Transcripts For BLOOMBERG Bloomberg Surveillance 20180124

To the primespeak minister and we are joined by the Deputy Governor of swedens riksbank. We will also be speaking to the Prime Minister of italy. Ceo. He saudi aramco there are plenty of good interviews coming up. Trumps new trade barriers are putting more pressure on the nafta talks when they resume later this week. Ont is as important taxes washing machines and solar affect canada and mexico. We are working very hard to make sure our neighbors to the south recognize how important nafta is and that it benefits not just our economy, but his economy, and the World Economy. Very much open to re trade deals involving more people. Has withdrawner the offer he made last week to give donald trump more than the initial 1. 6 billion he requested for the u. S. Mexico border wall. Republicans called the move a step back in the continuing debate for immigration. Donald trump tweeted, crying Chuck Schumer understands that if there is no wall, there is no daca. The u. S. Federal reserve governor Jerome Powell has been confirmed to take the helm of the bank. Lawmakers voted 8413 in favor of the private equity executive. Trump take himd in november to replace janet yellen, the first woman to lead the fed. Her term ends on february 1. The acting head of the u. S. Financial could protection a posture pledged that has been decried by many of the customers overseas. Said he would continue to make sure the bureau enforces Consumer Protection laws, but added they will not assume the bad guys are the Financial Services firm they supervise. He attributed that to the democrats. Are spreadingins in the shadow banking industry. Investors pull back from the savings products that help drive leverage to dangerous levels. Trillioncted are 3. 8 of trust products. At least two of the products were forced to delay payments to the market, making it harder to refinance maturing issues with new ones. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Missed wanted to investor demands for higher returns this week, responding to the first buybacks. The bank plans to purchase 2 billion francs of stock. Earlier we spoke to the ubs chairman and i started by asking him what worried him most. Marketsi look at the and the economy, i focused on the outlook and then the risk. The outlook is one where we have never seen such a big disconnect between the hard data and the soft data. Thehe developed countries, hard data and soft data are pretty much aligned. In the u. S. , for example, our expectation is, you see when hundred 50 basis points more growth been pressed into these expectations than the hard data. In europe, it is 190 basis points to will the hard data actually determine what happens . Is there a better correlation . Or is there a or is it the soft data. The new fiscal policy regime and wen by january 1 of al have new discussions in canada and the u. S. Regarding infrastructure investment. Think there will be a shortlived this year and next year boost for the economy, and then we will see a growth that is unprecedented. Francine what does that mean . Escaping stagnation . We are frontloading future developments into this year. You can see the u. S. Tax reform forces you to frontload your investments. We see strong numbers. And people will take that as, we are out of the woods. But we are not. It is shortterm stimulus, but it needs to be followed by longterm development. The focus should shift from the , andary policy focusing on physical and doing something about longterm investments. Longterm investment into our economies will be the key driver of future sustained growth. Everything that helps us short lived is not that good. Risks i see, geopolitics you mentioned it. It is a big risk. I dont think the risks this year will come from markets. They are more likely to come from the political sphere. ContinueCentral Banks their current muted path for Interest Rate hikes, or will they fall behind . Francine how would you position yourself on the markets to issue political turbulence . We expected recovery to continue and it could actually strengthen over the next couple years. General consensus that is the case. I am concerned in the markets is volatility is still at an alltime low. There is a lot of complacency out there. If you look at Something Like this point, you could see there are pockets in the market with speculation. The impact of this current Monetary Policy on markets and on inflation is something Central Banks need to focus more on. Francine that was axel weber talking to me this morning. , defining draghi. Next, defining draghi. We speak with the riksbank Deputy Governor. Shes coming up next and this is bloomberg. Francine economics, finance and politics. This is bloomberg surveillance , and im Francine Lacqua in davosl. Monetary easing, is it the end of stagnation . Lets get to the Bloomberg Business flash. Nejra novartis have said drugs for cancer, Heart Disease and other illnesses will drive a return to growth this year. Earnings, excluding some expenses will probably rise to mid to high Single Digits. Price pressure on generics s. Oded sale blackrock boosted annual employee bonuses last year after a stinging 2016 when incentive payments were cut. Overall, the firms bonus increase was in the high Single Digits in the range of 8 to 9 . Bonuses jump to the 20 range, while others who did not do well saw them cut. The ceo of doha bank told bloomberg that the company can still grow. That came as they announced earnings in line with estimates. The dividends might come under pressure. Think it is better to because she is in the coming days because the banking model is getting changed. Payout the dividend matters to the world. The gulf states are very generous. We have to be measured and manage the oil through the risk profile. The dividend is likely to go through a bit of a downward trend. The business will be changing more. Ejra twitter russ is planning to close toys r us is planning to close 180 of its stores in america. The toy chain filed for protection from the creditors. The closures will begin next usth with babies r locations accounting for at least half. Francine last month the riksbank decided to end the qe program. Signaled that rate hikes and an exit from bond purchases will come sooner than the ecbs. Could history prove a cautionary tale . The riksbank has raised Interest Rates faster than the counterparts in frankfurt and washington twice. Both times it admitted a retreat after the krona rally. Joining us now is the Deputy Governor, cecilia skingsley. Thank you for joining us. When you look at the central 12k over the next six to months, it is almost widely accepted that we are in a tightening phase. What does that mean for your central bank . I am not sure we can order tightening yet, but it is less of an easing policy, and that makes sense, given that we are looking at a broad and strong recovery in greater parts of the world. Finally, many would say. ,here is a lot to think about how to change the policy around. And we have achieved what we set out to do, which was to bring back inflation close to targets. And we have a Strong Economy. We had the recession back during the euro crisis. It makes sense that we could start a bit earlier when the normalization would occur. Francine you have penciled in rate hikes for the second half of this year . We have a forecast that we will begin a gradual hike. We are not moving quickly here, given that we have a difficult history. That is our forecast. You know, stuff happens in the economy. We have to make assessments as we move along. The inflation, the drivers of inflation have changed a bit. Growththat the wage c is still on the low side, which is surprising, considering the market is moving very well in sweden and maturing well in other economies. A route now for normalization. Francine given what you just said now on inflation, is it your sense that the rate hike would have to be delayed . Know, this is the best forecast we do, given that we are going by 2 to 3 each year. And we have the support now from Global Growth. This is the best forecast we do. As i said, things happen and we have to be independent and mindful. That can work in both ways. Risks are veryhe balanced. Francine some of your colleagues are proponents were tightening a little bit sooner than expected. What would need to happen to put you inside that camp . That is an excellent question. I would have to say the cyclical outlook would increase further, that we have a surprising strong wage increase. Seen,aid, we have although the cyclical outlook looks better now, both internationally and very good in sweden, i think structurally in the world, we see the different correlation between unemploymentt gaps and wages. We see strong technological changes and different kinds of behaviors from wages centers. So, longterm, we will have to pressuree the low moves going forward. Francine talk to me about the motivation for the ecb. Your rates move ahead of the ecb with tightening. What has changed in your economy and the european economy that has given you more leeway. First of all, sweden has a small economy and 50 of it goes to the eurozone. We dont have much independence in the first place. We have got to be honest about that. But we do have independence. And now when we are having inflation back on target we did not have that for three or four years back but now that we have inflation back on target, we have a healthy, booming economy and we have reanchored our inflation expectations. There is now again room to use that sort of independence. It is not big, because we are living the next to a very big neighbor. But it is there. Francine what do you worry about with this very big neighbor . Is it your strength or the repricing from german bunds that could hurt what the ecb is going to do . I will not make comments about the Exchange Rate or the pricing in current markets, but the macro risks are there. The recovery in the u. S. Is not as strong as we expected, but there seems to be momentum, finally, after many years of struggle. Francine what points to concerns in the european economy is the lack of inflation, because it is still below expectations . Yes, globally we talked about normalization and rate hikes as early as 2010. That was eight years ago and constantly Central Banks have been surprised. Definitely on the same wavelength. They will probably have to be cautious. That is how they communicate. And we are having to be cautious. And we room is there will walk along this path. Francine how much do you worry about the next financial crisis . And how much do worry about your central bank and the ecb having enough tools to deal with the next financial crisis . It is important to remember that it is all of the economic policymaking Monetary Policy is not the only game in town. And the way we have distributed the different responsibilities for different policy areas. Fiscal policy is handling everything around public sustainability. We have tools that are in the swedish case, supervised by the supervisors. In a country moves by having stable price development. In a very uncertain world, it is good when Economic Agents can at least rely that overtime inflation will be between 1 and 3 . They are all academic questions that academics are delving into. Whatu had a magic wand, would it be . Would it be the productivity puzzles, or the phillips curve . Is there something in your studies of the economies, where you cannot quite figure it out . There is a long list, of course. I would probably like i would differently like to learn more the how the labor market manages the transitions when it comes to new technologies and globalization and the trade patterns we have seen. There is a bit of an enigma here. We learned in the books that more technology, more specialization coming from trade should actually improve productivity. E do not actually see that there is something here we need to understand more. Francine talk to me about the swedish housing market. It has attracted a lot of attention. The riksbank has been looking at it, but you have remained pretty calm with the price decline. At what point does it become a worry . Itit becomes a worry if becomes a problem for the inflation outlook. We are stabilizing prices in the general economy. We have been not concerned about the housing situation, the price. It has slow down because we have been sitting and looking at 15 in the urban areas for a number of years. We dont consider that to be sustainable. Finally, given that the building industry has given out a lot of new supply we see a slower development. There was always a little bit of worry that this could not turnaround. But we think that is natural behavior. Francine thank you so much. She is cecilia skingsley. We will be on a panel together, which i will be moderating, on friday. Lets get straight to the bloomberg first word news. Jra Donald Trumps new trade barriers are putting more pressure on the nafta talks. That is as important taxes on solar panels will import canada and mexico. Trump has repeatedly threatened to dump nafta. He could have more to say when he goes to davos. We are working very hard to make sure our neighbor to the south recognizes how good nafta is and that it has benefited not just our economy, but his economy and the World Economy. But we are also very much open to more trade deals involving more people, as long as it is in the best benefit of all of our citizens. Ejra Chuck Schumer has withdrawn the offer he made last week to give donald trump more than the one point 6 billion he initially requested. Republicans called the move a step backwards in the move to take over immigration, while trump tweeted, crying truck schumer fully understands, especially after his humiliating defeat, that if there is no wall , there is no daca. We must have safety and security. Has been confirmed to take the home of the u. S. Central bank. 8413 in favor of the private equity executive. Pickednt donald trump him in november to replace janet yellen, the first woman to lead the fed. Her term ends on february 3. The acting head of the u. S. Consumer Financial Bureau has pledged to town down the agencys progress meant regulatory stance. In the wall street journal had Mick Mulvaney stating that he would make sure the open forces Consumer Protection laws, but he will not assume the bad guys are the supervisors. He attributed this to the democrats. Spreadingstrains are in the 15 trillion shadow dow banking industry. O ofecent weeks, at least tw the products have been forced to make payments. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Thank you. December the European Union recommended the first ever triggering of article seven, which with the the states stripped of its Voting Rights in brussels. That is after the polish by minister refused to budge on a set of reforms, which the eu said threatened the judiciary. Support for the law and Justice Party has risen to 42 of 2 from a month ago. We are very pleased to welcome the polish Prime Minister. Thank you so very much Prime Minister, for joining us. Business mainly here . You have just met with the Energy Secretary of the u. S. Lets talk about the real diversification of gas supplies to europe. Because two different ways of supplying gas to europe is not a diversification. We want real diversification. We like competition. And this is what we spoke about. Francine will you get a versification . We would like to have diversification. Guest from norway. We worked on this together with the danes and with the norwegian government. But also, we built l g demonopolize thes to situation of gas in europe. Francine if you had three opportunities to do business in davos, i dont know who you are meeting with, but what with those three priorities be . The First Priority is really to be on the same pension of reforming europe. Words of todays davos. Fragmentation and putting the puzzle together. Because i believe we have so much and, in terms of interest, in terms of priorities and strategies. This model of the eu, the unity and diversity could be brought about and this is how to find a common denominator, including energy, it is one of my key priorities. Francine how can you find a, denominator . It is not as bad. Happens as a misunderstanding and a lack of dialogue. Two monologues are not the same as one good dialogue. In this dialogue, we explained wider European Partners is going to have reforms in europe. Thisll be different from western europe we were a big name beyond the iron curtain. Weve got to change our system and change our judicial system much more deeply. Will it change it to the point where it will be incompatible with western europe . No, not at all. We are making much more compatibility. I gave you one example. For example, random allocation of cases. This is something we have introduced as the beginning of this year. Where before, it was just mental on the decision of the court manager. Francine Prime Minister, talk to me about what would change her mind about the hero membership. You are either part of the solution or part of the problem this is a question i need to get answered because i am not so sure the europe is over with with the issues. Expert ingo, i was an the optimum currency areas. Francine i remember inflation point. I interviewed you a really . The ultimate currency area between geography is actually extremely important to get together in the form of one currency. And we are not here in terms of convergence. Fair. Ch is what would need to happen for there to be convergence and therefore, for you backing your father adopting the daughter . Many more years of Strong Economy growth. We need a disposable income around 80 to 90 of the richest nations like the dutch and german and so on. Convergence witheren the structures of the economy, like in different sectors. On one, this is actually pushing towards more unity. Freedom to provide services. This is one of the soul yet there inch not the European Union. The 20 green conversions. Minister, one of the things we hear also, often from the leaders is the rule of law, the triggering of i think the conflict will be resolved through explaining and dialogue. To brusselsll get with our message. Our reforms, our system is going to be more independent in the judiciary, more objective, more efficient. Francine do you rule out a reversal . So you wont go back on what youve done so far . Back, or if we decided to go back, our system would be much more different than the western european standard. We are going towards western european standards with our reforms. Francine but this is not what the e. U. Believes. Because of lots of smoke and mirrors, lots of misunderstandings, and i think we will get with our message to our friends in brussels. Francine when do you think you will have the e. U. On board . That would be a question more to the e. U. Than to us. Francine when i speak to you next year in davos, do you think that conflict will be resolved . Much closer. Francine what are you expecting from donald and what are you hoping to hear from donald trump on friday . Donald trump is saying free and fair trade. Like with china for instance, we have huge imbalance in trade. We export to china for goods and services for 2 billion, and we import for 24 billion. I fully subscribed to Donald Trumps free and fair trade. This is one thing. Francine but this is not protectionism. Some people think it is protectionism. In china, they are protecting their market in such a smart way, so to say, that many countries find it undoable to actually get there with goods and services to china. Open formpletely chinese goods and services. We have to change this. Another one is Energy Security and competition in the energy market. This is where i suppose President Trump will be also excellent extremely vocal. Francine will you meet with the president while hes here . No. I will be in budapest on friday. Francine that would be very difficult. I know you are a numbers man. Talk to me about, when you look at the outlook for public debt and the budget shortfall, what would that look like for poland . The situation here is extremely positive. Just 12 months ago, there were many houses and financial 2 ofutions forecasting gdp growth. 5 of gdpknow we have growth. For this year, we have planned 3. 8 . Public debt is falling. Budget deficit, which was planned to be on the level of 3 2017 withbably close 2 or below. E have reduced our imbalances our Economic Situation is much more balanced. We spend more on innovative investment. We spend more on infrastructure. Growth,last engine of private investment, is kicking in. Francine i guess the only concern would be the secondbest performing a emerging market currency. Thank you for mentioning this. Francine at what point does it hurt . Like the same time, i supply side of the Balance Sheet , supply side of the economy, to be very strong. We areing our reducing our risk for the business, and at the same time, it will help our exporters to be even more competitive. Too strong is not good. Steady, slowly strengthening is not bad. Francine are you worried that it will accelerate much more . If this goes to quickly, too strong, i will be slightly concerned. Francine final question on bitcoin, cryptocurrencies, do you look at them . We look at them. We warn the public. Francine will you regulate them . We are going to regulate them more. And shadow banking, weve experienced some very big shadow banking scandals a couple of years ago, and we dont want another one. Francine how would you regulate them . Would you ban them . Ban or introduce some special provisions, special regulations, so we are sure not to many unaware people are involved, so this is not another ponzi scheme. Francine great pleasure to host you here in our davos bloombergtv studios. That was the polish Prime Minister joining us for this exclusive interview. Lets get straight to the Bloomberg Business flash. Nejra novartis has said drugs for cancer, Heart Disease, and other illnesses will drive a return to growth. The company said earnings will probably rise by midto high Single Digits after showing no change last year. Price pressure on generics eroded sales at the end of 2017. Blackrock boosted annual employee bonuses last year after a stinging 2016. According to people familiar with the matter, the firms bonus bull increase was in the high Single Digits. They also said some star employees saw bonuses jump substantially in the 20 range, while others got cut. A black rock spokesman declined to comment. The ceo of doha bank has told bloomberg the company stand can still grow. That came as it announced earnings in line with estimates. Raghavan seetharaman said dividends will come under pressure. I think it is better to be cautious in the coming days. The banking Business Model is getting changed. Compared to the rest of the world, qatar and the gulf states, are very generous. We have to manage the expected credit. The dividend is likely to go through a bit of a downward trend. That is the momentum i see. Nejra toys r us is planning to close stores as part of a plan to emerge from bankruptcy. The move to shutter about 20 of its store base in america comes four months after the toy chain filed for protection from creditors. The closures will begin next month with babies r us locations accounting for at least half. Lets get back to francine in davos. Francine thank you so much. The french president offered britain the possibility of a brexit deal that covers Financial Services, but not without theresa may giving ground. We spoke to the former u. K. Prime minister and antibrexit campaigner, tony blair. He talked about the chances of a second referendum. You only get to a second referendum if it is clear Public Opinion is shifting. If Public Opinion stays in the place it was, the issue will be over. 2016 weback in june obviously voted to leave the European Union, but at that time, we couldnt know the alternative proposition. Francine what do you think british citizens actually look at to see whether brexit is a success or not . Is it access to the Single Market or level of the pound . Some people will say they want a brexit that keeps us in the Single Market. Other people will say we want a brexit that maximizes our freedoms and we should go for a more canada style free trade agreement. The consequences of that are large. When youve got many different outcomes, theres not one outcome of brexit, then it is sensible to take your final decision once you see video youve been offered. Francine which is what parliament will do. Parliament will have a say on that. The question is, will parliament be able to agree with the proposition the government brings forward . Brexit is a problem for europe. Europe will be diminished. It will be without the strength of the british economy. It will be politically weaker. Francine which is what the people voted for. And the question is, will they hold to that position one they see what the alternative is . Francine that was former u. K. Prime minister tony blair. Now onto the Banking Sector. India has set its sights on becoming a 25 trillion economy by 2025. That is according to narendra modi, speaking here in davos. That was yesterday. Mr. Modi saying india is removing the red tape and laying out the red carpet in an attempt to kickstart growth in an economy which is forecast to expand at a threeyear low. Lets speak to one of indias biggest banks. Joining us is the cio. Also with me, haslinda amin. I think it is your first davos . Haslinda it is. It is very cold. Francine thank you so much for joining us. The indian Banking Sector has a lot of things to scream about in a good way, but also huge issues. What is your main priority and your biggest concern . A lot of excitement in the indian Banking Sector. The entire Retail Consumer side is growing very well. Technology is making so many innovations. The indian Banking Sector is setting best practices as far as technology is concerned. Ityou spoke about, what is that we focus on . I think the corporate debt of the large corporates, i think that needs to get worked out. That is the other thing the banks focus on. Overall, a lot of excitement, good growth in credit, and huge technological innovation. Francine do you worry about Capital Buffers . Theres still a lot of bad loans and things the Indian Government hasnt been able to keep a handle on. I think we have to keep in mind the perspective about why some of the bad loans arose. These were projects that were being built when the economy was growing at 10 and was expected to grow at 12 , and then came the slowdown, the fall in commodity prices, delays in project implementation. Goes through some period of this kind. What is important is not to just focus about recognition of bad loans. What is important is to focus on recognition and recovery. That is what the Banking System is focusing on. Theres a huge amount of ecosystem to make that happen. Haslinda cleanup is happening. We are talking about 210 billion of bad debt. Have you been happy with the progress so far . On the go system a lot of progress has been made. Wh regulatory guidelines ich layout how the recovery can be done, but the most important thing is the bankruptcy court, which allows you to take companies to the National Tribunal and do a recovery and resolution process under the judicial umbrella. I think this year is going to be a watershed year in terms of cases getting resolved. The positive is that it is a time bound decision that ought to come. It gives a judicial cover, so the banks feel more confident. We havent really gone the full round for any case to complete the recovery, but we will watch that space. Im very optimistic. Haslinda optimistic, watershed year, and moodys said a peak of bad debt this year. Are you as upbeat as movies . That seems pretty optimistic. I would put it like this. In terms of recognition, i think pretty much that people know what the size is. Therefore, what is going to be the success is how fast we achieve the resolution and recovery, and what are the actual underlying values we get as we do the resolution and recovery . We havent really yet completed the cycle for any large case, but given the momentum, i feel optimistic. Francine how much is it in bearing the ability to land . If you look at the Banking Sector, it continues to lend. The consumer side of the business is growing between 15 and 18 . For banks like us, more than 20 . A lot of banks have the capital adequacy. Pinch. Nks would feel the but i think overall, the Banking System is growing at 15 to 18 . Francine youve explained it and gone through the concerns that investors have on the indian Banking Sector. If theres one thing you could fix in the next six months that would make your life easier, what would it be . The one thing i would focus on is the resolutions. Admit, or i must add, it does not mean that should w eigh the Banking Sector down. On the other hand is the entire growth, consumer, technology side, which is creating the growth, excitement, and so on. Haslinda Prime Minister modi talked about building india into a 5 trillion economy. That means 10 growth until then. Is that too optimistic . What will it take, given that hes not even creating enough jobs at this point in time . Economy, look at the we are already seeing the economy moving up. Even the second half of this financial year, we expect the growth rate to be 7 or so. What is doing well . If you look at the highfrequency indicators on the ground, on the consumption side, the consumption of nondurables, the car sales, they are all continuing to grow. Well, industrial side as the Capacity Utilization of sectors like steel, cement, inched up quite a bit. The credit to industry has now turned positive. The pmi index has gone up. On both sides, there is indications of growth already taking place. Haslinda what is not going well is inflation, still far from the target. Where do you see rates headed . I think inflation, while it is going up, i think it will still remain within the r. B. I. Acceptable levels of plus 2 or 2 . I think it will remain in that range. Therefore, the reduction in Interest Rate cycle i think has stopped now. Haslinda do you see an increase anytime soon . Not soon. I dont expect it to happen as we speak or very soon. Preparede would get for an increase. Francine would that cycle have happened by that time we speak to you next year in davos . [laughter] 12 months in this age is a very long time. Francine very diplomatic answer. What are you hoping to hear from President Trump . Before that, since you spoke about the financial sector, one thing we are all forgetting is that the structural changes that are taking place in the Indian Economy are driving financialization of savings and formalization of the entire economy. What that has done is probably in savings. If we look at the last 18 months, india has added 400 billion to financial savings. Of someual to the gdp of the countries. That is the kind of momentum we are seeing. Francine does that mean that a lot more money is to be invested, or does that structurally change the composition of the economy . There is a lot more money that can be invested. That is why you are seeing the ipos, the primary issuances, are actually growing. Weve done much more than weve done in the past. Moneyo means that, as the which was earlier not part of the formal economy, because of small and burn hours paying small entrepreneurs paying taxes, many entities, many parts of the economy that were not bankable become bankable. That creates a multiplier on its own. Haslinda what is the biggest risk to the Indian Economy . Were seeing Central Banks moving at the same time. Can an economy like india withstand such a move . I think the fact that, globally, Interest Rates would go up one cannot say that any economy will remain totally insulated, but having said that, i think what is important is that india has certain inherent strengths which given the resilience to cope much better. The strengths are the better than strong underlying demand. The strong underlying demand would lead to Capacity Utilization. Driver thats that would give the resilience. Francine what do you make of bitcoin . Do you look at bitcoin . Is there demand . Is your bank looking at it . Since it is not regulated, the banks do not operate on it at all. What we look at is the underlying blockchain technology. Blockchain technology is something that we believe is a very Strong Technology for our global trade transactions. We are setting some practice is to use blockchain for those trade transactions. Francine thank you for joining us. The sun is coming out. Lovely day in davos. Lets get straight to mark barton in london. Mark lets check on our gmm function. Cast our eyes at what is happening to markets. Stocks and bonds are down. Gold is higher. Look at the lefthand column. The ftse, iceland, finland, netherlands, lower today. Interesting is the second column. The dollar falling today. Big event in davos was a speech by treasury secretary Steve Mnuchin. Declinesed the dollars as a benefit to the u. S. Economy. Dollar weaker is good for us. The strength of the dollar is a reflection of the strength of the economy. It will continue to be the primary currency. What weve got today is the dollar falling to a threeyear low against a host of currencies , particularly the euro. Weve had some data today. Renaissance continues after some strong employment data. The labor market displaying unexpected resilience. Employment rising. Wage growth kicking higher. Bond yields are rising as well. With suez. O finish it is the big mover in european equities. Renaissance continues after some strong employment data. Shares down by 16 . That is after releasing preliminary results from last year that missed analyst estimates. Since it biggest slump started training in 2008. The company blaming the poor results on turmoil in catalonia and operational difficulties in morocco and india. Biggest decline are in europe today. Heres nejra cehic. Nejra suez has released preliminary revenue and profit estimates that missed analyst forecasts. The company said earnings before interest and taxes probably fell by 2 on a socalled organic basis from a year earlier. That is as political turmoil in catalonia and operational difficulties that led it to end services in morocco and india lead to 45 Million Euros of expenses. Novartis has said drugs for cancer and other illnesses will drive a return to growth. The company said earnings excluding some expenses will rise by mid to high Single Digits after showing no change last year. Price pressure on generics eroded sales in 2017. Ckrock boosted at all annual employee bonuses after a stinging 2016. According to people familiar with the matter, the bonus pool increased in the high Single Digits, about 8 to 9 . They said some employees saw bonuses jump substantially, while others who didnt deliver that cut. A spokesman declined to comment. The ceo of doha bank has told bloomberg the company can still grow despite the standoff with the coalition of arab nations. It announced earnings in line with estimates. Theavan seetharaman says dividend may come under pressure. It is better to be cautious. The Business Model is getting changed. Compared to the rest of the world, qatar and the gulf states are very generous. We have to measure and manage the expected credit through the risk profile. The dividend is likely to go through a bit of a downward trend. That is the momentum i say. Toys r us is planning to close about 180 u. S. Stores as part of a reorganization plan to emerge from bankruptcy. The move to shutter about 20 of its store base in america comes four months after the toy chain filed for protection from creditors. The closures will be in next month with babies r us locations accounting for at least half. Lets head back to francine in davos. Francine thank you so much. We got tom keene out of bed earlier. He likes to hit the piano bar in the evening. Hes demanded to be in with robert smith, vista equity partners. Tom good morning, francine. Youd think we would talk to each other for hours all day. We dont. You had your aramco panel yesterday. Francine so we are speaking to the ceo surely. Im excited to get some news out of him on the ipo. Tom is donald trump on your panel in two days . Francine maybe. I could tell you, but we wouldnt be speaking on terms anymore. Tom if you grow up with education, you win. Robert smith came out of denver with parents that screamed shut up and study. He went on to Great Success in business. His acuity is seen every day at vista equity partners, where he has a number of tasks, and including driving the discussion. Wonderful to have you. Why are you so shy with the media . Everyone says youve got to be visible. You come here with an entourage like mnuchin. Why are you so tentative . It is important that we do the good work. I have the Great Fortune of leading a fine organization. We are the fourthlargest Enterprise Software company in the world. We are focused on america and the world. Tom i want to do a business question. Francine has a number of important themes. Davos needsr me is scale. Everybody needs scale. How does robert smith define scale . The way we think about it is leverage of all scale. We are responsible for 50 portfolio companies. Our customers are demanding the highest quality solutions, intelligence, machine learning. We can only do that if we act in scale. Collectively, we have the ability to share information and deliver that across our portfolio. That is how we define it. Im looking at the largest i. T. Executives now thinking about scale and jobs retraining in the workforce. The Skills Initiative is being led by some of the largest tech company in the world. Letting enough people know about it. That is one of the narratives we want to make sure gets out. These leaders are fantastic leaders. Driving the scale of efficiency across every industry on the planet, that is the industrial revolution. Francine you believe in the digitization of everything. How do you capitalize on it . The future is the digitization of the workflow, the way we think about it, every company has to think about how to derive additional productivity and help customers become part of the new ecosystems. This year and the next few years, the rise of the incumbent. How do they deliver solutions to their customers . Francine what are you buying . Focus on a lot of companies in Enterprise Software. Those are the most productive tools that have been in our economy. We want to think about the chief marketing officers, the chief technology officers. Tom mr. Smiths parents arent buying this at all. Digitization. You have five children you admit to . Yes. Tom heres the raging debate, should they learn cursive . In america, this is a raging debate. It is important, because they need to understand the artistic nature of life. Tom thank you. Francine i do this every day. Tom in america, this is a raging debate. I think we should learn calligraphy as well. Verytheres a lot of constructive discussion about womens rights. What are you doing about women in engineering . Is there a special program . Woment we do to ensure have the opportunities to be successful at our companies, the average firm is about 18 women. We are 43 . Two of my five funds are run by women. This is all about brainpower. The competition is for brainpower. You cannot ignore half the population. We need the smartest people working in our companies. We need to make sure they have equal opportunity in the engagement of deals. Ive got eight ceos of Software Companies are women in our firms. We lead by example. We have meritocratic systems. Francine how much capital have you put to work . Billion. 7. 2 last 24, close to 15 billion. Francine how big is your fund . 32 billion assets under management. Tom is there too much money . In certain industries, there may be. In our industry, the amount of capital under management is actually smaller. We need to grow faster. Tom what is your strategy to go around these high valuations . What can we bring to those businesses . To be more productive and generate the product to relevant lifecycles . Part of that is bringing Artificial Intelligence into the Development Cycle with actual practicality of the Development Cycles. We have cracked the rubix cube. Tom one final question. Loves a weak dollar and trade. Come on, that is too easy. What do you want to hear from the president as he comes here to actually speak to america . What i would love for him to talk about is how we actualize all americans as part of the actual the economy. There are too Many Americans on the sidelines. We are trying to build all the economy. They are too many people embargoed. I would love to see him take leadership and make sure all americans have the opportunity to participate in this economy. Francine robert smith, thank you, vista equity partners. Lessons. Et free heres the bloomberg first word news. Taylor asking President Trump to payraise the gap tax for infrastructure. The chamber of commerce proposed increase. They say that would undermine the recent tax cut. Jerome powell will succeed janet yellen as chair of the Federal Reserve month. His nomination was overwhelmingly approved. He is a former private equity executive who is currently a fed governor. Republicans call it a step back in negotiations on immigration. Senate democratic leader Chuck Schumer has withdrawn the offer he made last week to give President Trump money to build a wall on the mexican border. Withresident says there no wall, they will be no deal on protecting undocumented immigrants from deportation. Open to area economy 2018 with the best growth and almost 12 years. That is according to syntax. The gauge is at a level that suggests Quarterly Economic growth of close to 1 . Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im taylor riggs. This is bloomberg. Back to davos. Francine thank you so much. Financial regulation, donald trump, so much to talk about. Tom that was wonderful to speak to dr. Frankel. The first person who was called on in the audience had to be the former governor of the bank of israel. Of course, he holds court with mr. Dimon and jpmorgan. He joins us today. You stopped my panel yesterday. It was a great panel. You brought out the calendar. You said, we are here today, but we cannot forget as juses said, we cannot forget about 1996. Why are you looking into the past to look into the future . The recent irregularities from the previous crisis. I would not call it celebrating, but we are commemorating the 10th anniversary of the current crisis, which we are about to exit from. 1997 we hadlier in the asian crisis, followed by the russian default. About a decade earlier we had the latin american debt crisis. What is common to all of those . That debt was an important issue. It was risking the economy, which was not properly priced. People were celebrating growth to the sky. This means to me we are now in a fascinating point in our cycle. Vos issm in da completely unprecedented. Ceos are all celebrating. Tom what is the buck for you, when you speak to mr. Dimon and you say, it is not a boom, but it is good. What is the but . One of the reasons the u. S. Etter and the optimism is there, people recognize that the deregulation taking place is helping the economy, that the environment is much more business friendly than what it has been, that the tax reform is for real and therefore, corporations will invest more and households will have more income to spend. This is the positive element. The but is, lets make sure we are not building skyscrapers on debtsoft ground and is soft ground. We should never have again so much leverage in the economy as we have had before. Francine the skeptic in me says davos is so optimistic about the future always watch out. Absolutely. Francine fundamentally, are we at he end of a cycle . At the end of a cycle usually comes a bust. Are we ready for that . If there is a next cycle, the next but will come after the relative expansion. Thats the key, really. Are we ready for it . And i think the kind of situation today is the ds ofition in the han policymakers is somewhat depleted. Monetary policy has brought Interest Rates to be so low that in the next crisis there will be no way to low Interest Rates. That is why it is so important that normalization proceeds. Policy has been Extension Area in efforts to deal with the previous crisis. Its important that as we look into the future, the ammunition is being restored. Which, wed yesterday, n a tovelop plan deal with the next crisis. Francine do you have any doubt in your mind that the next 12 months will not bring monetary tightening . That this is not the end of secular stagnation . I dont think we had secular stagnation. I think we had a significant slowdown. I believe we will see Interest Rates, including in the United States, going up by about four steps or six steps during the next two years, 25 basis points. To thew we turn professor from the university of chicago with your daily surveillance academic lesson. Secretary mnuchin said a weak dollar is good for america and american trade. But there are Second Quarter events to the servitude that a weak dollar is good for american trade. You could start with a 1. 23 eur o, a 1. 09 yen. How should mr. Macron and chancellor merkel and others responded to the servitude from the white house that a weak dollar is good for davos. Lets recall the previous secretary of treasury thats local about how a strong dollar previous secretary of the treasury that spoke about how a strong dollar was good for america. The exchangeve rate, one way or another, generates Sustainable Growth. What generates Sustainable Growth is productivity, innovation. Real Exchange Rates, not the nominal Exchange Rate. We should focus on the underlying issues that create available Economic Growth and innovation. Francine but is there danger that we start a currency war . Tom this is a very important question. I think we should present it at all costs. The currency war in the monetary mirror image of protectionism. Ore, we should have a mindset of openness in all dimensions, financial, monetary and trade. Tom the statement of the secretary of the treasury towards a weak dollar, not that we will see applies here or there. Freancancines important question, did we begin a new currency war in davos . I hope not. I did not hear the secretary, but i am sure there is a different context in which this statement is being made. War would be devastating for the World Economy. Protectionism would be devastating for the World Economy. We should call for openness. Tom i never wanted to get you in trouble with mr. Dimon. You terribly advised him on bitcoin, by the way, but dr. Frenkel, as a look at where the euro ought to be, does he have in his head, the appropriate valuation from mr. Draghi . Lets do it within his own context of his bitcoin issue. Mr. It comes to draghi, draghi is doing a very, very very seriousr circumstances. Europe is recovering. I think this puts too much attention on the ecb, the European Central bank. But the fact that we put the light over it means that government is still lagging behind. Francine if the ecb is lagging ahead, if they tighten, there is a huge repricing of German Government bunds. That could actually freak the markets out. Nobody could lay the European Central bank on being aggressive with tightening. The European Central bank is holding a very loose Monetary Policy and it continues with it. It reduces the degree of quantitative expansion. They are not talking yet about raising Interest Rates. Lets not create panic where there is no room for it. Francine thank you, jacob frenkel. Up next, we speak to the ceo of credit su itisse. First, lets get straight to nejra cehic. Nejra we saw a mixed picture when it came to equities in asia. In europe, the stocks of hundred snapped four e snapped, the stoxx 600 four day sos of gains. The u. S. Futures are pointing up with little bit. We are back above 11,000 with bitcoin. Lets switch of the board and it is a week dollars story, different from when i was sitting here 24 hours ago. The bloomberg dollar index, near that three year low. Steve mnuchin saying a weak dollar is good for u. S. Trade. 14087, the highest since brexit. The dollaryen, weaker by 0. 6 , despite what governor kuroda said yesterday. The end bear the brunt of the dollar weakness. The euro, at a three year high. Will draghi say anything about that this week . Ma money moving out of equities and bonds. Those yields are moving higher. The 10 year yield is at 2. 63 in the u. S. We saw a touch of steepening on the two10 as well. The oil rally taking a little bit of a pause on wti. Eiats confirmed by the data later, we could see more weakness in crude. Reporter novartis expects to return to growth during 2018. This is after three lackluster years. On news is counting drugs, increased sales and the offset revenue from the aging cancer medicine to make this happen. Blackrock boosted incentive pay last year. Assetrlds largest manager increased the size of the bonus pool by as much as 9 . The Asset Management business has benefited from the global rise of stock prices. In alphabet beats google. Google better more than 18 million and facebook spent more than 11 million. Grilled Nine Companies over questions as to whether pressure used their influence to influence the president ial election. That is your Bloomberg Business flash. Thank you, taylor. Donald trumps one point trillion dollars tax overhaul oth praise and warning. Our next guest has learned over time never to bet against the u. S. Economy and the positive impacts of u. S. Tax reform is underestimated. Of creditome the coo suisse. Thank you for joining us. Never underestimate the u. S. Economy. What do you worry about with protectionism . I hope all policymakers understand the importance of trade in the world group. I think trade has been a major factor in the expansion of the World Economy over the last 30 years. Issue of a longterm protection. We francine it has been a tough year for investment banks in general. Expected to be better because the fed will move and therefore, there will be more room within the markets . I think that is a youthful point of view. I think the u. S. Economy is a key component of the external demand. The u. S. Economy is doing well. It will be a lot of inward investment in the u. S. Economy. Either u. S. Policymakers want protection more than investment and to come in, they will have the teachertic yes, salaries will be low, but every market is going up in volatility is going up. The year started very well, but you could draw too many conclusions from 2020. Tom you have done many different businesses. Mckinsey sorry, i left off you did that. You have a real exposure to different businesses. Mckinsey, i see a thrust for scales. I want to know from you, is Financial Services what skill now . Five yea rs that is a great question. I think in terms of scale of the clients of focus on, so, my in theis ultra high net world. If you look at the World Economy , you look at personal Financial Assets and you have over 1 million, it would go through by 26 trillion. Nine in developed economies. Week led 30 billion in just the first nine months. It is a derivative of that world creation. It is an internal scale. So, you need an internal skill to really gain matters. You are think if secular way, i would have had them do the same thing. She is going to grow. That is called doing a bezos [laughter] the power of the expedition of commending is enormous. Once the restructuring is over this year, what happens during 2018. Australia is very clear. It was an issue when we were starting in 16. It was 65 billion. We will not cooperate with 77 billion. Were going to close it by jennifer 18. Will we have Strong Capital positions. It will start quitting capitals. You can generate profits from organic growth in gross profits. Are you limited by the swiss . When you walk down main street, is there a feeling of being constrained, by the culture of the nation of the switzerland as they look at their review. Final swiss man. I think we should all be settling for an advantage not lost every market i go to, being sweet is a plus. Francine let me ask you about costs. I know the bloomberg terminal keeps trying to ask you about heks and keep summit down wanted to achieve additional costsaving of 1. 1 5 billion francs this year. How . Tom we will give you everything youhe cross progression will refer to my early years. My fathers work in the 1980s. I actually think i am quite effective. Billiongone from 21. 2 to reach 2018 and we have Central Bank Still glowing. You insteadto ask with the commitment of your family to public service, we have a president who has had a focus on our way is was and ay to hen heritage fromlys africa. How do you respond to the certitude of the people at ident represents. The 1980s was that the gdp of africa was smaller than the bg the gdp of belgium. Will that two of your 50 billion is going to profit. As a numbers speak. I am incredibly reliant on facts and numbers. Everyone that going on to the World Economy is extremely important. U. S. Companies have to step up. If there is a trade war between china and the u. S. , can chinas money come to europe. Can the u. S. Trade it. Know about bitcoin . Should they be working at b itcoin . We are looking at booktrain. We think it is a great emoji. We believe very much and blockchain. That not cryptocurrencies . We also believe that Digital Currencies have a use. Been so wonderful. Thank you for being here from zurich. , our chief executive. We have so much talk about on this wednesday. The present here on friday. This termination here this morning with first comments on the american allegation. We will get the investigation , more thanh robo opinionated in what he should and what he should not stay in dallas. Tom good morning, everyone. Im tom keene with Francine Lacqua. Our large team from print media and radio as well covering the many themes. When i can tell you for certain decides theres a lot of snow this years last year there was a silence. The president of china spoke to davos. It was absolutely remarkable to see in all the years ive been here how quiet people listen to this speech from the communist china as they talk about global trade and the new chinese dialogue with the world. Jason frankel listened closely last year from j. P. Morgan Chase International and joins us now. I do agree with your observation and the discussion of china this year has just evaporated. Has that surprised you . Jason new things crowd out the old stuff and i will not say bad things crowd out the good stuff, but the fact of the matter is that china is the most important factor in the World Economy with the u. S. Of course and europea. The president of china used that platform to conquer the public conversation. I believe that President Trump must have taken notice of that because it would be a wasted opportunity if the speech of President Trump did not clarify in a more constructive way what is the strategy of the United States. I very much hope that the concept of the United States being an important leader of the World Economy would be reinforced. Tom help me with your experience. We have the former governor of the bank of israel and his former service to that nation. Help us with secretary clintons idea of free trade. Agreed President Trump that America Needs a fair deal with china. Have you seen indications that we have any chance of a fair relationship with china . Jacob when somebody speaks almostair trade, you forget the obvious. Tom do we have unfair trade with china . Needs to looky into the details because in any multilateral system, there always places that one can improve, but the key question is do you, to the discussions with the mindset that the objective at the end of the day is openness with clear rules of the or a trade wall where everyone is stretched to the rhetoric about the trade while will be displaced. I have reasons for optimism because theres nothing that breeds protectionism more than slowdowns. Recoveringconomy is and therefore the stage is being set for more constructive discussions. China today is not just another element of the World Economy. Part of theegrated world. It is 25 of all of european exports and american exports goes to china. China is now producing a significant part of the world output. Speak now toou to the supporters of mr. Trump who believe and what im going to call navarro ross economics. They have taken a very stringent view which ignores the game theory they dont teach game theory in chicago unless you are the late great gary becker. It is more game theory of princeton. What is the game theory that occurs if we raise tariffs on solar panels or on washing machines . Jacob ive seen something very specific of a given step of a much wider strategy swan not going to start going into each and every screw in this big machine. The approach should be i think that any discussion of this type should have up preamble. Opennt to end up with an trading system as possible because its good for the World Economy. Of course, in order to get that system, we much make sure gains ofe sure the trade are shared in an equitable way. Nobody has invented a tariff system that improves significantly for the long run. Tom this is critical. Within your sterling career, did we screw it up with nafta . We did not deliver the public good to lowpaid factory workers who were hammered by nafta. The fact is we did not provide the reach training and incentives. Were we fair to the supporters of mr. Trump over the last 40 years . They lost their jobs to china. Jacob its important that we clarify what lost the jobs. What lost the jobs was not the open trade. What lost the jobs was the improper facilitation of the open trade. Improper budgetary trade adjustments. Improper retraining programs. It is a fiscal issue. Lets not throw the baby with the water. Tom the germans do this better than we do. We can learn from the german model after world war ii on the fiscal side when theres real harm to the havenots. Lessonanother important one of the reasons why germany has been so much more resilient than some of its neighbors is the courageous policy of the former chancellor who lost his job, but he introduced Structural Reforms that may germany more productive than others. Leaders should not worry only about what is the next job but should implement and learn the lessons of structural reform. Tom one more theme here and i think its very Important Technology overlays davos this year, but in a different way than it ever has before. You and i walked on the slippery streets by all these storefronts talking about bitcoin, but particularly blockchain, blockchain, blockchain. Thats one part of the new technology. Our guys like you capturing the gaintial technological of things like blockchain . Jacob we recognize for a much the extraordinary potential and benefits from the blockchain technology. It is being implemented and used and we are putting a lot of resources into it. It raises an important point also to clarify. There was bitcoin and cryptocurrency. Bitcoin is not a blockchain. You can be all in favor of the blockchain and still find a deficiency in bitcoin. Furthermore, bitcoin is not the only form of an cryptocurrencies. Whats the problem with bitcoin . Its anonymous, which is no good because it can be used for wrong things. Scalability is no good. It comes from somewhere. If you could design and satisfyingurrency these limitations, at least you will be able to go on. Regulated and regulated in the appropriate way. Tom when i get together with mr. Dimon, we will continue this conversation. Jacob frankel. When we go to london. Let me go to london. Here is nejra cehic. Ra qualcomm getting a 1. 2 billion fine for apple shipped payments. This is the biggest maker of chips that helps run smartphones and the eu says its paid williams of u. S. Dollars to a key customer, apple, so it would not buy from rivals. No rivalt that could effectively challenge qualcomm in this market no matter how good the products were. This fine of 1. 2 billion represents 4. 9 of qualcomms revenue in 2017. The fine also ends the first half of two you antitrust probes into qualcomm. Past feweaking in the minutes and we are seeing reaction in the premarket. Qualcomm shares were lower in the premarket trade by more than 3 earlier. Still lower by some 2 . This is bloomberg. Tom good morning, everyone. Im tom keene in davos. Thrilled youre with us for our extended week of meetings at the World Economic forum. It is a meeting of record snow. It has been service of the swiss military and the people of davos literally digging about to put it into proper terms, a hockey goal death of snow. It has been extraordinary. One of the important conversations is central bankers and they happened pushed aside by President Trumps visit, but central bankers are always important. Theres particular attention paid to the bankers of government under real the rest. That would be south africa. He is the Central Bank Governor for south africa as they try to find a new politics. Here is our interview with him. We are central bank about to get inflation. We do not target the Exchange Rate. The Exchange Rate is a very important and put into the price formation process of south africa. What we need to be asking is what does the rent reflect. What is different from this year from last year . We are sitting on exactly the same when we are tried to convince you and the viewers that south africa has got a solid institution. These institutions have demonstrated that what you have seen since the zumba in south inica has been a resurgence confidence, both Business Confidence and market confidence. That is what the rand is doing. Francine having said that, the economy remains fragile. Is there a need for another to help the economy . Lesetja the economy is fragile. Let me say the growth is fragile rather than the economy is fragile. Its based on fundamentals. We have revised our growth projections to 1. 4. It signaled a bit with time that we will discover that we will have to invite the growth. With that policy meeting, we left rates at the same and we balanced the risks. Based on the policy horizon that we felt that the stance was to appropriate the money. Francine wearable rates be given the fundamentals you talked about earlier . Is there no need to look at another rate cut . Lesetja we are not targeting rates. We are targeting inflation. What is the most recent inflation outlook . Inflation ratee is closer to the midpoint and that is where we would like to see it, but todays inflation does not mean much p what. What matters is what inflation is over the horizon. We have been closer to 5 rather than the midpoint of the inflation target range. What determines the future path of Interest Rates is what the inflation outlook looks like and what the Growth Outlook looks like. We take every meeting as it comes. Beortunately they will not in davos, but when i talk to you in march, i will be able to tell you. Sometimes the emotion does not get lost in translation. You heard the passion as he talks about the challenges of a commodity nation and the clinical challenges of south africa. Im challenged to find the words of the commitment of bloomberg and southeast asia. We served a beverage of our choice in singapore, but here she is after conversations with the central bank of south africa. I want to talk about singapore, but lets talk about this important conversation. What do south africa represent with intentions of africa . When people talk about south africa, they think about corruption. When you speak to the Central Bank Governors, the fundamentals are in place now and it points to arise. Growth is poised to rise and everything is pretty much in place whether there is concerns. Realm and within the target so they are not too concerned about it. What he says is that right now investments are coming in more than before. Tom ive got to go to singapore here and your real knowledge of it. How has singapore changed with the new china . What do you see daytoday and the bloomberg arrived . In the bloomberg grind . Haslinda china is the biggest trading partner for singapore. China growing at 6. 5 and singapore being an export dependent economy. We have seen demand getting stronger and stronger. Doomsday scenario of china slowing down not quite playing out. Tom within that, is singapore booming . I was struck by london having a vibrancy often seen in years. What is the vibrancy of singapore right now . Haslinda right now . Tom real state is insane. Haslinda singapores economy is going through a slowdown. Its tried to go through recovery mode. You talk about hong kongs property markets. Its been in the doldrums for the past four years and trying to come up. There are signs that the worst may be over, but it remains to be seen. We were in a downward projected for years and it took a long time to get to where we are. Tom wonderful to see. We have got much more for you in the next three days. Secretary mnuchin with initial comments by the Trump Administration. He is at these meetings of the World Economic forum. This is a day where we are really grinding forward to the speech of the president that is scheduled for friday. Stay with us. From these meetings of the World Economic forum, this is bloomberg surveillance. Taylor this is bloomberg surveillance. Lets get your Bloomberg Business flash. The eu has come down hard on qualcomm. The chipmaker paid others to not use other chips in the iphone. This is after qualcomm trust the fire off a hostile takeover bid. Steel mills around the world appeared to be headed for banco profits. Reportedeas profits profits soared more than 60 last year to the highest level since 2011. Benchmark steel prices hit a fiveyear high last month. They have it helped by Global Growth and capacity cuts in china. Toys r uss Closing Stores in the u. S. To emerge from bankruptcy. Thats about 20 of its locations. The toy chain filed from detection from creditors four months ago. Toys r us has been hurt by years of poor results and a 5 billion debt loan. Over to you in london. Nejra pressure from saudi arabia and the uae are the Global Companies and qatar have failed. Thats according to the commerce minister. He spoke to Erik Schatzker at the World Economic forum. It is always like we are ready for deadlock and solve any issue on the table. With no affect to our sovereignty, are only agreement is applied to all. , from anher hand economic point of view, despite what has been said at the beginning, the qatar economy would collapse in a few days, the qatar economy in fact in. 017 did better than expected the 2018 forecast is even better. Economy andg up our we open up this destination for good and trade. We expected all of our contracts with even the blocked countries where there blocked everything it isatar, but flowing to the united arab emirates. Erik how much has the government had to spend to mitigate the effects of the blockade . Ahmed at the beginning of the blockade, we had to supply the market with consumer goods and food. We had to help the private sector to enter a new market. Thing that took around two to three weeks max and then it was all the private sector. We opened new roads to make it feasible. We can import goods from all around the world, like turkey and central asia. Erik you are saying Government Support was minimal. Ahmed it was minimal at the beginning. Erik how much in dollar terms . Ahmed it was mainly logistical costs. Quickly we stop this and now its fully private sector. Now its business as usual. We opened up new routes. We opened up new markets. Erik would you say the blockade is failing . Ahmed definitely. From an economic point of view, we can look forward to it without those countries. Cutters was qatars economic minister. We had ge release its numbers ahead of schedule on the bloomberg. You can see the Fourth Quarter adjusted eps coming in at one dollar 20 two thirds 1. 23. Ittle bit of a possibl a pause in the equity rally. U. S. Futures pointing higher after another record close to the s p 500 yesterday. Bitcoin on an 11,000 handle. In the fx space, it is dollar weakness pretty much across the board. Coming up next, we will be joined by the italian Prime Minister out of davos. This is bloomberg. Tom this wednesday morning, the americans defend for the First Time Since a bill clinton. Secretary mnuchin says that eight weak dollar is good for american trade. The euro continues to strengthen. Davos, Barclays Says is this 2006 . Davos men has an urge to merge. Barry at the handlebar meets bar needs scale. We consider womens rights and the tall, but then, the pretty. I am tom keene. We are here in davos with record snow. Francine lacqua is doing what we do at bloomberg, which is a driving the conversation forward. She had a wonderful panel yesterday. She had an exceptionally Important Panel to closeout davos on friday. As i mentioned in my opening, there is always something that descends in. The Financial Times today was an investigative report on the city. Here is a look at the sensitivities of womens rights, maybe mens rights as well, and we will see from their. We begin with an important conversation from this doubles. Here is our editor in chief. Much. , thank you very welcome to bloomberg. Run at the moment, the economy is growing. Movement,at populist and the centerright. Anotherems headed for hunk parliament. Can italy deal with another hunk Parliament Hung parliament . We have a lot of expertise, so i think this would help. My hope is that the result that we have in these five years of byernment will be perceived the citizens and the Public Opinion and this will give us a chance to give a government to the country. In any case, i think that italy is and will remain a stable country. The issue is, how long will it take to form a government . We know that it is not only an italian problem. We see a lot of examples in andpe of difficulties, perhaps we should ask ourselves, why the medical fragmentation is fragmentationical is there in almost every single country in europe. Is one of the ways to react to real difficulties. I think it is a mistake to underestimate the reasons of this populist push. We know that we have good buters in our economies, these did not reduce inequalities. Phenomenon that some of contemporary world, especially migration, can produce negative reactions. If there is a part of the public, of the Political Parties exploiting this, playing with the politics of anger and fear, i think they have their space. I dont think that they will prevail. How worried should people chick with stella . Could they really take someone out of the eu . P. M. Gentiloni we should be very cautious to disrupt and derail the mechanism that has brought us almost in all relevant economic areas of the world, to a dynamic growth. The issue in italy is that we and wethe right track have to continue in fiscal responsibility in gradual decreasing of our public debt, and we have to face our social and environmental challenges. Commitmentssion and is to tryernment now to continue to have the confidence of the voters and to continue this reform process also after the elections. Because if we stop the process, the result that we reached in the last year, and we havent reached them with the sacrifices of the community, the workers, the enterprises, these results would be at risk. It is of National Interest to go on with this right track. Does he fall into that category of people who go to far . Do you regard him as a populist . Callgentiloni i would not berlusconi a populist. I take note of the fact that he has a coalition where populist and antieu forces are predominant. Something is is it playing with fire . P. M. Gentiloni i think that we are not sure of the fact that these coalitions have the same heea, or similar ideas, in t of contemporary society. It is a little bit strange to have a coalition without having these common ideas. This is why the proposal to , that wein the reform are successful, even with limits in the last few years, i think is the proposal for the italian voter. Could you imagine if you ended up in a coalition with berlusconi . Do you think you could persuade him to keep going with these reforms, which she has a habit which heg dutch has a habit of denouncing . P. M. Gentiloni we are in a davos. N in italy, not in our Electoral Campaign was stress the fact that the only way to continue is to. In london, you are seen as the moderate with end of the countries of europe who could perhaps and up with a deal for britain which would be canada plus. You might be able to get the city of london still inside the European Union in some way. Is that something you want to achieve . 2m. Gentiloni i would say things. Need athat we for sure bill with the u. K. , a compromise. I dont think that this is under italian position. , i see abate we had prevailing position, strongly prevailing position supporting the necessity of having a good deal with the u. K. What kind of deal . Well the answer is first of all, in british hands. I am not saying that this is not interesting for us. Obviously we will participate and discuss, but it is not up to the italians, germans, define theopeans to kind of relations that we want with the u. K. Does the u. K. Want a sort of norwegian or canadian or swiss, or i dont know what model . If this is the case, then we would discuss the proposal. To be clear with an attitude procompromise, because we need a compromise. It is important to have good relations between the eu and the u. K. It is difficult to say that we have an agreement, but the Financial Services are out of this agreement. This is totally unrealistic. You would like Financial Services to be part of the agreement . P. M. Gentiloni we will discuss when, the dynamics, the timing. The details are terrible. Would you be open to the idea of banks in london, most of financial center, those banks being allowed to have passports, as they call it, to be able to work around europe . P. M. Gentiloni financial centee i understand why the u. K. Government is suggesting to this problem out of the rest of the negotiations is suggesting to pick this problem out of the rest of the negotiations. We cannot say that we are going to take the Financial Service deals out of the negotiation. I think the first step was difficult, but positive, because if you remember, if you months ago somebodymonths was talking about no deal, a catastrophic situation. Now we are beginning serious negotiations. They will be difficult. We have a good attitude to compromise. We cant accept the idea of taking the banking and Financial Services issue out of the deal. The other side of this is britain leaving, or britain becoming less important in europe. You got france and germany very much in control at the moment. You heard people worrying about france and germany running everything. Is that a concern that you share, that italy might be pushed out a little bit . P. M. Gentiloni no. I dont have this concern, because we perfectly understand the historical reasons of this special relation between france and germany. Relationshipal always allowed italy to play its fundamental role in the european context. Now with president macron and possibly a government in germany, this italian role could be even stronger, because we share many positions both with president macron and with the possible new German Government. I think that italy is extremely interested in not only maintaining, but strengthening ,ur relations with the u. K. Especially in geopolitics, defense, in the mediterranean. From this point of view, i totally share the point that is frequently made in london. We are leaving the eu, where not leaving europe. This is also in our european interest. We will come back to President Trump at the end. Telecom italia, where you have had issues with the French Company behind it. Would you like it to be split into 2 companies . P. M. Gentiloni well it is not my job to have an opinion on this. The only point that i would make is, we are an extraordinarily open market, in general. And france is not, in this respect. P. M. Gentiloni we are, especially in telecommunications, if you look lookommunications for example, to the mobile market. Has been for a long time on extraordinary market for mobile. We always had three or four main players and they were all owned them, they are not italians. They are perfectly living with our rules, so we have no problems at all with the fact that there is a Foreign Company controlling one of our telecommunications companies. Withly have had problems some assets connected with the security of our data. We exercise controlling power on the single issue. You would not wanted to be split between a commercial services arm and kind of a Landline Company . P. M. Gentiloni this is something that the market has to decide. France seems to be the place which is sometimes resistant to italian companies. Do you feel that the reciprocity is there . P. M. Gentiloni i only answered that we discuss frequently, but we reach an agreement. We reached an agreement assets between italy and france. They are very good once and i have to say that between me and president macron, on these issues we always find a common point of view. There is another person tomorrow,davos it is President Trump. To what extent do you worry about what he is doing at the moment . P. M. Gentiloni i remember well our discussions and sicily in at the g7. Icily in the end we found a common agreement. We found an agreement on free and fair trade. Fair trade is a bogus idea. [laughter] p. M. Gentiloni from my point of view, what were seeing here in davos this year is almost all of the relevant economic areas of the world having a good level of growth. Our main commitment and message should be not to disrupt this. Then we have to face the like socialblems inequalities, environmental issues, and so on. Everybody is allowed to protect his own worker, but there is a limit. The limit is defending our free trade, defending the model that brought us to this kind of growth. Do you see any way in which President Trump is defending free trade . P. M. Gentiloni i understand he and iepting compromises deem relevant that europe lays its own game plays its own game. It is up to the italians, the germans, the french, and the toopeans as a goal whole play a role. We have had discussions with japan and latin america and i hope we will close these discussion soon. If there is a gap, europe is ready to fill this gap. We do not need any disruptions from the mechanism that is working, as the figures that were seeing here are showing. Issues thatace the this growth has not solved, because if we dont face these under risk. Th is free trade for us is not an option, it is one of the fundamentals of the system that is giving a possibility of growth and prosperity. We have to do more not to disrupt what we have. , primeo gentiloni minister of italy, thank you very much for talking to bloomberg. Tom a very important conversation there with the Prime Minister of italy as they move towards a critical election the first week of march. Here is nejra cehic in london. Ofra let me bring you some the lines that we have had out of ge. Fourthquarter adjusted eps excluding charges coming in at . 27. The fourthquarter revenue number missing the analyst estimates. Was 33. 76 billion. Finally, reaffirming its your forecast year forecast. Ge falling short of analyst earning estimates for the second consecutive quarter. This is a beleaguered manufacturer continuing to deal with problems. Sales falling in the power division, which is struggling. By the way, just to give you continuing context, ge was the worst performer in the dow jones last year. The shares are down some 3 this year and they fluctuated a little bit in that premarket trade. Stick with bloomberg surveillance for continuing coverage out of davos. This is bloomberg. Haslinda union hase european come down hard on qualcomm. Finedind the company the company 1. 2 billion. Qualcomm tries to fight off a takeover bid. United technologies also coming out with earnings this hour. They forecasted unadjusted earnings share for this year that missed estimates. They now see fullyear adjusted sevengs per share to dollars and . 10. Novartis expects to return to growth in 2018. Novartis is counting on a new drugs, increased sales, to offset its decline in revenue. Four bonusade up of cuts by. The Worlds Largest asset manager increased the size of pool. Nus they have benefited from a global rise in stock prices. Google has lobbied more than any other technology company. Facebook spent more than 11 million. Congress scrutinized both companies on charges that their platforms influenced president ial elections. With haslinda now amin. She has done so much in our coverage of the challenges in finance and economics across all of asia. She has an important avenue with the Central Bank Leadership of with africa interview the Central Bank Leadership of south africa. When in doubt, hire and economist higher an economist. Hire an studiedt to hosea, who at harvard. They provided economic wisdom to any number of managing directors. He joins us this morning, as chairman of Standard Chartered. What did you do on day one when you moved to the world of Standard Chartered . What was your mandate from day one . My mandate was to be the guardian of the interests of the company, in particular of the. Shareholders. That was my mandate and motivation. I have acted since in a way that is best for the company, together with my 4 colleagues and our colleagues from the management team. Tom the Standard Chartered bank nersonifies being in a inclusive economy and an inclusive financial system. What will be the distinguishing feature of Standard Chartered . We are the international 70k, where present in nearly markets across africa, the middle east, and asia. There is no other bank that is present in these three parts of the world in the way that we are. Here forne is good. We have a responsibility to our shareholders and we fulfill that. We are in countries that represent about 60 of the global population, but whose standards of living are lower than what they deserve as human beings. We are working very hard to make sure that we make our money and do our business in a way which helps these societies fulfill their dreams and aspirations. You have committed something to like 20 billion in chinas growth. We have committed to facilitated financing. Road is a one formidable coming from china. We are talking about threats to globalization. It is good to see things that are happening in the east. The commitment to have the Transpacific Alliance on trade delivered in a few months. A lot of good things are coming from china. Maybe the single most important positive driver for globalization in the century. Haslinda this is also a country that is trying to rein in Global Growth. Are you not concerned with the issue . A lot of the financing is going to be provided internationally. This is where banks like us come in. We sort of help arrange the finance and then we get a number of investors interested from other parts of the world. I think that it is good that china is putting some limit to the growth of debt, because this has been going very fast over the last few years. Tom you are arguably the most qualified person in the world, with your fiscal work, and Capital Markets work at the imf, to answer the question of the worry of a debt expansion in china, but also a debt expansion in the other markets. Jose it is true that china has been the leading example of an increase in debt. So i think that it is very important that these economies make and continue to this sustainable by introducing the reforms that improve their longterm growth potential. Today they were adamant that china had its hand around this new issue. Do you have the same confidence . That thehink authorities in china get it. That might have not been the they gets ago, but now the implications of this high debt. Financial stability is given the preeminence that is given is a Big Development in china. If at the same time they preserve this is billy the stability of the financial system, i think this is very good news for the world. It needs to be managed and managed carefully. Haslinda so no risk of instability as it rains and indit growth as it reins credit growth . Mechanisms do you have to react if any of this materializes . The chinese Banking System has buffers. Tom i want to go back to the new Standard Chartered. I have heard this so many times before. A western banker who will not be named said that we are going into asia. Youve heard this one. [laughter] asia, we areinto going into Standard Chartereds territory. To do you respond as a bank the new flight of people getting off the airplanes in singapore, hong kong, getting off the airplanes africa, because things are better, and were going into your territory . Respond . He bankers jose Standard Chartered was born in africa and asia, so we have always been there. Respond . The fact that we are operating in some of the most dynamic economies in the world and others want to come in, i think that is a good sign. You want to be in places where people see opportunities. That is where people are sei ng it. We are very confident in our ability to provide products and services and solutions to our clients which are very competitive. Haslinda [laughter] dynamic. As several major banks make their move, can these markets withstand the pressure . Se i mean, these markets will respond in a way which is proportionate to the type of things that are happening. A few years ago you had the top of the fed starting to taper. Tantrum whener nothing had happened yet. Then you had a lot of convulsion in emerging markets. Now the fed has raised Interest Rates in a nontrivial manner. They have announced that they are going to be diminishing the size of the Balance Sheets and so on. I think as long as the normalization follows the map, things will be more manageable. If you have a significant departure from that and you have an abrupt change in rates in the United States, then the adjustment would be more complicated for the whole world. Tom let me ask you one final question. Does Martin Feldstein it look good as the vice chairman of the fed . Would he be good there is ving with Jerome Powell wot is he be good uldnt he be good there serving with Jerome Powell . I think he would do very good. Tom there you go. Heres taylor in new york. Influential koch network is asking President Trump not to increase the gas tax. He says a gas tax would undermine the recent tax cuts. Jerome powell will replace janet yellen next month. The Senate Overwhelmingly approved the nomination. He is currently a fed governor. Republicans call it a step back in negotiations on immigration. Chuck schumer has withdrawn the offer that he made last week to give President Trump money to help build the wall on the mexican border. The president says that if there is no wall, there will be no daca deal. Area economy opened 2018 with the best growth in almost 20 years. The gauge is now at a level that suggest orderly Economic Growth is close to 1 . Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Nejra, back to you in london. European equities taking a little bit of a pause after four days of gains. We saw a mixed picture in asia. The msci asiapacific index much flat. Pretty much it looks like we could see the u. S. Equities build. Fluctuating aen bit. It is a story of dollar weakness. Dollar losses multiplying. Three days ofer, losses. Steven mnuchin and says that he likes the weaker dollar, while he got that today well he got that today. It is 108 that you want to look at. Draghigoing to see mario against that stronger euro . Yields moving higher, 10 year treasury yield at 2. 63 . Wti crude up slightly again following that epi data. Tom . Tom thank you so much. We really appreciate that. Welcome to the World Economic forum. Secretary mnuchin spoke today. 2 got to others weve got other americans that have landed. She brings a wide set of perspectives in politics, academics, and in public service. Foring us, without question most important guest. The curse of that. N, look for ken Rogoff Rogoff speak of inflation. I think inflation will go over 2 in the u. S. This year. The unemployment gap is zero, or something, at the moment. It has been very slow coming, but the u. S. Inflation has been creeping up. I think it will be above 2 . There could be a lot of tension between donald trump and the stock market falls for some reason. We could suddenly see tweets about Jerome Powell in the middle of the night. It will be a unique moment when President Trump lance. How will he be greeted . [laughter] i really dont know. He is president of the United States. I do not know what he is going to say. I think this is a very International Forum and i hope he talks about the value of the Global Economy and the u. S. Role in it, but i just do not know. Haslinda is there a sense that this is the year when trump will exercise all of the threats that he made when he became president. And he ising nafta renegotiating the bilateral trade agreement as well. Do you see that happening . The Trump Administration has been very clear from the beginning that its approach to trade, and i think wilbur ross has been very clear about this. The goal is bilateral trade balance with each trade partner. If you take that as your starting point in International Trade negotiations, then i would imagine that you see movement on china, an renegotiation with south korea. What will happen with nafta . Last year the focus was on health and then it was on tax, and now i think it may shift to trade. Haslinda what is the risk to the Global Economy . Asia is already unsure what this policy is about. Fs beinghe tarif imposed. I am more optimistic. We think the framework is nuts. Trying to renegotiate the trade agreements country by country is nuts. K tend to think that the barl will be bigger than the the bark will be bigger than the bites. I wish that this was the biggest risk that i was worried about do. T what trump might tom you were the imf chief economist. These simple words are really important, multilateral, bilateral. Whatever Teddy Roosevelt said. What is the best outcome if we are exhausted from 30 or 40 years of Multilateral Affairs . Do we become bilateral . Talking about the World Economy, i think that one of the things that was highlighted last year, and you see this moving forward in asia, is a continued globalization. A globalization with a new leadership, a significant share of this globalization energy is coming from asia, broadly defined as a region. I think the Global Economy moves forward. I think that globalization is not stalled. It is moving slowly, but moving differently. Digitalon technology is going to be changing a lot of opportunities, both in terms of sectors, but also in the ability of small and mediumsized businesses to access the economy. Haslinda isolationist policies have to and end. Lets take a look at china. They are about to push through changes to credit in the country. In credit without causing instability . They say that they can. I think it will be very hard to do without slowing growth sharply. They say that we can act very quickly come weekend continued all, there is nothing to worry about. I would put some risk if there is going to be some outside event to the Global Economy. Ive looked to china, because somebody people say that is impossible. I am sure i said that last year. Haslinda [laughter] im a little bit more optimistic than he is on this question. I accepted the notion that the amount of reserves that the chinese have, that control over the Capital Market that the chinese have, their commitment to achieving growth with tools that we do not have at our disposal, and the fact that most of this debt is owed to their selves, i am ok with it. I am less concerned. Tom i would suggest that you are the conscious and soul of what american women are. How do you go to m. I. T. And get your first job at princeton . To point outwant that actually when i came out of wast. , womens liberation actually in the forefront. Princeton was looking for someone in the field that i was in, but they were delighted that they could find a woman in that field. Tom the uproar today is a cover inancial timesf about the same old thing. It is ugly. Fantastic investigative reporting, but ugly. Some people say that nothing has changed. Try to thisou debate even as we see these continued difficult stories . In my own professional personal life, i have never been to such an event, no have nor have i been asked to participate in such an event. I cannot say anything about it. The World Economic forum has been working on gender. We have a bloomberg. Com World Economic forum gender indicator report. We have a lot of committed companies and governments here every aspectok at of what you need to do to increase womens Labor Force Participation rates. Those can be childcare facilities, from training, from every aspect of what youeducation. The swiss government has an interesting one which was actually proposed this morning at a workshop. That was basically but Government Procurement policies. They can insist that the companies that compete for those procurement contracts have gender. Parity in gender wages. Tom thank you so much. We love to see you every year here at davos. Thank you for your commitment to what we do here. With the panel yesterday and of course with harvard university. Much more to talk about here at the meetings at the World Economic forum. Helicopters in the distance, i do not know if they are coming or going. Nejra when it comes to european equities, we had 4 days of gains. Same when it comes to emerging markets as well. The msci emerging markets index pretty much flat after eight days of gains. It looks like u. S. Treasuries could be on the front foot. Above 11,000. 11,000. Ipped below threeyear low for the bloomberg dollar index. Steven mnuchin and says that a weaker dollar is good for trade and the economy, while that is what he has got today well that is what he got today. 110aryen through the handle. What will mario draghi have to say about that, if anything . The European Union has come down hard on qualcomm. They fined the company 1. 2 billion for pink apple not to use other chipmakers paying apple not to use other chipmakers. Steel mills around the world seem to be headed for bumper profits. Benchmark steel prices hit a high last month. They have been helped by Global Growth and capacity cuts in china. Closing stores in the u. S. To emerge from bankruptcy. Toys r us has been hurt by years of poor results and 5 billion debt. Bloomberg business flash. Nejra the right way for the eu to tackle growing protectionism is a more robust market and not a trade war. That is according to the portuguese finance minister. Francine lacqua spoke to him in davos. Francine do you worry about the tariffs that President Trump has imposed . Of course we are always worried with protectionist policies, which i really dont think is the way to help our economies. We have to be ready and prepared to respond to that. Again, Work Together with francine so what does that mean, highs level of competitiveness . Cuts . Ax cuts is it tax do you retaliate . What do you do . I think we need to take our agenda and make the european economy strong it. We have the largest Single Market here in the world and we have to make that more robust. I think that will be the right answer to these challenges. Centenohat was mario speaking to Francine Lacqua at the World Economic forum in davos. U. S. Futures pointing to a higher open, meanwhile trading sideways on european equities after 4 days of gains. Handle on a 10,000 their, but now lets get back to davos, where my colleague is ray y ray. Leo dalio. Good to see you. I dont need to tell you that there is a lot of happy talk about the Global Economy and Financial Markets here in davos. Goldilocks, and i have heard it from a lot of people, but you are already looking forward to the next downturn and even to the next election. How come . Dalio we are in a perfect situation. Problem, is not a growth is good, but we have to Pay Attention to the cycle that we are in. Where are we . Stage we are in the late of the cycle. Time thatriod of might go for 2 years. When the central bank thinks that they should begin to put on the brakes take the punch bowl away . Thats right. Economic capacity is built at a certain rate and then there is the growth and demand. Think of it as driving behind a truck. The truck is going to 50 miles per hour. If youre driving at 70 miles per hour, that is fine, until you get to that capacity rate. You cant have the economy driving at that same 70 miles per hour, it has got to slow down, and so the central break bank starts to put on the brakes. Until Central Banks started to put on the brakes, we had one kind of environment. Now we are closer to its capacity constraints. With that closeness to its capacity constraint, we are still going to have a lot of stimulation. It is going to look great and it is going to be great. Allulation in the form of the tax reform, what it means for corporations, and there is a lot of cash on the sidelines. Investors have cash on the sidelines. Banks have cash, consumers have cash, and they can feel that they are being left out. I think that is going to be great for earnings. It will be great for that stimulation of growth. We have to look beyond that to say, what is Monetary Policy going to be in that . And how difficult is Monetary Policy . Now lets take a look at that, because we can look at step one, that is kind of the blowup stage of everything. Before we get to Monetary Policy, how long do you think we are going to lets call it, enjoy this perfect environment . And when i say we, i do not mean just the financial community. Clearly that is good for risk asset, presumably that is good for stock prices, right . Dalio yes. Some of it is trickling down to the real economy, so how long will people be able to enjoy that . Think it will be a 1218 month spurt. While that is happening, the central bank will have to tighten Monetary Policy . It will feel like it has to tighten Monetary Policy. With that, it is very delicate, because if you look at the history, there is a if there is a tightening of Monetary Policy so that Interest Rates rise at a rate that is faster than is reflected in the curve, the yield curve, it is a surprise. You can look at the Interest Rate that is discounted for every month to god knows how far. In other words, you know how eight bond or equities are priced off of that. All assets, private equity, all pricedsed off of that off of that. When it rises faster, it has a negative effect on asset prices. The slope of the yield curve matters. If you look at where 10 year rates are, lets say 2. 6 , as you start to get closer to that and that yield curve flattens, then that causes a constraint in the economy and a constraint in lending. We have a situation now because assets have had a long duration. There is a sensitivity to that. Assets themselves are more sensitive. Yields will bond produce the largest bear market in bonds that we have seen since the 1980s. Are we in it . I think we are an environment which is really good for stocks and bad for bonds. When did we enter that bear market . N the tenure crossed 2. 5 10 year crossed 2. 5 . Lio Monetary Policy will be delicate not to affect interest. I think the fed will not only tighten at a rate which is faster than is discounted in the curve, i think they will tighten at a rate that is faster than they are even signaling. They are going to get scared, in other words . Dalio they are going to be concerned. They have a supplydemand situation with bonds. The government will have to sell more bonds to raise money. This is true around the world, because other Central Banks, the ecb will let its Balance Sheet no off go off. In other words, it will not buy as much. What will the next downturn look like . It will not look like 2008. 2008 was a classic debt crisis. Large, theand economy has gone through a beautiful deleveraging. The Biggest Issue is that we talk about the economy as though it is one thing. It is not. 2 different are economies. Dont look at the averages, because if you look at the averages, you see 2 economies. Is the downturn going to be worse for the people with capital . Or is it going to be worse for the people who do not have capital and to generate all of their income through labor . Certainly going to be worse in terms of the feeling, if you look at that bottom 60 economy, the no employment growth, there is no what effect, and there is rising debt rates. When i am looking at this, we have social problems now. We have political tensions now. The reason we have populism now is because of that phenomenon. This is when things are good, so when the economy goes down, i think the issue is going to be a problem. As a classic, let me i am afraid that we are going to have to leave it. I could continue talking with you forever. Ray dalio, founder and chairman of bridgewater. Bloomberg daybreak asia coming your catching a falling knife ge reports fourthquarter earnings taking a hit for the quarter, but standing by its forecast for 2018. Live from davos, we hear from james gorman, ceo of morgan stanley. And the dollar continues to weaken and treasury secretary mnuchin says that is a good thing at least when it comes to trade. Welcome to bloomberg daybreak on this wednesday, january 24, im david westin. Theill get you a check on market with taylor riggs. Taylor the biggest story of the day arguably is the weaker dollar. Here is the bbdxy index, lower after Steve Mnuchin said a weaker dollar was good for american trade. Bearing the biggest front is the yen, the strongest relative versus the dollar going back four months. Futures are upp after poking record gains yesterday. David thank you, taylor. Ge just reported earnings for the Fourth Quarter with a slight miss on adjusted earnings per shar