tv Bloomberg Daybreak Americas Bloomberg October 4, 2017 7:00am-10:00am EDT
everything that's happening in moscow. saying -- if they decide to extend it. the deal is both good for consumers and producers. this is bloomberg. ♪ jonathan: the president advisers says they have delivered the list of final fed chair candidates. that puertots rico's debt will need to be wiped out after the damage and puerto rico, and spain's king accusing the cap salon -- -- i'm jonathan
ferro, alongside david westin. joining us for the hour is megan greene, the chief economist. coming up, we will break new highlights of that conversation vladimirian president putin and get to the commodity market as well. we want to get you up to speed on what is happening in financial markets worldwide. byures are softer, negative 1/10 of 1% on the s&p 500, down two points after a six-day winning streak on the benchmark in the united states, and in other record high close or tuesday. .25%,ollar up more than and we are down to 2.3 one on the 10 year, david. david: let's get a look at what is happening outside the business world. emma: the girlfriend of the shooter in the las vegas massacre has returned to the u.s.. she arrived in los angeles last night and was met by federal agents.
she had been in the philippines. authorities have called her a person of interest. there are pictures showing the inside of stephen paddock's hotel room, rifles clearly visible. he meticulously planned the attack, including setting up cameras outside the room so he could watch security approach. president trump is suggesting that puerto rico's debt will need to be wiped out to help the island recover from hurricane damage. the president told fox news that the government total lot of money to wall street and "we can take advantage of that." borrowed $74as billion and declared bankruptcy this year. >> amazon has been ordered to pay 294 billion dollars in back taxes to luxembourg, after the court ruled the company received an unfair subsidy. meanwhile, the eu also -- to
,ollect tax dollars from apple and calls it "extremely disappointing." global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra, this is bloomberg. david? yesterday, we reported that president donald trump has stopped his search for a fed chair, because he has a short list. we have some indications to several people are on that short list, but you think he has the person on that list. earlier today, our colleague tom keene sat down with mr. fincher, who spoke -- mr. fisher, who spoke about characteristics that should go into the fed chair. >> should you let the markets take care of it? if you decide to leave it to the market, wait a week and see what it really means. that depend ags great deal on the experience you
have and your understanding of how the markets work. , andyou get over the years i sort of -- the initial to take , for example, the initial reaction that people thought is that this is something that happens in closing markets. that is terrible. >> your final thoughts in london and your speech the other day, a wonderful speech, sort of a tapestry of the history of the bank of england. you talk about a never say never event. what kind of chairman duty to be steeled and ready for a never say never event? >> you need someone who has the flexibility of mind to see that he or she needs to take a different route at a particular moment in time or over the next year or two, and someone who has also the capacity to lead a very large, very complex committee, the open market committee, to agree with his or her.
ourd: joining us now is chief u.s. economist. did we get any hints about mr. powell, with the lifetime experience in dealing with economics? >> he was cautious to not tilt his hand too much, but was emphasizing the leadership credentials there. an ability to build a consensus, strong academic background to work with the fed and whatnot, so i think he is kind of shifting the expectations in some degree, maybe an outsider is not the right choice. and was certainly in stressing -- stressing the point of understanding the markets and not being too pressured. >> so it is not an outsider. does that point toward mr. walsh or mr. powell, both
who have been on the fed? >> he talked about the philosophy, progressing funeral by funeral. so this is the notion of things do not change, and i think he is also taking the conservative stance here. if you want someone who is a good consensus builder, certainly has the academic credentials, an understanding of the market -- to me, that is pointing to janet yellen. be pseudo-yellen would powell, i think. david: and they are both on the list. >> they are. i think kevin marsh -- warsh, even though he was a governor is viewed more as a maverick outsider, and there is a subtle leaning against that philosophy. jonathan: unfortunately you are not the recruiter for the next fed chair, the president is. when he sends out the job description, what exactly is on
that >>? -- that? a litmus test being applied to all of the candidates, and going back to the fact that president trump is a low rate sky, likes -- low rates guy, likes low rates. anything would tell you that interest rates should be higher than they are at present. this quote by taylor, i think that leans heavily against warsh, because he has been dismissive of the backsliding in inflation. he said we are hitting the inflation target, do not worry about it. he has been very focused on financial stability issues. publich -- warsh's comments also indicated he would be a bit more hawkish. so if you are looking for a low rate person -- not saying janet yellen is -- she is a labor market economist and believes in this notion and is willing to
examine the notion that maybe the neutral unemployment rate is lower in the cycle relative to prior cycles, and by that she is a low rate fed chair. carl, i want to begin with you. i had a conversation with someone from goldman sachs yesterday on a panel for black rock. i asked him the question what happens to treasuries of kevin marsh -- warshin gets the nomination? about gary cohn, and he laughed and said all markets rally. will that be what it comes down to? who is better for the markets? >> i do not think the market will have an outside reaction one way or the other to whoever gets appointed. it is being bid by of a bunch of global investors for the criteria of return, risk, and liquidity are very different
from what is happening at the fed. i think we are looking for a candidate that can blend the academics, the quantitative stuff, but also a feel for what might be happening in markets. with a whole down host of new governors, and as well as up to the politicians, who hold the fate of the fed's independence in their hands. >> i thought it was interesting the fisher highlighted that next fed chair will need to manage a political process. most people ignore that. who on the shortlist -- beyond can buildwho consensus on committees and get things done? think all the candidates that have been mentioned have some experience with the political process. it held in the administration, has been in washington with the fed for a while now. i think that dynamic has changed in the past 10 years since the crisis. congress has awoken to the fact that the federal reserve has large amounts of power and discretion, and they want to make sure it is being applied in
the right way. nonetheless, i think central bank independence is fairly important to market participants in any candidate that is seen as taking instruction is the -- it from the white house would not be taken favorably. david: we have a congress that has increasingly talked about auditing the fed, having more influence. the president thus far has prized loyalty over all other qualities. is there a prospect that that relationship may shift some, even subtly? is possible. none of the candidates really come from the wings of the republican party that president gotp elected -- that president trump elected. i'm surprised at the narrow range of candidates being considered. all of these names have been up there -- powell, not so much -- but these names have been up for a while. if i was the president and i said look, my agenda is to get tax reform and stimulus, maybe do something on the trade side,
i would want to nominate something that would not reactive inflation picks up as a consequence of this. we know nobody raises rates when inflation is low and nothing is actuallyl, but he wants to push rates higher and keep inflation down. so i would be looking for someone, a true believer on the supply side, if i were him, and someone who can talk to the republicans in congress on deregulation and auditing the fed, the fed being more responsive to political issues. jonathan: can you think of a name that goes with that? >> there are a bunch of supply-siders out of there. they are the same people who believe that tax cuts will pay for themselves, maybe not your one or your two, it will not raise rates inflation picks up as a consequence. jonathan: gary cohn? >> possibly, but there are others that fit the criteria. you want to follow
that conversation, we are watching moscow, where russian president vladimir putin is speaking along with the opec secretary general. you can follow those headlines on bloomberg on live . guests in new york city as we count you down to the fed chair decision, which comes possibly in the next couple of weeks. the short list might get shorter. this is bloomberg.
fail. joining us with the latest is anna redwood. she is calling for unity, but there is not quite unity in the audience is our is her future is concerned. what have we learned in the past couple of minutes? at theery strange things conservative party conference in manchester. go through big security checks, at least that's what you are told, to get into this building, background checks, i guess, but someone in the room had views that were expressive and was heckling theresa may as she spoke and through a piece of paper at her, shouting out, out, asking her to go. theresa may tried to joke about its, so trying to turn around to win the audience, if you like. security questions will be asked as to who this person was. he was escorted from the room with a load of media following,
a lot of people asking what is your story? no doubt it will all come out. we did get some details on measures to try and take on the labour party, because that is one of the key concerns here for this audience, and the defense of the free market, something else we have heard about quite a lot during this conference. jonathan: the word unity strikes me as odd, because typically we would say it was maybe a labor supporting that -- labour supporter that got into the tory party conference, but in this case it could be a conservative party voter that was heckling her, so this goes beyond the electorate, but into the heart her cabinet as well. is it unified now the way it was not a week ago, just before the issue of brexit? anna: they will tell you they are, won't they? they said in this building, in the last 24 hours, that he agrees with every syllable, mayy word with theresa speech on brexit.
a businessond had audience yesterday, and he told them look, if businesses care about transition, they have to look into what they will invest in the transition, so what is in it for the u.k. government. philip hammond will be trying to persuade members of the cabinet to are not quite old on transition. there are areas where they seem to disagree. boris johnson stepping into line for the moment, that is certainly the case here. but these questions over leadership do not seem to go away. until the next op-ed coming out over the weekend. anna redwood from england, thank you. we are joined now by darrell conkey, wells fargo investment management and ceo. steve, a fascinating thing for the u.k. and brexit. ideas, economic social policies that have been put forward, and actually doing really well in the united
kingdom. ideas, those socialist ideas, are leading in the polls in the u.k.. ,nvestors looking at sterling what does that mean? hasell: i'm not sure anyone more than a couple of minutes to look at sterling. i think there are a lot of things that are attractive in the short-term, and you have to ask yourself whether they will be as attractive in the longer term. have seen many experiments with socialism, with trying to interfere with the market mechanism, and many of them look pretty promising for a year or two, because you can afford to stimulate, print money, inflation does not pick up that fast, but at the end of the day there is a price to be paid for interfering with the market mechanism and the incentives that the market provides. so again, i would be somewhat skeptical. it would look as it if it is working. david: so in general, you are in favor of international developed
market equities. does that include the u.k.? it does, and it is surprising because they have done fundamentally better than what you would expect under brexit. weighted drop in the pound sterling probably has something to do with that, but construction data has been better, consumer data has been better of late, and certainly with the droplets -- drop in sterling and what is happening, it will favor companies exporting out of the u.k.. to the point you made earlier, this really revolves around three things. how fast can they get a transitional trade agreement in place, and can theresa may negotiate that before the year-end? second, the consolidation of the government. can she hold the conservative party in power and continue to build that? third, there is an extending -- outstanding question around article 50, and how the legal courts deal with any new trade
agreements going forward. they were holding up pretty well, but now it seems like every economic indicators turning to the employment data. when do you think that will start to turn? darrell: -- steven: traditionally, employment is an indicator. at the beginning of a downturn, productivity takes a hit relative to previous trends. signcould be the initial that the chickens are coming home to roost. like darrell was saying, they exit, but they had a big drop in exchange rate, which is the stimulus, and we saw that go through the economy. now they may be facing the reality, that money does not want to come in because of the uncertainty. that wave of stimulus has played of course. darrell: darrell crocco wells
♪ this is bloomberg daybreak. pepsico posted third-quarter earnings that beat estimates, also raising its forecast for the year. spots, the north american beverage business. it shrank 5%. big changes are on the way at ford. ceo jim hackett will cut $14 billion in costs and drop some models from its lineup. ford's future will be focused on trucks, suvs, a lecture -- electric vehicles, and driverless technology. the government is looking into ways to replace the use of social security numbers as the
main method of assuring people's identities. meanwhile, equifax has signed a contract with the internal revenue service to provide taxpayer and personal id verification services. at least one congressman wants the irs to explain the decision. david: in puerto rico yesterday, president trump offered countryce to help the get out of its terrible situation, not just with cash, but with debt relief. president trump suggested that he might go as far as to wipe out puerto rican debt completely. pres. trump: we have to look at their whole debt structure. they are a lot of money to your friends on wall street, and we will have to wipe that out. goodbye to that. i do not know if it is goldman sachs, but whoever it is you can wave goodbye to that. darrell: joining us now -- david: joining us now is kevin cirilli. this came as a surprise to wall
street, i think. did it, they surprised to other people in washington? kevin: the white house has not put out additional statements on what president trump was talking whether or not there is a plan in place to forgive or erase puerto rico's $70 million in debt for all of the -- 70 -- $70 billion in debt before all this happened. a plan was being put together two/some of that, -- to slash some of that, but when you look at puerto rico before the hurricane struck the island -- they had $70 billion worth of debt, pretty much impossible, the poverty rate 45%, so the economic situation a very dire one. they have been putting together a plan to deal with bondholders to address their debt issue, but that clearly is going to come as a surprise to certain
republicans on capitol hill, who have really pushed against it in the past, having any kind of taxpayer bill out for puerto rico. this situation very much having changed in the last couple of weeks because of the hurricanes. clarify briefly, kevin, the debt is not to the government, to private people. you have to pay it off. kevin: there are people on wall street who have been pressing puerto rico to deal with that. david: great to have you with us. jonathan? , aathan: puerto rico population the size of connecticut, space the size of nebraska, and more debt than any wisconsin, --, or new york. this is bloomberg.
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today a little bit softer, a marginal move lower by not even a 10th of 1%, both on futures on the s&p and on the dow. if you've a in the bond market -- if, treasury yields you add in the bond market action, treasury yields a little bit lower, a weaker dollar session against everything in g10, including euros and sterling's. the cable rate bouncing back after a couple of days of losses, up one third of 1% to 1.3278. president trump flies to las vegas today. he will meet with first responders and survivors of the worst shooting in u.s. history. authorities have now released photos inside of stephen paddock's hotel room, showing a number of assault rifles.
meanwhile, a woman described as patrick's girlfriend has returned from the philippines, where she has -- was met by federal agents. a rate of -- a round of trade talks with south korea are underway in washington, after president trump threatened to collapse the trade agreement between the two countries after -- in moscow, president vladimir putin says russia may extend a deal with opec to cut oh will supply -- oil supply until the end of 2018. the current deal expires in march. they are waiting until the end of the existing agreement to make a decision. oil prices has returned to the bull market, but they are warning that prices could fall back to $40 a barrel next year. stillent putin is speaking in moscow, and you can follow that on the bloomberg. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i emma chandra, this is bloomberg. are not: if you
following that conversation, i understand that our colleague asked mr. putin if you would be driving an electric car? i wonder if he asked him if you would be driving a tesla anytime soon? kevin: -- david: a tesla? jonathan: over in spain in europe, the crisis in catalonia continues. now spain's king is trying to lay down the law in an address to the nation last night. the caps on separatists have separatists catalan have been said to have shown " and -- maria, great to catch up with you. what is the latest, and what is the significance of the spanish king weighing in on this issue? how significant that is? that is right. so for our viewers in america, yesterday the spanish king
delivered a super unusual address to the nation. he never does this, he does not like getting into politics. so did you a sense of how critical this is. what he said his look, we are dealing with an administration that is completely reckless, and basically the catalan government has gone completely rogue. take toughero measures, the king is making it a matter of state. it is not just politics. i have to say, this is trigge ring serious tension in catalonia. the prime minister canceled his press conference, and is meant to deliver a big announcement. we are not expecting a unary lateral -- unilateral declaration of independence to be declared today, but we are expecting a series of events that could lead to it. help us understand the
spanish constitution a little bit better. we did not know about article 50 until brexit happened, now we are hearing about article 155? talk to me about it and what it means if they do something around it? you nailed it. it is an article that is in the constitution. a lot of supporters did not even know it existed until one month ago. nobody really knows how to itlement it, and like frexit is a perfect comparison. you know how to trigger it, but not implemented. -- implement it. this was a measure in the constitution never met to be used. now we are getting to the stage where the catalan government are willing to make this declaration of independence, but who is going to have to inevitably go for it? now the question, how will you trigger it? what would it mean? the president of catalonia understands he will be suspended? we expect the region on -- redrawnion
administration will be a mix of offices, and again, a lot of constitutional overlords in spain do not know what this could lead to a you know how to trigger it, but not implement it. megan: you mentioned that tensions are high, but is there a deal to be done? what is catalonia want that madrid would be willing to, do you think? >> at this point, it is very clear that this regional government wants a referendum. what is also clear is that they are never going to get one. roy a wall -- the king will not agree to it, because one, his voters would never forgive him for that, and he obviously does not want to go down in history as the prime minister that offers a bad referendum. the catalan government is not going to backpedal on this. they are carrying a lot of momentum. they have promised so much, and the expectation is so high that none of them can actually backtrack, so you can see where
the situation is heading. jonathan: we will catch up with you throughout the week. in the markets, quite simply it is not a european wide market story, but a spain story. the euro is stronger today, as it has been over the last few months, and for most of the year. 1.1775. spanish 10 year yield is climbing once again by four basis points, to 1.76. steve, i was wondering -- can we take a step back and look at the political implications over the last couple of weeks and say that this could face mario draghi into a bit of a corner? steven: i think it really affects the ecb timetable, because in the aftermath of the french elections, german election, everything seems to be going fine. the economy was good, they had a window of opportunity to begin the process, even though they would not call it paper in.
germany,ave the afd in the catalonian referendum, and upcoming you have the italian election, where it looks very likely that you could get an antihero, or a eurosceptic coalition coming out -- anti-euro, or a eurosceptic coalition coming out. if you look at this over a one-year horizon, you would not even think today is an unusual day. it has moved this much 10 times in the past. >> i got this chart that i think was very interesting, with europe insaying buy the u.s.. what you can see in this chart is that the multiple in europe has not moved. in the united states, it has continued to expand. many have called this a trap, because the s&p 500 is a play on tack. ampared to europe, which is
play on banks, and when you look at the banking system in a place like spain, 17% of the buybacks is one stock. if you look at what is happening in italy, the bank needs to do a lot of work. you need politics on site to get that done, right darrell? darrell: i think all politicians are fading back in that conversation right now. they are taking more to the intermediate, long-term restructuring of the banks and the debt. i agree with stephen, i think if you will, mess, in europe is greater than what the euro has been giving it credit for. catalonia does declare independence, it has to go back and renegotiate a deal with the eu, in which madrid is squarely a big part of. london and the u.k. are not part of that global conversation. it is a completely different conversation about how you establish any type of independence in that regard.
jonathan: so do you -- buy europe? you we do not have a government even in the netherlands, for good sakes. we believe the companies get past that at the top level, but underneath, the fundamentals are very strong. to jonathan's point, i would not call it a value trap, per se. i would say the multiples are there, they are decent. the income from the dividend side of the equation is solid. it is one of the places i think you can still find decent value in the globe right now. watch the euro. if it continues to strengthen, it provides a big headwind to earnings heading into the next year of 2018. jonathan: great to catch up with you both. thank you very much for joining
us. we talked earlier about socialism in the united kingdom, something you might expect from the labour party. the prime minister of the united kingdom, we do know and understand that the u.k. is now set to publish a draft law next week to cap energy bills, just showing that the threat from the left is driving the conservative -- driving the conservative party. the united kingdom struggling to speak in this address to the conservative party conference. we understand she lost her voice at one point, she had to face a , an interesting day for the prime minister. i will say, an interesting 12 months for the prime minister of the united kingdom, and a tough one at that. david: and optics do matter. hecklers are a nuisance, but it is one thing after another that continues to undermine her u authority. jonathan: all things have been absolutely dreadful. that is one thing we are watching, another thing we are
the opec secretary-general. if you want to follow this conversation, they are currently discussing middle east politics, iran, more specifically. you can do this on the bloomberg, on live . let's have a quick listen in. >> what do you think about u.s. policy when it comes to north korea? what do you think the president's approach? american, itre an is up to you. that is your position to judge. you would know better than me. [laughs] is there anyone [indiscernible] one, to be first completely neutral. to assess theo me policy of the president of the u.s..
mentioned -- i can reiterate that the rhetoric on all the sides shouldn't be -- aggravating, it should be a dialogue between the u.s. and north korea, between north korea and the countries of the region, and let us -- that is the only way to ensure a balance, unacceptable solution to the issue -- an acceptable solution to the issue. by the way, that came to my mind just now. i was talking -- everyone keeps lntioning the needs to against north korea. it has been living under sanctions for many decades. to2001 as i was traveling
japan, i met the father of the currently are. back then, he told me they have a nuclear bomb. he mentioned that. it is true. furthermore, he said that with the help of [inaudible] and it was not only one. and now it is 2018 -- and now it is not 2001. it is 2018, the country is ancient, and they have a hydrogen bomb. -- is under sanctions, and they have a hydrogen bomb. that is what has changed. can contributewe to the solution of the problem? therewas a moment when
was an agreement reached with north korea, but north korea cannot stop its commitment to its current nuclear programs. if someone decided to -- the north korean --, the commitments that north korea assumes, they were not efficient enough. -- sufficient enough. they must have done more. but that is what they agreed, that was the agreement. why do they provoke them? why did they have to do that? as the develop of their programs, they have a hydrogen bomb in addition to a stronger --,more, , seven kilometer range, and nobody knows where they are hiding them. that is why the rhetoric is so dangerous. frank, incompletely
the event you up -- in the event of a strike, lifted the target? nobody knows that for sure -- will it hit the target? nobody knows that for sure. no one knows what they are with 100%d where certainty. it is a closed country. but [indiscernible] i do not think so. i told president trump exactly what i am telling you now. we had a discussion on that issue. i believe i mentioned that --, it istrump gaining momentum. he going off his experience in a --, he, and we had listens to what i am saying, he
listens to my arguments. i know that everything that has happened in north korea is quite irritating for him. i really understand that. at any action aimed undermining compliance, we are condemning that. there is a chinese-russian initiative, a roadmap. if they are up to supporting and china could afford -- we could try to forget 'sat it was russia and china initiative. but we need to stop this confrontation and find a way to reach an acceptable solution. >> you say that president trump listens to you, but when you are talking about the rhetoric of north korea, that does not seem to be the case. with every single day that passes, his rhetoric seems to increase. two days ago, he very publicly
said forget about it to rex tillerson. tore is no point in talking the north koreans, i will deal with them. are you sure he is listening to you? talked last time, some time has passed where the situation is evolving every passing day. new factors are emerging, there were new tests by north korea. and nuclear bomb was tested, missiles were tested, everything is changing. what rex tillerson [indiscernible] you're watching bloomberg tv. >> why with a comment on that? moreieve would be interesting for --, anyways. >> i know you do love talking about the russia relationship with america.
i know you said you talked to donald trump on a lot of things, but can you give us a sense of how your relationship is developing? i know you met him in hamburg, but your conversations on the phone. can you give us a sense of what your personal relationship is like ca? relations arel almost none. we saw each other one time. we have a couple of telephone conversations on various issues .f mutual interest way, on certain issues we cooperating with the americans. there have been problems, some confrontation over our approaches are
different, but we are capable of coming to different solutions and corn aiding our approaches, coordinating our approaches. [indiscernible] i mentioned that on many occasions, certain forces are using russian-american relations to address the internal political problems. we are passionate, and we are waiting for the political process to come to an end. i hope the fundamental mutual which is the nonproliferation of weapons of mass destruction, the committing of cybercrime, our cooperation into the energy fields, cooperation and regional conflicts have been -- into regional conflicts have been
working tirelessly to come up with solutions. for example, the fight against terrorism, cybercrime. interestsfundamental that will change the nature of of our -- of our american relations for the better. >> do think donald trump is a hostage of the american political system? that seems to be what you said. that trump, with his characteristics [inaudible] >> as an electorate, why don't you give him your advice? i'm advised by my electorates, and i think that the president should be advised by his electorate. you are among them. so you can formulate your own position, your own advice on on abehalf or one behalf
group of citizens, a party, a business community. i'm confident that the business community that advises him to establish normal economic ties to prevent in order taking critical positions in the russian market. there are such companies, many of them. by the way, the st. petersburg ,nternational economic forum the american -- were abundant. they are real friends that are interested in establishing cooperation, and will continue promoting ties with them for the current political situation. >> has the president told you that he personally wants to
establish normal business ties with russia and the u.s.? why don't you ask him? i cannot tell you everything he told me. do you want me to tell everything to you? briefly, getting back to north korea -- >> that would be a bad thing, for sure. >> briefly getting back to north putin, you aret one of the -- the senior figure on the international stage. you have been involved -- out of all the major countries you have been around the longest. i know north korea is an extremely difficult country to analyze from the outside. how do you analyze the stability of the regime? is that something you worry about? is that something you think about? there is so little we know about
how north korea works. how stable you think the regime is? those who are trying to talk use ofh korea using the force, they are making the corian regime stronger. anat is a brief -- kore regime stronger. that is a brief answer to your question. believe north korea now has another route to the internet, 13 china, and one via russia. is that the right thing to send north korea after repeated violations of you and resolutions? resolutions? do allow that connection to remain open? >> what are you talking about? >> an internet connection. border.ve a common their nuclear test field is 200
kilometers from the russian border, located on the north korean territory. we are concerned about that, , with our trade and economic ties. thereioned that publicly are almost none, they are almost nonexistent. them oil per quarter, as i believe, compared to 400 million tons shipped to other free markets. i believe it is 400 million. 400 million pounds of oil are port markets,to and not to the market in north korea. [indiscernible] ,hese are just local supplies small cell companies -- small-scale companies.
there is not a route to are talking about. are talking about. a couple thousand north korean citizens are working in our country that have relatives there. almost nothing. almost no corporation. there is nothing to discuss. route you are talking about. a little bit about your legacy as president of russia, the russian economy, and the future. --hink these are questions >> a joke about the israeli army? a young soldier was asked and mentioned that -- is going at you, i will take a new the
mission. thee are tanks, i will take grenade thrower and tried to defend myself. airplanes flying, the tanks are and the terrorist says mr. general, i am i alone in this whole army? mi alone on this panel? alone on this panel? >> i will bring in the others in a moment. you know, we have elections here in march. as you know, the economy, the russian economy is showing some signs of recovery. a measure recently showed that russia has risen about five places, so now it is roughly in the place where poland and spain are. and if you look at surveys of wealth disparities in russia, you see that russia is more divided economically than it has been since he became president, the gap here is the most
extreme in any major country. do you see this as the biggest failure of your presidency? >> it is not as much of a failure, but a trend in the russian economy. as far as the soviet era is concerned, we are indeed not a good trend and i will stick it out. today, it came about from the very start of the when the system became dismantled. the markets took off which were the result -- now that it is indeed underway sustainablebserving economic growth, that was .3% in
q1. this year, .5%. currently, in the second quarter, it was already 2.5%. 1.9%. growth and werong are also registering positive trading balance. i am not going to throw too much statistics that you -- at you but the figures i believe or $180 billion. is it $180 billion? the current account? how much?
$130 billion is the current count. i think it is about $100 million, even more than that. we sit direct investments growing into fixed assets. backdrop ofnst the the lowest historical level of inflation that we are having. a record 5%. aregolden currency reserves growing somewhere at the level of $400 billion right now. the real income is recovering which is really making me feel happy. in terms of this difference, this is a real problem,
something we are going to work on. you also find certain things, wehout mentioning, which would not enjoy being able to see the full picture pier 1 i -- picture. the number by this, of people who live below the poverty line started changing. people, the 38%, to be exact, currently, that is changed. during the previous two years, this relationship changed for the worse. doubt we need to change a lot in our policy.
one should create a system government is going very specifically and purposefully to those individuals in those categories who are in need of it rather than giving it to everybody. those issues and problems and we understand what has to be done in order to improve it. >> we have been listening to russian president vladimir putin in st. petersburg with our colleague. a wide-ranging interview. about the russian economy and its relationship with president donald trump. declined repeatedly to give advice to donald trump about how to handle the situation. unless to be entirely neutral to north korea. he things there is too much rhetoric and he would like to step act -- a step back.
-- he would like to step back. >> pressure came into crimea. and i thinkork out most people would say, most security experts, so the real opportunity to deal with this was in the 1990's. your friend actually came out at the time and advised the president to initiate targeted strikes where they were developing nukes. .t did not happen >> instead, president clinton made a deal and it turns out they were cheating almost from day one which gave rise to the sanctions. jonathan: a lot of talk. in terms of what they can do in policy and action, it is pretty limited. the discussion with the president of russia, vladimir putin. much more coming.
i want to take the opportunity to get you up to speed on the market action. futures stay a little negative. we could snap the six-day winning streak. a record high close once again in the session. the market decided the a weaker dollar session. one third of 1%. treasuries due to -- catch a bit. the future of the federal reserve. president donald trump has delivered his advisers the final recommending the federal reserve. on that list, fed chair janet yellen, and a few more in the mix. spoke with tom keene of bloomberg surveillance today and joins us now. tom, great to catch up with you.
the future of the fed. me. to tom: it is interesting what the .ice chairman fisher said it is what he didn't say. he did not mention individual names but he did not really go to the rate dynamic. we look at it as a power game about what they do with interest rates. time talking more about shocks and the institutional structure of the fed and the kinds of responsibilities and stress that any fed chairman has to have. onathan: i heard you push the character and the background of the federal reserve and what they ultimately need to guide the market and the economy. take a listen to what he has to say. >> the differences is it something you ought to do or let the market's take care of it? if you decide to leave it to the markets or wait a week and see what it really means, those
depend a great deal on the experience you have and your understanding of how the markets work. that, you get over the years. initial reaction in people is something that happens, you close the markets. that is terrible. tom: your final thoughts in london and your final speech, a wonderful speech on the history of the bank of england, you talk about never say never events. what kind of chairman do we need to be ready for never say never events? >> you need someone who has the flexibility of mind to see that he or she needs to take a particularoute at a moment in time or over the next year or two. to who also has the capacity lead a large and complex
with -- to agree >> stanley fischer will step down this month. he is considered the godfather of modern central banking. something you pushed him on and i find it quite interesting is what he learned and -- is it still applicable question mark in the 1969 thesis at m.i.t., you wonder -- he made very clear economic set changed. also said that model and the thinking also their 10 or 20 or 30 years ago is still valid. the video you played, what is so important was the idea of, should the market be allowed to fix things? it is been a huge point in economics. professor fisher taught at
chicago decades ago. basic idea of, do we help the markets, the system, or are the markets the ultimate decision-maker? that is our question for the next chairman. jonathan: where does he get a martini at 8:10 in the morning? tom cole in way too early in the morning. but a beautiful day. ready for national baseball. yankees baseball in new york. early.n: 8:10 is not too tom keene, good to catch up. we will turn to someone who really knows about the importance of decisions and investments made. a career between wall street and lost each and. manager for michael bloomberg's assets, and joining bloomberg intelligence
chief economist. i will start with you. having digested what mr. fisher said but more importantly, candidates, how would you -- the race? would reflect a continuity of the policy put in place. president trump has said he likes her and admires her track mored and we should expect of the same, she would be a good candidate. to laid down the gauntlet some degree in her jackson hole speech where she was very resolute in the notion that if shegets a second term, would not put a wholesale rollback for reforms. what is very much consistent with janet yellen in terms of policy philosophy, how may be slightly more amenable to tweaking posts reform.
having room to adjust the burden the rule puts on some firms. games buto preserve is open and a little more flexible to making changes. powell, and, colin further down the list, warsh. david: a lot of people look at this as a policy decision. it is not just policy. it is a political decision. you have seen these decisions get made over the years. is president trump likely to take into account? president has, uniquely, really gone for the best person. reappointack obama to ben bernanke though they were of
the other party. you have to go back to the 70's 40 find the process has gone awry. the president for a long time is done the right thing in terms of -- has we have not had an economy sent -- economist since the late 70's. not economist but really an economist in a lot of ways. all of the three except for janet yellen are not economists. jonathan: we chosen this program -- jeff is putting forward as a serious candidate that he thinks could become the fed chair. which box does he pick for president of the united states? >> it is critical what boxee is
ticking. i think he would be a reasonable candidate and passes a lot of litmus tests of president. low interest rate, against rate increases. he is a markets guy. understandmeone to how it is working, he is the guy for the job. the potential question, he is also a republican, which helps matters, but the wretched would be his rhetoric about two big to fail. that would have pushed back. that is the biggest box not checked. jonathan: just want to get you up to speed on market action for you. futures are a little softer down 10.1% on the dow and a similar move on the s&p 500 and -2.5 for the s&p. on tuesday.hs
the longest winning streak since early september here at we equal that run in early september. treasuries, yields at two basis points. 135, 135,000. 237,000.ous number, we decline from the previous month but there in mind this theay, the payroll report, estimate is 80,000 compared to 156 in the previous month. inhave a revised figure now august. month.your previous just quickly, not much of a surprise, a substantial decline
from the previous month? pullback.ld see a big for hurricanes, it tends to be 100,000 off the underlying trend. payrolls.t 160,000 on i have my forecast at about 60,000 for this friday. the moral of the story, this friday's jobs report is a weather report and not economic. jonathan: i have got to give it to jim sullivan. he is the man to nail the payroll report every month. guess what his estimate was for adp? 135,000. >> a good forecast. unfortunately, adp -- >> i am with you. the payroll numbers as well. david: we want to talk more about the effects. more effects from hurricane. puerto rico got hit particularly hard and we have not seen the last of that yet.
down yesterday, we went way toond what people expect it one he suggested the u.s. government should simply wipe the u.s.to help territory get back on its feet. donald trump: they all a lot of money to friends on wall street and we have to wipe that out. you can say goodbye to that. i do not know if it is goldman sachs. but you can wave goodbye to that . >> wall street reacted with surprise and even dismay. it seemed to almost be an offhand remark from the president is what with the analysis be if the government action took steps to wipe out puerto rican debt? >> $70 billion of debt, it would be a big blow to the holders of the debt and the credit markets. no that puerto rico went through a massive restructuring and involved congressional legislation and a lot of pushing
and pulling litigation and everything like that. the president comes in and waves and i think it undermines the whole notion of stable capital markets and the government respecting that. david: is it even in his power? >> i do not honestly know the answer to that. i do not think puerto rico can declare bankruptcy on its own. the president surely cannot just wave his hand and eliminate the debt. there is probably some kind of congressional action. i do not think they will simply do that and wipe out the debt. puerto rico needs substantial aid but it also has substantial obligations and those will have to be reconciled. david: we have the moral hazard issue. steve: yes.
and frankly the fairness issues. puerto rico needs to be held in a major way. it does not mean you just wave your hand and wipe out $7 million of debt that they just occurred. jonathan: there is a lot of cash that you manage. if you look at the situation now, municipal bonds -- steve: actually not but ok. jonathan: that is interesting as well. with this affect the bond market? steve: we did the restructuring of the auto company and people had thought we crossed various lines we did not cross. capital markets and moral hazard and all of the stuff. a specialerto rico is case both in terms of the amount of debt and the situation it finds itself under. when it got in financial trouble before the hurricane, we did not waive our hands and say we would wipe out the debt. there will be a restructuring 2.0 in the future.
jonathan: the attractiveness of minas told that, there is a high-yield and that is like -- .hy people bought the debt is that it risked it take? >> sure, we all by risk. i do not think they will have to restructure the debt, but the people in new york who bought debt in the 1970's when it was trading at double interest rates, we take that risk and you need to let the markets function. >> i hope it is restructuring 2.0 and not orange county 2.0, which had big consequences back in 1994. we have to be cognizant of potential knockoff affects. participantsthink have a silver assessment of the beinghood of puerto rico able to make good on its
payments. raises broader questions and goes back to the trump part of the deal playbook. trouble, declare bankruptcy, etc., which may be changes how market participants will think about deficit implications of tax restructuring. we're watching president trump and mrs. trump on their way to visit the victims of the terrible shooting in las vegas for the day. president trump about to get on air force one just out of washington, d.c. his agenda things on is his tax reform outline. he has got that on capitol hill putting that on a microscope. it is being looked at closely on wall street. one of the major political and economic issues raised is whether these proposals would benefit the wealthy what -- rather than the middle-class. of fairness and tax
changes addressed in an interview here on bloomberg. plus i do believe what the ,resident's's proposal led into partnerships, that will help small and medium-sized businesses quite a bit by having that 25% tax rate. david: steve and carl are still with us. i want to put up a chart you created based on publicly available information about the --ely available effects likely effects. the left side are people with less income and the right side is people with more income. there is a big jump up in benefits that would go to people who make more money. is this progressive or regressive? steve: i think it is clearly regressive. the number for the around, 80% go to the top 1%.
you look at things like the state tax which entirely benefits people at the top and and even to larry's's, the vast majority of income is at the top end of the income level. they may be small businesses by number but taxes paid, people on the top you helping by lowering that rate. numbers, it up the is a net tax increase to fund a tax decrease for corporations. can slice the orange vertically or horizontally, and it still comes out as a very regressive tax plan. david: lay out how we should look at this. we had gary, non--- we had gary on last friday. pay a larger percentage or smaller? or the same? it is clearly more tax dollars
because they are already paying 80%. should they be trying to become more progressive or what is the right way to look at it? steve: obviously, the same is tax neutral. i believe the wealthy should pay more. you are in a situation where the wealthy have done extraordinarily well in the past 10 or 20 years in the share of total income and rising income. the middle class has been hurt you want to direct those tax dollars toward them. jonathan: some people are aguing they are having difficulties selling this tax plan. why? steve: they made an interesting strategic decision. we can debate whether it was right or wrong. they released and not fully formed tax plan. they could not release any numbers associated with it about who would benefit and who would lose. all the private people went out and did their own analysis and came back and said 80% goes to the top 1%, all of the numbers
we have talked about. they lost control of the ball. a debate is being driven by think tanks and other commentators who put out their own numbers and they cannot really defend it because they do not have a whole plan. thethan: what are consequence of that in terms of getting it into law? have a problem. funding the is corporate tax cuts. $1.9 trillion over 10 years. if they end up having to roll that back materially, and there are 40 or 50 republicans in the house of representatives. if they have to roll that back significantly, the deficit hawks get more upset and i think it is a little like help care. it is hanging on the edge of a precipice. jonathan: thank you very much. coming up a little later in 35
joined bye will be bloomberg review columnist right here in bloom -- new york city. right on the nose at 135,000. -- estimate friday, a meaty measly $80,000. a record high on tuesday. futures just a little softer. dow,on the s&p 500 and the a six-day winning streak for the s&p 500. the treasury market, yields are lower by a single basis is a weaker dollar session. from new york, this is bloomberg. ♪
and remove another $.10 down. now, $.34 on the dollar. this market has taken a beating over the last couple of years anyway. even a year ago, we were only trading in the 70's. david: i am not sure the market is right about this. the president said that in an offhand remark. says it: whether he offhand or not, are you hanging around for the action? how many times, it could only take one trade to move it but it is significant nevertheless and it speaks for itself. i want to get you up to speed elsewhere this wednesday. 500res are soft on the s&p here at a string of record highs
. , six-day winning streak another record close yesterday. treasuries pick up a bit with a yield, and if you want price action, go to the fx market. up .2% today. outside the business world. >> authorities -- described the woman as his girlfriend returns to the u.s. from the philippines, arriving in los angeles. more agricultural products.
underway in washington. america's is growing trade deficit. and the conservative party conference headed by primus or theresa may, saying she was fired. secretary they have -- they have been at odds. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. the primedo you think minister of the u.k. is having a tough couple of months? a rocky hour? david: and there is no end in sight. jonathan: handing over ap 45. you do not want to receive that. it means you have no longer got a job. david: this would be the
toughest job any prime minister in u.k. history would have. it is not going well. jonathan: there is something -- to be set about how she is handling it. we went into that election and when we went in, it would be a one issue election about brexit. marketategy of the labor would be to say we will make this about anything but brexit. they took the economic debate all the way to the far left here at what if we have a ,onservative party conference about how they respond to the policies proposed by the far left? >> what does theresa may stand for other than brexit -- that is who she is, do we vote for that?
jonathan: to have a conservative u.k. prime minister, the u.k. will publish next week to count energy bills. i talked about last year. if thatcher were listening to a headline about regulating energy that is the story in the u.k.. i'm pleased to say bloomberg is live in moscow for russia energy -- are vladimir putin panel was just wrapped up with energy for global growth. we are joined with the opec secretary-general. take it away. >> thanks. fresh off that panel, we are about mohammed. opec secretary-general. we just heard from bladder -- vladimir putin.
itis saying we could see possibly if it extends through the end of 2018. is that a blessing for the deal? >> thank you. russia under the able leadership of president putin to be other -- together with alexander, played a very key and historic role. showing that we reach a landmark decision in december of last year. i was not surprised to hear of another full endorsement of this decision and order to achieve a stability toive the market, no other person but president putin himself. we are grateful for that.
>> will you announce that extension? >> currently ongoing, led by the current president of the conference, who has been working around the clock in outside optics on this decision on the way forward. the on to q1 of 2018, the outcome of this consultation. i can tell you so far so good. we are able to maintain uniformity and cooperation, the unity within this platform of these platforms, still open for other countries to join. prices rally to about $60 last week. this is changing due to seasonal
adjustments. >> we have received the to september as projected. we projected earlier in the year in the region of 2 million barrels per day. we have seen that materializing. the numbers of demand growth will continue in our projections to the end and into 2018. >> he said he would like to see prices at $65 per barrel. would you agree? >> know, you would hear anderent projections different requirements depending
on who you talk to. but when we talk of growth, we would like to remain focused on stocks. continuedsue that has to the devil this market is finally on its way to the record across regions, offshore and onshore. >> what is happening with the plan to monitor exports? >> it is a work in progress. parametern to the key , the decision in december was reached upon. it would be enriching for us to look at other parameters chiefly, which is exports. various providers, exports
exclusively to see how we incorporate exports as one of the parameters. -- someountry's countries like iraq are lagging behind in what will you do about that? issue of compliance has the discussed at various meetings. monetaryhe fifth joint committee meeting. deliver conformity, over 100%. this is due largely to some participating countries performing, if you would like, in order to fast track the process. performing, if you wouldsome coo
to strive asuraged much as possible to hit the level of 100%. we have steve -- received commitments from the highest level that they will continue to to reacher is possible the target of 100%. they are committed to the corporation. it is a work in progress but all in all, so far so good. our conformity levels continue to rise from month to month. the level continues. we have seen the numbers normalcy returning to of stock drawdowns on a continuous basis in the united states.
ongoing. demand and supply is gradually but steadily coming to balance. >> a final question. we see a massive delegation and the king himself is coming. and historic visit. creatingd russians are major deals. arabia and russia, playedrecall last year, a leading role. he had toall intervene. the negotiations became extremely difficult to throw their weight in support of the efforts to restore stability
, that opens the page and paid way on way -- paved the september 20 -- say russia is supporting saudi right now? for opec? say russia is supporting saudi right now? for opec? >> you have had president putin this morning committed to working with saudi counterparts and they sought out these visits .f his highness to russia it is a welcome development. this partnership between saudi arabia and russia and, by extension, between opec and russia, which we have an ongoing energy dialogue since 2005. these developments no doubt will help us to strengthen this dialogue, to strengthen this energy dialoguepartnership, andy
institutionalize the partnership inween optic and non-opec but we are now jointly implementing. >> think you for your time. that was mohammed. john? implementingjonathan: thank you. , around theow table, sean taylor, deutsche bank cio of aipac -- let's begin with you and focus on the markets. the push and pull of the do thosemarkets, how three things mixed together and how does it come out? >> it is pretty positive for the next few months. we have had a tail wind of rates not as much as people thought.
field price has been the one all price, very good and we will probably see a rotation in the market. internet,man by the we might see the markets like russia and brazil will come back. jonathan cohen yesterday, you sachs andith goldman blackrock. that trade still going into next year, even though it has had a church it run through the years so are. why will we continue to cem outperform? earnings have changed. in the last four years, earnings have been -- beenyear, earnings have 24% consensus earnings. the market about 30%. we have had a really -- a little of a risk premium. we will have double vision earnings and i think that is a real change. relative to other markets that have done very well, earnings are not coming through strongly.
if it delivers, it will out form. isid: we have been told em attractive because of valuations. at what point does it become valued? yete are probably not there . i agree we are seeing earnings revisions up word. the fear has been given that the fact the fed appeared as if it would you more hawkish, everyone has been more worried about the strong dollar. that has clearly gone by the wayside. we have seen more strength recently but the fear that without there was somehow that the fed would derail the emerging markets. it does not appear to be the case anymore. if earnings are getting taken up, as well as i would not say em offers great value but in a world where there is very little attractive valuation on the equity or fixed income sides, em offers relative value if not great absolute failure. david: how definitive is the relative value on commodity
prices? i am mindful as we listen to moscow right now. >> i think that has been declining over the years. have seen more technology, more consumerist -- consumer strength. is it still highly correlated with commodity prices, yes but to a lesser degree as time goes by. jonathan: walk us through that. get auy the stoxx 600, i exposure to financial health care. what a mike any exposure to? >> it is a lot more balanced now, 27% technology. there used to be a case five years ago where you say it em is you actuallyen market news -- market neutralize it, it was not cheap. with europe, it is not so cheap. the technology effect has happened. also you actually because before emerging markets, it was really a play on
china. nominal growth with china was very high and positive for producers. now growth is lower and the domestic story is stronger. they are very different. jonathan: i'm sure they get a few many times. do you want to the passive in a place like emerging markets right now? given how expansive and how big that universe is? passive has actually outperformed most of the emerging-market funds this year. if you look at the 50 billion dollars that went in, most has been passive. continues to outperform for the next few years, which is our base case, it will be country by country and sector by sector and probably passive. david: sean brings up china. to what extent does china bring -- larger easte
asia? >> it certainly tries a lot of what is going on. it has been a little more balanced. the em consumer more broadly outside of china is making up a bigger part of where the earnings are coming from. the wind sock for emerging markets particularly in asia. what we are really on the look on -- look out for our science around the party congress upcoming in a few weeks. that will set the tone for where china -- where china balances how much growth we will maintain. i do not know what he will say but i think the balance between the opposing forces will be one of the next eight movers for where em goes. david: the one thing we do know, he is deeply committed to that. is it too early for investors to take account of that in a larger sense?
>> i think it is but it will be very important. at the moment, he is talking about one belt, one road, but also a strong domestic economy. things have changed for capital outflows. southeast asia outperformed when emerging markets underperformed because it had better growth. the story is still there but not as good as the korean story with earnings going through. at some point next year, you back to thath story and certainly for longer duration funds, particularly the frontier markets will be, it will be giving them a lot of very good news. back to that story and certainly for longer you both very much. coming up in the next hour, we'll be joined by a bloomberg view columnist right here with us live in new york. this is bloomberg.
jonathan: this is the 2030 five puerto rico general obligation bonds. in terms of the universe and not security, the general obligation , $18 billion. , $18 billion. most active security in the puerto rican debt universe over the last week at least. this is where we are moving today. $.35 on the dollar, when just eight months ago, it was north of 50. . significant move lower yesterday, close to $.34 on the is 35.and now it here is the picture for you. futures were a little softer. down about 1/10 of 1% on the s&p 500.
is 35. yields are a little bit lower , a strongerarket euro, a stronger pound. david. david: it is amazon's term. though aftertax cutting a favorable tax deal with luxenberg after apple had a $14.5 billion bill a year ago for preferential tax treatment. the can -- the commissioner said in an gmail statement, amazon was allowed to pay four times less tax and other local companies subject to the same tax rules. it is illegal under state aid rules. joining us now is paul sweeney. north american research. put this in context. it is normally enforcing competition rules for part of that is state aid. what they are claiming is the
big tech companies are cutting deals with luxenberg to cut taxes and she is saying no deal. >> right. of course they say no, they comply with the various tax laws . it is another example where companies are -- have heightened scrutiny, local tax jurisdictions. it is something the tech companies have been dealing with for a long time starting with microsoft 25 years ago. normal argue this is a course of business. is thething talked about european authority specifically targeting american tech companies. they have gone into europe and owned those markets. is this an anticompetition and a sense move? >> failing heart and although it
backed microsoft and the market competition issues but it seems companiesarge tech obviously do business on a global scale and generate tremendous amounts of cash all around the world. it has always been a challenge how that is repatriated. mcdonald's has an issue in starbucks has an issue in terms of taxes. when we talk about that, it is a competition issue and it is in the interest of public companies to minimize tax liability to minimize for shareholders. >> if you are one of the big tech companies and had to employ lobbyists, the tax issue in europe, where would you be pushing those resources now? >> the regulatory environment ,ith the trump administration they seem very favorable at the moment for tech companies and
regulated industries for the most part. when you think about bottom line impacts for a lot of these companies, with global cash reserves all around the world, it is taxes. >> great to catch up with you. coming up next, do not miss this conversation. he has phone all the way to cap -- from california just be with us. i doubt it is just for us. 5.1% on the dow. little softer we close yesterday on a record high on a six-day winning streak on the s&p 500. from new york, this is bloomberg. ♪
have delivered the final list of fed chair candidates. trump suggest puerto rico's debt will need to be wiped out to help the island recover from the devastation caused by hurricane maria. the european commission hits amazon with a tax bill. the eu is suing ireland for failing to collect from apple. from new york, good morning. this is bloomberg daybreak: europe i'm jonathan ferro alongside david westin. -- this is bloomberg daybreak. i'm jonathan ferro alongside david westin. alix steel is off today. softer onlittle bit the s&p 500. the dollar weaker against pre-much everything through the day. in the bond market a couple of things to watch. off by a single basis
point. for anyone witnessing the route and puerto rican debt -- the debt --puerto rican puerto rico has to figure out how to solve its debt issue. good luck, puerto rico. that's the market action at this point. abigail: lots of high-profile movers this morning. nearly 2%ading lower after the beverage and snacks giant missed revenues for the third quarter ever so slightly. north american beverages down 3% on a year-over-year basis. this forces the company to rely more on its frito-lay snack business that wall street is not very impressed. bonnie herzog saying there is nothing to get excited over here.
shares lower and lower on the week. taking a look at monsanto. companyd's largest seed put up a surprise profit. $.20 per share for their fiscal fourth-quarter versus the estimate of an anticipated loss of $.42. lots of demand for soybeans really helping the company. longcompany is in a takeover process from germany's bayer. jpmorgan is saying this is a bit of a game changer. a real positive for mylan. and treasurylar yields are lower today as markets digest the future of the federal reserve. president trump's advisers have delivered him a short list of candidates for fed chair. in the running, gary cohn, janet
yellen, jerome powell. noticeably absent glenn hobart and richard david. joining us with the future on the federal reserve, mohamed el-erian. the future of the federal reserve. did have any idea what the president of the united states wants out of his next fed chair? >> i don't think we do. leadocus is on who will the fed. that is important. also important is who's going to be around the new leader of the fed. you have to think of the fed as a team lead institution. you have to discuss the vice chair and other vacancies. >> i think the chair is very important. it's the one vote that counts. it's the one vote that really
counts. probablymatters and is going to be a little more hawkish. what's interesting is there are dovish republicans being proposed. potential governors who would be would on interest rates pullback qe and get the curve to widen out a little bit which would be good for the markets. and probably the ones that trump when he starts interviewing these guys he's going to go with one who is more anti-regulation. the fed has really gotten into the regulation business post 2000 eight. some of the candidates being proposed are really talking that up. candidates my guess will emerge after these interviews with trump.
how were talking about see the fed acting. i'm wondering about the issue of asset price inflation. we have had greenspan and other central bankers saying the fed is notoriously not good at spotting these bubbles. we have any expectations on what these candidates might do? dovish republican is not going to care much about asset prices. i see them more focused on sustainable growth, low inflation and therefore not too many rate hikes ahead. qeinst the backdrop of reduction in getting the 10 year up a little bit in yields. that is a good thing for the financials and a good thing for the markets. if on top of that you get someone who is pulling back a little bit on the really tough regulatory side of the fed which has been fighting the cap market
side of the fed all the way up here. that would be good for the growth story. david: are we seeking a level of precision that doesn't sustain? we know what the president thinks about regulation. he's not going to put someone that's for more regulation or even the same level. we don't know much about monetary policy. as a practical matter is there much of a difference? there won'tort term be much of a different. in the short-term we have the unwinding of qe on almost fedmatic pilot and what the has told us is this is the equivalent of watching paint dry. don't expect anything exciting. given what the boj and the ecb is doing i don't think that in its self is going to impact the economy. on interest rates little talked about once again just like march
the fed has moved up significantly market expectations of a rate hike in december and done so without disrupting markets. it's really important that the fed is able to do that again. we will get the fed to hike and they will see whoever is going to spend time talking to the staff trying to see what they see that may be different from what they believed. we will not see a major change in monetary policy in the short term. in theit happened spring. it appears to be happening right now in december again. how long can they keep on that path without the inflation numbers really supporting them? for now they are saying trust us, it's coming so we can go up. not getting those inflation numbers. it's not going to change things. >> now we are starting to talk about the mystery of low inflation.
maybe we cannot just depend on a 2% target. that issue is under discussion. ifhink what's important is the employment mandate is flashing green the inflation mandate is flashing yellow. you are wondering what to do. elevated asset prices come in. at that point elevated asset prices may encourage you to hike even though the inflation is still yellow. that's why we get a december rate hike assuming no big shock occurs. jonathan: you coined this phrase the beautiful normalization. i want to ask you a couple of questions. one of them is about the spread that still exists between market expectations and the federal reserve space case. is set topread reconcile next year and how much weight you can put on the summary of economic rejections. those yellow dots given that
that could change radically in the next six months. >> i put a lot less weight on this than others do. have theficials possibility they would stop doing this. having said that i think they meet in the middle. you are going to see convergence. to markets i think markets have been conditioned to expect loose almost forever. there has been conditioning that has gone in by every dip. put more dollars at risk. that conditioning and slowly going to be taken out of the market. fed down is the realization that maybe they won't get the inflation rate they are looking for. maybe there's different dynamics. puzzles oute big there for economists like me. we don't understand inflation dynamics like we used to.
we don't understand productivity or wage determination as we used to. what you get is convergence in the middle. ni: we have yields falling at the same time have the biggest short position in treasuries in a decade. like quite a precarious trade for investors to be an right now considering there is no clarity at the moment of who will be the next chair. >> i agree with mohammed. we are looking at the 10 year drifting up between 2.5 and three over the next 12 months. i think that's a very reasonable expectation given what you talked about in terms of the structural forces. in the bag ins december and the low inflation numbers are going to force them into may be giving up.
onhave a 10 year closing in three. that's a nice curve for the banks to work with but it's not enough to kill asset prices. i think it is a very bullish backdrop. i want to establish what the market biases. you are on the bloomberg. the headline crosses. kevin walsh nominated for fed chair. is that a buy or sell on the s&p 500? >> he's thought to be one of the hawkish guys out there. day the data the is not supportive of the significant set of rate hikes. he is a little bit anti-regulation which i think is the more important thing. traders, rate hikes. that's a buy for me.
jonathan: let's get to the puerto rican debt story. the president of the united states is puerto rican debt will need to be wiped out. mick mulvaney says there will be no bailout for bondholders. of puerto rican general obligation bonds is about $18 billion. this is 2035 security. the price of it is pretty plain. $.32 on the dollar. at 44.ed yesterday the decline over the month is drastic. the decline over the 24 hours is drastic as well. talk us through what you've learned. inthe president last night this interview with fox news said puerto rico debt should be wiped out. mick mulvaney was very clear that what the president did not mean a bailout for puerto rican debt. he said the trump administration
is going to be very at and helping with storm recovery but when it comes to the debt that needs to go through the pro mesa process congress started more than a year ago. jonathan: i want to bring in mohamed el-erian. is the president talking since that ultimately this is what needs to happen? ofpaying is a function willingness and ability. in the case of puerto rico both willingness and ability have been hit hard by the devastating hurricane. if you look forward to has to be debt reduction. done iny this can be the context of an orderly debt restructuring. debt reduction is part of puerto rico's future. david: is puerto rico a one-off case?
looking ats are really crushing debt burdens they will have trouble meeting. givenrto rico's special the incredible damage that has been crated by the hurricane. wherever you were before the ability to pay has declined significantly. the notion of bailout is not going to happen. maybe there's something to facilitate orderly restructuring. be a reduction in the contractual value of the debt. david: what is the mechanism by which that gets done? >> hopefully -- this gets done lots of places. theget together and creditors see that by reducing the contractual value of the debt they actually increased the stream of anticipated payments and the debtor gains from the debt reduction. is an orderlyfor restructuring. it happened numerous times in the corporate sector and it should happen again here. jonathan: the numbers are
staggering. an economy the size of nebraska, population the size of connecticut and a debt load bigger than every single state with the exception of new york california and massachusetts. on top of that the declining population. let's say they started from zero again. how long before they get into trouble? >> that's a function of how they are managed. that's why the price was so low to begin with. he speaks to an entity that is over indebted. there are very few options. is massive austerity. we have learned from greece that doesn't work well. unless you can magically grow puerto rico which unfortunately is not easy you're going to have to do debt reduction. are we starting to see a unified approach to the issue that has emerged on the table in
a much more significant way? bitt is still a little complicated because we have the president throwing in this curveball. even with his budget director trying to clear things up there is still a question of is the president have an intention to push for greater debt forgiveness, restructuring that's very favorable to puerto rico. that's unclear. there is certainly a sentimental level. not at the financial level at all or at the policy level in washington a desire to do something that can really help order he could get back on its feet. there is very much an attitude in washington not to bail out wall street, not to do anything that's going to favor any of the big bondholders. jonathan: we have this very odd consensus not just around the table but on twitter as well. larry summers, president donald trump is right.
puerto rico's debt should be wiped out. there seems to be a consensus about what needs to happen. to what extent will this shake investor faith in what has long been considered one of the safest havens? >> it could. i really think people understand puerto rico is special. the hurricane has created enormous damage. the whole range of people saying yes, you're going to need debt reduction. a really interesting question is not what you need, it's how you get it. is this an orderly restructuring or does it have to get a lot uglier before something gets done? if you look at the price chart longer term on the security it was down 50% from issuance before the hurricane hit. investors have been buying and selling security at $.50 on the dollar.
puerto rico is never going to pay this back. since the current cane hit -- hurricane hit its down another 20%. their ability to pay is now reduced another 20%. that's the piece the government steps in as part of a deal the president orchestrates. the investors are going to take a big head. they pay a discounted price for securities. it has been battered since then. the original owners of the securities aren't in now. this has been treated pretty actively on the streets. i don't have a lot of sympathy for the folks that bought it in the trade did not work out for them. david: thank you, jen epstein. mohamed el-erian and stephen auth will be staying with us.
jonathan: amazon hit with a 294 million dollars tax bill by the european union. the world's largest online retailer is the latest u.s. company to find itself in eu tax trouble. allowed to pay four times less tax than other local companies subject to the same national tax rules. this is illegal. eu state aid rules. still with us around the table, mohamed el-erian and stephen auth. they've got a significant political problem. they would say it's not a political problem. they would say they've got a to pay tax.'ve got
do they have a political problem in europe? >> they do and a lot of u.s. tech companies do. one has been the stringent regulatory review coming out of the eu for a long time. decades of the u.s. tech industry. that issue is there for the amazons and the googles and the facebook's of the world. growing taxve issues. companies like starbucks and mcdonald's have tax issues as well. the reality is these are global players doing business in just about every country around the localesnerating cash in around the world. for some of the regulators they just want to make sure the proper payment are being made. what strikes me as interesting about the apple story is the eu is now suing island to go after apple to collect the money. when you talk about europe it's
not a unified europe in terms of how they want to tackle the issue. the irish saying, slowdown. we will do it our way. when we look at the european situation it is still a divided europe on this. the tax situation in europe is one of the least unified aspects of the european union. there are some loopholes or tax advantages and of course ireland has always had a favorable tax stream particularly for a lot of tech companies. there's probably a lot of work to be done on the eu side of this as well as by the individual companies in terms of trying to make sure they are paying the proper taxes. david: how much of this is structural? they have separate fiscal authorities and they can locate that property theoretically
anywhere they want their it gets not like you are manufacturing in a country and you have to pay taxes in the country. >> it's absolutely structural. these disruptive companies that combine powerfully content and authoritiesplatform have now bee .ystemically important not just economics, social and political. we are seeing the backlash play out. part of it is the tech companies own fault. culture issue. part of it is having realized they are systemically important and they've got to play offense. the question i would have for paul is how long can they play defense? towhat point will they have change the way they look at the world and start realizing they are systemically important? >> tech companies that have come to the fore such as the googles and facebook's are really
becoming not just consumer companies but also personal companies that everyone has a relationship with so they are very much on the forefront of everything. mark zuckerberg is going to have oftake a more global view how his company impacts the global economy and societies around the world. same thing for google. with some of the founders coming back to the company to take charge. got this taxve issue in europe. in the united states we have what could be a regulatory story emerging as well. when it be to address the tax issue in europe or the potential for a regulatory issue in the united states? since 2011 facebook has asked the federal election commission for blanket exceptions from political advertising disclosure rules. are these things going to start to change? >> facebook recognizes the power
of its platform. good.e seen it for the the arab spring from a couple years ago. the social media platforms are not just economic vehicles but social vehicles as well. they really touch all parts of society. size if nothing else they will invite all types of regulatory oversight. you will see them step up lobbying around the world. certainly in d.c. jonathan: does the political story become a valuation story? >> it could. it is part of a political story which is institutions within the private sector and the public sector under enormous pressure right now. institutions are the backbone for what makes mature economies function well. i think if they are not careful this could become a valuation issue. so far the investor base is saying it's just a little
hiccup. nothing more than a flesh wound. david: paul sweeney, thank you for being here. bloomberg view columnist mohamed el-erian will stay with us. futures just a little bit softer going into the open. back of a six-day winning streak and another record high. .quities looking a bit softer treasuries look stable. the dollar is weaker by .1%. throughout the morning it has been weaker against everything in the g10 space. we are just off the lows of the dollar index and 9347. here's abigail doolittle. we have small declines for both the s&p 500 and the nasdaq. this puts the s&p 500 six-day winning streak in jeopardy. the dow unchanged slightly to the green. we don't have any records at this time.
the bulls taking a little bit of a breather after this amazing streak of record highs. acknowledges the overly bullish sentiment but she thinks we are probably not going to have a pullback for at least a few weeks. let's take a look at some shares that are pulling back. some of the spanish related stocks. telefonica. all of these shares lower on certainty around catalonia's separatist leadership saying nothing will stop it from setting up an independent republic. we do have declines here. one question could be whether or not to buy europe. more recently investors and strategists have recommended buying u.s. equities over europe. chart may make the case to continue to buy europe. the stoxxtom we have 600 -- the s&p 500 on the year
up 13%. in blue we have the stoxx 600 of more than 20%. on top we have the price-to-earnings ratio for both. in blue for the stoxx 600 trading at 15 times next year's earnings. in white the s&p 500 at 18 times. in a way the stoxx 600 looks more attractive from a valuation perspective. we have a much bigger waiting for technology on the s&p 500 and for the stoxx 600. that could help to explain the lower valuation. jonathan: still with us, mohamed el-erian and stephen auth. moved over here early last year i was told by an investor in the united states, beware that investors here are extremely binary around the issue of europe. buy or runr buy buy run run.
the question is whether it based to be run run run on the politics of the last couple weeks. than thes no different american markets. it overshoots on the way down. we should be talking about catalonia. there is a legitimate demand for independence. the international community is not willing to help the process along. a series going to have of political crises in a very important country in the european union. it's time to take catalonia more seriously. internationalthe community to help the process or it will have a negative spillover effect on markets. jonathan: why is it legitimate? how does this bleed across through the rest of europe? at the moment it really is confined to spanish assets. >> the concerns that europeans that it will bleed
across. i don't think the contagion risk is as high as europeans have it . i understand why they are hesitant to get involved. if they don't the actors on the ground will make things worse. very little collaboration going on right now in this has to be solved in a coordinated fashion. david: does catalonia make you less inclined to invest in europe? >> it makes me want to sell the u.k. this is exactly the nightmare they had. you let the british out. easy. catalonia and then scotland and then whatever. there's all these little countries inside europe. going tohey are just beat the daylights out of the u.k. this is going to cause them to toughen their stance. david: the eu? >> i agree with what you said earlier.
you made a comment about how the europe trade is as much a sector trade as it is a market trade. that has been our view all along. we like the european banks. they are cheaper than u.s. banks. the underlying economic trend is good in europe. the yield curve thing is going to happen a little bit delayed relative to the u.s. you don't really have tech in europe. you got a more industrial cyclical economy in terms of the market. >> to what extent have we learned a lesson from greece in that the eu would step in at the last minute with a deal if necessary especially with catalonia? >> that's a great question. i don't know if europe has learned the lesson of greece. even now they haven't addressed the fundamental issue which is greece has too much debt. of speculation as
to whether germany's position is going to evolve or not given the change. it's not clear to me that the europeans will step up. their biggest problem is they feel this is a domestic internal issue and they are hesitant to step up. if they are not careful this is going to have massive implications for the eu as a whole. lesson isthe investor to fade any euro denomination risk whatsoever and to buy aggressively because it does not happen. the again it comes back on table. we have the potential for an italian election in the next 12 months as well with an antihero party very much in the polls leading some of them. i wonder what it means for president draghi. politics is back in a sizable way. >> first and foremost, the market has been conditioned to buy any dip whether it's
political -- it doesn't matter. it has been conditioned to buy. because there's very big confidence in central banks. the central banks have are back covered. market will continue to buy. you need a major series of shocks in order to disrupt this conditioning because it has paid investors well. that's the reality. which is youue keep decoupling prices from fundamentals. at some point you risk an air pocket and that's what investors have to realize is a consequence of this behavior. politics is an issue. you mentioned italy. not only because what's happening in europe but the u.k. itself. look at the conservative party conference this week. you need them to come together in a big way to disrupt markets.
jonathan: i'm sure you don't miss managing money and staying awake all night and getting to the office at god knows what our in california. a bond fund right now and you had exposure to the periphery in europe how would you be managing exposure through the next six months? remind investors there's a difference between attorney and a destination. this is a journey of low volatility. liquidity. it's a journey that pays you really well. let's remember not matter how long the journey is at some point you will have a destination. addition to my positioning based on valuation i would have a very big tactical positioning and i would be upfront saying this is a very big tactical positioning that is part of the journey. it's not yet part of the destination because i need to see better politics for that to become part of the destination. jonathan: mohamed el-erian of
richard smith is going to be on the hot seat again on the hill today. this time in front of a senate committee. smith faced the house energy and commerce committee yesterday and here's some of what he had to say. time we had no indication it was a breach. it was a sick fish -- suspicious activity. location where the ip address does not necessarily tell you where they're from. it's easy to set up ip addresses anywhere in the world. it was never intended to have that arbitration clause apply to this breach. it was a standard boilerplate cause as part of the product. as soon as we learned the boilerplate term was applied to this free service it was within 24 hours we removed that and tried to clarify that.
that was a mistake. david: joining us now on the telephone is keith snyder. a price target for $115. explain to me how you are sticking with equifax. just watching that testimony we are looking at a company whose very existence depends on our trusting them with data. took twor ceo said it months to find out exactly what was going on and another two months to track the situation because it's really hard. that didn't give me a great sense of confidence. his handling of the situation hasn't been ideal. the new ceo has been a much better job. at the end of the day long-term business prospects for the company are still pretty stable. this is a $13 billion company and whether consumers like it or not it controls a lot of credit decisions banks makes.
can the rails that a lot of financial decisions ride on. i think they're going to do just fine. look at other data breaches. jpmorgan, target. after the initial shock wears off they have done just fine recovering to new highs. we think this is going to be more or less the same situation with equifax. when you say whether the consumer likes it or not, that doesn't sound very promising for a consumer company. the testimony yesterday the consumer in may certainly didn't like his answers. he deflect did a lot -- deflected a lot of the questions regarding regulation and whether consumers should have more control over data. the equity analyst in me looks at it, the consumer facing portion of the business is actually fairly small. the global consumer solution is
only 11% of revenue while the u.s. information solution and that serves the banks, the financial institutions the biggest chunk realisticallyess doesn't face the consumer and that's the business we think is still going to do just fine. jonathan: you are not alone. the analysts that we survey at bloomberg, the consensus price target at the moment for 12 months is about $121. i want you to take me inside the most recent conversation you had with an investor about equifax as an analyst. how much resistance you might still be getting by the people who have to go out and buy the stock. the conversation follows a lot like it's going right now. how are they going to recover from this. will they recover from this and how long will it take. clients thatring
they are taking the steps necessary to reassure consumers that their data will be protected. ceo has announced the rollout in the near future of a lifetime service that will let consumers lock and unlock their credit. 12 months out we think after the congressional hearings and all of the articles fade we think it's going to be business as usual for them and they will just go back to doing what they do best which is collecting data on consumers and offering credit scores to financial institutions. we will make that conversation happen right now. stephen auth, has keith convinced you to buy equifax today? >> he knows more about equifax than i will ever know. we are not involved in this stock and we will not be. run models and crunch numbers but there is a psychology also involved in
security and in this case you have a company that basically gave away the personal financial data of half the country none of whom had a direct relationship with them. they didn't voluntarily enter witha relationship equifax. they didn't even necessarily know that equifax had their data. the government is going to be all over these guys. was 50% below where we are today five years ago. maybe it's a falling chainsaw. i don't know. i would wait on this one. you makeondering what of that is that it's not just the hack issue. of the way equifax has been handling this. what steps could they really take to restore consumer confidence? >> their next big opportunity is going to be who they selected as their new permanent ceo.
i think they're going to heavily way and outside candidate. with expertisee in cybersecurity. the veteran leader for the company to really write the ship . in the near term i think smith's testimony has been what the company needs. obviously the market likes what it saw yesterday. the stock was up almost 4.5%. it closed up about 2.5%. the market thought the company was worth 500 million dollars more after the testimony that was before the testimony. i think today's testimony obviously is going to center on a lot of the same topics and maybe a little more on privacy. he's going to do just fine in front of the committees. would add that for a regulatory standpoint we are not
entirely sure if anything will actually come from regulators. a veryly this is partisan environment that we live in with the u.s. government and financial reform as a whole is a fairly black and white parties haveoth very strong opinions and so we anynot entirely sure that new substantial regulations will actually come from these hearings. and stephen snyder auth, thank you for being with us. mohamed el-erian will be staying with us. if you have a bloomberg terminal you want to check out tv . you can watch us online and interact with us directly. this is bloomberg. ♪
large part to the hurricanes over the last month or so. will the report have any impact on the fed's plans to hike rates in december? still with us is mohamed el-erian. have 135,000 in the age of data dependence. how difficult is it to be data dependent for the next several months? >> it's very difficult especially for this report. notpect the fed will attacked a lot of information to it. it will see the impact of the hurricane as highly regrettable but also temporary and reversible. it's not going to react to whatever number comes out. i don't know how you can estimate the number with all that's going on. i don't expect this report to tell us much about the economy or what the fed is likely to do. the fed would lead the
market and carry on dragging expectations higher. over the last month as well expectations for december have increased aggressively towards the expectation of a rate hike and why have we kept on doing this throughout 2017? and is a game we are going to continue playing? >> i think the market is deeply conditioned to believe that this is a very dovish fed and that that if there is any uncertainty on the economic prospects it will below low for a very long time. the fed says, things are pretty good. they are not great but they are pretty good. occasionally the fed will aggressively and so far skillfully raise market expectations in a dramatic way. you about thesk week wage growth picture. is that assign it is too premature for central banks to start adding slacked back into the markets? why wagest quite know
have been so sluggish. models predict this and there's lots of structural issues going on. the impact of technology. the powerful combination of big data mobility and artificial intelligence. there's so much going on that we don't quite understand why it is that wage growth has been so low. unfortunate because it fuels discontent. it fuels the notion that people are marginalized, that people aren't sharing in the prosperity. the fed would like to see wages go up at a faster rate and we --e to answer some pretties tough structural questions. my expectation is that wages will respond. it has beenyou that so for the last few months and it hasn't happened. >> how much is this going to be tied to the economic policy coming out of washington?
>> it's critical. if congress doesn't move on tax reform and doesn't follow that with steps on infrastructure and skill acquisition and labor retraining and retooling we are going to continue to be stuck in this 2% world. anderms of economic growth two plus percent in terms of wages. you are right to bring it up. it is critical that congress move on these progrowth measures. jonathan: outside of markets it's about sport. i'm told the new york jets are doing something over the last month or so. are you impressed? >> it's a smile of shock more than anything. this will anger lots of people out there. fans moores us jets is not that they have a two games. it's the patriots. the patriots have been up 108 points at home in the beginning and we are tied with them. who would have imagined this?
queen's power rangers fans. let's not talk about it. el-erian,mohamed thank you for being on the program. 26 minutes into the session. just a little bit softer on the s&p 500. a very small retreat from a record high on the s&p 500. that's the story on markets in the united states and that does onfor us from the team bloomberg daybreak. bloomberg markets is next. from new york, this is bloomberg. ♪
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♪ we have much to cover this morning including an interview with puerto rico's governor. breaking data in the united states. waxed this is a measure of the services economy. 59.8, in above estimates, above the reading last month, 55.3. the largest portion of the economy doing better. it is a 12 year high following the major hurricanes showing the u.s. economy still appears healthy in the wake of that. this follows on the heels of the manufacturing data we got earlier in the week that was better t