tv Bloomberg Markets Balance of Power Bloomberg January 17, 2019 12:00pm-1:00pm EST
headquarters, i'm david westin. welcome to "balance of power." on the brief today, emma ross thomas on theresa may's next steps for brexit. and it is a 27 of the government shutdown. and from capitol hill, kevin cirilli on the robert mueller investigation. emma, first day of the rest of her life today for theresa may, so what is next on her agenda? talksthe moment she is in with opposition parties about the way ford for brexit -- ford for brexit, with a jeremy corbyn boycotting the talks. but the precondition she takes the deal off the table before he says down with her. some members of the party have been in talk with theresa may, but not many signs yet that may is prepared to make big concessions. what that means is as we go into monday and she goes to parliament with plan b, what we will see most likely is members
of parliament who want a softer brexit and who want to maintain closer ties to the block, try to force the government to change its cap and pursue closer ties, or indeed a second referendum. we have heard more on the second referendum today. jeremy corbyn has been more positive. he says he still wants to push for a general election, but they have said the option of a second referendum should remain on the table. you,: we will come back to but now we will go to washington. we want to talk about the government shutdown. anything we know today that we did not know yesterday? >> very little. to resolving the impasse. the two sides are deeply dug in. only a third are blaming democrats for the shutdown, so the president is losing his pr battle, the allies in the senate
are more answerable because they are from smaller red states that support the president and a border wall. meanwhile, you have house democrats who are overwhelmingly from suburban districts as the majority and they are viewing the law negatively. this is looking like a quagmire. david: is either side showing willingness to move at all? >> the only one making a demand is the president and allies in congress. they are saying, give us money for the border wall or the government does not open, the democrats are not making a demand, they are saying open the government with the items that both sides agree on and we can debate for security later. neither side is moving from that. republicans are demanding that wall. democrats are still saying no. david: thank you so much. hill andto capitol
kevin cirilli. gates is cooperating with bob mueller, that he is very much cooperating. former newni, the york city mayor, clarifying the remarks he made on cnn last night to chris cuomo and he is saying he does not believe there is collusion whatsoever between the trump campaign nor with president trump himself. hour tell you in the last the former new york city mayor told me the bottom line is they are standing by the story that the president said there was no collusion, that the folks surrounding the president there is no collusion and they are distancing themselves from the criminals like paul manafort who are now behind bars. david: it is interesting. that did not sell my get. thank you so much. we go back to london.
aily, once they do figure out new position, we'll could they do to take care of that backstop problem? we talked to the former u.k. ambassador to the united states and he had a suggestion. this is what he said. peter: one of the solutions people are suggesting after the collapse of a package deal last night is -- why doesn't the u.k. stay in a union with the european union, stick northern ireland in the process and give time to work out the rest of the relationship and slower time? david: there was back and forth with prime minister may end jeremy corbyn -- and jeremy corbyn. could that fix the problem with respect to ireland? customs union goes three quarters of the way to fixing the problem. there are other problems that need fixing that have to do with regulatory checks.
the customs union helps. the other option we are kicking around is what is known as the norway plus option and that is staying inside the eu single market as well. the problem is if you stay inside the eu single market, you cannot control free movement of people. theresa may continues to say she is not backing down on the customs union and if she did, she would lose a couple cabinet ministers and many tory mps would not vote with her. that is because the u.k. would strike out on its own and sign trade deals around the world. if you are in the customs union, you cannot do that. -- was talking about our proposals you would kick around in parliament and we will see more of that next week. it does appear the majority of
parliament is probably in favor of closer ties to the eu. that does seem to be the consensus the eu will not leave on march 29 but there will be some kind of extension and we hear that particularly from brussels. e.u. diplomats are working on the assumption the u.k. will offer some extension. while there is division in the eus to whether -- e.u. as to whether they should grant, that could be months after march 29. we areit sounds like going to have this conversation for a while longer. thank you. emma ross-thomas reporting from our london bureau. we turn to ms chandra. emma: we are looking at a mixed picture for u.s. stocks. they are starting to edge higher certainly with the s&p 500 and nasdaq. the dow jones in the red. disappointing earnings throwing
things off course this morning. after morgan stanley's week earnings report this morning. the banks have reversed course through the day each week. we have those earnings report starting monday. i am also looking at the 10 year yield rising for the fourth straight day. that is the longest stretch since december 13. u.s. jobs came falling to a five-week low. blowing oil estimates. we spoke earlier about the s&p 500 powering through that key resistance level of 2600. we have a chart we can show you of the s&p 500. or --xt barrier the 50 take duly -- the 50 day moving average. where close to it now where we are a little under if the value gavin is seen to the
day. we could reach the level for the s&p 500. let's talk about the news and stocks. i do not usually talk about the industrials. we're looking at ppg in the green. they have good earnings reports. considerg it will activists investments to fund management corporate's. did downgrade or cut its eps , the next quarter and they did on -- did that on economic concerns and we are looking at the likes of home depot and lowe's not liking that. falling today. pbg is a pacemaker and it comes when another pacemaker cut its forecast on economic concerns. when i'm a talk's, there
david: this is balance of power. i am david westin. we returned to mark crumpton for bloomberg's first world news. mark: president trump continues to point fingers at democrats, saying the government remains shut down because they refuse to approve border security. the president spoke during an appearance at the pentagon. >> the party has been hijacked
by the open borders fringe within the party. the radical left becoming the radical democrats. democrats will step over to do what is right for our country and what is right is border security at the strongest level. mark: the president is causing is -- is calling missile to better protect united states. he said our goal is simple, that incomingstroy any missile. his former economic adviser is criticizing the shutdown. gary kuhn tells the boston globe the shutdown is wrong and the furloughing of thousands of workers makes no sense. we will take a closer look at the shutdown in a few moments with republican congressman tom reed, who cochairs the bipartisan problem solving caucus which met with the president yesterday. theresa may says she is canceling her trip to next
and will stay in the u.k. to handle the brexit crisis. she is trying to find a consensus plan that can win support in parliament. the premise or has till monday to come back with parliament -- forarliament with a plan b leaving the european union. americans are drinking less alcohol. fell iner and liquor 2018. iws is from drinks analyst are. 9.5%.ption was done wine drinking rose for the 24th straight year. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. i am mark crumpton. this is bloomberg. david: thanks, mark. not much luck so far. rank and file members have been meaning to ring the government shutdown to a close but without
success. yesterday the bipartisan problem solvers caucus, which included seven democrats that down with president trump in a meeting the white house called constructive. joining us now is the cochair of that caucus, tom reed of new york. he comes from washington. good to have you. constructive -- help us understand how we can move forward. you were in the meeting. how can we get to agreement? thing isfundamental the two sides have to talk. that is what we did. we talked but importantly listened to each other and when we started to figure out what we were saying in regards to border security, there is a common sense solution that can be reached and in that conversation. i hope our leaders on both sides of the aisle in the house and senate will engage in that good faith discussion. in talking to democrats and republicans, the one thing i hear from both sides is people
want border security. they may disagree about which is entailed but as a practical matter, do we have to have a wall across the border in order to have that security from your point of view? you are not going to have a wall from coast-to-coast, 2000 plus miles. that is what i was pleased to see a democratic lawyer reference the need for a border barrier. that makes sense in certain portions, things like what you see in san diego that exist. that structure is doing what it is designed to do. keep the border secure and move board with other technologies that are going to protect american citizens by securing the border. david: from the white house, do you understand the president? that we could have two -- true border security, that we spend more money on a wall but there is also electronics and other technology that would make us
more safe? tom: i do believe that and i have seen in writing from the white house, public letters to congress outlining exactly that. that is where i think this compromise solution could be. hopefully, over the next short order we will see a deal reached quickly. david: let's talk about the short order. there must be pain being felt across the country. we have the government calling more workers back from furlough to work without pay, faa inspectors and people we need to have working. at what point does this reflect on the constituents that you and other people serve? are you hearing from your constituents? 7 this is just tom: this is impacting american citizens. that is why it is important we take care of this, but we also take care of it in a way we make sure we open the government but at the same time we all know
what a deal looks like. let's just do it. that is my message to my democratic colleagues. we know what needs to be done to solve this on all fronts. david: you have a better vantage point than we do. we have a state of the union address coming up. do you anticipate we could have a deal done before that? tom: i hope so. my position would be we get this done sooner rather than later, that the parameters of an outline of a position may be put in place so we can negotiate the details. at the end of the day, let's move forward together and if we know where this thing is going to land in regards to border security, maybe issues on immigration that can be thrown in there in regards to dreamers and those here under protected status, maybe there is a deal to be made. at the end of the day, you have to do this through talking. the fact that our leadership is not talking with each other, that is a problem and that is a lack of leadership that is causing this gridlock that is
frustrating not only me but our fellow americans. david: this caucus, this problem solvers caucus is committed to keep discussing things with the white house. is there another meeting scheduled? tom: stay tuned. we are working with not only the white house but both of our sides. could we be a forum? could we be a vehicle that could bring people together? let them work out the details, the parameters, but we are here. we want to do this and it is a good faith gesture by members on both sides. they want to put america first and not democrat and republican extreme politics. david: help us understand, those who do not serve in public office, why there is a failure of leadership. what is causing that? i will be specific with respect to the majority leader in the senate. nancy pelosi has been talking but mitch mcconnell from
kentucky has been quiet. why is that? is, whatcritical piece is the house going to do in the conversation? the majority leader in the senate has been quietly but consistently ready to move forward. once we get this discussion going and a deal be reached, but when you hear nancy pelosi talk about not one dollar for a border structure for a wall, that to me is an extreme position that is not sustainable. it is about compromise. what is border security? david: i appreciate your time. congressman tom reed from capitol hill. still ahead, the stock of the hour. we are looking at the parent company of mercedes-benz. talk from president trump continues to take its toll on the auto business. this is bloomberg. ♪
facts. trying to know all the facts. this after slumps in revenues. another french banks are planning cuts known as no bonus at all. when we reported on early this week. in $18 million loss on derivatives linked to the s&p 500 at the end of last year. they cut bonuses. this iscks and for bnp according to people familiar with the assets. no one has been told officially but they have been told to expect either cuts or reduced bonuses. we hear from deutsche bank last week. they were planning a 10% cut to the bonus they were said to be a cut to the bonus
pool. this can be said of j.p. morgan in the u.s. who is said to be increasing it. earnings coming up. let's talk about european cars. it turns out the tariff problem again. emma: -- closed 2% lower in the euro. automobiles and some groups forming today. this after the senate finance committee, chuck grassley said president trump is inclined to do tariffs. tariffs raising their ugly head again. grassley acknowledged this was not the best. he was not in favor. the quote said, they are a fact of life when trump is in the white house. the other automated not liking that. grassley thinks the tariffs
would make china and the eu negotiate more. we do not know. it is true if you look at the bloomberg and exposure to the u.s. and china has been growing. selling one of the best luxury vehicles in the u.s. last year. one of its first lady's luxury vehicles -- mercedes luxury vehicles. february they had to publish this report on whether there are national security implications. said he mighty introduce legislation to cut back on the 232 authority because it is -- national security it is hard to figure out how important mercedes-benz is. is tariffs and how much is weakness in the market? the auto markets are going to get softer. emma: you have this tariff conversation happening in the backdrop of weakness.
data showed europe's market shrank the first time since 2013. we heard from goodyear saying their weakening of demand and plus, a changing industry. the adoption of technology. this is happening with seeking ass legacy of automating now an alliance of costs. china's incoming ceo. up next, the expert on china. --will talk about while way go away. this is bloomberg. ♪
what she will do if president trump insists on delivering a state of the union address during the partial government shutdown. she sent a letter to the president suggesting he postpone his speech to the government's running. at a news conference today -- by]ase stand >> more than 24 hours. have you heard? no, we have not heard. emma: the federal employees -- mark: the federal employees required to provide security should not have to work if they are not being paid, both -- the government shutdown is now in its 27th day. transportation security the ministration officials saying the rate of airport screeners calling in sick is higher than normal but down from last weekend. the tsa could face a test by friday of its ability to process
airport crowds. last year, nearly 8 million people flew between friday and monday of the martin luther king jr. federal holiday. there is a new sign that a second summit between president trump and kim jong-un should happen. bloomberg learned one of kim's aids will be in washington friday and is expected to meet with the president and mike pompeo. a north korean official is in the u.s. for talks on the nuclear program. andos angeles, teachers officials and the second largest school district will be at the bargaining table, hoping to end the strike that began this week. clashes over pay, class sizes and support level led to the district's first strike in 30 years. officials said teacher demands could bankrupt the los angeles school system. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. i am mark crumpton. this is bloomberg.
one step lowered, one step back. china confirmed the vice mayor will travel to washington at the end of the month for trade talks. just as we learn u.s. prosecutors may be closer in indicting huawei. welcome to george magness, research associate as -- at oxford china center. treat to have you in new york. normally we talked to you in london. let's talk about this huawei situation which seems to be getting worse. to what extent is this a trade issue and to what extent is in -- it in national security issue? it has more to do with cybersecurity. who wants to be tech number one and how do you protect yourself in the process? the news from the federal investigation of huawei, this
accumulates a series of problems of the company is getting in lots of countries in the u k -- companies in the u.k., australia, new zealand, canada. people are starting to get hot under the color about what is this company. is it private? what is the role of the party? what are they doing with the information they are getting from investments? what are the funding and who went wide? -- and who and why? david: the chinese government and huawei, has it always been there? have we always questioned whether the government is behind huawei? david: there has always -- --rge: there has always been it is not always clear what is private.
a couple of things have happened in the last 202. last year, a national intelligence law was passed that requires companies and citizens to participate with the government in marshaling and sharing data for intelligence purposes. the second thing is all companies in china, which have more than three members of the have ast party have to communist party structure within the management of the company. when you have this conflict between party structure and the board of directors, it is clear which one is holding the shoe strings. it is a problem. david: this approach is not always in resident xi jinping's approach. we thought he was a reformer. whenemed like half way in, he got his renewal coming he came out and said things like, we are going to make sure we have members of the party involved in all the business in china. what caused the change? george: i am not sure.
when he came to power in 2012, something meaningful changed in china's governance system going back to 1978 and thereafter. i am not sure the change in 2017 or lastrom year's national people's comments where presidential term limits were abandoned. he has always been this way. he was never a closet reformer. he believes strongly the party lost control or influence in china during the previous administration and he wanted to resurrect the party. he believes in the party but it should have primacy -- that it should have primacy in control. this is who he is. david: at the same time, is there pressure on him because of the economy?
times,n the financial there was a report of a record amount of stimulus in the form of being inserted into the chinese banking system. does that indicate concern as part of president g's and ping of the economy? george: the economy is slowing down in a ubiquitous manner across a range of sectors. real estate, automobiles, you name it. there has been the emergence for the first time in the last five years of even ping's rule. the emergence of disquiet in universities and even senior party officials, that china is headed in the wrong direction. there is a tussle going on as to which -- how china should organize its affairs. concerns that the andomy is losing traction
these $84 billion is part of the process. it is well over $1.2 trillion. this is indicative of a number of things they are doing to try to soften the downturn. it is not going to stimulate the economy's growth yet. they have a problem to deal with. china,as a student of what does this tell us about trade negotiations at the end of this month? i ask in this sense. -- xi jinping is feeling threatened. sometimes leaders who were threatened get more rigid. george: a little bit of both. he is under pressure to strike a trade deal. the tariff measures that were introduced last year have not had a huge effect on the chinese
economy, but if the terrorists had gone into the -- into effect in january this year, and if they had been extended, then that would have had a meaningful impact in a year in which the economy is not doing well. china is under pressure to get a deal and keep these tariffs in a deep freeze. the easy bit, the low hanging fruit is the tariffs and imports from the united states. the tough stuff is the technology and ip. david: that takes us back to huawei. from the chinese president's point of view, it is gain. allow financial services to come in. we can afford that. but for tech, the china 2025 program -- protect, the china 2025 program at all costs. trade: negotiating the
related issues and market opening, mind you the u.s. representatives want to be sure the compliance is not a snow job. there is going to be reelection and follow through. that bit should be doable. the other stuff, i do not think the chinese want to give much away. they would say, why should we? it is our right to pursue technological prowess the way we want? david: we have to take advantage of the fact you came over from england. brexit seems to be a tough deal for theresa may to get done. how do you see it from over there? what are the prospects she can get a revised deal agreed to with brussels that can get through parliament? george: the chances of that happening are virtually zero. there are two parts. one is the legal agreement, which sets up the terms under which the u.k. will leave the
eu. of --her is a declaration a political declaration of what sort of arrangement might happen in the future. there is wiggle room. there is lots of stuff she can do to ensure -- a short members of parliament it would be something they could accept. a lot of members do not like the implications of the legal agreement so it is not sure there will be something that parliament will approve. david: no one seems to approve crashing out of the european union without any agreement. if that is all right, does not -- that leave any alternative but a second referendum? it is a good thing there was no parliamentary majority for crashing out of the e.u., but it is not enough. parliament has to approve something positive. they have to say we do not like a no deal but we will approve something else. there does not seem to be a
magical majority for any alternative. what is the space? david: do exactly what the promised are said after she lost the vote. i do not know we you want. thank you so much for being with us. coming up, the passing of a legend. we talk with the ceo of vanguard about the man who founded his company, jack bogle. the man who changed the world of investing for millions of americans. this is bloomberg. ♪
sad day. the world lost a giant and i lost my hero. nobody has done more for investors and asked last for himself -- less for himself than jack bogle. charles schwab and the list goes on and on. welcome to the ceo of the company that jack bogle founded, jim buckley joining us from pennsylvania. good to have you. as i said, i am sorry for your loss, the loss of everyone at vanguard. jim: thank you for helping us celebrate a great man. and celebrate the impact he had on the industry. he will not be forgotten and his legacy will live on. jack: as i understand, bogle was responsible for one great idea, which was creating a mutual fund that was indexed, tied to an index. where did he come up with that idea? jim: his bigger idea was to
create a company that was owned by its investors, owned by its clients so to create vanguard, he created this company were the owners were the people we serve. the interests were perfectly aligned. whether you offered an index fund or an active fund, your interests were making sure you kept costs low and gave that client the best return they could get. the index fund is coming along. he was always a great academic. when he created vanguard, and i should say the roots of the creation of vanguard in the index fund, you can find that back in his thesis at princeton. time, theree same was a time in his career where he was a believer in paying top dollar for investment not competing down on the price of the investment advice. what caused him to change his mind? 1991 aset jack bogle in
his assistant. i was fresh out of school. by that point, he had learned a powerful lesson am a that the ,arkets are tough to beat especially long-term. there is nothing like being the converted. waitarned how cost could at returns and how tough it was to outperform the market after costs. the work i did early with him was about that. proving low-cost smatter. result, passive investing took off like a rocket. we can show in a chart how genetically that has grown over time. there are some people who are concerned it may have gotten too big. i talked to sam zell, the famed investor about jack vogel, who had wonderful things to say and this is part of what he had to say about passive investing. sam: everybody is concerned
about the percentage of ownership of new york stock exchange companies, particularly -- reef's by passive layers players. bogle lois felt -- bogle always felt it was healthy for a percentage of your assets to be in index funds. if the percentage gets too high, then you institutionalize mediocrity. david: tim, as you know well, it was not just sam sell who had concerns. it was jack bogle himself who wrote this is a great idea but it can go too far. what are the risks? jim: i cannot help but feel jack vogel behind me now. -- jack bogle behind me now. index a believer in funds. he would tell me not enough people index. people pay to much. they are getting ripped off. when he would look out, he would where he -- what could be an
impediment? what would be an obstacle to indexing success? he was extrapolated -- extrapolating in the future, what could be public reaction and that is not to take away the power of indexing. he would argue with sam saying, your whole portfolio could be in index funds. he was a believer in that. individual managers that cannot perform. you have a 3% of finding that manager over the long run. do not find stocks that could drag return in the future because only 4% of them well. he would say, do not find a needle in a haystack. by the whole haystack. --buy the whole haystack. with samhave a debate zell right now. david: we called it passive investing. jack bogle was concerned about
corporate governments. who is going to help with corporate governance side. what did he do in that line to make sure we had better corporate governance? believers in corporate governance in vanguard. passive -- a passive investor will be different from an active investor. with a passive investor, we say we do not know who winds the game. we care who is played fairly. the active investor will say, here is a strategy you should follow. we do not want to get involved -- it is governance we get involved with. we want to make sure a company is well run. the board is composed well. of board is set up instead composition for executives, that they understand risks and engage in strategy. we do not want to get involved
in telling the company what strategy should be. attention andthat he is a big believer in great governance, the companies should be well governed but let's leave the management to the executives. david: tim, thank you for your time today. tim buckley is the ceo of vanguard. jack bogle, creator of the index mutual fund passed away yesterday. he was 89.
but he pulled out. representative tom marino, stepping down from the house. turning to latin america, it's two biggest economies have new leaders from opposite ends of the political spectrum, but they are both presiding over thriving stock markets for now. --come to bloomberg's julia, welcome. but start with brazil. first of all, what has he done? office january 1. he has not done much on the economic side. he has delivered on some campaign promises, most and foremost the gun control loosening he promised. he cited earlier this week, a law that will make it easier for brazilians to acquire guns which was a big heart of his campaign. fighting crime and letting citizens by guns. his name economic promise, we do not know what is coming from
there. we hear he is analyzing proposals he has received and he will greenlight it once he is back from doubles. david: is there any backing off? that was one of the big issues as far as the economy was concerned. the messages on pension reform have been confusing in the first week. it is unclear if the military will be included. this is a government that has a heavy military presence. and theven ministers local media have been reporting the local media are lobbying to be excluded from the reform and that would create a political problem for him because they would give everybody the right to -- an exception. we do not know if that is coming. we do not know the minimum age. he gave mixed signals. david: we may have lost the digital signal. e was telling us what
the new leader of brazil has done, which is not much yet. grown.ck market has i think we have julia back. the digital gremlins got into our system. let me turn to mexico. the story there is more ambiguous than brazil. up and then it came down and now it is coming up again. with --, he was elected on a very different campaign. he is left wing and he was promising to get the economy back to the mexicans instead of focusing on what was good for investors. anhad been saying he was airport project, 13 billion backed by some of the biggest men in mexico and he did and he didn't that caused problems for mexican markets and it made
volatility very high since he took office. investors reassured, because he said things like taxes for the banks, but also he is going to make whole with some of the bond -- -- bondholders? julia: his budget proposal was well received and he said he is not going to touch the bank. his party maintains he will. investors have been more positive on mexico but it has been a wild ride. you, joe yeah, reporting from south palo. coming up, charles evans joints bloomberg for an exclusive interview. that is at 4:00. this is bloomberg. ♪
>> they buy the gold in the biggest deal in mining history. u.s. chill versus opec. opec production's falls a two-year low as u.s. production hits another record. the showdown continues. pg&e heads toward bankruptcy. the implication for clean energy contracts. ♪ >> i'm alix steel to welcome to "bloomberg commodities edge." 30 minutes focus on the trading behind the hearts -- the