David lets get an update from outside of the Business World with emma. Emma in spain, the government may begin the process of suspending catalonia within rules. Spain rejected the president s response to demands he clarifying his position on independence. Earlier today, he told the Prime Minister he has a mandate to declare independence but wants to have negotiations first. In austria, voters have turned to the right for 31yearold foreign minister to become the world east youngest leader of a government. He claimed campaign after a victory after the campaign took on migration. It may make austria a more prickly ally for germany. And in iraq, troops have moved over to take over oil fields from kurdish forces. It sees the refineries. And the Regional Government last month the kurds held a referendum that backs independence. Global needs, 24 hours a day, powered by more than 2700 journalists in more than 127 countries. Im emmanuel macron. This is bloomberg. Emma chanda. This is bloomberg. Britains theresa may headed to brussels. We have Team Coverage from barcelona. In and i know that Prime Minister hall wanted an answer from catalonia. Did he get it and what comes ext . The Spanish Government said you need to give it a yes or no answer. Keep it very simple. Did you declare a resemble . Earlier, the catalonia president sent a fourpage letter saying i believe i have a mandate and want to continue with the to create resemble. Now the response from madrid has been clear. There will be no talks unless you drop this quest for independence and any matter thats not related to the referendum. Now, madrid has given him three days before a very final warning on thursday. He doesnt backtrack by thursday 10 00 a. M. , article 155 will be betrayed by madrid. The Regional Government will be suspended from office. What is he going to do before that . They are calling on him to repair the resemble and then madrid is not backtracking. He needs to drop this and there will be no talks unless he does it. David thanks. Things are moving very fast in catalonia. But things are moving forward in austria and now we want to go to Allan Crawford in berlin. What is going on with the election in austria and how it might affect chancellor america toll put a coalition together . Apart from the worlds youngest leader having just been elected is how he actually went about this. He inherited the conservative Peoples Party and he modernized it. Such trivial markers may seem it as changing the partys colors from black to light blue. Ut modernizing it. It came in third place but thats a big dangerous path to trade. And he its something thats being watched in germany both because he was a conservative party for which actually managed to succeed, but do you give up the middle ground easily to win votes in a short term . Its not an easy question to answer. David well keep a close watch on austria and germany. Lets go to the u. K. Emma, what is going on there . We heard last week that the talks were essentially stalemated. And now we hear the Prime Ministers headed to brussels. What can she do to get things moving . Thats a good question. It is a really important week for the u. K. And for brexit. This is the week that trade alks were going to talk. No one is expecting trade talks to begin this week but what the u. K. Is hoping is there will be some kind of concession from brussels. Remember that theresa may the end of last month made some concession in florence. Even though that has not been followed up by the hard numbers or a methodology, the u. K. Has not followed that up. But it has cost her politically at home. Lots of people in the conservative party who dont particularly want the u. K. To make big concessions in brussels and give it a hard, clean break. David thank you so much. Really giving us blanket coverage of europe this morning. Alix the headlines seem very destabilizing but the markets dont reflect that. If you take a look over in europe, you have europe modestly weaker but you can argue about the e. C. B. Buying from the margin coming in. And european stocks pretty much flat. Minors having a monster day in europe. Here is joining us it bob dole. Good to see you. Good morning. Happy monday. Alix how do you explain the geopolitical headline risk . It is pretty amazing. It has been going on here in the u. S. For some time. Look, i think the markets are paying attention to economies and earnings. And the geopolitics because theres so much uncertainty dont know how to deal with it. I think the gee political issues will continue to swirl and markets will continue to march the drum beat of how good the arnings going to be. Alix those on the european front were more pessimistic than the u. S. Heres what they said. Former president of germanys central bank. He said i can see the storm clouds gathering. Enjoy the recovery while it last because it will not last. What is he seeing . What is the Tipping Point . It is a lot slower than the u. S. The issues related to economy gotten better but because theres so many moving parts in politics in europe, the absence of anybody able to pass anything that controls all of europe, the problem with one currency and one central bank and different fiscal policy for every country, these issues are going to cause problems in europe. They have in the past. They will in the future. David at what point do they cause problems for growth . We have some warnings out of spain that they may have to revise their growth projections for next year. The u. K. Is struggling. At what point does the start to affect growth . I think it already is, david. The enthusiasm around the european markets from a u. S. Perspective has been going on for a bunch of months now. And i think its long in the tooth. So i dont disagree that were going to get a pause here at a minimum in europe. David but at the same time, theres still something of a discount for european equities, right . They have not kept up with u. S. Equities. Is there some head room there . I dont think so. The discount is related to structural differences. We have so many more growth industries. They have so many more old, more conservative slow growth industries. If you adjust, if you will, for sectorial differences, europe is not that cheap compared to the u. S. Alix it still seems to be italy is where the focus is. Take a look at the spreads here. Italy, germany spread this white line and spanish german spread is the purple line. Despite the rhetoric, it is 180 basis versus 167 when it comes to italy. Is it a blanket, leave europe alone . Yeah, we know that the farther south you go, generally the slower the growth and the more structural problems and the opposite. And having said that, germany which has been the paragon of strength and focus is struggling some too. Export markets in the likes. We had the strength in the euro over the last bunch of months and that puts a little bit of a headwind there. Europe has some issues. I think its a taller order from here. Alix if its not europe, im betting its the u. S. Bob doll will be sticking with us. And coming up later today, kathy wood, arc Investment Management c. E. O. On bitcoin. Really interesting stuff to talk about. This is bloomberg. Alix global central bankers gather for the g30 seminar in washington this weekend and despite everything, many seem to be still optimistic on inflation. My best guess is that these soft readings will not persist and with the ongoing strengthening of labor markets, i expect inflation to move higher next year and most of my colleagues on the fomc agree. And our latest economic projections, my colleagues and i project inflation to move higher xt year and to reach 2 by 2019. Oil price increases, become widespread, medium to longterm inflations with farms and how olds, expected to rise gradually. And actually inflation rate will increase to 2 . The euro area economy is experiencing a broad base robust and resilient recovery, which is, of course, underpinned by the interviews by the e. C. B. Since 2014. Despite these favorable growth dynamics, inflation developments have been somewhat disappointing. We remain confident, nevertheless, that the continued closing of the output gap will leave inflation to return to our medium term objective yet these returns remains conditional on a very substantial degree of monetary accommodation. The g. D. P. Ratio in this two years grow 40 . But i think it is more to do ecause the chinese economy recall the crisis recover quite quickly. So this is what we got. The total is that debt leverage in china is too high. So we need to find the opportunity to in focus alix joining us is michael mckee. And bob doll. That was a killer weekend. You were there and listening to all the central banksers. Why all the persistent believes hat inflation will rise . Michael at some point, they dont know when you have to pay more. And they all try to justify the idea that weve been in the extraordinary Monetary Policy for so long we got to get out of that and get to it a more normal situation and inflation is the justification for doing that. Alix and this is take a look over how far theyre missing the mark. Take a look at the global inflation outlook. You see the average coming in if you can come inside the terminal at 3. 8 versus the average which is about 2. 89 . So you can see the miss there. The bottom panel shows inflation surprise index. Now to the downside. Was there prescriptions for how there . It michael no there, was no particular prescription. The feeling is the u. S. Is continuing to grow and that will create demand for labor that will eventually lead to higher inflation. And the same thing came from the e. C. B. Although the e. C. B. Basically the message from peter is theyre farther behind. They still need stimulation to get it there. But theyre moving in that direction. The outlier japan, of course, theyre a long way, kuroda said from getting from the 2 level. So they need to continue their stimulus level. You heard about the chinese talking about a separate thing. All of the central bankers were optimistic about the Global Economy but theres a little bit of an overhang and the u. S. Its politics its europe and brexit and what goes on as they try to reform. The japanese have all kinds of problems with inflation, with korea and china, a debt problem. Theres something out there for each one of them to watch. David its all nice for all the central bankers to get together. The markets dont tend to agree with them. Is there an opportunity for investors there . If janet yellen is right, we should all go out and start buying tips as its as we can. People have been calling for this pickup for how many months . Maybe years now. And nothings happened. Eventually well get it. One of the big conundrum is unemployment, comfortable at five and we havent seen much of it at all. I think its coming. We just dont know the pace. Globalization and technology are the reasons that inflation has stayed lower for longer. David makes it interesting for investors. Mike mckee and bob doll, thanks ring with being with us today. This is bloomberg. Emad this is bloomberg daybreak. Facilities Management Service giant air mark is acquiring a couple of competitives for a total of 2. 4 billion. Facebook is according to a person familiar with the matter, facebook is looking to hire people with National Security clearances. They would be used to search for proactively for questionable Media Campaign during elections. And wall street marks a grim anniversary this week. Thursday, october 19 is the 30th anniversary of black monday. On that day in 1987, the downes industrial fell dow jones fell 20 . And thats your business news. D what i learned from black monday was that number one, these things happen. And when they happen, everything you make elsewhere disappears. It took me another 30 years to figure out something i told you 29 years on it. It was a year to explain that for a oure hedged whatever portfolio, alpha you think youre going to get, youre not going to get it. Because as what i call the problem. Because what happens cities you go bust on that day, theres no alpha. And most people dont realize that you have to shrink your portfolio and things like that. Now, since the black monday, i didnt really think about it too much except here, i have some cash. I realize it took me that i could do Something Else in my life and trade. See . I was in my 20s. It was time. I could figure out what to do. The problem is it liked trading a little too much. So particularly for these days where you feel deep in your gut that theres something you know right. Its not the money so much. Although the must be is like entertainment. It makes it easier. I like that. David still with us is bob doll of nuveen asset management. I am not going to ask alix where she was 30 years ago. But i will ask you the question. Where were you . Bob i was at the Oppenheimer Funds tour afraid center. I watched the orderly, pathetic decline on monday. Thank goodness for clock claim. Otherwise, it would have continued to go down. And the next day in the first few hours, the chaos, it looked like the system almost fell apart. It was a wild period. Portfolio insurance, there was a structural cause that wasnt just out of the blue and the interesting part was how quickly he market came back. It came up and then into 1988, just took up and were at doubledigit percentage very quickly. David from a distance, it looked like the machines did a good part of it. At least what we blamed it on. We have a lot more machines than 1987. Did they fix the problem, the Circuit Breakers . Bob market theres no question about that. And i think we have some of those issues. So we got to keep our eye on. For example, e. T. F. s. The volume has exploded and i think there are too many people that owned e. T. F. s that think they only own stocks not realizing they owned derivatives. In normal times, theyre like this. In abnormal times, they can separate. So keep your eye on this space. Alix i do remember half the kids in the class, their parents were like freaking out. They were like half broke in october. What did you learn from it . Bob i learned that when you have structural break in the market, you step back and say what do the fundamentals look like . And the fundamentals were pretty good. Everybody said i guess we are going to have a recession. We didnt have a recession. We had great buying opportunity. I didnt buy in october but the Double Bottom in december was orderly, back to similar prices and had a lot of buying that set up for a wonderful 1988. Alix so do you track that even now . Bob absolutely. When markets have big declines, you have to ask the reason why. Its not always for some sort of fundamental problems. Same thing on the upside. The fact that the markets up 20 in the last 12 months, it means the underlying environments ok but maybe that has something to do with the fact that we have so much money going into those products day in and day out. David 2008, there was a financial crisis. There was a fundamental underlying problem with the system. Bob thats exactly right. One was fundamental markets. And economy. And the other was structural and didnt last very long. Alix so do you have to leverage them when you look at a market like this and there are some structural concerns for you if bob i think what you have to do is beware of the fact that we could have a temporary break related to the market structure. I think barrons had a good article over the weekend on this. It doesnt even you run for the hill. It just means that you are aware of the risks that exists on the market. Alix interesting. We will be sticking with bob doll later. Later on the program, a chief Global Investment strategist will be joining us. This is bloomberg. And as we head to breaks, s p futures flat. You see a flat over in europe but the minors having a really killer run and the why comes from the next board. Alix this is bloomberg daybreak. Im alix steel. Happy monday, everybody. Here is how retrade. Futures down by a quarter of a point. You have european stocks flat on the day but minors seeing a monster rally and spanish stocks weaker. Risk 7 as that political continues to rise. In other asset classes, if you can change up the board, some of the movement in euro dollar flat on the day but not any kind of sustained rally because of those risks over in europe. And you wind up having a little bit of selling on the margin through the the 10year market. And then the area that im watching are commodities. Shocker there. But look at this monster rally. You have copper over 7,000 a ton. Up 3 . Highest level since 2014. Oil getting a bid. Gold, palladium. You name it. Lets get an update on whats making headlines outside of the Business World. Here is Emad Mostaque. Emad the u. S. And south korea ave begun naval war games in about 40 ships. At the same time, there are signs of north korea is preparing for another missile launch. British Prime Minister theresa may will try to bring deadlock negotiations in deadlock today. The latest round taking an impasse over how much the u. K. Will pay to leave the e. U. Nd island is bracing for the worst storm in 50 years with winds over 50 miles an hour. Global news, 24 hours a day, powered by more than 27 journalists and analysts in more than 127 countries. Im Emad Mostaque. His is bloomberg daybreak. David all of it shifts even more on the congresss already crowded docket. Joining us now on how congress is managing all that work is our analyst. Theyve got a lot to do this week and theyre anticipated to vote on more additional funding relief for the hurricanes. Whether its iran. I spoke a senior aide on the Banking Committee which has jurisdiction over the sanctions for iran. Theyre perplexed as to how the time line of this is going to impact the things that the other things that they want to get done including Health Care Reform and tax reform. Im told that as early as this week, there could be a vote on the senate budget. The house already voted to take that up several weeks ago. They advanced it to the senate. Following that advancement, should it pass the senate, that sets up tax reform. Theres still a handful of undecided voters on voting for the budget including people like senator rand paul as well as bob corker. Theyve got concerns over the deficit. But we should note that later today, President Trump is likely going to meet with mitch mcconnell. David so what about that deficit issues . If a senator votes against this budget resolution, he or she is saying were not going to get into tax reform . Do they really want to be in that position . It did you want guarantee the deficit. It was senator Lindsey Graham and others say theyre dead in the water if they dont get tax reform done or get some type of win. But if there is to be any Political Drama over the budget in the senate, it would likely be over an amendment process. Not get too into the week here. There could be some flareups but most folks are relationship tag the majority leader will be able to get the votes. I dont think hes going to bring to it the floor this week if he doesnt have the votes. David i really appreciate the sentiment. Im not sure its possible to talk about Congress Without talking about weeds. Thank you so much for being with us. And still with us is bob doll of nuveen asset management. Tell us how you assess whats going to happen as an investor . Bob our view is out of washington, d. C. This year and im speaking about a slide we still use that we made in december. Nothing on health care. Nothing on infrastructure. A modest tax bill in 2018. And a lot of noise. I will give the Administration Credit on rolling back some regulation and not putting new ones in. Thats been business friendly big time. No question about it. On tax reform as we said at the break, who knows . We just have been predicting what politicians are going to do is an impossibility. Having said that, we know theres an election next november. Republicans will commit suicide if they dont do something. I think we will get a bill retroactive to jan 1 of 2018. It will be smaller than whats being put on the table and they will get it done. That will be earnings positive. How much . We just dont know. A lot of people are modeling sort of 6 8 additional next year on top of a year thats probably going to be ok. So the numbers will be good. The question is do p. E. s already have that in it . Or do we get some further move in the market . My suspicion is the markets expecting a small deal. David a small deal. So that is the question as you pose it. If that happens, your base case happens whacks will happen with the equity market . Do they continue to rise or do they stumble at that point . Bob they continue to rise because the are ok. Theyre going to be ok than plus 4 . Probably closer to 7 or 8 . Yes, earnings are decelerating from the First Quarter of this year and will continue next year when we get this extra little fillup. Markets should be aok assuming that inflation remains behaved. Alix what sectors do you like . Bob financials. A little more growth. A little more higher Interest Rates and a little less regulation. Technology, footnote, a little less emphasis on the very high p. E. Stocks which are priced nearly perfection. And health care. Health care continues to be a great place in a country that is aging and trying to improve its standard of living. Alix that has the president that winds up signing the executive orders that destroy the insurers. Bob no question. If you look at Health Care Spending in the u. S. As a percentage of almost anything, personal consumption expenditures, it just keeps going up. Because were aging and we want to improve our standard of living the government can get in the way or provide it a tailwind for pieces of health care but overall, its still growth sector. David bob doll will still be with us when we come back. And if you cant watch tv anymore, you can go over and tune into our colleagues tom keene and david gur roe. You can hear them in new york, boston and all across the United States on sirius x. M. Radio. Live from new york. This is bloomberg. Emad this is bloomberg daybreak. Ter on bloomberg market, the inister of financial services. Now, to your Bloomberg Business flash. Canadas bombardirs exploring options for air space assets. It may sale its turbo prop and regional jet unit. Board yay faces crippling on the etliner. Tesla is the biggest expansion ever. Has been criticized for the slow pace and production. And the family of Jared Kushner has run into a roadblock after plan to transform its fifth avenue as a luxury ack churl trophy is being blocked by the tells partner. That could impair the ownership to their real estate empire. Alix thank you, emma. Crude extending its gains after poses a twoweek high due to turmoil over in virginia tech. Iraq. The map here shows the risks. This is the pipeline and the red circle shows where the clash is taking place. About 600,000 barrels a day. The majority goes in that pipeline from iraq to turkey. The risk is if it shuts down, how much oil will be shut in in iraq . Joining us is a director of Economic Research and bloomberg columnist. John, great to talk to you. Whats happening in iraq if what happened over the last week . Well, it seems that the Central Government in iraq is quite upset with whats happening over in the northern part. And they have taken control of their refinery and it seems that the iron fist the iron hand of this fate off iraq is going to apply force and begin to see how theyre going to be applying more controlling in that part of the world. That means that we could see some outages and some oil being taken out from the markets and the awe tom mouse state of Northern Iraq should be played into question as the Central Government over in baghdad wants to have the final say in everything that is being done up there. Alix and iraq is one of the Biggest Oil Producers with an opec. Give us some perspective of how much the north produces versus the rest of iraq to get an idea of if that production shut in, what would that mean for opec . Well, with its significant if we look at two things, not just the iraqi situation but whats happening over to iran with the decision by President Trump to basically singlehandedly get out of the nuclear deal. That means that if there are sanctions applied to iran and we continue to see this iron fist over the northern part of iraq in the independent area of kurdistan, we could be talking about a million and a million and a half barrels taken out of the market and the oil should be spiking upwards. David do we have any sense of how serious this conflict is . We were surprised in new york. Is it a skirmish or a civil war . Ecause the perish murderer are ferocious fighters. Youre right. Who are they going to help if right now, there are other forces involved. The turks seem to be quite adamant about applying force and not seeing the awe tom mouse region gaining more autonomy. But also the Central Government wants to apply force. This is going to escalate further which means the export pipeline is going to be questioned. Alix john, lots of report overs the weekend of different types of structures of an i. P. O. If we dont get a dual International Listing in 2018, what does that do to the saudi oil put . I think first of all the economic reform is the main issue the i. P. O. Is so central to the restructuring of saudi arabia. I dont see any pushback even if at all that we see no listing in london or new york. Its going to list in saudi arabia. We will see a private placement. But it is so critical, this iapoce i. P. O. Everything depends on that i. P. O. The 2 trillion sovereign wealth fund. They have a big Event Next Week so much i think its definitely going to happen but were seeing some issues right now and i think theyre going to be resolved. I dont see any way out of this i. P. O. Its going to happen. Alix thank you, john. Thats lot of eggs in one basket. Basically at the end of the day. Still with us is bob doll. Its not just oil today but copper having a monster day. Whats going on with commodities . Bob im not sure i know. Clearly the globe is improving in terms of growth. And thats not new news today. But somehow the Commodity Markets are reacting. That you put your finger on the oil, its a supply and demand sort of thing. But coppers up a monster amount to use your words. Maybe its just catch up for the fact that the Global Economy is improving. There could be something technical in it. There have been some issues there. Alix ben you look at copper, you say oh, look, the Global Economy is doing well. But copper is no longer that leadthru anymore because chinas economy has changed. Is it a Fair Assessment to say Global Economy is ok . Bob less than it was before for the reason that you pointed out but dr. Copper as we call it is still a very good indication of whats going on and Global Growth is good and improving. And synchronist. That may be part of the issue as well. And it is driven by china. David and we have the 19th party of congress coming up this week. Bob and to talk on the other side of my mouth, there are a lot of reports that the chinese slowing a bit. So a lot of cross currents here. David if she can consolidate his power, what does that say about the future path of the chinese economy . Bob its a positive and the more unified you can become, sort of the command and control economy anyway. China has its hands full. Its an emerging market. So its got some unbelievable positives but some big negatives. The negative, too many big 100story buildings with glass and nobody living in them and a lot of debt. And they want to buy all this good stuff. Alix do you like energy . Did you like materials right here . Bob pretty mixed on it. Theres a little more to go on the short rub. But while Global Growth is good, it is not great. And a lot of these commodities have some supply issues as well. Alix what does that mean for your take on e. M. . Bob long term, great place to be. If we have any kind of issue with commodities as weve been talking about, obviously, emerging markets break down commodity users and commodity producers. The users markets have done best. But the producer market may come on again. David with a about japan and the election with abe . What does that say about the japanese economy . Alix its record high stocks, right if bob exactly. Look, i think that japan has as we all know, the massive population problem. I. E. Is shrinking and it is old. So i think japan is going to continue to wallow. Alix you were a bit iffy with tech but if you go into emerging markets, isnt that a tech play . Bob absolutely right. Tech is a big portion of that. Alix is that part of your thesis . Bob it is, but i would argue a lot of the p. E. s of those tech stocks are not as suspended as some of ours are. Alix fair enough. Bob doll, great to see you. Check out tv go. Watch us online and click on our charts and graphics. Go to tv go on your terminal and you can really dig in here. Its a lot of fun. This is bloomberg. David this is bloomberg. Im david west on. It wasnt inflation and Monetary Policy people were talking about at the meetings in washington. J. P. Morgans jamie diamond took another swipe at bitcoin. What i have an issue with is the crip toe, sterling, euro, yen, theyre all fine. I dont understand the value of something that has no actual value. You can do whatever you want and i dont care. David jamie doesnt care. Hes not going to talk about it anymore. Were joined by cathie wood from arc Investment Management. Here as us eric is well. And trying to understand. Catalonia, youre going to understand how this works. This is not own bitcoin directly but this is somehow owning an investment that trades along the lines of bitcoin. Explain how that works. Cathie we can only own financial securities. Gbtc is what the Bitcoin Investment trust effectively liquids liquidates to if a person does not want to hold, if they want liquidity. So our funds own gbtc which sells at a premium for the investment trust. David they track bitcoin but theres a premium there. Is that because they are, we would say in legal terms allenable . You can inherit shares in a way that you cant inherit bitcoin . Cathie yesings the premium is because of the scarcity area. I cant own i cant get any exposure to crip to except through gbtc. No one can. And same with our funds. We have bought the Bitcoin Trust through gbtc and we tried to buy the underlying but the New York Stock Exchange prefered a traded security and thats how we ended up with gbtc. David which takes us to regulation . People have been trying to set up and the f. C. C. Said no. Take back your application. Whats the issue there . The issue there, first of all, beside the issues with the bitcoin market and fraud and all that that, was the initial didnt denial of the twins. That was in march. But the whole race got revived when the cboe tried to enlist Bitcoin Futures. When that happened, you saw three new issuers jump in and say we will have a new bitcoin that distracts futures. They thought if there was a futures market, they would be having more institutional liquidity, it would make it easier for Market Makers and what happens underneath it is highly necessary to avoid what happens in gbtc which is this massive premium. Ats why the majority of e. T. F. s trade higher. So the Bitcoin Futures list which i estimate early next year, maybe mid 2018. Youll seize thee e. T. F. s improve. Alix what about e. T. N. . It is what was working in sweden. Sweden has become luke a crip to currency e. T. P. Capital of the world. And that is why you have investors like mark cuban, goldmansachs modern are going all the way verseas to buy that. David part of the problem and jamie Diamond Point this out is he is very susceptible to criminal use and governments are not liking that very much. Cathie its interesting. Ive listened to a lot of regulators and have the opportunity to listen to an f. B. I. Agent talk about a bitcoin. And he says this is the best thing thats ever happened to us because all of the blocks are transparent. Its not anonymous. So you can track what appears to be elicit activity and the f. B. I. In certain cases has had the ability to crack the code and figure out. You dont hear a lot about elicit activity on bitcoin anymore. You just dont. Alix eric, what is bitcoin . And i mean that as in what asset class . Can we make that kind of comparison when were looking at these products . I dont know if you can compare anything to bitcoin. I thought he was pervasive when he said if something goes up and down 10 in a days, how could that be a currency . So i do think the currency argument is probably not what investors are looking for. They want to buy it like its g. L. D. And that what is a e. T. F. Would do who dont want to use bit coin. They want to ride this wave up and i think that ultimately would be bitcoin as a commodity but ill be honest. Im not sure. David isnt the closest analogy is Something Like gold . Its not an underlying stream of earnings that youre representing. Cathie yeah. We think the store value which is what gold is is a very good case because bitcoin has one thing over the currency. It tops out. Its mathematically metered to top out at 21 units versus 16 1 2 now. Not even gold has topped out. It goes up 1 a year in terms of supply on average so much jamie talking about, you know, store value. I actually think this has a lot over fiat currencies which are unlimited. Alix i heard all the gold bugs rolling off they graves. Thank you so much. Always a pleasure to you you guys in the studio. Next, a j. P. Morgan asset manager will be joining us. Lots to dig into. Well talk bitcoin too. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Alix inflation nation. That inflation will not stay low for long. Catalonia defends its push for independence. To brusselsheads for emergency talks as geoPolitical Risks bubble in europe. Commodities prepare for their highest close. David welcome to bloomberg. It is a happy monday for you in the commodities market. Alix here is where we stack up. S p futures flat. Weaker. Lar that focuses on ecb and how much they continue buying bonds in the future. Oil getting a big pop. Look at copper. The highest level since 2014. I want to highlight weakness in spain. Sterling one of the ownly currencies up against the dollar. Canadian dollar getting hammered against the dollar. It is about nafta heating up. Time for the morning brief. Lets look at the week ahead. On tuesday, Alexis Tsipras will visit the white house. Morgan stanley and gold bull and Goldman Sachs will report their earnings. The world index stocks is at a record high. The vix hovers below 10. Guardians of the World Economy do not see soaring stock and asset prices as a threat to stability. A seriousnot led to risk aversion in the Financial Market globally. Variations remain elevated. Is good news. There is a possibility Market Participants are complacent and not properly pricing risks, which requires attention. The the barclays ceo says market feels as it did in 2016. We need to be cautious about being too confident in the current trajectory. Martin gilbert agrees. Asset prices are generally too high. How do you play it . Joining us now, Nandini Ramakrishnan and Emad Mostaque. How do you manage risk . How do you price it . Nandini it is finding the right Asset Allocation that works and balances the biggest risk. For us, it is the weakness we expect Central Government bonds to face. Guild, that is treasuries, sovereign bonds, that is where we find the most risk. Broadly, as well, valuations are high in equity market. It is finding some valueoriented, cheaper sectors that have fundamentals that can back them up so you are not buying the whole index. When you talk about why they buy equities in this risk, they say their earnings are strong. Where is their juice for it to be stronger and where is the growth reflected . Synchronizede seen Global Growth. Eurozone taking on. Is on the patha we can see in terms of quantitative tightening. Some of these asset purchases. For equities, it looks positive. Especially if bonds blowout completely. We are a hostage to the central banks, particularly the ecb. If you have quantitative tightening there, what would that do . Yields will go up. You could see 3, 3. 5 on the u. S. 10 year yield. That is not that much. You will not have a cycle where you go to 3, 4, 5 interest rate. You look at the potential adding an extra 10 trillion in debt, you are captive to where Interest Rates can go. Everything is relative. It becomes difficult for allocators to allocate. You might get a fundamental squeeze followed by a we cant buy anything else squeeze. When you have access to capital that inexpensive, it almost means decisions are getting made that would not get made to make investments. Do we worry about that . Going back to the question of asset inflation. Money was readily available in the european region , the European Central bank was offering discounted lending packages to banks. The investment momentum did not pick up as much as you would expect given the low amount of interest cost or the money flowing forward. It is not a risk that it is turning around and companies have taken on too many projects they cannot pay back. Investment at the grade market, they have used that access to refinance debt and push things forward. Risks to operational profits soar over extending, we dont see that as a large in europe. Bringing it back to why the ecb is pulling back the program we expect them to do is because of fundamentals and the economy has been doing well. Unemployment is falling. Reminding ourselves growth is the reason quantitative tightening is about to happen in europe and countries should be able to navigate that environment well. Alix some of the valuations blow your mind. European highyield i want to bring up this chart. You see is european highyield, yield to work. The blue line is the u. S. Are clays aggregate corporate yield. Thinking about the fact you can borrow for cheaper than here in the u. S. Blows my mind. Is there an inflation number that disrupts this or is it the pace, not the absolute number weston mark absolute number . That chart is an exceptional chart and shows it does not make sense. Everything is being relative at the moment. It is when you are going to the , you go allt year in in the highyield and compress as much as your mandate allows. We should see a snap back. The fundamentals are strong and sustainable, do we see disruption in corporate activity . It looks stable absent geoPolitical Risk. This is the first week we will see the fed not reinvest their money into the bond market. What are you going to look forward to see if it goes smoothly . Talk,i that is the big how is the underlined going to play out in the market . Also just seeing how the general 10 year does. A lot of equity markets, you can whereargument that the 10 year treasury will go. Watching the curve, to see how this unwind, it really does unwind, so to speak. David Nandini Ramakrishnan and Emad Mostaque will be staying with us. Coming up, we will have peter roskam. That will be at 2 00 p. M. Eastern time. Emma in spain, the government may begin suspending catalonia within days. Spain rejected the response to demands to clarify his position on independence. He says he has a mandate to declare independence but wants negotiations. And austria, voters have turned to the right. They have cleared the way for a 31yearold to become the youngest leader of any government. The nationalist Freedom Party will also enter the government. In germany, a setback for angela merkel. Her union wonter the national though, it posted its worst result in state elections since 1959. That may weaken her hand in negotiations. In global news, 24 hours a day, powered by more than 2700 journalists and analysts and in more than 120 countries. David still with us, Nandini Ramakrishnan and Emad Mostaque. And germany,a catalonia. The only thing we missed was the u. K. And brexit. Risk is geopolitical floating around europe. Which do you pay most attention to . Big risk for the european recovery and european equities that we would expect or hope for would be Political Risk that comes from antieuro or euro skeptic parties. Logically, 19 countries is different if one or two of them want to leave. It is a different thing for the year a difficult thing for the eurozone. Any rise ofhing euro skepticism or rhetoric in these countries is a big deal. How that will rattle markets, one that is not mentioned or discussed now is the italian couldcal agenda, which include an election by may 2018. Goes to a coalition that holds those views, that could be risky. In terms of brexit, that has less to do than european recovery than these antieuro bubbling up in the eurozone. Draghi,f you are mario how does that affect your decision for the Bond Buying Program . It doesnt. You have a clear political calendar. Global in a synchronized growth environment. Inflation is picking up. They are almost locked into a path at the moment. One thing that could cause a shift is if you saw dramatic change in the euro. We have had a massive dollar bear market that has just started to reverse. You can see the news flow is starting to change and some of these holes are bubbling up. The ecb is saying some members have identified a limit of just over 2. 5 trillion euros under qe for the current rules. Dont have much more room for that to go. I have heard chatter of 25 billion buying instead of 30. Emad the Bond Buying Program tapers down. If they dont do it now, when will they . Limitslly with these being talked about. Pushback is starting. This is sensible. This is what they were looking for. I expected to end next year. Is mostich sovereign exposed to it . Nandini the market that has benefited the most, they hold as much as the purchase limit. They have most of the room to run. On the broad front, italian Political Risk could exacerbate moves in the sovereign bond market. Equal opportunity for all eurozone sovereign bond markets to be rattled. We expect yields to rise. They will not be one day where tapering means a taper tantrum of some sort it we expected to be a slow taper. David we hear we are going to do this slowly and we wont notice it. Does that make sense . If we had this much liquidity, by growing these balance sheets, taking the liquidity out must have an effect on the marketplace. Is difficult to make able case for european bonds at the moment. Going it slowly because into it it was unknown. If you told us we would the where we are now, many people would say really . They do it slowly because they want to see what Market Reaction is. We will not see sharp shifts. Things dont have a tendency to stay the same. There are Political Risks coming up. The economy looks strong, but there are air pockets as well. They have to be ready to adapt. This will push bond yields lower after we get this period of potential selloff. David from does it come back to inflation in the end . That is the thing we are watching, the central bank target of 2 met earlier this year and then the weakness. It depends on how consumers and is spending to see where mario draghi and his team can rationalize werther tapering rationalize further tapering. Alix how are you playing europe now . We like europe on a broad, global basis because of these risks and potential future fallouts that may happen. Spikes cheaply compared to u. S. Equities. We like the stocks that dont feel the threat of a stronger euro. It is not just German Companies versus the mediterranean companies. It is across the countries. Alix emad, what about you . European markets dont have a lot of text. Emad we are looking to some of the peripheral countries. Poland has benefited from the positive flows from europe. The markets ripped a lot. In terms of tech, we are moving in china and places like that. The eurozone does not affect that as a market. It is stable at the moment. Alix Nandini Ramakrishnan and Emad Mostaque. They will be sticking with us. Coming up, Michael Froman will be joining the program to discuss nafta trade issues at 1 30. We are about an hour away from the cash open. European stocks getting a boost from mining stocks, having a killer rally. Spanish stocks down. I am watching the commodities. Copper having a monster run. Oil, as well. GeoPolitical Risks in the middle east boosting oil. Yields move higher he by two basis points. 2. 2 nine is what we see on the 10 year. What will be the effect on the bond market . We will discuss that. This is bloomberg. David 30 years ago this thursday is when the stock market plunged 23 . A book was written about it. The author sat down with Erik Schatzker to tell us what he learned. These things happen. Happen, everything you make elsewhere disappears. It took another 30 years to figure out something. Unless you hedge for a portfolio , unless you hedge for events whatever younday, think you are going to get, youre not going to get it. What happens is, if you go bust on that day, there is no alpha. People dont realize they have to shrink your portfolio and things like that. Since black monday, i did not think about it much. I could do something with my life and trade. I was in my 20s. I could figure out what to do. The problem is, i like trading too much. Gut, there in your are something you are doing right. It is not the money, so much. David that was black swan author talking with Erik Schatzker. Short theyou could market. I knew you could have a short stock, but everyone was dragging around because there for a one because there for one case because there for a one k has been torn apart. Alix take a look at this. It is a great chart that shows the bull market. The blue line is what we saw from 79 to 87. Freaked outt being about the bull market we are seeing, but talk about what we saw in the late 1980s. A very different picture. David there is not a policy response to turn around. Aix we would have to see 5,000 point drop. David lets not talk about that. Is a fascinating chart. It is really interesting. Coming up later, we will becoming to you live from new york. This is bloomberg. Alix this is bloomberg daylight, one hour before the open in the u. S. We are just waiting for data. Futures are flat, up by about two points. You have the cell of only happening in europe when it comes to spain you have the sellff only happening in europe when it comes to spain. , whoppingufacturing beat, coming in over 30. Huge beat. The estimate was for 20. In september, Empire Manufacturing came in at 24. A big move, really reflecting the data in new york. A relatively positive way to kick off the week, but we have seen manufacturing starting to pick up strength. David the number certainly gets your attention. Bloomberg reported over the weekend that Canadian Company bomb barnier bombardier to u. S. Tariffs on its see serious c series jetliner. What do you know about bombardier . A major strategic shift for bombardier, and it is about cash flows. They are missing a lot of money and may marquee jet have to cut off other assets to support that. As you know, this has been a tough couple of months from bombardier. Trouble with the cseries has gotten worse because of the spat with boeing, which has led to 300 percent tariffs you mentioned. They hoped to do a deal on the rail business with siemens, but that fell through. The ceo has made a commitment to be cash flow positive next year. They have not been there since 2009, and this may be a way to help get there. Suggest, it is never one thing. It is several things. Surely, bombardiers difficulties with trade is one of the factors. Nafta, we have ongoing negotiations today and tomorrow in washington, and there are reports the United States is getting tougher with canada and mexico. It does not look great. Lets face it, bombardier is sort of the poster child for nafta. A have operations in all three countries. Be pullback on nafta will negative for them. I also do not think they are making these important decisions based on trade negotiations, because you just dont know. Is it going to fall apart . Is this rhetoric from trump to get a better deal for the United States . This is a longterm plan to reduce costs, increase cash flow, and find buyers and investors to help get there. David finally, give us a sense, from canadas point of view, what is the reporting . What is the mood about the nafta negotiations . Is there a sense this is standard negotiating, or is there concern about the future of this Trading Group . I think there is genuine concern but people are recognizing there is a process. They are still at the table. They are still talking. There is some progress being made. There also thinking, what does plan b look like . Do we have to make other alternatives, start thinking about new trade partners in asia or europe . What does it look like if nafta does fall apart . Can i do and the u. S. Could fall back on a Bilateral Agreement they signed years ago. , if it looks dire, may come out the least damaged from the class of nafta. David thank you for being with us. Iill with us from london, guess from j. P. Morgan and a guest from Capricorn Fund managers. There was a lot of concern when donald trump was elected about trade and possible interference with trade. As you describe global synchronized growth, to what extent is there a risk for the United States pulling back on their historical free trade orientation . Rhetoric ishe certainly accelerating again. We had that little period at the start where there was noise, but we have seen a few tariffs start to be introduced. I think that it feels like you might be on the precipice of something a bit bigger here. With the iran deal the certification and some of the actual iran deal decertific ation and tax policies maturing, we might be moving from talk toward action. That is concerned. We are in this period of synchronized Global Growth, and we would hope that would be maintained. Take how does an investor this into account . There has been an ongoing discussion of talk about President Trump as opposed to action. Which is it going to be . Is it time for investors to take this into account, or wait and see what happens . When you are thinking about making the investment decisions, you look for signals and implementation of policy that can start changing things, whether it is recessions, bear markets, or any inflection point. It is always better to preempt or act early, because there is an opportunity cost, for example if you are taking this as a reason not to be positive on. Lobal growth you are missing out on some gains at present. Like exports in emerging markets and developed markets are high. That meant some of the rhetoric that has been coming out since the election of President Trump has not been enough to deter companies and countries from trading with each other. We would still hold firm on this idea of the Global Growth story still picking up. Is one of the reasons emerging markets have struggled so we do in the past, carry on liking the Global Growth an expert story. Alix the Global Growth in exports story is where nafta stress is seen. You look at something above the 200 day moving average. You felt like a lot of the risk was priced out. Now it is priced in. Same thing for dollar cad. If you look at the fx pairs, which is the most honorable to upsides . What risk is not yet priced in . I think it is probably the dollar mix. If you look at it, the canadian tariffs and the adjustments of bute are really starting, there is a lot better in terms of communication between canada and america and between america and mexico at the moment. If you look at the construct that trump has built everything on, a lot of it was about the wall, immigration, these kind of big issues and big moves. That is what he needs to shore up his base. I have been more concerned about that one. If you look at that mexican economy versus the canadian economy Commodity Prices are now breaking out. You know that is very important to canada. Alix the you share the same reticence when it comes to mexico . You probably have an em story. I would say the vulnerability is more toward mexico in terms of discussions. If you look at destination of exports for canada or mexico to the u. S. As the percentage of gdp for canada, 20 , for mexico, 30 of exports of goods as a percentage of mexican gdp go to the u. S. Any threat to the movement of stress tod be a big mexican growth Going Forward and dependency on the u. S. , although that has been seen already in the fx market in terms of nervousness of investors based on this nafta discussion. Overall, we do see longterm potential for growth in emerging markets. Higher risk comes with higher reward. There has been a slight separation of emerging markets being less dependent on a lower or slower dollar, less debt denominated in dollars. The currency does look quite attractive in terms of finding upside across the em space for potential investors who can bear a bit of that volatility. Alix thank you for joining us from j. P. Morgan and capital point fund managers. They will be sticking with us. We will do nafta, then iran, then budget, then health care. It seems like a roundrobin of, what is priced in . David with every one of them, the question is, how much is talk and how much is action . We have talked about mexico, but it is canada he is taking action against with lumber. Lets get an update. Emma chandra is here with first word news. House study says cutting the Corporate Tax rate to 20 would increase average Household Income by at least 4000 a year. The take several years to go into effect. Firefighters in more than californias wine country say they have turned a corner against deadly wildfires. Fire crews have gained ground because the winds that fan the flames have died down. The fires are blamed for at least 40 deaths. Around 57 home and other buildings have been destroyed. In iraq, Government Troops have moved to take over oil fields in kirkuk from kurdish forces. Iran says it sees the refinerys facilities as a potential flashpoint between the Iraqi Government and the semiautonomous kurdish Regional Government. The cards had a referendum that backed independence. Google news powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David if you cannot watch us anymore on tv, you can tune into our colleagues on the radio. Bloomberg surveillance can be heard in new york, boston, the bay area, washington, and across the United States on sirius xm radio. This is bloomberg daybreak. Coming up on bloomberg markets, islands of International Financial services. Irelands minister of financial services. Alix crude oil getting a nice afterring up almost 2 closing at a twoweek high last week. Over the weekend, iraqi soldiers seized a kurdish refinery and oil atd, which puts risk. This map shows the kirkuk pipeline. It goes from kurdistan all the way to turkey. Exports 200 barrels a day of oil. Those are not disrupted yet, but will they be . And what does it mean for the Global Oil Market . We are joined by stuart wallace. Great to see you. What is the worst scenario for this conflict . Stewart another civil war in iraq. That is an extreme scenario. I do not think we are anywhere near that. The market is up 1 , 2 today. That signals that the old market right now is not really concerned about this. It is not particularly worried. There is a track record. The sense is there has been fighting, the territory is changing control, and the oil is still flowing. How much of the price rally we sought due to the weekend in iraq how much is due to donald trump cautiously walking back iran sanctions . Stuart i think it is more to do with iraq. Over the weekend, the attention was on iran, but what you want to worry about in the shortterm is iraq. That is fair. Certainly, in terms of the history behind this, yes, iran could be disrupted, but there is no sign the europeans really want to bring back sanctions. We will see later on. Iraq is a real and present problem. David give us a sense of relationships. We have armed both iraq and the peshmerga, who fight for the cards. And is this almost a gift to saudi arabia . Stuart i dont think so. It is part of longterm rhetoric. Some disruptions in that agreement with iran. They were not entirely happy. There is some caution. Is a lot more caution than you would expect, post the nuclear deal we got. Companies have gone and quickly. Everyone else has been cautious. They have expressed interest, but they are not investing yet. A lot of it is to do with changing rhetoric from the United States. That is what we are saying. Alix the Bilateral Agreement there is that issue. Stuart wallace joining us from london. You see copper, tin, aluminum, all seeing really solid rallies. Copper up by almost 3 . Prices k at the lme joining us for more is them on. He stock joining us is emad what do you make of it . Emad you have seen chinese numbers, the kind of data in overall economies. It is a globalized think nice growth story. There are spot prices above the futures prices. This is making it more attractive as a potential investment location. You are seeing overcapacity in several markets start to come in and be replaced by the drawdown in stocks. There is a reaction to these things as well as the weak dollar. Alix in commodities, how much is demand driven versus supply . Itd at a moment, a lot of is the supply side but demand is picking up. We are at the basic start of this economic recovery and we hope that continues. With deals with things like iraq, that could go very quickly. The peshmerga deliberately have withdrawn so as not to impact oil securities. That starts to expand. Almost unified everyone. The structural flaws have not come to the fore. David if this is a longerterm turnaround in Commodity Prices, what does this mean for emerging markets more broadly . Historically, they were tied to it. Tech on the msci , theremerging markets are multiple countries and multiple drivers. Countries have had a massive recovery. They hollow back led are based on the covers. When you look at the stoxx themselves, at the current levels, Companies Like glencore are massive cash flow cows. The market is not pricing in that the current commodity level will remain. Up tois cash up catch occur. Good if emerging markets stay where they are at the moment. Alix what part of the market are you most bullish on . Emad oil into next year. I have been bullish for a while. I was bearish during the summer. Be olitical risk should you should not see the Second Derivative change. We are still talking about that for march onward. You see some of the shale plays start to tighten off. Alix is that 60, is it 55 . Emad 70. I see 80 next year, and i am probably the only one in the world. Alix you literally are. Some had it for 2020. He is looking at 70 oil for next year. If you have a terminal, you can click on our charts and graphics, interact with us directly. It is really fun. We will be back with emad. This is bloomberg. Emma this is Bloomberg Daily bloomberg daybreak. Facilities Management Services giant aramark is acquiring a couple of competitors, for a total of about 2. 4 billion dollars. Aramark supplies uniforms and food for schools and stadiums. Facebook is taking new steps to prevent foreign powers from manipulating future elections to the social network. Facebook is looking to hire people with National Security clearances. They would be used to search more proactively for questionable social Media Campaigns during elections. And daimler is looking at increasing units for truck making, to encourage innovation as the industry shifts to electric power and driverless technology. Daimler says it does not plan to develop any businesses. To divest any businesses. Took anotherdimon swipe at cryptocurrency. Jamie i have an issue with a nonfiat currency crypto sterling, euro, yen, they are all fine. I do not personally understand the value of something that has no actual value. Consider it all you want. I dont care. Let me start with our guests. You have followed this quite a bit. Jamie dimon says it has no underlying value and will come to grief. He said it could go to 100,000 and he does not care. What is your response . Emad i think it is a bit difficult to tell you. One of the misnomers is that it is a currency, cryptocurrency. I see this more as a crypto asset than anything else, because that is where it is going. It is moving from this thing you could exchange because the costs of transactions are expensive. Has introduced bitcoin derivatives. Morgan sex would be offering this to institutional clients. A half percent, it could double, it could triple. If you are adding that much money from big pools into this asset, it is a nice risk reward trade. Then it becomes an asset as opposed to currency. It correlateoes with . Does it correlate with anything . That is the appeal of both. Gold has zero correlation. It does not necessarily go up if the stock market goes down. For diversifying your portfolio, there is value. Makingg, the value is money quickly. I am not sure how many people say a bit going etf or to launch in six months. How many people are doing it for Asset Allocation, like they would with gold . I think this is more of a mad rush to something that looks like a hockey stick. It could serve that purpose once it stabilizes a little bit. Alix you could go long gold, short miners. The problem is, you cannot short bitcoin. There is no way to hedge it. What do you do . Emad i think you cant short it in certain ways, but it would be risky to. You almost want Something Like this. For me, you have had various stages, from the cyberpunks to more retail. Your getting different Groups Holding it at different points. It can drop 50 in a day. If you know that, it is fine with than a constructive portfolio. Investor has a million questions a day. It is region popular questioning at the moment. There is a whole class of people that are going to be interested. This is going to stay volatile. This is very interesting as an asset diversify her. Diversifier. David they have been effective in marketing because all you hear about is bitcoin when there are a lot of cryptocurrencies, and ethereum is no slouch. The first mover in any market, any business, especially etfs gld still has the most assets, even though there are ones you could argue are better. When you are first, it takes a long time to eat into that market share. I think that will make bitcoin be the one for a while. I was talking to an issuer in sweden who put out the east 30 p. M. The e30tn. Their idea is to have a cryptocurrency basket. Alix that doesnt sound volatile at all, sure. Thank you for joining us. Coming up next, the Charles Schwab chief Global Investment strategist will be joining us. We are looking at a pretty flat takein the u. S. As miners the stage in europe after a killer rally in copper