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tv   Bloomberg Best  Bloomberg  March 3, 2019 3:00pm-4:00pm EST

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taylor: time now for "bloomberg best," here are the stories that shaped the week in business around the world. trade tensions are put on pause as the u.s. delayed tariffs on china. >> the extension of the deadline was huge. >> i don't believe it will solve all the problems. taylor: speaking of delays, theresa may opens the door to extending the brexit deadline. >> we have seen an extraordinary 24 hours, because we've seen major policy reversalses. taylor: pageantry meets diplomacy in hanoi. the trump-kim summit collapses with no deal. pres. trump: you always have to be prepared to walk. >> the north koreans are saying that the u.s. could have missed an opportunity. taylor: fed chair jay powell answers questions on capitol hill, while monetary policy
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experts share insight with bloomberg. >> the key factors that are driving growth in germany are still intact. >> the impact on capital investment has actually moved the system. >> my best judgment is the fed is probably not done yet. taylor: warren buffett sends out his annual letter. earnings season continues, with beats, misses, and reaction. >> the objective is to continue to grow the good stuff that's been growing fast. >> the whole economic environment is a little bit lower in 2019. taylor: it is all straight ahead on "bloomberg best." ♪ taylor: hello and welcome. i'm taylor riggs. this is "bloomberg best," your weekly review of the most important business news, analysis, and interviews from bloomberg television around the world. let's start with a look at the
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top headlines. on monday, investors found themselves under less stress after an encouraging development in u.s. trade negotiations with china. >> president trump is extending the trade truce with china, siting substantial progress in the latest round of talks. however, there's a less optimistic tone from beijing. negotiations will be more difficult. certainties cannot be ruled out. the president has said they are making headway on key issues like ip, tech, and currency, and the goal is to reach a deal that benefits both sides. how do we quantify the progress that's been made? >> we are waiting for exact details on the two sides. we have the broad color around that is not an agreement on purchasing more goods and presumably more consumption -- concessions on u.s. companies getting better access to china's market.
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but the big takeaway is that right here, right now, the trade war truce is being extended. that's the bottom line for the global markets and the world economy. as we approach the march 1 deadline, all indications are a lot of the risk has been should -- shouldered to one side, and u.s. and china, whatever way the final deal plays out, u.s. and china are on track to something that puts the trade war on the back burner for now. >> is this a win for china? to what extent does it relieve the pressure on president xi? >> it is most definitely a win. extension of the deadline was huge. the economy has been slowing because xi jinping and the government have been on this deleveraging push. add in the trade war, and it's taken growth to a place where the government is not comfortable. they've had to step in. yesterday we saw the rally in the market as it became obvious that stimulus was coming back. so big win for china. vonnie: the federal reserve chair jerome powell says the u.s. economy remains strong, but dangers are brewing.
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in his semiannual testimony on the state of monetary policy, powell noted the fed is watching the state of affairs closely and is prepared to adapt policy if warranted. chair powell: this is a good time to be patient and watch and wait and see how the situation evolves. vonnie: was the fed on message or did you hear anything off-track? >> jay powell was very much on message. he's doing his best not to move the market at all. it appears that he succeeded in not moving the markets at all. he repeated the sort of now-standard fed prescription for the economy of patience, watch the data as it comes in. the economy slowing, but at a pretty good spot. he says if inflation is low, there's no reason to worry about raising rates, we'll keep an eye on things going forward. david: big news out of europe today. prime minister theresa may gave a report to parliament on progress on her brexit plan. in giving that report, she laid
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out next steps, either approve the plan or take another route. >> it's been an extraordinary 24 hours. we've been major policy reversals. both from the labour leader and from the prime minister herself. both must be said are tactical. jeremy corbyn is trying to prevent labour mps from his party and theresa may says it will not just be a vote on a deal, but a vote on whether no deal should happen or whether the government should request a delay to the march 29 exit date. the key she said would be a short extension. it would be a one-off. does this take no deal off the table? that's the question that businesses and consumers and markets want to know. in fact, no, it doesn't. >> military tensions between india and pakistan have not helped markets this morning and they have escalated the most serious level in decades. the pakistani military says it
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has downed two indian aircrafts, a day after the indian air forces bombed a terrorist training camp in the neighboring country. give us the state of tensions right now. >> pakistan has said they have shot down two indian aircrafts. indian tv channels have been showing some wreckage of a helicopter possibly down. no one is 100% sure what's happening at the moment. indian airlines are announcing to passengers that there are now flight restrictions in indian airspace. >> pakistan's prime minister addressed the nation this conciliatory,ed and he should better sense should prevail and both sides stick together and discuss. for the market, it's a double whammy. the country's currency and stocks are already off the field, and this comes ahead of the elections that are due in
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the next two months. haidi: the nation's top trade negotiators says the u.s. is pushing for a trade deal with beijing that includes "significant structural changes" to the chinese economy. robert lighthizer says china has offered to buy u.s. goods and it is not enough to resolve the trade war. >> i don't believe this is going to solve all the problems between the united states and china. we have very different systems. >> he may be trying to dial back expectations, both with the public, as well as with his boss. they're not wanting to base this on more just soy beene -- soybean and boeing airplane purchases by the chinese, but they want some sort of deal that will set in place changes that will -- what the u.s. feels will be leveling the playing field before u.s. companies in china. >> president trump's second summit with kim jong-un has fallen apart without an agreement. south korean stocks and the currency plummeted after future
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talks of north korea's nuclear program were thrown into question. pres. trump: you always have to be prepared to walk. i want to do it right. i would much rather do it right than do it fast. >> we have known from the get-go that north korea has wanted sanctions lifted. this is a country that has struggled economically. people are in a dire situation. trump said he was willing to lift sanction says, but for that to happen, the u.s. will need more in return. >> north korea said the u.s. "missed an opportunity" in talks. we're sort of getting mixed reports here. what is the latest? kevin: well, president trump says that the north koreans had said that they wanted the removal of all sanctions, but we were just at a press conference with the north korean foreign minister as well as the deputy foreign minister, and they provided a different account. according to them, they say they were willing to get rid of some
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of the u.n. sanctions, a very different account than what president trump had said. north koreans are saying that the u.s. could have missed an opportunity. they are saying their proposal is the better one and that is very different account from what president trump gave at the press conference earlier this evening local time. david: pmi's were out overnight and showed an up tick after official numbers on thursday pointed in the other direction. help us put this puzzle together and tell us, where is china's economy as far as we know right now? >> there are people talking about this private sector gauge. today is one example of that. we are seeing a pickup probably in the back of extra infrastructure spending. there's signs of an uplift in one of the components in terms of new export orders, one of the forward-looking aspects of that. it is still in contractionary territory and the pmi is pretty negative. the feeling remains that china's
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economy is under some pressure, and that's why there is potentially a sense of relief coming down the lines if we do manage to sign off a trade deal with the u.s. >> u.s. officials are preparing a final trade deal with sandrump -- deal with president trump and china's president xi jinping could sign within weeks. how expensive could this deal be? what would it look like if we get a deal at this stage? >> what we have been hearing in the last 24 hours are some messages from the administration that they think they got something that is pretty close to a final deal. steven mnuchin saying over one 150 pages in this deal, therefore serious detail potentially. we don't yet have a date for signing summit. we're hearing that the president is keen to do something as soon as mid-march. but some other folks in the administration, including
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ambassador robert lighthizer have also said there's still work to be done. taylor: still ahead as we review the week on bloomberg best, much more on monetary policy and the longtime fed chair alan greenspan, and bill dudley. plus more reaction to the summit in hanoi. up next, it was another busy week of earnings reports with executives stepping forward to explain the results. >> we are one position in terms of growth, and we continue to do this. taylor: this is bloomberg. ♪
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taylor: this is "bloomberg best." i'm taylor riggs.
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earnings season is beginning to wind down, but there were still plenty of companies reporting this week. let's start a roundup with standard chartered. the european bank announced a three-year strategic plan. >> standard chartered has unveiled its long-awaited turnaround plan. the bank is aiming for $700 million in cost cuts by 2021. >> we took about $3.2 billion of expenses out over the next three years. -- the past three years. the next phase isn't about cost cutting. it's about reshaping the operation for real growth. and that has to do with leveraging our really great demonstrated core strengths with our global international network, which is unique, and it's impossible for someone to replicate, and to focus on our client segment, which is growth. -- which is growing. both of these areas are growing double digits today. these are high returning areas. the objective is to continue to grow the good stuff and at the same time, continue to reshape the rest of the organization.
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eliminate these drags that are still pulling our returns back. >> bank of ireland has reported underlying profit of 495 million euros. they are boosting from 11 and a half cents per share to $.16 per share. it's building to a payout ratio of around 50%, a sustainable earnings. a tempting promise to investors. when do you think you'll hit that 50% pay? >> lendings are up, costs are down. what we have said before and continues to be our policy is we'll get to the 50% payout in the more medium term in a prudent and progressive way. >> the mixed bag of retail after macy's cut costs, while home depot fell saying games will start to cool off. let's start with macy's. they said they're going to cut costs. what's going on there? >> this is a company that
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implemented a $550 million a year cost-cutting program and i think most of us who watch it closely, we don't think the the company's problem is bloated expenses. we think the company's problem is top line. it hasn't made enough progress in connecting with the new generation of shoppers, and that a lot of its initiative seemed at more wringing more sales out of the shoppers it already has as opposed to cultivating new ones. home depot is a healthy business. its forecast is for 5% comparable sales growth in the year ahead. that's tremendous. most retailers would be the envy in that category, and home depot has been putting up money like that for a long time. best buy topping analyst expectations before the day today, sending shares surging. the electronics retailer is a bright spot for what has been a gloomy earnings season. >> margins had been a big concern of investors and analysts going into this quarter. we knew the top line was going to be good. we knew they pulled out all the
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stops for sales. the margins looked pretty good and i think that shows that they are executing in services, which carry a higher margin. they are handing over parts of the store to vendors, and vendors help pay for those portions of the store. that helps as well. a lot to like for best buy. >> they saw lots of their coal mines earlier this year and it looks like it is paying off to a record of $13.5 billion. the company also announced dividends with expanded buyback program. when you look at the record amount that you're giving back to shareholders, how much is coming from the asset sales? is that like shareholder return or is this something that you're worried they'll get used to? >> today is a very good day. we just disclosed of $13 billion to the return to the
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shareholders, the highest in the 147 year history of the company. it's a combination of three items. one is the ordinary dividend, which is around 40%, around 30% of special dividend, mainly driven by divestment and the rest is a buyback. we believe we are well positioned in terms of balance sheet. we are well positioned in terms of portfolio. we are well positioned in terms of growth. and we'll continue to deliver promises. >> they beat their first half guidance on higher prices. and a weaker aussie dollar. net income was up 42% from the same time a year ago. you have cautioned it could be the peak and things are softer going forward. >> yes. what we have seen in the has first half been a benefit in the run-up of pricing in north america and asia. we have seen prices moderate to the back end of the half, and we're guiding toward a softer half on the back of those lower prices.
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>> covestro is warning that profits this year will drop more than estimated. the materials company cited increasing cost and decreased prices. why are profits coming down? what is the main reason here? is this the global economic slowdown or are the problems with trade hitting them as well? >> i think we see our materials are very much in demand. i think that will continue. and we're prepared to have long-term profitable growth. what we see short-term is we have increased competition on the supply side, so some is coming to the market and that is why despite strong growth, we see some pressure and that is the main reason for 2019. >> basf has reported fourth quarter results that have beaten
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estimates on increased demand for catalysts used to reduce pollution from cars. that is as it's ceo predicts profit in 2019. what is it really down to? is this a rebound in automotive sales as you predicted last quarter? >> we have seen a significant slowdown in the automotive industry in the fourth quarter, which put the automotive industry for the whole year, 2018, not in a very good shape. the predictions for 2019 is a slight increase in activity, slightly higher number of produced cars. i am able to say the yield side is slow in january, so we expect as part of our forecasts for 2019 that we see a certain revitalization of the automotive industry. however, the whole environment is a little lower in 2019. it's still growth. we are far from a recession.
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>> weight watchers plunging about 30% after the company basically saying that member recruitment was going to be a lot lower than last year. what accounts for the warning that the company is giving? that they're not able to get as many customers in the door? >> it does not look great, especially if they are telling that to us in february which is diet season. people start their diets in january, they go through them through the winter, and then they stop. if they did not start out good, it's not good the rest of the year. something about the american consumer is changing. people don't like the idea of dieting anymore. to be fair, the company has rebranded itself. it's trying not to be calorie counting, so much as wellness and health. there's still a lot of consumer sentiment to change. >> we have got gap coming out and they're going to flit into two publicly traded companies. they say old navy is to become a standalone company. clearly many people feel this is
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going to be more valuable. >> this thought has been out there for a long time. old navy has been the growth engine of the company. it's a discount play. you get tons of families going in there. meanwhile, banana republic, gap brand have been struggling for years. the c.e.o. has tried a bunch of different things and basically got nowhere with them. this is something that investors have been clamoring for a while. ♪
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taylor: you are watching "bloomberg best." i'm taylor riggs.
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in his testimony on capitol hill this week, federal reserve chair jerome powell cited a slowdown in european growth as one of the signals making the fed hesitant to raise rates. those concerns were echoed in the latest report on the german economy, which predicts growth below potential for the rest of the year. the president of germany's central bank told bloomberg's david westin that while the data has hit a soft patch, fundamentals remain strong. >> for us, one of the key factors that are driving growth in germany are still intact, and that is cheap financing conditions for one, but also a buoyant labor market and very dynamic wage growth that should progress domestic demand. david: when you talk about the trade issues with respect to germany, how much of that is external and how much is internal? we've heard reports it's not
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just trade with china or trade with the united states, but actually internally within the european area that the trade is down. is that correct? jens: i think the main point for our forecast is they are currently surrounded by a very high degree of uncertainty, and part of that is related to the looming trail conflicts. -- trade conflicts. what we are seeing is factors that are related to the eu and such, like brexit, like some political debate within the euro area, but then we have this looming trade conflict which is, of course, affecting, or potentially affecting the very open german economy more than others. on contrast, we don't see there's already a palpable effect of this high uncertainty on, for instance, investment. this is where you should see it first. david: would it be helpful to business, the economy overall,
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to give clear guidance about when we can expect rates to go up for the ecb? jens: i believe the guidance is working as it should because markets have already reacted to the softening economic data by postponing their expectations of a box. so in a sense, this is sort of an auto pilot. we told markets that through the summer we will not raise rates or longer if needed, and they fully understood the message. taylor: coming up on "bloomberg best." more of the week's top business headlines. president trump is not too busy to tweet about oil prices and investors seemed to like g.e.'s latest restructuring move. and we have also got more compelling conversations, including thoughts from howard marks on the fed, and an exclusive interview with bill gross as he heads to retirement. >> i took the book out to my ex-wife, and i said i think i have asperger's, and she said, you do.
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not, you do? but she said, you do. taylor: this is bloomberg. ♪ want more from your entertainment experience?
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taylor: welcome back to "bloomberg best." i'm taylor riggs. the meeting in hanoi this week between u.s. president donald trump and north korean leader kim jong-un ended abruptly without any agreement. u.s. sanctions remain in force, and north korea retains its nuclear program. guests on bloomberg television discussed what this may mean going forward. >> i think the north korean will -- north koreans will have to make a choice, either return to criticizing the united states and ramping up anti-u.s. rhetoric, or they will say this is also a process, we have to keep working on it. kim jong-un is very committed to the process, and he wants to have a positive, new
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relationship with the united states going forward. a lot of this depends on how the north koreans decide to spin the outcome of the summit, and how they see the message to their -- feed the message to their own people. it will be interesting to see how the north korean leader talks to his own people about the summit. >> is the korean peninsula safer or less safe? >> even if there had been a joint statement that was signed today, it is not clear the peninsula with have been any safer in the short-term, because they possess all their nuclear weapons. >> i think actually for the u.s. this was the best case scenario. those watching this were a little nervous of sanctions relief and what they could bring to the situation. this was a challenging meeting because the carrot and stick approach in terms of what would the u.s. stand to gain, what did the north koreans really wanted, -- really want, i mean, they wanted full sanction relief. the next step here is likely a pretty long delay in the further talks, because this isn't a huge
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priority relative to the market, relative to a lot of what people in congress are interested in. >> how difficult will it be to get a fully verifiable denuclearization deal with a country like north korea? daniel: i think it's going to be nearly impossible. unlike iran that was at one point part of the global economy, north korea's entire existence has been entirely isolationist. i think there really were expectation management issues here. kim jong-un is willing to have this discussion, which shows a willingness to attempt to enter the global economy, but the survival of his family and regime is at stake, in balancing what you have to give up and what you will receive --- the make north korea great again pitch, i don't think he was necessarily buying it. haidi: are we better off than we were at the start of this week? >> we are probably not worse off. i don't know that we are better off. we are better off in the sense that the north koreans now understand that we have a clear, bright line as to what we will
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not do, which is to say we will not give them a substantial or complete elimination of sanctions without their making a much more substantial commitment on denuclearization. if there is a negative sign, -- side, it's not what happened in this meeting, it's the fact that the diplomatic discussions between the united states and the north koreans may have given a signal to some other countries that don't have as strong commitment to the sanctions, but they can do a little more trading, or can explore other options with the north. i think we are not worse off because of what happened, i think we are in a stronger position, but it may be that the sanctions are not going to be as strongly implemented by some of the countries because of the more visible diplomatic initiatives that the north has
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had. >> sure. >> now let's get more expert perspective on monetary policy and the global economy. bloomberg's michael mckee traveled to the nab conference in washington, d.c., where he spoke with former federal reserve chairman alan greenspan, as well as former new york u.s. fed president, bill dudley. michael: you told the members of the organization here today that the longer run outlook is not so great. the short run outlook may be better for the economy than people think? >> i'm merely saying -- it could be better than other people were forecasting. i think what it is, i think most economists will agree that the tax cut and the impact of
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capital investment has actually moved the system, productivity growth had been a little over 1% for a goodly number of years. we are not coming out of that particularly, but we're not too bad on productivity. somewhat better than i would have assumed. it is essentially the result of the tax cut and how long it will last, i do not know. michael: the outlook for inflation, you suggest that there is maybe something to be concerned about out there. one of the big debates at the school of monetary policy conference last week was whether or not the phillips curve is nonlinear. we will suddenly see a breakout of inflation. do you think that's the case? alan: i think the phillips curve is misspecified. it shouldn't be unemployment, it should be a unit of labor cost. you can't really measure what
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the concept of it's going to be unless you know what productivity is. i argued very strongly in 1990 that we need not be concerned about our employment rate -- the unemployment rate declining, because we had a very significant rise in productivity, and as we came down from 6% unemployment down to 4% and lower, nothing happened. why? because unit labor costs didn't rise that much. >> i think generally what the fed is saying in the language of being patient is that they will take a pause and wait for more data. there are a number of things that pushed them off moving to more tightening. number one, a tightening of financial conditions, stock prices went down. credit spreads widened. that was one concern. second, foreign growth looks weaker, especially in china and europe. three, there wasn't any inflation. inflation was the story of the
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dog that didn't bark. even though the unemployment rate was low, you weren't seeing any acceleration of wages, and that wasn't feeding into prices. my own personal view is that as long as inflation stays, the fed will be on hold. if the economy keeps growing above pace, more pressure on resources, and inflation will drip back up. my best judgment is the fed is probably not done yet. michael: how far do they go? at what point do you risk an accident? bill: that's why i think they are being patient. they don't want to inadvertently cause a recession with inflation this low, because then people would say, well, what did you do that for? if inflation were to accelerate, then at least they have a motivation for why they are moving to tighter monetary policy. michael: what you did that for was to prevent a downturn in the economy, which this group suggests may come in 2020 or 2021. but the fed doesn't have a lot of ammunition at this point.
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to fight. bill: that's one concern that the fed is wrestling with, the peak federal funds rate in the cycle is 2.5%, 3%, is not that much room between that and zero. there has been a lot of discussion among fed officials and other market observers of does the president have enough firepower to get us out of the next economic downturn? my own view is that i think there's more firepower than people realize, because they invented a whole bunch of new tools to use if they are ever at the guidance, asset purchases, open-ended purchases, we will just keep buying assets until we actually achieve the objectives of an actual recovery. taylor: this week marked the end of an era in investing, as bill gross's retirement became official. erik schatzker sat down for an exclusive conversation. the bond king shared his views on market and politics, as well as some very personal stories
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about his life and career. personality, not to get personal -- but i have asperger's, which i keep compartmentalized. they can operate in different universes without the other universes affecting them as much. i had a nasty divorce and i still had feelings about pimco. but i think i did pretty well in compartmentalizement, not that i didn't wake up in the middle of the night and start damning one side or the other. but when i came to work, it was all business. i don't think it affected me that much, but it's hard to know. you are not your best witness when it comes to trying to figure out whether something is
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affecting you or not. so that's a possibility. erik: i didn't know you had asperger's. is that what you meant in february of 2016, in one of your outlooks, you wrote about michael lewis' book, and the movie it spawned, "the big short." you said you shared an attribute or affliction with one of the heroes of the book. and it wasn't his glass eye. bill: exactly. if you got a minute and a half, it's a fascinating story. i read that book, and lewis is a great writer. and within that chapter about you said you shared an attributs that aspergers have. that michael had as well. i read them. some of them were not being able to look somebody in the eye, which i'm not doing very well at
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the moment, singular hobbies like stamp collecting etc. i go, that's me. i took the book out to my ex-wife and i said, i think i have asperger's. she said, you do. not, you do? but she said, you do. taylor: you can find more of erik schatzker's exclusive interview with bill gross on, and in a special she said, you do. program airing this weekend on bloomberg television. ♪
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taylor: this is "bloomberg best." i'm taylor riggs.
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let's resume our global tour of the week's top business stories. oil entered the week on something of a rally, with prices up about 20% since the start of the year. that momentum shifted suddenly on monday following words from the white house. >> president trump has continued his war of words with opec, tweeting that oil prices are getting too high, opec please relax, take it easy, the world cannot take a price hike. the market is listening. should they be? >> yes. from these levels? in fact, this is part of our call for this year, expect more of this. every time the market goes low, opec, russia, imply they will cut more. every time it goes up, see signs that prices are too high. but the market is stuck in a range, and the big picture is it's way oversupplied. opec and russia have to keep cutting back to make up for all this massive production from the u.s. trump knows he has the upper hand in this case.
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vonnie: ge surging after announcing the sale of its biofarma. it is part of a larger turnaround by the ge ceo. you would have to imagine that $20 billion is a nice salve for the balance sheet, but is it enough for the longer term? >> $21 billion is a lot of cash, and it does go a long way in terms of resolving their balance sheet issues, but remember, they laid out $50 billion that they will need to bring in to resolve their overall debt issues. they are also getting cash from the resolution of the merger with the transportation unit, but as you remember, the original plan was to ipo the health care business and move some of that debt and pension liability on to that. that plan has now been shelved, and you are still keeping that pension and debt liability in the fold, and you are also getting the cash flow from the health care business. i think this is a significant step forward. but they are obviously a lot of
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issues that ge has to work through, and the fact that they are looking to keep cash flow in the fold tells me that the challenges of power are probably running fairly deep. >> making a hostile bid for newmont mining, that could unlock $7 billion worth of real synergies. the deal would be in $18 billion all stock merger. >> they are making takeover plays for newmont mining. the ceo of newmont has called this desperate and bizarre. how much of this is really that about acquiring new mount and how much is about stopping the other bid? >> this is a very carefully considered process. we have been working on it for a long time. we don't believe that the gold and the newmont deal creates any value for anyone. we do believe that, as we demonstrated, our proposal has the ability to unlock $7 billion of value for both newmont and barrick shareholders. >> from our standpoint we are continuing with the acquisition.
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we will take on board whenever we receive from barrick, but we are very excited about the prospect of joining up. we are going through the process of getting approval, shareholder approvals, regulatory approvals in the first part of april, and we have been diving into the details in terms of the value proposition that offers to our shareholders. >> warren buffett isn't giving up after a write-down last week, but don't expect them to buy any more shares. what did you take from the annual letter? >> it was kind of interesting. he doesn't expect a huge deal anytime soon, which is important given that he has $112 billion in cash, so he could be doing a large deal, but the prices are not reasonable for them right now, he says. he doesn't expect a huge deal -- how else could he spend his
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money? he spent a lot of the letter talking about his changed repurchase policy, which is interesting for him. he's normally favored eyeing businesses of other companies over purchasing his own stock, but he change that last year, buying back $1.3 billion in shares, and he explained that in his letter. i think that will help his successor. they can point to the fact that buffett himself did stock buybacks if they need to. vonnie: elon musk confronting the sec on twitter, after he's held in contempt of court. he hit back at the sec pointing out that the investor calls. musk is not breaking down. he is poking the bear. is it wise? >> i don't think the investors would say so. this is reopening a case that started last fall over a tweet from musk saying he will take the company private and the sec alleged that actually he didn't have the funding. what the most recent tweet does is reopen that issue.
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the sec goes to the judge to say we had a settlement, we had some rules in place, people will check his tweets before going out and now they are asking -- did he violate this agreement? shery: elon musk is delivering his promise of a cheaper model 3, but is also warning that tesla may not be profitable this quarter. what does this mean for tesla? this is an announcement we've been waiting for for the past three years. >> that's right. if you are a car buyer, if you had $1000 down waiting for the $35,000 tesla, this is great news. if you are shareholders, it must not be good. after trading shares were down 3.4%, getting past the early adopters of people who really wanted it, people who were obsessed with tesla, getting more into the mainstream car market. that is where you have to fight harder to get sales and reduce prices, the same time as the u.s. federal tax credits that
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they get have been cut in half and are reducing. the pressure is really going to be on them to reduce costs so they can make a profit. >> president trump's longtime former personal attorney and fixer michael cohen testifying before congress. >> i think for prosecutors, there's nothing revelatory here, but for the rest of the public, it is astounding to see a sitting president attacked and treated like this in congress. in terms of the legal issues, obviously michael cohen cannot speak for prosecutors, but he can give us a glimpse of the threads of open inquiries. we can see potential, and that is all it is, but quite interesting. >> lyft is riding ahead in the race for ipo. the rideshare company disclosed a trove of statistics as part of a filing this morning, including the average cost of a ride last month, the number of drivers it had in 2018, and how much money
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the company has lost. i want to start with how much you think the turmoil at the end of last year is driving this, and whether we will see others unicorns deciding to get in when the market gets us any indication it has an appetite. >> absolutely. we are expecting a lot of ipos this year. everybody's racing to get out. no surprise that lyft came out today -- they are trying to rush in ahead of uber. one of the most notable things was the revenue growth we saw in this company, we saw $2.2 billion, almost doubling from the year before, but like any high-growth company, we also saw huge losses. lyft reported $911 million in losses last year, up 77% from the year before. ♪
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>> i have been tracking the pound, currently trading at its
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highest level against the dollar since june. what's perhaps more astonishing, given all the brexit generation, is that the british pound is the best-performing major currency this year. compare that with last year when it was one of the worst performers. investors are obviously enthusiastic about the prospect of the delay. the question now is whether british politicians have taken a no deal exit off the table, or whether they have kicked the can down the road. taylor: there are about 30,000 functions on the bloomberg, and we always enjoyed showing you are favorites on bloomberg tv. maybe they will become your favorites. here is one of my goto functions. bpod-go. it will lead you to bloomberg's entire portfolio of podcasts, including masters in business, hosted by bloomberg opinion columnist barry ritholz. this week, podcasts include conversations with howard marks, who shared insight on markets and fed policy on stage at bloomberg's new york headquarters.
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>> the fed, some people have been complaining, they tighten too much. other people are saying they are behind the curve. you have been a student of the credit markets for decades. what do you think of where the fed is and what the future behavior might be? >> i talk about the said in a -- the fed a little bit in the book, there is a chapter on the role of government and central banks with regard to the economic cycle. the fed has a tough job. actually, it has three tough jobs. number one, it is supposed to manage inflation, keep it under control, which means that the economy shouldn't get too hot. number two, it is supposed to support economic growth and employment, for which they would rather the market did get hot. number three, there are a lot of people who think the fed's job is to prevent a recession and declining stock market. i don't think jay powell feels the latter.
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i think interest rates -- low interest rates have been the outstanding characteristic for the financial markets for the last 10 years, dominated behavior over that period. they have been unnaturally low, they were made unnaturally low in order to bring the economy back from the global financial crisis. and the abyss of collapse. there are reasons why rates should be higher. number one, rates should be at their naturally occurring levels, the free market will allocate resources prudently. to date, it has been subsidizing borrowers and penalizing savers and lenders. number two, the fed wants rates to be high enough so that if the economy slows down they can drop rates and stimulate the economy and so forth. there is a belief that there is
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an inverse correlation between unemployment and inflation, when unemployment gets really low, that triggers inflation. that's called the phillips curve. everybody, since we are now at a 50-year low in unemployment, everyone has been waiting for inflation to get going, which is what the fed's main concern is. that is why they have been talking about raising rates. but it hasn't happened. everyone is mystified by why we don't have inflation. there's no easy answer. taylor: that was just one of the many podcasts you can find on the bloomberg. you can also find them at, along with all the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. thanks for watching. i'm taylor riggs. this is bloomberg. ♪
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♪ carol: welcome to "bloomberg businessweek." i'm carol nassar. we are inside the magazine's headquarters here in new york. this week's cover story, the global challenges facing the auto industry. from car production to efforts to reduce emissions and the growing popularity of ridesharing. we've got a question for you, have we reached peak car? also in the magazine this week, what if you worked for a ceo that required you to exercise on the job and with the ceo?


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