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tv   Bloomberg Best  Bloomberg  January 7, 2017 12:00pm-1:01pm EST

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♪ erik: coming up on "bloomberg best," the stories that shaped the week in business around the world. from confronting carmakers to dismantling obamacare, the donald trump transition gather s speed as inauguration day approaches. >> clearly, we see a better manufacturing business environment under donald trump . >> we are going to try and protect the insurance coverage that americans have today. erik: chinese currency surges against the dollar and all signs point to tightening at the fed. >> there's a lot of uncertainty. that is to be expected.
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erik: new reports see political risk everywhere in 2017. experts assess the hotspots. >> we are seeing the forces of gradual slow motion integration. >> when way the chinese could retaliate is going after american companies. erik: ceo's talk tech at the consumer electronics show. >> this is a year of dramatic change in industry structure. >> we have gone from company consolidation to industry consolidation. erik: that is all head on "bloomberg best." ♪ erik: hello and welcome. i am erik schatzker. this is "bloomberg best." your weekly review of business news and television from around the world. the week began quietly with most global markets closed for the new year's holiday.
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the calm was disrupted on tuesday by a donald trump tweet. ♪ >> donald trump criticized the automaker for building a plant in mexico. he said, "make it in usa or pay a big border tax." gm was not the only company under the gun should ford also canceled plans to build a plant in mexico. give us an idea of how global the manufacturing apparatus is for general motors. >> what trump was talking about was the cruise that make most of the cars in ohio. the sedan is the car that consumers buy the most. hatchbacks are made in mexico. americans are never really embraced hatchbacks.
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this is still really symbolic. this is about donald trump pushing another automaker after already tussling with ford over investment in mexico. he wants them to start bringing jobs back. i will tariff if you don't. >> he is very good at governing by anecdote. this is one way he will try to govern. he will work very aggressively to say he is working for the american worker. it is going to make it very difficult for him to give this up on a global scale. >> would you have made this same decision regardless of what the president-elect had said? >> we would have made the same decision. our main reason for canceling the plant is that our next-generation focus was going to be built in that plant. we have seen a market decline for small beagles in america. >> it is a ford decision. it is not something the
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president-elect can go out and say he did it for america? >> we look at all kind of factors before we make these kind of decisions. we see it better manufacturing business environment under donald trump. we see the progrowth policies he is outlined in the tax reforms. this is a vote of confidence that he can deliver on those things. ♪ >> china is set to be supporting further capital outflows. let's get over to beijing to our chinese correspondent. >> they are considering now contingency plans to support the yuan and easy capital outflows. that includes asking for conversion of some of their foreign exchange into yuan for the capital account. they may also trim some of their u.s. treasury holdings to support the yuan and maintain a stable exchange rate.
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it shows the pressure they are under to pull back on some of these capital outflows. >> how unusual is this move by china? >> the fact that they are treating this contingency plan -- we have had the devaluation of the currency, the market troubles in january, at this time they are looking to kind of react to overseas movement in the dollar. it is slightly ominous in my point of view. this time, it is more of a dollar story. if donald trump makes good on his threats to do whatever he has said he is going to do, such as impose tariffs on chinese exports, that could spell a lot of trouble. i think people are very concerned about what will happen after he takes over.
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>> the minutes have been released after their meeting. upside risks are being considered. officials are concerned they might have to quicken the pace of rate hikes to fend off inflation. >> the were concerns about what might happen under the fiscal policies of donald trump. there is a lot of insurgency which is expected. what caught my eye was their discussion of labor markets, and that a number of people felt they could under shoot the fed target of full employment. there is a line in here that says, "if that were to happen, many participants emphasized that adjustments to monetary policy might be required to achieve and maintain the committees maximum employment objectives." in other words, they are forecasting three rate increases over the year, but if the economy continues to run hot and
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labor markets get stronger we might move sooner and faster than markets anticipate. ♪ >> the chinese offshore yuan posted its biggest gain in today's on record. overnight lending rates soared. why is the yuan up so dramatically against the u.s. dollar? >> it is almost killing season in china today. they are looking at those shorts in a big way it is not clear if they are directly intervening today. we do know they have engineered a classic, liquidity shortage. the are trying to stop the yuan flowing from the mainland and moving it into hong kong. the chinese authorities are really sending a signal that depreciation is not a one-way bet. place your money where you will. we are coming after you. ♪
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>> five seconds away from the payroll report. the number comes now. >> 156,000, so below the 175,000 estimate that john mentioned. the unemployment rate, as expected, picking up. hourly earnings coming in a little hotter than expected at 0.4%. the year-over-year gain at 2.9% -- that matches the highest rate since june of 2009. a little bit higher wage growth as jobs gains were lower than estimated. the participation rate is steady at 62.7%. that means total job growth overall -- >> the underemployment rate is relatively high and needs to come down by 1% or 2%.
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they were talking about the labor force that wants to work. it is a decent number, and it suggests the gdp is moving along as much as to percent or 2.5%. i think, in order to get a healthy economy, donald trump suggests a strong economy -- you need 3% real growth and 5% nominal growth. we are not about a point under for both of those. ♪ erik: still ahead as we review the week on "bloomberg best," exclusive said insight from a voting member. plus, extra opinion on significant risks facing global markets in the financial economy in 2017. up next, more of the top business stories. the renowned banking executive picks up a new challenge. >> you'll be looking at
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expansion into asia and other parts of the world. erik: this is bloomberg. ♪
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♪ erik: this is "bloomberg best." i am erik schatzker. let's take a look at the donald trump transition starting with the nomination of a new leader to the securities and exchange commission. >> has been donald trump picking a long time sullivan & cromwell partner. the president-elect said he is a highly talented expert on financial and regulatory law. he will ensure that our financial institutions can thrive while playing by the rules. it sounds like donald trump picked the ultimate wall street insider. >> there is no doubt that he certainly has been wall street
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bona fide over the years. he has represented the biggest names in private equity funds and hedge funds. you are really talking about someone who has spent well over a decade representing some of the firms that ultimately are under the regulatory oversight of the sec. >> the battle over the fate for the affordable care act is underway. the opening salvo is underway on capitol hill. mike pence earlier promised in orderly transition away from the health care law. he criticized obamacare. >> the american people have sent new people here because obamacare has failed. >> i think pence brought a little bit of news today in the realm of -- he said that president elect trump plans to use executive actions as part of the repeal and replace process.
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there is a lot he can do by executive action to begin obamacare services such as benefits that insurers have to include in their plans. >> i believe, and i believe the market people also will believe, medicare will be less expensive when obamacare is gone. we want to get rid of this law and then put in place a model and concept that is principled and doctor-centered. >> we have seen changes in rates for americans in recent times. we do not want to lose that. we want to try to protect the insurance coverage that americans have today. the affordability and quality of their insurance coverage. >> toyota shares have fallen after criticism from donald trump to open a plant in mexico.
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>> they will build a new plant in baja, mexico to build cars for the u.s.. donald trump said, "no way." we do not know how much that tax he is threatening will be. take a look at the share price. you can see what the power of his tweet actually is. it cost toyota around $1.25 billion. toyota did come out with a defense saying that production would not decrease due to their new plant in mexico. for now, it seems targeted is going to move ahead with their mexico plant to make their cars. also in that statement, toyota trying to burnish their credibility with the u.s. and really with donald trump by saying, "look, we have done so much for the united states including millions of dollars of investment in the united states,
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manufacturing facilities, and employing 36,000 people." >> moving beyond washington dc, the story about currency controls was not the only significant story out of china this week. we continue with encouraging data from the world's second-largest economy. >> the gauge coming in at more than an expected reading. it is the highest reading in almost three years. it is a bit misleading because that's is july 2015. >> i think there is better sentiment and mood among corporate china. you can see the escape from deflation after four years, and it is starting to feel true now. with that data, we are seeing the chinese economy in a sweet spot.
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maybe they feel they can take their foot off the pedal of stimulus package. they are probably in a better spot them were they expected to be a year ago. ♪ >> he was the rainmaker that helped to build deutsche bank into a wall street giant. he is now planning his second act in a smaller competitor. we know what he is going to be doing? >> he is going to be the president. he will be leading expansion into asia and different parts of the world. he will also be doing a lot of what he did at deutsche bank -- creating new products for clients, finding new clients, and helping to push people into more complex products than they had before. >> he can bring in a lot of growth because they have a lot of leg room to grow in debt and
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equity sales, and also in trading. >> written's prime minister need to be told the uncomfortable truth about the difficulties negotiating brexit. >> are we lurching with moments like this? it makes us think we are moving towards a harder form of brexit. >> i think it underlines how difficult the brexit process is going to be, and how long and drawn out it will be. i do not think that is news at all. perhaps he has decided he does not need this kind of stress at the end of a long career. clearly, it is going to be a difficult process. i think it is not also news to anyone that there are some differences of opinion in the government. ♪ >> prime minister theresa may is
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taking no time in filling the vacuum from that surprise resignation. she reacted fast. i guess it is a question of strength and weakness. which one is it? >> she did not want a vacuum to open up. that letter from ivan rogers laying there some feelings in the civil service about the lack of negotiating. so, she brings in a former ambassador to moscow. she did it very quickly -- barely 24 hours after rogers resigned. as a senior government official tells bloomberg correspondent tim ross, it seems to suggest she acted very quickly and was perhaps stung by some of his criticism. it is a fairly unprecedented look into the inside of government.
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>> let us talk about deutsche bank. they are currently looking at private equity firms to look at their settlement with the u.s.. according to someone with knowledge in the matter, one of those possibilities is that -- >> essentially, they are saying they can look at private equity and get that relief. >> yes, they say these private equity firms can do this on a regular basis. if we look at them, we can get credit on the consumer relief total. >> what is a pitfall? >> it is part of the negotiations. it falls into the bucket of it cannot hurt to ask. however, they said that the point of the settlements is to provide additional consumer relief. this is something going on
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anyway. it is not additional. you cannot count it. >> christmas is not really getting to some retailers this year. macy's reported disappointing holiday sales. they also said they would cut around 6000 jobs from its payroll. macy's -- it is not really a surprise, is it? >> they were hoping for better results. they had put a lot of work into the business. yesterday, we got a look at some of the stores that will be closed. it is more than 60 of them. >> let's talk about sears. there is news coming out that they are going to close another 150 stores that are not doing well for them. >> i think with them it is a liquidity management game. for them, it is about getting to figure out what the right size for the business is. we've gone from 3000 stores to 1500 stores and maybe you get down to 700 or 800 stores at
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some point, but for them, it is just figuring out what the right size of the business is. ♪
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♪ erik: welcome back to "bloomberg best." i am erik schatzker. the effectiveness of the central bank was a constant debate in 2016. many complained that historically low interest rates were distorting the prices of financial assets. it is now a new year. will we see a new direction in monetary policy? in an exclusive interview, we explore that question with the former head of the reserve bank of india. ♪ >> when do we exit our great bond market distortion? >> i think we are in the process of exiting. i think the federal reserve is seeing limited room for
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continued accommodation, and they are starting to raise interest rates. i think you will see the pressure on other central banks come off as much as it has over the past few years to continue accommodation. my guess is that we are in the process of exiting. how fast it will be depends on, to some degree, policies of the united states. what kind of policies the new administration rings. how comfortable they feel with those new policies and whether they need to move faster or slower depending on those administration proposals. >> it seems to me that as one pressure comes off, another comes on. we have seen plenty of rhetoric during the campaign and what is happening on capitol hill with a new round of congressman being sworn in. many of them want to change the relationship between congress and the federal reserve. how do they deal with that change? >> i think it is an important issue around the world.
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the central bank has only been around for the last few years. they have acquired a sense of political power that certainly creates apprehension among the political establishment. of course, they would like to control that power. unfortunately, it is coming at a point when central bank independence will become increasingly important as inflation prices rise. they will be asked to control inflation which we have spent many years getting an apparatus that will ensure independence and allow them to raise rates at the time that is needed without feeling constrained by political pressure. >> the backdrop to this is the possibility we could see policy changes in a big tax reform.
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a big infrastructure spending proposal. it seems a kind of damned if you and damned if you don't. >> given the political situation, this is a time they have to tread very carefully. given the tradition they have established, the fed will do what they think is right rather than cater to political opinion. ♪ erik: straight ahead on "bloomberg best," we zero in on the fed. we have an exclusive interview. also coming up, interviews with some leading lights of the tech industry. first, what you need to know about risk in 2017. experts tell bloomberg it could come from places you do not usually expect.
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america is driving global political risk and uncertainty. this is bloomberg. ♪
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♪ erik: you are watching "bloomberg best." i am erik schatzker. 2017 could be the most volatile year for clinical risk since world war ii. that is according to the eurasia group and their report that was released this week. we discussed some of the details with some very respected analysts. starting with larry summer. >> what is your chief concern or observation as we are 17 days away from the inauguration of president trump? >> i think it is a moment of extraordinary uncertainty.
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there are prospects that things could work out well for some. however, there are enormous risks to the global economy. enormous risks from a possible united states protectionist measures. risks from extra mentation in a world where certain pillars of american foreign-policy are up for grabs. enormous risk to the american economy from an administration that will take a very different approach to american society than has been traditional. this is probably the largest transition ideologically and in terms of substantive policy that we have seen in the united states of the last three quarters of a century.
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>> there is no question that donald trump comes into this office with a feeling that most important bilateral relationship in the world between the united states and china is not being fundamentally well-managed. he feels that the united states needs a hard response. it is happening at a time when china will not take any uncertainty. from 1998, we started off from. when we talk about global, political risk it was emerging markets and the middle east, and that the financial crisis hit. you had the eurozone. in 2017 leading the docket is the united states. america is driving political global risk and uncertainty. it is a fundamental change from anything we have seen over the past few decades.
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it is this transition that matters so much to the rest of the world. ♪ >> i am curious about the new representative we have. i wonder if the u.k. is going to be at the top of the list. you need to do a brexit to get along with the trump administration. >> there is an idea that the united states will have a trade deal with the u.k., and i think that is very far-fetched. i think it is going to take much more than two years to reach an agreement with the eu. it is going to damage economic growth to the united kingdom. it is at a time when europe is in the process of gradual, slow motion disintegration. as an anti-european union policy -- political party gains power in france and italy. >> what we need to know about
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the domestic policies of beijing if they address the president of the united states? >> the key risk we see for china is then being on risk in 2017 it because of the leadership transition. the potential for china to overreact. their leader is so focused on the big incoming congress -- they are going to be on edge to any kind of external activity or action whether it is u.s. china relations or north korea. it could pose as a distraction or some kind of activity that could -- that he would have to respond forcefully to in order to not lose credibility at home. >> do they take out u.s. companies? is it a supply chain problem? or is it even worse? >> it really depends on what the
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provocation is. i think the u.s.-china relationship -- if donald trump decide to take some aggressive trade actions against the chinese, then one channel they could retaliate is by going after american companies. the role kind of formal ways they can harass american companies as a way to retaliate. ♪ erik: risk is a word that came up several times in the minutes of the federal reserve policy meeting as they debated the rate. on friday, we had a chance to probe deeper into the fed thinking with robert kaplan. ♪ >> you read the minutes of the last meeting, and you cannot help but walk away with the belief that -- federal reserve officials have very little confidence in the donald trump forecast in 2017. there may not be a lot of confidence in what monetary
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policy has to do. is that fair? >> i would not say that at all. the second half of 2016 was very strong. our own forecast for the fed is that the first half of 2017 will also be strong. gdp in excess of 2.5%. i think the reforms provide upside to that forecast. i would not say that people like me, members do not have confidence. we are acknowledging that, with additional economic policies, it will provide upside to our forecast. we might need to be nimble to edit our forecast as conditions unfold. >> you need additional fiscal stimulus? >> i will say this, there have been two, major headwinds we have been talking about. one of those is slow labor force
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growth due to aging and graphics. the other trend is weak productivity growth. i've been a believer that monetary policy alone will not deal effectively with those issues at this point. we need some kind of reform. potentially, some infrastructure spending that could improve productivity. policies that could improve those two issues. our belief is that the policies would be most effective if they address those two points. >> what you think of the report after today? >> i think it is consistent with the message that we are moving towards full employment. it is consistent with moderate growth. i would say it is consistent with our forecast. for me, it is consistent that we
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will have relatively solid gdp growth in the first half of next year in excess of 2%. >> what about the wage numbers? >> it is notable. it is worth noting that, as the labor force is tightening, it is tightening more for skilled workers than unskilled workers. it is consistent with reduced labor slack and moving towards full employment and a tighter labor market. ♪ ♪ erik: this is "bloomberg best." i am erik schatzker.
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♪ erik: this is "bloomberg best." i am erik schatzker. the annual consumer electronics show is a showcase for new products and innovative platforms. it also brings together the tech
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industries most influential executives. we spoke with a number of ceos and these are some of the highlights. >> last year, it was all about connectivity. we are really doubling down as an industry. this year, we are showing technology and four pillars of conductivity. that is about collaboration of many different technologies from apple, samsung, ibm, google. more and more automation that you bring in is getting complicated for average users like you or i. we want to customize the human side of machines. the u.s. political scene has been talking about the hacking, so set of security is important. you cannot have home security without cyber security.
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it is very important. these are some of the biggest trends we are showing here with the home and the car. >> you are talking about driving us in a self automated car. it already talks to you and opens the door to you. when is it a reality and not a concept? >> it is more than a concept now. i think the technology is ready. as far as the infrastructure, we are not ready to deploy. cars today are being driven by humans, and they are not intelligent. so the next few years will be exciting in terms of implementation. >> is it theoretically possible that these series of hacks have
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any affect on the brand of yahoo! in any way? >> from what our goals are, yahoo! remains on track. the breach is a bit of research, and the investigation is ongoing. >> what you see hold such value? the reach continues to dominate the discussion. what do you see in its underlying value? >> it has a very large footprint on the consumer side. it has a large advertising and e-commerce business in asia. we look at this asset, the combined assets would have over a billion of consumers doing billions of dollars in ad revenue. it has a very big footprint in mobile. you add into it verizon with the opportunity for data and targeting and getting to mobile consumers. it is huge. i think the breach information and investigation is there, but from a business strategy standpoint the next five or 10 years -- the assets coming together represent a very unique
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opportunity and scale. we have gone from company consolidation to industry consolidations. verizon has been very clear on their execution and thinking on where they believe the world is going with media and wireless mobile. we are excited about verizon and the team overall. there is one issue that needs to be resolved over all, but on the integration side as far as the strategy -- the strategy remains intact. >> my colleagues had a dispute this morning about the thoughts on the at&t and time warner deal. he is seemingly not a fan of it. what are your thoughts? >> who cares what he thinks? unless he is going to micromanage it and go through the whole legal process, he is just doing what he does. he is making noise.
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he really does not know anything about the subject. >> it has taken a chunk out of the company shares today. >> i have heard this a lot recently -- if he says something, your stock goes down. yes, fine. if your stock is subject for more than a day or two to his comments being a negative drag on you, then you have a very lousy business. it is all part of today's ridiculous silliness. >> the merger efforts last year -- do you see any likelihood of the merger being resurrected? >> no. >> why do you think that? >> if you are presenting the shareholders, then you are not going to buy five, for anything other than a bargain sale price.
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if you are on the other side of the committee, then you are only going to sell it at a premium. it was never going to happen anyways. >> how would you try to turn around paramount? >> you make good movies. >> president elect donald has taken aim at companies -- particularly those that manufacture in mexico. he has been threatening tariffs on companies that import products from mexico. does that change at all your view on how you operate in that country? i know you produce in mexico. >> we produce in mexico, but we also produce a lot in the united states. we have the largest any factoring plant in the united states. it is the largest plant in all america for the car industry. we are happy in the u.s.
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what i want to tell you is that there is a new administration coming. there are going to be some new policies and limited. we are business people, and we will adapt to the new policies. >> what does that mean? >> with additional the past be coming to north america, we will take into consideration the policies coming into place. so far, the policies have been nafta. this was an agreement signed between the three markets, and we adopted to that policy. if this changes, then we will adapt to this condition. what is important is that, as a rule, we implemented for everybody. >> as it stands now, he has clearly targeted mexico. if you are going to add capacity it is going to be in the u.s. or canada? >> i do not want to preempt on what will be decided when the new administration will be in position.
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i can tell you, we will not make any moves before understanding exactly what is going to be the new policy of the american administration. this is the second largest car market in the world. when the president of the united states says something, everyone listens. ♪ >> clearly, this is a year in dramatic change in industry structure. i strongly believe that capability will persist, but something is going to happen with them. i also predict that cable producers will fail miserably. i stand by my predictions. >> including also that google is going to get into the wireless world. i want to mention one that people keep predicting that you have to keep swatting away. it is a merger between t-mobile and sprint. you seemed to hint earlier that you think this might go through.
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that this might actually happen. i do not want to put words in your mouth. but it might happen particularly with a new president in the white house. >> in order for something to go through, it has to exist. i would never comment on the existence of something that we are currently at auction about. the structure around mobile internet is going to bring together multiple players either vertically or horizontally. the scale provided by sprint and t-mobile being together is something that has long been considered. i believe, under a trump administration, there will be a different level of regulatory scrutiny and possibly industry structure. i think it is going to be a fascinating year, what a great year to be a healthy, vibrant, growing brand.
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and then decide what's the best way to serve your shareholders and customers. ♪
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♪ >> we go into the bloomberg, and we are using a great function. this is bloomberg mass that was released last year. we see ford in blue and gm in yellow. erik: there are about 30,000 options on the bloomberg could we always like to show you our favorites on bloomberg television. here is another one you will find useful. quicgo. it can take you to our quick takes for insights into timely topics. here is one that examines the
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civil war in syria. >> half a decade of uninterrupted violence. 450,000 deaths. at least 11 million people displaced from their homes. that is like the entire state of ohio. even as the syrian government recaptures aleppo, there is no end in sight. here is the situation since 1966, the minority offshoot of shiite islam has been in power. the sunni muslim population represent around 60%. the current president took over in 2000 after the death of his father. cut to 2011 and arab spring. the world watched the rising as tunisia toppled its dictator. instead of stepping down, assad violently crushed the peaceful
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uprising using tanks, artillery, and gunships. many protesters responded by arming themselves. that is when the complex took on a more serious nature. the saudi's through their backing behind aleppo. shiites gave their support to the regime. meanwhile, another power attacked both sides. then, there are superpowers like the united states and russia who are frequently at odds over the war. the united states is against assad while russia supports it. both countries are actively fighting inside syria against the islamic state and al qaeda spin off. russia uses the terror attacks to bomb groups supporting assad including rebels supported by the united states and its allies.
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devastated by the fighting, syrians were able to escape the bloodshed by fleeing by the millions into neighboring countries. straining resources into a global humanitarian effort. for years, the united states has assisted that assad must go. in the interest of the broader fight against the islamic state. donald trump's presidency means that stance might soften further. he suggested partnering with russia to combat the islamic state. should take precedence over supporting the rebels. erik: that was just one of many quick takes you can find on the bloomberg. you can also find them on bloomberg.com along with the latest business news and analysis for the four hours a day. that will be at for "bloomberg best" this week. thank you for watching. i am erik schatzker.
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this is bloomberg. ♪ . .
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david: did you think you would grow up to be the ceo of a large company like pepsi? indra: it is a dream come true. i pitch myself every day. david: when you get advice do you ever listen to it? indra: you never know if a nugget can translate into a success for the company. david: not long ago an activist showed up. indra: my job is to make sure the company is performing very well. david: suppose somebody has a product from a company that is based in atlanta and you see it in their refrigerator, what do you do? indra: i let it be known i'm very unhappy. >> would you fix your tie, please? david: people wouldn't recognize me if my tie was fixed. but ok. let's leave it this way. all right. ♪

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