tv Bloomberg Surveillance Bloomberg January 6, 2017 4:00am-7:01am EST
francine: just the job. president obama is set to hand his success of the best streak of employment growth since the 1990's. china strengthens the yuan by the most since 2005. does this justify the currency manipulator name tag? fall after trump threatens a border tax as the company expands in mexico. the boss of me son tells us, message received. >> we will not make any move before understanding what is going to be the new policy of the american administration.
this is the second largest market in the world. obviously when the president of the united states says something, everybody listens. francine: and building bridges. theresa may prepares for her first meeting with the incoming u.s. president. what will the so-called special relationship look like in 2017? this is "bloomberg surveillance ." i'm francine lacqua. with me this morning, hsbc's global chief economist, janet henry, and stephen isaacs, head of the investment at alvin capital management. we will speak to one of the city of london's is known economists, roger bootle. that is in half an hour. first to your markets. china's offshore yuan falling the most in a year to pair a weekly rally. mexican peso climbing after the central bank sold dollars.
european shares falling a touch. asian equities next. the all-important monthly u.s. jobs report and oil declining a touch. straight to the bloomberg first word news. here's sebastian salek. sebastian: the offshore yuan has paired its record weekly rally after china's central bank raised less than projected. some analysts reiterated bearish views on the currency. code than has advised clients -- [indiscernible] china meanwhile is prepared to step up scrutiny of u.s. president-elect donald trump takes punitive measures against chinese goods. they say the options include subjecting american businesses to probes, launching investigations, and scaling back government purchases. written's prime minister is set to meet the u.s. president-elect in the spring.
theresa may sent her most senior aides on a trip to america last month to build bridges with donald trump. may suffered the embarrassment of being outflanked by nigel farage, who met trump within days of his victory in november. german factory orders fell in november, partly offsetting a surge in the previous month. iners dropped by 2.5% october. retail sales fell 1.8% in november. the reports follow data suggesting germany's economy strengthen at the end of 2016. morgan stanley is cutting its global bonus pool for equity investors i as much as 4%. wall street's biggest trading firm by revenue has been fine-tuning compensation since november and is due to pay annual bonuses to employees next month. global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. francine: president obama is
poised to hand off to donald trump the best stretch of job growth since the 1990's. according to a bloomberg survey, the u.s. economy added 175,000 workers last month. that would bring 2016's advance to almost 2.2 million, the sixth straight year of job gains, the longest winning streak since 1999. let's bring in janet henry and stephen isaacs, head of the investment committee at alvin capital management. thank you for joining us. genet, when you look at the u.s. jobs report, this is the last jobs report for president obama. i'm sure that donald trump will tweet. how do you view this? it is almost a productivity problem, not a jobs growth problem. janet: given the relatively mediocre growth rates, it has been quite a job-rich recovery. it has just been without productivity and wage growth.
if we were to see a slowdown in employment growth, it might point to some improvement in productivity. but mr. trump has obviously promised to make america great again and return jobs to america, so it is easier for him to argue we're going to create jobs than to talk about productivity. francine: can he create quality jobs? stephen: governments don't create jobs. even donald trump will acknowledge that. francine: he personally is bringing jobs back to america, he's tweeting, ford is now building in the u.s., toyota is under pressure, all these guys quivering in their boots. arehen: i think the markets applauding the animal spirit and the business culture that trump is intending to bring back to america is something that has made a difference already. i think one can expect some sort of follow through in the first few months of his presidency. francine: janet, this is a great chart that hillary clark did. you can see the problem with the
initial jobless claims is that going down with the blue. this is what we talked about, productivity. donald trump promising 25 million jobs, but how does this go up? this is the problem we are seeing in most western economies. janet: it is weak productivity in a lot of places. there are a number of reasons. basically, you need to get more out of each worker. you can get that improving skills, by adding more capital, by adding more investment, and it has been extremely weak investment. some of it has been energy-related, but there's been other weakness in investment spending. what you hope to deliver is a pickup in investment spending. you would normally associate slightly stronger productivity growth. what we're seeing at the moment across the developed world and the emerging world is the beginnings of a cyclical industrial upturn.
it may not last long. the markets may have priced in that upturn. during cyclical upturns, you also get some cyclical improvement in productivity. the longer-term productivity story will have to come from a bigger pickup in investment and other areas. francine: if you are janet thisn, how do you look at today? so much depends on the inflation trumpst, on what donald can do with infrastructure spending, with tax reforms. janet: the fed, and particularly janet yellen, has always been very careful to frame her discussion in the natural rate. where do they see the long-term neutral rate, equilibrium rate, for the economy? a lot of that depends on long-term productivity growth, long-term potential growth. at the moment, no one has any idea what the mix of policies
under the trump administration is going to do to long-term growth. what we do know near-term is there is a bit more cyclical strength and there's the expectation of near-term fiscal policy. there's going to be a bit less spare capacity. i think this is what we heard from the fomc minutes. they really haven't revised up their growth forecast. the balance of risks have shifted a little bit. francine: stephen, i know janet henry and hsbc in general has upped its forecast. what are the main risks? stephen: let's talk about productivity for a minute. the public party agenda is clear. they are blaming regulation. they are saying obama, eight years piling on regulation everywhere, and what they will do is a bonfire. and secondly, big tax reform. kind of a modern form of reaganomics. viewrump administrations is to tackle productivity with
these measures. that may take some time. francine: tax reform, so you repatriate money. in a lot of american companies are sitting on cash. you have to make sure the ceo's feel confident enough to reinvest them. stephen: but you also lower taxes. the point about, why would any invest ifr individual the tax take is higher? then you have a higher bar for the success of the project. invest if the tax take isrepublicans beliu lower taxes, you get more investment. francine: what is the one thing that you want to know about in terms of trump's plans? is it trade wars that would hurt your forecast? is it the fact that he could un-unifiedeven more america? janet: what we want to know is the sequencing. reflectionot of the
in markets is a reflection of my momentum in the economy then people have realized. now we've got the expectation of looser fiscal policy and later regulation that has helped fuel that optimism. from here, what we are going to hear is the sequence of events. we are hearing about border adjustment, tax reform. that is going to be a long time. near-term, perhaps there is a of these risks that have been put on the back burner, protectionism, isolationism, maybe there are some threats on that front. he's portrayed himself as a dealmaker. there will be risks. but this is where, at a time of optimism, the risks may lie. francine: we have to talk about dollar strength. janet henry and stephen isaacs, stay with us. don't miss our exclusive interview with dallas fed president robert kaplan.
he will join us from the american economic association annual meeting in chicago. let's get straight to the bloomberg business flash. samsung electronics has posted profits that beat estimates. operating income rose 50% in the quarter ending in december. that is as memory chip prices helped the world's largest smartphone maker bounce back from the withdrawal of its galaxy note 7. guess has rallied in after-hours trading after a surprise day of sales gains. same-store sales gained 4% last month. that lends credence to the turnaround plan. there's been some rare positive news from the hedge fund industry. according to an investor letter, a main hedge fund returned 3% last year, is first annual gain in three years. crest posted a gain of almost 50% in 2016.
a spokesman for breath howard and blue crest declined to comment. that is the bloomberg business flash. francine: there are still two weeks until the inauguration of donald trump, but he's not waiting to make his presence felt. shares in toyota have fallen after the billionaire threatened a border tax if the company expands production in mexico. carlos gone, the ceo of nisan, said that when the president of the united states speaks, everybody listens. >> we will not make any moves before understanding exactly what is the new policy of the american administration. this is the second largest market in the world for car markets and when the president of the united states says something, everybody listens. francine: people close to the president-elect have told bloomberg that he remains opposed to the megamerger between at&t and time warner as
he believes it would concentrate too much power in the media. let's get more on the stories with stephanie baker. janet henry and stephen isaacs are still with us. stephanie, he's actually doing policy, donald trump, just by tweeting. if you are a ceo, you are changing your strategy. stephanie: and monitoring his twitter feed very carefully. the significant thing about toyota is this is the first time he has targeted a foreign company for allegedly moving jobs to mexico. in this case, they would be shifting jobs or production from canada to mexico which makes it all the more extraordinary that he's targeted them. but it shows that he's willing to intervene on a case-by-case, company by company level. i don't think we've ever seen a u.s. president do this. and it is -- francine: and it is working,
almost, isn't it? stephanie: i think executives are running scared. they don't want to be on the receiving end of a twitter tirade by trump at 6:00 a.m. bloombergwe have a scoop saying he would be against this at&t and warner deal. what can he do? stephanie: he can't really intervene too much in the justice department ruling on that. that could be challenged in the courts. he's got limited room to maneuver in terms of influencing the way the doj would rule on it. i believe the fcc gets involved in that. he could have a bit more sway. but again, i think what you're seeing is, all it takes is a tweet or a comment from him to shift the debate radically. everyone's going to be looking at that merger differently. francine: stephen, when we were sitting down, we were talking
about fomc, and you were saying, will he have power over fomc? i know he has two members to replace. basis, are you concerned about central bank independence? stephen: the nominations have to go to congress to be ratified. but i think the republican house is pretty dry, pretty hard money in its thinking. i think if trump picks two people that are inclined to take a different view on interest rates, a harder view, i think they will be passed. there is a battle for the republican party going on. the battle is everywhere. it is a battle with hacking, where he's clashing with john mccain. battle in the governorship of the higher republican party this week. trump was apparently manning the phones and calling individual voters to try and influence the election. the governor there is john
kasich, who is very lukewarm on trump. there is a battle for the republican party right now. francine: going back to interest rates, what kind of interest rate environment does donald trump want? he keeps on saying he wants higher interest rates. stephen: i don't think he has a strong view on it, but there's does, and that is mike pence. i think mike pence is going to take a pivotal role in the administration. mike pence was author of legislation that nearly went to the house to remove the employment part of the mandate. that stream of the republican going toich trump is come into, sees a low discount rate as those on the vocation of mbification -- the zo of the economy. francine: what does dollar do? janet: at the moment, i think the cyclical data is going to continue to surge.
as long as we don't get any negative policy announcements, the dollar continues to strengthen. our strategists see it firming in the first half of the year. the fact is the fed is already telling us they expect to raise rates three times in 2017. we think perhaps they won't manage to do that. we're going for two great prizes. francine: dollar strength? janet: dollar strength is part of it. that will be offsetting some of the favorable impact on financial conditions. equities are rising. conditions are still easing. although mr. trump has indicated more isolationist policies, the u.s. is not a closed economy. deflationary big pressures elsewhere in the world. europe, japan, they still have a deflationary backdrop. it is still that global influence we think will restrain
the ability of the u.s. to generate higher inflation, and the fed will tread cautiously. even two rate rises would be faster than the last few years. francine: thank you so much. stephanie baker on trump tweet watch. we are going to sleep in london for six hours and he tweets six times. stephanie baker, stephen isaacs, janet henry. china's a challenge. as the country works to shore up its country prepares for a possible trade more with the united states, what does it mean for the rest of the world? this is bloomberg. ♪
francine: this is "bloomberg surveillance." i'm francine lacqua. china's policymakers have a lot on their plate as they work to strengthen the currency against the dollar. today the offshore yuan pared its weekly rally after the central bank raised its fixing less than projected. the country is said to be considering action against american companies in the event of a trade war. according to people familiar with the matter, authorities are prepared to step up scrutiny if donald trump takes punitive measures against chinese goods. still with me, janet henry and stephen isaacs. janet, how should we view the yuan right now? we've seen a little volatility, but they have reserves, outflows, and the currency. it is like a juggling act. how do they stabilize? janet: i don't think anything that happens to the rmb is going
to be a straight line. at the moment, as the inauguration approaches, there is this risk of protectionist actions. they want to keep it fairly stable. there is measures they can undertake. we've seen what they are doing in the offshore market. they can tighten up the paperwork for local currency for certain purposes. education, the children, etc. they can persuade state owned convert their foreign currency into local currency. there's various things they can do. he owned convert that, i think t likely direction is the rmb does drift lower. francine: this is kind of very zeitgeist, but do you have the authorities' backing? do you believe the authorities are trying to do everything they can to stabilize the economy and will do a good job? janet: i think they still have quite a large toolkit. we've come a long way from a
year ago, when markets were doubting whether there was a tool kit at all. comments moves in the he not do a lot for anyone. it caused a lot of turmoil. if china does have a bigger depreciation, it means a stronger dollar and bad news for the u.s. we hearing these comments about china preparing measures if they need to. they just need to prepare something if there a need for retaliatory action. francine: if we do enter a trade war or a semi-trade war, is it the u.s., or can we see a really tough china? stephen: i don't think we will get an actual trade war. i don't think the republican party would allow it. but you could get a currency war. that is what happened in 1994. the last time the chinese economy hit a proper roadblock, they let their currency blitz and the americans swallowed it. the question is what would happen in 2017 or 2018.
with trump in the white house, china in trouble, which i think it is, and the currency could rebound on you nationally. it is a difficult situation to forecast. francine: is that not why we could get some kind of trade war, so the u.s. -- president-elect donald trump has been tweeting. he suddenly says, if you continue manipulating your currency, then i put up trade barriers. stephen: i think you get a sort of proxy trade war. you get people sort of pouring over documents, putting caps off restrictions. i don't think you are going to get a hard trade war. francine: stephen, we made you a on surveysdp chart and expectations. you are bearish on india. stephen: i'm concerned about the policy that i think modi unleashed rather ill advisedly.
it is already looking as if it is going to have a substantial effect on the indian economy. this is at a time when u.s. bond yields have been rising fast. the indian rupee is fairly stable. the high nominal yields a track foreign capital. suddenly, the currency drops around 20%. that is what happened with the temper tantrum. i think we are heading towards that. i think modi has lost control of the situation. francine: stephen, thank you so much for that insight. stephen isaacs, thank you for joining us. janet henry from hsbc stays with us. up next, we talk theresa may and the chancellor. ♪
minister named tim barrow as the country's next ambassador to the european union. the move came barely 24 hours after his predecessor, rogers, resigned. rogers piled on the criticism on theresa may's government. the british chambers of commerce said u.k. businesses will have no choice but to raise prices. the pressure is greatest on manufacturers, with the balance of companies expected to pass on cost increases to consumers. there's a huge amount of diversity of views in the business community, as there was prior to the referendum. there are those who believe their own business and the u.k. as a whole would be better inside the single market. there are those who believe they would be better outside the single market. that diversity hasn't gone away. thosesses are evaluating options and possibilities and seeing how it affects them. sebastian: a new report by
lloyds bank found business confidence in britain has bounced back. of index, an average expectations of stronger sales, orders, and profits, rose to 14%, having fallen to 12% in the previous survey. it remains below the long-term average and points to a possible slowdown of economic growth. that i speaksses to are cautiously optimistic. if you dig into the details in the report, it is showing that businesses aren't looking to invest in 2017. investment levels are looking sluggish. luretian: paris could workers as the u.k. begins its withdrawal from the european union. says paris will make its case to executives in meetings next month as it competes with rival city such as frankfurt.
global news 24 hours a day howard by more than 2600 journalists and analysts in 120 countries. francine: thank you. in terms of u.k. economic data, it was the week that beat. pmi's,ction, services, all beat estimates. the composite rising to the highest since july of 2015. figureset said the point to economic growth of 0.5% in the fourth quarter. despite the positive data, pound investors are focused on the political risk. yesterday's pmi beat barely moved sterling in contrast to last summer. the resilient data should be music to the ears of my next guest, former economist at hsbc. he then went on to found capital economics. economist for brexit, he's been a passionate advocate for the u.k.'s
withdrawal from the european union. roger bootle, welcome to "surveillance." we're also still with janet henry. roger, why are the data so much better than a lot of economists rejected? roger: i think the puzzle is not so much the data. it is what people expected. this was frankly a chronic failure of economists in general. they jumped on a bandwagon which was set rolling by official forecasters. i think this was a classic case of economist group think. they got this profoundly and utterly wrong. francine: will they get the next thing wrong? a lot of people are saying we are not in brexit yet. 50at happens when article gets triggered? roger: they are already about a year out of date.
it is possible that we will see a sharp fall back in confidence, but i very much doubt it. there's been some appallingly bad analysis on this question. in particular, the idea that consumer confidence would fall as consumers look to the far future, the negative effects that the official forecasters told us were going to be there -- they just counted all that income back to the present, then they were terribly gloomy. hang on a minute. if we were going to leave the european union, it was because more than 50% voted to lead the european union. i never bought it. francine: what is the one thing we will gain from brexit? roger: several things. there's a distinction between matters economic and political. economically, we will gain the ability to make our own trade policy. this is important. to do away with the external
tariff, to leave the cultural policy, and possibly to forge trade deals with countries around the world. francine: without a period where we are -- i'm not talking about the consumer, but the general person on the street says, i don't know what relationship i will have with other countries for a while. roger: i think that is fair. there is a degree of uncertainty about all this. but in this whole story, what i think has happened, there's been the officials and the big companies and trade negotiators that pick themselves up in this whole question. the idea is that prosperity is somehow determined whether politicians, these chaps with nice pens -- francine: you are sounding like donald trump. good: that may not be a thing. at least he's a winner. prosperity does not emerge that way. it comes from the hard work and enterprise of ordinary people and businesses. goingne: what is the u.k.
to look like in two years? at the moment, we don't know. janet: the economy will look weaker than it has over the last couple years. even the official numbers with the bank and the treasury talking about 1.4% for 2017 for growth, that is a lot less than the 2% plus figures everyone was talking about. you're talking about, how does the man in the street feel about brexit -- for a lot of men in the street, the women in the street, not that much has changed so far. the first the average person in the street will feel is when the price of things goes up a lot. the price of oil is going up. as inflation rises, and it is unclear how much, because it looks like there's a margin squeeze, they are going to feel their income squeezed. it is interesting about the data. in the near term, they seem to be supporting by borrowing more.
sometimes you borrow more because you are confident in your ability to put it back. sometimes you borrow more because you need to. i think consumer spending will slow and investment will be weaker. supply chains potentially are going to be disrupted. that is an uncertain world. francine: roger, inflation will go up. the person on the street will feel, unless wage growth follows -- is it unlikely that wage growth follows? roger: i think we are talking about pretty small numbers here. inflation is going to rise. francine: 3%? roger: i suspect it might get to 3%. our latest figures don't show it breaching 3%. probably next year, rather than this year. wage growth, i think, will pick up. the squeeze on real earnings, i suspect, is going to be minor. francine: will the city of
london be worse off than it was pretty june 23? your: you're going to something from me you don't often hear in this debate. i don't know. the city will lose a few jobs in the short term, but i don't think very many. in the long-term, i'm convinced the city will be better off for similar reasons that apply to the rest of the economy. francine: how many job losses? a few is what, 100 or 20,000? roger: maybe 20,000, i don't know, but it certainly isn't hundreds of thousands. this idea that institutions are peopleo go to frankfurt, who believe this have never been to frankfurt. francine: we're going to take a short break. roger bootle and janet henry. up next, ambassador ambivalence. the representative to the e.u. quits and calls out theresa may's government. while the lack of a transition deal be the issue?
francine: welcome back to our weekly brexit show. i'm francine lacqua. let's get a check on your markets. here's nejra cehic. nejra: good morning. looking at the gmm, european stocks are down on the day. they are heading for a weekly gain still. by zero stoxx 50 off point 4%. some weakness in juggle and france. sterling off by 0.3%. euro pretty much unchanged. it was weakening earlier. this is how the sovereign yield space is shaping up and looking over at commodities, gold down 0.2%, dropping for the first
time in four days. it has so far had a pretty strong 2017. now, going back to european stocks, the stoxx 600 entered a bull market months after its global peers, but it is trading more cheaply nonetheless than the s&p 500. the other thing that i've been watching closely and we've all been focusing on today is the yuan. this is the offshore yuan declining after a four-day climb, paring a record weekly rally after the central bank strengthened its currency fixing less than analysts expected. we have seen this drop as much as 1%, the most in a year. the wild week has echoed short squeeze in january of last year. goldman says now is the time to sell, the best time to bet aftert has tended to be
they flushed out those bearish positions. sticking on currencies but also looking at the treasury yield, yesterday we saw the bloomberg dollar index have its biggest drop in nearly four months. tracking the 10-year yield, which fell the most since brexit, ever so slightly higher today at 2.35%. you can see the dollar-yen correlation on this chart. we've seen the dollar surge above ¥116 today. pretty payrolls short squeeze going on there. top forecaster does say it is time to buy back into the dollar trade. francine: thank you so much. the u.k. prime minister named career diplomat tim barrows as the next ambassador to the european union. the move came barely 24 hours after predecessor ivan rogers resigned. piled criticism on
theresa may's government for not having a clear brexit plan, accusing it of ill-founded arguments. let's get more with our simon bootle, and janet henry. simon, thank you for joining us. what did we learn about brexit this week? simon: happy new year for theresa may. there's a memo from deloitte that the government said had nothing to do with them until they were banned from government contracts for a period, and yet this memo from ivan rodriguez seems to suggest many of the same thing. muddled thinking, lack of coordination, this feeling that the negotiating team hasn't been built up yet, doesn't know what it wants. concern from the self-imposed deadline that theresa may doesn't have a plan. that puts pressure on her to start formulating that plan. francine: roger, you campaigned
for brexit. you got what you wanted. are you concerned about how negotiations are going, or at least the perception of an incoherent message and muddled thinking? roger: do you think it is possible ivan rogers was against brexit? i don't think it is surprising that the government should be in and theref discussion isn't a firm answer. these are difficult questions. eventually it will be disappointing indeed if we don't have a coherent plan. is it disappointing or surprising we haven't got one now? i don't think so. francine: what are you expecting for the next six months? roger: that is a critical period. the end of march, article 50 has got to have been triggered. what i think we're going to see is a pretty clear idea, not just on britain's side, but on the side of the e.u., what the red lines are.
i'm interested to see what sort of concessions the e.u. might be prepared to make. in particular, i think what is going to be interesting is how the attitude of the british government develops if it becomes clear that he you is not prepared to make many concessions or is preparing to drag this out for a long time. ivan rogers said it might take 10 years to negotiate a trade deal. i think if they dragged their feet in that way, we will be out just like that. francine: if we talk about uncertain economic times, it is because we don't know the model we are looking at. what is the octomom period of negotiation? optimum period of negotiation? janet: the nature and the length of time will depend on what kind of trade relationship. it could be quite quick.
if we have our own membership under the wto rules, negotiating that alone could take two years. it is more likely going to be a lengthy process. 10 years, that does seem like a very long time. francine: simon, every chairman has asked for a transitional deal. are we any wiser about whether this is a priority of the government. simon: theresa may has hinted at one. the question is perhaps not what the deal looks like, but how soon one is confirmed. if you are a banker, it is going to take athe question is perhapt the deal looks like, but how while to find places for your staff. you want as much clarity as you can. time,ears time, two years they say, there is a transitional plan -- that is way too late. the banks want a much more transparency.
the light is ultimately at the end. francine: roger, what do you think the red line should be? will the u.k. concede anything on immigration? roger: i don't know. i think it is clear that the u.k. should want to continue to admit a fair number of migrants. people on my side, at least the leaders of our group, are quite clear about this. but the idea that we should make a major concession on unskilled migrants, i would regard that as highly undesirable and highly unlikely. simon,e: roger, janet, stay with us. up next, the u.k. prime minister prepares to build bridges with donald trump. we look ahead to their meeting and what might be in store for the so-called special relationship. this is bloomberg. ♪
month to build bridges with donald trump. may suffered the embarrassment of being outflanked by nigel farage, who met with trump within days of his victory back in november. let's get more with simon kennedy, roger bootle, and janet henry. janet, i don't know if there's a crossover. does it put the u.k. in a stronger negotiating position? now there's a link, which i don't know if it is a direct link or indirect link, with the united states of america. janet: there is a link. last year, president obama suggesting that in any bilateral negotiations, the u.k. would be toward the back of the queue. one thing we know from donald trump is he's not in favor of mega trade deals. we've seen tpp, etc., being kicked into touch. the fact that he's indicated he's in favor of bilateral trade deals and theresa may will be seeking some kind of bilateral
trade deals, there should be grounds for some kind of agreement. francine: what kind of special relationship with the u.k. have with the u.s., roger? roger: i hit those words. --on't know what it wants to i don't know what it amounts to. we never know what the chemistry is going to be like. if the chemistry works, a lot of things can follow. at this point, i find it difficult to see how it is going to work. attitudes, i think there is a chance for britain and america to be in the same place. theresa may has been much more suspicious of china than was true of the previous british government. he seems to be generally pro-british in a way the previous president was not. francine: if you don't want to call it the special relationship, what do you want to call it? roger: i don't know, friendship,
cooperation? special relationship, this is really about churchill and roosevelt. francine: fair comment. simon, what do we know about the personal relationship between heads of state? what do we know about theresa may's style? we all follow trump's tweets. will they get along? simon: hard to say. as roger pointed out, chemistry is going to be important. precedent. theresa may, a lifetime politician, versus someone from business. issuesly, the for roche captured the headlines. they mostly tried to smooth that over. [indiscernible] there's relationships
starting to build. at some point they will all get to know the british and vice versa. francine: roger, would nigel farage make a good ambassador? you took a quick jog at the u.k. ambassador to the e.u. do we need more pre-brexit ambassadors? britain'stink tha foreign office is supremely accomplished. we've got some excellent diplomats. it would be a shame if we didn't make use of those. i'm in favor of appointing tried and tested career diplomats, but at the same time, i don't think it is the position of those diplomats to be undermining government policy. francine: janet, what is the one thing that we are almost too certain about. a lot of people say we don't have negotiating strategy. you also have to find out what the e.u. wants. how much do we know about the e.u. and how much they are willing to give in to the u.k.? janet: we don't know very much.
the rest of the e.u. did not want the u.k. to leave him a so it is difficult for them to really make the first move. the u.k. needs to come up with its plan of what it wants and put it to the e.u. and see whether they can find some common ground. e.u., the fact that the u.k. has remained resilient, it is not really in the interest of the e.u. to give the u.k. particularly attractive deals. it sets a precedent for other countries to seek similar. francine: janet henry, roger bootle, and simon kennedy from our brexit team here at bloomberg. "bloomberg surveillance" continues with tom keene and i. ♪
panic move. the offshore bond falls as attempts from -- you want falls as attempts from the chinese currency regulation comes in below estimates. president-elect donald trump moves closer to the white house. this is "bloomberg surveillance." i'm francine lacqua in london. tom keene in boston. what are you doing in boston? tom: a wonderful night to be in boston. fenway park. what a joy it was to go down to the nexus for baseball in america, the green monster, that acclaimed scoreboard. the privilege of seeing bentley play army in ice hockey. spread outn ice rink across that way part. it was something. francine: folks, thomas getting.
tom is there to -- tom is kidding. tom is there to look at boston jobs. tom: boston is ascendant right now. that is big news for boston. francine: i knew tom keene was looking at the economy in boston. we care about it a little bit more than we did eight months ago. let's get straight to the first word news. here's taylor. theresa may center top to aids on a secret mission to the u.s. to build bridges with president-elect -- two aides on a secret mission to the u.s. to build bridges with president-elect trump. a frosty startad to the relationship. trump is going after another automaker, this time it is
toyota. the japanese company plans to build a factory in mexico to make its popular corolla model. trump says he will impose a big border tax on the cars. the ceo of toyota rival says he gets the message. nissan spoke to bloomberg from las vegas. >> i can tell you that we will not make any move before understanding exactly what is going to be the new policy of the american administration. this is the second largest market in the world for cars and you want the president of the united states, when he says something, everybody listens. the philippines says crime has dropped 32% since robert iger jeter date launched his drug war since taking office last year. shows jeter day with an 83% job approval rating -- rodrigo jeter date -- duterte
with an 83% job approval rating. existence plagued the , but the new statue is located to the consulate in south korea. japan is recalling its abbasid are in protest and suspended -- its ambassador in protest and suspended talks. this is bloomberg. francine: thank you so much. this is your data this morning. we need to keep an eye on mexican peso. emerging markets back in the spotlight. it climbed a touch. tom keene is very focused on turkish lira. china's offshore you want. .- you want -- yuan i want to show you the renminbi. stocks are pretty much unchanged. crude is back up.
this is the picture for futures in the united states. i also want to show you the vix. a lot of analysts are saying they want to watch the vix for 2017. you can see the asian stocks were down. point 94. the dollar briefly surged above 116 yen before the trading day. tom: i'm here in our boston studios at our boston news bureau and i look out over the charles river and in the distance is m.i.t.. that is where the modern butterfly effect was codified. right now, you see that in the indian rupee, the philippine peso, the mexican peso, and you see it in the turkish lira. what is fancy about that chart. let his go to the bloomberg -- let's go to the bloomberg. the idea of an acceleration in
depreciation. not like venezuela, but nevertheless, a real instability in these emerging-market currencies. that curve of the turkish lira really gets your attention. francine: yes, nothing like the turkish lira going log quadratic. this is my chart of the day thanks to hillary clark. we will pay attention to nonfarm payrolls, but this is the real story. initial jobless claims is in blue. you can see the jobless claims figure going down. look at this. , it is u.s. output per hour. this basically shows that we have a productivity problem. the productivity has changed a little bit. this is probably what donald trump has focused on. he promised 25 million jobs, but
what does it actually mean for output per hour? from hare joins us on set harris associates. always a great pleasure to host you. thank you for coming on. it is u.s. job state. we need to start on that. what are you most worried about for 2017? david: talking about the jobs, we are getting close to full employment. full employment, if you look at the data as it is presented, there are a lot of people who should be in the labor market that are not. getreal challenge is to those not in the labor market in the labor market in a productive fashions so the graph goes upward and not downward. home andpeople work at are constantly working, it seems. youou are not sleeping, have the bloomberg on your phone and you are working. does the data pick that up?
getting the people not in the market back in is the biggest challenge. if you look at the data as it is , we are at or close to full employment. francine: david, you own equities. toyota, weith ford, saw donald trump tweeting about them. are you uncomfortable that your president-elect is tweeting about companies that you could own and he could almost single-handedly change the share price? david: we actually do own toyota. the question is whether these tweets are really a reflection of policy come are the brinksmanship, are they threats, was a trying to establish a stronger bargaining position as they relook at nafta? who really knows at this stage? this is the problem with government by tweet. this is the negative part of what mr. trump is portraying as the future president of the united states. the positive is the type of people he is bringing into his cabinet and the direction he
seems to be setting for deregulation and lower taxes. i think what he is telling these companies is we want you building here. we are going to take this heavy regulatory burden piled on you, we are going to take it off of you. come to the united states and produce. you don't need to produce in mexico. tom: david, you are one of the great, acclaimed international investors of this generation. you always had to worry about the dollar dynamics. your vaste two had international holdings against the strong dollar? david: you know, we were heavily hedged when the overseas currencies, the euro, the swedish krona were way overpriced come away overvalued, as defined by purchasing parity. the policy is to hedge when these currencies are measurably more than 20% overvalued. when the swing back into fair value and undervaluation, we
take them on. we are only hedged against the swiss franc and the australian dollar. the other currencies fundamentally now are undervalued. we are not afraid to be exposed to undervalued currencies. tom: it is friday, it is jobs day. let's go to a little inside baseball. you just mentioned purchasing power parity. find little confidence in purchasing power parity? >> it is inaccurate over the short term. if you look at various academic studies and papers, it does have some bearing. in the short-term, currency prediction is extremely difficult and using ppp as a short-term measure is not good. over medium and long-term, exhibit stronger. with us fromrro chicago. i'm in boston. francine lacqua in london.
when they opened up what has become a wonderful event in boston. all the different colleges playing over the next few weeks. right now, taylor riggs. taylor: the world's largest smartphone maker, samsung, posted its biggest profit in three years. rising memory chip prices up them bounce back from the death of its fire prone galaxy note 7. thandebacle cost them more $6 billion. boeing is closing in on a $10 billion deals with india's budget airlines. price jet is poised to order from boeing. india is the world's fastest-growing aerospace market. the deadline to impose article 50 edges ever closer. increased uncertainty for the passporting rights of british lenders.
david herro is the deputy chair and cio for international equities at harris associates. david, when you look at the u.k. banks are you have increased your exposure following the referendum, article 50, does it not bring so much uncertainty that you can reduce the exposure? david: when you look at the capital position, both lloyds and rbs are very strong and they the the ability to absorb problems caused by the uncertainty. the negativet implications, article 50 could have had, now, thankfully, to date, what we have seen as quite the opposite.
the economy has recovered quite strongly, possibly as a result of the uncertainty. markets dislike uncertainty. behind them and we know that is going to happen, there is still uncertainty about the impact, but i believe this has released some pent-up demand that has been building before the referendum. rbs,e meantime, lloyds and they are a little bit of a different situation -- rbs still weanwo wean -- to themselves of these penalties, but lloyds is in a really sweet position. francine: i have about a million questions. yuan lloyds, rbs, credit suisse, what are you adding? david: the bank separately proved to be far more resilient, the european banks in particular, than what was expected at the beginning of 2016. recall in 2016, everyone said
the lower negative interest rates, the energy loan losses was going to take the banking sectors. we did not see any widespread destruction of earnings power from these banks. we have seen the opposite. we saw slow and steady growth. banks, besides earning money on interest rate spreads, they can cut costs, they had lower loan losses, which meant it was good, so we continue to build our positions in these banks as they continue to weaken and as the valuations -- francine: which ones? david: basically all of them at different times. there was a time credit suisse when credit -- went below 10 francs. valueew is that intrinsic did not go up, so we traded below that. we are wherever we are in the .igh single digits
that is representative of the way we manage money. if the spread titans, we trim a little bit. credit suisse is one of our top five positions. , youine: on credit suisse came on board with what the ceo was trying to do. are you absolutely sure they don't need extra capital and do you believe they will ipo? david: they settle this rmbs lawsuit or problem with the department of justice right at the end of last year. it looks like it wasn't such an egregious settlement. as a result, perhaps, they already took a reserve, they added a little more, there doesn't seem to be a lot more in the pipeline negative, as far as settlements and penalties and fines. if this is the case, perhaps, with internal profitability, they might not need to put that swiss banking unit public for a
capital reason. they might want to do so for other reasons, but before, it was seen as a way to increase the capital buffer, but with the lower rmbs, perhaps it might not have to. audienceink that our is pretty familiar with the tone, the cadence, the pace of london and new york banking. only with the other geographies. is there is a new tone of voice, a new humility to international banking given what we have seen the last number of years? or is it going to be the same old, same old in the banking recovery? david: you see the pendulum swinging in both directions. tom: i agree. david: as a result of the higher capital positions that have been mandated by the basel rules and regulations come you will probably see a little less bandwidth and the pendulum. the highs will not be as high, the lows will not be as low.
there will be less competitive .ressure, to some degree you will see relative stability in earning streams for banks. that has positives and negatives. tom: david, this is critical. you are going to tell me the bandwidth is going to come in and that is herro talk for the idea of it as a utility. are you going to make your alpha and banking shares by capital , or as a dividend chair that gives you most pop? david: these banks are yielding quite high amounts. i would say there are going to be utilities plus plus. they're going to be a bit more responsive to the macroeconomy. london picks up, losses go down. vice versa, on the downside.
with a little more pop, utility like. tom: very good. david herro with us from london. at 8:30, we will have the jobs report. i will be with david gura on bloomberg radio. on bloomberg television, a conversation with william gross of janus capital. we will talk to him about the jobs report and then migrate forward to the discussion of january 20. ♪
francine: this is "bloomberg surveillance." tom keene is traveling the world. he is in london next week. right now, he is in london -- boston. let's get on to italian banks. probably the one that gave markets most angst. david, now you own intesa. a concerned are you that the politics of back in the forefront in italy? is monte dei paschi don't with? david: so far, it has not infected intesa. i thought they were be pressured to continue to put into own, to do something with monte dei paschi.
francine: if you look at the restructuring of monte dei paschi, is it better owned by the government? david: i think at this stage, private equity, the government, take it out of the public eye, fix it, then push it back out. we have to deal with the bad loans. in order to do with the bad loans, italy still has to push this and po resolution process. this is a big part of the problem. npl resolution process. italy, 8-10 years. in the u.s., the u.k., anywhere else, it is one or two years. in italy, 65% of these bad loans are backed by collateral. if you could get to that collateral, that helps resolve the problem. francine: are you buying the credit at all? david: at this stage, we are not.
there are some attractive elements to it. there are struggled -- stronger capital positions. but we really are happy with our holding in in tessa. -- intesa. they have done everything they were supposed to do. they continue to cut cost, they are continuing to work on their bad loan boat. interest markets are weak, but hanging in. the italian economy is picking up a little bit. is one of our favorite european financials. francine: there you go. david herro, we are back with the cio of harris associates. this is bloomberg. ♪ with the xfinity tv app,
only xfinity gives you more to stream to any screen. download the xfinity tv app today. i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. francine: this is "bloomberg surveillance." tom keene is in boston. i'm francine lacqua. i'm in london, as ever. glencore is back in business.
shares are rising. they are going to start paying investors back. david herro is the cio of harris associates. we want to talk to you about sports and politics. i'm trying identify all yorkie holdings. glencore, are you adding? maintaining, certainly maintaining a rather large position in glencore. it is roughly a 4% holding in our global and international portfolios. the first phase was the recovery phase. that has all been mopped up and take care of. now, this is the growth phase of their business. we have had improving commodity prices. they are proactively doing a little deal here and a little deal there. they are doing things to grow value per share after stabilizing the balance sheet. francine: i'm looking at the share price. it gained 200% in 2016.
what can the team do this year to make that better? david: i don't think you are going to be able to sustain that , but it isgrowth about getting the most out of your assets and doing what it takes to grow a good cash flow, a free cash flow stream. you do this by running your operations, by doing the low bolt on deals, like what they did with the russians with the oil, to enhance your trading business. these are the things you do. and you are very careful to not overpay for anything and you are careful to not take ore out of the ground when prices are low. tom: i really got to say from here in boston, it is a joy to speak to you. i look out at the acclaimed fenway park and kenmore square off to the side, the dome of 1802 david: here it comes. tom: just in the distance is a
tom brady sleeping in this morning. maybe he will watch a football game this weekend. maybe mr. trump will watch it as well. i want you to help me with the leading blue talker see of your clue talkding receipt -- clue talk receipt -- tocracy of your gop. how will it play in green bay? bayd: the people in green are the ones that elected mr. trump. america first the's not have to mean we have to stamp on everyone else, i think it just means what it says. , think the people of greenbay that is what they liked about the trump message. we will see if he is able to sustain that. he is not easy to read. i've been involved in politics since i was 11 years old and he
is difficult to read. tom: for our global audience, will you please describe the soft underbelly of the new york giants? david: what you are going to see is they are going to roll into lambeau field with a very high amount of overconfidence because they have played very well at lambeau against the packers and the packers are going to pick them apart. the packers' defense is not good, but their offense is roaring to read we don't know why he is back, but he is back. the giants are going to get ripped apart. it will be a high-scoring game. francine: i got about five emails about this. it is like an education for me. " surveillance" on sports with david haro. tom: my deepest sympathies. we will do cricket on monday in london. david haro, i don't give a damn. i just want to know tom brady gets about eight off days before he plays again. david: that is dangerous.
he is one of the greats. their coach is probably the best coach in the nfl. they are trying to play this year to prove they can win without cheating. they don't need to cheat. tom: listen to you! enough! you are off the set. don't disparage the new england patriots. terrible! francine: tom is not calling the shots, but david has to go. let's get straight to the bloomberg first word news. here is taylor riggs. taylor: president-elect donald trump meets today, but the targets of his recent witticism, the chiefs of the u.s. intelligence communities, will brief them on their findings about the russian computer hacking. , fbi,rectors of the cia and national intelligence will be at the meeting. top republicans in congress will not say whether americans could lose their insurance once they repeal and replace obamacare.
budget officenal has estimated that doing so would strip insurance from about 90 million people. -- 19 million people. lawmakers urge the u.n. to repeal or amend its resolution, so it is no longer one-sided or anti-israel. the obama administration of stain from last month's vote, allowing the u.n. measure to pass. global news 24 hours per day, this is bloomberg. german elections form part of the european political risk this year. chancellor angela merkel is expected to win a fourth term in office despite pressure from the far right and her so-called open border policy. henderson.is callum think is a much for coming on. we are looking at the main risk.
is there any chance that she does not become chancellor a fourth term? >> one should never say never, particularly given 2016. one of the lesser risks is that she does not win. one of our top risks, which you see in the publications that came out is that we have a weaker merkel. mandate for policies and pushing back against is weaker. francine: if she were to step , would it be something much uglier than what we are seeing now? callum: one aspect is the domestic driven aspect. else follows on
from merkel if she steps down, but also there is the more she is then aspect, absolute linchpin behind european solidarity. she helped europe get through the eurozone financial crisis. if she goes, is anyone else capable of keeping europe together? tom: let's dovetail with the wonderful international relations. your foreign exchange expertise. values the optimal euro against the dollar for the chancellor? where does she want the euro to be? callum: certainly, german manufacturers wanted weaker because germany is a huge exporting nation. the weaker the euro gets, the better that is for exporters. , which isn offset higher inflation globally.
there was a headline yesterday suggesting that mario draghi should hike rates because savers are losing out in negative european rates. there are two offsetting factors. tom: right. you directly go to the offsetting factor. there has been a lot written about this. the lethargy of the german economy, full that into the way germany fits into europe for 2017. lethargyhere is a behind the german economy at the moment, but the overall economic picture is reasonably good. if you look at eurozone economic data, sentiment, indicators,
inflation has clearly bottomed, part of that is because of demand. the overall macro picture is better. the political picture is getting worse. tom: let me take you off the eurasia group script, if you would. my number one script is the old butterfly effect. and you see something big happened that resounds around the world, how much of a butterfly effect is there with the trump presidency for the emerging-market currencies where you are truly expert? are we going to see many butterflies around the world? callum: i'm not sure we have seen a butterfly rather than an elephant, as of november 9. clearly, markets have priced in a huge degree of fiscal easing by the trump administration later this year, stronger growth, higher inflation, and we have gone from a qe related deflationary trade to a reflationary trade and that has
some way to go. we have seen some degree of consolidation. that has some way to go. we have seen the end of a trend. there is no question that fiscal easing is coming at some stage that is a game changer in terms of financial markets. emerging markets are financially a spread product. so, they face higher competition from higher u.s. yields. e.m. has gone from top-down outperformance, which you saw for much of 2016 to bottom up, selective performance in 2017. francine: think you so much. i like that. you were mentioning the butterfly effect discussed at m.i.t. and now we are looking at elephants. callum henderson stays with us. coming up, don't miss michael mckee's exclusive interview with the dallas fed president live from the american economic meeting in's annual chicago. look for that conversation at 12:00 p.m. in new york.
tom: we cannot show you images of the casket and flag. the most historic street in american baseball, i would suggest. fenway park. francine lacqua, dazzled by american baseball, in london. i'm tom keene from boston. can rogoff will be coming out in a bit and then we move on to bill gross later on. bill gross joining us on television, as well.
right now to our business flash in new york. traders andty morgan stanley are likely to get smaller bonuses this year. wall street's biggest stock trading firm is cutting its bonus full. morgan stanley's equity revenue dropped more than 3% in the first nine months of 2016. chrysler's ceo sergio marchionne is entering his final stage of trying to free the company of debt. consumersg helped by buying more profitable models such as jeep suvs and dodge ram pickup trucks. carlyle group is exploring the sale of nutritional supplements maker natures bounty according to people familiar with the matter. the company could fetch as much as $6 billion. natures bounty brands include your protein. that is your bloomberg business
flash. tom: taylor, thank you. we have been looking at international markets. callum henderson still with us. to turn to the american economy on this job stay. megan green has provided terrific value looking at international economics and folding back into "trumpforia." it is a trumpforia job stay, isn't it? >> it really is. i think expectations may have gotten out in front of their skis. i have no problem with that. it is the wage growth that might come in a bit lower. tom: interview after interview, we are fully employed, fully employed. bring up in new york the unemployment rate chart. it is an extraordinary chart migrating through 10% on down below 5%. on the bloomberg terminal, that
actual unemployment rate chart. yet, everybody is miserable. why am i miserable if i'm fully employed? megan: i think more important than how many jobs we are adding is where we are adding jobs and that trend has not shifted at all over the past year and a half. we are adding our jobs in low-wage, low sector industries, mostly service sector industries. that makes sense considering we consume about two thirds services, only one third goods. goods producing images desk jobs are the high wage jobs. tom: cap policy generate better quality jobs? can they pick and choose? megan: it is going to be really hard for policy to do that. trump is that a lot about how our manufacturing jobs have gone offshore. he is right that we have lost our manufacturing jobs, but not really to mexico. we have mainly lost them to automation and those jobs are not coming back. policy mixes are not going to reverse the trend of what we are consuming, which are
increasingly services, which tend to be low-wage. tom: thanks again to all the response to our interview with secretary of the treasury summers, the former treasury secretary. one of the great interviews we had was with david blanche lower -- blancheflower. a lot of economists tell me it is full-time america and all of my viewers said, you don't know what you were talking about, it is part-time america. which is it? megan: i think it is part-time america, actually. you see that in different measures of inflation. luckily, the fed is looking at the people who are part-time for economic reasons. they would like to be working more, but cannot find the work. that does remain a problem. we are also engaged economy. -- a gig economy.
tom: let's go to francine in london. francine: because we are nearing full employment, it is more about productivity and the u.s. output gap. how does donald trump actually create quality jobs and do with productivity? callum: that is a very tough question. he has certainly promised a lot and very much in line with the forecast for the payrolls, perhaps markets have gone over their skis in terms of expectations versus reality. the question is the type of jobs he creates and also the reaction function from corporate america to his promises. corporate ceos have stashed away billions of dollars in cash and as they start to feel more confident and put more money to work, then we will see a further leg up in this job growth and a for the decline in the unemployment rate. perhaps, we will also see some
degree of differentiation in favor of full-time work versus part-time work. for now, i would agree with the previous comment, that what we have seen is a huge boom in jobs , but largely in part-time jobs rather than full-time. tom: how do we get back to where we were? there is this all nostalgic. we are acting philosophical on what we have done the last couple decades. how do we get back to that american job economy that we think we remember? do is what we need to boost long-term productivity. there are a couple of policy things that could help with that. unfortunately, they don't tend to be profitable. the private sector is likely to remain uninvolved. wall financed by u.s. taxpayers a profitable exercise? megan: no, it is not. schools, education, roads would be useful, in terms of boosting long-term productivity. , we have very few
details on the infrastructure plan, but he hopes the private sector will get tax credits. the private sector will probably not be interested because they get -- being to profitable. you sogan greene, think much. what a privilege it will be later today, not my conversation with bill gross, it is a conversation with a relatively new minted mayor of this boston, martin walsh will join us. he has a city on the rise. general electric coming to maher walsh's boston. this is bloomberg. ♪
we are back with callum henderson. the problem with china is that ,t has reserves, outflows currency. which one should they stabilize first? callum: the number one political priority is the congress. their focus is on macro economic and political stability had of that because it is a transition year in terms of power structure. ,o come back to your question some degree of modest currency weakness. they will focus more in capital controls rather than letting the market do what it wants. how should they have to spend? you have donald trump being inaugurated exactly two weeks from now. how far should they go? callum: it is a fine balance.
if necessary, they will simply impose more capital controls rather than let the currency fall. the following currency would be good for them. close --uel for the l capital outflows. if necessary, they would impose more capital controls. we have already seen that to some degree. i think the major focus is on january 21. callum, let me do a public service here. we have seen the short-term offshore rate ballooned to 80%, to 60%, and plunged overnight sitting at 20%. those are gyrations that make for hysterical articles. should i be worried about the short-term balloon and short-term paper rates in china? i think that spike in chinese interest rates is a timely reminder by the
charge.ies who are in i think it will be a relatively gradual process. to use a previous term, to get ahead of its skis. it may weaken a little bit further, but it is not going to be linear. tom: think is so much. congratulations to you and all -- dr. bremmer on your eurasia group's top risks of 2016. we will continue. in this hour, kenneth rogoff. worldwide, this is bloomberg. ♪
but it is a most different jobs day. greet president trump in 14 days. america is fully employed, but chair yellen is still attuned to the slack in the american economy. and on the certitude of trump strongcs, on a trump dollar, kenneth rogoff of harvard university. good morning, everyone. this is "bloomberg surveillance ," live from boston, massachusetts. and of course, francine lacqua in london. it is jobs day, but it is a unique jobs day. francine: it is a unique jobs day, the less jobs day of president obama, exactly two donald trump gets inaugurated. tom: i am in boston to meet with professor rogoff. bentleyht, with university, what a joy to go to
fenway park. for our global audience, to me it is the sistine chapel of baseball. to see army play bentley was great. they call it the frozen fenway. i was frozen out by the green monster. schoolsools and public play for a number of weeks. we are thrilled at bloomberg and bloomberg radio to participate in that event. we are also thrilled to participate with "first word news." teresa -- taylor: the advisor flew across across the atlantic to meet with the trump team. chubb and theresa may had a frosty start to the relationship. trump is going after another automaker. this time it is toyota. the japanese coming plans to build a factory in mexico to
build its popular corolla models. the ceo of one of toyota's rivals says he gets the message. nissan's carlos ghosn spoke to bloomberg from leslienissan's co bloomberg from leslie us -- from las vegas. carlos: we will not make any move until we understand exactly what is going to be the policy of the new administration. this is the second largest car market in the world. he says trump is saying america first, and he is fine with that. the philippines says crime has dropped 32% since president crackdown last year. has him at an 83% job approval rating. koreane commemorates the
slaves the japanese took before and during world war ii. japan last year apologized. recalling its ambassador in protest and suspended currency swap talks. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. tom? francine? francine: thank you so much, taylor. these are your data points. european stocks are climbing a little bit. they are gaining for the first week of the year. investors are trying to figure out what the u.s. payroll numbers mean. u.s., they will probably get more clues when president donald trump becomes president, inaugurated january 20. 6.8284.want, china is trying to figure out whether they can stem outflows,
while at the same time having growth in currency. for yen, picture 115.79. we went above 116 very briefly. the let me look at bloomberg. i want to get through this quickly to get to dr. rogoff. the theme of the week is the butterflies with the emerging market move. y axis. is a fancy there is a curve to it. all you need to know is the curve is not a good thing. there is an acceleration in a.m. currency depreciation over the last -- in e.m. currency over the last -- in e.m. depreciation over the last two weeks. francine: it is all about u.s. jobs. this is what the market will be focusing on. initial jobless claims are in blue. in white, u.s. output per hour. , ofld trump will inherit
course, the labor participation force pretty high. but he has promised one of 5 million jobs. we want to know about output per hour, so productivity. tom: very good. francine lacqua in london. i am tom keene in boston. which means the first phone call you make will be to kenneth rogoff of harvard university. it helps that he has my book of the year, "the curse of cash." without question, in the last 10 years the most hated economic book. professor,s day, let's start with the american economy. can donald trump come to the rescue? : i don't know that it needs to be rescued. the economy is recovering very well. but, yes, i think donald trump in the near term probably is
going to see in even better economy than we have seen in the last year. tom: the arch debate is over part-time versus full-time america. alan krueger, there is a small startup school in new jersey called princeton. alan krueger has written with gigence katz about the economy. part-time,ut advanced? is that a good thing? ken: i think there is a certain romance for manufacturing jobs. we saw that in the election. it reminds me a lot of the way when i was growing up or even as acollege student, there was romance for agricultural jobs. manufacturing jobs are going to disappear, too, with or without donald trump. ,om: the creative destruction you and i witnessed. we both grew up in rochester, new york. in the last two or three years,
they destroyed the kodak manufacturing buildings of my childhood. what is it about the present economy that will be transient and not permanent? rochesterhappened in is that it got hollowed out by globalization. lot, are less people, by a living in rochester than when we grew up. it had kodak, bausch & lomb, xerox. cloud is in amazon rochester now, the computer building. but this is a little different of what is going on here, where there is also technology, digitization, and other things going on. francine: i want to bring you over to my bloomberg terminal. churn, basically a unemployment figures depending on a high school degree or not. the white line, the first line is no high school degree. the blue line his bachelor's
degree or higher. and then purple, the middle one, is a high school degree but no college. i was surprised that they are actually tracking. they are tracking. will donald trump continue this? ken: you know, i do think that there is scope to the economy to sort of reorient jobs in a way that raises productivity and increase his growth. i think animal spirits are improving. whether they will prove right or not, i think we will see a pickup in business investment. business is excited about the deregulation, the corporate tax. they may be completely jarred when they get to the uncertainty policy changes that they see under trump. but right now there is a very positive attitude in business that i think will increase hiring demand and improve the quality of jobs. i do not know how long that will
last. francine: the animal spirit you are talking about -- does it make a difference if you are a , withd you want to invest the donald trump tweets, which forces them to invest so they do not get singled out? ken: that is very counterproductive. the more donald trump does that, the worst economy will do. all the anti-trade stuff -- trying to think that we are going to build our economy on manufacturing jobs -- you have got to be kidding. there is this romance, like for agricultural jobs. we do not have a lot of manufacturing jobs. i think the big growth is in the service sector, technology, medicine, jobs like that. tom: we see that with the biotech expansion, general electric coming to ken rogoff's boston. it is jobs day. we must speak to professor rogoff on the tumult in india.
economics. francine lacqua in london. i am tom keene in boston. part of the reason we are in boston -- not only good hockey games, and fenway park and all that -- the curse of cash. it is blessedly concise. ken rogoff on negative interest rates, and more importantly, ken rogoff on the use of cash within a society. you had a publicity surge off mr. modi's actions in india. give us an update on the technical execution in india of what you talked about with "the curse of cash." ken: i talked about getting rid of large denominations, corruption. but they do not have large denomination notes in india. i talk about doing it over a long period. he did it overnight. most strikingly, the idea is to exchange the old bills for new stronger ones.
he had them printed, the new bills. tom: many other countries are thinking about this. australia is not india, but australia is also not sweden, is it? ken: australia is absolutely thinking about getting rid of their hundreds. they are not planning on doing it overnight. they are very sensibly updating a commission to look at the economy. there are different ways to approach restricting cash. the us trillions will look at all these things. tom: we have a new president coming in. i have no idea if donald trump has read "the curse of cash." if he did, how would you brief the new president? ken: i would think you would like the idea of cutting back on crime, of being able to raise new revenue of people who are not paying.
would like new bills with his family's picture on it. tom: are you kidding? ivanka on the $500 bill? they do that in england. we do not do that in the united states. ken: maybe, tom. a theresaill have may. going back to india -- how long will the effects of cash shortages linger back at we have .he first reading on gdp how difficult is it to measure? ken: it is very difficult to measure. it is hard to know what the trend was. it has clearly setback gdp by 1% or 2%. the biggest problem is that they had not printed the new money to replace the old money with. that is coming in finally. it will take a couple of more months and i think it will finally have smoothed out. francine: what is the sector of
industry that it will take the longest to revise? ken: real estate, gold is a big thing. these things were crushed because they are all in cash. that is what the prime minister was trying to get at. it is very corrupt. the real estate sector collapsed. it will pick up. they will have to find other ways to restrict cash transactions. india has two find more ways to address corruption, which is a huge problem. francine: the problem is that are withs' concerns the state election on february 4. at does this mean for modi? ken: i don't know what existentially it will mean for him. in a few years it may have salient effects. if it means having a big
psychological effect, that there is a positive effect, that people switch to getting bank accounts, which they are allowed to do when they are biometric -- in the short term, i do not have an answer to that question. tom: two things that are so timely to our audience -- the first, can you link "the curse of cash" and the challenges of corruption in society and the actions to stop that to a currency depreciation like we rupee?en in the indian ken: certainly over the long run, why has india not done as well as china? corruption is the number one thing. corruption int of china. they have more in india. tom: i want to focus on what we have seen this weekend with bitcoin. in the back of this book is rogoff on bitcoin. his bitcoin of fraud? ken: no, it is a technology.
i think the government ultimately has to regulate these cyber currencies just in the sense that, can banks take them, can retail stores take them. on the other hand, this volatility is kind of remarkable in something that was supposed to replace the currency. it is very unstable. in underscores one of the fundamental problems with why it will not relate -- with why it will not replace cash. francine: with the technology underlying bitcoin, is that the new discovery, that investors will latch onto it this year? ken: it is huge. it has so much with having to do with security, with preventing hacking. i do think over the long-term we will see central-bank digital currencies that will compete. i do not know if they will use
-- let me tell you, the central banks are looking hard at that. francine: professor rogoff, thank you so much. ken rogoff, harvard professor, stays with us. coming up, michael mckee sits down with an exclusive interview with the dallas fed president. look for that conversation at 12:00 p.m. in new york, 5:00 p.m. in london. this is bloomberg. ♪
tom: the first week of january, and it has been something for "bloomberg surveillance." london. lacqua in i am tom keene, in boston today. bill gross will join us at 8:30. right now, kenneth rogoff of harvard university. a heatedhis week, conversation with lawrence summers, professor at harvard, the former president of the university and the former secretary of the treasury. he made headlines. trump is bordering on economic creationism. --have a economic theory wilbur ross, noted philanthropist from yale university, who will be secretary of commerce. your professor summers got heated.
will you join him in criticism of navarro-ross economics? ken: i don't know what trump economics is. there are lots of different people on the team with different views. i certainly share the view that we need to fundamentally improve productivity if we are going to think about improving growth. there is no magic with tax cuts. on: i quote an economist mercantilism from 1948. our borders and say we are going to fight for what is ours? ken: we have benefited so much from globalization. if we slap tariffs on china and restrict companies from doing business with mexico -- yes, it will bring back a few jobs, but it will raise costs to low and middle income workers a lot. see biges we shop will
price increases. that will bite us pretty hard. francine: professor rogoff, i am looking at a tweet from donald trump from four minutes ago. he says the media does not report that any money spent on building the great wall will be paid by mexico. i had to do a google search. there have been reports in the last six hours of the taxpayer being asked to pay for this law -- for this wall. will we actually see a wall? ken: i have no idea. it will be far more effective to find ways to restrict large cash payments because that is the big driver in the united states, that employers can pay off the books, pace of minimum wages. that will be a lot more effective than building a wall. but he wants a trump wall. tom: from the boston studio, you can see the wall between harvard
and m.i.t. very quickly -- we have got to -- is it going to be a better american economic growth with what you have seen in the rhetoric the last two years? ken: i want to answer cautiously, yes. growth under donald trump is going to be quite strong for the first couple of years unless he goes crazy on the trade stuff, that the economy is doing well already. there is a lot of business confidence and other things. i think he will do well, but that does not mean it is sustainable or good in long run -- in the long run. tom: from london, from boston, this is bloomberg. ♪
from 2016. the deficit ratio is expected to go higher. now they want to keep it at 3% per the final figure requires approval from the national people's congress. that is later on this year. we are back with ken rogoff, harvard professor and former imf chief economist. what does this news from china telesat about how the authorities are trying to keep a handle on the chinese economy? ken: they understand that they have had a credit fueled bubble for a long time. they have to withdraw, they have to reorient the service sector. but of course they always want to put off that moment. they are having a very hard time struggling with how to bring down the chinese economy.
i do not know about reading too much into this, except to tell you that they are not planning to go to 6% deficit and keep the thing going forever. on somerific research of the esoteric nature of foreign exchange in nations. do we know what reserves are, and do we know how much of a given nation's reserves are utilized? ken: that is a good question. in china there is a lot of bad debt, and the reserves are going to be used for that. on the other hand, they will be used to stabilize the currency. reserves have played a role similar to capital controls, where they are trying to stabilize currency in that way. there is a real mystery to some of these discussions. no mystery to our first word news. here is taylor riggs. taylor: president-elect donald trump meets today with the targets of criticism, the chief
of the intelligence committee. ciadirectors of the fbi and will be at the meeting. so will the director of national intelligence. top republicans in congress will not say if people will lose their health insurance once they repeal and replace obamacare. that could put them on a collision course with president-elect donald trump. it is estimated that repealing obamacare would take insurance from about 19 million people. the house passed a resolution rejecting the united nations security council vote on the israeli settlements. the obama administration abstained from last month's vote, allowing the u.n. measure to pass. the bank of england forecast that consumers will ease on spending this year -- according to an economist, inflation is speeding up because of the drop
in the pound, and that will produce a squeeze on spending power. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. tom? francine? francine: the u.k. prime minister, theresa may, will meet with donald trump in washington in the spring, according to her office. may had a behind-the-scenes specialve to build a relationship before the triggering of article 50. also with us from boston, kenneth rogoff, harvard professor and former imf chief economist. thank you for joining us. i would like to leave party politics to one side because we have a global audience. tell me how you would start the negotiating process. do we need a traditional agreement? would you go straight to the u.s. to get a special deal with donald trump? >> i think the thing we need most of all is clarity.
we have seen over the past few days the problems that occur when you do not have clarity , from them the top politicians. civil servants need that. they need to be going into europe when we trigger article 50 and say this is what we want out of these negotiations. we understand that there will be give and take on both sides, but we need that clarity, and the civil servants are doing the negotiations as well. francine: i hear this over and over. when you start negotiating, that is what you're doing, starting to negotiate. and then there is nothing left to negotiate. barry: there is. in a negotiation, you set out what the basic objective that you have is. and then you listen carefully to what the other side has. at the same time, you need the best intelligence about what the other side's redlines are.
the civil servants -- that is what the civil service is supposed to be providing. when we see the politicization of the civil service, when the civil service is told they are not loyal enough or they are not ,art of the brexit campaign that becomes a problem for politicians. that means that politicians are closing their ears, they are not listening to what the civil servants are saying because actually the civil servants' job are saying from the other side that we need to do this. francine: what do you think the prime minister wants? it is -- is it a curb on immigration? barry: the prime minister wants to say to the british public that she has curbed immigration into the u.k. the danger of that, the things
that civil servants have been warning her about, the danger of that is that we lose the access to the single market that we will need if we protect jobs and economic growth in the u.k.. and reconciling those two is what this tussle is all about. tom: mr. secretary, good morning from boston, from our studios overlooking cambridge, where you studied at harvard years ago. you have the immense good fortune of studying with john rawls. his book is one of the original , inferiorhe century justice. give us your theory of praxis. rawls, help me here with the level of ignorance that is out there right now. barry: that is a wonderfully phrased question. look, the wonderful thing about ls' state of ignorance is
that he sets you in an original position where you do not know what role in society you are going to occupy. he then says, as the head of a family which over generations experiencing from positions in society, you have to then choose a structure for society that can provide a future, that wherever you are on that spectrum, you will find an acceptable social contract. new socialbuild a contract with our colleagues in europe. does have tons, it be acceptable not just to a few people now. it has to be acceptable to 100% of the british population, not just now but over the next 10, 20, 30 years. it has also got to be a settlement that is acceptable to our colleagues in europe.
that means it has got to work for both sides. and at the moment, it does not seem to me that there is the clarity of purpose, and it does not seem to me that our civil servants have the clarity in purpose to live with that. tom: professor rogoff, this idea of everybody wins versus an elite plutocracy winning -- how do we change that? how do we get to a broader win for american society or in the united kingdom? ken: that point underscores one of the problems we have been having. we used to imagine a society with more social mobility, and there is evidence social mobility is going down. i have a question about brexit. understand that after they have negotiated the perfect agreement and got whatever they have wanted, that it takes years to implement? it is very technical, these agreements.
you do not just make the agreement and switch from one thing to the other. often it takes five or 10 years. is that something that the brexiters understand? barry: one of the problems that clearly emerged between the ministers in charge of this -- liam fox and david davis -- and the chief negotiator, who has now resigned, sir ivan rogers -- he felt certainly that they had at appreciated just what complex set of negotiations this was going to be, and how long it would take to unfold. things when we heard like it was going to be 10 years perhaps before a transition period and the negotiations would all be completed, fox and davis just threw up their hands and said this is not acceptable. now, actually, when senior silver servants -- when senior
civil servants are telling you that this is complex, difficult, and takes time, you only have to look at the wto, at the way in which complex negotiations like -- in which complex negotiations have taken years in the making to see that this is not something that can just be snap your fingers, tell people what you want, and that is the end of it. rogoff, iprofessor want to go back to something that you said about social mobility. that is a huge problem needs to be addressed with social mobility, and that people will be left behind by globalization. when did we start distrusting our politicians so much? there is a great piece written , thatnid bershidsky nobody believes the people at the top. ken: i think the financial crisis really turbocharged this trend. it is things we have seen in the
past with waves of populism. that't think in 50 years people trust of the politicians. they did not. but we are certainly on a bad path right now. gardner, wonderful -- barry gardiner, wonderful to speak with you today. coming up on bloomberg radio, a conversation with the mayor of boston, martin walsh. from london, and from boston this jobs day, this is bloomberg. ♪
bloomberg radio, through the morning, we will look at the american labor economy. lacqua in francine london. i am tom keene in boston. taylor riggs has the "bloomberg business flash." taylor: equity traders at morgan stanley are likely to get a smaller bonus this year. for thes is being cut equities division by as much as 4% according to people familiar with the matter. morgan stanley's equities revenue rose 3% in the first nine months of 2016. carlyle group is exploring the bounty.nature's the company could fetch as much as $6 billion. nature's bounty products include metrex. tom: this is one of the joys of the show. it is good to have a first rate academic like ken rogoff on.
but to add real value, we bring in one of the leaders of thinking about operational research across all of america. at harvardbeen business school, out of cornell, rather, and a tour of duty at carnegie mellon years ago. to have them on our set -- and we have another robert kaplan on our set with michael mckee later this morning, the dallas fed president. doing monetary economics, are you? robert: he takes care of the capital markets part. tom: establish for us a leadership observation about president-elect. robert: this is still uncharted territory. right now he looks like a transactional president, reacting quickly to events, not often in deep consultation with advisers.
but that may have been something that was very effective during the campaign. we will have to see what leadership style he uses when he becomes president. tom: you own the phrase "balanced scorecard." what is the balanced scorecard for donald trump? that is the challenge of any leader, is to not just have people around you that agree with what you are saying and doing, but actually have people that can challenge your assumptions and have that occur before you make some of the big decisions. so you do have a leadership style. we can see that in some of the past presidents. .hey encourage that dissent they were better at listening than just speaking and advocating. the people he has brought in our operational. done fromget things outside washington. some of the short-term agenda is
reasonably clear with what he wants to a college. but this is a very complex world , and one person cannot possibly have all the knowledge for how to deal with that. it is not just the team he has but how he works with that team, how he encourages them to offer their opinions and occasionally dissent from him that will determine ultimately -- tom: francine lacqua in london. tweet watch trump's -- in the last five minutes he has tweeted three times. at the wall in mexico, paying for it ritual actively. now in the last two minutes, the never grants were never going to beat the passion out of my voters. were in big trouble, which is why they canceled the big fireworks at the last minute. they saw a movement like never before. robert kaplan, i am wondering,
is he changing the way diplomacy works when he interacts with china, or is he changing the way that politicians speak to their voters? he speaking clearly and to them directly. robert: he is appealing very much to the base that did elect him. giving credit to some of that leadership, he was able to detect this group that was going unrecognized and unrewarded during the past 20 years. he developed a set of flashy actions that would appeal to them, not all of which will be easy to put into action. and some of them are contradictory. --: francine lacqua in i francine lacqua and i will be in davos in the coming weeks. help us with a tactical moment, with the if or double care act and whatever the new affordable
care act is going to be? to throw out such a large piece of legislation? robert: there are components of this that are quite good and effective, and you want to be retaining that. so michael and i have been working for the last several years on health care. but we are not working on how you raise the money. we are working on how you pay for health care. some of the initiatives under the affordable care act, in the way they are incentivizing physicians and hospitals, are actually very good. tom: do we risk losing that? robert: we risk losing that. if we go back to the service world, it is very dysfunctional, it is bad medicine, and it is very unaffordable. if we can produce better outcomes at lower costs, which are some of the initiatives that have been done by medicare and
hhs, they are a very good movement in that direction. tom: professor, thank you so much. robert kaplan of harvard university. kaplan willrt darken the door of bloomberg television later this morning with michael mckee in chicago. coming up on "bloomberg radio, thee" and retirement expert of america holding court in boston college. us.ia munnell will join this jobs day, this is bloomberg. ♪
francine: this is this is bloomberg. -- this is "bloomberg surveillance." report, ther forex goldman note saying it is time to sell the chinese currency's and we also spoke to an heard .rom an analyst that is a picture for your dollar, 1.0586. tom: francine lacqua eyes in london. michael mckee is picking up the chicago cubs world series ring
at the american economic association meetings in chicago. what is the tone of these important meetings this year? of -- the tonene is one of confusion. what is donald trump going to do to and for the united states economy? will he bring fiscal stimulus that will raise inflation? will he deliver on his promise for jobs. economists in general do not agree with most of what mr. trump is proposing, so it is going to be an interesting set of discussions over the next three days here. francine: there is a great exclusive interview you have coming up later. michael: robert kaplan of the job -- of the dallas fed on jobs day. ofwill have what he thinks how the economy is doing and how monetary policy should respond. it will be his first year because he is relatively new to the dallas fed. i want to go back to the quote from the fed minutes, where he
uncertaintyve great with what will happen in 2017 with fiscal policy and what that will mean. we will try to pin him down a bit. tom: michael mckee, thank you so much. professor rogoff, final thoughts with you. professor summers talked about uncertainty. define the uncertainty professor rogoff sees right now. ken: there is uncertainty in u.s. politics. tom: but it is more than politics. ken: we do not know what direction the fed will be going. i would think the economy, there is a lot of upside on uncertainty. in chicago, going out to the aa meetings today, there is a lot of hostility. people are angry. a lot of people supported hillary clinton or even bernie sanders, but that does not necessarily mean in the short-term the economy is going to be so horrible. tom: what does india do in the coming weeks to level the
country, to calm the country? ken: it is very simple. they have to get the cash printed so that people can go about their business. this is a 90% cash economy. you cannot drain it overnight without replacing it. rogoff, and again with my book of the year, "the curse of cash," the most hated book in economics, i will say, in 20 years as well. so much more coming up. it is jobs day. stay with us. with30, a conversation bill gross. from london, from boston, this is bloomberg. ♪
welcome to "bloomberg daybreak." alix steel is away on this payrolls friday. it is like that. futures in the united states pretty much dead flat. dow down about 11 points. not even negative at a single point. switch out the boards. yesterday was the pre-payroll squeeze. looking at treasuries. the yield is down to 235. a bit of calm, but not in china was a weaker chinese currency. david: what you need to know. jobs, jobs. today is nonfarm payroll is about one president-elect trump said is the most important goal of his administration, he wants to add 25 million jobs in 10 years. how many were added last year? since that a year yuan felt as much and a single day. in the prior two days, it shot of more than any other day.