Transcripts For BLOOMBERG Countdown 20131212

And im abenomicm anna edws manus cranny has the details. Israel lost the Stanley Fischer may be heading to the fed. Elliott gotkine has more from tel aviv. To settle over sanctions violations and more people will be flying in the next four years. Caroline hyde has the latest numbers from the International Airline transport association. Plus, the russian race to become the next market for online video. Ryan chilcote has more on the content wars. Bringing you some big interviews today on bloomberg television. The ceo of Viacom International media net work joins the pulse. You dont want to miss that at 930 a. M. London time. Pleasantly but here from the International Air transport association chief executive, tony tyler, joining bloomberg at 10 30 a. M. Gone public in the ipo priced at 20 per share 2. 35 billion. What are investors getting . Real estate and a darn good franchise. Thats how you wrap it up. Arehis valuation, they beating starwood which is seen as a much more upscale brand but have a look at some of the brands they are getting their hands on. I know its a franchise company, but errors the waldorf astoria. The bulk of the business is done doubletreeonors and and that is where blackstone is playing the trade. They will keep 76 of the company and they will be committed for many years, they say. 7 unemployment and 60 of the business and help that is done in the United States but its getting better. Revenue per available room. You just cant beat him. Weve tried. That was something of a boom for private equity, wasnt it . Deal ofwas a great chastisement. Top of the market, you are buying a big cyclical play like hilton but they are connoisseurs of property. 69 billion under management. Upscale the growth story and ticket to china going from six hotels franchised in china. They are building 171 and they have boosted the rooms by over 30 . Why . This is one hell of a cyclical business. When things get better they are saying it could last for a few years. This is when you begin to look at it. They seem to be the masters of the timing and terms of flipping property deals and indeed locking value. Doing iskstone is taking that opportunity. Its the best year for ipos since 2007. Shall we have a stat from the day . Great function. I dont know where to begin. The biggest ipos in america. There are 109 of them. The first one according to bloomberg is fs global credit opportunities. I think what youve got here, foreign ambassador, shall i have a bit of star word, hilton, where should it put my money marriott . You will get a bit of a sugar rush only opening but this is a growth story. The valuations are risk. Can it fly . After it goes live today. Starwood has the boutique w brand. Hilton does not have the boutique brand. Could it be that you take the real estate they actually own and put it into a Real Estate Investment trust he . That opens pandoras box. For more on the story behind the hilton ipo we will talk the ceo and the man behind its turnaround at 3 00 p. M. London time. Family fischer looks to become vice chair of the u. S. Federal reserve. President obama has already offered him the job. Elliott gotkine has more. Is this a surprising choice he . Where you put as your greatest drawback, your greatest asset. Its great to just drawback in terms of being nominated to the position of vice chair of the fed. Greatest asset. During his eight years at the helm of the bank of israel he was widely edited for sheltering is real from the Global Financial crisis. Economy kept growing throughout. They did not have any times of contraction. Decisive. At he is he bought foreign currency by the boatload to export from strengthening shackle as well. Widely expected it is Crime Fighting ability. He told him one or two dubbed things because he was his mentor and he also incidentally taught mario draghi, ecb chief as well. Preks you have to decide whether you give dates were conditions. That is more appropriate and it should be the Forward Guidance. That means you have to understand that there are lots of things i could happen. That was official comments on Forward Guidance. Hes not been a huge fan. What the models are telling is by giving the Forward Guidance in the first lace. Manyuve interviewed him times. Whats he like cap though very patient when he gets asked the same question why journalists like me all the time. Hes selfdeprecating and witty. Here. N be just north of they had a farewell dinner in to honor and they went back to where he used to serve. Humble,a man who is very well respected by investors, people who work with and you would be hard pushed to find anyone who has a bad word to say about stanley fischel. Never be allowed to retire either. Rbs is set to settle paying 100 million to settle an. Nvestigation of violations theyre accused of supporting regimes in iran and cuba. 100 million, this is real compared to some of the ones weve seen. Drop in the ocean for something very similar. Valued at 500 23 million. In the summation about this, they did not disclose or payment hid in rbs saying that here in the uk there are written this instructions on how to evade detection. Theyve been accused of being business with these countries under sanctions and actively trying to hide it. Its been friday december in terms of the headlines. Customers lose access to their accounts and the ceo has stepped down. Thathave come out to say they have deep regrets for the. Versight failures he owns 81 of the bank and it is one that probably want to sell at some point. You think they have serious questions to ask the management. Coming up, digging into tre to online streaming in the Airline Transportation Safety Administration predicts airline nextl will be up over the five years. Ryan chilcote in Caroline Hyde have more on those stories. Ryan caroline . And airlines set to win out. Domestic all about travel. China is really going to be feeling the growth but so will the middle east. I will dig into all the numbers and outline which carriers will be winning out for him the surge in passengers. Notorious for pirated movies and music, the legal online media market is growing by leaps and bounds. Very tiny now but it could be massive. Of the talk to the ceo russian version of netflix and we are looking for clues as to what will happen next in ukraine. There is speculation that police or the government could try to use the military to clear the streets of kiev. We have the Russian Parliament addressing in a few hours and we will see what they have to say about his neighbor. Coming up, i next guest says the fed, ecb, and boj will lower the rates. The news team is back. Ron burgundy and his anchorman 2 crew have been doing allover america to create does for the films sequel. Keep it here. Time for todays company news. Montclair has priced the ipo at the top of the range. The value of orders from Institutional Investors exceeded 20 billion euros. Shares will be priced at 10 euro . 20 apiece. Microsoft said sales of the new xbox one console reached more than 2 million in its first 18 days on the market. Theyre trying to keep up with Sony Playstation 4. Recently, they sold 2. 1 million since they went on sale. Will join the s p 500 next week replacing teradyne at the close of trading december 20. They will also join the s p 100. Facebook shares climbed nearly 5 following the news. Welcome back to countdown. Am anna edwards dovish for guest is the fed, ecb, and boj. The head of fixed research for hsbc, good morning. Will the big three succeed in persuading markets and Interest Rates will stay lower longer . The way weve come up with a title for the turtledoves, everyone is focusing on the date change in taking about events that might happen or data points to worry about. Most people are quite negative because theyre thinking about where things go wrong. Its always about what happens when they start doing this. If you just read through all the noise around Forward Guidance or around tape ring or what new measures the boj might bring, what toys the ecb has. If you look at those, theyre not going anywhere and Central Banks are doing every thing possible to make sure they toerstand rates are close zero in the big regions of the world them they will stay there in the big developed market regions for a long time. What happens if data improves, growth accelerates . Youre not including the uk is your big three for obvious reasons. Thehe limit of yields in uk, for example, and in some way is challenging this concept of rates staying low forever. A cyclicald a bit of upswing in the data but it has to be sustained to justify the valuation. In the uk in the u. S. You have a 150 basis point shift upwards and yield in the last few months. The question really is cameo economy take this much tightening . They have done better than expected but can it continue next year . Is on thee onus bullish view of the economy to prove that it will continue. Everything that we are seeing is suggesting the data could start to turn downwards again in 2014. Its interesting you are putting these three together because currency people, on the program and talk about how they are playing the dollar off the yen in 2014 because they see Central Bank Policy diverging. Should it have been two turtledoves, the ecb and the doj . And then the fed different . I dont want to oversimplify but when you have zero rights, the hedging costs are zero. Zero rate in japan, four four przybilla speculator, whatever, the cost of hedging is zero and it means the liquidity created by each of those three becomes a sponge. Whats happening in japan as we look across acceleration to hit the 2 target, that means the yields are into the floor. Is an outflow into the u. S. Treasury market from japan and you can see it in the data. Be a bigt there would flow from japan into the u. S. And europe and it did not happen. It went the other way because there is a big by of equities by foreigners. Now youre seeing it. Its in the data each week and you can see theres a big influence of foreign securities. My point is the yen may move. It just moved about 5 in the last three months, moving down. All stuck in this range. 10year treasury is still 2. 8 . You would have lost 1. 5 . Thank you. More when you look at the european bond markets yet. Global head of fixed Income Research at hsbc. Welcome back to countdown. Am mark barton our guest is the head of fixed Income Research at hsbc. Stanley fischer, people are suggesting he will be the number two out the fed. He is formerly the bank of israel governor. The reason its interesting is because they are looking to see if the fed will become more act list. They would look at the personalities and the track record. I noticed in a September Fomc Iman tapering making references to emerging markets economies. The taper that never was. Hes got someone who has experience with currency inflows and outflows and being quite activist on rates. He brings some experience to the fed from overseas and i think we should remember that Something Like 50 of the u. S. Treasury market is overseas and has been a consensus view that the u. S. It just sets rate for the u. S. Economy. You have many big emerging market locks that fix their currency rate against the dollar. By definition, we set currency policy over much of the world. Having someone in theire about his attitude to tapering . It would be good to start but then saying it would be good to detract to gradually. A caveat. E has theres been Forward Guidance. He likes the data dependence rather than date dependence. Its about the institution more than the individuals. We like to play up the personalities but its a big institution. What are the outlooks of the bond market next year and 42015 . In a way, the corporate sand financials are a bit stuck in the middle between the u. S. And eurozone. It has put the uk at the cheaper end of the range. We are actually going overweight because we think it has been too much. When it comes to the spread markets, the uk is a bit the same and there is enough in the corporate sector, for example. That means the credit market is exposed to that. How narrow cabinet go . Is that the lowest . You do not find many big liquid sovereigns that yield as much. Between 1. 52, you cannot find any big liquid sovereigns that yield so much and coming back from that point, they get more spread from just every emerging market apart from brazil. Thank you for joining us. Showingferrell has been up as ron burgundy all over intoca and we will dig anchormans marketing. It you look lovely tonight. You, too. Are you married . Im. Don got any ideas. These are the Bloomberg Top headlines. Protesters have retaken the square in kiev. The demonstrators rejected a president for national dialogue. Later today, russian president ladner prudent will give his state of the nation speech where he could address the situation in ukraine. Restoring credibility over bank stress tests. Over 90 of economists say they confidence in the ecb dan the European Bank authority. Rbs will pay 100 million to settle claims it violated sanctions against iran and other countries. U. S. Authorities say rbs withcted transactions sanctioned countries and failed to disclose information about its activities. They say they deeply regret the oversight. Hello. Welcome to countdown. 6 31 a. M. In london. Resultsporting annual later on today and lets get over to european editor david tweed in berlin. Share priceite a rally this year. What has been the driver react . At 62 but you have to look at it in the context of radius years because of a graph from 2012 2010, the share price is still down 41 and that is really a story about whats been going on with metro because it had not been keeping up with the times until they put their new chief executive officer into place at the beginning of 2011. Let me just give you an example. Huge cash and Carry Company and they also have electronic retailing with the brands saturn and media. Until 2011, they did not sell anything on the internet. When amazon came in to germany, they absolutely cleaned up and left metro behind and they have put a strategy and place where they are now selling electronics on the internet and thats an important thing to be selling because at least you dont have to go try on a television set. That explain some of the share price and performance theyve seen this year. Also, speculation that they may sell their Department Stores here in germany. The real speculation is about what could potentially happen if they ipo off the russian cash and carry business. What might the russian business be worth, david . What would they do with the money they put it up for sale . This is causing a lot of speculation around the metro share prices because the russian business according to commerce 9. 6 say it could be worth billion euros. Metros entire market capitalization is just over 11 billion euros which means you could in fact get the russian business, nearly 10 billion euros and the rest coming in for free. They are saying it is a valuation game. Growingso the fastest business for metro. Its a growing 20 per year. They might take some of that money out to expand another fastgrowing markets. David tweed in berlin kicking off our retail discussion. In the next outlook series, talking retail and what does it mean for the likes of amazon, asos . Bloomberg industry senior retail analyst, good morning to you. Why are valuations so high for the likes of amazon, asos, then traditional retailers . Greed always. The traditional retailers, people fear that the internet retailers will eat their lunch, dinner, Everything Else and just take them away. They are being reworded on sales growth rather than particularly on profit growth. People are sort of investing in them as well. They think these are Proven Winners were proven survivors and they have endless sales growth. People want to be part of that. It is feared you will not earn these stocks as they continue to outperform. David was just telling us the story about metro not selling anything online and it seems quite startling, but where are the companies that are ahead of manyurve and have so platforms for multiple devices and the companies that are behind . Retro is a really interesting example. Hadelectronics business this great Business Model through the late 1990s and early 2000s with a gave 10 to the store manager and he chose prices ended selection, which is great, but as soon as you go online, it creates this huge conflict because who is earning the online sales . Who is setting the pricing policy . Does the store have to match the range . That was the problem. They had tried it before but it had not worked. We are looking, there are some legacy retailers, some of whom are in trouble in other ways. It will be 20 years since tesco did their first online transaction from supermarket in gateshead. You speeds things up you plug into a phone line. You can look at next as well. I remember them setting up their internet platform and they asked how much they spent on that and a few hundred thousand pounds and they said it was not enough. You should have wasted loads more money. You have some of these people who have been really embedded into the business and then you have people who are moving much more rapidly and have decided they need to get online very quickly. What is the internet asset . Asset long time, it was light and amazon was the most obvious example with just one or two to warehouse and shipping everything but more recently as demand has gotten more competitive and people want things quicker, the accept amazon has just shot ahead and they need to build more warehouse is to where people are. Their guidance for the next few years and now its 55 million. Thato sales ratio is not different from traditional brickandmortar now. Cap x sales ratio is not that different. Happy toareholders are fund the investment and sales growth. The question is what happens to the margins . Will we see margins beat all of brickandmortar retailers as the amount goes up the . Thanks, john. The comedy sequel from will ferrell and adam mckay opens next week in the United States but ahead of that release, ron burgundy has been on quite the promotional tour. Let me get this straight. A movie that came out in nine years ago and earned a respectable but not extraordinary 95 million is spawning a sequel that maybe the comedy hit of the Holiday Season . That is without a doubt the dumbest thing ive ever heard. How did that happen . It was wicked funny and became a cult classic thanks to cable tv and netflix. I dig. We all dig. I dont know if its any good, but already its a marketing juggernaut. A year and have since the movie has been announced theres been a museum exhibit, a book, dodge , a mobile game, cameos. They even rename the college. Ins are no new thing but they are taking things to a new level. This is ron burgundy reporting for espn or espin. They are no strangers to digital media. Their comedy website makes more than 30 million a year. The other reason is that ron burgundy is a character that comes along once a decade and he is genetically engineered to play him. I love scotch scotch, scotch, scotch we love that he is selling us a dodge durango, that there is named after him. It could tank but it probably will not and you can be sure to see this marketing push for lots of other movies but a strategy does not work unless youve got the goods. I dont know how to put this, but kind of a big deal. Hes kind of a big deal. Hits a little close to home. Mark barton is kind of a big deal. Have you been asked to endorse any dodge durangos . In my future career. Scotch man and scotch in it. Its butterscotch. Plans to introduce cheap long haul flights. Is the model sustainable . We find out next. Time for todays company news. Samsung is said to be reaching an antitrust settlement over key patents that required only minor changes to win regulator approval. Hasould end of the pro that lasted nearly two years. Boeing beating airbus for a order valued at 5. 6 billion. To canada chose the 777 replace the narrowbody fleet. Online Christmas Tree sellers are seeing a sales surge this year. Home depot began offering them online this year and said they expanded the lineup for this season. Still, online sales make up nor more than 3 of the 1 billion u. S. Market. Countdown. To i am mark barton. And im abenomics anna edwards. Is it sustainable . Air shuttle. Have not heard of it . Its been around since 2001 and its headed by this man. Now hes trying to take the low cost model longhaul with cheaper flights to the u. S. Hows he going to do it yet though you need the right tools to do it. You need the right aircraft. The only aircraft that we have found possible to do it was airbus 350. Toohey said the 787 is expensive to do lowcost long haul. If he cannot do it with ryanair, how can you . He can if he gets it back to the aircraft. Thats the problem. We started with the dreamliner. I know hes looking for it. Aey are a lot easier to get hold of. Norwegian air shuttle is not the first to try the nofrills longhaul flights. They offered cheap tickets on longhaul routes but 16 years later, it collapsed. Now be more fuel efficient, it still no guarantee the Business Model is sustainable. Hes a fascinating man. A former fighter pilot. 498 pounds. We will ask him in a minute if it seems as much as it really was. I know it was not that it seems like it now. Passenger growth is said to speed up in the next car through years as the Airline Industry recovers. They published the forecast yesterday and Caroline Hiatt is here to tell us what they said. 31 is how much we are going to see the number of passengers flying per year, how much it million seven9 about four years time. The average is about 5. 4 per year and interestingly its only domestic routes which will be ining the real ramp up usage. The strongest, unsurprisingly, emerging markets, middle east, asia and pacific. Interesting where its been divvied up. China is the single largest driver of almost a quarter of all of the new passengers, 31 increase going to be coming from china were largely domestic flights. China becoming the second biggest market in terms of domestic flights after the United States. Internationally and middle east, that is ready most of them will be coming from. Interesting countries really ramping up, ms. Beck asked on. Eckistan. The governments have realized the value of connecting aviation. Africa picking up playing on their geographies. Day with us because we will bring in john strickland, an siation analyst for jl consulting. Paint a picture of the fortunes of the industry just listening to caroline talking about the latest forecast. Whats your assessment . Its not surprising to her of the massive growth in these emerging markets. We have the old world and the new world. Europe and the u. S. , the market is in the doldrums and that reflects the wider macroeconomic context and what caroline said about the different attitude aviation. Of capacity in airports, problem with air traffic control. If we look at a new world, much more embraced and seen as a tool for developing economies and massive rising middle class in laces like china and india antisurface has not even been tapped in terms of market potential. The longo you make of cost longhaul model . Lots of established airlines said it wont work for a long time. Its not what passengers want but in asia its been going for a little while. There has been some testing as a concept. Interestingly, when i was talking to norwegian, i asked how it was going to work, if people would be able to survive without the tapering. Would they really pay . They have a premium. When is lowcost and when is it not quite . Lot of lowcost longhaul airlines have failed. Kualaia is based in lumpur and it is said by air asia that has a number of affiliates around asian countries. They have been focusing very much on the growing asian market and keeping flights to a maximum sector. Norwegian is going to some longer services, asia, europe, north atlantic. Capacity is an important factor. He not going for larger capacity and these are quite small packages of seats but i think they have to be careful not to be reliant and placing all of their eggs in the lowcost backs it backsket. They are introducing 787 on a number of global routes. Interview,d in the the likes of Michael Oleary cannot get his hands on the aircraft as of yet other aircraft probably does not have the same operating costs but nonetheless it will be cheaper. He loves the 787 waxing their oracle. Talking about the air quality. The 77 seven body was a big hit in dubai. 777x wide body was a big hit. They got off to a great start. What will playoff in the coming years is the new version of an already well established triple decker versus the airbus offering. The a350 was originally brought into combat the 787. N. L. Have a range of capacity sizes. They will be debating if the new one will take out some of the helpful fire in this new model. We see the ultra large aircraft, the 747 replacement and the airbus a 380 are struggling. The market is moving to more direct flights and they can offer smaller amount of seats at less risk that therell be days where the jumbo was 400 plus seats and it seems to be much more limited, a far more niche martin where perhaps you cannot yet its bond so easily and if you cannot fly two or three a day. Very quickly, when he launched the flights, which as we saw from the advert, just slightly below 500 pounds, it seems like a lot of money. In my recollection it was much less. He came in and offered a low price but it was not the same management on a cost bears to make sure that you could underpin those cost. He drew massive slack. Iny did go out of their way the premium cabin, its important to get higher average , the traditional carriers are not willing to give and have them steal their most profitable customers from them. Back in a few minutes. John strickland is here. You cannot talk about airlines without talking about consolidation in the big one. His year can it avoid the pitfalls that have dragged down other mergers . It was given the green light this week from regulatory point of view. We now have three big legacy worldwide, two big lowcost carriers. The evidence in the states is that these mergers have worked very well. Theres always a Human Element you cannot underestimate the complexity of putting two business cultures together and , but theyjob losses have delivered financial results. They have to be more disciplined in managing capacity instead of everyone fighting for market share. Theyre focused much more on profitable price and profitable equity. The message in the u. S. Is a positive one and here in europe, we have seen consolidation to an players,at the major five groups, account for half the market. Clarks will regulators announced consolidation . They need to see what happened across the atlantic. List tens of buying out smaller ufthansa buyinghan smaller related. Marriage. , klm, mixed john, inc. You. Lots more to come on countdown. The following is a paid presentation. Now theres a new way to completely cover your flaws. Make you look 10 years younger instantly. People asked if i got botox. They say, your skin is beautiful. They said it looks like i had porcelain skin. The airbrushed beauty breakthrough, luminess air