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tv   Bloomberg Best  Bloomberg  June 15, 2018 10:00pm-11:00pm EDT

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>> coming up on bloomberg best, the stories that shaped the week in business around the world. distort handshakes and warm words as trump and kim met in singapore. our good vibrations a step toward real results? thehey can't ignore elephant in the room, denuclearization. >> on the question side, will kim honor the agreement? >> 400 words that don't spell out how denuclearization takes place. >> a path for immediate megamerger. companynese tech struggles to cope with penalties , security worries rise. >> they call it a cyber
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intrusion. >> plus, 1-2 punch for investors as central banks issue rate decisions. >> a lot of signals sent by the fed. are trying to give as clear a signal to the market as they can. onthis is all straight ahead "bloomberg best." welcome. ," your "bloomberg best review of important business news, analysis, and interviews from around the world. the week began with donald trump kim jong-un heading to singapore for the face-to-face summit, but monday, there was still tension in the air from the g7 meeting over the weekend. mights year's g7 summit
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not have a unanimous communique after all. justin trudeau said at the summit's closing press briefing that his nation was insulted by u.s. tariffs. meanwhile, president trump en slammed singapore trudeau and other g-7 nations, saying the u.s. would not sign the communique. how are we to interpret this aggravated tweets coming left, right, and center? >> it did seem hard to believe. calledthe summit, trump justin trudeau indignant and lashed out at his allies. i was at the meeting and we were preparing for a lot of fireworks. then it turned out that trump seemed to get along with people. didn't think we there would be a communique at all and by saturday, we heard there would be and of course, there was. justin trudeau said it shows we
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can deliver when people thought we couldn't. it was quite shocking when we got the tweet minutes later from trump saying "this is an insult to us." of things,d scheme not agreeing on a communicate does not change the world, but it will be very hard for the leaders of the major countries to trust that trump will commit to what he said he would. rishaad: trump meeting kim. that summit and the potential for progress, which could ease some of the biggest sources for geopolitical tensions over the years. >> they shook hands, took photos, smiled. the issues, the details. will the agreement be good enough for both sides to sign this joint declaration? >> they can't ignore the elephant in the room, and that
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is denuclearization because that is the strong point that the united states is insisting on and it really is linked to what the north koreans want. it all comes back to the big d word, denuclearization and the timetable kim jong-un can offer. matt: president trump and kim has-un have signed what been described as a very important document, following a historic one-on-one meeting and working lunch between the two leaders. is complete denuclearization of north korea and it will be verified. we signed a very comprehensive document and i believe he is going to live up to that. hasresident trump said he been able to assure a long-term commitment from the north korea to denuclearize. exercises might be suspended. theresident trump said summit has exceeded expectations and there have been words from a current meant -- encouragement
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from south korean president moon , saying president trump has achieved a feet no one else has delivered. president trump called this agreement a comprehensive agreement, but really, it is 400 words that don't really spell out any kind of deadlines or 10 -- timetables for how denuclearization takes place or the next steps. at&t shares are slipping in late trade after a judge cleared of timeion takeover warner without conditions. at&t says the deal will fuel its evolution into a media powerhouse that can go head-to-head with the likes of netflix and amazon. stunning victory for at&t. it is kind of embarrassing for the government, if you look at it. the government staked its case on the deal, it said, would raise prices for paid tv subscribers. the judge today absolutely
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dismissed that and said the government's case was gossamer thin. >> they knew they took a risk when they brought it, but this was a new head of the antitrust division. this was something he felt strongly about and he wanted to take that risk. loss in a big case and is something that shapes antitrust laws going forward. >> the fed is picking up the pace of tightening this year and in a clearly telegraphed move and signaling four rate hikes for the end of 2018. >> we have a solid economy on our hands, and we are trying to conduct monetary policy in a way that will sustain that expansion, keep the labor market strong and keep inflation above -- right at 2%. >> i think what powell was trying to convey is the idea
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that yes, we are recalibrating monetary policy. it is not new news. we have been doing that since we were lifting off from zero years ago and we are not doing this in the expectation of halting this economic expansion, just keeping pace with it. >> a lot of signals sent by the fed, not so much noise this time around. the most important thing in the news conference was they are going to do news conferences after every meeting in january. that will change thinking on trading desks, because you won't have off meetings where you don't think anything will happen. comcast has made an offer to acquire much of 21st century fox, topping a previous proposal by disney and setting up a bidding war for rupert murdoch's media empire. what are the key terms of the offer? $65 billion is the headline figure, compared to 52.5 that disney had offered. -- key thinging=
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is they are matching a offer disney had made. if it gets blocked by regulators, disney said it would pay. comcast said it would match that and reimburse disney $1.5 billion that fox would need to pay disney for breaking up this deal. the other thing, they have given some guarantees on regulatory rupert to reinsurer murdoch and fox shareholders that their deal can get through the regulatory process. divesting u.s.ut assets, their regional sports network, and possibly their interest in hulu, as well. >> the central bank is ending its bond buying program. in a press conference, mario ecb would wind down the decade-long program by december. the ecb will hold interest rates unchanged through the summer of 2019.
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this is probably the most transparent central banking we have ever seen. is it good for the european economy and financial system to be this transparent? >> they are trying to give every signal to the market they can. they are trying to tell them what they are going to do and how they might react if things go wrong. for now, they assess that the economy is doing well. allow them toably raise rates sometime in the second half of 2019, but at the same time, they have clearly said uncertainty is growing from geopolitics to trade. we know what is going on in the u.s., italy, and all that and this means they want to keep their options open to change their program if needed. lefte bank of japan monetary policy unchanged and lowered its inflation assessment at today's meeting after raising in january. governor kuroda she's core
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prices in a range of 0.5% to 1% down from 1% previously. that pushes japan behind its global peers when the fed raise rates while the ecb plotted the end of bond buying. >> i think it is more of the same from the boj carried they have cut their inflation outlook a bunch of times, one more won't change things a lot. they will keep the 10 year yield at zero, but this highlights the contrast with the fed. the fed said they would do more, the ecb said they would stop their bond purchases this year, so for a country -- a central bank that is raising interest rates as in the u.s., the currency rates should rise and the dollar is rising a whole bunch. for japan, where they have monetary easing and for as long iswe can see, the currency falling and this announcement today will put more downward pressure on the yen. the u.s. is slapping tariffs
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on $50 billion of chinese imports. china, planning to announce retaliatory measures. >> trump's terrace plan will implement more than $50 billion worth of tariffs on 1300 products. the president said those products to be finalized, despite pushback on capitol hill. meanwhile, $100 billion more in the pipeline. >> he is imposing tariffs on 818 items in china. 284 items newher to the list. they will have to go through public comment, that would add another 16. you get a total of $50 billion. most of these are intermediate goods, inputs and to other manufactured product. it is kind of a global product -- problem for everyone and we haven't heard from the chinese yet. they say they will retaliate in kind, putting more companies on notice because they will be targeting specific u.s. made products. >> china's finance ministry has
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made this statement following the announcement of tariffs. the u.s. measures violated the relevant rules of the wto and it is contrary to the consensus reached in the sino u.s. negotiations. it seriously violates our legitimate rights and interests and threatens the interest of our country and people. >> chinese released their list saying we have $34 billion ready to be on hand july 6. we are still translating the list, but what we have seen so far is a lot of it is agriculture. pork is on their. the -- there. the pork producers have been concerned about retaliation for a while. automobiles are on there. the chinese list is very targeted in terms of where to hit and where to hurt the u.s. still ahead as we review the week on "bloomberg best," david rubenstein is , saying theous
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booming business cycle in the u.s. can't go on forever. >> at some point, we will have a slowdown. i just don't know when it will be. rishaad: this is bloomberg. ♪
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rishaad: you are back with "bloomberg best." let's continue our global tour of the top business stories. in britain, where theresa may faced a vote in parliament on the future of her brexit plans. theresa may has escaped the brexit build a feat after promising concessions to rebels in her party. she has reassured wrote eu members of conservative party that she hears their concerns over the possibility of leaving without a deal, but the balance could be tough to strike as the clock ticks. what concessions has she made or
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has she said "trust me?" >> we're used to last-minute compromises, it is a tendency huge speak to. we are getting different accounts of what was offered for the pro-eu tory rebels, but the -- in the end, theresa may brought the 15 rebels into her office. they say she committed to giving them a new amendment, which will go back into the bill before it goes next week, that will give the commons a veto over know bill. in way of pulling britain back from the brink, what they say is the worst outcome. the brexit department last night put out a strong statement ripping that up. he said nothing like that was offered. we just agreed to keep talking. i'm carol massar theresa may is done -- >> theresa may done is compromising with tories. apart.l fell
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ground,s holding their gambling the rebels will extend. is made confident she has rebels on their side? she says she will get this -- through this potential stumbling block. >> according to our reporting, the government thinks it has the numbers to avoid rebellion next week, but we shall see. it will be a knife edge vote. -- countingcanting on your own side and the other side. we will have monday and then the knife edge vote on wednesday. bitcoin sells the most in three months after a hack on a south korean crypto exchange. this year alone, the virtual currency has slumped more than 50%, four times its rivals. >> they have called it a cyber intrusion on their system. the latest we can tell you is
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70% of the cryptocurrencies they had under their umbrella is in a cold wallet, which is taken off server so the internet can't access them anymore. the tokens0% were affected and of that, about two thirds were frozen. that leaves about 10% that is unaccounted for and as far as we can tell, the tokens that were stolen. in terms of dollar value, we don't have a specific figure yet. we also don't have details on how the attacks were done, who perpetrated, who the victims were. the company says they are quad with authorities to get to the bottom of this. china's factory inflation rose faster than expected in may on rising prices for commodities, including oil as well as metals. does this mean chinese out of the woods in terms of concerns for growth? china willt half of
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be outperforming. at least the official target of reboundome gdp, the ppi is a good sign. we know china went through four and a half years of deflation, starting from 2016 and the ppi helped revive the economic momentum. we have had concern whether there would be a drop of ppi, but the number released over the weekend is very welcoming. basically, we think the piece -- ppi will be 4%. >> china's central bank has held off from immediately raising borrowing costs following the fed hike. the pboc decision came as economic data came in worse than expected. the world's second-largest economy showed signs of losing unexpectedy with an slowdown in factory output and lackluster retail sales and investment. was a surprise.
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they could still move. they don't have to move the morning of the fed, but that aside, there is a view we had a soft numbers out of china, indicating some moderation is going on. at the same time, the pboc governor speaking to shanghai, making pointed remarks for the need for financing smaller to medium-size companies. the pboc could yet move, but perhaps the broader focus is not on overextending or over tightening too much and making center -- sure there is enough juice flowing through the wider economy. russian president vladimir are discussingn a game plan for next week's opec meeting. the oil minister expressing optimism that oil production will be reached. he said they will come to an agreement that satisfies, most importantly, the market. i think he will be a reasonable
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and moderate agreement but nothing outlandish. >> they will raise production, but by how much? my guess is, it is about one theyon barrels a day increase because they will try to offset declines from venezuela. there at a crucial tipping point, because demand distraction could take place and they know that. they need to balance things, and they realize opec is once again relevant in the oil market. they'll want to play this very carefully. >> argentina has named a new central bank chief after the surprise resignation of its chief. his argentina running out of options? >> it looks that way, doesn't it? they have done pretty much everything they can in this current phase of the peso weakness. they have a $15 billion standby loan from the imf, they raised
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interest rates substantially a couple of weeks ago to 40% in one 600 basis point move. now they are having a head change at the central bank, someone who had suffered a little on the popularity front in terms of credibility from investors, as well. >> former trump campaign chairman paul manafort sent to jail by a judge. mr. manafort has been accused of many things, including money laundering, but he is going to jail today because of something else. severaln the last weeks, paul manafort was accused of witness tampering and that is why he is going behind bars today. that cool -- court report, coming in the last hour. this is the most monumental development so far and the most notable fate of someone close to president trump's political orbit. now going to be sitting in a jail sale. we can't understate that enough. ♪
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rishaad: you are watching "bloomberg best." david rubenstein is coexecutive chairman of the carlyle group. he also hosts the show "peer-to-peer" on bloomberg television, which launched its fourth season this week with apple executive tim cook his special guest. bloomberg surveillance and shared his thoughts on the u.s. economy. he is uneasy about the rising level of government debt. running a $900 billion deficit probably this year. next year, probably $1.2 trillion. we could see $2 trillion annual deficits if we don't get the growth rates the government is projecting. $20 trillion deficit now and
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more in a decade. that is something the federal reserve has to worry about. right now, i don't think the wall street traders and bond people are as concerned about it as they wl be in a year or six months. you never know when these things will come back to haunt you but right now, it is something to watch. >> on the economic point of view, are we underestimating the strength of the u.s. economy? andou look at economists forecasts, what are they getting wrong today? david: i'm not sure they are getting anything wrong. it is hard to know but this is the situation. we are growing at close to 3%, which is pretty good for an economy of our side. the biggest concerns with the deficit and debt and how long can we continue this? we are about 109 months into a growth cycle. we have only had one growth cycle longer than this. at some point, this will slow down. what causes it to slow down? is it trade barriers and tariffs wars, the growing concern about
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the deficit or debt? is not likely to be subprime mortgage -- mortgages like before, but whatever causes the next recession, it is something we can see now, we just know -- don't know which thing is likely to cause it. aba geopolitical factor. at some point, we will have a slowdown. the head of the council of economic advisers said if something can't go on forever, it won't. this growth cycle has been terrific. i hope it will stay another year or two at least. i think the recession has been pushed back because of the favorable economy and tax cut bill, at least for a year if not longer. rishaad: coming up, more of the week's top company news and conversations on two hot topics. the u.s.-north korea summit in singapore and policy moves by the world's most important central banks. >> they are taking the opportunity to normalize interest rates and i have to
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say, personally, that is something i welcome a lot. rishaad: this is bloomberg. ♪ what's a gig of data?
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♪ >> welcome back. there were plenty of promising optics at the u.s.-north korea summit in singapore, although few details were resolved, and the negotiations still remain. we spoke with several experts on geopolitics and global diplomacy about what the summit achieved, and what lies ahead. i think people are overanalyzing this. we have a framework now for discussions. the one, i think, significant benefit we have that no one is talking about is a reduction in tension. i haven't heard president trump mentione fire in theory.
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-- fire and fury. and i haven't heard the north koreans talking about turning seoul and washington to a sea of fire. we have had a significant reduction in tension. nobody is talking about the brink of war. i haven't had anybody saying that they were saying it a few months ago. this is just the beginning. the devil is in the details, no question. he will know when we get the north koreans to the negotiating table how we move forward. there's a lot of heavy lifting to be done, and i think mike pompeo will have a significant amount of work to do. like i said, this is just the start of a very long journey. there will be potholes and speed bumps along the way, but i think it is fair we should test north korea's diplomatic intentions and see if we can come up with something that will advance american interestss in the region. >> when you boil it down, what did the u.s. or its allies get,
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with the suspension of u.s. r. ok. military drills? this is something that caught south korea and it government off guard. >> that was a surprise to me, too. i think most experts felt that we should not trade our legitimate exercises with an ally for commitments from the north koreans. we think they shouldn't do that. i was surprised that that. i think it is a mistake to make such a move without consultation, without allies. you will have to see how that works out. term,esident uses a vague war games, i don't know whether he means all military exercises, all joint exercises, or just certain exercises that improve the movement of a great deal of equipment. this is something that needs to be worked out and certainly
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requires consultation with south korea and japan. went off tot pompeo consult with our allies immediately after the meeting in singapore. side, let's give president trump and kim credit for meeting and for having a collaborative session. the atmosphere was very good. on the question mark side is will kim actually perform as he indicates and move toward denuclearization. on the negative side for the u.s., is if there are moves to take u.s. troops off the peninsula or cancel military exercises absent similar and equivalent moves from north korea, that's a loss for u.s. allies. >> how about the other, peripheral parties in this, watching from afar? did china get a good victory here? >> i think china would say
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anything that reduces u.s. military presence in the region is good news. stepecondly, any that reduces confidence -- if it surprises south korea, if there wasn't a consensus, then we gave a good friend a shock, and that is good news for china as well. ♪ course, is theof south korean relationship. i think we have to be very careful not to create a situation where south korea thinks we were taking them for granted. a lot of people have pointed out that the south korean president is very concerned that the show goes on. this is something he pushed for. but he is equally concerned about showing to the south korean public that he can manage the u.s. relationship. there's a major disconnect like this, and that's not going to help him. so i think it is appropriate
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that secretary pompeo go to south korea first. there are also big issues for the japanese, who have some real concerns about the fact that there's nothing in the agreement about missiles. and finally, if this is ever addressed, and if we really get traction with north korea, and we look back and say how do we do this, i think china will be part of that picture. i think that is also something the administration has had trouble getting their minds around. and centralanks bankers were another focus of attention this week, with policy decisions coming from the federal reserve, the ecb, and the bank of japan. here's some of what distinguished guests on bloomberg television had to say about developments in monetary policy. >> i want to get your initial reaction, not so much to the 25 basis point hike, because that was expected, but the hawkish
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tilts from the fomc and the expectation that there might be four hikes total through the end of the year. >> right. well, when you read the statement, the language, especially in the first paragraph where they describe the economic outlook for the next three years or so, lots more hawkish wording. but what was striking to me was when you go to the numbers, the projections that the various fomc participants provided, really not much changed at all from the last time they did a dot plot back in march. it's not much. it's true that the sequence of dots for the current year, 2018, now suggests that there are four rather than three, but that is just the movement of one dot. when you look forward at the projections, their projection for gdp growth really peaks in
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2018, then there is a deceleration in 2019 and a further deceleration in 2020. the unemployment rate comes down a little more, so that's a little more robust. but the inflation rate is flat throughout this period. really, not much changed in the numbers themselves. so yeah, it is a somewhat more hawkish tone overall, but is specially when you look at the numbers, it's not a hugely hawkish position, in my view. >> let us talk about the institution we observed yesterday, the central bank of the united states. boy, are they trying to get out front of the data and game and guess. within your years of research, can any central bank do that? unusual i think what's -- it's difficult to look back
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to the past and to find a clear model of this. i think that they are taking the opportunity to normalize interest rates, and i have to say personally, that is something i welcome a lot. we have missed a few chances to do that. my concern is that when we do next enter a downturn, the central banks don't have a great deal of ammunition. the more headroom they have to respond if we do have a more serious market situation developing, the better. i rather welcome what the fed is doing. it is clearly a little bit risky, but as they point out, monetary policy is still quite accommodative at the moment. i'm i in favor of what the fed s doing. >> emerging markets benefited, really, from this decision and this press conference today by the ecb, and almost from the fomc decision yesterday. how does the divergent story play out now in the next three
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to six months? >> one of the things we are seeing is one of the ramifications is dollar tightening. when the global economy was doing so well last year and outperforming the u.s., the fed could raise rates in the dollar was weakening. now when the fed raises rates, the dollar will strengthen. that's an additional form of tightening, an additional form of potential pressure in terms of dollar funding globally. there is some tightening of conditions globally, fed tightening is starting to be felt. it's proceeding as planned. they want to tighten policy, they want to cool things off. it is working more outside the u.s. than inside the u.s. right now, but that means we should probably continue to see the dollar strengthened through the year as they proceed with rate hikes. would there be an urgency to make a statement on rates? the economists we surveyed before today said it wouldn't
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come until december. why did he feel the need to make an announcement on rates, or give guidance on rates? >> i think maybe he wanted to push back the rate hike expectations, with what he mentioned about the external environment, the geopolitical situation, the soft data in the euro area compared to the u.s. i think it made the balance smooth. note on the other hand, being too hawkish and not moving too far from the interest rate. given thepectations, way the council gave some space, to move next year. i think this is the main reason. i want to see more data from the euro area, where positive data, and i think they want to see how the u.s. develops and whether or not this affects the euro area. the forecasts are not taken into
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account at the moment. ♪
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♪ >> you are back with "bloomberg best." i'm rishaad salamat. let's resume the week's top stories with an emphasis on company news, starting with a significant announcement from electric carmaker tesla. >> tesla titans. the electric carmaker plans to slash around 9% of its workforce. the ceo just tweeted this, saying it is part of a, quote, "difficult but necessary we organization. just to be clear, this is salaried staff and does not include production associates." >> that's right. when he explained this in his letter, he made it clear it is
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not production workers. the model 3 won't be disrupted, they won't pull people off the assembly line, anyone who's involved in the production of the car. the support staff around it might be touched, but it will not be production workers. >> thereby answering the question all investors have, which is will this affect the production targets? >> daimler has been ordered to recall 774,000 vehicles in europe following an accusation it used illegal devices in its diesel engines. the move follows consultations with the german government in berlin yesterday, which the ceo called constructive. the carmaker escaped more caustic measures, such as fines or a hardware fix that has been very important. >> the cost is very low. it will cost them something like $75 million, $80 million max.
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the software will be approved by the german authorities. we have seen that before, in multimillion recalls. these costs are immaterial. what is important is they have a solution, they make peace with berlin, and they get the cars properly fixed. telecoms in chinese divement maker zte took a after it agreed to pay at least $1 million in penalties and overhaul its management. this as part of a settlement that allows it to resume business after two months hiatus. apart from the billion-dollar fine, what are the implications for zte? anwell, a billion dollars is extra fine, and to put that in context, that's about equal to four years of operating income at zte. the implications
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are that they have to fire their whole board of directors, all of them have to go, according to the deal they signed with the u.s. department of commerce, and they need to get rid of all their senior management. anyone in a senior vp position or higher. in addition to that, any staff or executives involved in the deals that sold equipment to iran or north korea. that's a got them into trouble in the first place. i calculate we are talking 30, maybe 50 different people could be caught up and fired from the company. that's quite a lot, and would make it difficult for zte to get up and running quickly, even if the sanctions are lifted against them by the u.s. department of commerce. has agreed to buy envision health care. it's a provider of physician services to hospitals. a long time coming. walk us through how it has done. >> sure.
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this is really the culmination of a month-long strategic review. it started last october. one activist disclosed a stake in the company and was pushing for takeover options. the company said today that throughout the review, it contacted 25 different potential buyers, including carlyle, onyx, different consortiums. united health was also considered as a potential buyer. and kkr emerged as the leading bidder, and we will see where it goes from here. the rolls-royce is said to be 4000 jobs as they try to simplify their business in boost profit margins. the retrenchments would bring the total number of jobs to nearly 10,000 since 2015. >> we know that they will focus predominantly on hq. rolls-royce has already said they are looking to shift their
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headquarters in victoria to central london, which will help them shed costs. but on a bigger scale, the bigger question, why now? i think the ceo, who came in about three years ago, has been quite frustrated by the lack of progress that rolls-royce has managed to achieve in terms of the turnaround. this is kind of a crucial next step in what they hope to achieve. airlines plans to raise a billion dollars by selling shares to investors. they are offloading up to 20% of its listed shares to 10 investors. what is this money going toward? >> hainan has been in this aggressive expansion mode, flying to nonstop destinations. obviously, this money they will be racing from their shareholders will help them in buying planes, and probably
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addressing some of their pricing going forward. -- stock fraud. muddy waters was involved in $20 billion in overseas stock exchanges. >> so we are short tal education group, which is a china-based core profit edging -- china-based for-profit education company. the stock is up some 2500% in the past five years. you say it's a fraud? >> yeah. business, but it's profits are fraudulent. -- but its profits are fraudulent. some people might say, why would they do this? i'd point to the value of the chairman's holdings. three years ago, his holdings
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were only worth about $900 million. today, they are getting close to $80 billion. there's your answer as to why. to be clear, it is a real business with real students in real learning centers, it's just not able to grow nearly as profitably as its been portrayed. >> qualcomm has cleared the last hurdle for its 43 billion-dollar takeover of nxp semiconductor. bloomberg has learned that chinese regulators have okayed the deal that has been pending for more than 18 months. acquiring it means qualcomm can lessen dependence on the slowing market for smartphones. >> we understood china had approved the deal, which is important to qualcomm. is it in jeopardy? >> it could be. this deal has been a political football between the united states and china for some time, at least that's what qualcomm believes, although there are legitimate reasons for antitrust hardee's to look at the combination. it's a little bit ironic, too,
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because qualcomm has blamed the u.s.-china tensions for holding up the merger, but at the same time, qualcomm has also benefited from u.s.-china tensions because it's squashed this hostile takeover broadcom was trying to do for qualcomm. qualcomm has been on each side of this divide. ♪
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♪ weeks, we next couple will be getting live pictures out of moscow. user, doe a bloomberg your bracket. you can choose who you think will be the winning team. >> there are about 30 thousand functions on the bloomberg, and we always enjoy showing you are
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favorite on bloomberg television. maybe they will become your favorite. here's another function you may well find useful, quic go. it will lead you to quick takes, where you can get important context and fast insight into timely topics. here's a quick take from this week. ♪ >> after the end of the korean war, north korea was virtually cashless. everyone worked for the state and was provided for by the state. and in the communist bloc context of the day, it worked. in 1989, north koreans were more than twice as wealthy as their comrades in china. brown spent his career analyzing north korea for the cia. >> they were integrated reasonably well into the soviet plan system of countries. >> the loss of support from the soviet union after its collapse in 1991 led to a series of great famines in north korea.
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>> the famine pretty much ended the distribution system, in which the north korean state fed everyone through the russian system. the government couldn't supply food, so people went off on their own. >> since then, a strange hybrid economy has emerged. part government controlled, where rations are allocated by the state, and part graymarket, where currency is earned in the market economy. for example, a textile worker in the state run textile mill earns around 3000 won per month, which has a street value of about $.40. but the worker pays nothing for housing, utilities, and receives food rations. her sister might legally work for an export company. she's allowed to get 30,000 won per month, with fewer perks. another could work for a chinese company and earn 300,000 won per month, but with zero perks. paidl state workers get
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through this incredibly low wage system and are dependent on rations. the ideal situation is for one person in a family to work in a state system, and other people in the family work in the marketplace and earn real money. >> it's a highly inefficient system, and per capita income, north koreans are eight times poorer than chinese and 20 times poorer than south koreans. rather than reform, the government sought to fill a shortfall of hard currency by trafficking illegal goods abroad. according to numerous reports, this illegal business is run by an agency known as office 39. >> it's an office that organizes principally to raise u.s. dollars for the ruling kim party. >> a study from a washington-based human rights group traces the criminal ventures back to the 1970's, where about 1000 diplomats were it -- where about a dozen
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diplomats were expelled for smuggling. later, the government switched to foreign organized crime syndicates to sell things like counterfeit pharmaceuticals and heroin, manufactured from state-mandated poppy farms. north korea's government has dismissed the claims, and some analysts have also questioned it. since 2005, intercepts of north korean smuggling have fallen sharply, though more recently, claims of cyber theft have proliferated. meanwhile, kim jong-un has started speaking to south korea, about opening up for investment zones,ricted economic and is talking about switching to a more china like economic system. whether that is a true change of heart or a tactical retreat in the face of sanctions remains to be seen. ♪ >> that was just one of the many quick takes you can find on the bloomberg terminal. you can also find them at, along with all the latest business news and analysis, 24 hours a day. that will be all for
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"bloomberg best" this week. thanks are watching. i'm rishaad salamat. this is bloomberg. ♪
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♪ emily: i'm emily chang in san francisco and this is "bloomberg technology." coming up in the next hour, a trade war underway. president trump imposed 25% tariffs on a $60 billion worth of china made goods and promised to add more. beijing probably retaliated. facebook is teaming up with academics for collaborations and bodies. what this new partnership means on the platform. a crisis is building in the pacific ocean in the form of a mass of garbage totaling 80,000


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