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tv   Bloomberg Daybreak Americas  Bloomberg  March 11, 2019 7:00am-9:00am EDT

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rate policy. >> chairman powell in no hurry to raise rates. waiting for the world to catch up with the u.s. growth. it happens again. and boeing 737 max 8 crashes right after takeoff in if european, putting regulators worldwide on high alert. pbc governor -- pboc governor says there is work yet to be done to rid welcome to bloomberg daybreak on this monday, march 11. i am a david westin here with lisa abramovitz. alix steel is on assignment. lisa: and, we get a sense of how president trump is going to balance the budget. he is not. even considering faster than expected growth. let's get a check on those iskets and can , boeing leading the news after that crashsee david mentioned, the second in six months. that is what is dragging the dow down.
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otherwise, u.s. futures are up. in hang seng closed up china. monday tends to be a good day for chinese stocks and it is continuing that way. the pound falling as we get word that theresa may does not have the support for her deal. 10 year yields are near negative for the first time since 2016. can you believe we are back here? david: i cannot believe they .ere that far, the bund yields today at 8:30 eastern time, we will get u.s. retail sales numbers for the month of january. tomorrow, u.s. cpi data, and the british government will have a quote meaningful vote on theresa with furtherone, votes scheduled later in the week in the plan is defeated for a second time. on thursday, u.s. ppi and durable goods numbers. congress, that npc
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finishes in beijing. and we will also have the skinny budget from the white house today. ,e kind of know what is in it cutting all discretionary spending by 5%. and that means we will not get a balanced budget for the next five years, like, because corporate tax rates are down. lisa: i have to wonder, even bond traders don't seem to care. when they are not pushing back them up and why not just keep expanding? we about that in the show? david: breaking news right now, something that had been expected. a shipactice of technology company. you can see that nvidia shares are down, and the chip company is up on the acquisition. lisa: given the fact that this is actually more consolidation in the chip sector, it is interesting to see how that
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pushes forward. david fish time for that bloomberg first take. time for the bloomberg first take. we start with the amazing boeing news, really disturbing news of the plane crash in ethiopia. you can see what is happening to stock, down >> boeing has a big problem. after the first crash there was an assumption that some of the things behind the crash were not as much as we are now you have about five months -- there was an assumption that some of the things behind the crash were pilot training. now you have five months between that crash and this crash, and there was pilot training. if so it does indicate some sort of mechanical failure. we don't know anything at, but if there is some mechanical failure, boeing has some liability issues. it is not only a problem with
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the f.a.a. grounding their flights, but it is also a problem for investors when all the people harmed by the crash are sued. >> yes, it is a problem also first of all for the families of those who were lost. boeing shares are down, 20% of the orders of these new jets came from china. . china has grounded them. how important is bowing to the industrial sector? the dow is down entirely because of bowing right now? >> it is very important because it is important to the area. it is less important to the s&p 500 and the industrial sector, but it does come as a difficult time because boeing has been one of the best performers. this is a stock that is well beyond its last year's highs unlike the rest of the index. froms peak, it was up 50% its lows in december, still up 40%. the struggle. but we were pricing in so much, we were pricing in which things for boeing.
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this particular model is 30% of operating profit. if this starts to leak into profits, we could see greater down shares because of extraditions being so inflated. expeditions represented by what the stock price is doing. lisa: we will keep with boeing for the render of the show and for the day, frankly, because it is such an important story. we got some economic data from china overnight. , the idead new loans that perhaps credit is accelerating as quickly -- is not accelerating as quickly as expected. exports picked up, basically trying to paint a positive she on the economy at the time where there are ongoing tensions on trade. what did you make on this data? was it positive enough to generate optimism about global growth? gina: all these mechanisms by which monetary policy will impact the economy in china are
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really inspecting a selected group of companies and is selected segment of society. look for at the yield curve, the credit card, it is only the highest quality credit borrowers getting a lift from this. you see that in the stocks as well. the stocks of have a greater percentage of their companies are outperforming the rest of the chinese shares. there is clearly not the wide spread impasse yet, and that is represented in the data. expectations were for better improvement and we saw in these segments. i think you are getting incremental but not widespread improvement. it suggests that we will not get this huge lift in global growth from china just yet? david: we keep asking ourselves, how much of it is the trade chinaand how much is itself? yesterday 90's conference, they said, we are close to consensus that we are not there yet. >> the answer is both. china has to get its house in
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order. there is a lot of bad debt in the corporate and banking sector that nobody has a real handle on. it is something that could bring down the economy domestically. then, we are in the middle of trade talks with the u.s.. trump is honestly a hardliner on that front and china has, of both of those sol -- for china to come out of that cleanly, it would be a tricky act? david: chairman powell give us his paws and what is going on with monetary policy. >> patient news we don't feel in a hurry to change are interested policy. what has happened in the last 90 or so days is that we have seen increasing evidence of the global economy slowing down, although our own economy has continued to perform well. >> gina, this is the interesting tension. our economy is doing ok, the problem is the rest of the world. how does an investor reconcile those two things?
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gina: i think now they are reconciling it by looking for evidence that it is leaking into u.s. data. the employment report was relatively weak. some of the customer numbers we've had lately haven't been as strong. so the investor class is looking for signs of weakness in the domestic economy to reflect what we are importing from the rest of the world. we have yet to see any perfunctory classes in march, i think that is what is keeping this position -- when he tuesday of hold, we don't know if our next move is tightening or easing. are talking earlier about the skinny budget that the president just released and a lot of it hinges on strong growth, 3% annually. is there evidence that the strength we're seeing here can continue for the length of time they are relying on to balance the budget in even 15 years rather than 10 years? toi think it is a misnomer
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balance the budget in 15 years, that is not what you expect out of a sophisticated, developed western economy 15 years is very far down the road. on very robust economic growth. i think people should be .autious in the near term corporate earnings remaining issue in the near term, job growth and consumer spending remain an issue. there is a lot that people should take caution from. david this and that is after he promised 10 years. right, he will kick and on the road. david: thank you both for being here with us. the reminder, you can look at all the charts we just featured on the gtv terminal. coming up, more on fed chair powell's no rush attitude with peter tchir, academy insecurities had of microstrategy. live from new york. this is bloomberg. ♪ this is bloomberg. ♪
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♪ >> this is bloomberg daybreak. with yourna hurtado bloomberg business flash. their bid purchase this is really chipmaker, mellanox technologies, the price, $6.5 billion. the deal will give nvidia a foothold in the growing market for data center components. levi strauss is betting it can overcome growing competition in the apparel industry. the iconic make of dan in pants and jackets will offer -- maker price will bethe $14-$16 a share. levi strauss is repetitively valued at $5 billion, the majority owned by descendents of
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the founder, levi strauss. saudi arabia is extending those deep oil output cuts into next month. bloomberg learned the saudis will supply customers with significant a less oil for april, the latest sign that the saudi's are determined to regain control of the oil market. that is your bloomberg business flash. david: thank you very much, viviana. fed chair jay powell says the are in no hurry to raise rates. >> i don't think we would overreact to inflation modestly above 2%, anymore than we overreacted to inflation modestly below 2%. i think we will always be moving inflation back to 2% but we do that in a symmetric way? david: we welcome peter tchir, microstrategy had. thank you for being here. how far off the trigger is the finger?
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peter: i think last year they went too far, this is a good cause. it let's the past hikes work their way through the economy? david: there was a column in bloomberg opinion last week where the writer talked about how he thinks the market has gone overboard with discounting any further hikes come and there could be a slowdown in the first half, second half, a pickup? data: i would see how the plays out. i am optimistic that we'll get a trade deal and did i would pick up, but maybe expect a rate hike in december? david: what effect has that had on economic conditions thus far? i think they slowed it down a lot. i think we saw housing and autos both very dependent on rates slow down. again, they are right to pull back, they went overboard. i think a lot of things occurred to hurt the economic conditions as well -- stock market volatility. so we are looking for some
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pickup in the data. the payroll report didn't help third much, but there are a lot of signs the economy is picking up. lisa: the u.s. economy, everybody says, is super strong. how low can extradition's go for europe? everyone is saying that low canions -- how exhibitions go for europe. we have turkey in recession, how much is it going to bleed into the u.s. economy? peter: to me, first we need the trade deal with china, then, how do we react with europe? the rig go after them with auto tariffs, or do we play nice and try to encourage global growth and try to get everybody to get had anto the nice sync we year and a half ago? david: when you compare prices with europe and the united states, they are headed in the wrong direction. they you are prices are coming back and the u.s. is tapering
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off? peter: i think people got too optimistic about our ability to avoid this or too pessimistic on europe. everybody seems to be downplaying draghi's message. lisa: i want to be off topic a little bit. we will get retail sales in the next hour. i have to wonder, people question the validity of china's data. is the u.s. data getting equally messy? perhaps i am being overly dramatic, but the december .etail sales numbers -- wow peter: i think we have this factor of garbage in and garbage out. you would think we had better data collection at this day and age. let us spend on getting better data collection on the u.s. government so we know what our retail sales look like. fuzzy.ay too lisa: do think at this point of the data has become messy enough to discount? do think it was fair for people to just write off the december
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sales numbers? peter: people looked at the numbers and said, it doesn't make sense. adp was strong, so whether we have this weird data? we're supposed to spend time getting better data collection. it is garbage? david: you have the upside in the downside. gdp numbers were surprisingly high. often when we break these numbers down, we said, is this right? peter: payroll came in over 300, which again, was a bit of a head scratcher? david: but in fairness, you shouldn't pick a single data point. if you take it on average overtime, it is ok? peter: i think we have to take it on average and look at three-month averages. but it shouldn't solve the problem, we should investigate how to better collect data. how do we avoid this garbage in, garbage out problem. lisa: how much of the messiness is potentially politically motivated, if any? peter: i don't think so. lisa: i ask because i honestly -- i'm not saying it is, but this is clearly what some people
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will say. when you. talk about china, that is what they say. that it is a politically motivated massage of the data that gives a certain message. are we heading toward that in the u.s.? peter: i think people are trying to do everything within the bounds of what we have to work with. household data is still knocking door-to-door versus payroll. i am not worried is that it is politically motivated, but i do think we should address it. lisa: all right. david, it wasn't that bad. peter, you are sticking with us. coming up, boeing is under pressure after a second 737 max jet rushes and kills 157 people in ethiopia. more on that next. this is bloomberg. ♪
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>> boeing is under pressure. shares drop about 9% in premarket trading after the
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37 max eight jet crash. we are joined by two guests. consultingages projects for the commercial and industry.ircraft we start with our first guest, what is the latest. how is boeing responding and which nations have granted the 737s? >> so the news this morning was that china is among the countries that have round of the plane amid concerns that what happened in ethiopia over the weekend was potentially a repeat of what we saw in indonesia last year. there is no confirmation of that yet, so one has to be careful. clearly, bowling shareholders are concerned about indeed there is something about the design of this plane or the way it operates but causes difficulties for pilots. shares are down about a present this morning, roughly 20 billion
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of boeing's market capitalization wiped out, so it is a very serious situation developing. boeing has sent people to the crash site but there is no information yet of what exactly caused the crash. have heard that the black box has been discovered, so hopefully we will get that information soon. passengers also want to know if the aircraft is safe. lisa: richard, given your vast experience and perspective in the industry, is there enough information to establish whether this was a pilot operation issue or whether this was some kind of plain-specific issue? richard: we don't know anything at this point. they will just have to work as closely as they can with regulators to find out any details they can about the crash happened.ain what it will be a nervous and intense next couple of days and weeks, i am afraid? david: so we don't yet know what caused the crash. let us jump ahead if we could.
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if in fact there is a problem what iss 737 max 8, that due to boeing? how material is that to boeing's bottom line? richard: on the positive side, it is unlikely to be a fundamental design problem because of the did not change the fundamental nature of the 737. it could very well be a repeat of the disaster with lion air, in which case they will have to make software modifications, there will be training procedure changes, o following which gets quite expensive. but at the end of the day, you will not see the same airworthiness of it called into question. it is just a question of how many resources need to be devoted to coping with this. lisa: that is an interesting point because that was part of the issue of the 737, the upgrade. let boeing didn't want to have to force pilots to actually get more training because of how
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expensive it was an because they were competing with airbus. can you talk a little bit about that? richard: both sides at the same ngine theird to re-e existing designs. there was a little bit of a race to do it, but i don't think anyone has alleged that there was a decision to cut corners, rather, there is a feeling that there was perhaps more that needs to be done to get pilots familiar with that. not all of the pilot union said, we feel shortchanged of information here, some said that this was common to -- commensurate with what it'd to be done for the design change? david: what might this mean for boeing in a competitive race against airbus? this is a very competitive industry and these short-hall flights have become the new short-haul flights have become the new
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thing. chris: boeing had something like 6000 orders -- 5000 orders for the 737 and editing they will be stepping away from that yet. should airlines will want assurances that the aircraft is safe. and that the functionality is clear for the pilot. there was a lot of discussion last year round of the automated system on board the 737 max which forces the nose down in certain circumstances. nearly, if there is a software fix required, in his to happen. but as i said, it is not clear yet. we have seen the report about -- it is not clear that we have seen a repeat of what happened last year. lisa: just about 20 seconds, i'm curious, richard, do you think
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it was prudent for china and indonesia to ground the planes ahead of any more information? richard: it might have just been necessary because of passenger reaction against flying on the planes. . you can't second-guess the regulators. at the end of the day it is their responsibility to keep the flying public safe? david: thank you to both for being with us today. coming up, closer to a trade deal? china and the u.s. agree on crucial issues in trade talks. about vision is pushing back against some of washington's demands. the asset manager had of emerging markets and joins us next. this is bloomberg. ♪ is bloomberg. ♪
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lisa: this is bloomberg daybreak. alix steel is on assignment today. nasdaq futures pointing up. tech is leading the way even as the dow sinks as we have boeing
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leading shares lower in that index. up, shockinges given the fact that theresa may does not have support for her latest brexit plan and the dax up as well. let's get a checkout was going on across assets. crude getting a bit as saudi arabia plans to prolong their output cut. 10 year yields climbing two basis points. iron ore dropping. trade talks on-again/off-again. now we are off-again a little bit or there is some skepticism? and theney skyrocketed the disaster down in brazil. hurtadorn to viviana who is here with first word news. viviana: president trump will propose a budget that would not balance for 15 years despite plusger economic growth,
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the president is calling for domestic spending cuts. these have little chance of passing congress. a warning for opec. the oil cartel will be squeezed by u.s. shale producers in the middle of the next decade. the iea saying by 2024 opec's capacity to pump crude will decline because of declines in iran and venezuela. energy slowly returning to crack as.-- to carac the rest of the country remains in the dark. the struggle over electricity is feeling the power struggle between nicolas maduro and juan guaido. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. david: this venezuela ongoing
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disaster. ,ights are coming back in parts although not the rest of the country. lisa: it is a tragedy they keep steepening. you have to wonder when the country does emerge, who will be left? the immigration away from venezuela will be shocking. -- has been shocking. david: now we turn to china. china says it is making progress. governor says there is a consensus on some things and gave a specific interpretation on currency stability, saying we are consistent on several issues. we talk about not engaging in competitive devaluation. china will not use the yuan exchange rate as a tool to boost exports or ease trade frictions. we welcome james donald. still with us is peter tchir. welcome, james. give us a sense of where you think we are in our talks with china. james: it is hard to tell.
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quite frankly. i've never seen such a huge change in the consensus. in october and november things were very pessimistic. it did not look like a deal could be done in any conceivable time period. now there has been a lot of optimistic comments, including the one you just gave. i would say that consensus is there will be a trade deal. need toa lot of things be tackled first in order to have a comprehensive trade deal that will reassure the market. lisa: that is a good place to go. that would reassure the market -- what does the market need to get in terms of a trade deal in order to rally? peter: we need to get a trade deal in place. when it currency. we'd access to their market. people will downplay that we do not get enough intellectual property protection and that is why we will see a bit of self. -- a bit of sell.
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we can forget about the bad data and let markets rally. i do not think it is a high hurdle in the trade deal. what is important is what gives on next. david: suppose we get something but it is not nearly what we were promised. it does not sell at a big ship from where we were to begin with. is it enough to get some sort of deal to get some of the tariffs off? james: i think the markets need to be reassured further than that. we are looking into an election year next year. there's too much of a chance that trade issues can come up again. deal,do get a major trade that is the sort of thing that could reassure markets tremendously. you could see a tremendous further move in china if that happened. i think it is going to take a lot to do that. peter: once we get a trade deal,
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several important things to look at. what we do with canada and mexico in terms of the steel tariffs? do we roll those back? what about european autos? we fight them or back off? a lot of direction this could take. is this a sign we will negotiate with everyone, or is this we negotiate with china and pick more fights with europe. drivingw much is trade down chinese growth and how much is that hampering economic momentum in the united states? do have a view on that? james: i think it is having an effect on growth and direct investment in china. during the last 25 years it has typically been high. .ow is virtually nonexistent at the same time, there are other things. deleveraging corporate balance sheets has been a big factor. trade has had an impact. david: taken beyond china and
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into emerging markets. i will put up a chart that shows global trade overall has gone down. james: global trade going down is not good for emerging markets. you are seeing a negative effect on economic growth in emerging markets. i think you are also seeing deceleration of growth elsewhere and probably in the u.s. to a larger degree. the actual premium of economic in emerging markets has a high chance of increasing this year. david: are valuations low enough to make sense to invest in emerging markets? james: there are always risks in emerging markets. this is the chief asset class. there are interesting characteristics. flow.creases in free cash there was a large capital expenditure cycle between 2010 and 2016 that ended.
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we are likely to see pretty good returns and other areas. i remember not so long ago, when people were worried about the credit growth in china. it slowed down, but is still growing dramatically. take a look at china's total debt. ofhas risen to about 260% china's economy. it is surging. i'm wondering, how much ammunition does the nation have left to continue to prop up the economic? peter: i think it will get more difficult. we also see a shift where we see some of the company debt disappear and be replaced by sovereign debt. chinese government bonds will be entering some of the bond indices. i think you'll see a true market for china. international bonds develop. .aybe a few large corporations
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i think that will be part of what china has to aggressively adjust for over the coming years. david: does it matter? the u.s. is borrowing more money but we do not save as much. china saves a lot. a lot of the investors in chinese debt are chinese citizens. can they sustain a high level of debt? markets, therging jet -- the debt to gdp ratios are low compared to china, europe, japan. china is a different situation. is that in the global financial crisis, china cannot afford a major recession or the possibility of a depression. it decided to spend a great deal of money. it was alarming, the increase in debt, especially until two or three years ago. it concerns me less right now
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because i think some things have been done that are improving the position of some of the companies that need to be financed, particularly the state owned enterprises where lossmaking had become profit-making now. that is important. that means this credit growth is going to flatten somewhat. lisa: i want to go back to what you are saying. perhaps not as worried about china as you have been in the past, including the credit growth. i want to talk about other nations, for example, turkey, which just entered another recession. the of other nations that are having trouble. nigeria has been borrowing a lot. how apache is the emerging-market framework and other nations you would not invest in? y is theatch emerging-market framework and
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are there other nations you would not invested? bees: they're always countries going through good times and better times. turkey is in a difficult situation, some of it i would say self-inflicted. argentina is in a difficult situation. lisa: would you be buying in those places? james: yes. if valuation is important in your investment approach, there are stocks that are interesting in those places because they are so cheap. there are also exciting opportunities that look better. indonesia, politically, is going through a time that looks impressive. , if they prioritize pension reform, if they actually get a comprehensive tension reform through, it could be a very bright story indeed. david: for this discussion
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through the lens of an investor. what does this tell you about where we should be investing or not. large caps versus medium or small caps or industrials versus cyclicals? james: we have a group of 11 retired generals and admirals who served as our devise a report. i agree that indonesia is changing in ways that are interesting. turkey we have been nervous about. we have seen a big push toward russia and away from the u.s. and we see that continue on the military side. turkey we would be more concerned about and venezuela has been a very depressing situation. we are surprised how well the military has stuck with nicolas maduro and there's been very little progress. we thought this would have shifted toward the humanitarian side. that is an area to watch. that is a cold war cap of influence where you have russia and china on one side and the western world. you are seeing russia and china versus the u.s. playing out in
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microcosm. seeing global tensions. lisa: i am wondering, bonds or stocks when investing emerging-market? periodwe may go into a where currencies and local currency debt and equities all do relatively well. it depends. a strong dollar is not typically good for those areas, but if we have a flattening of the dollar or a slightly falling dollar over time, that could be fabulous for those areas. lisa: do you agree? james: i think we could see a lot of growth. venezuela, we see india investing a lot of countries like china. i think there are a lot of growth opportunities in emerging markets. lisa: james donald and peter tchir, really interesting to date in. -- to dig in.
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deutsche bank in commerzbank edge closer to a merger. this is bloomberg. ♪
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viviana: this is "bloomberg daybreak." next hour,n the related companies ceo. i'm viviana hurtado with your bloomberg business flash. temperature -- tesla will raise vehicle prices. the electrical carmaker will shut down fewer stores than previously announced. after teslaes
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alarmed analysts by saying it would close most of its bricks and mortar stores. the company is in talks with china about ordering batteries to power its cars. carlos ghosn tried and failed to join a board meeting at nissan where he used to be chairman. nissan/renault and mitsubishi are planning to form a single board for their lines. -- their alliance. than 108 days behind bars, carlos ghosn was freed on bail. "captain marvel" is heating up the editors in north america -- up theaters in north america. disney says captain marvel's global opening of $455 million was the sixth biggest ever. that is your bloomberg business flash. lisa: we turn to the wall street beat where we cover three things wall street is buzzing about. criticizing maternity
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leave cuts. top female executives site maternity leave for long-term cuts to their bonuses. citigroup launches a new currency trading hub in the region. deutsche bank and commerzbank edge closer to a merger. the german banks intensify formal talks as time runs out for a turnaround. we'll be talking about this for a while. joining us is jason kelly, bloomberg's new york bureau chief. david: i read this and i almost thought it was a typo. lisa: the headline was a typo? david: you can take maternity leave except we will hold against you. jason: that is the point that is the most surprising. timesing to the financial , women at ubs taking financial
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leave -- taking maternity leave. this is a dozen women. not only with their bonuses cut, but then essentially it resets the level of their bonus going forward. it is a long-term punishment. i have to agree with david. it is 2019. lisa: there a lot of things i read and i am like, it is 2019. they were also saying ubs was using this as an excuse to cut back expenses and cut bonuses, which is what they want to do anyway. you've seen this across the board. it does not excuse it. it is 2019. that is the dumbest excuse i've ever heard. cut people, cut people. to cut the people on maternity leave? i don't think so. lisa: let's move along. jason: there will be any disagreement. lisa: hsbc is moving more of its
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employees to singapore, trying to boost its high net worth investing personnel so that it can cater to some of the rising numbers of wealthy individuals throughout asia. this was interesting because, oh my goodness, the growth in ultrahigh net worth individuals in asia, which means $30 million or more of net worth is astronomical. jason: the numbers do not lie. you look at the growth of the super wealthy, people with $30 million or more. india leading the way but then you have philippines, china, vietnam, the rest of asia, southeast asia and asia leading the way. 700 private banking jobs. hsbc is talking about moving to singapore. the other number that jumped out at me, the number of asian billionaires will rise 27%. the number by 2023 will be more
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than 1000 billionaires in asia. this is where we quote willie sutton who robs banks because that is where the money is. asia is where the money is. banks.rush of who has an advantage? jason: it is hard to say. some of the more traditional players, probably some of the european banks have been there and some of the london-based banks who have had outposts there to the old days of hong kong. do not count on goldman, morgan stanley, and others. lisa: which cities in asia have an advantage of recruiting billionaires and banks -- singapore has made some had roads. david: deutsche bank and commerzbank. the ceo has thrown in the towel. he has resisted a merger and now he said fine, let's start
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talking about a merger. it almost feels inevitable. jason: it is starting to feel like that or it has felt like that for a long time. a couple notable things. one is it has come out through various reports and other competitors this is the deal that was originally talked about in 2016, what would it look like? taking some of the retail division of commerzbank and merging it into deutsche bank and having it is a separate company. we do not know what they are considering. the other thing that is important about this is the german economy is not doing great. that is what has the clock ticking. lisa: germany's goal is to give loans to local companies. gate?t deutsche bank's -- gig? there are some a banks that are trying to lend to small businesses. isn't deutsche bank's then that they are a global bank?
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david: of their the deutsche postal banks? jason: could be. ,o the point of global ambition i think they have still that that dramatically. if you look at what they've done the u.s. alone. we will see what happens. david has said this many times. i keep quoting you. ,t is hard to imagine a world -- a world where the german government says there ok without deutsche bank. david: you can tune into jason on business week on bloomberg radio every day from 2:00 to 5:00 eastern time. tesla doubles down on china. said to be in talks with the chinese battery producer to power model 3 cars. this is bloomberg. ♪
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david: this is what i'm
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watching. a lot of tesla. according to people familiar -- they give us a lot of our news -- the chinese battery maker are in discussions with tesla to make batteries for the model 3. lisa: this i thought was interesting. if elon musk pulls this off, if people's this one off, it will be fortuitous for the company because it is the world's biggest car market. they are ahead of other areas when it comes to electric vehicle adoption and it pushes forward the factory -- they got loans in china to build that factory. it'll be interesting to see "off the ground and break into that market. david: in the meantime he is a big court experience today. lisa: yes he does. david: he violated in order
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saying he cannot between things he -- he is tweeting things each not be tweeting. lisa: the message not so good. but they could be making inroads in china. david: exactly right. lisa: they are also casing the prices on their snx. tesla news all over the place. elon musk is great at messaging when it comes to getting his name out there. david: coming up, denise chisholm, fidelity head of sector strategy. we will talk to her about the fed and em. live from new york, this is bloomberg. ♪ you.
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a news conference over in beijing. also today, i have to say we have the so-called skinny budget from the trump administration. that 5%arly across-the-board as far as the
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eye can see cut out of the u.s. government according to itsident trump area lisa: will be interesting to see how much pushback there is on the stronger economic growth projections. 3% growth projections we have not seen for long time and most economists say will not happen. even with the expectation of a prolonged 15 years before we balance the budget it is reliant upon that growth outlook. david: no economist seems to agree with that but they got it -- they don't get as much money out of corporate taxes. we have a red headline. barrick with drawing its offer to buy newmont. proposals for the shareholders. it looks like also withdrawing the offer to form a jv in nevada. we will see. barrick is withdrawing newmont by and proposals. i think i miss reading the headline. i think what this says is they will go forward with the joint venture.
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1% andarrick shares up newmont shares up 1%. david: i correct myself there. lisa: i've got to say, the mergers in the gold space, absolutely fascinating this year. david: the interesting thing is if they can have their cake and eat into. bible assets in nevada without actually merging the countries. -- the companies. let's get an update on headlines outside the business world. viviana: searchers discovered what may be keys to the mystery surrounding the crashing of an air ethiopian jetline. they found the black boxes from the boeing 737 that crashed minutes after takeoff. all 157 people on board were killed. max inond crash of a 737 months.
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a global grounding could put .inancial pressure on boeing president donald trump will propose a budget that would not balance for 15 years. despite assuming stronger economic growth than private forecasters expect. president is calling for deep domestic spending cuts. these have little chance of passing congress. a warning from the international -- from opec. the oil cartel will be squeezed by show producers until the middle of next decade. the iea saying opec's capacity to pump crude will shrink because of the kleins in iran -- iran --of
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because of declines in iran and venezuela. although our own economy has continued to perform well. david: we welcome the fidelity head of sectors energy coming to us from boston. good to have you here. listening to jay powell i could not tell as it was good news or bad news. i guess it's good news because we are not getting a rate hike anytime soon. if we have a bigger problem could it not affect global economy as well? a very strong bullish signal for equities. 80% of the time with double market returns historically unless you are in an economic recession. that is clear historically. the fed that pitted can
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in atall declines recession. outside that it has been a bullish trigger which means the market has discounted whatever slowdown is about to happen. lisa: can you care the market discounting its weakness we are expecting going forward with the rally we've seen so far this year with tech shares? they have driven the rally in stocks with netflix and facebook's leading the charge do expect that to continue? denise: from a technology perspective when we really saw washe fourth quarter extreme dislocations in the equity market especially relative to the credit market where some of the signals i watched were most dislocated, the relative valuation of defensive sectors versus cyclical sectors like technology specifically. evaluation spreads we see expressing fear in stocks and the valuation of high risk which
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is evident in technology. with the rally we've seen all of the dislocation measures which moderated somewhat are still in top quartile readings of historical ranges suggesting if we are willing to look at the next 12 months despite the rally we've seen there tends to be upside in a likely situation especially in cyclical sectors. david: i believe a lot of the drive up with tech has been driven by a handful of large players such as google and facebook and amazon. warren, theytor were thinking about breaking these things up. is that a danger or is that often the horizon? denise: in terms of regulation the impact you would see would be through margins so that's the biggest risk to the technology sector. if you want to find the data
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it's in our updates you can find the what you see historically is this sector has the highest margins it's had since the 1960's yet it's international equities
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to take a leadership position. lisa: iq so much. you will be sticking with us. we'll get more coming up. we will be speaking about china. china and the u.s. agree on crucial issues and trade talks. beijing pushing back against washington's demands. this is bloomberg. ♪
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viviana: this is bloomberg daybreak. dropping its hostile $70.8 billion offer for newmont mining. it says the two companies will
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enter a joint venture agreement in nevada where both have gold mines. eric says it listened to shareholders and agree to shareholders and agreed the nevada project was the best way to realize the minds potential. nvidia agreed to buy mellanox technologies. $6.9 billion in cash representing 14% premium. the deal will give nvidia of put -- a foothold in the growing market. levi strauss is betting it can the economic maker of denim pants and jackets will offer shares in anand ipo it could raise up at 500 -- reportd billion. flash. your business lisa: defining progress. china delivered to push back against the man's made by washington with chinese officials offering their
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interpretation on progress. is yuan stability. he said we'd reached consensus. we talked about not gauging in competitive devaluation and compliance with previous commitments. china will not use the exchange rate as a tool to boost exports or ease trade frictions. still with us, to nice chism -- sholm. chi dv others any reason to trade off of recent headlines out of china? i wonder who is trading off of these headlines that are basically meaningless because they flip-flop every day? denise: it is tough to trade off news flow. what you want to do as investor is get to the signal. you see a lot of signals in china. sort of the trade wildcard aside that can go either way to your point. there are a lot of signals building on themselves over the
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last three to six months. david: how much of it is trade and how much of it is the fundamentals in china? if we did get a deal with china in the next 30 to 60 days what sectors will be most affected? denise: the trade deal aside let's go to historical data which has a pretty specific investor playbook. historically in china the stimulus they built up which is 3% of gdp over the last 12 months does not tend to hit until the 12 to 18 month timeframe. on top of the inflection we recently saw which was confirmed by loan approvals increasing. if you put those together, which is interesting you're seeing it at the same time that rotter asian le eyes are turning at the --e -- broader asian
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,roader emergent market stocks we've seen some multiple compression. if you put those data points together and say what does it for donnelly influence that we can watch you want to watch the manufacturing index. we are in a contractionary position. if those indicators and up turning which history suggest they have a pot probably of doing, turning that index higher tends to be a cyclical event even in u.s. equity markets with specific sectors in technology, technology, financials industrials and materials. lisa: this is interesting from a lot of perspectives. i want to talk about what this means. he said the u.s. equity markets may not be leading global markets forward in the next six to 12 months. do you think it's a emerging markets led by china? denise: i do.
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the risk reward is most positive there in terms of the two things i see that are rare signals that have had historically high probabilities, the relative valuation of those emerging-market equities and china specifically that has its thats -- raised emerging markets would outperform. we are at a rare level we have not seen a lot in excess of 90. that does not mean it will but it shows you the change in terms of what we see on a go forward basis. the second signal is what i was talking about in terms of valuation spread. the difference between high valued stocks and low valued stocks is suggestive of crowding and fear. people are crowding into stocks they think are immune to whatever concern you have like a trade war driving up multiples. indicate the
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equity market has discount a lot. arid: if as you say pmi's e key, though it matter whether it is services or composites? we've seen some diversions where manufacturing is going down while services going up. denise: extreme divergence specifically in china. really when you look at equities the correlation has been tightest with manufacturing indices. they will give you that second deviation. second derivative measurement where services are not. lisa: one thing i'm struggling with. you expect china to engage in more stimulus in the second half of the year. how much ammunition does china have to continue to stimulate its economy given how substantial its debt growth to gdp has been?
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denise: i think that's a good question. it may be a temporary phenomenon. will continuef it to stimulate for the year but what we've seen in hindsight between a reduction in interest rates and tax changes has been significant at 3% of gdp. what you seen in the inflection in credit focusing on the changes we've seen is suggestive that the headwind of deleveraging is at least temporarily forestalled. i don't think you have to make the argument as an investor to say it's on to be like 2009 where debt to gdp had a longer runway. that inflection between declining manufacturing indices and accelerating is pretty significant on top of that valuation framework that may get more of a tailwind despite the fact that real leveraging might not be as significant as seen historically. david: coming up, barrett and
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its hostile bid for newmont. instead the companies enter a joint venture. this is bloomberg. ♪
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david:david: time for the bottom line when we look at three companies with watching. isholm.ith us, denise ch barrick accepted a counter proposal from newmont saying why don't we get together on a joint venture on those nevada assets. denise: which is interesting because it is perhaps both of them winning if you look at shares going up. said we have no problem with sticking with this. arricks now getting -- b getting in on the action. gold is definitely a small portion of the materials index. i've seen broader is relative
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levels whichbottom does not always mean you want to buy the materials sector but it's pretty strong. 70% odds. in terms of that valuation spread metric as expression of fear is most dominant in the material sector. a high degree of dislocation so a lot of fear would represent the ability for materials to climb that wall of worry. agreed towhile nvidia make its biggest acquisition ever. paying inechnologies, cash for the american israeli company. what i think is interesting, more consolidation in the chip sector. .e tried this before will this should consolidation be what is being proposed? david: the third company, boeing. brooke.,
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brooke: you're seeing that in 18%.tocks down the second crash of the 737 max plane in five months. too much of a coincidence in my opinion to have two of these planes relatively new planes crashing in that short amount of time. we are still getting information. we don't know what caused this crash but there seemed to be some similarities between the two as you look at the wreckage does appear this ethiopian airlines crash was caused with severe impact. david: the tragedy all the lives lost. did they think they got to the bottom of what happened? denise: i think that's what really is raising questions. the issue in the lion air crash -- we are finding out information. the leading theory is this change to the flight control system that boeing implemented with this new model, the 737, designed to prevent the loss of
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lift so it forces the plane nose down. sensor reading. it's not clear that was the blame in the ethiopian crash we had. this system design was sort of well-publicized. after the lion air crash you would think that the pilot would be aware of this feature and know the countermeasures to take . that raises the question of is there something else? another problem with this point we don't know about? lisa: shares just recently took a leg lower in premarket trading . i'm more than 10%. denise, i would love to get your thoughts since boeing is dragging the entire dow index lower. do you have a sense of whether buis will be sending a signal to investors ory is this something you don't play in? denise: you don't plan it. i think what's critical is
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margins. unlike what we talked about in technology were margins are at all-time highs and valuations are at the 33rd percentile you don't feed and valuation support in arrow space and defense. those margin trends are key indicators to watch. with a lack of support the risk reward potentially with that shift is sort of onerous. david: thank you both for being with us. coming up we break jay were a retail sales data and take a look at the health of the consumer. manhattan's new $2 billion shopping mall. joining usill be next. this is bloomberg. ♪
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lisa: this is "bloomberg daybreak." alix steel is on assignment with her oil friends. nasdaq futures up heading into a higher opening except for
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boeing, driving down the dow. shares plunging 10%. u.k. stocks higher. dax in germany also higher. you can get a check of what is going on across assets. 10 year yields up one basis points. we are getting january retail sales. they did rise .2% month over month. retail important because sales advanced more than people had expected in january, but, last month revised lower. that number was bad enough. even more questions about the data collection process. people dismissed it out of hand saying they were inaccurate because they were so low. the backward look was even worse. david: one thing for sure is the data are surprising almost every week, whether it is the jobs
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numbers last friday or the gdp numbers or the retail numbers. for january, there's been revision further to the downside because people were not believing the numbers for the last month. lisa: if you look the retail they wereuding autos, better than expected in january, but even worse than they were in december. it really raises questions about the data collection process. it goes back to peter tchir's point about how they collect the data and whether there will be more pressure to make it cleaner. joining us is bloomberg news economics and policy correspondent michael mckee. michael: i do not think there is a problem with the data collection process. people do not spend as much money during these months. we are looking at declines in motor vehicles that pushed down the headline numbers. we new motor vehicle sales have been off. -- furnituresales
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sales down, gasoline. as gasoline prices go down, you have an effect on retail sales because they sell less in terms of the value of what they sell. lisa: people say when gas prices go down, people spend their money on other things. shouldn't it be a wash? michael: people say that but that is not necessarily true. david: was it just the market overall and financial conditions? december was an ugly month. did people sit on their pocketbooks and say i'm not sure? michael: it looks like they did. personal spending numbers were not good for december. we also have the government shutdown. a lot of bad things happening at once and people may have decided to pull in their horns. the good news in the january numbers is the general merchandise sales were up .8% after a 1.5% decline in december.
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retailers -- amazon up 2.6% in january and that maybe gift cards. those are not counted until they are spent. everybody gets their gift cards on christmas and not spend it until january. the good news -- eating and drinking establishments up .7%. the ultimate discretionary spending. if you are pulling in your horns, you're not going out to eat. people went back out to you again. lisa: what does it say to you that people roundly dismissed december being wrong and that the revision was even worse than the numbers we saw? michael: it may suggest the numbers were better than the market wanted to think they were. more accurate. there's a tendency to dismiss outline numbers and they can be statistical noise. it does not mean the numbers are wrong but it may mean for one month people do not spend that much money. and then they come back.
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when you look at it over the course of a year, you will not be able to find the numbers. it looked like a big deal at the time. we are seeing a bit of a slow down into 2019. it is not falling off a cliff because we saw a rebound from the december numbers. david: many thanks to michael mckee. retail sales came in for january significantly better, excluding auto, then had been predicted. at the same time, revisions were downward for december which had already been negative. down 2.1%. s&p futures up a little bit given the news. now want to turn to something in manhattan. that is hudson yards on the west side of manhattan. the largest private real estate in the united states. it will ultimately encompass one million square feet. michael bloomberg played a role , first aselopment
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mayor of new york, and that he made a personal donation for the building of the shed, a cultural center for the arts. welcome the ceo of related companies, jeff blau. welcome back. it is going to happen. are you ready? jeff: this friday. we are ready to open. it is almost like when you're renovating your apartment and you have two weeks to go and you're not shirking get done, it is amazing what can get accomplished in the last seven days. it might be a photo finish but friday we open. three office buildings, two residential buildings, one million square feet of retail. i'm glad to hear retail sales are up. 100 different shops, 20 different restaurants, and equinox hotel and equinox club. lisa: so many aspects of this project is hard to know where to start but let's start with retail. one million square feet to do you say? jeff: we are anchored by a neiman marcus. david: the received wisdom is
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malls are dying. this is a special kind of mall. jeff: we do not call this a mall. it is an urban retail center. david: it does not trip off the tongue. lisa: you can call it any other thing, but it is a model. jeff: we have seven levels of retail in the middle of new york city. the largest retail building in new york city anchored by neiman marcus, 100 different shops and 20 different restaurants. ise you said, retail changed, even from one we started construction. we redesigned who would be inside. neiman marcus adjusted their business plan. we changed. a lot of restaurants, a day out. people do not need to go to the mall to buy a shirt. they can do that online. they like to make an event out of it. have dinner, go to a shed and maybe buy shirts on the way out. david: is this a destination for
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people who do not live in the vicinity or is it more people who will be there? yup a lot of people living in the area. jeff: it will be both. we think everyone who comes to new york will come here to shop. it is not just retail. the high line has become the number one tourist attraction. over 8 million people year walk the high line. it happens to dead end into our retail. you spend a couple hours on the highline and have lunch in our retail. lisa: i wonder how difficult it was to market all of these need -- these new units at a time when there has been weakness in the new york housing market, especially given the fact it is hard to price this region. it is an emerging market. jeff: right now hudson yards we have two rental buildings and two condominium buildings. highest rents in new york city at the corner of 30th street and 10th avenue, in the
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midst of one of the world's largest construction sites. we get our lowest rents on the upper east side. new york city has shifted west. whether it is corporations, where people want to live, and hudson yards is at the epicenter. david: their arrangements you make with the local government for a huge project like this. those are in the center of attention because of the amazon situation in long island city. there been reporting that taxpayers do not make out in those deals. what is your perspective? jeff: i think what happened to amazon is a disgrace for new york. you $3id i will give billion come at you give me $25 billion, will you haggle over the 3 billion or will you say it is ok? after-the-fact people say now we have $3 billion to spend. there never was $3 billion. now it is gone.
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$25,000 of economic activity is gone. the money that could have been used for infrastructure does not exist. lisa: the new york times ran a story said hudson yards got significantly bigger tax breaks than amazon would have going to long island city. from your perspective, has new york city pushed back and said we're not going to give those, would you not have done the development? jeff: let's clarify couple things in the article. i do not believe subways and parks are subsidy to every developer. that is part of the government's job to expand the city. that was a huge number in the analysis the new york times put out. -- second is the only thing tax abatement paid for those subways and parks. that will be paid back from the increment. no, i do not think this to element could have happened without the subways, without the parks, and the tax abatement to encourage companies to move west. david: this resistance would not
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have happened without a growing populism across the country. is that likely to cast a shadow over future developments, whether new york rather locations? where the larger political problem than in the past? ? aff: this is definitely political party. people need to go back to the theory that it is governments job to create economic element. new york city is the greatest city in the world. we are not going to stay that way if we do not encourage companies to come here. worse, if we tell them not to come here. lisa: moving full circle and going back to retail. there are some empty storefronts in new york city. what are all of those neighborhoods doing wrong that hudson yards will be doing right? jeff: one of the things we were able to do is curate from the beginning. you go up and down madison avenue you see a lot of storefronts that are empty. developers and owners are holding out and they can only
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put in one store. with hudson yards, we have not just a storefront but an opportunity to have critical mass and have restaurants. we have 20 different restaurants and coffee shops. more affordable restaurants. a prepared foods concept called little spain. all of these things. we have an entertainment component. company is putting in an exhibition space that will have kids streets. exciting things to do beyond just shopping and i think that is the difference between a one-off street retail. it reminds me of rockefeller center. jeff: it is the new rockefeller center. when we thought about the plaza, we said let's study great plazas throughout the world. you think about new york, you do think about rockefeller center. we said we wanted to design a
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365 day a year christmas tree so everyone has to come to hudson yards. blau, related companies ceo. --ing up, olympia crude columbia crude production speeds up. that is coming up next in today's follow the lead. this is bloomberg. ♪
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viviana: this is "bloomberg daybreak." coming up later, david cote talk -- david kotok, cumberland advisors ceo.
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time for follow the lead, a deep dive into the stories and moving markets from industry veterans and insiders. .oday our focus is on shale colombia's state-controlled oil company is looking to add refinery conversion capacity as it seeks to increase exports. to a ceo aboute the companies plan to boost production and reserves. filipe: in terms of reserves, there are four things we want to do. , increasing the recovery factors, the second is columbia, the third is going abroad. we already have a presence in the u.s., in mexico, and in brazil. the fourth is unconventional's and columbia. alix: before we get to that, it feels like the easier by an
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would be to buy a u.s. company. is that on the table? filipe: it is something we have looked at what if we going to the u.s. we want the production in the reserves. we want the know-how. part of what we thought about is can we partner with somebody, can we create a joint venture where we get the expertise in the u.s. and bring it back to columbia. seconded some of our employees into an operator ship in the permian so they can learn from that. they can also help us design unconventional pilots. alix: the thing that struck me as the u.s. will be a return. you will get the reserves and the oil today. you do not have to wait to develop it. that seems a no-brainer and .uper appealing felipe: it has to be the right
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opportunity at the right price. when the timing is right we will announce that we have a deal. we will keep on looking. alix: in the type of asset you are interested in, can you describe the kind of assets you are looking at? it is: i think eventually something that has production today, that has legs, that will have reserves going forward. hopefully we can be in the liquid sewn, and on the gas zone. we already have a presence in the u.s.. we produce roughly 18,000 barrels. it is equity production in the gulf of mexico. these will increase our investments in the u.s.. alix: i know you will be spending a few hundred million dollars in developing unconventional in colombia. what are the governmental hurdles? the current plan we have allocated $500 million for the pilots. hurdles -- regulation for expiration.
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we need to get the licensing done with the environmental licensing. more importantly, we do not need to do this quickly. we need to do this right. alix: felipe: don't you need to do this quickly? alix: don't you need to do this quickly? felipe: yes. columbia has billions of barrels of reserves. -- if we do itth well, this is all about energy security. , instead of country talking about six years of reserves can talk about 15 or 20 years and underpinning economic growth. alix: you think you can be with the u.s. is in 10 years? felipe: i think we can learn from the u.s. and that is why we have seconded people in the u.s. operations.
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that is why we want to learn and bring that no haul back home so we can go up -- that know how back home. argentina wants to the same thing but that is not working out felipe: -- that is not working out. felipe: today 10% or 15% of their production comes from unconventional's. ecopetrol has been operating in colombia. we -- bringing partners from the u.s. can help. alix: what type of infrastructure would you be missing? felipe: rates. andanted to bring the rakes the horsepower for the pumping capacity in the fracking activities, we'll you need to bring those -- we will need to bring those in. the industry in colombia has been there for a long time. we have companies working in terms of service providers. i think it is something doable. david: that was alix steel speaking to the equity petrol --
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to the ecopetrol ceo. joining us on the phone is alix steel. terrific issue. it is clear they are committed to extracting oil and gas from columbia. and they do it at the right price? alix: when he says he can take his time, i do not think that might be true for some of these big oil companies. this brings us to the iea call that says opec will squeeze shale until mid-2020. part of that will be because of these big guys. control,exxon, echoed the -- echoed petrol -- ecopetro l. this will bring in companies that can offset oil prices and volatility because they are so big. david: who are you talking to? alix: speaking about the i-8
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e.a. -- the iea i'll be speaking to the head of the iea later today to see the potential snags for u.s. production growth. bottlenecks, private players, capex cuts. how that squares over the last -- the view that shale will be the biggest oil producer in the world. want to keep cutting in the short term. i will be speaking with the coo of conoco, the head of shale natural gas and energy production. that is the big talk with the big chill guys. they want to talk about new energies. they will be seeing if that is feasible and the cost for something like that. an interesting today -- an interesting day. david: always great to hear you in your element. that is alix steel reporting from houston. lisa: baruch is withdrawing its rack is withdrawing
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its hostile takeover bid from newmont. this is bloomberg. ♪
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lisa: here is what i'm watching. barrick is withdrawing its $18 million hostile takeover bid for newmont. instead the companies are doing a joint venture around their nevada project. joining us on the phone is andrew cosgrove, bloomberg mining analyst. it seems like investors are looking at this as a bigger newmont for barrick the . can you walk us through what we know? the ownership terms are going to be 61.5% for barrick and the remainder for newmont. this compares to newmont's offer which had a 55/45 split. barrick was looking for something closer to 65%. there was upward movement for barrick in this case plus they will be the operator.
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it is only premarket action. david: this may be a great deal financially. what doesn't mean for newmont's ability to control its asset. how important was the nevada park to operation? nevada was clearly a big portion of newmont. it is free money laying on the table. that is the crux of the issue. the fact they were able to get this done and taking a bigger step back, the longer this bid got dragged out in the longer there were eyes taken away from integrating goldcorp by saying investor access -- gold prices are going up, and allows both of them to focus on acquisitions. lisa: it is also a huge conglomeration. we have gold court and newmont -- they are all coming together.
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who can compete at this point? commodityey produce a . it is still a fragmented global industry. it is not like where you can control a corner of the market. -- a nicehave acquisition the other day. i do not expect this trend to stop. the size of the deal will not rival anything we see now. lisa: andrew cosgrove, thank you. david: coming up, sky bridge capital partner. that does it for bloomberg daybreak america. that does it for us. this is bloomberg.
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jonathan: from new york city for our viewers worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪
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jonathan: global equity markets looking to shake off the biggest weekly losses of the year. a clean read on the economy becoming more difficult. a free jobs number and decent retail sales. boeing increasing after a second crash, leaving countries grounding flights. from new york, futures positive six points, up .2%. five days of losses. euroe fx market, the 1.1237. yields are up a single basis point. treasuries a little softer on the session. top story,th our investors finding it difficult to get a read on the economy. >> we are bipolar. >> noise. >> residual noise. >> very good data and bad data.


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