu party has begun their convention today. matt miller has grabbed a lawmaker and he has him standing by now. matt: i am here with the head of
the cdu. it's the most populist state in germany. you have an election coming up in may. chancellor merkel said this would be a difficult year for elections. why is it so difficult? >> the last election in 2013 was a debate about some issues. there was not an aggressive party outside the parliament. now we have a left-wing party and a right-wing party attacking the political of -- the middle of the political scenery. and you have the debate between the parties. and you have the question will we have a coalition red red green? .o one knows what will follow you had almost one million
refugees coming into the country. angela merkel said she wants to for bid the wearing of a full face veil. is that an attempt to outflank the right? >> a liberal open society shows faith. the other message is people who can still have support. those who come for other reasons, they have to leave the country. now we have less refugees than one year ago. i think this process differentiating the different questions, this is our answer for the next year. you are leading the
ceremonies. you have a long day ahead of you. thank you. back to you in new york. thank you, matt miller. mr. gross putting out his monthly newsletter. alix: he says trump is short-term good for stocks, bad for bonds. his anti-globalization agenda may hurt profits. trump stimulus and potential trade issues and what that winds of meaning for earnings. we will discuss that over the next two hours. david: it is safe to say he is already good for stocks. l gross will be joining us -- bill gross will be joining us later today. this is bloomberg. ♪
on this tuesday, december 6. jonathan ferro with david westin and alix steel. live from new york city. futures positive come up nine points. s&p 500s&p 500 up about .8 of 1. in the fx market, you're a strength early in the session, but down by point 33 of 1%. the first drop in five days for crude at $51 -- $51.14. alix: hanging in the balance, can the bank raise capital to cover bad loans? reports say they are meeting with ecb officials to go over a plan. urginged tensions, leaders to remain calm amid donald trump's unpredictable foreign policy. what it means for businesses. we'll get the latest raid on the u.s. trade balance. commodities fall, oil slim been -- orioles slipping.
plus, aluminum and copper, leading metals lower after the recent rally was called irrational. david: thanks. , r carliurn to eliza from london. if they were not in the news enough, ecb officials and ic crossing a wire and their stock is trading today. what should we read into the plight of it this morning? anda: these are key times, they have until the end of the year two complete recapitalization plan that has a number of parts, the most difficult that is to demand in the and trust from ambassadors for an equity raising of 4 billion to 5 billion euros as of political uncertainty. the of the referendum on
country is adding a layer of uncertainty to that part of the deal. david: earlier, we heard from lorenzo, who used to be at the ecb, and said it is largely in the hands of the italian government. what are the plans for them to step in and what would happen to those retail bondholders who might get squeezed out? elisa: it is not just the italian government. there are european wide roles that governments need to apply when they provide state backing to lenders. possibly impose losses on stakeholders, including retail bondholders, and that this clearly the scenario that you would think the government would try to avoid at this point, trying to rely on private funds, but as private funds only coming in with uncertainty on the outlook for government, which italy does not have. jonathan: always great for your insight treats ui. we say, limit down in italy.
for more in the european lenders, let's turn to someone with opportunity. creek capital ceo was on with us a few months ago and says it cannot get much worse for european banks. including even greek lenders. mark joins us now. you are used to being contrarian. i will throw out one for you. in the attempt to raise capital for this bank, it is trending, would you buy? mark: probably would. jonathan: why? mark: during crises, one of the best things device financials, particularly after they are restructured. look at the greek banks. after restructuring, pretty good investment. if you are too early and there's no leg down and get restructured, along with everybody else in before, it can be challenging. there is so much bad news in
that market today perry do so what happened on sunday. there were people two months ago saying the soonest there was a 20%,te, they would go up u.s. markets it follow, but instead, markets were up. all the bad news is in. if you can get a good network of equity buyers, a lot of people with a lot of capital and they don't know what to do with the, and you can buy something for cheap, high margin of safety, looks interesting. jonathan: what does that banks need to do? you are in for how long and what to they need to do? mark: it has got to be a long-term by and think strategic. there are a lot of strategic buyers out there, people looking to make return on capital. alix: what about that yes and what does it have to do with the drunk input? -- draghi input? mark: i think central bankers have lived beyond their useful life at this point. jonathan: you live it and it
supports you. mark: it is helping, it is there, but a friend of mine said it best. i remember when i did not remember the names of central bankers. i long for that day to return. [laughter] draghi put, yellen put, all of this i think is find up to a point, but there is a point to which monetary policy is a band-aid and we have to rip it off and get back to growth. monte paschi about nowhere near where they were in june. david: i wonder how far your thesis goes. you say, go in. mark: absolutely. david: i would be worried if the italian government goes and because cutter taking over carrier. mark: last time, we talked about deutsche bank, someone who would come in and say, wait a minute, this is a global franchise and i can buy in ahead of everybody else because i can go price. david: where else do you think
it is fully priced in and a bargain? more broadly in european? mark: we think european financials are you next year's commodities. within 2017 will be european financials, just like this year was commodities. commodities are dead, bear market, they continue to go down, and boom -- and commodity is up. i think european financials will be that story, next year. jonathan: that is the cliche, but it will be more than that for those banks. what will be the tail when those european lenders? -- tailwind for those european lenders? mark: i think time. there has been time for all financers around the world where they made bad loans and they have restructured and lived through the. there are definite problems. i traveled to italy with my son a couple summers ago, and we cannot find any young people.
it was a real problem in terms of demographics. 10,000 people every single day turned 60 five in europe, same as the united states, so there are challenges. i think the euro is weak enough people totart to push open up manufacturing and look at places like spain, italy. i think it will be a challenging valueut it has been investing and about margin of safety. am i getting enough margin of safety to make sure mike upside is ok -- mike upside is ok? if i buy above fair value, i cannot hope that someone will pay me more. i david: buy on sale, that is good. i know you don't want to talk about central bankers, but let's mention mario draghi. there's a big difference in european and u.s. financials. they're looking at increased expectations of inflation and make tax from the fed and you're
not looking like that over the ecb. doesn't that give european financials a leg down? certainly a disadvantage. your key point with the u.s. is expectation. i am one of the few people on the planet not certain that she will raise rates. i think she does 25 basis points but i am not sure there are many after that. i don't see inflation. icd flashing in the u.s. more than inflation. everyone is talking about inflation. if you look at prices of everything, they are trending down. and the value you get, the technology you get or services you get for that amount of money are trending down. good price is down. the only people cling to our oil prices up from their lows, but they are down 50% from two years ago. side of theother inflation and all this fiscal stimulus. fiscal stimulus will not occur probably until 2018. a long time to get through that process because you don't get to
snap your fingers and say, let's spend wintry and dollars. alix: how do you hedge that? youou had that for 2016, may have gone long for oil, short gold, but what is your heads for the thesis for 2017? mark: i think the challenge in hedge investing is basis with risk. if we went long one commodity and short another, he could have a basis for his the between mining strike in south africa, something like that. welooking at financials, could go along to european financials, short european index, but then we have a whole host of problems. what if european technology takes up and we are short the index and more highly rated in the index? for as, we like the biggest hedge cash. we like having lots of cash because of the high option value. if i think about the best
investors i know, people accept carmen, julie robertson, they have lots of cash right now. they do not believe this bull market boom everyone talks about. i think there is more risk and markets globally then people are expecting. alix: mark, you are sticking with us. morgan morgan creek ceo. crude another leg lower, off by about 2%, around $50 a barrel. can they hold on this crude takes a dip lower? now, an update on making headlines outside the business world. emma: breaking this hour, verizon has agreed to sell data centers to equinix for 3.6 billion dollars. equinix operations of real estate investment trust, verizon acquired most of them years ago, planning to enter them into cloud businesses. verizon has abandoned the plan and looking at mobile video and
advertising. angela merkel has called for a ban on the full face coverings won by some muslim women. she spoke at the christian democratic union convention today. she sided with party officials call for a ban, including clothing such as workers. the european unions workers negotiations say it will last less than two years. they plan that if negotiations stop by march, they could be finished by october 2018. they also warned the u.k. would not be allowed to cherry pick what it likes about the eu. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. alix: thank you. around record closing. individual movers, apple on the upset by almost 1% in premarket. arecook says while sales headed to a record quarter, so total units sold, but the first
week record. they say holiday sales show customers may be waiting for the apple watch, so some upside for them today. autozone, first-quarter earnings increased by 13%. sale in stores rose over 1.5%. wrapping it up with pandora, raised to outperform it oppenheimer. makesrger with sirius sense and there are rumors circulating friday. andorra rose 16%, up 4% today. inius and pandora are preliminary investigations -- negotiations. david: we'll talk about where mark yusko is finding opportunities. later, the founder and ceo, ups and downs in commodities and what they mean for hedge funds. this is bloomberg. ♪
jonathan: this is "bloomberg ." i am jonathan ferro. equities holding steady, dallas at all time high and futures up by 10 points on the dow, up by three points and s&p 500. thanks outperforming come at fiveche bank up about percentage points. germany up one quarter of 1%. big move in the fx market, two-month high up 127.47, up one .1 of 1%. yields just bouncing lower, down by a basis point to 2.38% on the u.s. 10 year. alix: over the next three weeks, what is your playbook for 2017? earlier, we spoke with [indiscernible] and we asked which would break
benefit from a breakdown in the markets? especially given donald trump's economic plan. ,> bullish u.s. equities bullish for the u.s. dollar. i think there would be a different outcome in europe, where it is tough to make a polish european equity story. get a widerprobably differential in interest rates within europe, and then out in of howt is the question china responds to trump maneuvers, assuming he keeps going. alix: also with us is mark yusko , and you are nodding. europe,u.s., iffy on do you agree? mark: i am nodding because we are good friends. we do not always agree. jonathan: but that is your friend. mark: i think luke is one of the
smartest guys, amazing, but i do take the other side on the u.s. i think the u.s. will struggle. i wrote a lot about this in my newest letter called "hashtag save ferris, u.s.," a comparison of donald taveras buehler -- donald taveras buehler -- to bueller and they talk about how it is similar to the late 1920's and hoover was elected, so i think there are risks in the u.s. he talked about asia and i think there are lots of opportunities, finally kurdistan unwound -- japan unwound the negative interest rates a price, so there are opportunities per you have to be a little more overall cautious and a little more hedged. i said that this year in the
last couple of weeks of proven me wrong, so you can't get it right all the time. david: so the good may not be as good. could the bad be as bad, specifically with trade and china? mark: i can go really bad, if you would like. i could paint the scenario ducats really ugly. -- that gets really ugly. is a badbad -- war word all around. we are ready have declining trade, mobile trade. in 1989, only knocked down the berlin wall and ushered in the economicperiod of prosperity the world testing, global trade accelerated, great things happened and now we are talking about building walls. that doesn't make sense. trade and the world, growth. we are at a time to the graphically great there are aging boomers around the world. we do not need shrinking growth. we need expansion, and we need things that think positively. jonathan: talking about building
walls, the keyword, i wonder if they do anything? month,son of the last emotionally, if you look through political noise and the policies on the table, how difficult will it be to do that next year? mark: i think you are spot on. one, i think you are right. you get elected on the tales and govern from the middle. as an outsider, donald trump has only been one of three people in the u.s. that didn't have national political experience, general or governor. only three. when you get to washington, you will find out that the swamp is still there and it is challenging to navigate. we heard a little push back, i will charge 35% tariffs on republican said, rights, i don't think so. it will be difficult to the policy ideas are good, many, some appointments really good,
good leadership and help positions. i can be positive but it would take longer than people think and it will be a kid and take. one of the things -- a give and take. every time they talk about cutting tax rates, tax receipts go up because they close loopholes. people have to be careful what they wish for sometimes. has been thekdrop massive selloff between the bond markets, so 10 year yield about 2.4%. what level does the yield hit that starts to tighten financial conditions, and cause some kind of interior wipeout in emerging markets in u.s. equities? mark: that is the question everyone is focused on. a friend of mine just raised a fund called the risk disparity fund, where a point where they all unwind. alix: they got august but it didn't happen. to thef you go back taper tantrum in 2013, we went from 1.6% to 3%, and everyone is
talking about this big move, the move, but 1.6% to 3%? we started at 1.6% before the election and our 2.4% very to forget that the percent, i will start to say we are not still in this long-term down shoot. i believe that long-term we will see lower lows in interest rates and we will see a secular low in rates, probably in 2021-2022. jonathan: why do we have to wait for the equity screen to show it? did this year since the summer. thet has been here since summer. by doing up to wait to see it in stocks? is it already there when the mortgage rate changes? mark: it is here and profit will be tough. multiples are going to decline if you have a higher discount rate. right now, a lot of short covering going on, a lot of windowdressing coming into your end. of thet couple weeks
year do not have a lot of information content. last year, we came to the santa claus rally and markets were straight down. jonathan: you can't say those things on "bloomberg daybreak." santa claus rally? don't do that, mark. mark: [laughter] i'm sorry. jonathan: mark yusko great to have you. withmiller is standing by an important conversation, coming up. matt: i'm with the deputy finance minister of germany and part of that committee for the cdu. what do you think about how from merkel -- how angela merkel did in her speech? she did very well with the long applause, but very emotionally about the spirit of that freedom and freedom as the most important value and obviously, it is something our delegates wanted to hear. matt: what do you think about the comments on the face
theveil? it doesn't seem to be a new position, but angela merkel aligned herself with that. >> it is clear that we do not want any full veils in germany and we went to ban it as far as legally possible. we need to make some laws this year, so that is the real news. we finally have heard in the debate that they really want to abandon it. againshe also said, never will germany pays such an incredible influx of refugees, uncontrolled may be a better way to put it, issue trying to flank the right so you won't get any competition or as much competition from an nfd right-wing party? >> germany has taken hundreds and thousands of migrants and everyone knows we cannot do it again like this because then we
lose except ins the population and receipt arising right-wing movement in the country, so we do want to help refugees that are fleeing from more. on the other hand, people who came where migrants and came for other reasons, and the debate today was how about we can make them leave to go back to their countries and that would bring back acceptance in the population for what we do because those are not the people we want to help, and they should go back. matt: you also face threat from the left. what do you do to try and go on the left flank and protectors up against the red-green coalition? in oure need to be clear position with the economy. we want relief, they went to increase the burden on the people, so that is a difference it can make clear. it is about integration, values of our society, which we want to
make clear. we do not want multiculturalism like the left want. we want a german lead culture and we wanted to be accepted. lawre the party of enforcement with more police, and police to be able to have the power and man and legal power to do it is necessary to keep the country safe. matt: earlier today, the high court delivered a decision that rwe and these utilities would have to bear a lot more at the cost from the reduction nuclear power or phasing out of nuclear power than may have been thought before and shares took a big hit . was that a mistake to phase out nuclear power? jens: no because that is what the population wanted. to reenter the renewable energy source, and now we are one of the leading countries in this. with the decision today at the courts, [indiscernible]
i'm surprised by the press release, to be honest. we have to read it and then we can take our conclusions. matt: thank you for your time, jens spahn, deputy finance minister for germany and cdu. jonathan: appreciate the content you are bringing to us. matt miller over in germany for the cdu convention, talking about utilities and apparently, some compensation. stocks falling very well. up, we are looking at trade data and what it means for president-elect donald trump. it drops in four minutes time. ♪
all-time high yesterday. european equities at the six weekall-time high yesterday. european equities at the six week high, on the dax by four. treasury stable throughout most of the session, yields lower by about one basis point. $ on the euro-tall at 10741. trade balance the widening in october, coming at -$42.6 billion. september revision was proposed slightly better $36.2 billion but the trade deficit continues to widen. other key data points, third quarter, non-foreign productivity at 3.1%, staying in line with second, lighter than estimates. unit labor cost catching the of 1%. .7 estimate was 4.3 of 1%. the previous reading in the second quarter was .3 of 1% -- .3 of 1%. the previous reading in the
second quarter was .3 of 1%. that raises the question of our james and pricing power that u.s. companies have. the fed looking at that into their meeting next week. david: and perhaps inflation to do have to talk about china in light of president-elect trump and what he said. the escalation between tensions of the u.s. and china, we are joined by michael mckee, international economic correspondent and tim hopper, global asset management chief economist. they have been hundred $15 billion. you have to get to one trillion. welcome. michael, let's start with you. there seems to be an escalation between china and the one hand and trump administration on the other. there is the discussion with taiwan, mild rebuke from china, cash mild review from china. the came up more powerfully. -- mild review from china. this came up more powerfully. are they [indiscernible]
is a matchthink it of seymour interest live. trump out the whole idea of whether china was manipulating currency backwards because they tried to manipulate it higher. look at what happened in trade data. our trade talents with china is lower on a year-over-year basis, the first time in many years this has happened. i have a chart that shows we start to see the trade balance going the other direction, which is interesting. if you put on terrorists, now might not be the good time when you have the chinese -- if you on tariffs, to put now might not be bigger time. david: the trend has been in the other direction, what donald trump has played into for the american people. michael: politically, good move, but economically, it doesn't square with the facts. david: how concerned are you about trade relations with china and the united states?
jim: this is a factor to think about when we look at the investments going forward. i think at the same time, we are in trump's new administration and we need to give it some time and see what unfolds. the long termtake deal, so we need to see how that goes and see what unfolds before we make that. wenthan: this data point across the bloomberg and highly anyone pays attention, but now, that trade deficit and trade balance is set to get more and more important. what will it mean to you in the coming years? forward, this is the one thing investors can look to to see how trump is dealing with other nations, where is he taken the united states with trade, and that is -- that makes it important. let's wait and see, but let's watch this indicate there. alix: i wanted to piggyback off
of u.s. imports from china falling. i have another twelve-month moving average chart. this is the kind of idea, u.s. imports in china slowing, china losing market shares in the u.s. if we do have some stimulus, does that help demand and hurt the trade balance and make it worse at the end of the day? michael: i have not done a complete breakdown in the last couple of months, but you have to look up what it is we are not buying and whether or not stimulus would increase our purchases of that. what we have seen for the chinese over the years, they are losing some of their manufacturing employment to other countries because their cost are going up. are happens is the chinese experiencing the same form of globalization that we are. a chart that shows manufacturing employment in china has dropped since 2010
significantly as people move offshore to bangladesh or vietnam, the low-wage-low-margin goods were used to make your moving to china and now moving on. if we are not providing -- find them from china, we are buying them from somewhere else. jonathan: the goal from donald trump, addressed the trade deficit, and the other, introducing the fiscal stimulus plan and currency will get stronger and they will compete against each other. in many ways, he almost needs the fed chair to hold off from rate hikes. will the fomc be able to do that? tim: we do not believe so. if we do get stimulus from the onetrump administration, that is inflationary, progrowth and caused the fed to perhaps not only raise as we currently think they are, but raise faster or more, so that will be the case, but on the other hand, i would take other side of the trade when it comes to currency. currency typically moves in
expectation of future fed rate hikes, so we have seen that now, but typically after you get if you federal tax, a seat -- a few fed rate hikes, you see the dollar fall and i'm not certainly will see much more increase in the dollar. alix: you heard labor costs coming up, productivity about 3.1%. going to want to see the economy run hot on the fed, do the data points forced to give them pause? a longer viewke of productivity, it has been low and we need to see it stronger. continuoustronger readings that are stronger, then you can see an economy that can ear stronger growth rates and interest rates. we had to look at that long-term trend. today is not enough. david: i do not want to weets from donald
trump, but there is nothing that would cause them to back off of his concern heard you will see we have a larger deficit and more trouble. -- concern.st china you will see we have larger deficit and more trouble. on this tariff business, we are not sure we are there with you, president-elect. is talking about evening the playing field by increasing tariffs on china. it is getting more level, out of whack still but more level. on mexico, he is trying to impose tariffs on u.s. companies moving to mexico, which goes against the republicans capitalism, crony picking winners and losers, and it sets up a problem for american companies because they can lose out. if another company wants to create furnaces in mexico that doesn't make them now here, they can go to mexico and import them
to the united states with no terror. -- withcannot do that no terrorists, and carrier cannot do that, so they will compete with the company with a lower cost base. republicans say it doesn't want her us, and then you get the question of, you need to punish people for moving up, do you need to punish people because they lay off workers? where does it stop? david: as an investor and you look at this, how do you take it you?account or do how to make investments in certain properties say they will be ok the murder what closes down with china or texaco or say, wait and see? tim: we will have to wait and see. on the other hand, we do know that mr. trump will use the bully tactic. he will continue to use it and i suspect that will cause some change in corporate behavior along the way. alix: in 2017, what is your strongest conviction?
tim: crowe is accelerating. i travel a lot around the world, -- growth is accelerating. i travel a lot around the world, and what has grown is this populist movement. not something just in the states. not something we just saw in the italian votes, but something we seen other democracies. i think what we see is the beginning of a change in attitude, that monetary policy was not equipped, well equipped to handle the crisis on its own, and now we move toward this goal. we should begin to see more theal stimulus throughout next several years, but not only in the u.s. but other countries, even europe. jonathan: great to have tim hopper with us, tiaa global asset management. coming up, what latin proverbs have in common. i will not bring you any. by new regulations make it
emma: this is "bloomberg daybreak." emmain the chandra -- i am chandra. coming up, exclusive interview with pierre andurand. i am david westin. you might not normally think of bank research reports and purple prose in the same sentence, but things may change. let me quote from a research report on the david wrote -- "we think the rsb, a marriage of convenience, that has been leaning toward the global growth model for the better part of 15 years is headed toward the divorce, and it is -- divorce."
research,mes to bank incremental and pouring us out and big and bold is in. to talk about what is going on and why, we are joined by joe weisenthal. why is this happening? is this an economic situation and they cannot afford so they have to cut back people? or is it that they will have to charge? real issue ishe they are basing the same issues of every form of media that people are bombarded with email, facebook updates, and the pressure is on to cut through the noise. the more interesting headlines reports that will go viral that people will share and talk to analysts who are mostly going to charge because they know people are not reading 200 pages of text, so anything you can do to cut through the noise is important in any media environment, and that goes for
sell side research. which one might have thought is boring. jonathan: that is the style, but let's talk about regulations. they had charges for research now. i wonder if that forces them to make bigger out of consensus calls than they otherwise would have made previously. joe: there is almost a clear economic need to put out something that actually is valuable that makes a call that is what paying for. this has always been a problem for self side research and how is it the business model. you ask people and know it can give you an answer, but i think the pressure is on. thethan: i spent time at french bank with an internal panel on how to make research better. one guy, 40 page pdf and to put the message at the back, and it was for anyone who actually got to the end, and guess what? no one read the whole thing. alix: i always read the whole thing. please, alix steel, no one reads the whole thing.
"some research, -- we can quote research, the bondman piper is reading the way lower and lower levels to the dollar. kit is fantastic at this and very smart. i wonder, one of the really smart guys who does not have the marks in schools could get lost amongst this. joe: even besides the pros, you just think, he keeps it concise, you can read the first paragraph of his email and you will always click into it because you know you will get some interesting nugget, so the whole package is there, the writing, idea, the form. david: research is quick take. alix: to your point, it is actionable, concise and catchy in an amount of time. the killer is the 20 report research pages that i read. strategyof global fx and security says the more money
we come across, the more problems we see. i kind of want to do a dance when i talk about that, but the issue is you wind up making stronger policy than your other would have made otherwise. does that seem to be the risk? you manage money or make calls has this problem, where there is safety in being wrong if everyone is wrong, and it takes a lot of career risk with being interesting and being out of consensus, so there probably is a demand to make a stronger call, but there will always be that inherent riskiness of doing that. alix: which is why you like david russo much. joe: the other thing is, there are analyst who have been, i will say, not right for a long time, but people still love them . some of them doomsayers, often people would love them, even though they are perpetually wrong.
jonathan: and it challenges your view. joe: rights, and not a lot look to investors to make the trade but food for thought to inspire their own. david: you know what comes next, video. infinite video. alix: [indiscernible] do that. i do not do videos. i am a visual learner. joe: i stick my headphones into my computer. i don't know. jonathan: joe weisenthal, great to have you with us. time for other stories making headlines. here is emma chandra. emma: fiscal fourth-quarter earnings fell because of the warranty charge et al. brothers, the largest luxury homebuilder in the u.s.. they took a 2100 million u.s. charge related to all the houses stucco.e
they deliver 22% more homes during the quarter and average selling price is up almost 6% to 840 -- $834,000. agreeing to buy dell park, the price at $2.8 billion in cash. roper develops software and engineered products for health care, transportation, energy and other areas. the founder and ceo of japan's [indiscernible] according to a person to play with the matter, there is no specific agenda. he wants to meet trump because he impressed in the u.s. they own 82% of sprint. they are raising 300 and dollar investment fund and have put -- $300work in the u.s. billion investment fund and have put some to work in the u.s. jonathan: could a trump presidency be good for mining? theeard about how he thinks u.s. policies from donald trump may benefit the company. >> we can see some positive impact in the trunk administration in ratio to the u.s. one, in themples,
investment structure, it would be good for us. we have an integration to copper, so infrastructure is good to copper. the other potential positive is with permitting. jonathan: it may well be positive for his business, but will that change his plans with development strategies? take a listen to what he has to say. went toastian: no, we be very focused in terms of growth. jonathan: quite clearly, commodities and minors had a big year. stocks over europe had gained over 60% year to date. going forward, they have gone from volume come upon to dig mpcause prices -- from pup today, and because prices have gone that. i wonder, or they say, we are going back to volume again? david: a possibility, but the
trunk administration should help by giving cost down and value up. alix: shale producers are saying, we will not come crazy at $55-$60, but jeff curry, goldman sachs, said last week, they have not seen the supply response they thought given the commodity, so maybe they are better for bigger miners. jonathan: david: lesson learned may be. david:learned into forgotten. coming up, then you fear gauge ringing alarm bells in the air of trump. radel of the charts is next. this is -- that all of the charts is next. this is bloomberg. ♪
is that what this is? david: exactly what it is. he had a costume ball on long island to thank people. it is time for battle of the , joes with a reunion weisenthal taking on alix steel. joe, you first. talkingple have been about the rise in rates and why that is and maybe because of donald trump and because of fiscal stimulus, but here may be something else to think about. the world economy of looking good, this charge is messy and lines are hard to see, but the key idea is every line represents one of the cities economic surprising indices for a major revision, u.s., eurozone, japan, china, u.k., emerging markets. if you look at the very end, every single one of these indices is above zero, which means in every region of the is comingnomic data
in better than economists expected to a measure that gauges how did it comes in relative to expectation. the covert the last year. that never happens. there are always multiple regions coming in negative at any given point. right now, the entire world is beating expectations, so a lot of good economic news and that could be one reason why we see rates rise around the world. david: great chart, shows the broad brush but also dispersion. the bottom, e.m. is the one of the least. pretty surprising. it is all about relative expectations. fascinating to see every single one at this moment being in positive territory. david: pretty good, alix. awesome. charts are why i don't show them for so long. the fx market shining a light on markets. this. is your currency basis watch the white line is they yen for
one year and the blue the year-dollar swap or one year. if you are an investor and you you wantand euro and to hedge dollar obligations, the lower it goes, the more you have to pay. in 2008, you saw it happen and over in europe and the sovereign debt crisis. in 2012, there was a lot of risk and a reduction in dollar banks. to non-us this is what that line down constitutes. we see something similar this time. both are rolling over, meaning that dollar funding is becoming much more expensive. this is a key matter to watch, all about trump. dollar is more expensive and rallying. yesterday, they said a dollar shortage is one of the reasons why they say dollar upside, even if unsustainably high. david: the thing i love what her chart, i have so many questions. it is great. both great. this one is easier to understand and prettier, but i want to talk
about this to understand it. alix steel loses to joe weisenthal. jonathan: we do not judge charts on how pretty they are. david: you may not but i do. jonathan: coming up, a sitdown interview with pierre andurand, capital management founder and cio, to talk crude and outlook for commodities. we count to down to the cache open, 34 minutes only, futures positive. in europe, outperformance on the dax, up .33 of 1%. on's stable, yields lower on a 10 year at 239 and the euro weaker against the dollar at $1.07. from new york, this is bloomberg. ♪
welcome for our viewers worldwide. you're watching bloomberg daybreak. we are counting down to the market open in 30 minutes. there was an all-time high at yesterday's close. dow futures were up 1/10 of 1%. it's a story of crude lower. in five.first day in five. crude is lower and yields are south as well. the opec euphoria is fading just a touch. david: this is what you need to know at this hour. trade takes it. the u.s. trade deficit is any high. american companies are porting more equipment and consumer goods. raise what it needs for its bad loans. they are meeting with ecb officials to go over a plan. commodities fall, oil is slipping to a 16 month high.
aluminum and copper are leading metals lower after the rally was irrational. ands the capital leader ceo. that's what you need to know at this hour. alix: you can see most commodities are lower. by 1.6. is off copper is off by 1.4. china is wanted that the price rally in these ace metals has been irrational gains. they see prices declining in early 2017. a lot of supply is coming online. this is what they are contending with over the next six months. i want to highlight for you that apple and chipotle. apple is up by 1%. their sales will hit a record. 4%, there isff by
a warning on chipotle for 2017. they have yet to suggest a recovery for the company. they are speaking at a barclays conference. they are in a hiring freeze and they took their eye off the ball when it came to hire -- customer service. jonathan: oil is down for the first time in five days. joining us for an exclusive interview is pierre. capital is one of the largest commodity had -- hedge funds. they suffered a 3% loss in october. both numbers are reading returns. it's great to have you with us on the program. the talk on the street is you went out there and loaded up on $60 crude and it paid off
handsomely. talk to me about where you were. think they've been going down around the world. market haven the enough non-opec supply the klein. -- decline. i am confident they will cut. they were too close not to come to a deal. i think the market is a bit complacent now. the fundamentals since may have been priced in. the deal has not been priced in yet. we should go pretty fast to 60 or 70 year. jonathan at they haven't actually done anything. a lot of people don't think they will. here: it would not have taken 10 months to come to a deal.
this is the first time they have a committee to deal with the cut fromea now russia is coming from latimer put in as well. the oil companies will obey. i am confident. part of the reason why the market is skeptical is you have production of over 34 million euros a day. even with a cut, it would not take them to the cut of 32.5 million. they are going to pump as much as they can in the next two months so they are cutting from higher levels. think the increased production going into that meeting good push off each other. for the deal to happen, it will cut production. alix: talk about the pressure in
the meeting. there were reports that you were talking to saudi officials before the meeting took lace. can you give us an insight into how that negotiation work and how iran and iraq wound up caving? pierre: a few hours before the they invited a few traders on tuesday. they wanted to understand what would happen if they were not to cut because they felt like they were still quite far with iran and iraq and they could not trust them to come to an agreement. they were worried about it and they wanted to get a pulse for it. we talked the day before the meeting. tos a way to put pressure come to a deal. to understand the market would punish them. jonathan: central banks do
similar things. they gauge the market conditions. from what you gauged from them at, what are they worried about at this point? are they trying to put a flaw in the market? the conversation you had, which one was it? pierre: i think they want the market to be balanced. they are worried about the deficit over the next few years. like there has been a lot of capital being cut. -- have a super spike in the next few years. they are frustrated that the fundamentals are not being priced in. since may, prices have not gone up. they want levels to go back to a normal level by late next year. the price will finally fall off. they are worried about elective investment in.
-- investment in. they are worried about u.s. shale. banks, the at the major wall street tanks, -- thanks, they are looking at prices going up next year. it's probably going to be double because of cuts in capex. david: you said you are not that worried about compliance. isthat because saudi arabia the guarantor of the agreement? the iranians did not give that much up. the russians are not clear on what they gave up. saudi arabia is stepping up to the bar. are they guaranteeing the success of this agreement? pierre: pretty much. they are guaranteeing compliance i think. remains to be seen.
i think they will cut somehow. it will be fair for the markets. what is your price call them it? you were bullish in february when nobody else was. went bullish in january when that was not the thing to do. what is your call on short-term in 2017? pierre: i think we will see $60 by the end of the month and $70 next year. it's funny how the market can become complacent. high over the last 18 months. prices,till at very low 50% lower than two years and two months ago. it's not working for most.
the tablehemselves on with those prices. jonathan: you said a committee will oversee production in various countries. do you care if they cut or not so long as the message is there? we may have a situation with a don't cut at all. how would you know? pierre: you can look at the logging's. we could see in january if they are not cutting or not. will we see triple digit oil again? pierre: i think it's possible. there could be sanctions on iran again. it could go back down. the supply would be going down. see toward thed end of the decade. $85 in 2018. is david: he will be staying with
us. we want to get an update. we are going to emma with first word news. emma: donald trump is pushing to cancel orders for a new air force one. cup said boeing is building a brand-new 747 air force one for future presidents. costs are out of control. cancel order. anglo merkel is making a pitch to critics of her liberal immigration policy. will protect the country. she is calling for a ban on some muslim women. she spoke at the convention of the christian democratic union. the presidential recount in michigan expands to its largest county, which includes detroit. the fate of a state wide recount in pennsylvania awaits action in a federal court. jill stein is not expected to
overturn donald trump's victory. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. alex? alix: we will have more with pierre and how the rebound in crude prices could affect crude prices here in the u.s. and how quickly shall production could come online. our guide warned of the unthinkable, brexit and a donald trump when. what is on the list of things that could go wrong here? that is ahead. this is bloomberg. ♪
to deal with is the response from u.s. shale producers. i spoke with the president and ceo of one of the first operators in oklahoma. i asked him what shale producers would do at $55 oil. >> there will be a lot of activity in the u.s. and you will see supply turn and start to grow again. year --th this is the here. you see $85 in the next few years. will goshale production up. i think $55 oil will stimulate u.s. reduction. it will go up. 200,000 barrels a day or so. at $65, we will probably see $400,000 -- 400,000 barrels a day. a lot of projects have been cut out a lot of maintenance. the rest of the world is declining. most of the gains in opec
production are behind us. since the last meeting in 2014, opec production went up $3 million -- 3 million barrels a day. that is behind us. u.s. production went down one million barrels a day. alix: how do you price in tech knowledge he and decline rates here in the u.s.? they are declining. we have wells that have not been completed. all of that could lead to potentially more upside production than you are anticipating? pierre: it remains to be seen. a lot of these countries are marketing production potential. they don't speak the total truth. alix: what? what you saying? few weeks waslast quite impressive. this is my favorite chart. and 2018.17
we are now at flat. what do you see this curve looking like in the next few weeks? pierre: it's hard to know in the next few weeks if prices will go back down. i think by the end of next year, we will be here. ande will be large declines the shape of the curve will follow that. with opec cutting, they will go back to a more normal level. not: why is the market pricing in? pierre: nobody speaks about the elephant in the room. the mistake a lot of key analysts make as they assume the same decline for 2017 we had in 2014 when we had higher prices. that is a mistake to make. the fieldsat all of
in the world, we have a better handle on what decline rates are. point do the oil prices incentivize more drilling and more production coming out and more projects being sanctioned? can you talk about the leadtime to make a decision on when the oil comes out? pierre: anything that is not shale oil, it takes a minimum of three years from when the field gets the green light and when production comes online. production going up for the next few years. it will come after 2020. i think we need $70 and stable at $70, it needs to stay there for a long time for those projects to get the go-ahead. alix: does demand need to grow a lot? pierre: i think demand over the
next few years will be in line with the last few years. it's toolectric cars, early for them to have a big impact on oil demand. down the road they will have a big impact. large oil companies need to keep that in mind. if you're going to invest in the fields, i think they should be worried about electric cars. we may see less projects getting the go-ahead because of that as well. alix: if you are a producer and you were sitting and taking this into account, are you hedging your production over the next few years right now? are you going to take advantage of a price hike you might see? pierre: opec is giving a free boot. they don't know what the cost will do. we have cost inflation. a lot of people think prices are following cost. it is the other way around.
costs are going up. thethey are hedging and don't know what the cost will be. at a time when opec is doing this, i don't get why there is a hedge. airlines have no hedge at all. i don't why they would stay like that. opec draws a line in the sand. alix: oil is heading higher and the opec is going to triple digits. it's a pleasure to talk to. aged: coming up next, the of allah cart media consumption. we look at how cbs's re-configuring its production in a time of cord cutters. my interview with les moonves is next. this is bloomberg. ♪
bloomberg daybreak. we are eight minutes away from the opening. boeing's down. it's remarkable that donald trump is moving markets on twitter. boeing is building a brand-new 747 air force one. costs are out of control. cancel order. do we need to get used to this kind of thing? david: i think so. jonathan: quite remarkable. the numberhas been one network for several years. they are heading toward another ratings crown this year. they are moving aggressively to distribute their content or other distributors and directly to viewers through their subscription called cbs all access. i sat down with the chairman and ceo of cbs, les moonves. we expect to have 4 million
subscribers by 2020. it's going to be for millennials and the cord cutters. people want to pick and choose what they want with channels. you will find people that say i want to get netflix, hulu, and cbs. or apple tv and cbs. people are going to be programming themselves. there are still going to be homes that want to get 180 channels and have everything. there will be people who are more particular. they don't want the paper channels they don't watch. -- pay for channels they don't want. who would've seen the advent of hulu, netflix? amazon? to accomplish what you would like to accomplish, we have seen how disney has done
it. do you need to have an ownership in a distribution platform? les: i don't think so. we are relatively small when you compare us to disney. we are a premium content company. our job is to do great content for cbs, showtime, etc.. if we do that, all the distributors are going to pay us for what we are offering and we don't necessarily need to be in the distribution business. neededfor example, at&t time warner. at some point do you have distributors of knocking on your door? we want to buy you best and mark -- by you? les: we are a controlled company. that is more difficult. i could imagine there are people out there when you see at&t
paying a lot of money for time warner that a company lark ours would be very viable. david: as you look back at this election and the coverage, are there things we should be re-examining about the way we covered it? did we serve the american public well? les: that's a very good in tough question you are asking. i am very proud of what cbs did. i think there was a lot of confusion in the marketplace about fake news and real news and biased news. i think every news organization is looking at this campaign saying how are the polls so wrong? how were people so surprised? why didn't we see things coming it differently? i am happy with how we handled ourselves that cbs news. there is not much we would have done differently. david: that was les moonves of cbs.
you can be skeptical about his ability to collect money from consumers. he was a pioneer in retransmission. billion getting $8.6 from cable companies. jonathan: i think it's safe to say he knows what he's doing. open is four minutes away. at the moment, down futures are up 10. in the bond market, treasuries are doing nothing throughout much of the morning. in the openinge is up next from new york. this is bloomberg. ♪
high and futures positive. the s&p 500 is positive as well. the opening in a bell -- opening bell rings. bond market, treasuries have been flat all day. bond market, treasuries have been flat all day. the euro was stronger earlier in the session for a fourth day and then rolled over in the last four hours. they are down by about one third of 1%. the story is the opec euphoria fading away. it's down by 2.6%. we are looking here at what's going on with individual indexes. a new record closing high for the dow. i feel like a broken record. the dow hit a record closing high. and the nasdaq is up 2/10 of 1%. apple is helping to lead the way for the nasdaq. the dow is coming off its 10th record close since the election.
there could be an 11th. the s&p is up three. you can see that in medium stocks. the median indexes up 6% since the election. these are some of the biggest gainers. up 7%.is up 8%, cbs viacom is not one of the winners. not all media stocks are created equal. versus the is up 5% new york times which is up 21%. there are some regulatory hurdles as well, but this illustrates how the sectors are moving with a comp victory. comcast is up 13%. david: we are going to talk about the outlook from media companies. this is a guggenheim securities manager. welcome to the program, michael. how much is this a reaction to the election and the effect on the advertising business?
michael: i think there are a couple of them tax. the two biggest things we have seen affecting the media has been the results of the election and the launch of these over-the-top services, direct tv now. with respect to the election, you have a couple of things. you have the tax implications for these companies that tend to be heavily domestically run. you also have the possibility of lighter touch regulation, which tends to be perceived as a positive to distribution companies. between those and some enthusiasm for these new over-the-top products coming out, you see an incremental investor interest. david: we just played a little bit of an interview with les moonves from yesterday. we talked about cbs all apps sex. -- cbs all access.
they launched that without cbs. they weren't getting paid enough money. they are not going to get in unless they are fairly compensated. you've got out price target at $67. michael: it would be a mistake to say i'm not concerned. sidess case, i think both , it's in their interest to be including cbs and the product and i think they will get there. the comments from both parties publicly have been that they are working through closing the gap and what the expectations are and they want to make this happen. i am optimistic it will happen. the product is incredibly stronger by having cbs. it's the most-watched network and it has massive contracts with nfl football. one of the reasons we like cbs so much as we believe they are undervalued by traditional
distributors and we think that gap is closing overtime. you like cbs, to you like it with viacom? les moonves said he wasn't going to talk about that. other is not as high as stocks. michael: we do like cbs with viacom, but it's not a slamdunk. believe that cbs has one of the strongest management teams in media, if not the strongest. we think viacom has been under operated. we think the assets are undervalued relative to their potential. fire column is a very large business in terms of the number channels it livers. we are moving away from a channels based business. the key brands like nickelodeon and mtv should retain their , some of thev to
other networks are at risk overtime. cbs plays a strong hand by itself. we think it could lift the value of viacom. i don't inc. they need to get it done and they don't need to overpay. david: thank you so much. that is michael morris from guggenheim securities. now another sector, from media to attack. the stocks to go beating at the end of the year. down they have come back and they are flat and out. i'm going to bring in brian from morgan stanley. he joins us from new york city. let's start in an unusual place with amazon. they had an announcement yesterday that they are inventing a new kind of grocery store, you don't have to check for people inside, they see this as a major move for them.
brian: the high-level level way to think about this is this is their next up at behavior modification. they have a strategy between amazon fresh and prime now and the new stores to drive online grocery adoption. $2.5 trillion of consumer expenditure, $800 billion of that is grocery. this is part of their effort to drive more of those grocery dollars online and into their coffers. david: it strikes me that what is going on is each of them are getting into the other persons business. getting intoook digital video quite a bit. what is going on with this new discover video tab? brian: it just rolled out in beta last week. it's important to their long-term strategy to drive more
online video ad dollars onto their platform. they are taking share of advertising budgets from traditional displays and print in magazines and newspapers. the one area they haven't cracked is pulling dollars off traditional television. that probably requires a stronger video offering. the video button they rolled out last week is really a way to drive more video consumption on the platform and pull more video advertising dollars off television onto facebook. stories can be compelling if you are an investor looking for specific stocks. does it matter of donald trump comes in and we have a trade war with china? brian: i think there's no question that donald trump does bring uncertainty to the equation for all of the market in the world. the key thing we want to watch is who are the appointees. what is going to happen in the
first 100 days? is he going to be focused on it taxes or cash offshore? we don't know yet. whats we were watching our are going to be those key agenda items for the first 100 days and what does it mean for the stocks? outperformance we saw earlier in the year continuing 2017? brian: we think it can. the fundamentals continue to be strong. amazon takes share throughout the holiday season. commerce is shifting more toward amazon. advertising budgets are moving more toward facebook and google faster than before. after we get through this first hundred days and the uncertainty of the trumpet administration, the fundamentals will be strong for upper revision to top and bottom line numbers. with the pullback we have had, the valuations are not
stretched. , brian from so much morgan stanley. jonathan: there are several things going on. one of them is jamie dimon is speaking at the goldman sachs conference today. the stock is doing unbelievably well after the election. activity, trade and activity is up 15% plus in the fourth quarter. he said rates don't change how the bank is run. on regulation, he is taking for corporate tax return -- reform to get done. this. capital flight. on the bank regulations, voelker, itepeal of would have helped the market have liquidity. reaction off these comments is rather muted.
j.p. morgan stock is not doing much. boeing is the big story. mr. donald trump went to twitter. boeing is building a new 747 for air force one. the costs are out of control. cancel the order. stocks are off by 1%. don't let the magnitude of that stock price shake the narrative. the president-elect is on twitter, bashing down and order for a massive u.s. company. the stock is lower, maybe that's not a big deal. the president is talking about a major order for a major u.s. country. david: i know you know where the term bully pulpit came from who invented this. he was not shy about going after individual companies. imagine if teddy roosevelt had twitter? alix: how much volatility is in
that? it could be huge. this is what we are going to have to be reacting to over the next four years. jonathan: in remarks to the illinois -- illinois when it comes to writing these laws, our competitors will write them for us. to send product around the world. this boeing ceo had a message for donald trump. now he clearly has a message for boeing. david: his court is loving this. to take them on. it a they have to retrofit little bit. you have jamie dimon saying that trade activity is up. do bank stocks have more room to run?
the big story has been what's happened with financials, what a turnaround story. banks are up over 17.5%. i want to turn to abigail doolittle. abigail: the banks are amazing. the big banks did open higher on the day. we are looking at a decline. this is jamie dimon as you mentioned earlier. he is speaking at the goldman sachs conference. we go to the bloomberg and take a look at the mrr or the member ranked rating return. we see a lot of green. the banking sector is up 19% since november 8. a huge tail wind is behind these banks. bank of america is up 28%. behind this move is the act up in yields. go to the bloomberg and look. this is a three month chart in blue. , that's500 banks index
something to pay attention to. in the white box, the 10 year yield does appear to be moving back down a little bit. the question is whether or not this massive rally in the banks can continue. it will depend on the move in the yields ahead. alix: for more on those jpmorgan headlines, jamie dimon is at goldman sachs. he says the trading activity is up 15% in the fourth quarter. he says he sees some repricing in the trading business. it's still fairly healthy. it is begging for corporate tax reform. we will keep you up-to-date on these headlines as they cross. we are joined by fred can in. -- fred cannon. can the rally we have seen continue? fred: for how long, who knows?
we don't think bank stocks can go up 20% for the next year or the rally willt, meet reality and will see some of these. we will see if less regulation comes through. the narrative behind this rally. alix: how much of the next few weeks will be about book squaring it? you are going to have to on them at the end of the year versus the fundamental belief that these companies will start doing better and making more money. fred: a lot of it is the momentum. people have to own it. we increased our earning estimates by 8% in 2018 last week the reason was the higher bond yields and expectations for higher rates. next year, we are going to have to see some of these policies come through to see if the banks can continue to work. david: give us some
differentiation. among the big banks, who could benefit more or less? fred: we think the best opportunity is between $40 million and $250 billion in assets. there is not much talk of helping out the largest banks. bank where they can get relief from dodd-frank and people feel comfortable they are not systemic and the regulations can give relief. there is a sweet spot in that large regional bank. versus thenal banks jpmorgan. maybe we would see more liquidity. we want dodd-frank to make sense. can we quantify what a rollback in regulation could look like when it comes to earnings? credit: it's tough. if we got a lot of positive things, we could see the banks tangible.ncrease --
we don't think we can get back to that 20% of precrisis. the other real issue is how much capital they have to hold. we don't see a lot of proposals to get massive reductions in capital. david: this does come back to politics. there are no constituents for the big banks. there are many supporters in congress for the regional banks. a notablemer, he is exception. credit: banks are big payers of taxes in addition to getting that rate that. one of the reasons why jamie dimon is hot for it is territorial. if we go to territorial taxes overseas, jpm will be one of the biggest beneficiaries. david: that is interesting. jonathan: thank you very much. i want to take you back to that
boeing story. after donald trump tweeted in the past hour that the costs were out of control and they will cancel the order of air force one, reporters tracked down donald trump in the lobby of trump tower. this is what he had to say about boeing. >> it's out of control. it's going to beit's going to b4 billion. i think it's ridiculous. i think boeing is doing a little bit of a number. we want boeing to make a lot of money, but not that much money. about 9/10e are down of 1% on boeing. boeing is doing a little bit of a number. we want them to make a lot of money, just not that much. does that cancel the order? david: it's a negotiation. , say this with great respect
this man is amazing on television. there's a reason why he was so successful on the apprentice all these years. alix: this is real money to boeing. most of that money comes from commercial airlines. this is not immaterial when you make these statements. david: they have the same thing on the military side. up, the authors of bloomberg's pessimists guide are back for 2017. it's not looking good. the biggest risks for the market next year. we will bring you that next. from bloomberg, -- new york, this is bloomberg.
pessimists guide. john is the executive editor of international government. don't read them to your daughter . you will have nightmares. is the possibly of real social unrest in the united states? afterwe put this together donald trump selection. a lot of scenarios start to transpiring as we were writing it. californiall see in and insurgency of resistance against some of the proposals of the trumpet administration. we are talking about social unrest in parts of the country. we might see the emergence of a leftist coalition against him. there is the idea that
california-based liberal billionaires might put together opposition movements and putting more money into the democratic party, resistance to some of his environmental regulation proposals. david: that is not altogether far-fetched. north korea being able to deliver nuclear weapons to the west coast of the united states. john: this could be the big foreign-policy challenge to donald trump. these claims from north korea that they are close to developing a missile that could hit the west coast is not that far-fetched. there are a lot of worries the they are close to making a miniaturized nuclear warhead. , it'se thinks about china beijing that has the power to have any sway over north korea. jonathan: last year, so many of
those things came true. , it was not a doomsday scenario that people thought it would be. john: that's true. that's always the difficult thing when you make connections. it's interesting what markets of seen over the last few weeks. -- is something we can expect to see. is one of the most read stories on the bloomberg today. that doesn't for us. it's 26 minutes into the session. we are down by 1/10 on the dow. from new york, this is bloomberg. ♪
julie: right out of the gate, breaking economic data on durable goods orders and factory orders. both for the month of october. looks like durable goods orders have a gain of 4.6% in october, higher than the 3.4% initial read here. rising.orders and revision higher in september. looks like -- these numbers coming in our sort of in line with what we have seen on the economic front, with much of the data coming in ahead of estimates. durable goods orders coming in at four point 6%. meantime, we are about 30 minutes into the trading day in the u.s. abigail doolittle has the latest. kind of a sideways t