tv Bloomberg Best Bloomberg January 20, 2017 8:00pm-9:01pm EST
>> coming up on bloomberg best: the week in business as seen from the world economic forum in tugboats. a new u.s. president takes command. how will trump lead the economy and where? >> president trump represent the hope of globalism. erik: brexit comes into sharper focus. >> i want to negotiate a free-trade trade agreement with the european union. business and financial leader share their outlook for the year ahead and their insight for changes on the global horizon. than17 will be better 2016.
>> we are placing bets on technology. >> the middle classes disillusioned about the future. >> the eurozone may not survive. >> the most influence in the world right now is populism. erik: it is straight ahead on "bloomberg best." ♪ erik: hello, i'm erik schatzker. it welcome to doubt both and welcome to "bloomberg best." your weekly roundup of the most important business news, analysis, and more from bloomberg television and around the world. world economic forum, we had the chance to discuss the week's biggest stories with some of the worlds finest minds. let's take a day by day look at the top headlines. >> 2017 is starting out as the year of geopolitics led by
brexit in the incoming trump administration. a single country is likely to have more effect than china. their president spoke for the first time it out us. -- at davos. wax i saw the president of china's speech as a major message that says, let's recognize the fact that we are interdependent. we need to communicate using the same language. >> sterling rallying today after prime minister theresa may gave the most explicit position yet for brexit. she remains committed to honoring the will of the vote. >> i can confirm today that the government will put the final deal to a vote in both houses of parliament before it comes into form. >> it is pretty clear that the european relationship will be status low.
it won't be as good as it was. i think they can negotiate many things. it's important for them to step aside and renegotiate the rest of the world. >> theresa may made it very clear that it is going to be a hard brexit for britain. you get the parliamentary approval. got, what? 5000 people there? >> you pick of a mobile home and move it across. these are real things. let's work our transition plan. >> citigroup and goldman sachs wrapping up the big earnings with most companies reporting results that beat analyst estimates. >> goldman sachs has seen some stabilization after a year of very steep declines. that uptick is a very key focus for investors. it is 2017, the crisis is
ancient history, and goldman sachs is so much more profitable than morgan stanley. morgan stanley is a .7%. >> it is called interest rates. goldman sachs is a massive beneficiary of the quantitative easing program because there is a massive shift in trading. people buying bonds the last four years because rates went from 12 to minus one. [indiscernible] as they have one of the highest market shares, they have benefited. unchanged from the ecb at 0% on the resting rate. it marginal resting -- maintained a -40 basis points. the asset purchase program, at least through march. through that in april it went from 80 billion to 60 billion euros a month.
it carries her to the last of 2017. >> the main concern for germans right now is inflation. up inan inflation jumped december but german inflation shot up 1.7%, double the rate it had been the month before. germans historically don't really like inflation. >> we will suffer some political problems explaining to german that the inflation rate is likely to raise to 2%. some -- we will try voters, it isour these advantages.
>> steven mnuchin in his bid to become the next treasury secretary. he told senators at his confirmation hearing that he will be a steward of the post. veryam committed to be responsible in my position there and make sure that i properly provide the support from the treasury department. i would take my responsibility very seriously. >> is that a safe bet that it is good for goldman sachs? >> i think it is terrific to have a bunch of pragmatic business people participate in the process of washington but all of those people will be very focused on the reputation in their business. i think that this administration is going to be focused on growth. think inople that can practical ways, it provides
opportunities and jobs. it is a good thing and in that environment, goldman sachs will benefit. i donald john trump do solemnly swear. president trump: i donald john trump do solemnly swear. >> that i will faithfully execute. president trump: that i will faithfully execute. >> the office of president of the united states. ofsident trump: the office president of the united states. and will, to the best of my preserve, protect, and defend the constitution of the united states. >> so help me god. president trump: so help me god. >> congratulations, mr. president. donald trump now officially president of the united states. he was the focus of much discussion throughout the week in davos. plenty of trump talk coming up
erik: welcome back to "bloomberg best." os, erik schatzker in dav site of the world economic forum annual meeting. written's exit from the european union is the most pressing unresolved issue facing global business today. u.k. prime minister theresa may is creating a plan to start resolving it. she spoke this week with bloomberg editor-in-chief. theresa may: we want to build a global britain that is an advocate for treat -- free trade, free markets around the
world, and ensuring we are taking those opportunities. i want to negotiate a good free trade agreement with the european union. i want the best possible access for trade, operating within the european single markets. i value financial services in the city of london and i want to ensure that we can keep that global britain. i believe we will do just that. >> you think that financial services has a that more priority given the value to the british economy? theresa may: of course, the services that fit around the banks and asset management companies as well are important to us. britainok ahead to the of the future, the global britain. britain outside the european union. i want to make sure we have a good relationship, that good partnership. i believe it worked for the u.k. and offer the union -- also for
the european union. see a contradiction between being free trade on one hand and on the other, wanting to intervene in different markets? >> i don't see a contradiction between saying that we want to be free traders and also want to make sure that markets are working properly. that's what gives people the confidence and globalization which sadly has been eroded. >> on confidence, you have the pound. it's gone down by 1/5 and you seem to be fairly relaxed with that if i can put it that way. where it getsel to parity with the dollar and you worry about the pound? theres theresa may: what we have also
seen in the economic data is the strength of the u.k. economy. the point laste year that we were the fastest-growing major economy. we had figures that showed unemployment coming down once again. you see a fundamental strength in the u.k. economy. forward this version of britain that is free trading. i lookw version and across the atlantic and see donald trump that takes a protectionist attitude towards trade. what do you say to him on that? around may: if we look the world, there is a question about free trade. it goes to what we were saying earlier, globalization has left them behind. that's why think it's important for them to go out and give that message and show. they want to make sure the economy works for everyone.
it is free trade. it is enterprise and the engine of growth that is the engine of our economies. erik: global bankers are bracing for brexit. jpmorgan ceo jamie dimon has been very frank about the potential negative impact of the split. not just for his business, but for the global economy. he also sat down with john nickel for weight. aite.hn nickel fothw >> she doesn't want to give a particularly special deal. you are a global bank based in london and hire a lot of non-british people to work there. generally, they say britain is heading in the wrong direction for jpmorgan and other banks. dimon: london is a center where we have huge economies of scale that include the people of europe. it is passed on to the customer.
,hen they change the rules, yes it will reduce jobs there. the brits will decide how we want to compete around the world. it's not up to me, it's up to the prime minister and the parliament. it looks like there will be more job movement than we had before. >> [indiscernible] jamie dimon: we don't know yet. rules were thein jobs are required to move in. it could be more flexible. it depends. remember, 27 nations. this is the negotiation that will take quite a while. >> another election coming up this year. have you packed in the possibility -- is that one of the worries you have? jamie dimon: it wasn't just the effect on britain, the gdp, the u.k., etc. it was really the long-term of europe.
thatishful thinking was brexit would cause the european union to look at what went wrong and fix it. went wrong is going wrong for everybody, not just britain. >> europe is not fixing its problems. a constant: you have -- you have the same political things about immigration. how much power goes to brussels, how much inflexibility you will have. i'm still hoping they do it. but if you have a le pen presidency, it is a very complex thing. it is a long-term pessimistic view of europe. >> the less they change. jamie dimon: things will have to change. they have to more competitive globally. they are doing ok right now. they are doing 1% plus, which is ok. and i have respect for the european people.
but they have to change. it may be forced by politics or new leadership. more of the week's conversations from davos coming up. donald trump has been talking tough on china. should the world worry about a trade war? saidltiply things that get to create a enormous anxiety. i think it's a little overdone. erik: this is bloomberg. ♪
erik: you are watching "bloomberg best." i'm erik schatzker. donald trump did not appear in davos this week, but his presence was certainly felt. he is a tape of the commerce and about trump starting with trump's advisor that sold his stake in sky bridge capital to join the white house. he came to speak on behalf of the new administration.
>> there is one message you want to convey on behalf of the president-elect. this gathering right here. >> it is a really basic message. the administration wants peace and global prosperity, but one of the paths is to help working-class families and middle-class families of the -- united states. we want to see real wage growth because the purchasing power will filtrate back into the world and lead to more global growth. in a lot of ways, president trump represents a hope for globalism. if you can fix into cure the wage situation in the united states, it will lead to global demand. erik: what is the question you keep getting that you are trying to answer? anthony scaramucci: he has a very interesting communication style. more you get to know him and the more time you spend with him,
you understand his communication style. erik: it's not working for these folks? anthony scaramucci: these folks are used to a certain buttoned politically correct style. it is more synthesized to be inert. the president will say things in those are inner. i think he has an authentic, refreshing delivery system. and i think people will start to appreciate that more once he is president. erik: of all the things donald trump has promised to do, which specifically is of interest or concern to you and carlyle. something you have to be thinking about running a private equity firm. >> i am an american citizen and i'm more worried about the thenry and those issue what affects carlyle. i'm not worried about of anything he said, but i look at things more than a perspective
from carlisle. he said he will produce higher growth. taxrly, we would like some relief in the corporate world and he said he would produce that. we think less regulations would be good, he said he would produce that. as i know, singing you're going to do things and getting them done are different things. the congress and the united states really takes care of tax legislation. it takes a long time to get it done. we don't know what it's going to be like. there will be some uncertainty for a while. i think he already has if you talk to u.s. chief executives. i am bullish on the u.s. economy. but not for a long time. i would guess the next two or three years, maybe before the next election if he seeks reelection. it will be quite a difficult picture because there will be a big deficit. what he is proposing will probably increase the deficit to
some degree. those repatriated funds, will they going to capital expenditure and innovation? it drives topline growth. the s&p 500 effectively shrinking. they have paid out more and dividends and buybacks. so management is basically abdicating responsibility. >> that will change. it is expected to change and is priced in. >> it will change. the issue of trump, the u.s. economy and what it means internationally. the u.s. wins, you lose on the international front. >> what we see is an administration talking about growth. talking about infrastructure spending, tax reform. , repatriation and things that are progrowth. if they were to change
the tax policy on repatriating, or if it were a holiday entirely, how much would you bring back to the u.s. from overseas? >> i think you will see our company, companies like ours across all industries bring capital back onto the balance sheet of the united states. which is likely to be a good thing. we are very supportive of that. -- therement officials is clearly a concern about president trump. the team that he selected, both people being appointed into government and in the advisory council he has put together all indicate a level of engagement at a business level that is reasonably encouraging. clearly again, there will be changes of the way nafta is constructed. and often what he's talked about is not that he's against free
trade, but the agreements put in place were not great deals for the usa. , hehere is a presumption only sees exports as good. >> we would probably disagree with that. put aside the word globalization that has some pejorative text to it. the marketin definitely results in a lot of people prospering over the last 20 or 30 years. there are endless world bank and imf studies that prove that. trade, it's, free regarded as a force for good, generally. many people have told me they are very concerned about what chuck -- trump might do with china. what do you make of the saber rattling? the u.s., it is that generally, has a pretty unbalanced relationship with many countries. paidrms of taxes that get
to enter another country. we let people come to the u.s. basically free. aspect, notwhole just with china, is being looked at by the new government. erik: but he has singled out china. were toorry that if he pursue an aggressive policy on trade with the chinese that american companies would lose some of what they've had in china? market access like companies like years have had? >> i was at lunch yesterday and talked to the president of china. it was a good conversation. erik: what did he say? was very positive on a long-term relationship between the countries. erik: the president told you this? >> that's what i just said. erik: i'm just making sure everybody understands. >> yes, they understand.
to engage when the and the u.s.t figured out what its positions were. and that they've gone through many u.s. administrations with many chinese administrations. he was anticipating being able to work things out. u.s., despite the kinds of language that, from time to time, is employed. it's early days, erik. multiply the things that get said to create enormous anxiety. it's a little overdone. still ahead on "bloomberg best." much more from doubt us. they say populism is the number one issue that markets had better be ready to deal with. and heads of global banks give their forecast for 2017.
♪ welcome back to "bloomberg best". i am erik schatzker in davos. many bank executives came to the meeting this week, and most of them sat down with bloomberg television to talk about the state of their business and the global economic outlook. an expectation that 2017 will be better than 2016. we have talked about a low interest rate environment, so a change is positive. in june, things were much more difficult in terms of
valuations, and you have seen the recovery. the negative is the same, all the uncertainty, political agenda, elections in france, netherlands, germany, italy, so it is always that balance between some positive and some less positive factors. >> do you worry about deregulation in the u.s.? you are not on the same playing field as your peers there. for any industry, strong competition is healthy and benefits the customer. that is where you need to start the discussion. we want competition because that provides innovation and competitive products and services. a level playing field is not negotiable. we hope we can achieve it. have heard that a lot
of the european banking sector is too complex. is 2017 the year where they de-complex themselves? >> we are in the process, make ourselves simple, more resilient, more compliant. that is what we are doing. program,ansformation in 2016, we completely change the organization, a completely new structure. we introduce cost-cutting and cost efficiency programs. 10.2% when i arrived, at 12 now, almost 200 basis points in 12 months, that is material. in 2017, it is solidifying that platform and as we go launching initiatives that are medium and long-term to change the way we do business. more optimistic
or perhaps more pessimistic about the outlook for your business is based on what you hear about the global economy and where it is headed? >> people are wondering about politics, and that is a big but they feel good about the prospects in the country. we are all trying to figure out what is going on with the election cycles, what is going on in our country as the administration changes this week, but still very solid, growing, spending money, so we feel good. will be the 2017 first year in a long while that your bank and others might be able to focus on strategic priorities instead of reacting to the regulatory environment and being forced to cut costs because there is so much
pressure on the top line? on thatve been focused every day for a long time. in the consumer business, we had 5700 branches, now about 4500. we had 15,000 salespeople, now 25,000. there has been a massive transformation. chip cards were invented, massive strategic transformations in our business, and it will go on no matter what the regulatory environment is because it is driven by customers. mobile technology has changed the way customers interface with institutions. 20%, thoseng 15%, are numbers -- >> let me ask you this, what can you do if the regulatory
overhang goes away? >> it is more about capital liquidity than the way we operate the company. wewant change the way operate the company in terms of doing right things for clients. ,t may become easier at times but what we do has not changed in the last 6-7 years, and we focus on drive, drive, and drive. >> there is a sense that economies are beginning to slowly grind to a higher growth rate, which would be better hopefully for all of us, and the banks, including barclays, we are open for business and providing credit, and hopefully 2017 is a good year for the markets. >> will we see more volatility, binary markets, as we figure out reflation in america and brexit? the long-term impact of brexit, my own view is it will
not create an economic shock. whether we lose 10-15 basis points per annum, that is something that will have a price , but we hope like the prime minister does that, you know, the entire world is taking a new look at the united states, u.k., and europe about trade agreements. we hope, like i think a lot of people, that the world continues to be integrated as an economic matter, and we hope the political rhetoric settles down and the u.k. can negotiate trade arrangements with the european union that are beneficial for europe and the u.k. quantify it, but if you could qualify it, how disruptive would this be to your business? will get ane agreement between the european union and the u.k. that will be no more disruptive than what barclays had to do in the united bank holdinging a
company to exercise our business activities in the united states that we did last july. is uncertainty, which no one likes, but i do believe this system will, out of more rational and it will be some movement, using other offices at times to book certain traits, but i don't think it will fundamentally challenge the importance of london is a financial center for europe. markets,ok at the brexit, trump, everyone was saying how the markets would go down. what was wrong? did people get trump and brexit wrong? >> i thought there would be a shock because it was so different than what the pundits were calling for, that i never thought the markets would go down. economy butts, the first of all, the markets were
trending more favorable anyway, but if you look at the policies that trump has committed himself to, they are quite stimulative and market supportive. be outesa may wants to of the single market, her position is to prioritize curbing immigration over the single market and i will not give priorities to financial services. london,a global bank in and the single market is how you sell across europe. >> i think the thing speaks for itself. who am i? i take that vote has primarily a she as ammigration, so politician, i think that has to be her declared priority, but at the end of the day, as you are correct, the financial service industry is so important to the british economy, it will take account and that will become an
important priority and britain will have to take those issues into account. it won't be dominant. it won't be doing that to please our industry or goldman sachs. it is in the best interest of the british people in the british economy to be accommodative towards this important industry as they can possibly be. >> do think the main gainer will be new york? >> so far, i would say that it is already a bit of a gain or. -- gainer. wear to operate our business to maximize global potential, we would get into the u.k. as much as we could, so if business needed to be done in the u.k., it was always there. if business could not be done in the u.k., we start to migrate, the time zone of europe is the
best time zone from which to surveilled the whole world. you wake up with japan, and you go to bed at the close of new york, so that is the best place. if you live in new york, it is hard to watch asia, so we are on track to move more global activity and operations and technology, all those things make more and more sense, to operate out of u.k. out of europe, and so now we are slowing down that decision, and now we are moving their. we have to move there because we want to preserve our option nality. erik: more conversation from davos coming up. "bloomberg bestthis is bloomber. ♪
erik: welcome everyone. this is "bloomberg best.". i am erik schatzker. from oil production to film production, we touched on a wide spectrum of business issues with a wide range of gas in davos this week. .- of guests in davos >> the agreement on the 30th is a milestone event. if you look at what is happening in terms of reductions of output, it does appear real, countries are coordinating and working to reduce output, and we are at $55, $60, versus $45. cuts these production don't go to plan or people cheat, what kind of level do you have base your forecasts on oil for here? >> next year, we are planning $55.
curtailment's, can tell men' out of the middle east and russian companies. this looks like a real commitment. cheating on the margins, but the big players are cooperating. we have felt for a while that the markets are essentially in balance. there will be ups and downs, but we can plan solidly, but we will be disciplined and how we spend capital. >> you have been given the job , anunning saudi aramco enormous transition now in saudi arabia. do you think the saudi arabia that will emerge because of what has happened will be a different saudi arabia than what there was a couple of years ago? >> they are diversifying their economy and not relying on one commodity. >> do feel the weight on your shoulders? will do our best
and should help and support, because even though we are in oil, gas, and petrochemicals, we would like to have less reliance on the sector to support the economy, and i think diversification, we are putting more into chemicals, more into tools, and we are getting into renewables, so we are looking at different markets, and is a company, we are trying to diversify. the kingdom is also trying to diversify and be less dependent upon one commodity. at the same time, we are expanding oil and gas. ofwe have asked the chairman the film association of the u.s. to pass a message to mr. trump, let's leave the entertainment industry alone. no more please. >> is there some way that
entertainment is different? the fact thatut chinese have limits on the number of films that come in from the u.s. is it better to have no limits, or should people be able to limit what comes in and what goes out? china, although we say there is controlled, as i said, there is also different categories, coproduction, outright purchase of rights, and different channels into china. in the u.s., more and more companies now are doing coproductions. allocatele, they will a few films to coproductions, a way of bypassing control, but i would like to say that the u.s.
toernment, if it were control investment, that would be bad. it's great that china joined wto, that they participate in markets, that they have been a huge deflationary contributor, have done a lot of programs in their country. ,here are financial imbalances democratic deficit in the way they run the country, so i would not say they are a model, but they are doing a lot of things right. the fact they want to engage in the world, i think that is great. todo you see them beginning emerge into philanthropy, jack ma getting to give away money? >> the sector that jumps in first is the tech sector, so , a lot of thea
tech people are doing great philanthropy there. in china, the same thing. and are still in their 40's 50's, still pretty young, but already whether it is health, environment, education, starting to give gifts, a lot of good dialogue between our foundation and their foundations about what works and what doesn't work. >> what do you consider to be the biggest risks right now, keeping in mind that we are talking about what appears to be an optimistic world? what are the biggest risks and how are you managing them? >> for us or the markets? >> oh, um -- >> i think the biggest risk of the markets is the geopolitical uncertainty. everybody is talking about populism, which is not exactly what the davos crowd is all
about -- >> that is an understatement. thatming to a recognition things geopolitically have changed dramatically, the brexit vote, the presidential elections in the u.s., a number of other regional political movements, they are not, that is not a flash in the plan. i think there has been a fundamental shift, and i don't inc. anybody understands what the implications are. legitimate trade wars and protectionist behaviors, etc.? so the biggest risk is the economic-political risks backed up by geopolitical risks, terrorism, the refugee crisis, etc. stanley, wemorgan have risks every day in our is not obvioust that i can point to one. there is not an outsized
position we are taking. i like the business model. the word to describe the most important influence in the world right now is populism. it is no longer central banks most important, through my lifetime, they were the most important economic factor, no longer traditional fiscal policy. how itgest force and plays out in the world over the next number of years will be populism. populism could be populism of the left or populism of the right. it tended to become more extreme. i think we are entering a time when worldwide it will be a more important issue. where theemities communists and socialist on one end and the fascists on the other. inyou follow that through terms of degrees, populism is a force that needs to be understood and dealt with well, because the real question is will it be smart or stupid? we need to be calm, collected.
on technology. we are not sure the fundamental nature of products will change much, although relation tends to impact that. we don't inc. the demands of our clients and counterparts will -- think thech demands of our clients and counterpoints will change too much. we need technology to improve our own controls. we can use technologies to improve our efficiency, and we can use technology to improve the customer service. you need people there within the technology and innovation in the future of finance? do you still need someone on the watch? >> tom: we do need people. tom:you still there? >> we need that common sense. those algorithms are harder to monitor. internally,ntra exactly as mario said, we need to replace a lot of people who
are performing the functions of computer. , people atthe work much more value, then we get computers to automate what we hope will be much more standardized business. in a panel called the crisis of the middle class, francine lacqua discuss the challenges of globalization with an imminent group of gas. have a middle-class dissolution, how do you change that and get them back? >> i don't think there is any single bullet. there are obviously elements of the middle class looking up and an elite hasll lived, and seeing all the various benefits that have gone to people at the top of the income distribution.
i think it is a mistake not to recognize that the middle class in my country, and i think in others, is also very concerned that people do not feel that the them.ment is fighting for they feel that everybody else is being looked out for, the wealthy look out for themselves, others who are poor and they ,eel they are not being heard and they have expressed that they are not being heard in the brexit vote, india tying -- thedum, and of course italian referendum, and of course the u.s. presidential election. is an opportune time to put into place the policies we know would help. i completely agree with larry that there is no silver bullet response to that. it is really time to say what policies do we have in place?
what more can we do? what measures do we do to reduce inequality? >> the middle class is disillusioned about the future, disappointed about the perspectives for their kids, disappointed about the security that they can get out of the welfare system that may become unsustainable, and it is expressing this disillusionment in terms of saying no to what ever the policy leaders suggest, and we all know very well that it is much more difficult to build up a solution, to design and implement it, then it is to say no. the fact is that no is now dominating the political landscape. erik: that wraps up this special edition of "bloomberg best" from the world economic forum annual meeting in davos, switzerland. you can find more coverage from davos and the latest business news of bloomberg.com.