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tv   With All Due Respect  Bloomberg  December 16, 2016 8:00pm-9:01pm EST

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>> coming up on "bloomberg best ," the stories that shaped the week in business around the world. >> i think the fed took a small step beyond just being a dependent. >> the oil outlook brightens for crude. and the changing of the guarded goldman sachs. >> goldman sachs is making this move from a position of strength. >> donald trump continues to construct his cabinet. his unconventional picks spark discussion. >> if you are going to be
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president, you want the best people sitting around the table. >> and some of the sharpest minds in business share ideas. >> i am comfortable with shorter duration assets. >> the worry is still up in chinese credit growth. >> there is some exuberance over how people are doing. >> it is all straight ahead on "bloomberg best." hello and welcome. ," to ourbloomberg best weekly review of most important business news, announcements, and television from around the world. let's look at the top headlines. week began on a note of optimism for oil. . opec had sealed its first output
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cuts with independent producers in 15 years. will producers met in vienna and began to increase output by 1.2 million barrels a day, and saudi arabia has signaled it is ready to cut production more than expected, ready to cut by more than 50 million barrels per day. >> i have to say that the situation is different as we go country by country. i was very pleasantly surprised to see so many countries respond to the invitation by opec in russia to participate in this deal to stabilize the market. >> the big highlight of the meeting and the weekend, we have to. one of them was russia and opec meeting to produce some creative accounting. in any case, those natural the clients we are adding those in as actual cuts. asse were really unexpected,
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saudi arabia as saying it is ready to cut production. they are not saying they're going to do it, but they are prepared. i am a cynic, looking further down the line into 2017 and beyond. why would this agreement work? had not previously worked. the only way it will work as if the saudi's are being absolutely greatined and will take a deal of pain, a disproportionate amount of pain, and i and -- and not commence they will do that. >> they want more for their oil, do they said what they will and they will carry out what they will do. they will cut supply and the price of oil will come up. be at $60 a barrel it within 30 days. >> president-elect donald trump is close to naming his secretary of state, and the front runner comes from the world of big oil.
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the other day, president-elect tweeted "whether i choose him or not, rex tillerson is a world-class friend and dealmaker." stay tuned. do you think that is where it's going? of thenows the details places he operates. he has also run a big organization and met globally with a lot of leaders. all of that is clearly too good. the public-sector experience. it is clearly different from running that. happenedmember what when paul went from alcoa to the treasury department, it was not necessarily a resounding success. foundations shake and quake on park avenue with these nominations. impressive guy, but when we saw michael jordan go from basketball to baseball, you can be great in one area but not
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great in another, it somewhat >> related area. we will see. -- related area. we will see. >> the confirmation process will be interesting. do you want someone in there who could be potentially threatening to the nation? >> i want someone a secretary of state who has experience in global diplomacy. businessrson brings a experience, he does not bring a diplomatic or government experience that would be help all -- helpful. >> no surprise, the target range for federal funds moves up to a quarter percentage point. the real news is movement in dot clot, which would mean a three rate hikes in 2017, not to.
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>> do you buy into three rate increases? >> it would mean that the short-term real rate would increase much -- would not increase much, if at all. i would not doubt the ability of the central bank to raise interest rates three times a years,r the next several because the global economy and even the u.s. economy is relatively highly levered. housing will begin to reflect that. >> i think the fed took a small step beyond just being dependent. you should walk back this notion of high pressure. people can say wait a minute, are we not seeing the higher expectations? in addition, this is a fed that could be tighter than we thought otherwise. i think that is what moved .epartment -- moved the market
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it was not the statement, but the press conference. >> the bank of england keeping .25%, alsot rate at keeping its purchase plan at 435 billion pounds -- 435 million pounds. will havek they higher inflation, but they expect slower growth. >> your member at the november meeting, the boe made a shift from neutral stock, saying they will have limited tolerance for this target above inflation. andling has risen some six a half -- 6.5%, and the boe a knowledge that today, saying that the game could mean less of an overshoot over its 2% target. it limits the tolerance of what could still be mentioned. >> yesterday, bloomberg reported verizon was taking a new look at its deal to buy yahoo!.
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taking $1ooking at billion off the purchase price. is that realistic? could verizon want to get out of the yahoo! deal altogether? >> the hacking deal expose a couple of days ago is a real problem for yahoo! in this process, i think. if nothing else, it will give chance toprocess -- look at the books of yahoo!, to determine whether yahoo! is seeing any decline in their user base, which would drive profitability and value for the company. i think it would be difficult for verizon to walk away, although it might still be on the table. i think what is more likely here is that verizon will be able to come back to yahoo! and renegotiate the terms of the deal, potentially including price. >> what are the realistic options for verizon? likely one is that they extract their pound of flesh and reduce the price.
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stock is showing some discipline on behalf of verizon if they walk right now. they also might look at some legal entity were they are putting aol and yahoo! in that entity to create a firewall, which would be an unbelievable amount of liability. you do not know how big the infection is here. this is pretty ugly. the program, we dig deeper into donald trump's cabinet nominees. will their business credentials translate into success in washington? ce addressestask for the risk of climate change. and the italian bank taking bold steps to put itself on surer footing. tothis is a recovery and plan to make the bank leaner and maybe meaner. >> this is bloomberg. ♪
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♪ ." this is "bloomberg best we continue our tour of the week's top business stories in italy, where a bank and rolled an aggressive plan to boost profitability -- unrolled an aggressive plan to boost profitability. they want to raise 13 billion by cut stocks why do they need to do this? we have been tracking the italian banks quite extensively recently. >> we are seeing a large, copper has a, steve -- comprehensive, strategic plan to do risk the bank. the bank.
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they will also try to write down a lot of the nonperforming loans, increase the coverage rate on those nonperforming loans, let go of 6500 positions in the bank, which adds to an already -- i think it's 14,000 jobs to be terminated. it's a comprehensive plan to make the bank leaner and maybe meaner. >> what about the capital, where is that going? >> they laid out 12.2 billion euros one-off charges that are coming in the third quarter. they are trying to set aside more provisions for bad loans and get a number of loans off of their books, so they are writing those downs. . the capital will be used up pretty quickly, and it is to reset the bank, get the bad stuff up the table -- off the table, and get set up with some gross -- growth. has replacedchs
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gary cohen. studya shift, but it is as she goes -- steady as she goes. their mantra earlier was live to fight another day. revenue has not grown much this decade, but they have preserved the franchise. when they were founded, there key to the franchise was preserving clients lost. s. now you have two ceos, one who has done a lot with clients in the trading side, harvey schwartz, who has been the cfo the last three years. >> is is a great time to take over, because they have come off a lean trade and are looking for plenty more. at what the stock has done since donald trump have gotten elected. >> i think this is a fantastic
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time to become the chief operating officer of goldman sachs. we have increased our estimates -- 15% of goldman sachs. we take the stock price into an all-time high over the next 6-12 months. rate time to take over. -- great time to take over. for a colossal deal have collapsed. the merger plan dissolved, how surprising was this? i guess it is a bit of a surprise. over the weekend we picked up that they were reluctant to do a deal because they wanted assurances that they were going to control or have control of combinedr-redstone companies, which are big and would need a lot of work. he wanted it without interference, if you will. she was reluctant to that.
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the announcement that came to date that she and her side wanted to make it look like they were out front and they were the reason the deal fell apart. a they have a vision for combined company, you have bob their, what is his vision for paramount and viacom? >> there will have to be some restructuring and job cuts, and i think you will push more into international viewing. that is a place for apps they might be able to boost themselves and return some profitability. likely, both companies feel good where they are. japanese companies have seen their stock dropped after being targeted by short-sellers. >> what has been happening? >> an interesting morning today in tokyo, and terms of activist short-sellers. we have a report from well
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investments just 30 minutes before the market opened. a large but not too well known company basically questioned the accounting, earnings outlook, the auditor. about an hour later, we saw muddy waters make their first report on a japanese company. he has gone quite big. the target is quite a blue-chip japanese company run by billionaires. they are asking whether organ to -- organic growth is really there, and that sock -- stock 6%, quite a lot, almost -- and they trimmed the losses back to 2%. alphabet company separating its self driving car into a new unit within the family.
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the ceo has been running the self driving car unit and may be an tuesday. alphabet has been developing self driving vehicle technology for two years as part of the research labs. how does this change things were the self driving cars themselves? this will probably show that they will have a commercial product soon. for alphabetelay as a google parent is figuring out the logistics and building up the standalone companies. shares in australian gaming giant hats has soared -- tats has soared. >> what are the details for the offer? coury group is taking up the and they are offering
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up to $45 per share, which amounts to 47.3 australian giving dusters 3.4 -- investors $3.40 in cash. they will hang on to the lotteries part of the business, ofch generates 2/3 tatt's revenue. inthis offer was made back october, $4.5 billion, which was not as appealing now. but there are not two bids on the table, which -- there are two bids on the table, which illustrates how attractive this spaces. >> billionaire rupert murdoch might finally get what he wanted this year, complete control of sky.
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has agreed toox take over the company for $24.6 billion, what is going on? >> going forward, i think fox would need to get 75% of shareholders to approve the deal. they are open to bumping if they have to. fox would prefer to get the deal done at the 10.75 pounds, but they are open to bumping and they might need to. nothing major, several dollars a pound or so. you might see a 2%, 3%, 5% bump. there are advanced talks to buy a swiss drugmaker in the week. off this chart i got for you here.
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all it shows is how a number of bought a tally on four years. obviously this is a petite -- appealing target. doesn't look like it might be successful finally? negotiations are very advanced, i think they are excited to get things done. whether or not they reach an agreement, anything is possible. sales unit management is very demanding. at the 11th hour, let's see what happens with this. ♪
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♪ >> you are watching "bloomberg
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best." and climate change task force set in motion by d 20 liters made recommendation this week. they are addressing financial risks posed by climate change. the companies are also looking for climate change exposes -- disclosures. -- are he was joined by bank of england governor in an exclusive interview. this20 liters asked for task force. they asked for the private sector to find a solution. michael has let the work of the privat sector, by the market for the market. had thing to remember, we 1.3 trillion private u.s.
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trillionyou have $20 u.s. today endorsing private capital. it is that demand. this report is fully in demand to help make a market work much better. capitalism is going to make this work because the investors, employees, and customers of companies want to know what they are doing from an environmental perspective. whether they want social investing or impact investing, they are going to make bets, they have to have information. it would be easy for companies to say i'm not going to contribute, but the implication is what are you hiding? that impact the way businesses -- >> i don't think so. it's hard to argue that trump can cut back with the federal toernment has been doing
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address real scenarios of climate change. they have done almost nothing. the president has tried a handful of things lately with executive action, but fundamentally, all the progress in america to reduce greenhouse gases has been nothing. in spite of our state governments, and is all been done. it has mainly been done by the private sector, companies, and individuals who have adjusted their behavior to try to minimize climate damage and adjusted their business models and living models to what happens in the worst case. >> so the administration can no way deter companies from doing their -- >> they can make it worse, i suppose, but you are not going to bring back coal jobs. the world is stopping burning coal. you can subsidize the coal
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industry, but not to the point where you are going to get people to turn around. if you live downwind from a coal power plant, forget about what is happening in 2050. you and your kids, right now, are having your body damaged. realizere starting to that. that is happening with smoking, sugary drinks, the public is a lot smarter is -- then officials have given them credit for. they say you know, it's right, it makes sense to behave in a slightly different way, modify our behavior to protect ourselves. >> coming up ahead on "bloomberg best," donald trump is stocking his cabinet with ceos, many of who have ties to big oil. and the state of the markets from some very heavy hitters. they are not sugarcoating what they see. >> new york is a sad place, low
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growth, low banking system. >> this is bloomberg. ♪
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♪ welcome back to "bloomberg best". with new political leadership in the u.s. and the effects of forit, it is pivotal economies and financial markets, so what should investors expect? examined in awe number of interviews this week on bloomberg television. >> tell me what you expect from the trumpet ministration. going to behere is a business focus, a push to accelerate growth.
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ii think we will see a reduction of taxes, corporate and individual taxes. i think we will see fiscal stimulus around infrastructure, and a pullback of regulatory issues, and i think when you look at that, that is likely to lead to higher growth going forward. for investors is what does it mean around the deficits, what does it mean around inflation, interest rates? the same question when you think about trade. you see it playing out in the stock market today. the stock market is enthused about the growth story, but in the bond market, people are getting nervous about inflation and interest rates. theow has this changed calculus, if you will, inside the meetings where you and your colleagues and others that blackstone make these investment decisions? what are you doing differently
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today than 6-8 weeks ago? the lower for in longer environment, low rates, low growth, low inflation. we were beginning to see a tech upin terms of wages -- tick in terms of wages. if growth is higher and interest rates are higher, it does have an impact. i am probably more comfortable with shorter duration assets, apartments and hotels. i am more nervous about owning a lease. >> rise in cash flows, but also the potential to charge higher rents? >> exactly. it is beyond that. will the energythe interstitial
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sector look like. we have seen the banks rally because they may not taste the same restrictions as before. i don't think anybody has a crystal ball, but a lot of us will be focusing on this as we look forward on how to deploy capital. in the lasthe tenor four weeks since the election? a pickup inen volumes in equities and also a rotation. the rotation has been out of defensives into cyclicals. we have seen some energy companies, and we have seen infrastructure, companies that people think will have an infrastructure angle. infrastructure,
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, or energyergy policy will be so different that it will change demand? a lot of expectations about the president-elect and his policies, regulations, financial services, pharmaceutical companies, andgy people are re-rating them. >> the selloff in the fang is one of the other characterizations when you look at the s&p and the 50 basis point difference. the initial speculation was maybe trump would go after social media, tax amazon, or regulate netflix and youtube. >> technology traded down, but it was rational initially. technology companies have the
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highest percentage of foreign trade in terms of exports, so when you look at potentially trump coming in and having a protectionist policy, there was some fear over retaliation in some areas, so a lot of the big global tech companies got hit. there is a lot of anticipation about the large private technology companies coming in 2017. size ofhink about the those companies and ipo's, investors are thinking about positioning. >> what is the biggest risk to 2017? deliver policy does not or the banking sector? policy is monetary evolving is working. i think we are in a gentle ecbtening phase, even the reducing the amount of qe somewhat.
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goode whole, that is quite from a banking perspective because the yield curve is rising. worries are elsewhere. i think the worries are still in chinese credit growth. things are still moving forward. there is growth in the economy, but at the expense of a large expansion of credit, something we have to keep an i on. >> on china, what is your biggest concern? renminbi going down, outflows accelerating, and reserves going down, how do you fix this? >> the chinese are taking various measures to reduce the outflows, whether preventing people from using their credit cards in hong kong or whatever. are micro measures going on, but in due course, we are
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going to have to acknowledge that credit is too high, and they will probably have to raise rates. two of your rivals, j.p. morgan and bank of america comment last week indicated they were having a solid quarter in trading. how are things going for morgan stanley? >> things are going fine. i think there is over exuberance about how people are doing. underlying flows have picked up only the election, but marginally up on the year. of that,tting a share particularly fixed income, but i don't think this is a significant pickup and activity. >> you return from europe. what did you pick up there? a sad place, low growth, broken banking system. 80% of lending and continental u.s., is inverse the
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where we have fibrin capital markets. where banks are not capitalized or have not gotten rid of nonperforming loans, they are a drain on liquidity for the economy. there is some real sense of result, particularly in italy, to result the banking issues. clients want to buy into the , soor and see a way ahead you are seeing a repair of the bank balance sheets. the downside is that probably because of brexit you won't see development from capital markets for a while. >> what worries you now about brexit? >> just the uncertainty. you can model almost every option that you think might happen. the sooner there is some clarity and direction of travel and what you cantion is means
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discard some options and prosecute other ones. , they've canstaff begin to plan their affairs and it can be business as usual. the sooner we get to clarity -- >> what kind of clarity? or example, a buffer. mark carney was working on some transitional agreement. with that be helpful for banks? thehen you think of regulatory reforms we have been through, when the reforms are finalize, there is two years of implementation so people can collect information and presented, so it is difficult to think that something as significant as changing the relationship with europe that you can say on day zero we are moving from that system, and on day one you can accommodate everything that has changed within your system and so on, so there has to be some transition,
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and again, in terms of the planning, if there isn't a belief that there will be some transition, you have to plan for the fact that there might be none. ♪
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>> you are watching "bloomberg best". donald trump put fort key cap meant nominations this week. he is building a team with considerable expertise in business, but not in government. let's look back at some of the choices he made this week, and the vigorous debate. trump's cabinet is starting to look more like a board room than. rex tillerson is a likely secretary of state nomination. wilbur ross, commerce secretary.
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anything likeseen this with this injection of business leadership in washington? they may be watching right now. that it is no doubt a different group of people coming in to run the government. we will see what happens. they are successful business people. businesscessful in does not mean you will be successful in government. sometimes they do well, and sometimes they outdo as well. >> you have the cabinet looking like a c suite, the corporate tax rate lower. they will do well. is that the correct linkage? postelection,oria everyone is happy for who won
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the election. they look like they would do well in government, but you don't know. when i worked in the carter administration several hundred years ago, carter had a weocratic congress and thought we would get all these things through congress. it turned out the democrats in congress have their own ideas. it may turn out the republicans in congress have their own ideas as well. comes along and says i'm going to create an administration like an all-star see sweet, do you see this as a positive? a it is hard to see it as negative. there were a lot of people who were career politicians in the past administration, organizing, nothing to do with job creation or the people in charge of
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defense to not have military backgrounds per se. doesn't it make sense to have someone in charge of the nsa or other organization to have spent their career insecurity? >> you are talking about wwe. >> it created jobs, entertainment industry, but here is a woman who was successful in the private sector, try to run for senate, but could not win. grading jobs for small business is important to growth, as you know. >> president to is coming together. rick perry considered friendly to the oil industry will be nominated as energy secretary. big oil is dominating this, whether strategy or coincidence, but it is pretty amazing how
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many people from the energy sector are going to run this government. u.s.u have the most senior oilmen as the most senior u.s. askomat, and people will what that means for u.s. foreign-policy. these other appointments, mostly taxes, an oil-rich state. you have rick perry at energy, the former attorney of oklahoma at the epa, and the oil friendly guy into rear. it means probably a lot less regulation. >> we probably have some problems we need to fix. these guys probably understand those problems. are talking about is changed regulation. >> there will be our lot of regulatory change, that is for sure. coalback coproduction -- production, want to see pipelines built.
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i think it will be a much more friendly environment for the oil and gas industry. real question will rex tillerson's experience at exxon and russia translate into a changed relationship with russia for the u.s.. >> the rhetoric is that all of a sudden you will get land opening up, new regulations for oil, oil flooding the markets in the u.s., if that is the correct story. >> i don't think that is. what we have in the united states is that oil markets are driven by supply and demand, as opposed to opec that might make a decision on cutting supply because they are national producers and have the ability to control it. in the united states, you have producers who are responding specifically because they can make a profit or not. >> if we see less regulation, less onerous climate regulation, will they change their
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longer-term business plan and model on those things? because what they are fundamentally looking at over the longer term is what kind of profitability do they have. if regulation is imposing significant costs that affects their competitiveness, that could be an issue. today, for example, the area of production most likely to come back into production quickly is more unconventional production, shale gas, shale oil, particularly because ironically the decision by opec and non-opec producers to cut supply , which is going to bring the price of oil back into a range where the average price of production is once again competitive. cabinet will test the theory. >> give me an example of why there is so much more difficulty?
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how much harder is it? >> you could take over almost any major company today with a relatively small team and you have the board with you, and you can make changes in that company . in government, it is different. directed by the policies of congress and the oversight by congress despite the fact the republicans control havehat, unless they something else, the congress will roll over and agree with and every he proposes limitation on them vis-à-vis's these agencies. they implement the policies and the laws the commerce and the president agreed to. that is the difficult challenge for these people who are used to going into a company like wilbur ross taking over a company that is distressed and being able to
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make fundamental change quickly. it is not the way it works. be a you were going to president, you should have the best people sitting around the table. i think it is a mistake for the american public to constantly told if you work for an oil company, a bank, that that automatically makes you bad. you want the best team. i think it is a good thing because a lot of these people who are patriots who want to help the country. they will not try to help their former company. these are people with deep knowledge who will hopefully do a great job. >> do you think now when you look at that shift in terms of wall street that this is a bit of a reset moment for the industry more broadly in terms of what the american people are expecting or likely to see? reset moment is a for business in retreat. 145 million people work in america, 125 million work for private enterprise, 20 million work for government.
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we hold them in high regard, firemen, sanitation, police, and teachers. is a hugesiness positive development for society, and for years it has been beaten down, so i think it is a good reset. ♪
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i am just taking a quick look at what is going on with the bloomberg screen, a function that is an old favorite of mine, the h as function, i'm buying the bloomberg dollar index and selling the euro index. if i take it down to a one-day trade, the spread is blowing out. functions on30,000 the bloomberg, and we always enjoy showing you our favorites on bloomberg television.
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maybe they will become your favorites? for fast insight into timely topics. this week, driverless cars. ♪ thought of cars without drivers is both exciting and terrifying. there is now little doubt that robots will one day be behind the wheel, hope for the elderly, disabled, and bad drivers. arecompanies like bmw pouring billions into developing vehicles that use sensors to react to traffic and people. they've added features like hands-free driving and self parking cars. a driverless feature is so appealing that it is not just automakers. google has logged over 2 million
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miles testing its cars. the guys who make iphones are involved too. it is also a technology that saves lives. currently driver error is blamed and 94% of crashes. globally, one .2 million people die every year on the roads. here is the argument. this speed of invention is overtaking the ability to regulate. the first car capable of talking to each other will be driving soon, but the rules of the road have yet to be finalized. vehicles being tested came under scrutiny after a fatal tesla accident. there is also a major ethical and i limit. -- ethical dilemma. the question of liability can disrupt the insurance industry.
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the big automakers see a changing dynamic between vehicles and human. autonomous pods replacing the family car in the driveway, reducing pollution, easing traffic, and saving lives along the way. ♪ manyat was just one of the bloomberg.on the you can also find them on with all the latest deals and business analysis 24 hours a day. that is all for "bloomberg best" this week. thank you for watching. this is bloomberg. ♪
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♪ announcer: "brilliant ideas," powered by hyundai motors. >> ♪ i-d-e-a, ideas ♪ ♪ i think it began that day, the darkness, doom, gloom. narrator: british artist maggi hambling is best known for her intimate portraits and controversial public sculptures. being a nonconformist, she refuses to be pigeonholed.


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