tv Worldwide Exchange CNBC September 14, 2012 4:00am-6:00am EDT
. welcome to "worldwide exchange." >> these are your headlines from around the world. >> equities get the bernanke bounce. risk assets rally. >> the fedded goes all in on qe-3 to jolt the economy. >> the committee has become convinced that further policy accommodation is warranted on to strengthen the recovery and support the gains we've begun to see in housing and other sectors. >> and former ecb president trichet says the central bank's man to save the eurozone should be subject to conditions.
>> it has to meet the requirements and conditions including of course to be came mention rat and for the public sector and private sector as well. welcome to today's program. significant that we'll start here at the wall today because it's really about the fed. >> significant in markets this morning. if you look across the board starting in the u.s. whirling around the globe, you get a sense of just how strongly people have reacted to the fed decision. >> let's remind you the federal reserve chairman launched that $40 billion stimulus plan to buy mortgage backed securities each month and he's warned these
efforts alone may not be enough to protect the economy from the twin shocks. >> the fmoc decided today on new being as electing to expand its purchase of securities and expand its forward guidance regarding the fund rate. specifically the committee will purchase additional mbs at a pace of $40 billion per month. >> so the dow jones on the heels of that announcement yesterday adding 1.5%. that brings to a level of 13,539. and this is just 4% below its all-time high. similar for the s&p 500 and nasdaq. nasdaq from its era bubble highs. small caps posted its fifth highest closing level on record. take a look at what's happening in europe. we've largely seen a follow-on from that positive mentality. 1.5% ftse 100 adding this morning. same for xetra dax. cac 40 up nearly 2%, ibex up
better than 2% to a level of 8108. and that just gives you a sense of the rally. we're seeing european banks in particular are outperforming this morning. here anywhere from bbba adding 2.25% to, even unicredit, some of the italian banks. french banks adding in the range of 2% to 3%, as well. ross, apparently the potential for having low rates much longer which would put pressure on their net interest margins is overwhelmed by the fact that simply better growth prospects generally are boosting prospects today. >> absolutely. and it's commodities that have been flying. as far as bond markets, we're containing spanish bond yields. they have nudged down this morning getting down towards
below 5.6 beginning of the week. here we go, italian bond yields auction yesterday, yields back below 5%. in the u.s. higher 1.75%. the dollar had weakened into the fed announcement and it's continued to weaken. euro-dollar now over 1.3028. aussie dollar performing strongly getting back towards the 1.06 level. we'll get on to commodities in just a second. sterling-dollar up at 4 1/2 month highs, as well. sos the dollar maintainses weakness most the decision that we had going into it. multimonth highs, as well, across a number of commodity markets, as well. spot gold, 1777. we've hit just below that for
the moment. but 1800 is holding. silver is the one doing not quite so well, copper also up multimonth highs. so that's where we stand with reaction. let's bring you up to speed in asia. already today chloe has all the details out of synof singapore. >> take a look at how investors loaded up on risk, whether commodities, gold, some of the risky currencies, as well. sensex, we just had an inflation gauge coming out of india. way higher than the consensus forecast p just sitting below 7%. it was in fact 7.55. but there's another huge positive going into the indian session which is that the government raised diesel prices for the first time in 50 months. the government trying to to something to consolidate public
finances. how you can move when headline inflation sticking above 7.5%. even the mid cap minors actually rallied today. that index a little more than 1.#%. we have the government downgrading its economics assessment for the second time running in two months, but investors really don't care about that. policymakers are warning of the risk to dollar-yen. the last time the bank of japan actually moved dollar-yen sat below 78, currently that's where it is sitting. the bank of japan will meet in the middle of next week. whether they also join the qe party, that remains a key concern. something a lot of investors are looking out for. south korea, rallied close to 3%. there was another positive going into this market in that s&p upgraded south korea's long term sovereign rating. they're following up on the likes of mood candy's and fitch which made a similar move
earlier this year. so this market rallied close to 3%. shanghai composite, the underperformer. only higher by just over half a%. tightly liquidity positions. evident in light of the fact that the pboc conducted 28 day reverse repos. so a lot of people are waiting out to see whether the japanese and even the chinese joined the easing party. back to you. >> at the same time, china state researchers have criticized the fed's qe-3 program saying the move will cause global inflation and drive ups asset prices. one think tank calls it irresponsible. researchers in beijing says the new bond buying scheme will be particularly for china given its large treasury holdings. simon, let's pick up on that. are we going to see greater
dollar weakening and will it have a major impact on asset prices in emerging markets? >> certainly we have seen the dollar weaken both in the run up to the decision and then subsequently on the fact that bernanke surpassed what was expected. we've had a negative call on the euro and we're reviewing that as the risk is very much more two way in respect to what draghi has come out with with his stirlized bond purchases. the one thing to remember is that qe-3 as opposed to qe 1 and 2 is by no means a unilateral policy move by the fed. you've got the swiss national bank, bank of england and potentially the ecb all doing pretty much the same thing. so we don't see it as nearly as much of a negative for the dollar as it has been in the past. but some of that liquidity will come out into the emerging markets as we've seen on previous occasions and that may
future some pressure on the currencies. but again, you have to remember that central banks are quite active in the currency markets on a regular basis and they will make sure with exporters already under pressure with collapse of sales in to europe, they will make sure that those currencies don't appreciate too quickly and they'll be there pretty constantly trying to smooth out any appreciation and making sure it doesn't move too fast. >> that's what's so interesting. a lot of people talking about this is in essence a kind of coordinated global central bank action here. we've seen easing from the european central bank, even the bank of england recently has been in easing mode. now the fed. but is this more akin to a movement when central bank was propping up global command or more akin to 2010 when it reignited talk about currency wars? >> it certainly could reignite it. if you look at most of the central bank, all the commodity central bank, they've been
complaining for quite some time, but they're the most relick tant of all to do anything about it. central banks in scandinavia getting concerned. you obviously can't have everybody needing to devalue their currency to try to get a gain in the export market. and if you look it at the various regions, if you look at europe as opposed to u.s., you would say there's a much greater need for europe to devalue the euro to try to generate some export growth there because they're already in recession. same would apply for the uk, they're much more reliant on external growth than they are domestically. so there isn't that strong a case for the u.s. to need to devalue the dollar. >> what the fed seems to be doing is coming out with insurance prices. because if the the u.s. economy slips below stall speed and ism data suggests that might happen and that really does impact
everybody else in the world, so is it right maybe to have an insurance policy, is it the right insurance policy? >> and i guess the answer is they're doing what they can. we've always raised questions how effective this policy is. the biggest beneficiary was oil prices which rose the most. and a significant increase in oil prices is going to be a new and severe head wind for the u.s. economy that will counter act a lot of the extra liquidity they're providing. so it's not all good. we've also got the fact that bernanke has made reference very specifically to the fiscal cliff in the u.s. and so we could well see some deleveraging coming through and a much slower economy from that perspective and as you mentioned, we're not starting from a very strong position as it is. and that could lead to elevated risk reversion. and as we've seen in the past, there have been many pretenders to the title of safe haven as far as currencies are concerned.
but there is only one and it is the u.s. dollar. risk aversion starts to come back towards 2013, then the dollar will be the main beneficiary. >> simon, good to have you on with us today. plenty more to come from you out there in singapore, of course. don't forget a lot of discussion coming up today on the efficacy of central bankers and whether they're doing the right board. >> we'll be hearing from jean claude trichet and perhaps some of his thoughts on how mario draghi is doing. certainly ben bernanke is all over the headline. i thought he was so plain spoken yesterday the way he was talking. felt like for the first time he was kind of just laying out this is my ideology, this is how i view the world. >> if you think you can do a better job, anybody anywhere in the world, now is your opportunity. because you, too, can apply too become governor of england. the effort is out today in the economist. governor of the bank of england.
>> not something you see every day. >> it's not. demonstrate management policy skills, advanced understanding of the equity markets. strong communicator. this reads like your cv. >> do you think i'd have a fighting chance? >> that's the point. you can be anybody. >> i have tried to go on the website this morning, admittedly before 9:00 in london, and i couldn't find the application. so maybe they were waiting until 9:00. >> it could even be a canadian. it doesn't have to be someone is britt pish, but a person who is a person of undisputed integrity and standard, so i'm not sure you're qualified. >> i was going to apply until i read that final paragraph. but if you have any thoughts or comments about that please write
to us, email@example.com. or tweet us @cnbcwex. and the rest of it, you know where it is. on today's show, we'll also be in cypress. very nice place. europe's finance ministers are planning to push madrid to take a full bailout. >> and we'll also see anger over in india where it's over diesel price hikes. we'll head to new delhi it for all the latest. . >> protests in north africa continue. >> and pressure mounting on spain as eurozone finance ministers meet and report in a dutch paper suggesting the ecb is negotiating with the imf on the spanish rescue package worth 300 billion euros. stefane is following the story for us. >> reporter: it looks like it's a pretty good report to be honest because 300 billion euros is more or less what would be
needed for a spanish bailout, for the amount of this potential deal for spain is credible. regarding the fact that the imf would be implicated in that story, again, it's credible because if you look at what the prime minister rajoy say a few days ago, he said he had no objection to the imf monitoring the spanish compliance with the condition of an international bailout. it's all about the condition of the bailout because if you remember also the prime minister say spain would not accept any additional condition for a bail skrout. he believes that the country fills all the requirement for the bailout in particular with respect to the european budgets target, deficit target that has been set. so basically what rajoy wanted to say he has no objection to check that spain would respect the public deficit target. i'm not sure that he's ready to accept anymore conditions especially as they come from the
imf, especially that's the finance minister underbudget minister is quite reluctant to psych international inspectors to take a look. tanld be also a problem of credibility ahead of regional elections very soon in the north of spain. so, yes, the report from here seems credible, but again it's all about the condition. over to you. >> and all about the leaks ahead of those meetings. stefane, thanks very much. >> and we have data out this morning, spanish banks buying 470 billion in august. 402 in july. the net were rowing 388, 375, so still the borrowing of spanish banks and ecb going up in august compared to july. thousand, of course this is all waiting for what's going on in the super capital. cecile has been following the
meeting and she sent us this report. >> it's another finance minister's meeting, but it's slightly different than the usual ones we go to. this is called informal. informal means there won't be any decisions, there won't be any communications where measures are actually taken, but the advantage of that is as the german finance minister schaeuble just pointed out as he came into the meeting and talked to the press, he said the advantage is we can have an open discussion about a lot of things without a great deal of pressure. so what is on the table? plenty, of course. first of all, an speaker rim report by the troica looking at the situation in greece. second the commission will come again with an interim report. and they have to inform about
thes constitution al court. we also heard from the german gu finance minister that some conditions have to be made before the german president can actually sign. and of course dare i mention spain, that's another topic here on the agenda in the afternoon we will hear more about the euro group meeting, of course, and what had been on the table. but right now, it's pretty much open discussion on a volley of topics. >> all right. that's still vsilvia. we'll hear more from her in the second hour. a lot of hurdles in the crisis the last few weeks. how substantial have these moves been? >> the change from the ecb has been pretty significant. we've been saying all along that what you need in the market is a lender of last resort and it now seems that the ecb has stepped up and taken on that role,
albeit on a conditional basis. it looks fairly obvious to everyone exempt the spanish perhaps that spain needs a bailout and also in terms of the ecb policy, we need to actually become a reality rather than just a theory and that will be very important. so although there is opposition, we really need spain to step forward, take the bailout, get the ecb program up and running. but one of our big concerns is the ecb made their proposal conditional. so draghi has said that he's prepared to do everything that he can, but he's now very squarely handed that back on to the politicians and that's not anything that will inspire any confidence. the other thing in the longer term we're very concerned about is draghi has said very clearly that the support can be revoked if these companies don't keep to the austerity plans. and what we've seen pretty much across europe is almost none of them have been able to keep to these austerity plans. and if there's going to be one
really extreme problem as far as the eurozone recovery is concerned, about if the lend are of resort actually carries out it threat and starts to sell the bonds rather than buy them, then there aren't going to be any buyers at all. >> all right, simon, more to come in you. also still to come, we'll talk to marc faber about his take on the qe-3. as you can guess, he's not a fan of money printing. before we get there, prices are going up in india including at the pumps. we'll take a look at the impact.
going up. indian's wholesale index jumped more than expected it gained 7.5% in august from a year earlier. analysts looking for a gain less than 7%. the sharp uptick leaves little room for a rate cut. speaking of inflation, there's been plenty of reaction to new delhi's decision to raise subsidized fuel prices. political opponents call it an attack on the poor.
shireen, what's the reaction? >> the reaction is along the expected lines of middle classes, protesting the highs of the go. saying they're shocked the government has decided to go ahead with a price hike. but what's actually happened is that diesel prices haven't been hiked for almost a year now and the government needed to do this. petrol prices will de facto reduce just a tad because there's been a tinkering as far as excise tut iduty is concerne. kerosene has not been touched. this will help as far as the fiscal consolidation, but it's baby steps. a lot more actually needs to be done to bring subsidies under control. could we see more action from
the government? yes, a crucial meet willing take place in a couple of hours where the cabinet will decide on whether or not foreign carrier, foreign airlines can invest in an indian company. retailers will be watching this very closely. today the cabinet will perhaps take a call on whether it will be effective starting today. so a couple of building ticket also on the cabinet's agenda, fuel prices hike has been, political opposition along expected lines. >> shireen, thanks very much for that. for more on india's inflation and fuel price hikes and what they mean for the rbi and government, we're joined by head managing director asia research and economics. p.k., welcome to the program. what's your reaction to the fuel price hike? who stands to benefit the most.
>> the government benefits because fiscal consolidation is a key agenda item and this is a fairly decisive step. there were some hikes in fuel prices particularly of petrol and lpg about 2 1/2 months ago and this diesel of course hasn't been raised for some time. the fact that they raised these prices is good news from the fiscal standpoint and it does appear that over the next few days you'll get quite a bit of news on disinvestment, reducing it stakes in about five or six of its public sector enterprises that it has stakes in. and perhaps divesting in to companies. >> and p.k., talk us through how you invest around all of this. what companies to you now look attractive, where do you want to
steer clear? >> well, i think the indian rupee is at a competitive level, having depreciated very sharply over the past 13 or 14 months. and consequently, the exporters both of goods as well as services are likely to be the winner. so we like companies in the auto space. significant export markets, as well. we like the software exporters like cmc. the boost that it's likely to gr give to the u.s. economy. >> and we want to talk about the rest of the region. china still so important. and you have some predictions about what we may see from there. >> yes, i think there is room
for the pboc to act. given the fact inflation for cpi is fairly moderate, just 2%. food prices have picked up a bit, but with producer prices declining 3.5%, i think there is room for the pboc to act. i think they will either cut reserve requirement by 50 basis points or cut the policy lending and deposit rates by 25 basis points each. >> p.k., can i ask you, what do you think has changed to make this happen? we saw that the pboc was still doing reverse repos. they seem very reluctant to give the easing that the rest of the market wants. they're concerned about inflation. if we look at india, they seem unable to provide the type of stimulus some of the other markets have got and probably these are two of the stock markets that have lagged in what waef seen in terms of overall performance. china, everyone is waiting for the stimulus to come through and
we're still waiting and the officials have said you won't get the type of stimulus that we had after the '08 crisis. so what is it that you think has changed just recently for the stimulus to come through and will it be big enough to actually make any difference? >> i think fiscal stimulus will be modest. they don't want to ignite another spurt of fixed asset investment, especially property related. it's worth noting of course that on the monetary side, there's been quite a bit of action. we've hood several cuts in the policy rate and the reserve department. and credit has responded. seen a fairly sharp spike in credit over the last couple months. july and august credit numbers were very strong for this stage of the year. so it's not as if there is no
stimulus. there is a substantial monetary easing under way. and i just think that there is room for one more cut given the fact inflation is pretty tame. ppi in particular is declining. >> i need jump in. there's a great thing going in singapore. i love seeing our guests have that discussion. >> always something great going in singaporsingapore. simon will stick around. still plenty more to come. >> anger boiling over in the middle east. morrow tests slated today in egypt. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking.
these are the headlines from around the globe. markets get the bernanke bounce. risk assets rally led by basic resources. >> the fed going all in betting open-ended programs will spur hiring and prapt jolt the economy. >> the committee has become convinced that further policy accommodation is warranted to strengthen the recovery and support the gains we've begun to see in housing and other secretary tours. >> and in a forecast exclusive,
the former president trichet says the plan should be subject to conditions. >> it has to meet requirements and conditions including to be commensurate with the market you have to cope with and be accompanied with appropriate messages for the private sector as well as for the public sector. >> we're an hour and a half into trade. up nearly 2% in spain. the bank's been pretty good performers today. best sector commodities, but up a fresh 14 month highs all thanks to the federal reserve. people keep talking about ben bernanke, but there was only one 1%er. everybody says it's bernanke, bernanke. there are however many members voting.
>> and let's take a look at the bond curve for a sense of how it's playing out. ten year german bund is higher, 1.62%. the gilt, as well. and we're seeing spain and italy getting down to 5.67%. and italy under 5%. remarkable. >> euro up the fresh four month highs. euro dollar 1.28 -- probably need to put the dollars up. aussie dollar firm again nearly back up to 1.06. gold up at six month highs, as well, this morning.
>> chairman of telefonica telling reporters that the spanish market is still complicated, no visibility on a recovery in revenues in its struggling domestic business and potentially wants to list between 10% and 20% of its german unit to fetch up to 2 billion euros, this according to a source speaking to reuters. shares responding up about 2%, but again, that is in will not generally speaking with what we're seeing in the ibex today. >> south korea an upgrade on its sovereign date. sherry tells us why. >> s&p raised south korea's rating one notch with outlook as stable. this is the first upgrade by s&p on south korea in seven years. so this agency says this is thanks to fiscal health and
policy making that promotes economic development. and less negative assessment of a geopolitical risks on the peninsula given what seems to be a smooth change of leadership in north korea. we have been getting signs that the young leader is consolidating enough power for a stable regime since taking the top job late last year.upgrade follows two other major rating agencies. moody's late last month and fitch early this month. and analysts say the upgrades will help to bring in more foreign investment into korea in one asset coupled with major economies moves to ease their monetary policies, as well. back to you. >> thanks for that. that's the latest out of south korea. meanwhile japan wants to quit using nuclear power by 2030. the government announced the exit plan, a clear shift away
from its original energy blueprint which was set up before the fukushima disaster. tokyo propose to go restart some of the country's reactors to ensure that will is enough electricity supply. the country's anti-nuclear movement is expected to oppose restarting any facilities. >> geopolitical tensions are continuing. six chinese surveillance ships have entered the water around disputeded islands in the east china sea at the center of a territorial fight between tokyo and beijing. japan says it will do whatever it takes to keep the area secure. beijing says japan's action would be negative for trade ties. >> anti-american tensions continue in north africa. protests outside the u.s. embassy continued overnight. as many as 40 people wounded in clashes between demonstrators and security personnel. this is according to state television. anti-islamic video made in california has sparked a waiver
of protescee wave of protests. in libya, christopher stevens and three of his staff were killed in an attack on wednesday. newly elected government has announced that four arrests have been made after the deaths. joining us for more is david hartwell. david, good to see you. thanks for joining us. how serious is the escalation this week? >> it's quite difficult to gauge. the libya example clearly is some degree of confusion over whether the attack on the embassy was an al qaeda inspired attack using the protests ever the film as a cuover. but there is widespread anger
across the middle east that the film goes toward the prophet muhamm muhammad. if you've actually seen the film, it's quite difficult to watch with a sort of an eye which it's arrest tis technically poor and quite tragic that something so bad and so deliberately designed to inflame tensions has done exactly that. >> david, it has inflamed tensions and in your view, just how significant is the violence? how much further could this go? >> i tend to take the view that it may well be sort of a brief but very, very intense outpouring of anger in much the same way as perhaps the 2005 dane in addition c danish cartoon episode. but you can't i go information the fact of the arab spring to vocalize their opposition to american policies particularly is much more prevalent now.
and i think interesting what president obama said the other day in terms of relations with egypt calling them net an ally or a friend, that may be an indication or certainly a hint that the close relationshipit a or a friend, that may be an indication or certainly a hint that the close relationshipt any or a friend, that may be an indication or certainly a hint that the close relationshipht a ally or a friend, that may be an indication or certainly a hint that the close relationshipert ally or a friend, that may be an indication or certainly a hint that the close relationship an ally or a friend, that may be an indication or certainly a hint that the close relationship they enjoyed in the past won't be in the future. >> that may be the case. a lot of people this morning waking up and trying to figure out just how significant this may ultimately be for instability across the middle east. and we've certainly seen a number of conflicts and a number of difficult relationships ahead of the elections. rhetoric is ramping up. how likely will any of these worsen relationships between these critical nations? >> it's difficult because like the arab spring, there are so many different kind of dynamics involved in each country.
clearly there is certainly angst from egypt, for example, that a lot of the demonstrations particularly after the initial 11th of september anger outside theist u.s. embassy were expressions of anger from angry young men rather than a focused demonstration against the united states. that is likely to change today because we have friday prayers and there will be more widespread demonstrators today. but there are individual circumstances in each country which will play out in the future of relations. so the conditions in yemen are very different from egypt and we have the drone strikes in yemen which feed into anti-americanism there it and egypt, it's probably more to do with the closeness of the british regime. libya is more difficult. you have the risk of increased presence in the east which is kind of feeding the instability
there. so a lot of different local dynamics at play. >> david, while we concentrate on this of course we're still working out what's going on with the really big story. which i don't want to downgrade it, but iraq of course. and how is that going to pap out? >> in terms of -- >> nuclear weapons. >> it remains very difficult because we're still trying to analyze what the israeli intentions are. that's the key going forward certainly before the u.s. election. there is a widespread fear that perhaps the israelis are trying to up the pressure ahead of the election in terms of trying to influence the outcome of the election, but trying to sort of engineer the u.s. into delivering a red line policy which clearly the obama
administration is set against them. perhaps they're trying to influence any future romney administration. it's a dangerous policy for the israelis. it could fall flat in terms of sort of in a sense march the troops halfway up the hill and then having to march them back down again. >> david, good to on speak it to you. thanks for that. a quick look at the agenda in asia. reserve bank of india meeting on monday. there may still be an outside chance of a rate cut. china is set to release august investment figures. meanwhile japanese and malaysian markets are closed for the holidays and it's respect the age day in japan. meanwhile this morning in an exclusive interview with cnbc, trichet says the central bank's plan to save the eurozone should be subject to conditions. he's been speaking to our very own michelle caruso-cabrera,
former anchor of this show. great to see you this morning. what kind of mood did you you find jean claude in particularly in regard to all the events that have happened since his departure? >> he seems incredibly relaxed, ross. and good to see you, too. he's speaking in the room you see behind me right now as part of the annual meeting of the big business school here in spain. but before that, he sat down with me morning and like i said, he's very relaxed, very positive about the program. let me give you what i think are the lee headlines of what he said. first, he thinks holders of senior bank debt in the future should bear losses when a bank fails. many may see this as a reversal of position because in ireland, he did not allow that to happen. he said that was a time crisis and a future regulatory scheme that would presume it to be coming as announced by mr. barroso, that in the future, senior bank holders should bear
loss. up until now, they have not. he expressed extreme optimism that the american congress will solve the fiscal cliff. he expressed more optimism the american congress than a lot of americans actually do. he thinks they will it actually get it solved. as for the omt program announced by draghi last week, he did not see it as revolutionary. he said we bought securities when i was running the ecb, we bought sovereign securities in unlimited amounts twice. he thinks it's important that it works in tandem with the government. i said will this program work. he said yes. >> not on the making the working assumption that it will work, but i think that it is of extreme importance for not only europe, not only the euro area, but the rest of the world. and again, it depends now crucially on governments, the governments that have to adjust and collectively through the esfs, esm to deliver. >> he kept saying how important
conditional itity was. however, when asked very directly about what conditions should be imposed on countries that actually access the program, he wouldn't say. he said that's not the rove the ecb, that's the role of the eu. coming up up later on on "worldwide exchange," a program i used to love hosting with you, and well come, kelly, we'll talk more about what he said about the anger that a lot of greek debt holders still have about the fact that the ecb did not take a haircut while they were forced to during that restructuring. >> michelle, we'll definitely talk about that in the next hour. while we have you here, did trichet give any sense of atonement for the way that he navigated or handled the ecb policy during his tenure? it's hard to imagine anything like what mario draghi has announced happening under a trichet regime that many now sort of look back and blame for exacerbating europe's crisis. >> no. in fact, like he told me, he said when mario draghi isn't
very different from wlae i did, i i bought securities twice. i would have done it -- i did it in unlimited amounts. i bought sovereign debt over a couple year period. so he actually life-no, to answer your question, no. >> well, we'll see what market reaction is to his comments, as well. thanks very much for joining l. go get a nice spanish coffee or whatever. >> send some over here. >> i'm sassign son isimon is st. i don't know if you agree with trichet's view that he's not all that different from draghi. what do you think? >> well, he's correct in that he had similar policies. of course his problem was that he didn't attack sufficient conditionality to it, so he went in and bailed out the italian bond market and berlusconi immediately backtracked on all the austerity measures he said he was going to put through. and that's really the main
concern. we're worried about an lgt. the crisis solution is moving from the central banks across to the politicians. the main benefit of all of these policies is to buy time. and up to today the politicians have nearly wasted that time. we haven't seen any long term solutions coming through. so this is the main concern. if the politicians are going to get their act together, what we've seen in the past is that they've been unable to do that. they're staggering towards a third bailout because they can't agree on what measures should be taken and now we're at the stage if it doesn't happen, it means they don't get the aid. we also have the problem that everyone is against monetizing the debt. that includes getting a banking licenses to the esm and if you see the amount of money that already has been poured in to greece, if xu trap late those numbers over to spain let alone italy, the esm and the esfs combined is woefully short of the type of money that we're going to need. so there is still an awful lot of longer term concerns out
there. and while the move from draghi has been very beneficial in the short term, there are a lot of worries. >> all right. simon, stick around. also still to come on today's program, we'll be out in cypress where europe's finance ministers reportedly planning to push to take a full -- >> we should go out to cypress.
striking miners in south africa has rejected a pay offer that would put an end to the five week strike. details were not disclosed by management, but workers said it was well below the 12,500 or $1500 they were demanding. 34 miners were killed in violent clashes with police at the end of august. company trying to work out a debt deal with it creditors following a 40% drop in the stock yesterday. reports the world's fourth biggest iron ore miner had asked for waivers on some of its loan conditions. also chatter that it's negotiate to go sell part of its stake to ease its debt burden. simon, we now have some more qe
from the fed and a bounce back in commodity prices. what do you do with commodities? certainly they've been under pressure about the concern of the growth recession in china. >> i think there's very much a mix. if you look it at the commodities like precious metals, we're overweight gold for quite some time and we're happy to keep that. we think the growth outlook somewhat challenging and even with qe-3, we don't think there is a great deal of up side. people worried about inflation, inflationary bonds we think is a better hedge, but precious metals for sure look like they're poised to keep pushing higher. >> central banks doing more to
keep global growth prospects, how you do you fight the fed at will this juncture? it seems like it would be consistently a losing strategy. >> i agree. you don't need to fight the fed. at lgt, we'll pretty much stick with what's been working for us most of this year, and that means overweight u.s. equities in particular and stick with the quality companies that have rising dividends, like technology and health care. so you can still be involved in the rally, but we still like to stay a little bit more on the defensive side. in the u.s., we also like high yield bonds. the corporate bond market in general will do well. it's good enough for credit and as long as the central bank will keep interest rates nailed to the floor, that'ses also a very good environment for corporate credit. >> how much risk now -- the central bank's pretty much flat. we'll see if we get anything from the pboc. but the burden now rests with politicians. how much of a risk is that
bearing in mind the rallies in global equities we've had in the last few weeks? >> it's a very severe risk. long term prognosis isn't perhaps as good. trichet he was confident. we're not particularly confident at all. the u.s. congress is the most quided it's a ever been and it seems many of them are prepared to go over the cliff just so they can blame the other side. so we think there are significant headwinds to growth in the u.s. in 2013 and we have to watch that very carefully. we need to see who will win the election and what they'll do about it and politicians have constantly let us down and that's a significant concern. so for the moment, the qe-3 rally is likely to continue. but we've seen that these rallies don't tend to last and we'll be very cautious and careful and make sure as i said we stick at the quality end of the market. >> okay. simon, good to see you today. thanks for joining us. i believe it's now tiger time in singapore. >> it always is.
>> very important time. it's a beer. stick around, grab a tiger programs, because still to come, we hear noted mark fabe irc fab thoughts on the fed. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race.
if you're just tuning in, i'm kelly evans. >> and ross westgate. >> markets get the bernanke bounce. risk assets rally across the globe. >> fed goes all in on qe-3 to spur hiring and give a jolt to the economy. >> committee has become convinced that further policy accommodation is warranted to strengthen the recovery and support the gains we've begun to see in housing and other sectors. >> and in a broadcast exclusive with cnbc, former ecb president jean claude trichet says the central bank's plan to save the
eurozone should be subjected to conditions. >> it has to meet requirements and conditions including of course to be commensurate to the disruption of market, you have to cope with, and to be accompanied by appropriate messages for the private sector as well as for the public sector. we're into the second hour of "worldwide exchange." it's really all about reaction to the fed today for global markets. >> markets off to a galloping start as people debate whether the fed will actually do anything to boost growth prospects. nevertheless, the stock market sending a clear signal across the world. >> just remind you exactly what they're doing. if you've been stuck in a closet for the last 12 hours or so.
>> tfed is launching qe-3 worrid the economy isn't gng f enough. they'll buy $40 billion in mortgage backed securities each month until it sees a sustained upturn in the job market. extending its pledge to keep rates at historic lows until mid 2015 and will keep its monetary policy in place for a considerable time even after the economy gets stronger. >> this is a main street policy because what we're about here is trying to get jobs going. trying to create more employment. we're trying to meet our maximum employment, so that's the objective. >> the fed's new policy isn't a cure all, he says congress and the white house must address the so-called fiscal cliff, potential tax hikes and spending cuts that is that would trigger automatically in january if there's not an agreement to deal with the deficit. nevertheless, look at what's happening across markets. take a quick look first. reminder what we saw in the u.s. yesterday. the dow jones industrial average closing at four or five year
highs. 13,487, just 4% blow its all time high in nominal terms. poisesed to add to that nevertheless today by another 30 points or so. s&p and nasdaq also edging higher. russell 2,000 yesterday posted its fifth highest closing high ever. all of this on incredibly high volume, as well. let's take a quick look at european markets. it's broadly consistent and again in the green by the rang of 1% to 2% in some cases. ftse up 1.4, cac 40 was up almost 2%, it's come off a little bit. ibex 35 still over that 2%s threshold. european banks are driving a lot of the gains, as well, as you look at anything from the spanish banks, up 2%, over here to credit agricole up closer to 3%. so, ross, it's not a huge move, but nevertheless for a move that frankly puts pressure on banks at least u.s. banks or net
interest margins, we're nevertheless seeing a positive tone. >> and continues since what we've seen midsummer. >> whatever it takes. >> and the fed now doing what they think is whatever it takes, as well. yields on core bonds continuing to rise this morning. ten year 1.2%. peripherals, steady to down. spain 1.567%. but here we go in italy, they continue to fall below 5%%, 4.982. particularly benchmark three and 15 year which haven't been auctioned since july last year. and u.s. yields heading higher, as well. the dollar, while it was weakening into the fed decision, it has continued to weaken. we're up at fresh four month
highs. dollar-yen tracking near the seven month lows at the moment, though people will be slightly wary. commodities are firmer reflected by the aussie dollar and the dollar pound was up, as well. spot gold 1773. the 2012 high we will hit this in february, 1790. so not that far away from matching that high for the year. silver slightly firmer. continuing to put on gains throughout this morning and nymex, as well, back to nearly $100 a barrel. this is going to be key really hear. you take a look at plans from the fed of course to improve the economy, but if that continues to boost oil prices, you've got an automatic choker this. so we'll talk about that.
meanwhile what's happened this asia take, chloe has all the analysis for us out of singapore. >> the fizzling out could happen seern than we thoug sooner than we thought. the defactor central bank warned of the growing risks to asset bubbles. remember we had a rally on the hang seng index, up 582 point, and then boom, there they are, rolled out effective immediately, property tightening measures capping at 30 years. instructing banks to go easy on mortgage lending and the tighter rules will apply on holders with more than one mortgage. rules effective immediately.
so ultimately this could affect the thinks of the pboc, which is why despite the huge rally that we saw in the asia pacific region, the shanghai composite continues to underperform. with dollar-yen sitting below 78, whether they need to ease, that is going to be another thing. remember the japanese government downgraded its economic assessment for the year for the second time running in two months. south korea also make sense as to why the bank of korea didn't move against the dismay and surprise of many. ultimately kept rates on hold. and australia up more than one. india's rbi, whether they'll cut rates. that's a difficult one given hong kong is moving quickly already rolling out mortgage tightening rules and this is going to be the predominant theme here in asia. what to do with huge capital
flowses just when asia was thinking that we have problems sort of under control. >> chloe, thanks for that. >> joining us to walk through the implications of the federal reserve's historic move, marc faber. and a fellow at the roosevelt institute is joinings us from new york. marc, first to you. your reaction to what the fed has done here. >> well, basically they've done what i expected they would do, namely to implement qe-3. but this time it's not just qe-3, but essentially an unlimited qe going forward, with the fed buying essentially mortgage backed securities and continuing the operation twist and the implication is simpdly that asset prices will go up and the money flows down to the main fair economy. it's defined oos an econoas an the well to do people whose
asset prices go up and whose net worth increases, but the money doesn't flow to the man on the street quite on the contrary, the man on the street is faced with higher cost of living as a result of rising energy and food prices and other prices, rental prices going up. and so what you have is a small economy that is booming and the majority of the economy that actually is being damaged by qes. >> mike, do you agree? >> no, i don't. i think it's he been a great thing for main street and everyone else in the economy. this is the first statement we've seen where the fed has stepped on the gas and also crucially took its foot off the brake at the same time. by actually tying qe to the fact that it will be continuous up you until we have a full recovery, it's really expanded the ability of federal reserve policy to tie to specific
events. bernanke himself addressed the issue of whether or not his policy is hurting savers and as you correctly pointed out, a weak economy helps no one. the biggest distributional problem we see ises mass unemployment which hurts main street well and beyond anything else. so up until we get to a point where we do have real employment growth and real growth it that will be what really hurts the economy. >> marc, you're laughing. come back. >> yes, i'm really laughing because the commentator who just spoke about how money printing helps the economy, he would have said exactly the same in 2001 and created the greatest housing bubble in the history of the united states that then led to the crisis. and the money printers and the
knee knee owe keynesian interventionests are responsible for the crisis and that people should really know be and aware of. >> if anything, monetary policy has been too tight since 2007. we see a huge boom in unemployment, tee nationary trend, we see no wage growth. these are all the classic signs of fed policy being too tight. now, of course there are big numbers being thrown around with qe that's not ever been tied to economic growth and to the actual state of the economy. now, i'd ask in turn what you would want the fed to do. i think it's positive that unemployment would go up, at which point you would see real devastation on main street. the fed needs to do something. in the united states it has a dual mandate. price stability and full employment. and it's done neither. and so i'm glad they're finally tying those actions together. >> marc, fair point. what would you do as a policy
maker? >> well, first of all, if i were mr. bernanke, for sure i would resign after having messed up the u.s. as badly as mr. greenspan and mr. bernanke have done over the last 15 years. and mr. bernanke before he was fed chairman, he was one of the principal architects of ultra expansionary monetary policies, never paying any attention to credit growths that led to the housing bubble. and if i had messed up this badly, i would for sure resign. but secondly, if you you really want to have an expansionary mop taker po monetary policy that helps the man on the street, should you do what sheila bair proposed, namely send each household a check for $5 million interest rate free. i would go as far as to say send them each $10 million free as a gift and put it on the balance sheet of the treasury and the
fed and that would boost consumption temporary. don't forget, no countries has ever become rich from consumption. it's capital spending that leads to riches. and i think the mandate of the fed and the hope to boost asset prices to then create wealth is ludicrous. is ludicrous. it doesn't work that way. it boosts spending, that i agree, but the collapse there after is even larger as we have seen following the nasdaq, following the housing bubble. >> mike, there is of course your concern about tighter monetary policy, but also undeniable here that perhaps there has been some erosion of the general middle class. is there something to marc's idea that it would be better to write people checks directly? >> so if you're asking me if monetary policy would be
supplemented by president obama and congress doing another round of fiscal stimulus, absolutely. ben bernanke himself says this in the press conferences. right now in the united states the biggest worry is that they'll do the exact opposite and in six months radically cut back on spending which goes out to businesses and people in terms of the so-called fiscal cliff. so, yeah, absolutely there's still plenty of room for fiscal stimulus. but at the end of the day, if you send out checks to everyone and the fed tighten, it will cancel out that stimulus. the fed is the one ultimately driving the car in term hes of how the recovery will go. so are you correct, if we spent everyone a check for $5,000, you'd see a huge boost. but if the fed immediately tightens, it will be canceled out. so at the end of the day, the fed needs to drive this and i'm glad they're finally starting to drive it towards full employment. >> mike, if more qe weakens the dollar, drives up the cost of energy, gasoline, food, you've
got an actual choker on the growth of the economy, haven't you, so doesn't one cancel the other out? >> well, we need to be careful here. there's obviously more qe -- when you have a balance sheet recession, when you have a deflationary and deleveraging economy like we have, obviously there are certain constraints that we'll have. housing policy is a total mess and that will block certain effective channels on this. that said, to the extent that it can boost spending, boost investme investment, push money off the sidelines into the economy and employ people, that ultimately is what will build wealth because right now wealth has collapsed in the united states, entirely a problem with the housing market collapsing and prolonged period of mass unemployment. >> marc, your final response here. >> my final thoughts are this. you understand if you have very expansionary monetary policies, you actually encourage expansion
of government through the fiscal deficits, the transfer payments. we're not facing a fiscal cliff. we're facing a fiscal grand canyon, never ending deficits, and one day it will be a problem in terms of credit rating and in terms of the fed having to monetize at the time when it may not need to monetize, when inflation will pick up. and my view is simply if we have an economic crisis in the western world, it is because the government is now in most countries 50% of all of the economy. in asia, most economies are growing, but the government is only say 15%, 20% of the economy. so this enlargement of the government spending is basically a cancer that is spreading and taking the freedom of people away. and we more and more regulation,
entrepreneurs won't hire. you prnt money, what it will lead to is mergers and acquisitions and each merger and acquisition leads to redundancy. in other words, people losing their jobs. >> the may fair economy as he's calling it. marc faber is staying with us to share his thoughts for a few more minutes. mike, thank you very much for joining us this morning. fellow at the roosevelt institute up bright and early to have that debate over qe-3. >> good debate. both sides covered there. spanish daily reported back here in europe that madrid will feel some top down pressure as eurozone finance ministers meet today in cypress. joining us from the island is still silvia. we have two issues. one is we'll try to hammer out rules for greater banking supervision on the back of the ecb. the other is how far or near are
we to any kind of assistance for spain? >> that's a difficult question. before we went into this meeting, we all thought that pressure is going to be really on spain to hammer out some kind of bailout program that goes beyond what they have for the banking sector right now. but we've just been talking to some of the spokesmen of the finance ministers and what i hear, i can only say is the vibes i get out of there, there doesn't seem to be an awful lot of pressure. what i heard from the german finance minister, the spaniards are doing everything they can and it's up to them whether they want to ask for a bailout program. so my feeling is the pressure isn't as much as the markets expected. and you quite rightfully said the banking supervision, we have the interim report from the
commission, we've gone into banking supervision, banking union, how far have we gone ahead with what the esm can do or cannot do, the german finance minister pointed out here this morning before he headed into the meeting again saying no appear what and when the esm comes on board, let's not for get the big word conditionality. before we get a direct capitalization of the banks, we need a program and we need a unanimous decision of the and you are row group. so all that seems to be skvery r away. but everybody quite happy today's informal meeting will not come with decisions, just with discussions. >> silvia from cypress, thanks very much for following all of that. still to come on the program, former ecb president jean claude trichet says the eurozone must make painful adjustments. >> we cannot ask the rest of
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markets get the bernanke bounce. risky assets are rallying. >> this after the fed goes all in on qe-3 betting on an open-ended program to buy billions in mortgage backed securities. >> tree he shay tells cnbc the central bank's program to save the euro should be subject to conditions. >> good morning to you state side in particular. here is your action across commodities right now to the fed's announcements last night. brent up nearly a buck 50.
nymex just shy of 100 a barrel. spot gold not far away from the 2012 high as well as 1790. silver also slightly firmer. not big moves. >> even as the ecb is denying it's in negotiations on a spanish bailout that was reported earlier in a dutch newspaper. so despite the eurozone political milk up and running this morning, what the fed is doing is keeping a bid in the market and marc faber managing director of the gloom and doom report is still with us. we're talking about gold, looking at the price there. how much further do you think it can run and do you expect that this is the start of a pronounced move? >> i need clarify one point. i criticized very strongly the fed before and on previous occasions. but, look, i benefit from money printing. i have assets.
i have equities. i have corporate bonds. i have gold. please print as much money as you can as a private investor. but at the same time, i have a social responsibility and i can tell you that this monetary policy is going to lead to a complete disaster. moreover, i have some very good news for your listeners. the most powerful people throughout history whether they were kings, high priests, religious leaders, emperors, queens, generals, all eventually were poisoned or died in battle or through the guillotine or september sent in exile. who are the most powerful today? not government officials. the central bankers. so you know what will happen to them one day. that is the good new. and concerning about gold, yes, i think with more and more qe globally, the price will trend
higher. i don't know how far it will go. for this we need to call benny and he will tell us how big the monetization will be. we need to call the ecb, they will tell us how much monetization there will be. but there will be plenty more. that, i assure you. >> marc, in your latest notes you are actually a little cautious on gold saying despite some calling for this to be the big move upward and despite the longer term fundamental, are you somewhat cautious and same thing with equities. >> yes, i think we are in a period where everybody agrees money printing leads to higher asset prices. and everybody thinks the same way. makes me a bit cautious. and concerning gold, i'd like to see a correction now to around
1700, 1650, and then the price should hold there. and there that would make me more positive. but as i also explained again and again and again, i will never sell my gold as long as we have people like bernanke at the fed and fiscal deficits as far as the eye can see and people in government irrespective whether it's going to be mitt romney or mr. obama who will have very large deficits that will not address the deficit issue. >> marc, at the same time, we're worried about growth recession in china, we may get more policy initiatives from them over the weekend. china's been a big underperformer over the last three years. shanghai was down at sort of three year lows. what happens to emerging markets now? >> yes, that is a very good question.
because if you look at how markets have moved over the last 18 months, from the lows in 2009, the u.s. has doubled, the u.s. has outperformed just about anything else over the last 12 to 18 months. and relatively speaking, and that's why i wrote four months ago i started to buy stocks in spain, portugal, italy, france, because they were at the 2009 lows or lower. china, the asset allocate tors will look at china recently investor surveys that said that china is the most unpopular market for the next 12 months. i think we can easily get the rebound of 10%, 20%. i'm not interested in chinese stocks, but you can play china through buying hong kong shares and i don't think hong kong shares are terribly expensive in the context of zero interest rates and in the context of money printing.
>> marc faber, thank you for joining us and for looking out for the little guy. as he said, as far as he's concerned, he's part of the may fair economy that benefits. >> great for investors, not great for the man on the street. that's marc faber's view. still to come, we have the latest on the increasing anti-american protests in the middle east. plus more from that exclusive interview that measure shael has c michelle has conducted with trichet. >> and poised to add to yesterday's gains.
welcome back. i'm kelly evans. >> and i'm ross westgate. >> markets get the bernanke bounce. riskies assets rally. shares in europe hitting a 14 month high led by basic resources. >> this after the fed goes all in on qe-3 betting on an open ended program to buy billions in mortgage backed securities and will spur hiring as well as give a jolt to the economy. >> the committee has become convinced that further policy accommodation is warranted to strengthen the recovery and support the gains we've begun to see in housing and other sect s sectors. >> in a broadcast exclusive, former ecb president trichet says central bank's plan to save the eurozone should be subject
to conditions. >> it has to meet requirements and conditions including of course to be commensurate to the disruption of market of to cope with and be accompanied with appropriate messageses for the private sector as well as for the public sector. >> we're looking to add to yesterday's gains. the russell 2,000 for small caps closing at its fifth highest level ever. ire pea an markets mentioned, 14 month highs there led by strength. and european bank, ibex 35
benefiting 2.6% to the up side. the crack 40 just kissing that 4% level. >> dollar index down four month lows.ack 40 just kissing that 4% level. >> dollar index down four month lows. 40 just kissing that 4% level. >> dollar index down four month lows. mooen while row tests continued overnight with as many as 40 people wounded. this is according to state television. anti-islamic video made in california has reignited anti-american sentiment and sparked a wave of protests across the region. in libya christopher stevens and three of his staff were killed in an attack on wednesday. the newly elected government has announced four arrests have been made over the deaths. we'll continue to of course get
reaction. oil was starting to rise a little bit. in reaction of course more to the federal reserve to push brent over 117, nymex over up nearly $100 a barrel. thanks for joining us. what do you make of this latest bout of violence, how serious an escalation might it become? >> i think there are a couple ways to think about it. first of all, it's reminiscent of the controversy around the danish cartoons. and those certainly spread to many countries around the muslim world. there was problem of course in terms of loss of life, there were many people killed, and it was difficult for companies with danish branding. but it wasn't a game changer. what it does underscore is the simmering anti-western tension that can be easily triggered by a catalyst such as this.
so i think it's within that kind of theme. >> so not a destabilizing factor. i wonder if 2012 is different enough, if there are enough simmering tensions, enough things just under the surface that could be triggered, you know, whether it's by this movie or the danish or what have you it if we're not more vulnerable this time around. >> now we're in the arab spring environment and certainly that's different. so itvents a challenge. we have libyan president following rule by gadhafi. in libya, 30 years of mubarak. so these leaders are now with a complicated balancing act of addressing their gles it tick constituencies and relations with washington. so it is a much more complicated phenomenon and it will require these leaders to really have a robust response. >> it's interesting you talk about relations with washington. you believe president obama will
get reelected, which is interesting, explain that, and then explain what that means then for relationships back into the middle east. >> sure. well, in terms of our call for a second term for obama, we think that when you look at the polls, the statistic significance of 400 polls giving you the same result is greater than a few. his lead is narrow, buts eye consistent. secondly, events have put the he momentum behind the president. we see evidence of a modest convention bounce. let's see if it holds up another week or so. and the fact is that in terms of the u.s. economy and we say it's not just the economy, stupid, the lows for the u.s. economy were in 2009. so in that sense, although growth is sluggish, we're on an upward trend. and of course the incumbent has an advantage. and to dislodge him, you need a challenger with significant momentum. >> and the implication that that
would hold for the mideast region. again, front page reports about what the relationship is between barack obama and netanyahu and the potential for that, whether it's that part of the mideast or some of the other areas where we're seeing violence to just complicate efforts to keep a lid and keep things stable across the region. >> when you have autocratic regimes in power, it's a lot easier to maintain stability of a sort. but what we see is when you have a change in leadership, all the forces are unleashed making things more complicated in a pre-election period is this new shift in the relationship between israel and the u.s. >> very briefly, if obama retains the white house, republicans retain congress, what are the implications for the fiscal cliff? >> we think there is some possibility of a temporary fall over the cliff. not because u.s. policymakers don't understand the implications to the u.s. economy. they are great. but you because it's possible that a new piece of legislation in the new year, in the new term, could be more appealing
for both sides to vote on. >> your biggest worry spot on the globe right now? >> the eurozone i think remains the most destabilizing to market. we had good news in terms of headline risk this week with the german decision on the esm. and dutch elections. but there's still plenty of instability to come and i think draghi's actions put the onus now firmly upon the peripheral country leadership. >> and on that point, it's interesting to note the german parliament is preparing to invite mario draghi to address t the budget committee. that shows you sort of the political tension. t t tina, thanks so much for that. and coming up next, trichet says the eurozone must make painful adjustments. >> we cannot ask the rest of the
in on qe. >> marc faber tells cnbc that the fed is doing nothing for the man on the street. >> and trichet tells cnbc the central bank's program to save the euro should be subject to conditions. >> while we're looking reaction to the fed announcements, still keeping an eye on the euro. draghi apparently going to be invited to address the german parliament on the eurozone bond buying plan, will according to a senior mp from the german parliament. they want him to address as well the budget committee. that's what draghi might be up to. we'll see whether he accepts it or not. meanwhile trichet says the central bank's plan should be subject to conditions.
it's part of an exclusive interview have our very own michelle caruso-cabrera. this time last year when i saw trichet in italy, he looked pretty tired and worn out. do you think he's recovered somewhat sense he stepped down? >> incredibly relaked. understandably he doesn't have one of the toughest jobs in the world in the notice pr. you can seat huge crowd behind me. trichet just finished addressing them. let me give you some of the headlines. very supportive of the program announced by draghi last week. he doesn't think the program is revolutionary. he said we bought securities, government securities in unlimited amounts twice under my leadership. what's different this time now is that there will be a plan
hand-in-hand with the government so they have to commit to, so more conditionality. but he's very supportive of the program and he he says that it meets the requirements of the situation at hand. he also said another key headline in the future holders of senior bank debt should absolutely take losses. they have not done so in the past. but when the new regime is in place in europe, bank holder, debt holders should not assume that they are going to be pain free like they have been in the past. and i also asked him about greek debt. i still speak with a lot of greek creditors who are angry that they took a loss while the ecb did not take a loss on the debt that they own under trichet. in fact draghi said last week in the future the ecb will be qualm with all these debt holders. so that's a big change. so i asked trichet if debt holders had the right to be angry, and he said, no, they absolutely do not. >> no, i don't think so because had the ecb not been there any
any case, they would have lost much, much more. there is absolutely no doubt on that. so i think that in terms of the is it father or not, there is absolutely no doubt. on the other hand, the ecb has the taxpayers money and has to be very, very keen on defending the interest of the taxpayer. so i will not embark on this. >> but the spirit of the question is there was a contract, they understood the contract and they see it very much as a violation of the rule of law. >> i don't think it is the case. >> in terms of the conditionality that should be imposed on the new omt program, he wouldn't answer that question. he said that's not for the ecb to decide, that's for the european union to decide. we'll have a lot more coming up on u.s. "squawk box." back to you. >> and don't want to miss that. michelle, great to see you. thank you so much for that. as michelle says, that will be on air all day today.
>> and i want to quickly bring you this news, german government spokesman saying the government is further talks with kfw's part pi participation in aeds. one of the biggest deals to happen.art participation in aeds. one of the biggest deals to happen.rt participation in aeds. one of the biggest deals to happen.t participation in aeds. one of the biggest deals to happen. participation in aeds. one of the biggest deals to happen. >> it just a ploy for aeds just to get the german and french governments off their backs. >> and if so, they're stim retaining this golden share provision it sounds like from the early reports. >> it would be different from actually being able to excerpt board room control. >> absolutely. that's the new ceo's goal. >> because it's prevented them from getting contracts in the united states. still to come, goldman sachs is overhauling its training program. several looking to jump ship. we'll delve further into what this means with liz rappaport.
at bank of america, we're continuing to lend and invest in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone. bob...
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goldman sachs is ending its two year program with college students. it came after gold man fired a number of analysts over the past year for signing on to work at other firms in violation of their contracts. joining us now by phone from new york, liz rappaport from the "wall street journal." thanks so much for getting up to join us. you can explain, is this a move specifically what's happening at gold man or more broadly the financial haveindustry? >> i think both, yes. i think it suggests that at goldman, this program had become something that was a little bit
abused by the people that were entering it, people were coming in and getting paid, you know, kind of pretty solid amounts and they had a lot of job security. and in the meantime, they were looking for other jobs. i think that it shows for the competition for the best talent out of college is really stiff and broadly on wall street, i think that it just reflects kind of another cultural shift where this was a main stay thing, kind of became the gold standard in the '80s and the early '90s for people who wanted to go into banking. and move up the ladder. it was kind of the plumb job. >> and it's so interesting now because goldman's having some difficulty retaining people a, but that almost is a different sense than what you might expect from a lot of these firms who if anything are faced with an influx of people looking for work and perhaps looking -- willing to take lower pay than they might have in the past. >> definitely. there are two sides to the coin
for sure. they are definitely hiring a lot of people and if they're giving out jobs, that's a positive for the economy when so many people are not and they're very desirable. however, i think that my reporting has shown that over the last couple of decades, bank -- i talked to many business school graduates and they have said for a long time that there was a shift away from wall street as the most desirable job out of business school. they were moving in to things like hedge funds, they became really, really lucrative jobs and private equity, as well. this analyst program gave the sbrants a lot of job security, guaranteed you a two year job which certainly in this economy is something that people wanted. and taking that away points to that, as welsh points to sort of an effort by goldman to be able to have more options of its own in terms of not having people in
some stricter contracts. >> and quickly, what do you think the imarket response will be? >> i think the market response, you mean the stock price? >> broadly perceived in line with what goldman needs to do to position itself better going forward? >> yes, i do think so. i think the program was getting abused and that's the primary reason for undoing it and making people come in there and think, look, this is my job, i'm going for it, this is not a secondary training program for me to put on my resume and show to head hunters. >> liz rappaport from the "wall street journal" walking us through that. thank you so much for calling in this morning. let's take a quick look at what else is on the agenda today in the u.s. august retail sales out at 8:30 a.m., and also the august cpi report. 9:15 a.m., august industrial production figures. just before 10:00, final report on august consumer sentiment.
and we'll see if any of that can dislodge the rally we've seen across the globe. 1.5% for the ftse and xetra dax, almost 3% now on the ibex 35. >> and it's commodity sector doing the best today and that's reflected in the commodity prices. my next $100 a barrel, present up nearly $2. gold 1773. 1790 the high this year. and earlier on the show, marc faber from gloom, boom and doom report gave us his verdict on qe-3. >> the money doesn't flow to the man on the street. quite on the condition traer, t contrary, the man on the street is faced with higher cost of living as a result of rising energy and food prices and other prices, rental prices going up. so what you have is a small economy that is booming and the
today's top stories, investors put on the rally caps as wall street embraces the fed's aggressive promises to ease policy. yes, there is still a world of worry, but mario draghi says europe is already seeing positive results from the ecb's bond buying announcement. and in corporate news, apple is now officially accepting orders for the iphone 5. it's friday, september 14th, 2012. "squawk box" begins right now. >> good morning and welcome to