tv Bloomberg Surveillance Bloomberg January 7, 2020 4:00am-9:00am EST
♪ francine: washington orders more trips to the first gulf as tensions continue to climb. tehran assesses scenarios for its response. the swiss bank cutting up to 500 jobs and naming two new division heads two. tesla is made in china moment. the consumer rollout of vehicles ins underway -- elon musk is shanghai as the consumer rollout of vehicles gets underway. ♪ welcome to "bbg surveillance." i'm francine lacqua in london. these are your markets. a defiantly optimistic mood is what i have heard from a lot of
the big money managers trying to brush off the pessimism that came with increased tension in the middle east. if you look at the european stoxx 600, gains 0.6%, gold a good litmus test to see if it is a risk on or risk off mode. the u.s. 10 year at what .8. today, tom keene will be in conversation with alan greenspan. that is a conversation that you don't want to miss. it will be talking about monetary policy and why not, maybe geopolitics as well. today, tomlet's get straight te bloomberg first word news with viviana hurtado in new york city. >> he will testify in the u.s. impeachment trial of president donald trump. this is from former national security advisor john bolton. this declaration injecting fresh drama into the legal proceedings. it also complicates the u.s. senate's leadership plans for a swift trial with no witnesses. nancy pelosi has not yet passed the two articles of impeachment to the senate.
in an overhaul of antitrust law, china is targeting internet giants. it potentially gives regulators the power to rein in the country's increasingly dominant tech companies if they are have found to have violated a lot. d as muchd be fine as 10% of the revenue. american companies and consumers are paying almost a full cost of u.s. tariffs, according to the national bureau of economic research. not hadthe levees have a major impact on foreign export prices. overall, americans bearing the brunt in most sectors. that is not the case in the politically important steel industry. not had a major impact on foreign export harvey weinstein was charged with rape and sexual assault in the state of california. that is as the former movie mogul awaits trial in new york. he was already facing life in prison. he now has to confront a new set of allegations against him.
los angeles district attorney says he used his power and influence to "commit violent crimes." spacex using a falcon nine a booster and successfully launching more mini-satellites. the 60 satellites will join more than 100 others placed last year in orbit. spacex intends to launch thousands of small orbiters to provide worldwide internet. global news 24 hours a day, on-air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.ana this is bloomberg. francine? francine: let's get straight to our top story. more u.s. forces are headed to the middle east following the killing of the iranian general. the amphibious group carrying 2200 marines will move to the persian gulf after the deployment of over -- americans to the kuwait last week. the pentagon is denying that u.s. troops in iraq are getting ready to pull out. a letter saying that was sent to iraqi officials. the pentagon because the letter
a draft that should not have been sent. joining me this morning is leslie vinjamuri, head of the america program at chatham , seniornd james athey investment manager at aberdeen. what exactly is president trump's foreign affairs, i guess, strategy and the middle east right now? leslie: this has been the big puzzle for everybody, all of us watching. what we have heard for the last three years from president trump is that he wants to reduce america's commitment to the region with the exception of countering radical islamic terrorism, that he wants to focus on the big, geopolitical questions. this seems to do anything but. it is pulling america right back into the region. even those people that are closest to president trump, and certainly, congress did not expect him to choose this option for responding to iran. so right now, what we are seeing i think is mixed messages on
what is happening with america's troops in iraq. there is a lot of scrambling. the focus obviously now is going to be on de-escalation, managing the potential fallout. europe is, you know, grappling around, trying to manage the situation with great difficulty, as we can see. i think when we try to talk about strategy, we have to be very honest with ourselves that there is not a lot of strategy at the moment. francine: iran is saying that the retaliation they will put in place will be a historic nightmare for the u.s.? is this talking tough or are we potentially looking at a war? leslie: iran is obviously in a very tricky position. just imagine the second-most powerful and revered person in the country being taken out by the united states. it is talking to its people, who are on the streets, who are ng.ning -- mourni a couple of things are very interesting. the statement they issued was
very measured, very calculated. aea is something they are taking very seriously. they have walked back some of the commitments but not all of them. they are holding out a caret to the international community saying, it is on your back how we behave in the future. the targeted response, there will be direct targets. they will take the military targets very seriously and there is an indication that they will not use their traditional strategies. francine: what are their options right now for retaliation? leslie: i think this is something they are carefully considering. there are regional options, attacks on u.s. military personnel in the region, on embassies, diplomatic staff, pushback on the jcpoa. these are the things people are watching very carefully to see what they can do. there is question of what iran's position in iraq will be going forward. francine: amid all of this, the
markets initially panicked but are now back to normal. even oil is down after that volatility. james: it wasn't much of a panic, was it? we have learned in the last decade that markets can get over these things relatively quickly. of -- the rolect of -- the equity market has been drugged into submission by the amount of equity we see going back into the system following their attempts to tighten the balance sheet back in 2019. marketst unusual to see have a very shallow response and then get back to, you know, looking for all the positives that they can possibly find. whether that can continue following any response or escalation is open. francine: are they focusing too much on central banks? james: i believe they are a bit too optimistic. valuations in the u.s. look somewhere between overvalued and extremely overvalued and quite worryingly overvalued.
the macroeconomic picture that i see over the next 12-24 months. central banks have been the main or only game in town. francine: if you look at the middle east going back to it, how high are tensions against the u.s.? does that spur more geopolitical , you know, i don't know if it's hatred, but anti-u.s. sentiment? leslie: absolutely. i think the key thing, especially in iraq, there has been a mixed opinion on america. i think what we are hearing from those focused on iraq is that this is going to create a wave of anti-americanism that will be much more difficult to manage and content. obviously, that is the case in iran, but i think across the reason -- but i think across the region. there is so much focus right now from the europeans across the region who manages. and even, frankly, across the
u.s. government. we do have to differentiate between the president and the rest of what is going on in washington. it is not always the same. if you are a market actor watching this, you're sort of saying, everyone wants to de-so let's wait and see -- everyone wants to de-escalate, so let's wait and see. francine: who takes the place, is it china or russia? leslie: for a very long time people have wanted to say the u.s. needs to get out because it's making a series of big and very bad choices, the invasion of iraq on forward. there are some very big things at risk. one, of course, the number one concern for the u.s. and for europe has been countering the threat from isis. pulling out is sort of not a yes or no. there are lots of goals that have to be taken into consideration. i think this is where that question of strategy is so profound and the lack of a
strategy. how do you get out? when we see there is a leaked memo that the u.s. is pulling out of iraq, no, we are not, yes, we are. what are the implications of a rapid withdrawal? what does it mean for the resurgence of isis and anti-americanism across the region? francine: james, where are havens? do they change at some point? gold? james: even when we saw north korea launch afrancine: missilee end, it still rallied. it is safe to say that traditional havens are certainly the first port of call. gold, precious metals broadly speaking. we have seen a pretty dramatic response, not just as a result of the factor that we have had escalation in the middle east and tensions. going back to the central breaking point, when you have debasing the currency, it seems natural that some of those traditional inflation hedges perform well. it looks to me to be a pretty
solid environment for precious metals. francine: do things like this actually impact central bank thinking? james: again, we have seen that the fed is hypervigilant, in the kind wait, hypersensitive is a bit more pejorative. absolutely. there are things they have no control of whatsoever that they will overtly take into account in their reaction function. they are so asymmetrically dovish. this probably doesn't move the needle much at the moment. it's all about what the next stages come a what sort of broader implications and disruptions to any sort of oil supply, those are things to take into account. francine: james athey and leslie vinjamuri both stay with us. one of the biggest globe -- what are the biggest global risks in the year ahead and how should investors be positioned? we will ask about the popularity of president trump and whether the middle east strike is good or not for the greenspan 2020 u.s. election. we will discuss that next.
♪ economics, finance, politics, this is "bbg surveillance." i'm francine lacqua in london. let's get straight to the bloomberg business flash. here's viviana hurtado. >> we begin with a $24 billion raised by xerox as it continues its pursuit of hp. the xerox ceo says it removes any doubt about the company's ability to finance the deal. in the tech sector, it is the largest ever bridge loan and welcome news to banks. they are hoping for more merger activity in 2020. aston martin says profits last year slumped. this increases urgency for the sports carmaker to attract new capital. full year earnings for last year were over 100 million pounds
lower than in 2018. eight are of the company's turnaround plan is the dbs. it helps by 2023, the suv will help its -- help it double output. ubs is restructuring its private banking business and announced new regional heads. the move of following a decision to dismantle the unit dedicated to the ultrarich. according to an internal memo, the rebound will remove three levels of management. it will also speed up the lender's ability to lend to rich clients >>. ubs expects 500 job losses as part of the changes. that is your bloomberg business flash. francine? francine: let's continue to talk about the biggest geopolitical risks. speaking to us yesterday, the eurasia group president said career, north korea, venezuela, and syria are unlikely to -- he says this year's presidential will be the most
contentious in centuries and poses the biggest risk in years. still with us is leslie vinjamuri from chatham house and james athey will be the most contentious in from aberdeen asn investment -- asset management. how does it affect the 2020 election? this is a deflection from the impeachment process. does it make president trump more popular? leslie: certainly, within his base. endlessly, there is a getting tough on iran. iran has not been the most admired country within the united states for a long time. president obama tried to reset that within the jcpoa. there is a lot of latitude for rustling up anti-iranian sentiment. a lot depends on what comes next. what does iran do with respect to its nuclear program? how do the democratic candidates play this debate?
now, we have seen some statements from the different candidates. i think there is a risk here that, you know, the democrats have to play carefully, right? they can't be seem to be not tough on iran, especially if iran undertakes reprisals. -- orcomplicit boards supportive of the decision to strike as it leads to the acceleration of iran's investment in its nuclear program or the resurgence of isis, and a lot of that, we have to see how it plays out. i think it will be very likely now to be a broader calculation in the elections and more broadly, that question of america's engagement in the middle east. should america be in? should it be out? if it gets out, what are the consequences going to be? francine: as long as the economy is good, this will play a big part. the voter will vote on whether their job situation is better, whether they have more money to spend. what is the state of the u.s. economy? not bad.
is it going to get better? james: history says markets in the economy are pretty solid. first and foremost, i agree in terms of the iran move by trump and how that plays in the election. i agree with leslie. the interesting strategy side of it may well be smoking out democrats -- scoping out democrats in their views. theary in 2016, flip-flopping she had engaged in for years. i think that is an interesting angle and i think that will play part. in terms of how the u.s. economy is doing, everyone in the market consensus believes it will magically revert to some sort of trend growth and just a there throughout the year. i struggle to see that. the beige book has been telling you that for years now, the market has been struggling to hire. once you start to get to that situation, you see confidence has been declining rapidly. businesses don't feel great.
i struggle to see the u.s. consumer continuing to hammerhead. francine: if you look at impeachment, john bolton said that if the senate issues subpoenas first testimony, he is prepared to testify. could that be a game changer? leslie: i think that could be a very significant game changer. john bolton is a very interesting figure because he is hawkish. he was very behind trump, and then suddenly, that relationship fell out. he knows a lot about what is happening in ukraine. he's willing to talk. he has credibility with republicans, he has credibility, i would argue, i would suspect, he has a credibility with trump's base, with the republican party in congress. i think if he comes forward and says things that are potentially damaging, or revealing, or confirm the evidence we have already seen on the ukraine question, i think it could actually be a game changer. it is a big question as to whether or not mitch mcconnell
is going to call witnesses, whether he would allow john bolton to come forward. the fact that john bolton is now talking i think is very significant. i am not surprised about the timing. francine: leslie, thank you very much. leslie vinjamuri there, and atheyjames athey -- james from aberdeen as an investment stay with us. details emerge of a dramatic escape from japan. we will have the very latest from beirut next. this is bloomberg. ♪
francine: this is "bbg surveillance." i'm francine lacqua in london. let's get the latest on one of our top stories, nissan says it will take appropriate legal action against its former chairman carlos ghosn. ago.ed japan over a week he is planning to hold a news conference in beirut tomorrow. he will maintain his innocence and argue that his arrest for financial crimes was part of a conspiracy. joining us now from beirut is yousef, aldean -- yousef gamal el-din. what is expected to unfold in the coming hours? tightncine, security is as we wait to hear what carlos ghosn has to say. it will be a tense two hours ahead. the understanding is he is putting together some sort of statement to the world that would outline what he sees as a takedown of him and his team from its former position in renault, nissan. the coming hours will bring a
press conference, as you already pointed out. story run-up to this has been developing rapidly. the lebanese government, for their part, despite the notice on interpol, they don't extradite citizens. on interpol, they don't extradite citizens. it is a bit of a tricky situation for the lebanese government, to say the least. the wife of the man himself has been issued an arrest in japan. francine: how did carlos ghosn actually get out of japan? yousef: well, bloomberg has undertaken a very in-depth reporting effort and broken down his journey from the very beginning. it really has all the elements for a blockbuster movie. it would really top the charts in hollywood, that's for sure. it includes the coordination of
an effort by a former green beret veteran. he was a private security contractor brought into basically bring out carlos ghosn. what they did is identified a security loophole in the private terminal in japan, where basically if you brought a suitcase or a case that is too big to go into the x-ray machine, there is a good chance that could pass through. they were able to get through that and then all the way out over russia to try to avoid the extradition countries, including turkey and eventually all the beirut.o francine. francine: thank you so much. we will have plenty more on carlos ghosn. that is coming up next and this is bloomberg. ♪ beirut. is bloomberg. ♪ beirut.
tehran assesses scenarios for its response. to 500s bank cutting up jobs and naming two new division heads. tesla has -- tesla's made in china moment. elon musk is in shanghai as the consumer role of vehicles gets underway. good morning, good afternoon, good evening. this is "bloomberg surveillance ." just over 1.5 hours into the trading day, let's check into european stock movers with annmarie hordern. withrie: i want to start ubs. they are changing the european region into three different regions. they can double the amount of clients. to do this, they are shutting about 500 jobs. premier oil surging 13% this morning. they are buying the north sea assets from bp for $62 million. and analyst says this is such a
good idea for the company and it will unlock value in their portfolio. nearly 12% this morning. they had a rough 2019. the share price over the severe has been down 60%. ,his is due to a weak economy brexit uncertainty. and they still do not have an suv just yet, francine. elon musk's motive truth has arrived. model three sedans were made in shanghai. the car maker's first factory outside the u.s. be hoping this marks a real -- a beginning of real competition for electric. i guess joins us from shanghai. what is the significance of the ceremony? >> i am here right outside the
shanghai plant. moments ago you saw elon musk dancing not once but multiple times on stage. to give away the first china-made cars to those very lucky first customers. he also announced that he is unveiling a model wide program -- a model y program. that would foreshadow and overtake the sales of other tesla models as more people had demand for suv's versus sedans. you had front and center high-level government officials and shanghai. we heard from the vice mayor saying that it would boost economic growth in shanghai. in fact, elon musk also wants to create an r&d center in china where they want to design cars to sell to the rest of the world. i want to highlight that government support because that is critical to turning that plot of land behind me, in less than
a year from a dirty money plot to a factory that is now producing more than 1000 cars per week. -- governmente a approvals for manufacturing and constructing as well as qualifying for government subsidies from local purchasing taxes. this is the pinnacle of elon musk's plan to go abroad, to go international. investors will be watching closely to see how there can be expansion into other regions. most notably, germany will be next. francine: what are the differences between the chinese auto market and the rest of the world? what are the challenges in china? selina: when it comes to the competitive landscape, you have international players like audi and mercedes and bmw, all trying to get a slice of the world's largest electric vehicle market and the larger market in
general. the auto market is in an unprecedented slump, with forecasts showing a third executive year of decline in total vehicle sales. in fact, electric vehicles, which comprise about 5% of the total market, they have been scaling back as well, given that the chinese government has been pulling back on subsidies. thatwant to point out tesla is going to be cutting the price of these model three cars in china by 9%, putting it on more competitive ground with local players, but also early data shows demand for tesla may be strong at the get go since registration jumped 14 fold in november. do more than 5000. -- two more than 5000. i am going to ask our guest about it, but we have too much news. let's get to first word news in
new york city with viviana hurtado. viviana: an historic nightmare for the u.s. in how iran is describing possible retaliation. to respond to the killing of its most influential general. the nation is examining 13 different scenarios, as the u.s. is sending more troops to the middle east. washington denies it is pulling out of iraq. in an overhaul of antitrust law, china is targeting internet giants. it potentially gives regulators the power to rein in the country's increasingly dominant tech companies. if they are found to violate a law, they could be fined as much as 10% of their revenue. the proposal follows heightened global security of tech companies are hovering wednesday and was charged with rape and sexual assault in california. int is as he awaits trial new york city. he was already facing life in prison. he now has to confront a new set of allegations against him. the los angeles district attorney said weinstein used his power and influence to "commit
violent crimes." -- noer elon musk news dad dance moves, but spacex using a falcon nine booster, successfully launching more mini satellites. they will join others in orbit. spacex intends to launch thousands of small orbiters to provide worldwide internet. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. this is bloomberg. francine? he spent 300,000 to try to get to the moon and we don't even get a dad dance. more borrowing for infrastructure spending ahead of the budget for march 11. meanwhile, the house of commons returns today. let's get more now with adam lind for, our news desk analyst.
currentou describe the government? the tory party is a more social government but still tori. >> it is definitely still tori, but the interesting thing to see going forward is how it calibrates policies in light of the fact that it won election by winning a whole slew of seats that were labor voting seats the expectation is that the conservatives will be looking to invest, and trying to continue to win elections by delivering in those regions for those who have had hardships. francine: how strong to the leader have to be to keep the current government in check? adam: they are starting from a disadvantage point of being a much smaller party in the house of commons.
on thecally, a defeat sort of skill for the labour party, opposition party, will mean it will take a couple of election cycles to get back into power. so it is really going to be important that the new leader can reconnect with some of those voters for recently decided for the first time in their lives to y's. tor they will have to make a concerted pitch. francine: it is clear the pie minister is facing more pressure to get a brexit deal. him is het will help is starting from the strongest political position from many of the leaders sitting around in a council meeting. he has been able to unite his party around the idea that there needs to be some level of tough negotiating in order to get an acceptable deal. i kind of feel that -- it feels to me that there is weariness donald sides. certainly weariness among
european leaders, not necessarily within the commission, but this is an issue that needs to be put behind us so they can deal with the structural issues that the european union and the euro zone specifically have to deal with in the next few years. i think for that reason there is a deal to be done. and the commissioner is meeting with the prime minister and there will be a possible news conference. to be bullish on u.k. assets, do you need to understand the travel, or do you need the signing of a trade deal? of a tradesigning deal would be super, not just from the perspective assigning any old trade deal, because a bad one could be worse than what we had originally. we need something mutually acceptable, and then needs to be politically acceptable but economically acceptable, recognizing we have a different economy than germany. assets need to see, first and foremost they need to
see a willingness on the europeans to actually engage in negotiations, and potentially be doing that in a sector-by sector way. which is easier to do that -- the wto permits those to have a period of trading with no tariffs for guided -- provided we are working toward a trade deal. as long as we can make progress, we do not necessarily need to be on a cliff edge this year without having to extend the transition period. francine: what are we expecting parliament today? adam: a resumption of debate around the withdrawal agreement bill which allows brexit to happen. that passed its first hurdle before christmas, and we are now at the point where theresa may's version of the deal failed and the mp's are expected to debate and pass amendments, but it is expected to be low key as the johnson majority is pretty strong. there are three days of debate scheduled for the next three days. francine: thank you for joining
how much room do you have to grow in 2020? fact, this industry is really built to grow because we have a mission as an industry, and the mission is to deliver new information. the growth is fueled by these innovations. today, if you think about some of the issues, 5g, think about about the current industry, all of these markets are going to -- itec itself, we are going our revenue by 2022, potentially difficult growth over the next two to three years. cars, ai --ectric
what do you see happening first? if you look at your industry in the next five to 10 years, what would be the main growth markets ? markets that you are not tapping at the moment? obviouslyst one is 5g. 5g is already happening. soitec is thator there is no 5g without soitec. for 4g bute roadmap also now 4g into 5g. we see that as clearly the first , what they arena using is accelerating the 5g. the second wave will be toward the end of this year, beginning of next year, with a technology that some of the countries like into this use getting technology.
and we see it as the second wave. francine: i understand that you provide a lot of the cereals used in 5 -- of the materials in 5g antenna. but will that slow down 5g? technology is being implemented. the china ecosystem is pushing six gigahertz technology to really drive, which is more or less, i would say the next step of what we have seen today. it is a continuation of the technology and from the u.s. side, it is totally a reshuffle of the design of what you have already on your phone, and it will start this year obviously, but in this market in 2021. francine: what are you doing to protect yourself in china. the u.s. pushed to block
equipment sales in china. does that affect soitec, or how does it affect soitec? , if: what i said to my team you want to protect yourself, you have to first build the capability to run faster than anybody else. if you want to be competitive, you have to provide the next generation of technology that the companies that you are working with are willing to get from the next product. so we are building a very strong capability in france, where we have most of our r&d capabilities. we have been building a very strong capability in europe, as well, working with imac in belgium, working with these partnerships. thing here is how do you bring the next generations of products that will enable the next innovation faster than anybody else.
obviously there is -- yes? francine: know, go ahead. paul: obviously, talking about like everye do company in the world, protecting sales on this. but at the end of the day, you need to compete, you need to run faster. francine: you paint a very clear picture of where you want to grow and where you see growth opportunities. the share price was up five folds since you took over in january, 2015. what are the chances that you will upgrade your earnings forecast for 2020? a little bit too early because the fiscal year in march, so fiscal year 2020 -- 2021, which will be most of the calendar of 2020. we are very confident in what we have set last year, meaning that
we are going to divert and renew in the next year. it isvery obvious where coming from. .here is no 5g without soitec it is a new wave of capabilities --t has to be built around this power efficiency that we all want to get, you want in your parking a lot of capabilities, but you do not want to plug your smartphones every couple of hours. to recharge. the battery. so we are building the capability for this new innovation, and really this is at the bottom of it. we are lucky to be there, but we are also working very hard in defending our core and extending our core. that is one of the reasons why also we want to get into the area, and that will
really enable the user of the car to enjoy 100 kilometers additional because of the capability. that is where our competency is about. francine: paul boudre, thank you very much, the chief executive of soitec. as we had to break, we are looking live at pictures of iran. sayreporters on the ground that there are 13 projected iranrios, response from over the killing of general soleimani. coming up next, we will finally talk about the fed. this is bloomberg. ♪
parliament returns from resource -- from recess. factory orders for november. with that, james athey from aberdeen standard investments. james, you talked about the fed and inflation. is it going to go up in the u.s.? well, there was a calamitous time in 2018, so we -- 2019 suggests we will see upward pressure on headline inflation. we are probably looking at a couple of elevated points in the first part of the year. beyond that, i still do not believe that the u.s. corporate's believe they necessarily have the pricing power to pass on cost increases that were already in the pipe. we have already seen margins pushed tighter, and that is not necessarily a bad thing. that comes with wage growth, which has been one of the big problems of this cycle, the lack of wage growth and consumption power. inflation is
probably asymmetrically downside for this year. but i think when the market it haso this view, where been, that inflation is dead forever, that is a dangerous point. i think we could be looking at inflationary -- newsine: we are getting from iranian state tv, saying that 35 have been killed and 48 have been injured at the so let many -- at the soleimani funeral. -- 35 have been killed and 48 have been injured. inthe soleimani funeral iran. if you look at geopolitics concerns, there could be tensions. we started the hour talking about that. are you expecting more volatility as we head into 2020? james: it is difficult to get less implied volatility in the
volatility market. we have gone back to the floor, we have gone back to this fed-induced slumber for financial markets as liquidity has been so abundant. it is difficult to get less volatility than that. i still think it is going to be one of those environments where volatility is high until we get to the end. i think there will be periodic spikes of volatility. francine: thanks so much, james athey. aberdeen standard investments, where he is investment director. coming up, we will have plenty more on iran and the possible trade measures that are affected. this is bloomberg. ♪
washington orders more trips to the persian gulf has tensions continue to climb. the ubs shakeup, the swiss bank cutting up to 500 jobs and naming two new division heads. tesla's made in china moment. elon musk is in shanghai as the consumer rollout of vehicles gets underway. good morning, good afternoon, or good evening. this is "bloomberg surveillance." i'm francine lacqua and london. tom keene is in washington. -- are in washington for what will you ask the former federal reserve governor? tom: we will speak with alan greenspan, the former chairman of the fed. any number of things to talk about. of course we will speak with him about all volker and the new changes at the fed. alan blinder is the vice chair, out with a interesting op-ed in the wall street journal about where the fed is heading. we will talk with chairman greenspan about this. this is a changed washington since friday of last week.
francine: it certainly is. it will be interesting to get the chair's thoughts on how iran changes forecast for the fed. we are looking at life pictures out of iran. to iranian state tv, there has been a stampede at the funeral procession for the iranian commander that was killed in a u.s. air strike last week. that stampede killed 35 and injured 48. we are bringing you the very latest from iran. let's get to the bloomberg first word news in new york city with viviana hurtado. the anna: when it does read italian for the death of a top general, it will be a "historic iran sayinge u.s.," the country is assessing 13 scenarios, but not revealing any more details. more american troops are headed to the region. this includes an amphibious group carrying 20 200 marines to the persian gulf.
former trump national security advisor john bolton says he will testify in the senate impeachment trial if subpoenaed. democrats are pushing for bolton and other advisors to testify. senate majority leader mitch mcconnell dismisses the demand for more testimony as a fishing expedition. japan is striking back after the daring escape of carlos ghosn. prosecutors issuing an arrest warrant for ghosn's wife, carol, saying that she give false testimony in support of his escape last week. family members were not involved. more mininching 15 satellites. elon musk hopes there will be many more. the latest ones have a piece thatastronomers -- claim the satellites were too bright and hampered operations. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than
2700 journalists and analysts in more than 120 countries, i am viviana hurtado. this is bloomberg. tom: let's go to the data. equities, bonds, currencies, commodities. the major message, with the huge flow out of -- news flow out of tehran and washington. we have euro pulling back, all the correlations you would see. john norman to join us here in a moment. onto the second screen. with the vix information 15 level, into 13.80. a weaker japanese yen. all of this is fractional, but nevertheless directional, francine, of a better, firmer market offer friday. francine: i agree with that. if you look at crude, it declined for the first time in four days. also drifting lower. , amongst thes regional shares.
and this is because there is optimism over trade that i think investors are trying to put aside fears over escalating tensions in the middle east. we are still seeing gold fluctuating and euro declining, but better than expected inflation in the euro area. let's get back to our top story. tensions between the u.s. and iran simmering, with reports claiming that iran is planning up to 13 responses to the u.s. over the killing of one of its top generals. normand of jpjohn morgan. thank you for joining us. are we looking at a war or not? >> i think it is very hard to tell at this stage. i don't think iran wants one, and i am pretty sure the u.s. does not want a war. but this is not how these things come about. if you pile in military personnel and equip an into a small and volatile region, the risks of something going awry and forcing everyone's hand is quite high.
that is the way the market needs to think about this. you can read as many stories as you like about diplomatic efforts, but if you are moving battleships in, that will be problematic. francine: how does this get de-escalated if that is what all sides want? is the tricky question. because there is no fundamental solution to the underlying problems in terms of influence in the region, u.s. is kind of the world leader. i'm speaking in terms of the economic story here. so much damage is being caused. there is a great deal of resentment and that will take a lot to reverse. tom: i want to go to the geography. one of the headlines, eight paragraphs in, they are moving 2200 marines i guess through the suez canal or all the way around. who knows? over to the persian gulf. review the gap between the gulf of oman and the persian gulf,
and the strait of hormuz. explain that geography this morning. have a huge amount of the world's oil moving through that. that it issue here is narrows to something -- what is it, like several miles of something at its narrowest point, and that creates a big problem. there is an international court in place that sees passage through there. it is relatively easy to attack the tankers. we saw in the 1980's with the tanker war, and we saw it again last year. that is really what we are keeping an eye on. you can disrupt global trade. it is the container shipping moving through there as well. -- 25ing like $.25 percent of container shipping moves through there. kennedy onr to will this.
do we just assume that all of that tanker volume will be "escorted i military"? there are two separate operations going on. the japanese have theirs, and the u.s. joined by europeans. there are limits to this. the tankers move relatively slowly. they are giant targets, and i would say the revolutionary guards have a long track record in these speedboat attacks. and what you would call the symmetrical warfare. it is hard to know what you can do to counter that. escorts work, but there have been limitations. francine: thank you, stuart wallace. joining us for the hour, john normand, jp morgan head of cross asset fundamental strategy the market is pretty cool about what is happening in the middle east. is it because central banks are here, or because they do not know how to price it? john: i think it is difficult to price something where they are
not sure what happens in the next three to six months. they will also not focus on an economic significant target. this is why spikes in the oil price struggled to stick around longer than a couple of days. francine: what does it mean for how the market prices if something were to escalate? john: one, there should be a higher average oil price over the balance of the year then what global growth would normally justify -- than what global growth would normally justify. that is kind of related to the idea that markets price in a risk premium for the possibility that there is an actual disruption to supply. we have not seen it yet even though the disruption in september was brief. it only lasted a couple weeks, but the markets price in a possibility that this will happen and be more durable in 2020. tom: more durable goes to the point of lower for longer. jp morgan is staking the franchise on looking out one year, two years, three years.
is this kind of turmoil the way it can impinge growth -- does it extend out the idea of lower for longer? i don't think it is a major influence on the fed's thinking. the fed is probably more angered by a broad set of economic indicators showing that the global economy is bottoming. advance back to trend growth is pretty slow. it will not come without inefficient -- without sufficient inflation. i don't think it is a primary influence for them. tom: what have you learned from foreign exchange since friday? thathave you observed since certain signals? john: foreign-exchange over the past few trading sessions is an inability to sustain the dollar versus commodity currency and em currency. it fell versus yen, a more defensive currency than the dollar. but the dollar's inability to
appreciate broadly for very wrong tells you -- for very long, tells you there is some -- a low rate in the u.s. francine: when you look at havens, is it always currencies, the usual suspects, or will there be a new one? safe there are structural haven assets, such as assets tend to be short, such as the yen pair this is why the end does well in these environments. the gold price is less of a consistent safe haven than the yen, but in this environment where interest rates are low, it will do well any time there is geopolitical risk. but it could do well next year without geopolitical risk. francine: does geopolitical risk impact central banks? or somethingiment like that? john: when they witness geopolitical stress, calling on the economy to weaken, they respond to that. they do not tend to be preemptive around it. they do not change policy before
the data starts to weaken themselves. tom: john normand will continue with us. a great lineup. holtz-eakin will join us. alan greenspan. i spoke to chairman greenspan last night. really looking forward to this. americansiders an aging , as he considers the effect on america's productivity and economic might. later today. this is bloomberg. ♪
,"m: "bloomberg surveillance in london, in washington. we will see what david westin brings in the coming weeks it a smart conversation to wrap up week. right now, a smart conversation with francine at our london desk, his john normand of jp morgan. the correlation he brings into the asset classes of equities, fixed income, currencies, and commodities. what is the headline of note this weekend, john? what has changed with all that is going on with international relations? how does that correlate into the correlations? john: to me the headline is that there are a lot of developments in play, none of them really that major, meaning that even though the oil price surprised, it is not that much of a surprise or shock in the context of an oil market wher
production is diversified. some of the data has been consistent, most of them moving in the right direction. and a lot of headlines seem alarming, but when you dig deeper, none of these are big derailers for the move up in markets this year. tom: what did big conservative money do? did they pervert -- did they go to cash?did they go to what is jp morgan observing? any: there has been hardly participation in the move up in risky markets by hedge funds over the past several months. it has been something mainly driven by real money investors, longer-term investors. some would see that as a reason why there could be broader participation by hedge funds. it confirms that they longer-term investors are focused on a business cycle that will go on for a long time, a monetary policy environment that will be accommodative for a while, a fixed income universe that does not look attractive on
a yield basis. these are forces that are hard to push back against with the handful of headlines around geopolitics. francine: when you look at 2020, is there somewhere that you would be more focused on for investors? john: nothing was totally unloved last year in the sense that every market went up, so it is not as if there are that many orphans lying around. in terms of the relatively poor performance last year, there , and they fired -- in the fed environment, the growth in varmint, there are valued stocks that tend to get -- the growth environment, there are valued stocks. ith the downturn in growth, is getting a bit of a lift from geopolitics but also from china stimulus. francine: are you expecting the china trade war to be over, not to escalate, or could we go back to the usual tit for tat, one step forward, two steps backwards? in hong konguation
triggered some sort of sanction action by the u.s. congress, so it is not so much about trump pivoting back to a more -- i think he has made his mind up that that is bad for his reelection. but there is this third actor, congress, looking at hong kong as a reason to take action on china. it is not something i think you can put any kind of defined probability around, but it is a situation to watch. francine: i feel like i ask because it is the beginning of the year -- let me jump in with a quick question on bubbles. are there any bubbles that will burst in 2020? john: not yet. i think you have expensive markets are most the board. the markets that are not expensive are the e.m. complex. but that is relatively small compared to what i just mentioned. we are far away from bubble territory. do with gold?ou my experience is each and every
pro has a different outlook on gold that is more than just intellectual. it is almost cosmic. what does john normand do with gold? john: i want to hold it for the next one or two years. it is the preferred asset class for the kind of fed environment that we are moving into where the fed is pursuing a strategy of letting inflation drift up, real interest rates drift down. i think this works in favor of the gold price. you can get more tactical around the gold price if you feel like interest rates might shoot up in a given month or quarter because growth will surprise to the upside, but i do not think that is a big story. ratetory is the interest environment being promoted by the fed. francine: john normand stays with us. coming up, ready to name names and detail much more about the dramatic escape from japan, carlos ghosn. this is bloomberg. ♪
viviana: this is "bloomberg surveillance." let's get to your bloomberg business flash. ubs is restructuring its banking business, with the swiss bank announcing a new chief in europe , the middle east and africa. three levels of management in the unit could result as many as 500 job cuts per last year, aston martin says profits slumped. highlighting the need of the company to attract new capital
for a turnaround. battered by an industry downturn and uncertainty around brexit. the cars, by the way, are best known for being the right of choice for movie spy james bond. attempt an isp is a record breaker. it is the biggest bridge loan enter -- ever in the tech center. the ceo telling hp's board there should be no doubt about the company's ability to raise financing. in november, hp rejected xerox's initial offer. it says it was too low. that is the bloomberg business flash. tom? francine? francine: nissan says it will take appropriate legal action against his former chair, carlos ghosn. he fled japan a week ago and is planning on holding up has conference in beirut. home of carlose ghosn, are people talking about
how he got out, or are they trying to figure out whether there is any chance that he will be extradited back to japan? the mean, that is one of big talking points here in the conversations that i have had so far the last few hours. since my arrival, basically, how he managed to escape. quite a big deal of respect comes with that, understanding that the japanese authorities are in theory keeping a close eye on him. but also the other part of that question is, as you already say, what comes after? the japanese authorities are not letting this go. beiruts here in downtown spoke with the lebanese president, and pushed and pressed the case, that as far as they are concerned, he is a fugitive of justice, and he should be handed over. tom: this is so important. one of the great questions here is how alone is mr. ghosn?
i don't mean to be a poet, but you get the idea. is he in this alone, by himself, does he have a support group? does he have a corporate or institutional support group around him? yousef: at this point it is not clear what that institutional backing is. is it likely that it exists, arguably given his dramatic escape from japan, which included a private security contract. you also understand why it could potentially play the role as well, but there is no naming of any wider corporate more on that front sovereign involvement as well, which involves than another source of speculation. one of the country's governments that happen in the past would be able to use some of its muscle globally to make this all happen. tom: thank you so much.
a busy day tomorrow in beirut. we will bring you coverage of the press conference of mr. ghosn. our correspondent in beirut. the new slow is still extraordinary and constant. on washington, tehran, and baghdad. this is now from the associated press, in a headline that we are seeing out, where the united states is warning of possible iranian action. that meansre what per se, but nevertheless, we will continue to bring you this flow. i would also point out our reporting at bloomberg of mediterranean marines moving to the persian gulf. stay with us. this is bloomberg. ♪
tom: tuesday, the afternoon in tehran. there was a stampede, 35 reported deaths in kerman near the birthplace of general qassem soleimani. huge turnout of thousands of people continuing, with that, talk in the last 12 hours, even 18 hours of various threats, actions. formal headlines from the associated press the u.s. issues a maritime warning and i want to make clear, a maritime warning across all middle eastern waters. more on that through the morning. new york city with the first word news, viviana hurtado. reporter: southeastern australia firefighters taking advantage of cooler weather to contain wildfires. 24 people have died in new south wales, 1600 homes destroyed. fires expected to burn for months.
harvey weinstein charged in california with raping one woman and sexually assaulting another. facess announced while he trial in new york on similar allegations. jury selection in the trial begins today. boris johnson feeling pressure from business over opposed brexit trade deals. companies lining up to lobby for a final report, limiting any .conomic disruption 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. this is bloomberg. u.k., thein the brexit deal returns to the commons today as the government resumes the push.
our editor joins us now. thank you for sticking around or coming on. tim, there is a resumption of parliament. they want a trade deal between the eu and the u.k. where we get a deal? -- will we get a deal? tim: expect more drama by the end of the year. time for the team is insisting they can get it done but most people on the eu side think there will be another extension to the transition which the u.k. will be in after it leaves the eu in a month. francine: how would you describe this conservative party? tim: powerful. they have a majority in the comments so they can do whatever they like. like you areseems
trying to get back to the people who have less. tim: it gets to the heart of the question about what will johnson be like as a prime minister now he has that majority. in the election, he successfully converted lifelong historic labour party seats by promising to adopt more progressive policies. we will see how he keeps that support base as his own. tom: i have like 15 questions so we will settle down with three cups of coffee. back to brexit. all-powerful and if his party is all-powerful, is everybody now assuming brexit is done? his brussels, is germany, finland, they assume this is done? tim: pretty much, i think. brexit day, 31st of january.
i cannot see any way that does not happen. the u.k. will be out of the eu this month. what happens next is the defining negotiation on the future trade relationship. that will be potentially more detail, quite technical, much trickier to get done. brexit will have happened but the future is still to be. tom: john norman with us from jp morgan. have you had to adjust as a large bank pan-european view what is going to happen february 1? is it that abrupt to jp morgan? john: not at all. the process of deciding the future arrangement with europe. backhing that gets pushed to the end of 2020, you don't have a big risk to the economy over that intervening period and
you also have fiscal stimulus supporting the economy. stablek at a macroenvironment for the next year, stable boe outlook. the big adjustment is recognizing sterling as an investment opportunity doesn't really belong on the radar for the next several months. what will make you want to go? john: if there was some sign the u.k. government was taking pragmatic steps on trade and willing to make whatever concessions are necessary in order to think the agreement by the year -- to ink agreement by the end of this year. fiscal stimulus would make me more positive on u.k. assets. francine: labour party is fine and a leader. what kind of leader do they need? tim: someone who can win back the seats forest johnson took.
took.is johnson certainly, there is going to be the mother of all battles inside the party to determine the future direction of it. many are lining up rebecca long bailey. we enjoyedss, david's company yesterday as he spoke about the eurasia group and the top risk for 2020. i asked him a root question and he would not answer. are they even part of this discussion? tim: they are all having to change their colors. when tony blair was around, they are now adopting a much more sympathetic tone toward jeremy corbyn's old policies, because the labour party is embedded in supporting
the left-wing policies. if you want to win, you have to get behind that plan yourself. tom: how generational is it? we have seen this with bernie sanders and others in the u.s. how age-related is that move, out to a more moderate labour party? tim: good question. another point about whether or not it is a generational issue for labour. when can they think about getting back into power? johnson could be there for five years and another five after that. they will need to win those young voters back and get back the older voters too. [laughter] tom: we thought john norman was. francine: the flipside is europe. are we going to see better things from the european economy, 2020?
john: i think you are because you have unique events that constrain europe last year. the damage to the economy, they are all fading slowly. the fading of the brexit risk, but tiny risk -- the china risk and industrial risks and germany. europe will be stepping up. not impressive but better than last year. tom: john norman from jp morgan, we thank tim ross and the u.k. team for continuing coverage of the most interesting government experiment of the nation. speaking of government experiments, that would be washington, shake into its foundation this side of the beltway yesterday by the news that john bolton may want to speak in some form. we will get perspective from greg, and also important perspective on the relationship across the potomac with the pentagon. this is bloomberg. ♪
tom: "bloomberg surveillance," good morning from washington, queen victoria street in london. extraordinary news. headlines from associated press from u.s. on iran. we will have those for you. john normand, jp norman with us this morning -- jp morgan with us this morning. off the radar with the news for economic optimist down to some houses with sub 2% view. john: we think it is a 1.5%
economy for the next year. lift fromting a policy easing, inside and outside the u.s. low drama economy for the next year. a significant bear on the u.s. economy, you need to put more weight on the physical drag and believe policy stimulus doesn't matter. tom: michael has provided real leadership on this with the idea of a sustained sub 2% economy. is that politically acceptable, that the people of america and their representatives would say, 1.9% is good enough? john: i am not sure most of the people in the beltway know what the run rate on u.s. growth is. most people could tell you where the unemployment rate and the stock market is. those are both performing incredibly well.
even with the pace of growth in the u.s., less than what we had before the financial crisis. it is more about unemployment and spot prices rather than growth. francine: e.m. u.s. story, dollar story, structural reforms. bullish on e.m. 2020? john: moderately. the calls around the high-yield emerging markets, dm bond yields are so low, there is room to carry. mexico, brazil, russia, indonesia. it is not something you find in the rest of asia. it pays to be selective. to me it is more about the carry trade in a handful of countries rather than the asset classes more broadly. francine: how do you deal with policy by tweet? mexico, south africa? john: certain countries are always exposed to more
idiosyncratic risk because of that. even those countries that are vulnerable to presidential tweet risk, there is resilience. those tweets are drivers of volatility. tom: john, set the table for my conversation with chairman greenspan later today. the chairman is focused on the demographics and the aging of america. link in demographic economics into nominal gdp, animal spirits and how it filters through productivity of a nation. john: you tend to think of demographics as having some impact on up size and quality of labor force which then impacts productivity. people tend to associate aging of an economy with a less productive economy and they look at japan. ise people think u.s. extremely slow motion version of japan. it is worth unpacking. tom: do you agree?
john: i think it is an incredibly slow motion version of it, meaning, if it took japan 20 years to get to zero bond yields, no nominal growth kind of setting, it will take a much longer time plus another recession to do that in u.s. it is an extremely gradual process. not something that drives investment strategy over the next year. tom: always beautifully explained by john normand, synthesizing economics. that will be part of my discussion with alan greenspan. we will touch on the legacy of paul volcker. alan greenspan, looking right now at the aging of america and how it filters through to all we do. on the blinder op-ed in the journal. this is bloomberg. ♪
this unfolding story, particularly his sense of the pentagon across this potomac river as well. john bolton, this city came to a stunning halt, i'm guessing, 2:00 p.m. yesterday as well. you study this carefully. who was the most upset he has decided to testify? greg: donald trump, for one major reason. rudy giuliani. bolton knows where the bodies are buried. he knows he played a crucial role. that is the big wildcard. tom: this is america. whatever you think of america, this guy, politics, left, right, cable war news. america, in a given trial or process, we want voices heard that someone is innocent until proven guilty. are we going through that process? greg: no. it is going to be hard to smear john bolton.
mcconnell is in a difficult spot. he needs to have at least a pretense of a fair trial. bolton may get his hearing. i don't think this will lead to trump's ouster, conviction. it will be a body blow. francine: do you think he will be called to testify? greg: the democrats are united in calling him to testify. the only really need 4 republicans, francine. mitt romney, susan collins. there are enough to get people to have him testify. the crucial issue. even if the testimony is damaging, most all republicans will stick together and say, this still does not rise to the level of high crimes and misdemeanors. it will hurt trump. i do not think it will oust him. francine: game changer if he testifies and confirms? game changer with the base? greg: probably not.
the bigger game changer with the president space is he has this version, any kind of middle east involvement, he wanted to get out. famously, isolationist. his base agreed. now, all of a sudden he has totally flipped. that has raised a lot of issues in the base. tom: a chairman of the joint chiefs of staff moving between the white house and the pentagon. give us the update of the relationship with the pentagon, under immense global stress, headlines, associated press in recent minutes, 2000 marines moving from the mediterranean around the persian gulf. great. what is the relationship in the two miles from the potomac to the white house? greg: this administration is understaffed. they missed matts. tom: explain to our global audience why general mattis, general kelly are missed? greg: they were really good.
they had a strategic view of the world. they have been around the block. now you have inexperienced people who have not been around the block and yesterday, what did you see? big confusion over whether we would pull out of iraq or not. big confusion over cultural parts of iran that might get it. the right hand is not talking to the left and. -- and. that would not happen if general mattis was still here. -- hand. kimmitt and others as well, all had the same message. we need a diplomatic and political strategy. devoid ofly strategy in washington? greg: it is not clear. tom: what is the strategy? greg: i don't know. it is not obvious. mark warner, democrat, saying,
yes, there were probably reasons for us to move on the iranians last week. there has to be an end game. for a president who does not want to be involved in the middle east, this is very confusing. tom: does marco rubio have a strategy, the gentleman from florida? greg: he and others are more consistently hawkish. getting a consistent and out of this president is something to watch carefully. francine: how does what happened in the middle east and tensions with iran change with the 2020 u.s. elections? greg: i thought all along this would be close. electoral college does not look great for trump. he is a slight favorite now. this is a huge wildcard. if this blows up, to news on for quite some time and the markets get jittery, consumers get jittery, that has the potential to hurt someone who boasts he is the world's greatest negotiator.
francine: what will people vote on, mid-november, early november, 2020 u.s.? do people care about foreign policy? greg: it is a clear choice. it is either the issues, the economy, geopolitics or trump himself. if it is the latter, people saying trump himself, it is just wearying, tiresome to go through this every day with hearings, impeachment on and on and on. if it is a referendum on trump, he is in trouble. if it is on the issues, he wins. tom: the politics of the democratic party, michael bloomberg, a candidate for that nomination, the founder of bloomberg lp and bloomberg tv and radio. greg valliere, i am seeing a shift back and forth between liberal progressives and something more in the middle of the party. explain to our audience, the nuance. this group of people, this set
of people trying to figure out that calibration, how to calibrate that middleground. greg: i will go out on a limb. i thought all along there could be a surge by bloomberg or amy klobuchar. right now the stories bernie sanders. plenty of money. doing well in iowa. new hampshire easily against hillary. number one antiwar candidate. tom: is bernie sanders going to do with the democratic party what jeremy corbyn did in the u.k.? greg: sanders is a little more likable. it could be analogous. i could see him winning. right now, he will be the high candidate. tom: remember when we had a hot chocolate and listened to the manchester newspaper? it is all gone. do the young kids control the democratic party because they support the senator from vermont? greg: in certain states. new hampshire, yes.
iowa as well. march 3, the bloomberg strategy, it gets different. spending all your money on ads makes a big difference by then. it is still really fluid. tom: greg rally her, thank you so much -- greg valliere, thank you so much. continued news flow out of baghdad, tehran and washington. this is wonderful in the next hour. and douglas holt z-eakin will join us. they have much in common. then there are some differences. this is bloomberg. ♪
tehran considering 13 scenarios. baghdad may be without american troops. washington, the navy moves 2200 marines and a helicopter unit from the mediterranean to the persian gulf. yen fractionally weaker. gold off the recent record surge. change, johns bolton changes. testified? important resolution from congress. this is "bloomberg surveillance," from washington. i'm tom keene. francine lacqua in london. global response. what is prime minister johnson saying about the events of baghdad and tehran? francine: it is difficult for europeans to navigate this. on the one side, they don't want to escalate. if you are johnson, you want to keep president trump on the side but you don't want to aggravate iran. he said he will not lament the
loss of the general. he also went against what president trump intimated he would do with more violence against cultural sites. honestly, this is why diplomacy. it is difficult diplomatically to keep both sides. tom: i read that carefully. delicate and diplomatic. always delicate in conversation, alan greenspan, the former chairman of the federal reserve, today, washington. you will see that later in the morning. new york city, first word news, viviana hurtado. "historic nightmare for the u.s." head of the national security council saying the country is assessing 13 scenarios, not revealing details. the u.s. has issued a warning to shipping in the middle east.
john bolton says he will testify in the senate impeachment trial if he is subpoenaed. democrats pushing for him and other advisors to testify. mitch mcconnell dismissing the demand for more testimony, calling it a fishing expedition. japan striking back following the daring escape. prosecutors issuing arrest warrants for his wife, carol, saying she gave full testimony in court. after his escape, the former chairman said family members were not involved. spacex launching 50 more internet satellites. ben musk hopes there will several thousand of the panels providing internet service throughout the world. the latest ones have a dark ,oding to appease astronomers claiming the satellites were too bright, hampering observations. 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'm viviana hurtado, this is bloomberg. tom: thanks. quick quick quick data. guests to start the are. futures advance. -- to start the hour. real caution on friday, early monday, away. next screen quickly. a quote on brent crude. $68.49. francine: oil dipping. treasuries and gold fluctuating. euro declining. better-than-expected figures out of european inflation. european bonds drifting lower. also strengthening. tom: adam posen will be with us in a moment. we need updates. our chief washington correspondent, kevin cirilli. one question on john bolton. the drama on the hill. next 48 hours. how important is susan collins
of maine to this world around john bolton and six other topics? kevin: it adds pressure on the former national security advisor, john bolton, to mitch mcconnell to say, wait a minute, now there is three, collins, murkowski, bolton, all saying they are open to having a trial that raises concerns democrats have made. tom: important history, our men and women at sea and in the middle east, relating back to the pentagon, finally to a capitol hill that has to demand action. what should we look for in the next 48? kevin: do the polls suggest this is a country that does not want to go to war. a new opportunity for nancy pelosi to say, we are not just focusing on impeachment. we are trying to match this measured approach to foreign policy. she will do that by introducing resolution in the house that essentially says, if the
president, within a 30 day window, does continue with military force, he would not be able to do that. i want to take a step back. this is a debate quite frankly that lawmakers have been having well before president trump was in office. republicans, libertarians, rand pauls of the world, raised this concern in the obama white house.this is not a new debate . is what'skevin, happening in the middle east, tensions, the airstrike, an elegant way to put the spotlight out of impeachment? kevin: no. it will but it was not by design. i will tell you this, the full expectation back from the holiday recess was this week would be marked completely by the issue of the calendar as it relates to appeasement. lawyers a legal debate, debating whether or not the speaker has to hand over the articles for the majority leader
to do that. i was struck by senator lindsey graham, a republican from south carolina yesterday saying publicly, mcconnell doesn't have to wait. tom: out of the train yesterday, there is a cadence of a civil war 4, 5, 6 years, intergenerational, world war ii in that. this has been essentially a 17 year war. is this city exhausted? kevin: the country is exhausted. that is a great point. the backdrop to this, i think that is why you are seeing confusion. some have raised privately parallels behind the president style with north korea, with the confusion he has exhibited as it relates to iran. that said, you look at polling, prominent conservative commentators in the past 48 hours -- one source at the state department said qassem soleimani
-- no one is debating he is a bad guy. the democrats are raising concerns to how the president went about it. tom: we will look for your conversations on radio tonight. kevin cirilli. always ripping up the script, adam posen of the peterson institute, one of our formal thinkers on economics, filtered into international to international relationships. public service of all to the bank of england as well. we could talk for three hours this morning. i want to go to joe 101. cottage industry of trying to calculate the cost of war. to be blunt, trying to do it politically. associated as liberal and democrat, joe has done a good job over the years of counting up the cost of a 17 year war. it is trillions of dollars. adam: you're right to give him
credit. he has played the role very straight. it is important for people to see two things. counterintuitively, we can rack up a huge cost in human terms and monetary terms but the economy continues to grow, has continued to break records on unemployment. it doesn't necessarily mean anything short-term. the second point, joe's main point, any valuable contribution is the opportunity cost. these trillions of dollars. the flip of how much damage we have done in the middle east for essentially no gain. tom: tell me what the peterson institute has written on this. the council of foreign relations and others, for obvious, i saw, stephen cook publishing and foreign policy magazine last night. what has the institute said? adam: we have made contributions in three areas. the first, establishing the
point i made, even if it is counterintuitive, the impact on the macroeconomy, the energy market disruption, military disruptions, isn't going to be felt short-term. day-to-day trading, yes. more importantly, secondly, we have looked at sanctions and whether or not the kind of sanctions we have seen on iran, that president trump is seemingly considering on iraq, this can cause harm to smaller countries. they end up costing the u.s., especially unilaterally. that is what we are looking at in iran and iraq. sorry. francine: just to pick up on that. the fed, other central banks, would actually have to wait the data to change. they don't price in geopolitical factors. adam: absolutely. i don't think, also remember,
where the central banks are now, they are all in places where they don't want to move very much. emergency liquidity injections, for some reason, a financial disruption. they have been isolated out of the world economy in a large way, except for china, they have destroyed their economy. u.s.,rect pushback on the is not very big. i would not expect centrals to react very much. francine: is it not changing the composition of economies? the market tries to ignore it but it feels like a huge hit. adam: what we are seeing, and you had your deep dive yesterday on geopolitics, we are seeing huge shifts. through the trade war, we are seeing an ongoing rise in uncertainty and less dependability in the u.s..
less clear statements out of the white house. which isno end game, being talked about in your previous our. no one can stand up and be the diplomat to bring us together. jimmy carter, emmanuel macron? it cannot be. you know, it is going to be a terrible, depressing thing continuing to push down a cross-border investment, technology investment, energy investment. but, it is not going to be disruptive in some obvious short-term way. tom: we continue juxtaposing through the hour. we talked to adam posen about this, a conversation with alan greenspan, former chairman of the fed. stay with us. from london and washington, this is bloomberg. ♪
viviana: you are watching "bloomberg surveillance," with the bloomberg business flash. ubs restructuring the private banking business with regional changes in europe, middle east and africa, removing three levels of management in the unit that could result in as many as 500 job cuts. martin profitsn slumped, highlighting the need to attract new capital for a turnaround. 2018, they went public. since then, it has been battered by industry downturn and uncertain the around brexit -- and uncertainty around brexit. hp, aattempting to buy record breaker.
billion, the biggest loan ever in the tech sector. the xerox ceo says it removes any doubt about the company's ability to finance the deal. in november, hp rejected the initial offer saying it was too low. tom: thank you. people ask me, how do you do interviews? with alan greenspan, chairman of the fed, we will address paul volcker and his legacy this morning. far more, what you do, as you wait for the newspapers, i have done that with alan blinder with an important op-ed for the wall street journal on this thing -- regime change. 2% target, professor blinder at princeton really wonders through the nuance. we do that without imposing now. the great distinction on greenspan he makes is the communication strategy. greenspan would say "mumbling with great incoherence."
are we talking too much today? does that part of our central-bank challenges? -- is that part of our central-bank challenges? adam: we are over communicating but that is not the real challenge. the late paul volcker would have been furious to see the number of reserve bank presidents hopping on tv every five minutes. discussion to some degree. the real challenge is real. there is such low productivity growth, such low private investment response to low interest rates, such low wage response to low and employment. this is not just the u.s. it is japan, germany, the whole world. larry summers, secular stagnation, not just alan, we have a good discussion at aea, larry summers, myself, bernanke gave his presidential speech, he
was more optimistic. monetary policy toolkit would work. janet yellen, summers and i were on the docket, try it but do not put all your faith in it. worry about fiscal policy. that is where the action will be. tom: this is incredibly important for 2020. fancy physics words like responsiveness or elasticity or fluid dynamic. the viscosity of the american system. does the engine need a quart of oil? adam: it seems to. we're doing the best we can with what we have got. growing above potential probably . it is getting worse, in part for political reasons we were discussing. no matter what we have done, with very large tax cuts, regulatory changes trump has done that are very favorable to business with a growth environment, with not very much wage growth, you are still not seeing a strong pickup in
private investment. you can say that means it has nothing to do with policy. i would say it means we have had a regime change to a much more uncertain regime. there is clearly something fundamental. it is going across the rich world. there is a new book talking about the lack of composition in the u.s. many have touched on it. there is a decline in dynamism in the u.s. tom: let's bring in francine lacqua francine: what are your thoughts on mmt? it is now resurfacing? something like helicopter money? adam: i think there was a lot of language created around that. i'm not sure those terms too much work. what i have emphasized -- do much work. governor brainard has mentioned this, the idea of straightforward fiscal monetary
ordination. i point to yield curve control the boj has done, where they target the 10 year bond interest rate, we say, we will keep the study as long as conditions do not change, enabling fiscal policy, without committing the central bank to a specific policy, to judge the content of fiscal policy, also deliverable. you can keep the 10 year rate where it needs to be without -- this means to some degree giving up and saying he will not hit your inflation target easily. you're doing something else short-term. rather than getting complex or invoking weird theories, you can just say, let's do fiscal policy, monetary policy through a straightforward means. tom: we will continue and i must say, aea was more than unusually important this time around. chairman bernanke, thinking constructively on negative interest rates, one of the themes through january, particularly at davos. it is parliament, i guess
valuable inn very trying to decipher brexit. we are almost at the end of the process. signed off. we now negotiate future relationship, u.k. and e.u. insight into direction of travel johnson will take? unlessning wto rules e.u. gives a good deal? adam: he will continue threatening to the last minute possible. people are to some degree excessively hopeful he will put economic rationale back on the table. what is instead going to happen, it will be close to hard frexit. hard brexit. -- there will be nuclear power,
transport, some specific issues. the fundamental thing is future alignment of services industry in u.k., so critical to the economy, with the eu, is going to be in question. it will not be resolved. for political expediency, boris johnson will push for a break of sorts even before that is resolved, because it will take years. one last point, before we were talking about fatigue about war in u.s. in washington. fatigue about brexit in britain, as you have spoken about is incredible. they just want it done. mandate fora sacrificing economically to have it done. francine: what kind of u.k. economy will we be left with? same time, this government is trying to have more social policies which breaks from the past, from previous conservative governments. adam: they have to.
the breakdown in the nhs is so visible inhumane and unpopular, for good reason. the rise in homelessness. it is so visible and visceral. regional policy, because there is such fraction in pressures in the u.k., they have got an emphasis on spending. tom: shortlist, adam, had a ring to it. the peterson institute with us. we will continue with douglas. stay with us. wonderful conversation. this is bloomberg. ♪
tom: "bloomberg surveillance," from washington and london, francine lacqua and tom keene, thrilled you are with us. iranna: a warning from following the killing of the top general, ahead of the national security council, "retaliation would be a historic nightmare for the u.s." saying it is studying 13 possible scenarios. u.s. issuing its own alert to shipping in the middle east, iran could take action against american interests. southeastern australia firefighters taking advantage of the cooler weather to contain bushfires. 24 people have died in new south wales, 1600 homes destroyed. fires expected to burn for months. harvey weinstein now charged in
california with raping one woman and sexually assaulting another. the charges were announced while he faces trial in new york on similar allegations. jury selection in the trial begins today. prime minister johnson feeling pressure from business over opposed brexit trade deals, companies lining up to lobby for a final accord, limiting economic disruption and access to europe, the country single biggest export market. 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'm viviana hurtado, this is bloomberg. thank you. speak toportant to individuals. douglas, a number of years ago, with the peterson institute and adam, now in charge of bringing the mandate forward for the institute. we are absolutely thrilled they
could both join us today. within the economics from aea and that, we have to go, as we have rarely done recently, to fiscal. credit forhat, full the invention of cbo, you really drag it forward, doug, into a modern era. give us the extrapolations forward of the trillion dollar permanence we are enjoying. how grim is the nation's deficit? douglas: it is our single biggest economic risk going forward. no doubt about it. dual problems of fundamental mismatch between spending and raising and revenue, leading to trade deficits, this year and as far as the eye can see. debt, gdp rising unsustainably. that is just not going to work out well. it is a question of when. the second problem is the budget priorities are wrong. places where you can genuinely
invest in the future of the economy, basic research, infrastructure, education, we are getting crowded out of the budget by the big mandatory spending programs. tom: on the programs, we trot out a bipartisan panel that tells a future president, future congress what to do. is the system so broken we cannot even do a bipartisan panel? douglas: i think we need to have a fundamental piece of public education first. eight years, president obama told the american people, there is nothing wrong with the budget you cannot fix without taxing rich people. trump has said, there is nothing wrong. neither is true. we need honesty with the american public. we have a problem. a big problem. it will take more revenue, a lot of economic growth and control on spending. we have to do it. adam: you have to listen to doug on the keywords, more revenue. what is striking about the u.s. is no matter how much it gets
spun, the share of the ennui we collect in taxes is much lower than any other rich economy. there is a permanent gap we have of 4% lesshe level gdp in taxes that we get. douglas: this is a great illustration. end of the year, december, a big spending bill, lots of stuff gets tossed. what to they toss in? they get rid of the things that finance the aca, the cadillac tax, classic american politics. we will spend it. we don't want to pay for. [laughter] tom: francine. francine: [laughter] classic or classy, i will forgive you. when do you need to fix the budget? is it now or can it wait a couple years? the u.s. is the u.s. adam: this is where i am different from dog. it would be -- from doug.
it would be better if we did not do things like cut the cadillac tax but i don't think the u.s. is in imminent fiscal trouble. the problem is, and i agree with doug, we are wasting money on things as opposed to public investments that have a clearly high return, better uses of public money in the current low rate environment, we should be doing. it is not just the tendency to not pay for things. it is the wrong emphasis, undercutting public investment in a way that is irresponsible. francine: is there something someone could do now that would not be politically unstable? douglas: look at the list of things that have to be done. reform the programs, social security, medicare, medicaid, old age and income programs, those are difficult. raising taxes, you know how hard that is politically. we are in the tough stuff.
that is why no one wants to do it. i understand that. at some point, it has to happen. tom: food we raise taxes from? -- who do we raise taxes from? adam: you can restore a lot of the tax code that has gone back the last 20 years. it does not have to be a wealth tax. progressive income tax. cutting loopholes. changes to the corporate tax. we have a difference of opinion. assumes,p, everyone gave a free lunch the corporations. do you think it is beneficial? douglas: if you look at the track record, u.s. -- tom: share buybacks -- needs the tax code to be competitive with the world. system,e to territorial overdue and inevitable. the real issue is they did not complete the reform.
a lot did not get done. they would be progressive if they brought them up. there are better and worst ways to raise revenue. list taxes are utterly destructive. you can raise revenue in a sensible fashion and make us competitive. adam: both politically and economically, the one place where politics is right is company sitting on huge cash flow, piles, not investing them. you are seeing, there are huge multinational corporations that can shift profits and not pay them. both of the sense of fairness, and enabling us to raise other taxes, for their own sake, they have to be plugged. it is too bloodless. that is not the way the corporate tax system is. francine: how would you do it? adam: first thing, i would work on the international coordination on taxes that
mention territorial taxation, making sure multinationals pay in accord with how much business or sales they do in various regions, including u.s. i would look at something we started 50 years ago, francine, we changed corporate finance rules and governance rules when we thought companies and managers were sitting on too much cash, which changed the rules about reporting and acquisitions and mergers to put more pressure on cash flow. remember that? then we have to look back at that. we have to talk much more critically about the investment parts of the tax code that make it even more, shift the tax burden so if you're not investing, you are paying. am: douglas, do you have point where $1.6 trillion begins to unravel?
the problem with the discussion about fiscal outlook is everyone assumes if you do not have a crisis, you are ok. getting a d is not ok. we are just getting by. up in lostll show opportunities, less growth, less opportunity. tom: is it crowding out of the private sector? douglas: it is. it may not be the traditional high interest rate, low investment, domestic. a lot will happen on the international front. exports, make yourself less competitive. it is still a cost. tom: we could go for like another two hours on this. this is great. adam: carbon tax. please. carbon tax. [laughter] [indiscernible] proved a carbon tax
doable, efficacious? adam: yes. tom: give me more than that. adam: one word. [laughter] tom: carbon tax has been proven in europe as effective. adam: yes. it raises revenue. it discourages dirty industries and dirty use of energy. it can be politically sustained over multiple years. tom: is there leakage where people innovate it by doing other things nation to nation? adam: not massively. tom: ok. your clinic. was, -- we just established a tradition in washington getting them together for a wonderful conversation. coming up, we continue the discussion we had yesterday with eurasia group, thank you twitter for a massive response to the top risk of 2020 from ian
confidence vectors for broad latin america moving down. how fragile is the confidence? reporter: it is quite fragile. the unrest rocking the region and the second half of last year is something we expect to continue this year. tom: what is the character of the unrest. we are so distracted by iraq. your world is off the radar. what is the character of that unrest? >> it is different by country but this is mainly driven by angry middle-class rotors. -- voters. they are frustrated by the government's inability to deliver basic public services. topics, list of generational change front and center. is there a generational shift in latin america? risa: it is more about a new
middle class that came out of the commodity boom, that once more from the government. it is happening when governments have scarce resources to spend in order to deliver on demands. adam: chile was the big surprise. risa: absolutely. adam: recent upside looks relatively stable, so on. how much do you think, unlike other countries, this will be endemic deadlock in chile or recurring problems as opposed to a one-off morning? risa: we see the dynamic that erupted late last year, something continuing this year and beyond. the government is trying to address concerns with a new constitution. we will see that process play out this year. that process is risky from investor perspective. there is a real possibility the constitution the government crafts is something that does not satisfy voters and demands continue to resurface.
tom: francine. thecine: where do you see most growth potential in latin america 2020? brazil or further south? risa: brazil is the one economy in the region where we are more constructive in terms of social dynamics and the potential for unrest. brazil is upward trajectory coming out of a difficult recent economic context. we see more of a match in terms of, angry voter population but also the president is an outsider, aligned with the demand for change, something distinct from other countries in the region. my colleague at peterson, monica, is tracking the brazilian economy. she has warnings, not from the political mess, but we should not get too carried away with
the projections of positive growth in brazil. there are funnel problems on the fiscal side. risa: well we see brazil as being the more positive story on the political side, there is still momentum around the reform agenda and you don't see this discontent at the same level we see elsewhere in the region, we have been flagging that. if the growth story does not pick up this year and continues to recover, brazil could see itself in a similar situation to neighbors. francine: what does the president need to do in the next six months to make sure growth is on track? pension reform or something else? risa: it is continuing to move forward with reform agendas. they have pension wrapped up. now it is moving forward with other elements. he has an ambitious reform agenda in terms of other fiscal reforms, also in terms of his microeconomic reform agenda, actually deregulating key sectors and trying to spur growth through that mechanism. tom: does the silk road
stretched to the western shores of south america? how will china invest in latin america? risa: absolutely, they are playing a big role in latin america in terms of investment. we see the shift away from the focus on commodities to more infrastructure, technology, the battle over huawei and technology is one battleground in latin america will you were see -- where you will see the tension between china and the u.s. playing out. they are a key player in the region and will be a source of investment and a tree partner going forward. francine: thank you so much. .urasia group coming up, more about elon musk and his maiden china,. teslan shanghai as delivers the first locally mad , tesla.
"bloomberg surveillance," with the bloomberg business flash. general motors warning pressure on the china business will continue. sold 3ar, gm partners million vehicles in china, 15% decline, lackluster economy and the trade war has hurt the world's largest auto market. boeing reassigning 3000 employees working on the 737 max program. the middle of the month, production temporarily shut down. boeing not expecting any layoffs. buildingny will start the max again when regulators give guidance. shoving 900 stores, in an attempt to overhaul the business, the company expecting 40% of headquarters staff, pier 1 drafted a bankruptcy plan and made a presentation to creditors. that is your bloomberg business flash.
francine: thanks. elon musk, moment of truth arrived. tesla hands over the first chinese made cars to the public today. the model 3 sedans were made in shanghai. marks thehis beginning of real competition in the largest auto market. joining us from the factory in how is thislina, different? is the chinese market different? absolutely. the chinese market is incredibly crowded. local players like neo and also global car manufacturers who want a slice of the largest ev lexus, alli, bmw, delivering in this market.
china has been in an unprecedented auto market. this is the challenge tesla is up against. forecasts pointing to the third annual straight vehicle sales declined in china. we have seen a dramatic pullback. 42% decline in ev sales, november. chinese government peeling back government subsidies as well as a broad slowing economic a barman. challenges tesla is up against, early data is positive showing the numbers in november jumped 14 fold to more than 5000. francine: if you look at how long it takes to see whether the china strategy pays off, is it three months, six months or longer? in terms of how long
this will be for this to pay off, sorry, it is windy -- francine: how do we measure success? reporter: absolutely. in terms of this factory, by one measure, it has already been a success. behind me, this was just a dirty plot of land, 90 minutes from the center of shanghai. now it is a massive factory producing 1000 cars a week. they want to ramp it up to 3000 a week. by that measure, tesla has done a good job in building a relationship with the chinese government. fast-track for approval for construction and project, subsidies for the model 3's. they have plans to launch the model y. they have 10% local purchase subsidies. they still have a lot to prove when it comes to the ramp up on delivery. they have only delivered a handful of cars at this point.
if you look at the history of tesla, they have had many production delays, suffered from many production issues. can they get past that? are they on more stable ground to really ramp up production smoothly? we look at the forecast. lmc automotive forecasting tesla may only sell 21,000 cars in china this year, given the challenges and the macroeconomic backdrop, the production issues, but you also have forecasts they could be 100,000 or more. francine: thanks. still to come, tom keene in conversation with alan greenspan. this is bloomberg. ♪
iran unveils scenarios for retaliation against the u.s. markets shrugging it off. stocks showing resilience as futures edge higher in the u.s.. and gold keeps rallying. metal pushes higher while traders boost bets for stimulus. welcome to "bloomberg daybreak" on this tuesday, january 7. i'm lisa abramowicz, in for alix steel. m headingoptimis into the markets. the nasdaq is leading gains in early market trading in the u.s.. meanwhile, you are seeing .uro-dollar weakness two-year yields edging a bit lower, and gold still getting a bid, at the highest level since 2013. now it is time for the global exchange, where we bring you today's market moving news from around the world. from shanghai and ohio to
beirut, washington, and las vegas, our bloomberg voices are on the ground with today's top stories. we begin with iran. general qasem soleimani's people was postponed as were killed in a stampede. the iran security council said, "there could be a historic nightmare for americans." what do we know about those scenarios, and what they could be? is they: the sad thing are likely to entail more death, which we've already seen in soleimani's hometown today. iran has said multiple times it intends to use u.s. forces in the region as targets. all of this is likely to take
place under the leadership of forreplacement at the head qasem soleimani. the u.s. clearly expecting some type of maritime action or singing that would be quite likely, sending a statement warning maritime assets in the region to watch out for this. also, deploying more troops to 2200egion, an additional troops are going to be moved from the mediterranean. these are marines, and that is addition to the 3500 that are already moved to kuwait last week. the u.s. has gone on about fortifying its bases, particularly in lebanon, where the head of has below -- of has zbollah is warning
the region. a letter leaking come us adjusting that forces could leave iraq. different secondary expert -- espere secretary denying this. lisa: thank you very much. the images coming out of iran truly amazing to see. meanwhile, the u.s. sending additional forces to the middle east. joining us from washington is kevin cirilli. kevin: good morning. conflicting messages coming from president trump and his defense secretary mark esper. the president over the weekend tweeting out that cultural sites would be on the list of iranian sites that the u.s. would target should iran forces continue with their expansionary foreign policy. that said, defense secretary mark esper saying that is not the case. he also says it was never on the table for forces to be pulled out completely of a rock. later today, lawmakers
officially returning from their holiday recess on capitol hill, and house speaker nancy pelosi says she's going to have a resolution introduced later this week on the floor that would limit the president's military powers as it relates to going after iran without seeking congressional approval. the bottom line, this week was would be anought impeachment battle, now turns to focus on the middle east. lisa: thank you so much. meanwhile, in china, test looking off production. the country officially opening its new multibillion-dollar plant in shanghai. bloomberg's selina wang is on the ground. : that's correct. i'm right outside the factory. stage andtook the gave the deliveries of the first china made tesla cars to consumers, and announced that he eventually sees the model y
overtaking sales of all of tesla's other car models. in addition, he says he wants to build a research and develop and center in china to create a china designed car to sell to the rest of the world. front and center at this event as well, you had high level government officials, including the mayor of shanghai, and what this is really indicative of is how critical that relationship tesla has built the chinese government has been in terms of ramping up this production site at record speed. this location behind me less than a year ago was a muddy spot of land, and now it is a factory turning out more than 1000 cars a week, with production ramping up eventually to 3000. tesla faces challenges in the china market as well. china's auto market is in an unprecedented slump, with forecasts pointing to the third straight year of declines in total vehicle sales, and electric vehicle sales have been declining dramatically as we
ll is the government pulled back on subsidies. lisa: tesla shares are up 144% from their lows back at the end of may, and you can see right now, tesla shares reaching $451 a share. meanwhile in london, brexit continues. members of parliament returning to westminster for three days of debate on the brexit bill. joining us from london is therese rafael. certainly, the brexit drama continues. therese: yes it does. for once, things are protectable this week. now that boris johnson is firmly ensconced as prime minister with a majority in congress, we can say that he has drawn a brexit bill that is likely to sail through without further drama. it will go through committee stages, where it gets analyzed. it then goes to the house of lords, gets royal assent, and finally, it's ratified so that britain can leave on january 31.
there are some amendments being proposed, including this is a sign of where the drama is now, whether big then -- whether big ben should chime to signal the u.k. leaving. after that, the real debate is over how long britain will take in negotiating the trade agreement with the eu. johnson has said they will leave by the end of the year. a lot of businesses, which have been very quiet through the debate in the run-up to the election, are now becoming more vocal. they spent a lot of money, stockpiled inventories, trying to adjust to a new trade environment, and there is a sentiment that the 11 month negotiating timetable is too to do a deal that would maximize access to eu markets. that is a real choice facing boris johnson now. does he want a quick deal with maximum divergence, which would friction, orde
is he willing to take longer to negotiate more access? lisa: meanwhile, carlos ghosn's daring escape escalates. tokyo prosecutors are getting out arrest warrant for his wife on charges of false testimony. for more, yousef gamal el-din is on the phone in beirut. please explain. yousef: it is a rapidly developing story around the potential arrest warrant for his wife. it comes as no surprise because the speculation was that she played possibly an important role in helping him pull off this dramatic escape from japan. we are in beirut, just a few steps outside the home of carlos ghosn. we are waiting for an important press conference that is set to take lace later wednesday. the expectation is they will be a series of revelations about what exactly unfolded and
potential he, details on a broader plot to try and take him down. the japanese authorities continue to pile pressure locally. the ambassador has met with the president in beirut and press the case that this is now a fugitive from justice, but of course, the lebanese are walking a very careful line here because at the end of the day, they are not obligated to hand him over. there is no extradition treaty in place. so we will see what happens. lisa: thank you so much. the debate heating up as to who will play carlos ghosn in the biopic that is going to be produced by netflix. i'm making that up, but still. in techegas, the latest at the annual consumer electronics show. apple returning after being absent for 28 years. can you give us a sense of the overview? what are the highlights there? reporter: good morning. it kicked off last night with samsung unveiling a smart speaker, the galaxy home m
ini. that is a space that they are sort of behind on, but they are hoping they can leverage their position is the biggest home appliance maker and use the home mini as the central connector to an ecosystem of devices, including washing machines, dishwashers, and the samsung galaxy smart. as you mentioned, apple is here for the first time since 1992, but they are not talking about specific products. they have their director of privacy here on a panel about data privacy. atre's been a shift at ces recent years from technology you can hold in your hands to the technology and gadgets that go in cars. we saw everyone from the likes of amazon threw two chipmakers like intel, qualcomm, and ford all focus on how they can monetize the data coming threw two cars with the advent of electric vehicles. and including combustion engine cars, that was really a theme.
a lot to come here in las vegas, including flying taxi from uber and a foldable from lenovo. lisa: stay with bloomberg for coverage live from the consumer electronics show, including interviews with delta see eo -- with deltas ceo and the cheap executive -- with delta's ceo and the chief executive of micron. you're seeing a bit of a positive tilt to u.s. equities ahead of the open. from new york, this is bloomberg. ♪
♪ lisa: now for the bloomberg first take, where we give you the news and get you the trade and analysis of the markets. here to discuss, we are lucky to have damian sassower our, gina martin adams, and also with us is art hogan, national securities chief market strategist. let's start with the historic catastrophe that iran is promising for the u.s. 13 retaliatory potential scenarios. it seems like, at least on a rhetoric level, things are really picking up. and wondering, gina, why do we not see more of a belief in it
by markets? gina: part of it is how does this manifest for the equity market. worst case scenario, we actually enter a war, those are not historically negative events for stocks because there's no negative earnings impacts. you would have to make a case that you see the equity risk premium widen, so it is all about valuations, not the earnings outlook. if earnings were to be impacted, they would be impacted through oil prices. oil price escalation could be very negative for the economy. however, the working assumption is that any oil price increase as a result of constrained supply out of the middle east will be easily offset by increased production in the u.s. so it is not an earnings issue. it has got to be a multiple issue. scott to be an risk premium issue. with respect to that, with premia are already very high relative to history. you've already got downside only premium, when you got the fed re-inflating get you got to see more movement in bonds and
currencies to see the equity market moving. art: obviously there is emotional reaction when things like this happen. we have a geopolitical crisis, and everyone freaks out. gold is up, stocks selloff the day after. let's take a pause here and see what could actually happen. gina hated on the head. the worst thing that's going to happen -- gina hit it on the head. they were thing that would appen for markets would be disruption to these pliable oil. if we have a sustained higher time, we are for a relatively energy independent in the united states. it would be concerned about higher energy affecting the consumer, but not $60 to $70. lisa: this is all really rational, but one thing that is really interesting is you said people are taking a step back. they never freaked out. obviously, we never saw the real kind of catastrophic consequences being priced into
market that all. damian: you look at one year brent crude, we are back at 11% backwardation, near an all-time high. the market is not expecting any effect at all. up 10e seen saudi rip basis points, so premiums are kind of expanding, and certainly in emerging markets. but for u.s. equities, it is a different ballgame. i will let gina talk about that. lisa: all those things are correct, but you also have the concept of consumer confidence. what does this do to the confidence of the main driver of the of us economy this late in the cycle? is that a concern, or not really? gina: it is if you see some actual economic damage, and that is a really big if. you've got to have acceleration in oil prices before you see the consumer react. we are not seeing that yet. if you get a 10%, 20% correction
in prices, the consumer will react. that it is too early to anticipate the consumer reaction. i do think you have a natural downdraft in consumer confidence that tends to happen after the fourth quarter. nobody feels great coming back to work in january. your bloated credit card balances are not so great after you've done the end of your binge, so in the first quarter, you should expect a little bit of friction on the consumer, but will it be reflecting geopolitical tensions, or is it just your usual downdraft following the fourth quarter high? art: i think one of the important things to remember, we've gotten used to there always being tensions in the middle east. so we are driving to vermont this weekend, and my kids are in the backseat, and one of them says, what you think about u.s. involvement in around? -- in iran. and it occurs to me that i asked the very same question at the same point in my life to my
parents 40 years ago. we've had tensions in the middle east forever, for decades. so part of this is something we have sort of baked into our always environment. the other piece of this is what exactly would iran do that would be detriment to the united states? that is what we are looking at here. damian: what about inflation? , that's the go up reality here. if oil prices go up on the chia political risk tension, will that manifest itself in inflation going forward, and will that prevent central bank from stimulating? we know all of this price action built on fed stimulus and ecb stimulus, the fact that we expect the central bank balance sheet to expand at an exorbitant pace, to me, it is, does inflation pick up? the verdict is still out, but i , you say 1.3% in euro area
may see some sticking to the upside. lisa: there's also a question of how much another rate cut is going to stimulus the price of stocks here. do we have a sense of whether the fed still has the ammunition to stimulus the price given where we are? gina: i don't think the equity market is expecting the fed to do anything this year, so if you get a surprise cut in anticipation of some sort of downdraft in economic growth, the market would celebrate that. the lesson of 2019 was never, ever fight the fed. when the fed decreases the interest rate, that creates a mess every inflation in multiples. it always will. looking to gold increasingly as the haven of choice amid all of the geopolitical tensions, even if it is just in headlines. gold is now near most overbought level in two decades. is this going to be simply a tactical trade, where we might see some weakness in the short-term, versus a longer-term, not as strong as
people think type of trade in gold? damian: i think it's been only three times in the last decade, and each time you have singled pullback significantly. in this low liquidity environment, you've seen a lot of assets overshoot on the upside and the downside. i think gold is just one of them. it would make sense to see a near-term pullback, but there's no question people are definitely concerned, and i thick it would make sense to have at least some exposure to gold in your portfolio, if not more conservative relative to last year. lisa: it broke out before this happened -- art: it broke out before this happened, so we saw it a week or two before this happened, and now it has exacerbated the move. so i agree, but there is a percentage of your portfolio of gold because it helps you sleep better at night. i think everyone is fine with that. [laughter] so much.nk you art hogan of academy securities, you're not going anywhere. you can find all of the charts
viviana: this is "bloomberg daybreak." we begin with xerox's attempt to buy hp. it is the biggest bridge loan ever in the tech sector. hp's board telling they should be no doubt about the company's ability to raise financing. in november, hp rejected the initial offer. it says it was too low. ubs is restructuring its private acting business, announcing new regional chiefs for wealth management in europe, middle east, and africa. ubs is removing three levels of
management that could result to up to 500 job cuts. the antitrustting laws. regulators could have the power to rein in the country's increasingly dominant tech giants. china is home to global internet corporations including alibaba and tencent. that is your bloomberg business flash. lisa: another story that caught our eye, facebook toughening up policy towards manipulating videos, referred to as deepfakes. the company says it will remove that material if it meets certain criteria. it is unclear if it would cover the infamous nancy pelosi video viewed millions of times on facebook, altered to make it is here as those -- to make it appear as though she will slurring. facebook says it will not delete videos made for the purpose of parody or satire. how sustainable is the boost for
green across the board, with bigger gains in europe. you can see oil declining for the first time in five days. meanwhile, the dollar weakening versus the yuan as people gain more confidence that china will gain steam, or at least has seen a recent bottom. seeing yields dropped, a little inconsistent in terms of whether we are seeing a haven bid or a risk on bid. meanwhile, after a 2019 that really was marked by fed easing, market participants are looking for even more, at least some of them. we are joined by michael mckee. market turns its lonely eyes to the fed. here's one of the reasons why. take a look at the set up for 2020 as we go in. the white line is the s&p 500. it's just gone up and up. the blue line is economist
estimates for growth in 2020, and they have come way down over the course of the year. it's not going to be as good a year in 2020 as it was last year, and nobody thinks that 2019 was all that great. but here's the thing that's really gets you, the yellow line. that is the profit forecast for profit margins for s&p 500 companies. talk about coming down. september started falling off a cliff. if they are not going to be making money, then investors are looking for a discount, and the fed is probably not going to be supplying it even though we have seen built into the fed forecast a little bit of a cut by the end of the year. the white line is the median of the fed dots. they are not predicting any change for 2020, but we are seeing the markets now pricing in one cut by the end of the year, and then they start coming back up again. we will see if that blue line keeps falling, if markets really
start to get to the point where they think the fed has to do something. i also want to point out that all of these charts i'm showing you are pre-iran. none of that is built into expectations at the moment. the other place people are looking is this debate over whether or not it is qe. the fed is buying treasury bills to try to protect the repo market to build the balance sheet back up again. you can see what they have done. we can see the reserves the fed is buying rise even though we saw a little bit of decline in the last week, as banks moved things around to deal with the turn of the year. the repo rate has fallen way down. so how far do they go with this? they have promised to keep buying through the second quarter in order to keep reserves of the level that prevailed in early september of 2019. that's right there. don't expect the fed to do a whole lot more in terms of qe. this is where we are as we go into 2020. obviously, something could change if we see anything develop with the ron or trade wars -- with iran or trade wars
or something like that, but right now, the fed on hold. not going to add that much more liquidity to the market. at the moment, you're on your own, boys. lisa: love it. michael mckee, thank you so much for that. meanwhile, morgan stanley saying that the abundant liquidity provided by the fed is exactly what is bullying the equity market amid some of the equity uncertainty, and light of middle east tensions. "liquidity wins. toed reaction in the s&p 500 yet another disappointing manufacturing pmi number and the recent events in the mideast is a good example of how problematic data news continues to be absorbed by excess liquidity." still with me, art hogan of national securities. do you agree that the muted price action we have seen in equities with response to the middle east was really a story of fed stimulus and ecb stimulus? art: yes and no.
here you are headed into 2020. when we were headed into 2019 19, we thought the going to raise rates three times. it is often a skew from what they actually end up doing. the crisis we are having in the middle east is, while it is new to us this week, it is not new overall. we've had tensions in the middle east almost forever, for decades. lisa: but that doesn't mean it will not necessarily percolate up. art: absolutely. let's say there is significant disruption in the supply of oil, if iran shuts down the streets of hormuz, and we have the oil price spike for a time. we go to the $90 range of oil. that is obviously going to have some transitory inflationary effects for everybody. united states can increase supply, and we certainly are on a regular basis.
we also have a fed that has an asymmetric target for inflation. the reason they continue to say that is because they will let that run hot for a time. i don't think this changes with the fed does this year. lisa: the interesting thing to me, one thing tina martin adams was saying is that equities are not necessarily pricing anymore rate -- one thing gina martin adams was saying is that equities are not necessarily pricing in anymore rate cuts this year. they say one digitally early in 2021. is that a problem for you? art: not really. the fed is saying we are not doing anything for two years. sense, you always price in some percentage of a chance for a recession. somewhere between 10% and 20%. so i think the rates markets are saying exactly that. if there is recession, the fed has to act. when we are talking about what is going to happen in the entirety of 2020, i don't think
it is as important as when we start to see where the dots are, and the cuffs right now are saying we are doing nothing. lisa: when you talk about the potential for an oil price spike, even without that, there's been an increase in commodity prices. you are seeing some signs of nascent inflation, and the fed is going to run things hot. how concerned are you about that eating into margins, especially when you see wages starting to pick up more significantly? art: if our inflation is coming from wage price pressure, that is the best place for it to come from. to ans no benefit increased price because it is not driven necessarily by demand. it is driven by a temporary lack of supply, i think that is the worst kind of inflation to have. lisa: but we are seeing price increases, certainly wage increases. what are they the right kind of wage increases? we are seeing them on the lower
end of the income scale, and we can see that that has been spending more than their income significantly, even as the economy recovers. is it enough for that segment of the population to the price increases or wage increases in order to continue with the economic momentum? art: absolutely. i don't think there could be anything more important to us then to see continued rises in wages. we are a consumer economy. we have been for the long time. we need to see the high level of employment manifest itself into increasing wages. that is the tricky part. people making things are going to have to pay people to do that, and there's going to be some squeeze on margins, but it increases demand overall. i think that is the most important part of 2020. we need to continue to see wages grow. if that's where inflation is coming from, the fed is going to sit pat for a while. we could see 2.5% core inflation before the fed even make the move. but hurdle for them to raise
rates is much higher than for them to lower rates. lisa: heading into the earnings season, i am wondering how much optimism is currently priced into markets. i was looking at junk bond yields, which have fallen to the lowest since 2014, and are within spitting distance of the all-time low. is there too much optimism based on the reality that we are probably going to see an earnings? art: absolutely. [laughter] lisa: well are we going to see a selloff, a response? art: probably. yes, the first quarter -- in gina laid this out very nicely -- the first quarter for the last four or five years has had a bit of a giveback. the gift that from a lot of comes -- the giveback from a lot of things. you hate to come back to work. your credit card debt is a little bit higher. businesses are slow in making decisions out of the gate. i think the first quarter has historically been slower. i think the second thing that probably is going to cause a bit of a pullback in markets is that
you actually have a phase i deal on a lot of uncertainty around being removed,e -- consumer comments consumer confidence and corporate confidence has a wide gap. i think that is going to narrow in 2020. that is not going to happen immediately. you buy the rumor and sell the news. lisa: let's head into your highest conviction calls for 2020. it seems like the consensus trades right now. emerging market will outperform, we perhaps get europe over the u.s. in terms of equity performance, the dollar will rise veryd rates will modestly in the u.s., signaling economic growth, not enough to derail the u.s. equity rally. art: i can make an argument for all of those calls. i think emerging markets tend to traded about it when he percent discount-- about a 20%
coming out of 2019. in the s&p 500, half hour companies have more than half of their revenues from overseas, so i would rather see you in the s&p then in europe just because i think that dynamic in europe right now is to in question. we don't know how brexit plays out. we certainly think that europe is still challenged by a lot of things. i would still avoid that. the weaker dollar makes a great deal of sense, unless and until we have a crisis like we have in the middle east right now, and that is a safety trade, but i think that dissipates a bit. ,y biggest conviction right now every four years we have an election. [laughter] lisa: your highest conviction is that we have an election? art: no, but that health care sales off -- health care sales off and the sector gets hit. whoever gets elected is going to somehow hit health care, and by the way, it never happens.
i think health care is a sector is very attractive as it comes up their pressure -- as it comes under pressure as we get closer to november. i think it is going to be my biggest event in 2020. dip inatch for the health care a buying opportunity. ,rt hogan of national holdings thank you for being with us. now let's get an update on what is making headlines outside the business world. viviana hurtado is here with first word news. viviana: a warning from a run following the killing of one of its top generals -- from iran following the killing of one of its top generals. it will be a "historic nightmare for the u.s." iran says it is vetting 13 possible scenarios. the u.s. issuing its own alert to shipping in the middle east. trump national security
advisor john bolton says he will testify in the u.s. impeachment trial of president trump if he is subpoenaed. democrats are pushing for mr. bolton and other advisors to testify. senate majority leader mitch mcconnell dismissing the demands. he calls that testimony "a fishing expedition." japan is striking back following the daring escape of carlos ghosn. prosecutors issuing an arrest warrant for his wife, carol, saying she gave false testimony in court. the former nissan chairman said family numbers were not involved. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. lisa: thank you so much. coming up, more bank job cuts. meanubs overhaul may saying goodbye to as many as 500 jobs. if you have a bloomberg terminal, check out tv . watch us online, check out our charts and graphics, interact with us directly.
viviana: you are watching "bloomberg daybreak." we begin with a warning from general motors, saying pressure wills china business increase this year. the world's largest auto market has been hurt by a lackluster economy and the trade war with the u.s. re-signing about 3000 employees working on the 737 max program.
production is shut down temporarily. boeing is not expecting any layoffs. the company will start building the mexican once it knows when regulators -- the max again once it knows when regulators will let it back in the air. -- dismissing 40% of its staff. pier 1 has drafted a bankruptcy plan and made a presentation to creditors. i'm viviana hurtado. that is your bloomberg business flash. lisa: we turned out to wall street beach, where we cover three things wall street is buzzing about this morning. first, the ubs shakeup picks up steam. winners, brevan howard, de shaw, and roman capital. can they extend their winning streak? goldman gives no details on
how and where it makes money. with us is bloomberg sonali basak. i have this was interesting. isn't this the most successful side of a lot of these big european banks? sonali: ubs is the 1000 pound gorilla in this room, but investors have been wanting margin improvement for some time. they want some cost-cutting, or at least costs in line. it is a very competitive business, and remember, the head had come over to ubs. businessca side of the that she had been running the americas side of the business for a long time. thee had been running americas side of the business for a long time. the job cuts are very sad, about 500, but they are removing three layers of management. can you imagine? lisa: are these changes being well-received? there's the inherent sadness around job cuts, but two people
feel like this is exactly what is needed to push it forward? sonali: i think when a big change like this happens, it could tend to scare people because it seems like a big change, but this change is very much in line with a lot of things they have been doing before. the market is reacting well to it. when you tell people you're removing three levels of management, i think people say, why were there so many levels to remove in the first place? lisa: does this take off any ideas of consolidation? management, wealth is the heartbeat, so they wouldn't do that. i think when you consolidate assets, you worry about what is whether youetime, will lose any advisors in the interim, but you could look for them to be one of the biggest consolidators in the business. lisa: let'slisa: turn to the hedge fund industry. seen a whole bunch of winners and losers announced as we get into the 2020.
brevan howard md shaw among the wares. -- brevan howard and de shaw among the winners. what does it mean to be a winner? sonali: de shaw is up more than 10%, beating the hedge fund average around 8%. investors are happy if they see double-digit return. that's where the composite fund has been for seven out of the list eight years -- out of the last eight years. lisa: i thought the most interesting hedge fund story was a rochus capital. sonali: they only started trading there. -- they only started trading their first full year in 2015, and they have been doing very well. back over to brevan howard, brevan howard had a decent year with about 8.4% returns, building off of a record year since the financial crisis last year. ellens happening there,
howard had given up his ceo spotify focus on trading more, so hopefully we will see those gains more. lisa: do have a sense of whether this performance is good enough to stanch the bleeding performance of flows? they believe assets are rising enough to offset some of the outflows, so we should start 2020 on good footing. not to mention more hedge funds are closing than starting come up at the ones that are starting our raising record amounts of money. people are starting with $2 billion at a time, so putting that into perspective a little bit is remembering that the industry is bleeding, but not dead. lisa: let's switch gears to goldman sachs, which is taking a new approach when it comes to attracting investors on the equity's side. sonali: transparency at goldman sachs. they had their investor day coming back january 29 -- they have their investor day coming
up january 29. we will hear some of the analysts try to ask questions. right before the endless day really starts, i think we will get some news on what to expect. their $5 billion investor goal will be a big question. a story today said one thing they are doing is looking to show what is in that investing and lending book they have that they have been trying to grow. lisa: that's what i thought was so interesting, that it was specifically having to do with proprietary trading with their in-house banking and investing units that they want to show more detail on. their: people forget that banking and investing unit. it has got a lot of stuff in there, equity and debt security. so a little more clarity i think
will help, but we will see what else they announced. lisa: bloomberg's sonali basak, thank you so much for joining us. in today's off the beaten street, disney is the latest pressure under pressure -- is the is the latest company under china.e in kong andt between hong housing has the stock plunging in hong kong. we will take a look next at today's trader's take. if you are heading out and jumping into your car, tune into bloomberg radio on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪
bloomberg cross-ice at reporter. he is focusing on -- cross asset reporter. he is focusing on high-yield bonds. luke: we were supposed to have been worried about ccc;'a lots ccc'syear -- about last year. that is certainly the case for the high contingent of oil related junk bonds, gaining steam with results from the higher oil prices. that said, how much is this sort of a great example of how the central bank is stimulating all asset classes? you are seeing yield puts go down on the rates side as well as the credit side. luke: there's the potential for very opportunistic issuing. geopolitics hasn't really slowed the issue at all. issuancesf energy
coming this week that will be closely watched try to determine the extent to which energy companies will be hopping back in, but the last time we were really talking about this was september, right around the time when apple was issuing the yield bottoming for a lot of these folks. it will be interesting to see whether this marks a top or something that persists, and the window stays wide open for an especially troubled part of the high-yield market. lisa: yields right now in junk bonds at the lowest level since 2014. thanks so much to luke kawa. coming up, bob doll, nuveen chief equity strategist and senior portfolio manager. from new york, this is bloomberg. ♪
daybreak" on this tuesday, january 7. here's everything you need to know at this hour. let's take it from the top. first up, a warning from iran. the u.s. is in for what it calls "a historic nightmare" in retaliation for the death of a top general. > iran has said more plural -- >> iran has said most times u.s. interests in the region is target. andhey destroyed our lives, we are scarred forever, and over what? lisa: japan embarrassed by carlos ghosn's dramatic escape. now they want to arrest his wife. >> the latest from news around
the potential arrest warrant for his wife comes as no surprise because the speculation was that she played possibly an important role in helping him pull off this dramatic escape from japan. lisa: he says he will name names of those with possible for his downfall when he holds a briefing in beirut wednesday. elon musk has something to celebrate. musk took the stage and gave deliveries of the first china made tesla cars to customers. he also announced he would be launching the model y program in china as well, and sees sales of the model y overtaking the sales of all other tesla models. predict hisand musk new suv will be a bestseller. welcome to "bloomberg daybreak." we are looking at a market that does appear to be headed for positive territory, with the nasdaq actually gaining ahead of
the u.s. open if you look at futures. you are seeing euro we can slightly versus the dollar. yields coming in on the short end of the yield curve, and we are seeing gold futures turning negative. they had been slightly positive earlier, so ending their streak, but still near their highest levels since 2013. we are heading into another day of sloughing off some of the high rhetoric out of iran and the u.s. when it comes to middle east tensions. there's a question of why we are not seeing more of a market response at the very offset of this percolating conflict. joining me now, bob doll, nuveen chief equity strategist and senior portfolio manager, and .ithra warrier, td securities i have to know what your responses to the escalating tensions. bob: i am surprised. yesterday we opened down a bunch, closed down a day. the markets are shrugging and
moving on, perhaps saying that this isn't going to be a horrific event like a lot of people are talking about. i am not sure it is that simple. i think this will linger for quite some time. lisa: do you agree? mithra: we are advising clients to take a wait and see approach. the big question is oil. how long does that rise, and how high, and how does that affect all of the other stocks and markets in general? a lot of our clients are saying let's take away to and see approach. the u.s. economy is still strong, and we have an accommodative monetary policy globally, so they are not panicking at. lisa: if you think that it is perhaps inappropriate to not be taking this as seriously as markets are, do you think that this is a selling opportunity? bob: i would be trimming some for a bunch of reasons. back to the oil question, the u.s., when oil went up, used to be hit hard. but now because we produce so much oil, it is not the negative
he used to be for the of us economy. that's another reason markets are hanging in there. lisa: but that means it isn't necessarily such a bad thing, right? bob: correct. it is not as bad a thing as 20 years ago when we were a huge importer of oil. lisa: gold reaching the highest level since 2013, a little off that now, yet signals show that it is perhaps completely overbought. what is your view on this? mithra: people are viewing gold as a more reliable hedge than oil. in the long term, people are more bullish gold. bob: i would agree with that. it is a better hedge. of course, gold has been running long before the events of the week ago, and this is just adding fuel to that fire. lisa: so you think gold will continue to rise. what about oil? we know that the u.s. is the swing producer here, and we are
seeing oil although but off its highs. i am wondering, do you foresee it gaining steam, possibly even finding $70 a barrel, if this conflict does it go away anytime soon? mithra: the thought is it may climb to $70, but going back to bob's earlier point, that is sustainable for the u.s. market. it is less about the price of oil and how quickly it goes up, and more about if the economy can withstand a higher oil price. lisa: at least you will not see oil prices go down that much with these tensions, which is a pretty interesting develop and. given how much energy stocks have underperformed, would this be a buying opportunity? thera: people are bullish energy sector. there's a lot of interest in investing that has come up in the past week. bob: neutral on energy. i wouldn't be overweight. i wouldn't be underweight. there are some interesting
things happening with the price of oil, but they are cash flow issues with many of these companies still, even at the higher price of oil. lisa: can we delineate between shale producers in the majors? we seen a real divergence in performance in the shares of these companies. you like one more than the other? bob: in a rising oil environment, give me the enp companies that benefit from higher volumes and higher price. the big majors or energy banks, if you will, are much more stable in up-and-down markets. lisa: another reaction we have seen two recent geopolitical turmoil has been an increased bet on fed rate cuts this year, that we do now have a full rate cut priced into markets. do you think the federal reserve will be more inclined to cut rates due to this overlay of geopolitical risk? mithra: and the conversations we've had in the past week, there hasn't been a sense that anything has materially changed. again, i think it is a wait and
see approach. the events of the last week haven't caused anybody to materially change their view. there's going to be a high bar for any movement. bob: the fed raised the bar in its lasty pronouncement about further rate cuts. i think it will step back and watch for a while, absent some horrific event. lisa: i would love to get your sense of china also because a lot of things are on the table right now in markets. the u.s. and china are planning to sign an agreement on january 15. we are seeing money flood into the chinese markets. do you think this is a good bet? littlewould maybe had a in the short run, but the chinese economy is doing better. they've done stimulus now for some time, and they are getting a better economy. we've not solved our problems, but it can move away from the headlines. china can do just fine. mithra: china is a big area of focus for all of our clients.
they are focused on increasing foreign investment, opening up their economy more, cutting reserve requirements. there's a sense that china is a place you can't ignore. lisa: we are going to dig more into that coming up next. bob doll of nuveen and mithra warrier of td securities sticking with me. more on their outlook for 2020 next. from new york, this is bloomberg. ♪
stimulus provided by the federal reserve. "liquidity wins. a good example of how problematic data and news continues to be absorbed by excess liquidity." still with me as bob doll of nuveen and mithra warrier of td securities. do you agree that the muted price action we have seen in equities is a pure result of central bank liquidity? mithra: there's a large part of that. the monetary action and accommodative backdrop has led a to see thate there's not a lot we need to do to drive prices higher. that said, i think the longer monetary policy remains accommodative. you are already seeing a hunt for yield that is continuing, and people are going to wonder re they put their money to get the yield. bob: it is all about the fed and
liquidity and interest rates. lisa: in other words, fundamentals don't matter. bob: it is not that fundamentals don't matter. what the market is saying is it is eventually going to be a better economy and better earnings. the jury is out on that. lisa: lets us extrapolate out here. if the fed has more ammunition to stimulate given the fact that the rates are actually positive, you think that u.s. markets will outperform this year? mithra: our strategists are taking the view that the u.s. market will be range bound, and we have an election, a big event in the second half of the year that is going to cause dislocation. we sell the calls from all of the analysts about the s&p, and it is largely bullish, but high bar foreing a any kind of significant movement. but people are generally bullish on markets. bob: i think the rest of the
world can win this year. the necessary condition is better economic growth outside the u.s. this liquidity, with central banks lowering rates not just here, but virtually everywhere, there are signs that non-us growth is picking up. a little slower in europe, but we talked about china, other parts of asia. the economy is improving. lisa: so invest in china, other parts of asia, maybe a little bit of europe. bob: and emerging markets more broadly. lisa: how much of that is predicated on a weaker dollar? bob: part of it is, but signs of the dollar having some weakness are already in place. longer-term, countries that run current account, trade, budget deficits the size of ours tend to have pressure on the currencies. is: --mithra: there certainly view that dollar weakness sustain a lot of these emerging markets. lisa: when people say europe is
going to outperform u.s., the pushback they often get is that european equities in particular are not as heavily weighted tech stocks. they have very little tech exposure, more heavily weighted toward the financials. using this is a problem, that tech will continue to outperform and be a strength when it comes to u.s. equities? mithra: tech will be the dominant player in the equity market, no question. is dominating every conversation. that said, and europe, one area where many clients have had success is in the mid-caps space. that is where fundamentals are actually mattering. there are companies differentiating themselves. there are spots people can play in europe and have meaningful price action. bob: when global growth is decelerating as it did the last couple of years, the u.s. outperforms. we are the most defensive market on the planet. when economic growth decelerates globally, which is the contention for many of us in
2020, that is when non-us should do better. lisa: i never called 2020 is active equity managers are going to outperform the passive index is for the first time in a decade. the skeptic in me says, haven't we been hearing this a lot? bob: active versus passive is not secular. it is a cyclical issue. most of those stars will line up this year. when growth is picking up, when the markets are range bound, to use your term. i agree with that. when we have non-us growth doing a bit better. those of the kind of tailwinds when active managers tend to do a bit better. when it is all about macro and rates falling and rates zero, it is hard because you have all of the zombie companies that shouldn't be around continue to do well, and active managers tend not to pick them. lisa: if active managers
outperform, will that attract new investment flows? bob: one year won't do it, no. it may stem some of the outflows from active into passive, but it is going to take longer term outperformance. it is not every active manager. if more than half can do it for a few years in a row, we will get some money back. mithra: i think there is cautious optimism on the active investment side. many of the macro items that bob has talked about have been priced in coming into this year, so it is not as much of a surprise coming out of much of something people have to then add to their portfolios. i do think what happens in earnings this year will actually matter. i think this year will be an opportunity for stock pickers to differentiate themselves. we are green shoots. lisa: the other thing you mentioned was the election. we had art hogan on earlier, saying that he thinks that what will be the net result will be
turmoil in health care stocks. this will be a buying opportunity. would you agree with that? bob: we think health care will do fine this year. we are arguing for a status quo election, therefore health care is probably going to be ok. lisa: defined status quo. bob: president trump is reelected, democrats hold the house and republicans hold the senate. in that scenario, they have pretty good earnings growth and new products. mithra: several health care managers are bullish on this year. their view on the election is that any regulation that comes out of the election as it relates to health care will largely be muted. they are not worried about a big move in regulation as it relates to health care stocks. lisa: i want to get your sense on earnings. one thing i know i am watching for is how much margins are impacted by rising costs, whether it comes to wages, whether it comes to some of the commodity inflation we have seen. what are you expecting in terms
of earnings? mithra: there is still an open question on what the phase one trade deal means that has been affecting a lot of the companies our client hold -- our client hold. there's a focus on the profitability and the fundamentals. people are focused on the numbers for the first time in a long time. lisa: imagine that, bob. [laughter] bob: a nice change of pace, right? we are going to have disappointing earnings, largely because of wage growth. , but wes is up 5% to 6% have pes at 19%. you better come through with earnings, otherwise the stocks will falter. every ceo we talk to can't find workers. and they need somebody, they got to pluck them from somewhere else and pay them more. lisa: you are sticking with us, bob doll of nuveen and mithra warrier of td securities. stick around for our exclusive interview with alan greenspan, former fed chair.
viviana: you are watching "bloomberg daybreak." we begin with xerox's attempt to hp, a record breaker. it has lined up $24 billion, telling hp's board there should be no doubt about the company's ability to raise financing. officialed xerox's offer, saying it was too low. ubs is announcing new regional chiefs for wealth management in europe, the middle east, and africa. ubs is removing three levels of management in the unit. that could result in as many as 500 job cuts. facebook is toughening up its policy towards misleading manipulated videos, deepfakes. the company says it will remove that material if it meets
certain criteria. it is unclear if that would cover the infamous nancy pelosi video on facebook. her speech was altered to make her sound drunk. facebook says it will not ban videos manipulated for purposes of parody or satire. that is your bloomberg business flash. lisa: thank you so much. still with me are bob doll of nuveen and me for warrior of td warrieres -- and mithra of td securities. there was a question of whether we are actually going to see action by regulators or consumers when it comes to tech stocks. byron wayne of blackstone, who comes out with these predictions every year, expects tech stocks to underperform, saying, "a millennial in new york city puts their phone down and makes eye contact with another human and finds it nonthreatening and refreshing." nuveenagree, bob doll of and mithra warrier of td
securities, that tech stocks have the potential to face more turmoil from some of the regulatory pressures? mithra: that is the main concern our clients are focused on when thinking about the tech stocks. we saw what happened in other regions, like in europe, there has been action taken on tech stocks. the question is, has that had material impact on their price and valuation? the jury is out on that. people are watching regulations, the impact of the trade war earlier. we haven't heard of anyone highly concerned by the impact of that on tech stocks. bob: i largely agree. the overriding i think it's -- the overhang i think is going to last for years. we are not getting any legislation this year, but there will be talk on the campaign trail. this one has too much power, that one is in the consumer's pocket and shouldn't be. but no legislation. lisa: are we going to see more divergence within the tech
stocks? people often complete one area with another. have seen breakouts in terms of media versus some of the hardware and software components. where do we expect to outperform this year? bob: i think the cyclical sectors will be best this year. in the first half of this year, you couldn't keep up with the software names, but since labor day, the chips have caught up with the software. see a: in general, we lot of interest in the software names. small and micro caps remain an area of interest, and faang remains very popular, but you are starting to see dispersion. lisa: are we going to say a renaming from faang to include microsoft and some of these others? will that take on less of an emphasis, some of these other companies coming in and taking some of the momentum? mithra: that has been a move we
have seen, so i do think you will see players like microsoft, when we look at client portfolios. you certainly -- they certainly play a dominant role there, but faang will be faang. lisa: i am wondering, too, if we see peak cloud. we have not seen as big accelerations as people expected. bob: we need some more develop meant in terms of the business. cloud is successful. the debate is who are the winners, who are the also rans, and who will separate until time goes -- who will separate as the time goes by? lisa: and microsoft and amazon, those are the players really pitting against each other. anyone want to weigh on netflix? bob: i think they are going to struggle.
their motto was unassailable a ago. now it is. they've got to do some reinventing. they will figure some of it out, but i thing it is a tougher road for them this year. mithra: a lot of our clients are focused on that is an area where they are cautious, netflix. lisa: bob doll of nuveen, mithra warrier of td securities, both of your sticking with me. femaleup, the role of tonded and what it takes start them. and sarah robinson will be with us. from new york, this is bloomberg. ♪ york, this is bloomberg. ♪
not be a protracted conflict. s&p futures higher. off their earlier highs. the dow is up. the ftse and the stoxx 600 both up more, but offer earlier highs. crude, the first down day in five. dollar weakness versus the u.s. meanwhile, emerging market strength. talking about trade and emerging markets, we are getting numbers on the trade balance coming in above where the survey was. -$43.1ual coming in billion versus -$43.6 billion. to trade deficit narrowing $43.1 billion. continuing to come in as the u.s. works through trade agreements. you can see the dollar strengthening in response to this given the fact that people view this as u.s. strength. seeing yields not moving much.
as we turn to the world of venture capital and how women are shaking up the space. duggal andis anu sarah robinson, founder of wonder and chief executive officer. female founders funds is a fund b and b2c across the b2 platforms and one of the services investing is wonder. warrier are mithra still with us. anu, i want to get you to get started. as you decide how to invest, how do you pair these goals of investing in female founded firms with investing in profitable startups? anu: great question. what we are looking for is a couple of key things. number one, we often invest prelaunch sewer looking to
invest in great people. what we look for is someone who has unique insight into a particular opportunity, who has relevant experience, and who is looking to reshape and redefine an industry. use to looklens we at, whether it is a company like wonder, secondly we look at market size. if you are building a business, does it have the potential to scale up to $1 billion? lisa: why is it important to be focused on whether or not there is a femur -- a female founder or not? i understand females are underrepresented, but some might say it is limited or a designation that does not carry as much important as how great the idea is. anu: a great point. the way to think about it is the stage at which we invest, there are hundreds of funds that focus on the opportunity.
what we have tried to do is build a differentiated platform and a differentiated way of looking at the world. what we are seeing is we believe women have unique insight from their personal and professional experiences that enable them to have and develop unique products and services that cater to what i think is a massive market. the way we think about it is it is an inherent advantage and will enable us to get better returns and compete with our peers. lisa: sarah, you are here. you are one of the firms anu invested in. can you explain your business? sarah: it is a members club for families. it is a place where families can play and hang out and it as engaging to grown-ups as it is to children. a lot of the places that have kids classes are often on engaging to grown-ups and we want to provide space where grown-ups can feel welcome. lisa: you clearly have children.
you clearly have experienced plenty of offense where you wanted to perhaps have extra beer in order to get through it. what does it mean to have fun for the adults while the kids play? sarah: usually i ended up taking my kids to a class where we were doing itsy-bitsy spider and a parachute over and over again. i thought why can't we have food and games. why can't we play charades. why can't we get a ball of wine and have fun. i mention a lot of people are liking your idea. sarah: we sold out of our founding membership two months before we launched. we now have over 1300 members. lisa: from the bigger investment portfolio analysis, how much is this something you are increasingly considering in terms of whether there are women being representative and alternative views when it comes to identifying opportunities. bob: picking up on what was said, there is no question you need different perspectives.
men and women have different perspectives just like other designations. lisa: to be clear. bob: i am surrounded by four. if you haveimagine children you would not mind doing itsy-bitsy spider over and over again with a glass of wine. bob: i have never done it with a glass of wine. i have to try. lisa: how much of diversity of gender is important right now. all of the investors are focused on finding female portfolio managers. we get that request over and over again. the biggest complaint is that it is hard to find them. they are looking to us and their partners to help them dig deeper. lisa: that raises a question. are there fewer female entrepreneurs or are fewer of them getting funding? why are there so few female
founded startups? anu: there are a couple of ways to answer that question. overall less than 2% of venture capital goes to women. what we have done since 2013 is publish a study starting at the first round of institutional capital to understand if those numbers are moving in the right direction. if you cannot raise $5 million a day, you will never raise $100 million. what we found in 2013 is that in new york there was one series around. in 2018 was the last time we did the study. ofre were 18 for a total $150 million. i think change is required and we have a long way to go. i think we are moving in the which is for us really exciting. was a difficult to get financing? early luckily i met anu
on and that accelerated it. there are a lot of people interested in finding female founders and in the family space when i started pitching the idea. lisa: did you get the sense there were not that many offerings geared toward the family space and you are seeing in each that have not been filled? sarah: i had tried to raise funding several years prior and my comparison when i started raising for wonder is things have starting -- had started to get much better and there were more women at that time. lisa: i am wondering how you -- howe the performance do you show to investors when you take environmental, social, and government issues into a count and have strict criteria, you can perform better. the big question and that is why we have not seen a rush to find more diverse
managers in the alternative space. the common rhetoric we always hear is i love esg, but i do not wanted to hurt my return. that is acute in the public market. in the private market, you have the ability to watch someone perform and grow over time. if you are investing in someone in the public market, you see returns every single day. there has to be a differentiation between the public and private market. we've seen esg investing takeoff more the public than in private. at nuveen webob: have a bunch of esg products and they are getting attention because they are doing well. these criteria show this can be a better investment than somebody who is not abiding by some of these standards. lisa: how do you convince people that from a return standpoint there is a proven track record that is positive? anu: i will be honest.
it has been incredibly difficult. what we are trying to do is prove you can generate top-tier returns by investing in a portfolio that is 100% female. historically, it has never been done. i found we have gotten a lot more traction from foundations. melinda gates is one of our investors. folks knew her in the institutional world who are specifically looking for diversity -- folks who are newer in the institutional world are specifically looking for diversity. the profile will no longer look the same. lisa: i talked to the founders of startups and there is the question of even if you can get the capital, how quickly do you scale up? how do you figure out how to put it to work in a way that does not push you to do too much too soon? sarah: that is keeping a level head and making sure you're not one of the founders who see the
next bright shiny thing and say let's do that. it is about having the focus and staying focused on the steps and how you want to achieve your goals. one of the greatest things of being a portfolio company of anu's is we all help each other. we are all networked with each other to help raise each other up. that is something that does not happen with other portfolios. lisa: what is the most common problem? sarah: there are so many. i do not know that one is more common than the other. it can be a hiring question, it can be something you thought would work that did not work. it can be a scale question. it can be how do you trend these expenses. how do you increase revenues. we all do help each other. foresee there will be reliable gauges to measure performance and demonstrate that in the near future? do you see signs this is picking up? mithra: anybody who is
allocating capital is extremely focused on this. there will be a way where you can more accurately and consistently gauge performance. that is the problem. we have not had a long enough track record of measuring the spirit as time goes on, you will see that. i am optimistic. lisa: you get the sense fundraising is getting easier? anu: i hope it well. lisa: anu duggal and sarah robinson of wonder, thank you very much. mithra warrier, thank you as well. bob doll of nuveen, you're not going anywhere. let's get an update what is making headlines outside the business world. viviana: we begin with a warning from iran following the killing of one of its top generals. the security council says retaliation will be "a historic nightmare" for the u.s. the u.s. issuing its own alert to shipping in the middle east. iran could take action against
american interests in the region. former trump national security advisor john bolton says he will testify in the senate impeachment trial of donald trump if he is subpoenaed. democrats are pushing for john bolton and other advisors to testify. mitch mcconnell dismissing the demand for more testimony. he calls it a fishing expedition. japan striking back calling the daring escape of carlos ghosn. prosecutors issuing an arrest warrant for his wife, who they say gave false testimony in court after his escape last week. saidormer nissan chairman family members were not involved. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. lisa? lisa: coming up? got milk? consumers move away from milk. bloomberg users interact with
viviana: i am viviana hurtado with your bloomberg business flash. a warning from general motors. the company says pressure on its china business will continue this year. selling overrtners 3 million vehicles to china last year, a 15% decline. the world's largest auto market has been hurt by a lackluster economy and the trade war with the u.s.. boeing is reassigning 3000 employees who have been working
on the 737 max program. production is being shut down temporarily in the middle of the month. boeing is not expecting any layoffs. the company will start building the max again once it knows regulators will let the grounded planes fly. big problems for another american retailer. pier 1 imports shutting almost half of its stores in an attempt to overhaul the home furnishing business. the company also dismissing 40% of its headquarters staff. bloomberg has learned pier 1 drafted a bankruptcy plan. i'm viviana hurtado and that is your bloomberg business flash. lisa: time for the bottom line. we look at three companies worth watching. still with me as bob doll of nuveen and brooke sutherland of bloomberg opinion. dairy is the second major milk seller to file for bankruptcy.
it is because of almond milk and soy milk. i am trying to figure out why they are doing so badly now. this trend has been offer a long time. do you drink soy milk? bob: i like milk. lisa: it is so interesting to me to see how they have not pivoted quickly enough and they are also .ealing with organic bob: it is amazing how tastes change. some based on popularity, some based on health issues. you see that lots of different places, but that is amazing. lisa: i will not go off on milk. but stock about what you are looking at, which is probably more interesting. that is apple. bob: a big company. lisa: bigger than borden. bob: a lot of crosscurrents. a lot of wall street analysts change their price target
yesterday. this stock has doubled in the last year. stock tom a very cheap one that is more fairly valued. if you have a lot of money in apple and are taking money off the table, i do not think anyone will falter for taking profit. in the meantime, there fundamentals remain good, whether it is new products they are working on, more services to go with the hardware. a great growth story. they are going to the consumer electronic show for the first time since 1992. expecting to see interesting things there. the third company is bowing -- is boeing. brooke sutherland is with us. from your perspective, how much can we glean from the raison d'atre sale? -- from the recent debt sale. certainly the max crisis
has dragged on significantly longer than anyone expected. on the other hand, interest rates are very low. boeing funding costs have gone down. why not raise debt if you can? if you also look at the other news of the day, you have boeing looking at reassigning 3000 workers to other planes and maintenance to some of the grounded max jets and this is causing ripple effects for its supply chain. you also have spirit aerosystems having to halt production given the fact that the max makes up more than 50% of its revenue. they are looking at layoffs, potentially. lisa: what do you think of boeing? you said apple was in hindsight a cheap stock. boeing has underperformed. do you think we could see a resurgence as people remember they are one of the only games in town? bob: eventually, yes.
i am a skeptic. i am on the sidelines watching. the problem with getting from here to there. i am watching carefully. lisa: there is also a concern about the credibility of the executive leadership. we have heard a lot of different max 737bout when the jet will come back online. even the fact that they are raising more money, does it raise concerns they know about something we don't? bob: i don't think so. they have made management changes. they have been through the ringer. it is all the delays related to all of the approvals they have to go through to get back on the stream and they probably misjudged how long that would take. brooke: to your point on the free cash flow, i'm skeptical about that. i feel that the market is under appreciating the rest and boeing needs to go through a significant investment cycle. if you look at what airbus was doing, they have had huge
success with their a320 family. boeing is missing out on that market. they will have to do something. whether that is a middle-market aircraft or redesigned single aisle jet, you are about $10 billion. in terms of share buyback, i do not think you will see the momentum you have historically seen over the last couple of years. bob: when i say long-term, i think it will be passed that. you are absolutely right. they have to make investment. they cannot just sit there. they have to keep up with their competition. lisa: i wonder how complicated it is for the u.s. to support bowing in its competition with airbus at a time it has had such history? bob: and the politics that go along with that. it is going to be quite a story to watch. you wonder who is pushing who in this story and is there a political angle and a quid pro quo? brooke: so far they have had boeing's back, at least as far
as the wto. the u.s. has been pushing the case for them. we will see how that works out. lisa: brooke sutherland of bloomberg opinion, thank you. and bob doll of nuveen, thank you for spending the time. coming up, futures little changed. we look at key resistance levels in today's technically speaking. if you're jumping in your park, tune into bloomberg radio heard across the u.s. on sirius xm 119ral one or 19 -- channel or the bloomberg business app. this is bloomberg. ♪
bill: futures little changed. theg the december 3 lows in january record high, 23.6% of that range, 30 to 14 how their yesterday. that remains your key support level. at 3258.ghs next i am looking at salesforce which had a massive breakout yesterday. let me go to the one year chart. you can see the big breakout. if i look at a five-year chart on this stock, you can see it firm this long-term bullish ascended triangle pattern. resistance around one other 35. a big breakout for salesforce. -- resistance around 135. the trend is clearly higher since october. resistance today around 140 108. if it can break around that, -- lisa: the mood is flat.
is it hard to find interesting technical patterns in markets like these? bill: it is not. whether it is gold, oil, there is always something going on somewhere. lisa: bill maloney. coming up on the open with jonathan ferro, lisa shalett, morgan stanley wealth management chief investment officer. we are looking at markets trying to find direction. they have found it a little bit, and it is down for the s&p as well as dow. we have an unchanged ftse 100. a bit of a selloff from earlier highs. from new york, this is bloomberg. ♪
jonathan: coming up, a cautious return to risk assets. investors looking for signs of stability with iran assessing 13 possible scenarios to respond to the death of general soleimani. with 30 minutes until the opening bell, good morning. here's your tuesday morning price action. equity futures lower more than .1%. ,oing into the opening bell dollar strength, you're a weakness. treasuries with the smallest of -- euro weakness. treasury 1.80 on the u.s. 10 year. stocks slowly shrugging off tensions in the middle east. >> the market does not believe this will be a long-term move. >> net-net it is not such a big deal. >> this continues what we have in 2019, persistent risk. >> the market isil