Skip to main content

tv   Bloomberg Surveillance  Bloomberg  March 5, 2015 6:00am-8:01am EST

6:00 am
of quantitative easing. jonathan ferro reports. china struggles. we speak about the linkage of the chinese economy the fragile market, and the government in beijing. deadly serious business. the federal reserve is comedy central brought to you by janet yellen. good morning. this is "bloomberg surveillance." it is thursday. i'm tom keene. joining me, olivia sterns. brendan greeley is on sabbatical. olivia: the lowest economic growth target in 15 years from china. they want the economy to grow 7%. china is facing a number of headwinds. they want to make the economy more efficient. >> we need to develop twin engines to drive development. popular entrepreneurship and innovation and increased
6:01 am
supplies of public goods and services. this will ensure that we will adjust without weakening momentum and will underpin with greater quality. olivia: in the past, premier li has said that lower growth is tolerable as long as jobs are created. the u.s. ambassador in south korea is recovering after being slashed in the face by a north korean sympathizer. there was blood on his face and hands and he needed 80 stitches. authorities say the wounds are not life-threatening. authorities say the man also once attacked the japanese ambassador. hillary clinton is trying to end the controversy over e-mails she wrote will secretary of state. she tweeted late last night that
6:02 am
she wants the public to see her e-mails and she is urging the state department to release them. she has been criticized for using private e-mail to discuss state department business. abvii has won the battle and will buy the company for $21 billion. johnson & johnson had been on the virgin of buying pharmacycl ics before abbvie topped it at the last minute. apple was going to start making a 13 inch ipad sometime this quarter and that has been pushed back to september. they are hoping the bigger device will jumpstart ipad sales. in pro football, peyton manning will be coming back for an 18th season in the nfl and he will be making less money to play. the broncos quarterback agreed to take a pay cut from $19
6:03 am
million to $15 million so that the team can use the extra $4 million to recruit new players. he had considered retiring after the broncos' loss in the playoffs. do you think this is all truism or do you think he is betteitter? tom: michael mckee is our reigning broncos expert and he is a little bit surprised with the pay cut. the apple thing, i think this is the ipad thing. this is an apple six plus. i love the battery. but it is an ipad killer. brendan:olivia: it is. that might be a laptop killer. tom: they have all of these different products and i wonder where they are going. we are going to a data check.
6:04 am
olivia, help me out here. the euro is all you need to know. we are not on a parity watch yet . but there it is. olivia: not yet, but a lot of economists and analysts have been betting that we will go down there. we are looking for mario draghi to put a little meat on the bone of qe. tom: exxon talking about low oil for longer. on to the second board. new strength. i am fighting the plague that brendan has got. let's go over to the bloomberg terminal and look at something that francine lacqua looks at every day. this is euro-sterling without the dollar involved. this is cyclical.
6:05 am
sterling, ever stronger. euro, weaker. olivia: a lot of people in england are looking forward to their holidays. tom: you have lived this. olivia: we were so close to parity in 2008 and 2009. people were saying, we might as well join the euro if it is worth the same amount of money. tom: the european central bank takes the headlines this morning. jonathan ferro is in cyprus. other markets move. you may not know this. the brazilian riau just got crushed. it gave way to weakness overnight. euro parity.
6:06 am
i had somebody call me up with a proverbial, what should i do with my 401(k)? i was giving advice to somebody about what to do with equities and what to do with bonds, which i did not do. what is your enthusiasm? gina: i think expectations are fairly low for earnings growth and that is the biggest driver of stocks. expectations versus reality. tom: you were a measured bull a year ago and two years ago. are you the same now? gina: i will stick with that. again, if you have earnings growth the set up is fairly easy. there is just not a lot of reason to say equities. tom: within this conversation is
6:07 am
china, which booms. olivia: which booms, although the npc downgraded to 7%, the lowest level in 15 years. gina, your year-end target is still the same. the bear argument is that earnings are maxed out. gina: i disagree with the idea that earnings are maxed out. we have a pretty long run for continuous earnings growth. we went through massive correction and expectations over the last six months. even a modest revenue recovery is probably going to propel reasonable growth. tom: we link equities and we have an intuitive feel of linking it into bonds and this and that. can you do the same exercise in china?
6:08 am
>> the short answer is no. the bond market is of trivial consequence in china. most people's personal wealth is held in housing. that has worked out well for a long time. it is hurting very badly. the biggest economic problem in china in 2015 is the decline in housing and the hit to economic growth. olivia: we have seen a huge run-up in chinese equities. is it the same divergence in china? is what is happening in shanghai different? donald: i would say so. the china equity market is dominated not by institutions
6:09 am
which are dominant here, but by individual investors but they are primarily wealthy people and it is a punter's market. one month is a long-term holding in china. this is a great story for the next 3-5 years. tom: it is like the 1920's or 1930's in america. what is the punters market in the united states today? is there a lot of retail enthusiasm? gina: there is very little retail participation. the only good that equity outflows have in pace -- outpaced was 2013. we have seen that persistently through the cycle. the retail investor rode the wave down, wrote it back up -- rode it back up. tom: where are you on the
6:10 am
financials? gina: i am still underweight on financials. that is probably my most controversial call. i do know if it is my most stress, but it is my most controversial call. we see the yield curve continuing to flatten, even as the red -- fed raises rates. olivia: what are you looking for on job stay tomorrow? gina: reasonable job growth. anything substantially less would not be great for a growth strategy. over the long term we tend to smooth out the jobs growth number. tom: is there a jobs report in china? donald: not really. it is a throwback to the early days about anything with income and jobs employment was politically sensitive. tom: so far this year you are
6:11 am
wearing the single best tie. [laughter] olivia: how about gina martin adams' tie? donald: this is a china tie. the dragon has five claws not four. olivia: that is top brass. [laughter] donald: i have a red one, too. olivia: we will be speaking about stress tests coming up. the results are out later today. is the american century over? we will be speaking to joseph nye coming up. tweet us. this is "bloomberg surveillance." good morning. ♪
6:12 am
6:13 am
6:14 am
tom: good morning, everyone. "bloomberg surveillance." olivia: we begin with weak economic news coming out of china. the lowest economic growth target in more than 15 years. premier li said he wants the economy to grow 7% this year. that is down from 7.5%. in south korea, terrifying moments for the u.s. ambassador. he was slashed in the face by a north korean sympathizer. he was attacked before a speech on u.s.-korean relations. his life was not in danger, but he did need more than 80 stitches for those facial ones. -- wounds. the future of obamacare could be decided by one vote in the supreme court. court watchers say it could all come down to justice anthony
6:15 am
kennedy or chief justice john roberts. the administration needs one of them to join the court's liberals. rick scott is giving up on forcing welfare applicants to apply for drug tests. the law has already been ruled unconstitutional by two federal courts. etsy was filing for an ipo. it is a global marketplace for vintage and artistic goods. it is open to raise $100 million. the nation's largest public school system has added two muslim holy days to its calendar. it is the first time new york city schools have officially recognized muslim holidays. all students will get those days off and those are the top headlines. tom: i read that story very carefully in the new york times. 12% of the kids in new york
6:16 am
city. i read the article. amazing announcement. olivia: better than a snow day. wall street is on edge as investors await the returns of the federal reserve's stress tests. the citigroup ceo has implied that he will be fired if they do not pass this time around. they failed the stress test last year. michael joins us onset. we were all surprised to see this headline. michael corbet's job, is it really at risk year? michael: there is a precedent here. there is some precedent here and michael corbet has put this on himself. he pulled an executive out of retirement and said, we need to fix this.
6:17 am
he said, if it happens again, it is on me. olivia: citi appears to be in a much stronger position this time, correct? michael: they failed on qualitative reasons. the fed did not like their process. that is what you cannot get a good handle on because the process is private. on a number of spaces, they are much better. on the qualitative basis, that is such a black box that it is hard to tell. tom: he wants out. his family wants out. corbat and the team are saying you have to come in and save the day. what are they actually doing? is it essentially, hire more lawyers? michael: it is higher more people. it is make sure that they can answer every question the fed has especially about their business overseas.
6:18 am
they are in some of the countries. the fed wants to know that they have a handle on how much can we lose in this country if this happens. being able to get the fed the answers is what it is all about. tom: which bank got an a plus? who owns the best practices? michael: it has come down to who is the most conservative and cautious in what they ask for. jpmorgan and goldman had to scale back their asks last year. tom: gina. i am not going to call and you because you are going to get put in the wells fargo timeout chair. [laughter] this discussion is the opening for boutique banking within america. this is the opportunity that your firm has. donald: there are a lot of firms
6:19 am
that see this opportunity. there has been a massive amount of deals and that was the lot of the attraction that the isi evercore. tom: your idea of a stress test is, should i take the window seat or the aisle seat? [laughter] olivia: the result of dodd-frank has produced legislation that has made an oligopoly in investment banking's, so only the big banks have a chance to compete. you are underweight financials, gina. the key is for people who like to invest is that the big banks are trading. why is this an opportunity? gina: financials is not just big banks. consumer finance, capital markets risks. we tend to focus on the banks and banks are an overweight
6:20 am
within our financial sector. there is a valuation opportunity. if you are looking at the entire financial sector, you have some considerable earnings risk and we account for that by making the financial sector -- tom: when do we see this? michael: this afternoon, 4:00. this is part one of a two-part test. olivia: what everybody wants to know is if these banks will be able to buy back shares and pay back their dividends as a result. michael: this is the biggest number they have all year. tom: coming up in our next hour a conversation with joseph nye from harvard university. his the american century over? joseph nye has an incredibly readable book. stay tuned for that. this is "bloomberg surveillance." ♪
6:21 am
6:22 am
6:23 am
6:24 am
tom: good morning, everyone. "bloomberg surveillance." in our next hour joseph nye from harvard university. olivia sterns gets us started with our morning must-read. olivia: joseph mine comes from the "atlantic monthly." whether or not we are at 1938 again. that was the last time -- that was the theme we heard benjamin netanyahu really hit on in front of congress. tom: frightening language that
6:25 am
harkens back. what we know for certain is that 1938 and 1939, all of this ugliness came out of nowhere. we now have china looking abroad. could china create bilateral relations with iran that destabilizes the western dialogue with iran? donald: i don't think that is what they would like to do. they are a big boy now. they want to have economic relations, financial business relations with every country in the world. they trade with everybody. they are building a real navy. i think this just goes with the territory of being an economy the same size in total is america. olivia: one of the things we are going to be talking with professor nye about is whether or not we are in this new age of geopolitics. he is arguing that yes, in part,
6:26 am
we are. do you think china sees this as the old politics of superpowers? donald: i think that they don't want to have one superpower in the world. i think they want to have two and they would be the addition. they are really asserting their influence within the south china sea, to the detriment of malaysia, philippines, vietnam. olivia: they are literally building islands, reclaiming land. we are going to continue the conversation about china. they just cut their growth forecast to 7%. ♪
6:27 am
6:28 am
6:29 am
he's out there. there's a guy out there whose making a name for himself in a sport where your name and maybe a number are what define you. somewhere in that pack is a driver that can intimidate the intimidator. a guy that can take the king 7 and make it 8. heck. maybe even 9. make no mistake about it. they're out there. i guarantee it. welcome to the nascar xfinity series.
6:30 am
tom: good morning, everyone. we go to jonathan ferro in cyprus in our next hour with that ecb announcement. let's get to the top headlines. olivia: china is forecasting its lowest economic growth forecast in 15 years. premier li set a goal of 7% down from 7.5% one year ago. the country is facing a number of problems including disinflation and excess industrial capacity. in south korea, a surgeon said that heaven and god saved the
6:31 am
u.s. ambassador after a knife attack by a north korean sympathizer. he needed 80 stitches. nine hours after the attack, the abbasid are tweeted he would be back on the job asap -- the ambassador tweeted that he would be back on the job asap. hillary clinton is trying to diffuse a controversy over e-mails when she was secretary of eight. she is urging the state department to release all of the e-mails from a private account. she says authorities will view the e-mails for release as soon as possible. republicans struck out in the latest attempt to get the keystone pipeline built. the senate failed to get the two thirds majority needed to override president obama's veto. >> if we don't win the battle
6:32 am
today, we will win the war. we will find another bill to attach this legislation two. we ought to just pass it on its merits. olivia: the president vetoed the bill because it removed his authority from making the final decision. the lawyer for the suspect in the boston marathon bombing has removed all doubt about her client. she admitted that he took part in the attack. she also said that he was under the influence of his domineering brother who was killed in a shootout with police. prosecutors are seeking the death penalty. we have heard this a lot the last couple of months. a large winter storm is dumping ice, sleet, and snow from texas to new england. new york city make it up -- may get up to seven inches of snow. for once, boston may be spared a heavy snowfall. boston may only get two inches of snow.
6:33 am
the storm has forced the cancellation of 3000 airline flights so far. the national people's congress kicked off today in china, the annual meeting of the legislature. let's get more from beijing. >> a lot of things covered in premier li's state of the nation address today. the premier said that there would be more charges and more difficulties ahead but that there is room for growth and the economy can remain resilient. >> we need to maintain policy continuity and keep expectations stable while moving forward with reform and structural adjustment. >> the government has said it will pursue a prudent monetary policy and proactive fiscal policy. the fiscal budget falls on some of the hidden local debt.
6:34 am
they are expanding spending to avoid an excessive slowdown. they will strengthen risk management and transparency. he also mentioned increased spending on the environment, as well as promotion of the private economy and innovative industries. he also mentioned a 10.1% increase in merchant re-spending. they want to attack corruption within the military, as well. a lot of work ahead as the government heads into the next year. tom: christine hah in beijing. if it had been a state of the union in washington dc, we see chinese dictatorship with a message this morning. the video always looks the same.
6:35 am
but this is not a legislative body, is it? donald: it is not a legislature and the way we think of a legislature. it is a body of 2500 most important people but in the long run, it is all up to the top of the party. that is how things work in china. that is not going to change. tom: let's take jonathan spencer's classic textbooks that everybody read on china and i want you to bring it forward to the chinese government now. what is the similarity of the government to what we knew 20 years ago? donald: i think the biggest priority is to maintain growth. one year ago, they said, reform. this year it is balance reform and growth. that might seem like a small change to you, but it is a big change to them. tom: i think that stephen colbert would call that growthiness.
6:36 am
[laughter] donald: the state of the union is to assert that things are fine, think everybody that has helped. tom: he goes down the road and thanks everybody like president obama? [laughter] donald: a list of the most important objectives. thank everybody. itemize the list so that you leave no stone unturned. tom: it is like a bill clinton speech. olivia: i am not going to bite on that. do you believe the statistics coming out of china? donald: i believe the 7.4% statistic last year was not too far from wrong. we have a run synthetic growth index that matches it fairly well. their growth is slow. the new normal is not 7% growth. the new normal is lower every year. olivia: how good of a job or the
6:37 am
doing managing the economy? donald: i would give them a gentleman's c. tom: if you are one of the merchant banks of china looking at these markets, don, you also work at the sweat level. what is the level of sweat? donald: the housing sector is not great. it is massively out of equilibrium. there is an excess supply of unoccupied units overhanging the market. tom: come on. stop it. how do you clear that disaster? donald: it is going to take time. how you don't clear it is trying to get these people that are dione five houses -- that own five houses to buy another one. the stimulus methods about
6:38 am
housing will not work. olivia: do they have to tighten their belt? donald: they are not going to tighten their belt. it is all about more monetary ease. they have cut interest rates and required reservation. it is about more fiscal stimulation. olivia: china also announcing that they were going to up the military budget by 10%. keep in mind that the u.s. still spends more than the next eight countries on their total military spending. you think that china is clearly turned to catch up with the u.s. donald: we know that the military spending numbers in every country in the world are not to be believed. there is too much black budget on defense. i'm sure that is true in china as well. if their gdp number is 8% or 9%
6:39 am
give them a break, that is not excessive. tom: let me ask you the money question for institutions. when do china and emerging markets get a better representation in the international monetary fund? donald: i don't think they do. they already have significant representation in imf. i think most of the other members are not really interested in increasing the weight that they have in that body. olivia: coming up, new minutes from the fed's meetings show that policymakers might think laughter might be the best medicine. janet yellen has some pretty good one-liners. this is "bloomberg surveillance ." we are streaming on your tablet your phone, and good morning from a snowy new york. ♪
6:40 am
6:41 am
6:42 am
tom: good morning. just about one hour away from that euro meeting in cyprus. the euro is quiet, resting after yesterday's festivities. the schedule a single best chart. here comes the comedian, olivia sterns. olivia: we are taking a look at behind the scenes of the fed.
6:43 am
according to the documents, the sense of humor recovered. what you are looking at his moments when the transcript actually had the word "laughter" in brackets. laughter grew scarce in 2008 and bounced back pretty quickly in 2009. i was pretty pleased to see that janet yellen was cracking a lot of the jokes. tom: is this john stewart comedy central laughter or "did you see that paper by alan krueger?" l kind of laughter. olivia: more of the latter, your sense of humor. [laughter]
6:44 am
tom: it shows that -- don, let me quickly review. we are a long way from the quiet arthur burns, aren't we? donald: we are. tom: is it too much? donald: the fed gives us too much guidance. the more guidance they give, the less latitude they have to move when they think they should. they set up these expectations which i find counter-productive. tom: we go to gina martin adams. gina: i think i agree with don. tom: do you have another joke with us? olivia: ben bernanke. the fed committee gave him a standing ovation because he was
6:45 am
named "time magazine" person of the year. he gets up and goes, "the power of the media." [laughter] they are dry. they are not on their job for the sense of humor. janet yellen wanted to stimulate sooner rather than later. she was very vocal on that. tom: what is the wells fargo call? gina: still june. sticking to it. olivia: 18% according to the fed fund future rates are predicting june. tom: that is also when the red sox will win three games in a row. [laughter] olivia: a tough thursday morning here on "bloomberg surveillance." we are going to go to nepal. 224 people were on board a plane, though no people were injured. it occurred during a fog that significantly reduced visibility. the crash occurred in the paul's
6:46 am
only international airport -- nepal's international airport. all flights are been rerouted through india. tom: that is really cool. it worked. olivia: you see a plane land in the river. i'm going to be taking off my shoes. your heel could puncture the raft. a ceremony begins on the full moon of the third lunar month. months walk clockwise three times around a temple to commemorate the day when 1250 monks gathered to be ordained by buddha tom:. -- buddha. tom: gorgeous. eric does our photos. olivia: in ethiopia, tom this
6:47 am
is what your dental x-rays look like. the oldest human fossil ever was discovered on a hillside. it is predicted to be 2.8 million years old. that is 400,000 years older than a previously held record. the fossil contains a job on and five teeth. this is before candy. tom: 30-40 years ago. olivia: who? tom: the guy that really got this going in the modern age. the fossils. olivia: can we have a sound effect for that? what are you talking about? tom: come on. everyone knows lewis b. leeky. olivia: i cannot believe those teeth still exist. that is amazing. if you have ever heard of lewis b. leeky please tweet me.
6:48 am
you can also answer our twitter question of the day. do you think that the american century is over? this is "bloomberg surveillance." stay with us. stop talking about teeth. ♪
6:49 am
6:50 am
6:51 am
tom: good morning everyone. that is not "the hunger games." that is new york city. [laughter] it is snowy. it is march. a rod got a hit yesterday. [laughter] olivia: doesn't that make you want to get out of bed? tom: let's go to turks and caicos. olivia: news coming out of china. beijing announces the lowest economic growth target in 15 years. premier li once the economy to grow by 7%. in south korea, terrifying moments for the u.s. ambassador who is recovering after being slashed by a north korean sub kaiser in the face --
6:52 am
sympathizer in the face. his life is not in danger, but he did need more than 80 stitches for facial wounds. pro-russian rebels say that the death toll in a minor accident is 32. the rebels say methane caused the explosion yesterday. accidents at this mine have killed more than 150 workers. authorities in liberia say the nation's last ebola patient will be discharged today. they now have no other confirmed cases. the latest outbreak of the disease killed nearly 10,000 people in the region. that is great news. benjamin netanyahu's popularity rose slightly in israel after that speech to the joint session of congress in the united states. his speech slammed u.s. efforts to cut a nuclear deal with iran. voting is scheduled in 12 days march 17.
6:53 am
"50 shades of grey" israel to be too hot for india. it is also not being showed in kenya, malaysia. the movie has taken in more than $400 million worldwide. those are your top headlines. semi conductor stocks trounced the s&p last year. trading has been a little bit wobbly in 2015. still with us is gina martin adams from wells fargo. i know you are overweight on technology, but do you think tech stocks can keep powering forward? gina: it would be a historically rare event and we do. we are leaning against history with our view that tech stocks can continue to do well without leadership from the semi conductor sector. we think this will be a fairly unique period for a number of reasons. the tech sector is holding up fairly well. you have the strong price
6:54 am
momentum. the second is earnings. when semis turnover, the broader tech sector momentum is leaving, and we have not seen that. it has been the single best sector for the last month. tech is doing well, as far as earnings. semis are just not as big as they used to be. tom: come on. bring it up. it is a roulette wheel. it was romantic. intel, i know you don't talk about individual stocks, but intel, 11.4% total return and deteriorates to 6.8% in the last 10 years. i would say most of the sector is one, big financial engineering exercise. gina: there is some revenue growth, but last year was pretty dicey. they had massive revenue
6:55 am
shortfall and earnings shortfall and then made up for that. tom: does wells fargo believe in the cloud? [laughter] gina: of course. tom: four is at the next semi conductor index? olivia: does wells fargo believe in the smartphone? [laughter] tom: no, the cloud is all a big rage right now. people would bring in the substrate to show you the wafers coming off the semi conductor and then we all went out and lost money on them. is that the cloud? gina: i think there will be winners and losers with cloud. just like there were winners and losers in semi land. cloud is a totally different entity. tom: sure. gina: it is not the same sort of sector. but it is a driver of investment right now and it is changing the world of technology to a certain extent. olivia: a lot of people say the
6:56 am
issue is that it is in a structural state of long-term decline. the conversation we are having brings up the issue, can we really treat technology as one sector? don't you want to divided between twitter and ibm, new technology and old? gina: we do. every sector has this issue. olivia: are you overweight the twitters of the world or ibms? gina: pcs somewhere in between. tom: is china going to win at tech? donald: no. olivia: really? ronald: china wants to -- donald : china wants to have its own tech sector. they want to have national champions and not be dependent on foreign companies. that is just the deal. tom: get me a bow tie that looks
6:57 am
just like your type. it is gorgeous. [laughter] thank you. let me do a forex report. jonathan ferro is in cyprus. we are not. we are in the snow in new york. stay with us. in the next hour, joseph nye. ♪
6:58 am
6:59 am
>> european central bank meets
7:00 am
in cyprus today to clarify their version of quantitative easing amid a plunging euro. joseph nye on america's place in the world. is the american century over? dubai looks 80 miles southwest. good morning everyone. this is "bloomberg surveillance ." it is thursday, march 5. i'm tom keene. let's get to our headlights appeare. >> the last time china's growth was the slow was 1990. they want to grow by 7% this year. china is facing a number of headwinds such as a real estate slump and excess industrial capacity. >> we need to develop when
7:01 am
engines to drive development. -- when engines to drive development. this will ensure a growth rate is just -- twin engines to drive development. >> he has said that a slower expansion is tolerable as long as enough jobs are created. in south korea, the u.s. ambassador was injured in an attack. he needed 80 stitches on his cheek. he tweeted later that he would be back on the job asap. his attacker is described as an activist. hillary clinton trying to end the controversy over e-mails she
7:02 am
wrote while secretary of state. she tweeted late last night that she wants the public to see the e-mails she sent from her private account and she is urging the state department to release them. she has been criticized for using private e-mails to conduct a state department business. there has been a major deal in the drug making business overnight. they will buy the company for $21 billion. they make a blockbuster blood cancer drug. you will have to wait a little longer for that larger ipad screen at apple was going to start making a 13 inch ipad sometime this quarter. that has been pushed back to september. there were delays involving the supply of the display panels. apple is hoping the bigger device will jumpstart ipad sales that have fallen for four straight quarters. number 18 will be coming back for an 18th nfl season.
7:03 am
he will be making less money to play. peyton manning agreed to take a pay cut from $19 million to $15 million. the team can use extra money to sign new players. he had considered retiring after the broncos lost in the playoffs this year. that is very generous, to give over $4 million of his salary. do you think he really wants the broncos to recruit more talent or he wants to tie his little brother for super bowl's? >> he wants to keep playing. michael mckee is an expert on all things denver broncos. we will get wisdom as well. this is the bank of england, a -- maintaining benchmark rates. doing better than good at the bank of england. the data check is one data item
7:04 am
on our risk -- euro-dollar from 112 through 111. this morning, bloomberg surveillance celebrates a new 127 page must read. my read for spring of 2015 for the entire hour, joseph nye with us. he is considered by many to be our foundational thinker on america's place in the times. in 1997 with his classic text and 2007 and now we listen to professor nye. the dangers of diplomacy. our ambassador to korea -- there is a school on the west coast called stamford. he is everything are foreign policy is. >> i was quite shocked to see
7:05 am
those pictures of him with that/on his face -- that slash on his face. >> do we underestimate the danger that our diplomats face? >> they have a harder job than people think. they think of them sipping cocktails and striped pants. they are on the front lines and are under attack. >> we saw the tragedy in paris. let's start with united states. bolivia spent a lot of time in london and across europe. we have evolved from world war ii. where will europe be in 10 years? >> i hope europe will get out of this current slump. i think it will hold together. whether the greeks will be part of it or not is a different question. will the central core of germany and france hold with italy? probably yes. the big question is what happens
7:06 am
to england after the next election. the labor party may wind up doing a coalition with the scots nationalists. cameron comes back, he has to do with some smaller party. >> you really think there is a real possibility that he will get his way and britain will leave? >> i don't think u.k. independence party will do that well. there is a fairly close call that britain could vote to get out. >> this speaks of a more fractious time. this is not margaret thatcher or the liberal democrats. there is a more fractious character. are you surprised by that? >> there is a populism in all the major countries.
7:07 am
you find a significant group from below that is unhappy. that is a reflection of low growth and a reaction to immigration. >> whether or not greece leaves -- the concern is political contingent. -- political contagion. >> we are already partly there. they're taking away roads -- of votes from the socialists in spain. if they make too many concessions he will see that and immediately get an extreme boost. >> let's look at europe and bring in --
7:08 am
how much is the shadow of world war ii still within our dialogue with europe? this always delicately comes up. have we moved beyond the ghosts of world war ii? >> we have and we have not. you look at the shape of world politics today, the un security council still reflects the outcome of world war ii. if you look at the goal of nato that which was founded in 1949, that reflects the early period right after world war ii. >> do you agree that we blew it and made a threat with nato that was too much for mr. bruton? -- mr. wputin? >> no. if you look at when the obama administration came in 2009, they made clear to vladimir putin that they would not expand nato.
7:09 am
bush had already said that we would not expand nato. putin has been using this as an excuse. >> did you write a short book on purpose? 127 pages. it's great. >> can the current structure of the government in europe hold? >> i think the europeans have been able to muddle along with a structure that is not a federation or fully integrated. i don't think you see a willingness to give up sovereignty. if europe holds together -- >> can it continue to function if they don't actually give up a little political sovereignty? particularly over their budget. >> they do. if you look at the compromises they make, it's always a little of this and the little of that. it's not dramatic.
7:10 am
>> they say we will have a 3% deficit target and nobody hits it. >> people that get the biggest opt outs are the biggest countries. france and italy. the europeans have a political logic holding together which keeps them together. the economic logic doesn't make sense. the political logic will prevail over the economic logic. >> interesting. >> we will be staying in your wheelhouse, going 12 what a question of the day -- going to our twitter question of the day. ♪
7:11 am
7:12 am
>> good morning, everyone. "bloomberg surveillance." time for our morning must read. as we speak to joseph nye we go to one of his former students. netanyahu wrong for 25 years? joseph nye with us. you will appear with him later
7:13 am
in the day. let's get out front of doctors a car area -- dr. zakaria. this interesting relationship with israel. i remember 1967 u.s. and academic lived with this for years. what is the new american-israel relationship? >> the american commitment to israel is unchanged. it will be there and is very solid. what is new is the pad relations developing between netanyahu and obama. -- bad relations. that has allowed a degree of political difficulty to enter into the relationship. netanyahu has played this for his political advantage. >> one of my high points in davi os this year was a conversation with the president of egypt. >> i don't think they have
7:14 am
adapted very well. there is an interesting editorial in an israeli paper if netanyahu wanted to be churchill he should have made the compromises with the palestinians come clear that issue off the table so you have everybody to focus on the problem of iran. but he doesn't have that recognition. at the same thing is true in terms of how they approach the larger problems. >> does president obama suffer from a lack of breath of issue? >> he has the right sense about the middle east. you can go in there and reshape these societies. they are going through a profound revolution. talking about 20 years or so like europe in the 17th century, the 30 years war which reflected forces coming up from below. that is what we will see in the middle east. >> the american century.
7:15 am
a wonderful spring must read from joseph nye of harvard. we continue our smart discussion on bloomberg television. edward morris on oil and his call to visit down to $20 a barrel. a controversial call. this is "bloomberg surveillance ." good morning. ♪
7:16 am
7:17 am
7:18 am
>> good morning good the ecb decision this hour. john barrow and cyprus. >> we begin with weak economic data coming out of china. the country's lowest economic growth target in more than 15 years. china once the economy to grow 7% this year, down from last year's goal of 7.5%.
7:19 am
terrifying moment for the u.s. ambassador in south korea. recovering after being slashed in the face. authorities say his life was not in danger but he did need 80 stitches to close the facial wound. the future of obamacare could be decided by one supreme court boat. -- supreme court vote. it could come down to anthony kennedy or john roberts. the administration needs one of them to join the court for liberals. the justice department says police officers routinely targeted blacks in ferguson, missouri. eric holder described the findings. >> our findings indicated that the overwhelming majority of force -- 90% directed at african-americans.
7:20 am
this deeply alarming statistic points to one of the most pernicious aspects. these policing practices disproportionately harm african-american residents. >> the killing of an unarmed black teenager over the summer setup up weeks of violence and unrest. sales of the playstation for recent -- reached new highs making it the fastest selling videogame console in the company's history. outpacing rivals like nintendo and microsoft. causal makers are facing more competition these days from free smartphone-based video games. the nation's largest public system has added to muslim holy days to the calendar. one is the end of ramadan and the other is the mecca pilgrimage. all students will now get those days off. >> brazilian real about to go
7:21 am
through an 11 year weakness. we are in three riel per dollar. we focused on america -- is the american century over? we asked in 1876 and now we ask again after years of subpar gdp. no one has thought more about the nation's place in the world then joseph nye. he teaches at harvard, which hardly describes his contribution to neoliberalism. he was part of the american wake society at princeton -- american whig society at princeton. >> and has grown to a power which is unprecedented.
7:22 am
it is interesting to note that the founding fathers worried about whether the united states was in decline. we have worried about that from the start. >> our believe in america is part of it. here's the quote from the book -- i can't say enough about the 127 pages. 82% of americans say the u.s. is the best place to live. this is that age-old question. why are we so miserable? >> congress with an approval rating in the teens. goes back to the immigration figures. people still want to come to america. >> immigration is controversial but we are built on immigration. china will never pass because
7:23 am
you can benefit from the best of the whole world. china has a talent pool of 1.3 billion. the united states can pull the talents of 7 million people. >> so much of what you have written about was soft power. do you think the u.s. soft power is in decline? >> i think the u.s. has more soft power than anybody else. it goes up and down. during the vietnam war and iraq war, caps off power is down. in both cases, we recovered. that ability to attract others, we are still doing pretty well on that. >> the soft power was so obvious during the cold war. when i look at what is happening in the middle east come i think americans have no soft power there. is that true? >> there are large parts of the middle east where we have a soft power deficit.
7:24 am
there are large parts of the world including china and africa and latin america where we have a lot of soft power. >> you mentioned in the book, global complexity. do you you're in for a simpler international relations? or are you happy with the cut got me -- the complexity of the moment? >> it's what we have to. when the when was founded right after world war ii there were 50 states. now there are 200. american century, i use henry's quote from 1941. he proclaims the american century. it is the second half of the 20th century. it is going to be the full first half of the 21st century. >> we want to know, what do you
7:25 am
think? is the american century over? this is "bloomberg surveillance ." we are on bloomberg radio, also streaming on your tablet, your phone and good morning. ♪
7:26 am
7:27 am
7:28 am
>> good morning, everyone. jonathan faro in cyprus in 17 minutes. let's go to the bloomberg terminal and link it in with joseph nye. is the american century over?
7:29 am
here is a depression -- slope matters. this is the atlantic charter. the bottom for america in the 20th century. it was ugly, ugly. we suppressed the news for six months. then up we go and there is carter malaise here. this is your american century. things look pretty good. do you presume this continues on forever? a metaphor for your international relations? >> never forever. on the other hand, we can often make mistakes about timing. an english statement from the 18th century after the american colonies were lost said "now britain is reduced to a miserable island like sardinia." that was the eve of britain's second century.
7:30 am
not forever, but for quite some time. >> we been talking about the reasons people want to come to america. what is the business environment like? >> we have lots of problems but on the other hand, if you ask where do you find a mortgage of neural culture -- more entrepreneurial culture pretty hard to find any country that exceeds the u.s. if you look at the chinese ranking of world universities the u.s. is 15 of the top 20. china has zero. >> let's get to our top headlines. >> china has no entered a new normal period of slower growth. lowering the target to 7% down from 7.5% a year ago.
7:31 am
the worst year for growth and a quarter century. the economy faces a number of headwinds come including overcapacity and greater demand for better social services. the u.s. ambassador to south korea has been hospitalized after a terrifying knife attack. amana poised to joint south korean u.s. military exercises slashed him while he was waiting to make a speech. he needed 80 stitches in his face. -- a man opposed. in a late-night week, hillary clinton said she wants the public to see her e-mails. the likely democratic presidential contender is urging the state department to release all the messages she wrote from a private account. she has been criticized for using private e-mail to conduct state department business.
7:32 am
she said authorities will now review the e-mails for release as soon as possible. republicans and struck out in their latest attempt to get the keystone pipeline built. the senate failed the two thirds majority. one supporter says the fight is not over yet. >> if we don't win the battle today, we will inwin the war. we ought to just pass it on its merits. >> the president has indicated he vetoed the bill because it removes his authority for making the final decision. it was an unusual opening argument in the boston marathon bombing case. a lawyer said he did it. he took part in the attack that killed three people and wounded 260 but said he was under the influence of his domineering older brother. prosecutors are seeking the death penalty. how long before spring?
7:33 am
in large winter storm dumping ice, sleet and snow from texas to new england once again. new york city make it up to seven inches today. in little rock, arkansas, up to a half foot may fall. for once, boston may be spared a heavy snowfall. it may only get two inches of snow. the storm has forced the cancellation of 3000 airline flights so far. how many classes have you had to cancel? >> three cancellations this winter. it really is extraordinary. i had 2.5 feet of snow in my backyard. >> can you blame it on the washington consensus? >> i think it is a deeper plot than that. >> institutions in our world of international relations. jonathan faro from cyprus coming up any moment here. dow futures up 31.
7:34 am
the euro front and center this morning. a stunning number, from 140 down to 110. getting there very quickly. nymex crude at 52. $81.59 a barrel. >> they are under attack -- accused them of receiving state subsidies. they argued to the company contributed to the eu's gdp -- hans nichols and spoke with the ceo earlier this morning and joins us now from berlin. >> we are at the beginning of a potentially nasty fight between the u.s. carriers sang the gulf state carriers get an unfair advantage. they watched this report with the department of transportation . have a listen to what tim clark
7:35 am
had to say about that report. >> the fact that they should have published it in certain stakeholder areas, not the least of which is the u.s. government come in january, making allegations which are very serious without asking us or allowing us to respond to that i have never known anything like that happening in my career. >> these are fighting words from the ceo of a successful airline. we clearly are going to have some lobbying. they will be talking, delta, american -- this is the beginning of a fight. >> dubai chicago, o'hara, this has been a huge success for emirates. 82 miles away, they have abreu dobby who has the real money.
7:36 am
are we going to have to chicago o'hare's best two chicago o'hare's in the persian gulf? >> qatar is also getting into the mix. they need access to u.s. markets and european markets. that's why this lobbying fight is so important. tim clark is heading your way. he's going to washington. they will be pressing their case to officials there. >> i do not get it. i cannot see how these activities of emirates in the u.s. market has done anything else but add to the u.s. consumers the entities we work with and the state governments and airports and chambers of commerce and the consumers themselves who fly on our airplanes at a reasonable fair. >> pub quiz for you. of the three gulf state carriers, which is the one you
7:37 am
can't take a shower on? olivia knows the answer. >> i like the stars on the ceiling of the emirates airlines. >> it is fabulous. >> you can see the big dipper. there it is. >> i did an interview with the ceo of qatar airlines. the new boeing dreamliner's have a little window in the bathroom. i think about my experience on american airlines and u.s. airways and then the flights on emirates. do you think the american airlines are the most potent symbol of american decline? >> let's say we have some catching up to do. >> what else did he have to say? >> he is talking about we have
7:38 am
this one year anniversary of the missing malaysian airlines tomorrow. he is very upset that they have not found the plane. he wants to have an expanded search. he doesn't understand why the search has been focused on the southern arc. there will be a lot of talk about airline safety and regulation and how a jetliner like that can go missing in the modern era. and almost a year later, no answers. pretty remarkable. they are going to increase their orders of the eight 380 airbus plane. emirates already owns 40% of those orders. >> thank you so much. hans nichols from berlin. we have a twitter question of the day. is the american century over? >> if you look at the airlines i would say probably. do you think the american century is over? professor nye thinks not.
7:39 am
please tweet us with your thoughts. this is "bloomberg surveillance. streaming on your tablet coming your phone and ♪
7:40 am
7:41 am
>> good morning. this is "bloomberg surveillance
7:42 am
." the european central bank is minutes away from releasing its rate decision. the announcement will not come out of its hq in frankfurt. officials have fled winter weather for warmer climates in cyprus. we got 100 trillion euros last meeting. we want to see some meat on the bones. we want to hear when they will start buying these bonds. will it be direct, reverse auctions? will there be enough assets to actually buy? >> it will not be like the united states. within the text books, we have never seen this before. professor nye is with us from harvard. mario draghi was there. it was not in the mario draghi textbooks at the time. >>'s problem is not an economic one. a lot of us think europe will
7:43 am
rebound. it is a political one. >> he has done a good job of steering between a strong consensus in germany which is to be very tough and austere and a problem in the southern half of europe, which you need a bit more loosening up. trying to keep both sides of that on board and still keep faith in the euro. >> you mentioned this earlier. the separation of a political european experiment and a union asked berman. i can agree that berkeley was way out front about this. -- and a union experiment. the angst of de gaulle -- do you have an optimism that your europe can continue to some
7:44 am
form of union? >> you want to distinguish the european unity and the euro, a subset of the larger market. there has been a lot of skepticism about the euro and it follows the unification of germany -- many people thought that was pretty mature -- premature. you did not have a fiscal union to support that monetary union. >> where is the comrade? where is the leadership in europe to cleave together this ugly theory? where is the -- >> the closest thing we have to that is angela merkel. she is not a flashy leader, but she is able to keep things held
7:45 am
together, to keep things moving. fortune magazine last year had a survey asking people who are the top leaders in the world and angela merkel and pope francis came out on top. i think she deserves to be there. >> you look at the influence that we see again as we go to these headlines coming out of cyprus. euro 11057 -- the litmus paper of the system is an ever weaker euro. do you look at foreign exchange pairs as a signal of a strong nation? >> they give you a good sense of market confidence or a lack thereof. the currency rates can tell you something about the current market assessments. whether that will look like that five years is a different proposition. >> the ecb has left its benchmark interest rate
7:46 am
unchanged at 0.05%. i want to get to jonathan faro standing by in cyprus where the ecb is meeting today for some reaction. everybody expected this. what we want to hear is from mario draghi. what is the number one thing you are listening for? >> we had the pivotal moment that they finally announced quantitative easing. i'm looking for, what are you actually going to buy? you have announced a big program, 60 billion euros a month but the stock carries at negative field. what is your appetite to buy that stuff? if you want to go down the curve, and by 30 year debt in places like italy and spain, are you sure those two countries are going to get into trouble? it could get a bit technical at times. you want a lot of color on what
7:47 am
these programs are about. you have the questions on the perennial headaches of the eurozone. greece. >> how are they going to measure success? >> how do they measure success? bottom line, why are they doing this? inflation has gone negative. if patient expectations have become unanchored. for them, success is getting that headline inflation number higher. i'm looking at credit condition. it has been a problem for a while. things are getting less bad. you are starting to see a turn in terms of credit conditions. we have to ask our question what is this about? getting borrowing costs down? what is the transmission mechanism for this? the number one mechanism for qe right now is the hero. -- the euro. >> who knows about what this will do to solve the structural problems. chances are, not much. thanks, john.
7:48 am
>> markets not moving on this widely presumed news here. things could rapidly change in the next hour. futures do advance, up three right now. good morning, everyone. "bloomberg surveillance." tom keene, with olivia sterns. macro prudential is not in joseph nye's classic power and interdependence. a respect for institutions from the atlantic charter of 1941 to the advent of the imf to today's reliance on central banks like the ecb. institutions are where policy is made. that is the belief. how will america pave it and participate in the new global dialogue? the american century -- is the
7:49 am
american century over? i go back to the majesty of your 1977 text, required read within the science of international relations. what is the new american theory? i can't figure it out. there is washington consensus this, that and the other. >> it is the world we have to describe. the united states has more alliances and is central to more networks than any other country in the world. about 60 countries according to the economists have alliances with the u.s.. china has one. we are having to develop a new set of informal institutions. how was the 2008 financial crisis solved? partly the imf, but much more the fed doing swaps with other
7:50 am
central banks. when you try to get the new capital reserve ratio set settlement plays an important role. >> we may have an economic confidence, but what all listeners and viewers -- the field is a clash of the moment. the clash of civilizations. that is part of the emotion of the moment. how do we find a confidence or a quite to our international relations? >> one thing that helps is historical perspective. if everybody says things are going to hell in a handbasket now, if it were 1956 eisenhower is president what do we do when we have all this power? >> become an a historical society. >> if you think about 56, what
7:51 am
happened? the soviets invade hungary. we did nothing about it. our closest allies, britain, france and israel invade egypt against our wishes. the french lose vietnam. even when we had it supposedly perfect control, we cannot get what we wanted. we have to be aware of a golden globe -- >> thank you. and then came mccarthy. >> in netanyahu's speech, he was trying to make the rest of the world think we are in a 1938 moment again. he is trying to make iran look like germany. >> no. i don't think so. a friend of mine said when you have a historical analogy or metaphor first ask your self
7:52 am
what things are similar and what things are different. there are some similarities but big differences. >> iran is much poorer than germany at that point. >> the hipster joseph nye -- here is a quote from the book. -- jonathan faro is in cyprus. that saturday when cyprus blew up, and blew up on twitter. how has twitter changed john kerry's life? >> it makes everything quicker. the time for reflection and careful contemplation and making decisions leaders don't have that luxury anymore. >> does it lead to dumb decisions? >> sometimes, but not always.
7:53 am
can had 15 days to solve a the cuban missile crisis in 1962. -- kennedy had 15 days. >> joseph nye -- are you an optimist? >> a dictator needs a way to cut his people off from the public. what we did, we helped him on that. we should be swapping them with american goods, tourists, people and that will erode that communist regime. >> the chinese government announced it would up its military spending 10% to keep this in perspective, the u.s. still spends more every year on its annual military budget than the next eight countries. saudi arabia is the fastest-growing expenditure of military -- china, next.
7:54 am
do you think china's role is this is still an era of superpower politics and they are trying to rival the u.s. for hegemony? >> i think the chinese are willing to work with the americans for making the -- they're worried about their immediate neighborhood. the east china sea, south china sea. are they willing to work with u.s. and imf within the wto? they get enough benefits. >> a lot of people argue that one of the symptoms of declining western power is the imf and world bank are losing relevancy. >> the chinese are starting institutions. the development bank and so forth. these are not going to release -- replace the imf.
7:55 am
the chinese still get enormous benefits out of the wto. when the dispute settlement mechanism goes against them they obey it. they have something to gain from this. >> president summers had a couple jobs in washington. forcefully shifting the dialogue saying the idea of long-term investment in education is false and our policy should be on investment in jobs growth. do you think he is onto something? >> i think larry would argue that you want both. his argument is if you have a rising tide you will be able to finance a lot of other things. as an educator, he would still put a bet -- >> my kids don't know in normal america. is joseph nye optimistic that we can get back to that sense of a rising tide? >> i think so.
7:56 am
if you look at demographics we have a better demographic than any other country. you look at energy, where we are becoming less dependent on imports. look at r&d and the new technologies of this century nanotechnology biotechnology the next generation of information technology, we are still on the forefront of all of those. >> people this age are graduating from schools like yours with debt up to their eyeballs >>. >>there are things we can do about that. people have suggested ways to reduce the burden of the debt. if you ask will people be better off 20 years from now, i think they will be. the numbers support that. >> a nice segue to our twitter question of the day. as the american century over?
7:57 am
"more countries are leaning on the u.s. now." second answer "if we stop militarily meddling in other countries, we can lead for another 50 years." what do you think of that? >> i don't think china holds the torch. look at east asia. why is it that japan korea, vietnam philippines, all these countries want us with them? they are fearful about the rise of china. with india, weiss india's relations with the u.s. improving? the rise of china. there is a natural balance of power in asia and we are benefiting from it. >> the final answer. "the american century has just g begun. it ain't over until it's over."
7:58 am
>> thank you for joining us. my spring read. much more on the european central bank on bloomberg television and radio. stay with us. ♪
7:59 am
betty: good morning. it is thursday, march 5. you are in the loop and i am betty liu. we are 90 minutes away from the opening bell. record highs earlier in the
8:00 am
week. jeremy siegel, the wharton professor. he was spot on then. now he says dow, 20,000. a further spotlight on the jobs picture. 30 minutes away from initial jobs claims ahead of friday's labor report. attention is on wage growth. on that note, we have kroger paying less than walmart or target. michael schlott and joining me with exclusive comments. here's a look at our top stories this morning. the u.s. ambassador to south korea says he will be back at work soon despite getting 80's digits for knife wounds. that is the scene of the inch best of the incident. the attacker


info Stream Only

Uploaded by TV Archive on