Transcripts For BLOOMBERG Bloomberg Surveillance 20171026

Trump says he and janet yellen are doing well together. This is bloomberg. Im mark barton in london. Stocks marginally higher today, up by a 20th 1 . Overis up a smidgen dollar. Long andng to talk hard about barclays. Look at barclays shares. Down 5. 7 . Deutsche bank down 2 . Getting some details from the norwegian central bank. Rates will be kept unchanged today. Riskslance of economic unchanged since september. Unchanged at 0. 5 . Heres the news with sebastian. Donald trump says hes thinking about getting janet yellen another term as fed chair. Terrific and they are doing very well together. Familiar to people the matter, gary cohn is not open to the fed. Mindel holly faye was speaking asked lucidly to bloomberg. I have a meeting with two banks. They will come and apply for licenses to operate in saudi arabia. Were open. The u. S. House has in responseanctions to irans support for hezbollah. The two bills market first action against iran since President Trump refused to continue the compliance over the nuclear pact. China has begun marketing its First Sovereign dollar bond. Since 2004. According to people familiar, the offer is 1 billion. The same amount of 10 year debt we offered at a premium of 4250 basis points. To European Union has agreed start internal propositions preparations in case the brexit of progress. They are worried the end of the year. Preparations will begin at the same time in case of a more positive outcome. Critical 48 for a hours. Kellys efforts catalonias to push for independence are coming. In madrid, this medicine and started today vote on the implementation of article 155. The turkish there only losses against the u. S. Dollar. The German Government so they will restrict financing to the country. Actively working to cut funding to turkey. Global news 24 hours a day. Powered by more than 2700 journalists and analysts in over 120 countries. Im Sebastian Salek and this is bloomberg. Thanks a lot. The ecb meets today to discuss how and when to bring its Bond Buying Program to it. Its one of the most hotly debated decisions of mario draghi said here. They have a ninemonth extension of qe to january. There are a range of potential outcomes. Joining us now, the managing director of pimco. Are you in line with the i would joinrew that consensus group. The view is so widely adopted. There are 50 dozen people out there who feel exactly the same. A surprise to the more dovish on the raucous side . Hawkish side . Andrew it begs the question of how these numbers it up to the press. Put in numberyou out there which is a low hurdle and you can surprise and exceeded exceed it. You look at the economic rationale of it, this a clear case for winding it down. Any number that is approximately around to 50 billion 250 billion, around eight to nine months. When is the next rate happening . The ambiguity because the well past parse use of words. Detail we saw bit more around their constructive ambiguity on for guidance. Very very important. That term, anchoring inflation expectations, i think we will see it today. Is it a date not going to come . It makes sense for the ecb to maintain as much optionality flexibility as possible. That would mean not specifying an end dates today. Fully in line with the consensus on the 30 billion. Now, youy 13 from 6230 can go from 30 20 in one go. 30, you to 0 in one go. 0 to can easily be normalized also faster . Theew if you look at what market is pricing, we can only look at rates. Thats not much. For japan, that would be fantastic. For developed nations, thats not much. There is a case for a faster exit. It has to do with the fact that growth is very strong. There are changes in the phillips curve. The relationship between unemployment and inflation. Theres a case to rebuild your policy flexibility while Global Growth is strong and seek synchronized. There are a worry on this kind of management to the executive order to put the ecb on a clear exit path before draghi retires in 2019. Mark how to invest . Andrew thats the tricky bit. Mark be the tricky one to the end. We are anticipating a yields will gradually move world but we are in a with the new normal. Growth is laura, inflation is lower, policy rates will be lower. Theres not much of a term of upside with yields. Evaluation across the board is very strict. We air all the more conservative side, looking for areas where there is more quality insecurities. Mortgage markets for example. Some parts of the emerging markets. This is more of a defensive construction of portfolios. Thats the angle we are coming from. Will stay with us. We will bring you that ecb decision today. Bloomberg it here on at 12 45 u. K. Time. Do not miss this mans news conference. Valenti coming up today including President Trump signaling janet yellen is still in the running. Gary cohen is set to be ruled out. We will discuss the finalists. We will speak to the ceo of Deutsche Bank after the lender posted results. This is bloomberg. Mark you are watching bloomberg surveillance. Heres Sebastian Salek. Sebastian Deutsche Bank has reported a bigger than expected drop in revenues. It keeps living bank ground to rivals. The 24 drop expected by analysts exceeded. Berkeley ceo has said he won a panic after one bad trading quarter but now he has had three. Has dropped in fixed income revenue. It performed better than Deutsche Bank. We want to see a better performance there. It really hasnt impacted our market share. Our market share has held in their given what the other banks have done. All of us expect a return to more normalized levels at a recovery of market revenues in Investment Banking space. Profit has fallen. Net income starts at 1. 4 6 billion euros. That compares with a 1. 8 4 billion euros of five analysts experts about my bloomberg. President donald trump is thinking about giving janet yellen another term as Federal Reserve chair as he bounces the desire to put his stamp on the central bank with the risk of changing leadership amid a stock market rally. People, trumphree to appoint gary cohn to the job. Should look at the odds, andrew . These are the betting odds. Jerome powell 60 . Yellen 19 . Taylor similar. Kevin walsh, bottom of the pile. Is that in line with pimcos thinking . Think the powell thing is a little bit of an outlier. I think was coming up here is the trump is maybe looking at the substance, at what has been done. The existing management and regime is doing a pretty good job. Thats maybe what were saying. Mark it would be a good thing if yellen is reappointed . Andrew that is what were seeing in these developments. Mark give me the impact on bond markets. What does it mean for yields . As you give your answer we will look at the 10 year and some key levels in the last couple of days. Quite the walsh one is in the more be i. S. School of thought. Weighed lobally way to lose and accommodative. There is a potential large regime change. The taylor one is a bit overemphasized. Than much more pragmatic what is rule suggests. Hes alluded to that in recent statements. Course, is more continuity and more to say. How is the one that is a little order to place. Everyone is after the 2. 4 question. If it significant . Or is it another psychological level . Do we make too much of this . Foreign technical analysis, these are very important things but in the grand scheme of things, think about this. Of you the trillions theidity of liquidity fed is put into the system. Look for the Balance Sheet will be in two or three years time and then think about the 2. 4 . There is some argue is that suggesting could be a lot higher. Refinancing that that that the fed will no longer buy. That is contingent on a continuation of growth. Its july 2019. This will be the longest expansion since 1945, if we get that far. There are strong arguments on both sides. We can stay in his new normal range. What were hike this year . What might care for you . What camp are you in . We will forecast the dots for next year of the year after and maybe a little bit more on the optimistic, aggressive side. We are seeing that long adjustment coming down to a new normal, a neutral type of level. That is the mediumterm direction were heading it. Will stay with us. Barclays. Look at the shares. Down 7 . They are falling the most since brexit. Biggest decline since january the 27th last year. Next, brexit plan b. The eu prepares a backup plan. We are going to discuss the state of negotiations next. This is bloomberg. Youre watching bloomberg surveillance. Nejra cehic is watching the market. Nejra not a lot of action. We are ready much changed that unchanged on europes benchmark. You have text that underperforming. A lot of that is down to nokia dragging those down. Interesting to keep an eye out financials as well. They are pretty much unchanged but a number of the bank are falling of the session. You have materials outperforming their. Interesting that those commodity producers are outperforming because we are not being illustrated Industrial Metals today or in oil. If we take a look at euroyen, eurodollar get a week high. Euroyen interesting because it is near an almost twoyear high. Over whether we see any retracement on this. We hasnt given nazi retracement levels on that. Fibonacci some retracement levels of that. We are pretty steady in this session. 2. 43 . The next resistance area for yields is 2. 48 . Stop the eu has agreed to start internal preparations on the possibility that the u. K. Will not meet a were agreement with the eu. They have started the prospect of not making enough progress to allow trade talks to begin at the end of the year. Andrew is still with us. From your german seats, how do you deal view brexit pro burress progress. Andrew from the continent, the progress is on the slow side. Its not such a big issue that it is. The 27 remaining in the eu is very adamant that based into those four principles. So long as the u. K. Signs off on this or principles signs off on those four principles, its very simple to solve. While we see right now in terms of this intend to the plan, its just there. Its a rational contingent the plan. Contingency plan. We are looking at a harder cut off. This is showing us the probability of a u. K. Rate hike. The. 5, we want to look at. The probability of a hike next thursday, 19 . 90 . Is it warranted . If you compare the u. K. To the u. S. , they look broadly similar in terms of their economics. Look at the policy rates. There is somewhat of a difference. That number is pretty warranted. Its ok. Mark you get bond market . Andrew similar thing. Its an extension of the front end. Euros are a lot lower versus treasuries. More Exchange Rate pastor into the inflation. I think, from our perspective, we would prefer exposure in the u. S. Than the u. K. Mark thanks for coming in. Managing director at pimco. Well be joined by Deutsche Bank chief executive to talk about the lenders future. 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. Watching are bloomberg surveillance. Heres Sebastian Salek. Of united president States Donald trump is thinking of giving janet yellen another term as fed chair. He thinks she is terrific and is doing very well. According to three people familiar with the matter, trump is not predicted to appoint gary cohn. Barclays ceo says he will not panic after one bad quarter, base at three. He trails most wall street route rivals but street perform better than Deutsche Bank. We want to see a better performance there. It hasnt impacted our market share. Our market share has held in their, given what the other banks have done. I think all of us expect a return to a more normalized level of volatility and recovery of market revenues. State is set for a warrant state is set for a crucial 48 hours with catalonia addressing independence. Madrid, the Spanish Senate begins a twoday vote on the thetation of article 155, cost is no tool that could oust the leader of catalonia from office. Global news 24 hours a day. Powered by more than 2700 journalists and analysts in over 120 countries. Im Sebastian Salek. This is bloomberg. Mark its been more than four months since guitarist saudiors, including arabia, cut ties with the allstate. Despite the conditions, donna bank is looking to expand its global reach as the country works to emerge from the shadow of the boycott. Would you say the worst is over when it comes to these tensions between qatar and its neighbors . Raghavan absolutely. You have seen the performance of the banks. Clearly, the banks have done extremely well. If you look at the combined banking system, stability is improved,idity has expansion is around 5 . Clearly the worst is over. We are incrementally adding and see opportunities globally, regionally, and coming to terms with the reality. Deposits haveent slowed. 2 . Andrew if you understand the dynamics of the market space, there were immediate reactions. But if you look at the trinity deposits in june, july, and september, its a decrease. Is instilling conference confidence. If you look at the central bank is proactively managed, liquidity for the moke local banks has improved. Banks are also stretching. Nternationally mark some breaking days. Saudi crown prince is backed extending the opec output cuts into 2018. Just crossing the bloomberg terminal. This is an interview weve done. Extendingcrown prince the opec output into 2018. Breaking news. Russia said a few weeks ago. Saudi arabia now accident. Seems the cuts will be extended. Just finetuning deciding. Raghavan thats the right move. You see the reaction of the oil price. Stimulate theto oil fiscal prudence for the economists. Theyre are taking the right kind of steps. They are coming together. The oil price will be stable and functional. Mark do we go to 60 for wti . Raghavan i will not be surprised at 60. To Interest Rate is likely go up. The dollar is weakening. Continue the to output cuts, it will drive to 60. Mark not been affected at all. Raghavan it will be enhanced. The scale of productivity. For the today. That will have relatives rodney purvis. Are doing well. Mark on the matter of the u. S. , do you keep and i under the next venture might be . Does it matter to you . Are you throwing her hat into the ring on who you think it should be . Raghavan i think janet yellen is doing a great job. She is in line with the global makeup. She recognizes there are still challenges to constructively engage in monetary policy. She is moderate in pursuit of practice. I think she will continue. Mark is a she will be made. Raghavan she should continue in my opinion. You said to me youre talking to four lenders the possibility of raising longterm funding. How are you progressing . Raghavan we are down to a few options and is going to terms. We want to borrow costeffectively. What will be the Lending Conditions . We want to make sure we have Cost Effective methods. Mark dollar bond sales . Other currencies . Private placement . Raghavan its private placement. Im sure will be able to start out. Mark times . Gimme times . It should be next three months time. You also said he want to sell some assets in the uae. Any progress . We are progressing. Were contemplating options. Have two branches, one in dubai and another in on without me. In abu dhabi. We can have a swap. Thats possibly an option. We are making sure the Financial Assets are being hatched and we can improve on for the liquidity. All sort of options are open. Mark finally, as you said, you want to expand the reach. I was i going . How is that going . Raghavan were scaling up our indian activity. We are going to have a new branch in chennai very soon. Synchronize growth in line with qatars economic momentum is early on. Mark great to see you. Raghavan pleasure. Mark its all happening today. The chief executive officer of the bank. Lets go back to the breaking news. Erik schatzker is in riyadh. The saudi prince back in the extension of the opaque opec into 2018. The ultimate prize is an interview with the grab prince. We had one in thats exactly what he said. He wants to see the production cuts that opec and nonopec producers agreed to extended beyond the march 2018 deadline. He believes the oil market has entered a new era and the control over output is the only way to support prices. This, as you know, is the first formal commitment by saudi arabia, the Worlds Largest oil producer, to maintaining the limits on production that have supported an increase in prices well into the 50s. I just looked at it is trending at 58. Invasive effectively certain that opec will extend these production cuts when it meets next month. While i say its almost certain . , who was then largest nonopec producer who is going to discuss, has led his support to an extension. Heres a direct quote from the conference. Everyone is benefiting. This is the first time we have opec and nonopec deals in stabilizing the market. These cuts started in january as a belated response to the collapse in order prices from 2014. Asked in the them again is a no choice option for saudi arabia. Why . Because the supply glut has proven very hard to defeat. Especially with the rebound in u. S. Shale are put. Cheryl output. Heres another quote. The markets has already swallowed the new supply. Its been swallowed. Now it is part of supply. Now we are going into a new era. He believes it is actually certain that saudi arabia, russia, and others have to extend these cuts. Back to you. Mark great job. We will speak you later. Saudi crown prince backing that extension of the opec production cuts beyond march 2018. Speaking in an interview with bloomberg news. Up next in frankfurt. You will hear from the Deutsche Bank ceo. This is bloomberg. Mark youre watching global news 24 hours a day. Powered by more than 2700 journalists and analysts in over 120 countries. Youre watching bloomberg surveillance. Having abank at decline as its u. S. Fears. Shares of Deutsche Bank and barclays declining today. Lets look at Deutsche Bank at shares. The question is how the bank will find the growth it needs to satisfy investors. I will bring it up on my terminal. We are down 2. 2 . We were down a little bit more than that. Barclays is suffering much more. Its down the most since the brexit referendum. That slump in thirdquarter trading revenue twice as much as the drop in its u. S. Fears. A Third Straight quarter of revenue contraction in europe since thats the bank in europes biggest Investment Bank. It was because of lower expenses. Comments from the independent research. They say these arent the kind of numbers you want to keep seeing. Matt miller is in frankfurt. What did we learn today . We learned that they are doing much worse than their peers in the u. S. Although they say if you are comparing apples for apples, their trading revenue is only down 24 rather than 30 . Still the peers in the u. S. On average at a drop of 50 . They dont know exactly when that is going to be able to turn around. I talked to the incoming cfo. I asked him when they would start making more money. Since 2000 15 has only had two quarters of growing revenue. Every other has been a decline in the revenue. Today, it missed the lowest estimate. Listen to the cfo talk to me. We have a little bit of noise export to come. A lot of the leading indicators in those areas where we have had lacking underperformance give us reason for encouragement. In the broader market, as we said, we will swim with the tide hopefully make some advances also. You have been a great job at cutting costs. Are you knew the end of paying for your legal woes . Are this chart is going to start stopping . Always hard to protect the is a depends on individual matters and how those matters are resolved. We are comfortable with other provisions of the moment at 2. 3 billion. We have had real success at working through a number of our litigation matters and brian enforcementulatory matters. Those of the biggest risk to the company a year ago. We want to continue the progress and work to resolve those matters within our existing provisions. At least youre not paying out nearly as much next year as you are this year and last year. Also, you have cap the head cap a significant amount and are start going to have synergies and eventually your postbank business. Your profit was so strong this quarter. Are you going to start having enough money to start returning capital to shareholders . James there are two elements to it. The expenses of litigation coming down but also severance. Then we think of the operating expenses. Those are down 4 . Basis. Hreemonth we want to do that progress that we have to continue to make plans for saving. Also create ways to offset the natural inflation of our business. We are continuing to invest in growth. We are creating the systems and capabilities to meet regulatory at our own expectations around the control environment. That investment is also become. The last thing i would say is that we havent announced the for ourion plans commercial Bank Franchise area over time, that will also great pass for certainty. The ipo, as far as building capital, the ipo of deutsche Asset Management is expected in the first half of next year . I wont commit to a timeline really think it will be well within the original timeline we announced that 24 months. We are making significant progress in preventing the company for the ipo. Its a lot of work in terms of legal entity restructuring and create the services of the company cap acetylene basis. Any Public Company typically asults in some cost savings you have a Management Team with more autonomy that is able to manage its own expenses more focused way. We would expect to see some benefits coming from that as well area the business well. What kind of returns you expect . James we do think its a strong business. Its one of the largest year and at that management companies. Well be right that the financial story were ready to do so. We think the overall performance of momentum in the business strong. How is the basic deposits in lending both business going . Especially with tapering moving towards a more normalized environment. James we are rate sensitive to the upside. As rates starting race, we should benefits to the family. Start to increase, we should benefits michigan. Benefit significantly. We have offset the headwinds that exist in our business from the rate environment. As all our instance rate hedges runoff, we are all sitting that with growth. Growth. Etting that with growth goe commission through a zero near revenue improvements area the Interest Rate changes, with a calm, will come on top of those brexit ists area another big issue. We were aired reports of moving 4000 employees out of london. How is that going in what is your clarity there . The 4000 number was never accurately reported. We dont have a precise forecast. Were working through those plans. Essentially desk by this activity. I think will take a considerable amount of time. Need tog i think people understand it is not a first of april 2019 event. Italy law. It will even off. All well itt will evolve there has been a lot of commentary about the negotiations ongoing. Its too early to give you aware that comes out. That was james von moltke. I am here for the ecb meeting as well. I will be back a little later on to talk about what we expect from draghi today. Getting some breaking news from the German Software company sap. An internal probe in its south African Business has found instances of misconduct in businesses related to the group the family and it has started Disciplinary Procedures against three employees. They have become entangled allegations around the group the family who are friends of the president. They have been accused of using their connections to win lucrative state contracts. Sap shares are up today about a third of 1 . Barclays shares falling. We will be speaking to the banks chief executive. This is bloomberg. Mark youre watching bloomberg surveillance. Sebastian the barclays ceo said he wouldnt panic after one that turning quarter but notice at three in a row. It trailed most wall street rivals and posted an average 20 decline. We want to see a better performance than. It really hasnt impacted our market share. Weve held and active given with the other banks have done. All of us expected return to more normalized levels of volatility and volumes. The failing lender purchased in june. Best of Bloomberg Business flash. Bloomberg surveillance continues next hour. Big day in catalonia. Big day in spain. We have the Senate Meeting in spain. Who to mont meets and catalonia. The leader of catalonia meets there. A twoday meeting in madrid. The catalonia president says the Spanish Government is exceeding its limits. More from catalonia. Tom keene will be joining us. This is bloomberg. This morning and mario draghi confronts a hard date of disinflation, the legacy of eurosclerosis and the need to get to quantitative tightening. A new populism all across europe , the fight for an independent catalonia, elections and austria and Czech Republic, can Angela Merkel hold europe together . In america, a painfree tax reform, or so they say. This is bloomberg surveillance. I am tom keene in new york and nejra cehic in london in four Francine Lacqua. The bank results are stunning with a tangible decline in barclays shares. Nejra the big focus on trading, not just at barclays but at Deutsche Bank and whether european banks are losing market share because they have underperformed when it comes to trading. We will talk more about this later. Also watching oil as the Saudi Arabia Crown Prince has backed cutting opec outputs into 2018. Tom we will go to Erik Schatzker in a bit. Lets get to the first word news with taylor riggs. Most is one of the anticipated European Central Bank Meetings since mario draghi became president as they meet today to discuss how and where it should end his largescale Bond Buying Program. Monthlykers may cut asset purchases and stretch them out as long as possible while waiting for inflation to pick up. In the u. S. , President Trump says he is thinking about giving janet yellen another term as chair of the Federal Reserve and told fox he would like to put his own stamp on the fed but says janet yellen is terrific and says we are doing very well together if you look at the markets you ars. Almost certain opec and its allies will cut production next month as the Saudi Arabia Crown Prince Mohammed Bin Salman says he wants the limits to stay in place has the current march 2018 Expiration Date. Until now, saudi arabia officials have stopped short to making a commitment to prolonging the cuts. The European Union working on a plan b in case there is no additions and brexit talks, eu countries will come up with a response in response to a failed negotiation. They want enough progress that trade negotiations can start at the end of the year. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom equities, bonds, currencies, commodities, great thing chart. Bank chart. Euro rebounds. The idea of the vix at 11. 30. I put the 30 year bond in. 2. 96. 2. 97. Yesterday, someone said a attention to some of the emergingmarket currencies, turkish lira weakens out near record weakness. Even South African rand takes weakness over the last two days. Nejra absolutely, also watching china. Mario draghi date and eurodollar trading at its highest in a week. The euroyen is up there with a touch of weakness. 134. 22. Weakness in cable. European equities pretty flat. A bit of movement in the banks. The 10 year yields down one basis point. 2. 24 2. 42 . Tom lets sit on this chart for a moment. The tice will join us in hour. The white line is jpmorgan, american backing. You see the ascendancy of American Banking over the last number of months. The yellow line is Deutsche Bank. Let me get this right, their ipo, you think this is the first time i am using this, down we go with Deutsche Bank. Barclays outperformed Deutsche Bank through much of the year. This is a huge challenge for jes staley, the immediacy of barclays breaking down beneath Deutsche Bank as you go back and compared to the arm of one year umn of one year ago. Nejra if you look at Deutsche Bank share prices, it says something about violation. Valuation. G i look at the ecb role in stimulus. Ecb assets as a percentage of the total holdings. This has come down. We were at 55 in 2008 and in 2012 closer to 45 and now at 35 . What does this say about the ecbs essential potential to the stabilize market the stabilize markets. Tom we go to germany. Matthew miller is on the watch at the European Central Bank Meetings. A Commerce Bank skyscraper behind you and the view in germany. How is mr. Cryan doing. . Give me a report card on his 2017. Matt he is not doing well, running Deutsche Bank since 2015 and only two quarters of growing revenue. Seven out of nine down. They are theyre trading revenue is down 30 , twice as bad as his wall street peers on average. Deutsche bank is not able to use trading, they say it is a cyclical industry problem that not gaining market share. Tom this will be front and center today, an important day for european banking. You will see Mario Draghis press conference, what will you be listening for any 8 30 new York Time Press conference . Matt there is such a wide array of thought as to what he will do. Bloomberg markets believes he will be more dovish and only cut from 60 billion a month to 40 billion per month and jpmorgan thinks he will be more hawkish and say he may raise rates once he is done with qe. It will be interesting to see quick lazy false and i have never seen mario draghi seem hawkish. I am expecting him to lead the time openended and say he can come back at any point if he needs more money because they are not close to their inflation target. Nejra he has to walk a fine line and try not to disrupt markets too much. How do you think he will play that . I do not see the fine line he has to walk. He can be as dovish as he walked wants as long as he recalibrate, he will fulfill the promise he has made two markets. Everyone expects him to be holding that bazooka by his side. Nejra thank you to matt miller. We are joined by our guest host Antonio Garcia pascual, he is the chief european economist for barclays. Great to have you. When we look ahead to mario draghi today, you think we will see qe lower for longer, what does that translate to in the markets . A neutral message . The message will be generally dovish. Longterm inflation is weak and they forecast, the ecb forecast inflation at 1. 5 in 2019. That is the mediumterm. With a lot of stimulus, not where they want to be. That use the word selfrestraint for growth and growth is doing great. They have a problem of stronger growth, better demand, but we can inflation. Week inflation. Inflation. In terms of numbers, they will taper some of the qe. They will be possibly nine and perhaps 12 months at a r month. If they do nine months, maybe 30, 25, 12 months, more like 2025. The key issue is the lower for longer. Nejra how would you reinvest into this . Another way to read investments will be on top of that and investments average per month will amount to Something Like 15 billion. Likely that mario draghi will get this question. He will respond with a number of approximately 15 billion per month. That is a general intervention by the ecb and the bond market. Tom wonderful to have you with us. This is a relative chart. The fiveyear, fiveyear forward. All you need to know is the red line is the United Kingdom with a high level of inflation expectations. America and white. This is the great disinflation that mr. Draghi has to place within europes, and inflation guideline where it was in 2009. You know this chart well. Economic growth and the supposedly covering of europe, is mario draghi looking at good animal spirits, good nominal gdp in europe, or can he hope for a better nominal gdp in 2018 . This is good news. All the stimulus seems to be working. Financial conditions are better. Growth will be probably north of 2 and next year in the proximity of 2 . This is helping to close the output gap but that is not closed yet. Employment is still full. Germany,the countries, you could argue at full employment. France, italy, and spain are not. Stimulus is Still Necessary and i am afraid wages will not pick up as much next year to bring inflation close to 2 . Nejra Antonio Garcia pascual, this. Day for ecb big policy, we will bring you the Rate Decision and then Mario Draghis news conference. This is bloomberg. This is bloomberg Surveillance Video lets get a Bloomberg Business flash. Similar problems for jes staley at barclays which is had three bad trading quarters in a row as the british bank says the fixedincome revenue fell 34 in the Third Quarter and he spoke to bloomberg tv. We want to see a better performance. It has not impacted our market share which is held. Even what the other banks have done. Return toexpect a more normalized level of volatility and volumes and the recovery of market revenues in the Investment Banking space. Harderlts may make it for him to win over investors skeptical of his rebuilding plan for barclays Investment Bank. Third quarter profit fell at lender the failing santander acquired a bank after regulators wiped out shares in junior debt to offset losses from bad assets. You. thank spain is set for a critical 40 hours as cattle on separatists either succumb to madrid or escalate their push for independence. Carles puigdemont will address the parliament in barcelona this afternoon and in madrid, the Spanish Senate begins a twoday vote on the implementation of article 155, the constitutional tool that could strip catalonias power. Lets get back to Antonio Garcia pascual, the chief european economist for barclays. A question about how this will be implemented. Antonio it has never been implemented and the article does not give specificity on how it should be done. The government has given us a they will remove the Regional Government and eventually call for elections within six months for general elections. How will they implement it is less straightforward. The level of selfgovernment and power to catalonia is extremely high. The footprint and president of the government in catalonia is little. The implementation of that 155, the taking over temporarily is not straightforward. ,ejra on the Economic Impact we have heard that there could be an Economic Impact on the spanish economy. When do you see that coming through . Markets are not pricing that in yet. Notnio normal that it is priced in because theyre waiting to see the resolution or not of the conflict. A defense for how many more weeks the situation will escalate. If it continues for weeks or months, no doubt it will have a negative impact with 90 of spain gdp, you can imagine 19 of spain gdp, if negative growth, spanish growth will see in the gdp numbers. Growth nextiled in year for spain at 2. 8 . If catalonia goes negative, you can easily see the number closer to 2 and under 2. 5 . ,om we have an october change the summation of catalonia and the austria elections of a bit ago and the Czech Republic elections. What is the task for Angela Merkel to keep the politics together to keep the economy together . What do you need from chancellor merkel . Not only Angela Merkel but macron in france. They need to put together a government which may not be a straightforward task. You will want to see germany working together with france. Europe has made progress and move forward. When these two have worked together well. The expectation is that there will. Mentionrted already to topics such as migration, defense, common policy in those areas. I think that will be important because addressing those issues may help address the issue of populism nationalist parties in europe. Tom very good. I want to continue this. Barclays down 7. 7 from its recent peak this morning and some of you may be confused why im not talking to Antonio Garcia pascual about barclays, the rules of the game is you do not talk to them about the executive responsibilities of a bank. When i look at europe and mario everybodyunderstand needs more patience and in a hurry up to get to qt. Are you saying we need to counsel patience for mario draghi to assist europe with their many monetary and fiscal challenges . Antonio i think this lower for longer is helpful for the periphery, helpful for italy, spain, and so on. ,t is necessary in a way because they themselves are forecasting the very longterm inflation of 1. 5 . The chart you showed, the , theyear, a very longterm markets do not believe they can come back to 2 . I think that is right. Lower for longer suits well be needs of the european economy at this point. Lets see what that means today, how much lower and longer . The policy path seems right to myanmar draghi will sound dovish mario draghi will sound dovish. Tom we will continue with Antonio Garcia pascual this morning of barclays. Coming up, at the top of the hour, any number of things does become, dr. Kaufman will join us on the new wall street. On the challenges for the next fed. There is the washington of taylor or powell or yellen. Surveillance. Nejra cehic and for Francine Lacqua in for Francine Lacqua. Davidtzker rubenstein on the changes at carlisle. Here they are. We will stay involved in the firm and i will be with the coexecutive chair and bill will serve as cocio. We are not walking away but changing our roles. We let the new people run the firm daytoday as of january 1. How much leeway will you give them . A fair amount, you cannot have a Successful Transition if you are helicopter and over people and we do not want to be helicopter parents. We will keep involved and help you as weekend and tell us what you want us to do. You guys run it daytoday. This was largely a decision that was yours to make. When did you personally and why it could have happened at 67 or 69, why 68 . We have worked together for 38 years and we began to feel that it is time to hand over the reins to younger people. It is not clear that people who , 67, 70 what are the best leaders of the future and we did not want to wait until it is too late and people say we should go. They were not saying it. Why these guys . Glenn has been with us for 23 years. Extraordinarily talented, working in the United States and europe for us and i recruited the other four years ago from warburg. They have good investment skills and people skills and complementary skills. We are confident they will do a good job. What are you doing to avoid the ge curse . Melt got hit in the reins Jeffrey Immelt got handed the reins. What isb has left carlisle doing about this risk . We have three people in significant positions, pete, the cocio. Not aware of anybody who is a senior person not happy with this and i do not expect in your people to leave. Senior people to leave. I do not believe anybody will lead the firm because of this decision. Tom fascinating and more extraordinary when you compare the Management Strategies that at a more visible Carlyle Group from bridgewater associates. We move from that conversation with David Rubenstein to my conversation with david gura you will here on Bloomberg Radio today. That is with ray dalio of bridgewater. This will be fascinating, not only his new not only on his new book but on the huge challenges forward for alternative investments, their underperformance to the markets. Ray dalio later today. Nejra cehic in london in four Francine Lacqua. Looking at the ecb and banks, barclays just flat out cannot find a good from bid from the peak of hours ago, down 7 . Jes staley will have questions to answer. In the desert, there are meetings that have been going on for a few days with important interviews. Erik schatzker has been Holding Court in riyadh and joins us. How are these meetings being taken by the many guests . We saw your conversation with David Rubenstein. A critical oped piece in the telegraph overnight. What is the zeitgeist in the hallways in the ritzcarlton . Erik to answer your question directly, i have been talking to many of the managers who collectively oversee 22 trillion. Almost to an individual, they tell me that coming here has made them believers, if you will. Is happeningortant in saudi arabia and a talk of an Economic Transformation is not just a pdf document the government produced. With mohammedoom bin salman yesterday and i sampled his enthusiasm, intellect, energy and partly for that reason and the fact he has drawn all these people here. They are walking away thinking maybe this is more than talk and more than a powerpoint. There really is something, not just generational, transformational happening in saudi arabia. Tom it is all backed by the microeconomics, price the reality oil. In your cover in your reporting, there is an oil dynamic, what is the new ones for saudi oil nuance for saudi oil . Said Mohammed Bin Salman the market has already swallowed the supply of shale oil and now is part of supply. Now we are going into a new era. That is the dynamic he sees. There is nothing saudi arabia can do to his stop u. S. Shale production can do to stop u. S. Shale production. The only alternative is to extend the production cuts that will expire in 2018 that opec agreed to with the russians. He believes that has to be extended. Vladimir putin told us that he has given provisional support to an extension. We look to the opec meeting next month and conclude that it is a near certainty. If the producers hold to those limits, it is possible that oil will oil prices were hold where they are with brent trading at 58, a lot higher than where it was a few months ago in the 40s. Nejra on the shifting dynamics in the oil market, one of the recent saudi arabia is trying to diversify away from oil. What does Mohammed Bin Salman say about saudi aramco ipo . Aramco ipo isi the first step in this Economic Transformation as they have to monetize the value of that asset and begin to diversify, deploy some resources and other things, whether private equity, real estate, internal development of other industries. He said the ipo is on track for the second half of 2018. We are probably still possibly one year away from that ipo. We pressed him on where it will be, local, international, new york, london, hong kong . He said he could not get out in front of his team as they are working with backers on making that decision where it is most effective where there is more liquidity and more credibility in the listing. Tom thank you so much. Let me show the chart. This has been one of our most favorite chart of the decade, daniel i kid that this is my prize chart, saudi adjusted for rising global incomes, and approximation about the two opecs in the 1980s, persian gulf one. The china boom with oil up above hundred dollars per barrel. Here is the collapse of the saudis are dealing with right now. Right now, with our first word news, here is taylor riggs. President trump could officially declare the opioid academic a National Emergency during a major speech today. It would pave the way for a stronger federal response including extra money. Partial data indicates the death toll from opioid overdoses could be headed for another record year. President trump does not intend to appoint his chief Economic Advisor gary cohn to the head of the Federal Reserve. According to people familiar with the matter the president said in at least one private meeting that gary cohn has no chance of being the fed chair and donald trump is said to have told advisers he is doing a great job and wants him to stay there through the battle over tax reform. Millions of americans living overseas make it a break in the tax bill being considered by congress. According to the Financial Times, republicans may eliminate requirements for expatriates to pay taxes overseas and in the u. S. House ways and Means Committees kevin brady tells the finance of times people may be taxed only on income earned in the u. S. Critical 48 hours for catalonia separatists as the president of the region Carles Puigdemont will have to decide whether to bow to the authorities in spain Central Government or declared independence. In madrid, the senate will vote on a plan to give their Prime Minister the power to kick Carles Puigdemont and his ministers out of office. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Nejra thank you. Despite a time of heightened geopolitical uncertainty, the worlds ultrawealthy are flourishing as billionaire wealth rose 17 in 2016, double the rate of the world index. According to a ubs report. Joins us to talk through the report and stay with us is Antonio Garcia pascual, the chief european economist for barclays. Great to read this report, fascinating. A return to growth. Where is this wealth concentrated, geographically . First, the report, the major themes are a return to growth. After 2015 when billionaire wealth declined, we have acceleration of growth in 2016. Double the index. Billionaires are usually successful with businesses. The other is the asian century, the acceleration of wealth, especially in the billionaire sector with asians is dramatic. For the first time, the number of asian billionaires has overtaken the number of u. S. Billionaires. That is incredible. Also, the impact in the andvation on job creation societies we worked on in terms of billionaires. Or example, the billionaires we follow represent 27. 7 million jobs in the world. That is the size of the working force in the u. K. They have a big impact on society. Nejra on the impact on society, what sectors are these billionaires in . Mainly tech or elsewhere . Great question. Finance companies, innovation, technologies. 70 of all the wealth today of billionaires is also for made. All selfmade. You see the boom in Technology Companies and Feeder Companies that feet off the Technology Companies. Services companies and Technology Companies are starting to blur and you are seeing a crossover. Tom a large part of society does not agree with you and feel billionaires are raving capitalism and getting the marginal gain from unfounded methods. Describe what you learned billionaire to billionaire. Not how they made the first million or first 22 million, but when they moved to a megawealth, are they doing it under what i would call constructively legal means . I think that is a great question. One of the nice things about this report, not just quantitatively exercise of looking at numbers but a qualitative peace. We interviewed over 90 billionaires. Or their advisors. It is deep and constant. It takes years for them to develop this wealth. This is not like you create an app in a garage overnight and have an instant 1 billion. Most are in their 50s, 60s, 70s and build businesses over time. They employ 27. 7 Million People around the globe. I think the members present that Wealth Creation equals job creation and the evidence is there. We see in the report that there is a desire to give back to the communities of which they live and work in. To help society. We see it in the way they participate in the arts, the private museums, helping public museums, funding public museums and sports franchises. Tom what are billionaires like now versus the millionaires of John Rockefellers time . You can pick your time, but if we go to tudor, there are always the rich. Why are they different than 40 years ago or 400 years ago . We see that they are incredibly into networks. Of have this acceleration bringing billionaires together from all walks of life and all industries. In the past, you think of a Billionaires Club which was a small group of people. Today, we see a network for a lot of reasons, not only to figure out ways to do business together, they do deals with each other. They can go to their network for financing and literally use the network in terms of the vote, like they use banks today. You see they are very philanthropic. Younger, selfmade billionaires have a different view on how to Impact Society and they want to make a difference. They like to see the difference they make in society. In fact oriented and philanthropic oriented, usually in the form of the network and they Work Together to find a better way and help develop a strategy and develop a focus. Nejra fascinating report from ubs, particularly the impact the billionaires are making on society. From your perspective as an economist, as you see more and more people getting richer and richer, is that trickledown effect happening . Will it happen . Antonio if you look at wealth distribution, there is still a long way to make it happen more evenly. As we were discussing before, the issue of the increase of populism, nationalism in part has to do with the result of a crisis. A little bit of a problem with redistribution of wealth. Leg for it to work is wealth distribution, there is more work to do with a better tax system and social security. Those are key issues. If you want to address the polarization of politics. Tom john mathews, thank you so much, with ubs. After your briefing on bloomberg surveillance robert radio, Bloomberg Bloomberg daybreak europe coasttocoast and in canada, even in houston, home of the victorious houston astros. This is bloomberg. Nejra i am nejra cehic in london with tom keene a new york. A big day with european banks with results from barclays, Deutsche Bank, and santander. Revenue with the Corporate Investment bank fell 31 , lagging behind the average of the shares fell on the news an earlier barclays Ceo Jes Staley spoke to bloomberg. We want to see a better performance. It has not impacted our market share which has failed in their. Even what the other banks have done. All of us expect a return to more normalized levels of volatility and volumes in a recovery of market revenues across the Investment Banking space. Joins usnathan tice and still with us is Antonio Garcia pascual, the chief european economist at barclays. If we look at barclays and Deutsche Bank, the key takeaway is the trading. Absolutely, the call is still ongoing and one of the things theyre looking to do is real we allocate 20 billion of risk allocate reallocate 23 and generate a new 50 billion of leveraged assets. They are turning up the heat. If you look at their targets, consensus, roughly the consensus is about 30 below pretext pretaxed level. There is a lot to do. Nejra a lot to do in terms of keeping up and taking market share from u. S. Banks. He keeps talking about returning market share but the businesses they are looking at, not the sales and trading which is key. They have things wrong. It isith Deutsche Bank, difficult to retain people, particularly with u. S. Banks doing as well and new competition from the french. It is tough. Tom here is a chart. Johnonly doing this for tice because i am honored he came on in the middle of a call. The blue line is barclays, the outperformance over the mother of all failures, Deutsche Bank, which has now flipped with barclays on a oneyear basis breaking below Deutsche Banks stock performance. The Financial Times article in october which focus about jes is hiss future, what relationship with the board and how tenuous is his tenure . The problem is there are limited options. Iny have 25 market share u. K. Credit cards. To betonest, they have the house on the back. On the Investment Bank. The worry is qe what happens if they get it wrong . Tom you and i learned about this, you merge, who will barclays mate with to survive since competitively they are in a no mans land between two big to fail and the other people below . Who are the candidates . Nobody. Commerzbank is one of the few large cap deals i would lend any credibility to for a variety of reasons. I think barclays is on its own and will have to work through the problems. It is trading at two thirds tangible book because of low roe. It will struggle to keep up with the sector because it has less that it can do. Tom he goes to the heart of the matter which is two thirds of tangible book value which is way below the one time and many other good banks are at. How many of a hundred 19,000 119,000out the door jobs go out the door . Side andve the retail you expect a drip feed but cannot afford to get rid of people in the Investment Bank because nobody would give him any more time to turn it around. He is stuck. Taking on risk. You hope he gets a right within the next couple of quarters. Nejra thank you do jonathan tice. Antonio Garcia Pascual stays with us. What tv , i have it here, jonathan ties, the headline from jes staley and all the key chart we have been showing throughout the show. This is bloomberg. This is bloomberg surveillance. Lets get to the Bloomberg Business last. Flash. Given the company pretty good a long slope for the Wireless Network equipment business. Terriers are mostly done with building their latest networks and nokia project the market could shrink by as much as 5 next year. The future of film and tv studio cofounded by Harvey Weinstein is in doubt, according to a person familiar with the situation, Colony Capital is no longer making the cash infusion in the weinstein company. The studio has been losing projects since a number of women came forward to say Harvey Weinstein rate or sexually harassed them. Ped or sexually harassed them. Tom we have talked about europe and continental europe, that is about to go against the ongoing conversation over brexit. I love the title for david davis , secretary of state for exiting the European Union and we speak to the chief economist for exiting this hour of bloomberg surveillance,Antonio Garcia pascual with an update on the european view of brexit. What is the combined brusselsgerman view on brexit right now . Antonio they conversations are clearly not at the stage where they would like to see. Hopingr end, they were to have a resolution on the exit border, and the rights of u. K. Workers in the eu, and vice versa. They are not. Agree they are not there yet. This is critical, because otherwise firms starting next year, they will start having plans for designing whether to move or how much they move. By 201s fully workable 9. The time is now. Nejra december was coming up as crucial for moving because onto trade and the eu is set to be starting a brexit plan b if it flops and december, also preparing for success. How does the bank of england handle this . The rate hike in november is already priced in. Antonio that is right, mainly because most of the members have told us so. A majority are for it. We have penciled it in. The question is for your, one and done . Or the beginning of a cycle . To answer that question properly, you need to have a deal on brexit. If negotiations go well by december, talking a couple of months, you could see a transition period. You could see some Financial Firms and corporates taking more time. England projections could be right and maybe you could see one or two more hikes. If things do not go as well, then you can see more deceleration in activity and more uncertainty. The bank of england is wrong and that will be at most one and done. No reason for the bank of england. Tom thank you for the briefing. Antonio Garcia Pascual is with barclays. A real treat coming up, Henry Kaufman will join us for the entire hour, legendary, on too many topics, the new fed and the president of the United States. And Henry Kaufman on the recent lift and rates. Coming up in the coming days, a new fed chairman. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. Tom this morning in frank for, mario draghi confront the hard data disinflation, the legacy of eurosclerosis and the need to get to quantitative tightening. Halloween beckons, republicans in washington going as the many ghosts of tax reform passed. Mr. Brady is looking for a trump message. Interest rates lift, we speak with Henry Kaufman on a return to a 2006, or is it a brave new frontier for american capitalism . This is bloomberg surveillance. Live from new york, i am tom keene. Nejra cehic is in for Francine Lacqua. European banks are considered and you really wonder are front and center and you wonder about the future of barclays. Focus he talked about the on the trading revenue where european banks are lagging their u. S. Years peers. A challenge for jes staley. Tom down 7. 7 on barclays shares off the london exchange. The ftse i should say. One of the most anticipated European Central bank meeting since mario draghi became president. The ecb meets today to discuss how it went it should end its largescale Bond Buying Program. Policy may cut monthly asset purchases and stretch them out as long as possible while waiting for inflation to pick up. In the u. S. , donald trump says hes thinking about giving janet yellen another term as chair of the Federal Reserve. The president paul fox he would like to put his own stamp on the fed while says janet yellen is terrific and we are doing very well together, if you look at the markets. All but certain opec and its allies will extend Oil Production curves next month. Saudi arabia Crown Prince Mohammed Bin Salman tells us that he wants to limits to stay of 2018 past the march Expiration Date and until now saudi arabia officials have stopped short to making a commitment to prolonging the cuts. The European Union is working on a plan b in case no breakthrough in brexit talks with the u. K. By december. According to familiar from a with the matter, eu countries will come up with a response to the prospect of failed negotiations. The eu wants there to be enough progress in brexit talks so trade negotiations can start by the end of the year. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thank you. Through the data quickly. We had too many good things to talk about. Euro back to a 118. Onto the next green. The next, 11. 25. Libra and South African rand weak. Nejra on mario draghi date, eurodollar at its highest in a week and euroyen, a touch weaker. Eurosterling is stronger with a little bit of weakness in cable. European Equities Trading pretty much sideways. The focus is on the backs. Banks. Losses in barclays. Tom here is a chart on european banking. Jpmorgan with their excellence in the last 12 months. So much of this is off of the enthusiasm in america for American Banking. Deutsche bank and barclays laggi ng. Barclays did better eight months ago, 10 months ago and cuts down sharply this morning with a disappointing relative news from barclays. Nejra looking at an ecb chart. The question is not necessarily whether we will see any form of announcement of tapering from the ecb, but how they will go about it at what details they will give. The percentage of the total boj holdings and these have come down, not just from 2008 but since 2012. An interesting question, how much affect globally on liquidity on the markets the ecb tapering will have . Tom a perfect time to speak with Henry Kaufman. You know him. Forget about dr. Doom and the syllabus of years ago silliness of years ago, think about Interest Rates at a broader view of american finance. Joining us is ms. Adams who has given terrific perspective on the equity markets. Wonderful to see you. Are you enjoying 89 . I wasnt 90 last week was 90 last week. Tom what did you do for your birthday . We had the whole family over and i rented a boat and we sailed the east river. It was a beautiful weekend and a beautiful day. Tom i thought maybe you would give a third tunnel to new jersey. This is the legacy and the business of Henry Kaufman in american finance. This is from eisenhower up to volcker. Down we go, the crucible is led by bill gross and others, we are at a Tipping Point and rates at something about 2. 40 . It is all clear on the financial crisis, do you agree . Dr. Kaufman i felt that last octobernovember, we had reached the socalled secular low Interest Rates. , based it off of the 30 year which im acclimated to which at that time was 2. 08 or two point 00 2. 08 . We are approaching nearly 3 . I think the Secular Movement downward is over. I think we will gradually move up somewhat. , great tory kaufman have you and we share a birthday month. Happy birthday to you. Tom he is looking more well preserved than you. Nejra absolutely [laughter]. You say that you are expecting rates to move higher, when and how far could ago . Dr. Kaufman i do not expect a dramatic move. I expect a modest move higher. Now, the 2. 4 yield on the 10 year should be up to 2. 75 or 2. 8 or 2. 9 . That will not be the end of the world. I have seen those rates before. Tom this is critical, you do not have the doom and gloom fear of Walter Heller Interest Rates of the 1960s. You are not looking for that kind of inflation. Dr. Kaufman not at all. I feel the Financial Markets is a captive of the fed and the fed is a captive of the Financial Markets. Om lets get to a super its exuberance. In this chart is fabulous. It shows the exuberance we saw a number of years ago, call it march of 2000. Henry kaufman fail this call. Call. Led this we are nowhere near that now. The equivalent move now would be the dow at 35000 and we are nowhere near the silliness of march 2000. If you look at valuation multiples, the pe is well below the level and 2000 and tech at that point, the bubble was evident with nearly 35 of the Market Driven by Technology Stocks and they were trading 30 times earnings. We are not there in terms of multiples. Free cash flow yield on the indexes double 2000. Sentiment was, generally the most wise, the questions i get are when is the crash coming and the imminent correction . A general hesitancy, particularly with u. S. Stocks that did not exist in 2000. Tom i spoke to charles cap are of whole foods and amazon yesterday, he was heated we are not at a point of market market exuberance. Nejra i wanted to ask you about the president commenting on the fact that it was a combination of him and janet yellen have been good for markets. As we speculate over who the next fed chair will be, what would be the best Case Scenario for equity markets . Always more of the same. Any change creates disruption for stocks. More of the same. That is the best Case Scenario. Janet yellen transitioning into next year would be the best Case Scenario. The on that, something similar to yellen would be generally perceived well by the market. Canadas closest in the rate would be powell. I am not sure we will get that. I thought the comments for the from the president where students were soothing to the market. Previously taking credit himself and now acknowledging monetary policymakers have had a hand in that. I think that will help the markets ease concern and points toward a more dovish potential future chairperson. Nejra on the succession, one of the things you said that fascinated me was the fact that the fed has failed in addressing too big to fail banks. And that doddfrank is not work the way it should have. I am wondering, which scenario of succession would be best in terms of regulation and addressing that issue against around too big to fail . Dr. Kaufman i do not think any of those that have been mentioned as successor to the chair would really address this issue head on. Embedded of the actions in 2008, 2009. My argument has always been that we should reduce the size of financial conglomerates. The conflicts of interest are great. They decrease the efficiency of the Financial Markets. And they lead to what we are having, financial public utilities. They are much more under the thumb of the federal government than they used to be. Tom we have a lot to talk about. We are set for an ecb meeting and an of a more important ecb meeting, we heard from Antonio Garcia pascual of barclays, looking for a dovish tone out of mario draghi. From london and new york, this is bloomberg. This is bloomberg surveillance. And germany, Ceo John Cryan reader is stuttering at Deutsche Bank. They reported a larger than expected drop in thirdquarter trading revenue. We spoke with the groups cfo and here is his take on the trading picture. We have been holding share, especially in fixed income market for this quarter down 24 . If you put together our fixed income sales and trading any financing segment, which is an apples to apples comparison with our peers, a difficult market for everyone and we have held share in that market. Similar problem for jes staley cap barclays, which is now had three bad trading quarters. The british bank says fixedincome revenue fell 34 in the Third Quarter and he spoke to us. We want to see a better performance. It has not impacted our market share, our market share has held , given what the other banks have done. All of us expect a return to more normalized levels of volatility and volumes and recovery in market revenues across the Investment Banking space been p results may make it harder for him to win over investors skeptical of his rebuilding plan for barclays Investment Bank. Been kevinyou cirilli thank you. Kevin cirilli is our chief washington correspondent. I love the new york times, the third headline, an older breed of conservative. The only one we know that knows that is Henry Kaufman. Where are the older breeds of conservatives conservative republicans, and he left account . Any left to count . If you with bob corker and jeff flake reverberating through washington the feud with bob corker and jeff flake reverberating through washington. How that will advance the president s effort on tax reform, happening despite the fallout from the two senators. The Republican Party no doubt in the middle of a crossroads in terms of its future and leadership. Into 2018, the Senate Majority leader and steve bannon are correct, if republicans do not get a policy victory by the end of this year, 2018 is looking difficult. Cirilli, and a couple of weeks ive for we will get a scoring of tax reform. Trillion,ber, 1. 5 what will be the response of the many shades of republicans . It depends geographically. We can talk about the tone of the president has been divisive among the republican caucus. Best illustrated by senator corker and senator flake. In terms of policy, geographics have played into the dynamics of tax reform, most notably on the elimination of the proposed state and local tax reduction. Do not forget about authentication, certain state, california and new york where republicans are critical of the administrations advancements of how to pay for this. Gary cohn who will not be fed chair, i am told because he is focusing on tax reform, is now floating an idea of a gas tax. Negative impacts for some factions of the Republican Party. R in gary cohn takes ube manhattan and that does not sit well in oklahoma. The pay for will be difficult. Nejra i want to get your take, so much commentary on social media after the interview with President Trump ends, its on janet yellen, does he favor for does he favor her or not . The big takeaway of the interview was he is praising janet yellen despite criticisms from republicans and his own party calling for new leadership. Three republican members of the House Financial Services committee wrote the president and said they would like new leadership at the Federal Reserve. Ofre is difficulty in terms all republicans being on board. It is down to three or four candidates. Tom thank you so much. Henry kaufman is with us. Bring up the chart. This is a fabulous chart. Thisdr. Kaufman remember moment of twin deficit frenzy in the 1980s. Down we went to 4 , deficit to gdp. Will we revisit 20 deficit twin deficits . Dr. Kaufman yes, i think so. It has to be understood that when you have an expanding economy, you also have to have expanding credit. Credit flows have to be there. Who will finance Economic Activity . Households . Is this. Business, governments . Who has capacity to borrow a lot, business corporations heavily indebted and their credit quality has deteriorated. Households, while not yet at their peak levels of borrowing, which they had 8, 9 years ago, they are not far away. Sister to going and analytically, the one with the this is a good and analytically, the one to issue more debt without more problems is the federal government. Tom this is too important and we should talk about this more, a lighting rod before listeners on radio and people watching on television. Gina martin adams is with Bloomberg Intelligence and Henry Kaufman as well. Later today, david gura and i speak with ray dalio. This is bloomberg. Tom nejra cehic in for Francine Lacqua in london. Looking forward to the ecb meeting today. Gina martin adams giving us first break on equity markets. We have to continue our conversation on your worried about the twin deficits and the u. S. Deficit. It is called a rockefeller republican. Maybe you are and i are the only one who knows what the phrases, is President Trump a rockefeller republican speaking to great Middle America . Dr. Kaufman not really. Tom what is the difference . Dr. Kaufman President Trump is much more speaking to be disadvantaged. Power, look when in more at society as a whole, particularly the middle class. Rather than the downtrodden. Tom the things the president brings up constantly is your equity market boom. Can you describe our equity market boom to a given president . I do not think so. If you go back to the recession 200 this stakes back to that and the bounceback subsequent to8 the recession and this one started in 2009, and if you will describe it to individual president it is obama and donald trump has taken it on over the last year. Even if you look at the last two 20 a, we had a magnificent very strong16. A very strong 2016 tom michael, and jpmorgan has a u. S. Potential gdp well under 2 . Is that america sclerosis . Worrying about importing a eurosclerosis to the American Financial system . Dr. Kaufman i do not think so. I think we face bigger issues. The most important thing that has happened is, we would have 2009, and said by the current year, the Unemployment Rate will be down below 4. 5 . Now tell me what the inflation rate will be. We both would have said higher. Even today, the chairwoman at the Federal Reserve cannot explain why that is. Tom we will continue this. Here is a beautiful monograph of great importance, on the tectonic shifts. This is bloomberg. I am nejra cehic in london with tom keene in new york. Some news to bring to your attention, a spanish publication reporting that catalog elections may be held on december 20 and a separate report saying that the government asked the Supreme Court to suspend article 155. Government may call elections instead of secession. Tom thank you so much. Lots going on today, of course an ecb meeting and we will have a press conference across all of our bloomberg platforms. Here is in new york your first word news. Trump couldident officially declare the Opioid Epidemic of National Emergency in a speech today, paving the way for a stronger federal response. Tollndicates the death from opioid overdoses could be headed for another record year. Appointes not plan to gary cohn to head the Federal Reserve. According to people familiar with the matter, the president said that cohn has no chance. He has told advisers he is doing a great job and wants him to stay there through the battle over tax reform. Millions of americans living overseas may get a break in the tax bill provided by congress. Republicans may eliminate requirements for expatriates to pay taxes overseas and in the u. S. The house ways and Means Committee chairman says people may be taxed only on income earned in the u. S. Latenight drama in game two of the world series where a record eight home runs were hit. Shote springers two run was the deciding factor in houstons win over the l. A. Dodgers. The series is tied one game each. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. Tom not good. Our teleprompter this morning is run by a diehard dodgers fan and it began to shake as you showed the astros tearing the extra inning victory as well. Haley, calm down. Nejra just to bring you some more news from spain and catalonia, we are hearing that the catalonia leader is to make a statement at 1 30 p. M. I am guessing that is local time , so in just an hours time or so. The government may call elections instead of secession, and that is the latest. Government asking the Supreme Court to suspend article 155. ,ust in the past few minutes what we have heard from the e. U. Side is they welcomed the sec call for relief for u. S. Brokers. The us is about the research issue, the fact that the Mifid Research to be unbundled from other costs. In the u. S. Cannot charge for research separately unless they register as Investment Advisors and that brings more regulatory oversight. What the sec said is we will make it easier for you to comply with mifid ii. Henry kaufman, Gina Martin Adams are still with us. Dr. Kaufman, if i could come to you first. Mifid ii really shaking up the. Arket in europe everyone is anticipating this january 3 regulatory deadline and what it will mean for Investment Banks, but not just for the sell side but for the buy side as well. What does this mean in your world . Dr. Kaufman i really think independence of research is a very difficult situation to achieve. Experience my own dating back many years, those who are the head of research have to really work very hard. The people working under them right objectively without interference. Otherwise, if you do not protect the objective nest of research and it becomes known in the research. Sell side that is not a thing to do for any firm, but it has been done and it is done when it comes to underwriting securities, the ability to transmit them to investors, but if you want research to do a job for you, you must protect the objectivity. If you cannot protect the objectivity the value of research diminishes. Nejra part of the point of these roles is to have more transparency by unbundling those research costs. Do you think the quality of Research Overall is going to improve with this . Dr. Kaufman to the extent there is more unbundling, it should improve. At the same time, i think research in the Security Firms will diminish over time. We are already seeing many more transactions in the Security Firm stock market area that do not require research. A lot of automatic trading, the speed with which computers are used to facilitate values and someone, all of that i think on,nishes values and so all of that i think diminishes the research overtime. 27, coming up on october 1986 the october 27, world seismically changed for london. Frankly now people within Johns Hopkins one john lipskys wisdom and they are going to pay for it. That is unchanging, isnt it . Dr. Kaufman yes, but i think if you want to have objectivity in research, the individual who is in charge of research should be in the Senior Management of the ontitution, and sit there executive Committee Hearings of the top management. I had that opportunity tom will that change on the sell side and with Goldman Sachs and Lehman Brothers of years ago . Dr. Kaufman when i was at solomon i was in charge of research and i was one of six members of the executive committee. When issues came up that had to do with research, i was able to defend it. Tom we had a heated conversation on this yesterday as well. Are we having this discussion because we have not had a three to four standard deviation move where everyone picks up the phone and says get kaufman on the line . Discussionng a mifid because it has been dampened and bottled . Dr. Kaufman we have not had great volatility and the movement in price of securities. That diminishes the order, so to speak, to have correct and uptodate and objective research. I have gone through periods where there has been volatility and if you do not protect the objectivity of research, business is lost. Tom nejra, jump in. Gina, you live this at wells fargo. Nejra how this all translate ands translate into the trading debate, one of the discussions has been around small and midcap stocks, how coverage of those might be affected if Research Departments get cut back and therefore how liquidity on those small and midcap stocks is affected. Do you see anything like that translating to wall street . Gina there is a couple things to consider. We have not talked about the may fed mifid on the buy side which is under tremendous this transfer to passive investment and indexing away from active investing. They actively manage funds for those who pay for research and those active funds are under great pressure structurally. This ad a leg of pressure to that so yes, i think you will see a lot of distractions not only on the sell side and disruptions, not only on the sell side, but on the buy side. Trendition to the secular which is pressuring the shops, it is tremendous. Nejra Henry Kaufman of Henry Kaufman and company, Gina Martin Adams of Bloomberg Intelligence both stay with us. For a deeper look at what the mifid regulations mean for banking, i am so glad gina brought up the buy side because i talked about that at length on my show. Do try and catch it. A great discussion in this episode. This is bloomberg. Isra coming up shortly, it bloomberg daybreak americas. Great to see you. What have you got . Center isfront and the ecb decision, the Asset Purchase Program running at 60 billion euros a month. How long will they extend the program for . We will bring you the conference with president draghi later. Tom keene will continue to cover the fed rate. Gary cohn is out, yellen is terrific. Tom keene, i have not heard your name yet. Tom the only thing i am doing on washington is i am on the shortlist to have another two dogs at bens chili bowl. We have Henry Kaufman with us and Gina Martin Adams, and now joining us, we are thrilled to bring you one of the nations authorities on what they have. He is a geopolitical futures, his name is george friedman. When we were kids, we loved to look at james. Janes they had all the ships and the military and the aircraft. If we did that today, would you know the military of japan . George we do that today and it is now online. They still have some of the best. When you look at the japanese military, it is the kind of military you would expect from the thirdlargest economy in the world. It is substantial, capable, and effective. Feldmantalked to robert about the economics of all of this and what is so important is the link of the common dialogue in your expertise on military, of the and military purely of defense or Something Different . George i do not know what the difference, offense or defense. You use the weapons both ways. The japanese have a substantial military force. Its navy is probably the best in the east asian area, not only because of the platforms but because of the command structure. They have a tradition for naval warfare. Chinese do not. They know fleet operations. When you look at the japanese, you have a military that is really capable and it can rapidly expand because they have the technologies inhouse, they train with the americans. This is a worldclass naval power and also airpower. The choice of how big it becomes and how effective it becomes is theres. For the chinese, there are so many hurdles to get over, ji just admitted in that speech, in 50 years we are going to be a worldclass military power. This was a huge concession. He knows it, he admitted it. Tom lets bring in nejra cehic in london. Nejra george, you were talking about china. Great to have you on the program. I am just wondering how is japan , with itsuntering Foreign Policy as well, the growing military influence of china. George we always talk about the south china sea. In the east china sea, the chinese have become more assertive than aggressive and the Japanese Navy faced them down. I have not been too many occasions in which the chinese did not back off. The japanese do not want to get involved in becoming a military militarily active power. They are happy having the United States carry the water for them. Tom are we happy for that . George we are because we control the reach much better if the japanese are not a nuclear power. Look at the two accidents at sea of our navy, are we and exhausted military . Do you buy the idea that the sailors and officers on their ships were simply exhausted by the budget constraints, leading to a lack of sleep . Happen inthing will the u. S. Military that does not need more budget. I think it is a training problem. Think they relieved the commander because he was not paying attention to training. The people working 100 hours because they are expected to an nobody was thinking about what they are capable of, we have some operational problems in the navy as some corporations have, but that will be taking care of with madison as secretary of defense. Tom george friedman, thank you so much. We will do much more of this as a move into 2018. We will continue with george friedman. Gina martin adams, thank you for Equity Perspective on the debt cross or golden cross. Henry kaufman with us as well. Let me show you how we bring this up. Usually i have this set up, im going to bring it now. This is tv. You literally go tv , you get your briefing which Henry Kaufman does every morning, but far more importantly you can look back at the news flow including this important segment with dr. Kaufman on the twin deficits. Bonus round, you can steal Henry Kaufmans chart. It is a washington, d. C. Awaiting an announcement on a fed chairman. This isaylor bloomberg surveillance. Shares of nokia are plunging. The company predicted a prolonged slump. Phone carriers are mostly done with building their latest networks. Nokia predicts the market could shrink by as 5 next year. The parent of Dunkin Donuts posted thirdquarter earnings with less than expected. They also had a midpoint miss the average estimate. Carlyle groups billionaire founders are walking away and will stay involved as they hand their private equity firm to new leaders, according to David Rubenstein. He spoke to Erik Schatzker. David we will still involved in the firm. I will be with bill conway as coexecutive chair so we are not walking away. We do let the new people run the firm daytoday as of january 1. Taylor rubenstein is the host. The David Rubenstein show that is your Bloomberg Business flash. Tom bringing up an important chart for dr. Kaufman as we can. If i go over here to kaufmans book, let me tell you a little bit about this book. It is short and it is important. Tectonic shifts in Financial Markets and may be the rename would be tectonic shifts in our central bank as well. With us is george your treatment and Henry Kaufman. Were you called him mr. Trump . Are you considered on the fed . No. Tom what do you and mr. Voelker talk about on this . Give us some insight into where you stand. Know, paul as you volcker is about to write his memoirs, this Just Announced in the paper the other day. 1927. Ou guys are he is just getting around to it now . Dr. Kaufman i will encourage him to write it in a candid way because paul tends to be somewhat senegalese. He has a long history and many associations with many different people. It would be very nice to get the analytics of that. Tom single best chart, with a great honor to do this with dr. Kaufman. His philanthropy to manhattan and new york has been really profound. The volcker years back here, down we go, the great moderation. Here we are in Paul Krugmans zero bound. The money question now is, can chairman taylor of stanford be a dove and can he migrate to discretion from a rulesbased nirvana of the taylor rule . Dr. Kaufman i think that is very difficult to do because then you would many have lived in the environment for a long time of the taylor rule and espoused it and talked about it. And then to negate it, that requires an enormous change in an individuals psyche. I do think he would try to modify the taylor rule, but he will try to adhere it. It also depends very much on who the other people will be that will come onto the federal board. That will have to support that kind of position. Rule, from my perspective, is applicable to an older world. Applicable to the current world and the future world of finance. Tom we are going to come back, dr. Kaufman with us now. We need to go to london and spain. On taylor were fascinating but the 10 year treasury yield, spains down some six basis points. The catalano president catal president may call Regional Elections rather than declaring independence from spain. A rally in the ibex and the 10 year spanish yields falling six points. Charles panty joins us now penty joins us now. Charles it has been a dramatic morning in madrid, or barcelona i should say. The catalano president catalan will make a speech at 1 30 madrid time. He is considering calling elections. His is a big change. The mood music we had this morning was that he was hunkering down, preparing to , and now wedence have this new statement in which we are expecting shortly. Nejra thank you so much. George friedman, if i could come to you for a final comment, we have not really seen much concern in the markets around spain. Ice fixed in to you think it could boil over into something much bigger . Cataloniae idea that is considering leaving spain, i do not even know how to think about it. Scotland thought about leaving the u. K. How to loan me a spain, and iconic catalonia thinking about leaving spain. 2008 was to put social and political pressures particularly in southern europe, that you have the extraordinary thing of catalonia. Whether they leave or not, this scars not just pain spain but the European Union. Tom george friedman, thank you so much, and thank you to Henry Kaufman. The ecb meets in frankfurt. Our matt miller in frankfurt listening to mr. Draghi. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. Jonathan it is ecb decision time, Mario Draghis central bank is expected to unveil its stimulus plans for next year. The president says yellen is terrific but indicates he might want to make his own mark on the fed. Trading revenue plunges at Deutsche Bank and barclays. Pressure builds to deliver growth. From new york city, good morning. I am Jonathan Ferro alongside david westin. This is bloomberg daybreak. Lets begin by whipping through the market action. Eurodollar dead flat at 1. 18. Futures steady and stable after the biggest oneday drop on the s p 500 in just under a month. ,reasuries find a bit of a bid yields come in by a single basis point on the u. S. 10 year at 2. 42. It is a busy day in the United States so lets get things started. Warner thirdquarter