Transcripts For BLOOMBERG Bloomberg Surveillance 20160512

It is a slow day because of the cars, brazil, and be a way. Boe. Tom that meeting was supposed to end last evening so forget about that, live right now in brazil their federal senates meeting on the future of president rousseff. That is important. Is 20 hours and counting of live debate. Lets get straight to nejra cecic. President Dilma Rousseff may be within hours of leaving office. The majority of the senate has voted to remain voted in favor of impeachment. Willice president well rise to power. And friends, president francois faces as government difficult vote in parliament after a controversial label reform. He ran the proposal through the lower house of the parliament and says it will make it easier for employers to make jobs. Samesexay it worse marriage has gotten private partial approval in parliament in an alloy. Italy is one of the last countries in the eu to approve samesex unions. And you study says air pollution is rising in the poorest city and increasing health risks. Global air perp andhe pollution rose there is a higher risk of lung disease. The poorest are most at risk. Is considering Newt Gingrich to be his Vice President candidate. The republican nominee has been giving an input to gingrich. Global news 2400 24 hours a day powered by our more than 2400 journalists and 150 news bureaus around the world. Tom we are watching the brazilian rail this morning. A modest strengthening, futures up eight. Everything wrapped up with that bank of england announcement and Governor Carney. On to the next screen if we could. Curvemportantly flattening in the United States again through 100. One of our themes. To join us in a few minutes. Adam sieminski will join us here in the next hour. Francine that will be a really important conversation. You have brent crude above 46 a barrel. Global equity is falling towards a low. The european stocks were down, now they are up a touch. I still want to show you the banks. We have seen reversals, and for good measure to show you pounds because it is boe day. A to 10this just spread. Spread. 0th , were at 100 basis points have a down as we have seen recently, and very quickly, you have twos and you have tens. They both go down together, they both go up together, or you get this. This is really important in a dynamic. That is what the bond strategists are looking at. The bet is on a rising 10 year and a lowering twoyear. Was that confusing enough . Francine that was fine. Cannot talkme as we in the morning but we are on the same page. Tom it is cosmic. Francine it is telepathy. I looked flat i looked at a benchmark. What this means is they are already the worlds most expensive bonds. This is the japanese jgb. They seem to suggest that locals actually want more, so u. S. Yield premiums over japan which is the white line is widening. The bond action result is the blue line. Tom what it is critical is that it is not normalized. Very powerful. Francine it really goes to show what bojs troubles, or the impact of negative rates. Lets welcome Alexander Friedman joining us as a guest host. I am very excited to have you on. This was meant to be the year of diverging Monetary Policy and there are so many more risks because policy has not really botched because of the risks they see out there, be at politics, china, brexit. How do you the markets right now, more volatility to come . Alexander i think we are in a sideways volatile. A sideways volatile period. It is basically resting on the equivalent of a threelegged stool and the three legs are Monetary Policy, fiscal policy, and economics or growth. The Monetary Policy leg has been bolstered as we have seen through every tool imaginable. We have run out of tools. A be helicopter money but probably not. Fiscal, that we are seeing a big. Uestion mark on a lot of dysfunctional politics so people look back to Monetary Policy but there are not many tools left. What are we left with . A shaky leg of economics. Becomee the wobble can a recessionary environment or not . Or is it just going to be kind of sluggish, low growth . Alexander i would choose the latter for now. I have heard a lot of commentators say every seven to eight years there is a recession. That is a simplistic way to put it. 1994, it fitsbout into these time frames but you have to ask yourself what causes recessions, and i would say we are more in a sideways model that a recession but the political story could derail things. Lets say you and i go out to dinner and i say i will give you a ride home afterwards but theres a 20 chance the cars going to crash and leave you badly hurt. Would you take the ride . Francine probably not. Alex, you have such an esteemed record linking our political into investments. Is this a point where we just shut down until the election . I usually do not link politics and elections but what we witnessed in america the last week is extraordinary. Speaker ryan meeting with mr. Trump today. Is it a point with brexit were the system just shuts down until we get through november . Alexander that is the 64,000 question. Lets start with how Monetary Policy looks at it. Monetary policy is not shut down that is reactive to the fiscal or political side, and that is quite worrisome. You see it with carneys comments in england. He says until i know the outcome of the referendum, Monetary Policy has to remain accommodative. Does that question whether Central Banks are independent . I think it does. In the United States i think it is a bigger issue. The u. S. Central bank is reactive toward what is happening in brazil and china. Tom i have been dying to ask this question all morning. Mr. Friedman, is this a dead meeting for the bank of england . Is it a dead meeting and not a live meeting . Alexander what is a dead meeting . Tom i do not know. I do not know what a live meeting is. Come on, francine. What, they are going to hike or cut rates six weeks before the referendum . No, they are not. Most important thing ive heard today is whether it is unanimous or whether one of the voters actually decides to vote on cutting rates, because that gives a political message to brexit in six weeks. I think we have to take a step back and remind ourselves whether it is cutting rates or raising rates, how much are we talking about . The tiniest amount. Am, you have seen this for long time. It used to be raise rates 100 basis points are more hear it now we are looking at a quarter of a point. Points or more. Now we are looking at a quarter of a point. Tom Robert Hormats and Adam Sieminski coming up. On the future of opec, stay with us. Francine i am Francine Lacqua in london, tom keene is in new york. Lets get to the Bloomberg Business flash. Nejra nissan is handing a life sought a lifeline to mitsubishi motors. It has agreed to take a 34 mitsubishi, who a keep fuel theted to french bank retail unit plunged 32 and trading revenue also fell. It will sell stakes and about three dozen regional banks to simplify its structure and reinforce capital. Americas egg crisis is over. Isis have fallen 75 since august. The biggest bird flu ever prices have fallen 75 sensed august. That is the Bloomberg Business flash. I do love an egg in the morning. Francine may 2. Brazilian president Dilma Rousseff may be on her way out as the majority of senators vote in favor of impeachment. The debate is ongoing and we have live pictures coming in. It is quite heated and you can see the emotion. Why is the vote taking so long . Quitet we were not expecting was that each of the senators would take 15 minutes to talk to walk through their position of ahead of the vote, so that has added a lot of time on to the session. However, we have just heard we are expecting the attorney , andal to stand up next that will sort of begin to signal the end of the process. I think in the next hour or so we will have an actual vote. It does seem like the result is a foregone conclusion. Francine what do we know about the rest of the day . President rousseff will talk at some point. John we have heard from local media that she has cleared her desk supposedly. That is an indication of where she thinks this is going. She is due to address the nation at 10 00 a. M. So she could resign or val to keep on fighting vow to keep on fighting. Handed a document and farming her that she is suspended as president and at some quite in some point michelle timer will become acting president. Brazil, brazil is brasilia is 2700 miles from rio. I assume the brazilian people are engaged in this debate. What will be the response when she exits . Is it hundreds of thousands of people cheering in the street . Is it a lead in silence . John we do not really know. We had tear gas fired at process protesters last night at pro rousseff protesters last night. Of peoplemillions coming out in the street on that famous sunday, protesting corruption. Having said that, it does feel like there is a certain amount of exhaustion in brazil. This has been going on for a long time. I think there is also a sense among the brazilian people that it is time to move on. , and onecurrency chart of my great miss calls years ago. Rally,en line is the low lula rally. This is the brazilian people. Do you just assume with stability we get a stronger rail . John that is what a lot of investors have been saying but i do think your chart is very interesting. This may be a historic day in recent brazilian history. It may be the day the Workers Party, 11 or 12 years they have been in charge, comes to an end. Over the weekend i was reading a book on global inequality, and there is a fantastic chart when he see just how much and a quality has declined in brazil over the last decade. Along with all the corruption, a decline in inequality is an important thing to know when we k at the tom in our next hour with further perspective on brazil and saudi arabia, maybe we will even look at his tax return, Robert Hormats, the undersecretary for secretary clinton in the Obama Administration. A perfect day to speak with him. Francine welcome back. London,ncine lacqua in tom keene is in new york. Shares in germanys largest power producer are rising the most this month. They beat estimates. Strong earnings from trading countered power prices. Withe on the phone bernhard guenther. When you go through the numbers and look at your adjusted cost for 2016, does it imply a lost for the last six months of the year . Bernhard it does. We did not adjust our full guidance for the year upward but we confirmed it with one exception, except for net debt. You are right, this means for the rest of the year on an adjusted net income basis we are expecting a slight loss. Francine this is tough. You are in a tough business, it is tough for your company. We were speaking to your competitor e. On yesterday. What needs to get better . What kind of catalyst can you hope for . Bernhard the Old Development is driven by the collapse of commodities and power prices in continental europe. What it takes to get us to a better situation overall again, would be either higher power prices which are the most likely driven by higher commodity coal, like oil, gas, and likegulatory intervention capacity markets for conventional power generation, which we have already seen introduced in the u k and france but not yet in germany. Tom what do you need from angela merkel, what do you need to spurs the animal spirit of germany . You are in the heart of it. How do you read jumpstart the rean spirit how do you jumpstart the german spirit . We need a solution on the nuclear exit discussions around the externalization of the provisions for the nuclear looms over, which the share price. The discussions are still ongoing so it is too early to say what we will come out with. The more important aspect on a macro level is, as i said before, a reasonable market design for the German Electricity market. Conventional power plants, which are still needed and will be needed quite a while as a backup for renewable generation, which is wind and solar in germany and we know that it is not always available, these power plants cannot make a living anymore on the meager power prices we see. We need some clever market design as in other european countries. Guenther, thank you so much. Hour, oilin our next with another leg up. You wonder can brent make 50 a barrel. Adam sieminski is a detailed spreadsheet on Global Oil Supply and demand, on the future of saudi arabia, on the future of opec. Adam sieminski on supply and ondemand. Coming up as we look at a beautiful, truly warm new york city. Good morning. Tom good morning on a bank of england today and all of you in the. Francine lacqua and i am tom keene in new york. Here is nejra cehic. Nejra as bad as the terror attacks in brussels where, they could have been worse. Look and solid police work in the days before the attack lessened the impact. The investigation found disarray inside of the terror cells. 32 people died in the attack. The Obama Administration unveiled new rules aimed at methane gas from oil wells. According to people familiar with the matter it will require Energy Companies to do a better job of plugging leaks. It is 84 more powerful than Carbon Dioxide when it comes to warming the atmosphere. Donald trump will meet with speaker ryan today. Ryan is downplaying the breakthrough at the meeting saying that unifying the party around the likely nominee could be difficult. Global news, 24hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. I am nejra cehic. Francine thank you. Lets get back to our guest host for the hour. It is alex friedman. I picked up something that he wrote earlier. It was well written and engaging. I picked it out as our morning mustread. Aresaid in this world there only two tragedies. You are quoting oscar wilde. He said one is not getting what one wants, the other is getting it. You said the fed is not only looking at domestic demands, but they have become the central banker to the world. Is that a mistake . Alex the fed has a dual mandate. One is full employment, the other is price stability or an inflation target. The fed has met both of those mandates. We have 5 unemployment in the United States and core cpi in the right target zone. Essentially, they should raise rates, but they are not. You have to be careful what you ask war, or as oscar wilde said, that you might get what you want. The factd not stomach that they could be on a 4 rate cycle. The fed has to look at the rest of the world. The question, is this an independent domestic body or not . Or do they have a different mandate, i would argue they do. Francine the Brazilian Senate debate of the more than 21 hours has started here theyre voting on whether to impeach president rousseff or not. It is ongoing. We will see a vote in the next couple of minutes. If you look at brazil, i know it is contained and a political risk, at the end of the day it is about economic this management. Economic mismanagement if the market is pricing a possible fed Interest Rate hike in june, what does it mean for the emerging market . Alex they have benefited from the dollar weakness. Down 6. 8 . That is because stories have been better, china etc. If we go to brazil, there are two dimensions. The expectations that there will be an impeachment and the Vice President will become president and the former head of the central bank will be the financial minister and we will see a trajectory for reform. If that does not happen, there is significant risk for the markets. We will find out today. Tom part of it is the diversions whether it is commodities in brazil or the transatlantic diversions between a bank of england today and the fed on june 15. No one looks at this better than Michael Mckee. Was all the rage three months ago . From oscar went wilde to Albert Einstein in the idea of holding 2 opposing views. At what is happening in the economy of the United States and great britain, you can see the economic surprise index from citigroup shows both are showing disappointing economic data. We are talking about the Federal Reserve raising Interest Rates and the possibility of the bank of england cutting Interest Rates. It is no wonder investors are having a tough time figuring out what to do. Thiswe will go to momentous announcement from brazil. Janet yellen has to worry about brazil at the end of the day . Just worry about everywhere, francine sorry to a draft. We have the final vote. 55 are in favor of impeaching president rousseff. She will not be going back to her office today. There has been a majority of brazilian senators saying they are backing impeachment. That vote has been placed. They needed a simple majority of 41. We have 55 senators saying they voted for the rousseff impeachment. This paves the way or Vice President mr. Temer to take power. We know that they have to bring toetter to madame rousseff inform her, and she will give a fact later. How do you manage to brazilian had he managed the brazilian economy . You need economic reforms. That is what the market is believing, that the next person botch it more than president rousseff. Alex the issue is that brazil has a deep economic recession and you cannot turn the dial quickly. It is around 17 that the central bank will have room to cut rates given that we should see an improving overall story. The most important step has been taken. Withinat is interesting roselle and something we have studied, Brendan Greeley is very good on this and john freire, is that this Vice President is more of the same. It is president rousseff and and acting president within the scandals the acting president is from the same cloth . Alex that is a good point. Some of his colleagues are under investigation. The key individual, as i understand, has no questions or clouds around him is the former Central Bank Governor who is expected to be the finance minister. Tom you have been a student of this for many months. It is no prize that this announcement of mrs. Rousseff pushed aside. I saw on twitter brazilian athletes saying do not come to rio for the olympics. Michael an article was published suggesting the olympics be canceled in brazil. Getting rid of Dilma Rousseff or not get rid of the problems, has the Country Economic difficulties ahead. With the senate and legislature, and a new president who is also tainted, it will be hard to get them out of this. Tom what is important is how people were out runs on this linkage of politics and economics. I would give the highest marks to Mohamed Elerian at pimco. He was out front on brazil being a unique mess. Is important now is the votes. They have come in and there have been more people than we thought that have supported the impeachment of resident rousseff. Of president rousseff. Someone will give a letter to president rousseff that she is no longer in power. The nitrile starts for her impeachment. She could resign at any moment. Up until now she said this was a strong, thisl stay is an opposition, this is unfair. When you have 55 senators voting against you, and all we needed and im notbe, suggesting anything, but maybe she will resign quicker than people think. You are seeing live pictures from the senate in resilient. In brasilia. Problem, alex friedman, when you look at brazil, you are saying it is about the finance minister. If they have someone in charge that is recognized as a decent guy to get the country rock on should cometors back. Alex we should be in a position in a year where the central bank could cut Interest Rates, that is the baseline expectation. She was either going to be impeached, and we should see this as a positive across the economic landscape. Tom lets look at the brazilian real. The recent modest strengthening. From the floor level to 3. 45 has been anticipated. Andael anticipation betting on the future. We will see where it goes from here. Tom Michael Mckee and i will look at the bank of england on bloomberg radio. Coming up, we will continue our coverage of the political moment in brazil. Francine lacqua in london, i am tom keene in new york. This is bloomberg surveillance. Stay with us. Francine lets get back to our breaking news. We found out in the last 10 minutes we have the vote from the Brazilian Senate paving the way for Vice President temer to take power. Whoferro is our expert our coverage. 55 voted for impeachment. Jon a goes to show how overwhelming the odds are. She is still the president. She has merely been suspended. This goes to a full trial in the senate. She is now off the stage and it is difficult to see how she comes back onto the stage. She is due to a declaration at 10 00 local time. Some speculate she may resign or she might say she will fight this down to the wire. She is now off the stage. Aancine does it make difference if she resigns now . John if you are Vice President who will be the acting president later today, it would make it easier if she steps down. He will be in charge for the next two years. It would clear things up. Tom that is the heart of the matter. Ins is a government, like the United States, the president and Vice President are elected together. Result must stagger forward for two more years with this present government. Is there a likelihood of an early election all law the United Kingdom . The United Kingdom . John that was speculation. Everything you hear coming from er, it does put together an agenda for the government. We are expecting the first to be made. Uncement the finance minister is one that our viewers and readers will be the most interested in. The former bank manager. Will be you think temer able to attract a different caliber of cabinet members . John he is looking for a cabinet of talents. He is very aware of the background from which this crisis has come. So many members of the lower house, especially, are under investigation for corruption. Careful in very terms of who he chooses. He needs to choose people that are trusted by the market and are not under an excessive amount of suspicion for wrongdoing. Alex is he under suspicion . John so far, no. Heard very little about him. The criticism is that he is an insider himself. To reform andd fix the system, and you need an outsider. What will be Dilma Rousseffs legacy . John if you look back over legacynd this is lunas asl, as contr controversial as they have been, if you look at and equality in brazil over the last 10 to 15 years very few governments have taken more people out of harvard he then the Workers Party has. You can argue that that was merely a result of the commodity distributedy were to the poorest members of society. That was their creation. One of their legacies will be the Corruption Scandal that they provided. There is no getting away from that, it happened under their watch. Also, along with china, another country that has taken a lot of people out of poverty. Tom is it a one party system, or what i will generalize as a conservative elite Financial Party and what we have had since luna . John you will see a government that is attuned to market . Oncerns surface in a budget two years. That is different than we have heard from the working party that has been criticized by being too profligate. Tom i want to continue with your expertise on brazilian finance, i am making a joke. With every emerging market, they have to keep the financial shop in order. The general statement, is brazilian paper bid . Alex that is a good question. I cannot say i know the answer. There should be currency strengthening and falling yields. There should be room for Interest Rate cuts aggressively in 2017. The positioning has been in place among sophisticated investors. Tom you really wonder if this is a oneoff opportunity for those of alternative investments to get on board. Last timeat lula did with a huge lula rally. You wonder in the trauma of the moment if it creates a huge opportunity for the fear of the red circle, the luladecade we will call it. Atill tell you, you wonder the opportunity in the headlines that will make the magazine covers. Late usually, you are too if youre waiting for the headlines. Most of the investors that have risk assets on brazil probably put it on too early, but now are feeling good about it. Tom thank you for your perspective on brazil. We will continue this discussion. Hormats ofert Kissinger Associates with his work at of the Fletcher School. Robert hormats as we see commercials politics in brazil. Francine i am Francine Lacqua in london. Tom keene in new york. The Brazilian Senate voted to president Dilma Rousseff from office. She will face an impeachment 180 days. H could last this means we will have the new government in place. Legislators after a landmark 21hours of debate voted to oust and trial the president. The vote was 5522. Lets talk elections and with alexuncertainty friedman. When you look at political uncertain he and the rise of the far right or far left it is all about inequality people who feel like they have been left out. We have spanish elections, france, germany, the u. S. In november. How terrifying is it that it is difficult to predict and we could have a strange collection of leaders . Alex people are unhappy because they are out of work, feel like they have been left behind. As a result they look to change political leadership. We have an austrian election where the far right candidate is 50 50 with the mainstream candidate. After that we had the brexit vote. Then you have this poll that came out that said 9 European Companies would like to have a referendum on whether to stay in the union or not. Italy and france already pulling in the 40s that they would like to leave the union. In the next four months, there could be a domino effect. In the United States, it leads up to that situation. It seems to me that this could be much closer than people thought a couple of weeks ago assuming trump is the nominee. We will go to you in a second, but could we see a fractured European Union like we saw last summer because of greece . Alex back to my car crash analogy, we go to dinner. A i drive home and there is 20 chance we get in a car crash you will not come. Is there a 20 chance the u. K. Will leave the European Union . Probably more. Will that cause black swans . Possibly. Tom i cannot convey enough the shock moment to moment with the news flow of the last three or four days on clinton trump. Heres a chart which most americans dont know. You know this poll. It is the United Kingdom that to gdp. Net debt it is a great underestimate in the United States of how small United Kingdom is with the elements of an island nation. We go to london and figure it is like us. Bring up the chart. It shows the fiscal debate and austerity debate that Governor Carney faces this meeting and every meeting. It is an extraordinary chart versus the United States. It tone when you link politics, it is incredible. David cameron was just voted a year ago as received another mandate in the election after four years of harsh austerity. Austerity in the u. K. Has been serious because they are close to the European Union and had no choice. It was at a time when bund investors were freaking out if you did not put austerity in place. , japan is to the link probably the greatest example. Have Monetary Policy, the political leader saying we will solve this with Monetary Policy and my other 2 arrows. We have to remind ourselves that Central Banks are not independent. They cannot be because they are reacting to swirling dynamics caused by politicians. Politicians are reacting to an unhappy populace, which is unhappy because of economics. It is a cauldron. It is unstable. Tom in our next hour we will on more this discussion than brazil. Robert hormats will join us from Kissinger Associates. A perfect day to speak with the ambassador. Adam sieminski on the future of opec. This is bloomberg surveillance. Last hour, brazilian senators decided that they choose to have their president face an impeachment trial. Rex it dominates any and all that mark carney can do. Brexit dominates any and all that mark carney can do. Saudi arabia on brazil. Adam sieminski and Robert Hormats. This is bloomberg surveillance live from our World Headquarters in new york on thursday, may 12. I am tom keene. Francine, all focus is on brasilia. Francine all we needed was a central majority for her to face forl, to face impeachment corruption charges. We had 50 54 impeachment against 22. Impeachment for against 22. I do not know if she will resign. Tom here is nejra cehic. The latest from brazil, president Dilma Rousseff has been suspended from office and faces a trial in the senate. Senators voted to impeach rousseff, who is accused of illegally using loans to cover the budget deficit. She will be suspended for 180 days and it is unlikely she will win the trial. She will be replaced by vice emer. Dent michel tm he will inherit the worst deficit in decades. Controversial labor reforms two days after protesters battled police over the measures. Hollande ran the proposal through the lower house of government saying it would be easier to create jobs. Medics say it removes worker protection. In italy a bill legalizing samesex unions has been pushed through. It has been over the objection over a catholic wing in the party. Italy is one of the last countries in that you to approve samesex unions. Air pollution is rising in poor cities and increasing health risks. Global urban air pollution rose 8 from 2008 22013. As a result there is a higher risk of stroke heart disease, and lung cancer. The oldest, youngest, and poorest are most at risk. Donald trump is considering Newt Gingrich to be his Vice President ial candidate according to people familiar with the matter. The nominee has been asking off at odds to give him him put on Newt Gingrich, who ran for president himself in 2012. Global news, 24hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. I am nejra cehic. Tom thank you. Lets get to the data check. I want to get to the brazil terminal shot. Dow futures of 80. Oil elevated. We quickly look at equities, bonds, currencies, commodities the vix curve flattening. Trading,lian real not 3. 45. We have seen the brazilian real strength than over the last few days. Strengthen over the last few days. Francine banks were the biggest losers, now they are gaining. Still under significant pressure because of disappointing earnings. The pound, it is the last forecast on Interest Rates we get from mark carney before the referendum on june 23. Dollar, 1to the. 4454. Tom inflation rising. Year over year. Almost greecelike. This spread is enormous. High inflation and weak weak gdp. That is the economic backdrop to the political drama. Francine this is what i picked out. I changed my bloomberg. I want to show you something interesting, which for me was unexpected. It is no real linkage to the trial president rousseff will face, but looking at the 10 richest people in brazil in white and the 10 in china in trackingk at the index billionaires. The 10 richest people in china and brazil. All ofis gaining despite the trials and tribulations the economy has been going through. Tom you get lucky. We scheduled Robert Hormats six months ago. We barely got him. A few things going on. You represented this nation at the state department with secretary clinton. Sides of the both aisle. This is not the brazil in this moment from our childhood or middleage. This is a new and different brazil. Brazil it is a different with different opportunities. Lands been considered the of great opportunity, but it has never the filled its potential. It is partly because of leadership. They have never quite gotten there. As a result, they are in the circle that you would see with a high misery index and weaker growth. They will not get out of it soon, because they bet a lot on petrobras. They are facing the headwinds. Thursday, and on i will not ask you the biggest stake you have ever made the biggest i have ever made was underestimating the success of mr. Lula. Exceptional success for the nation. Can they rekindle the lula opportunity . Robert he has his only goal problems. Lula did a good job with he was president. He was a candidate of the last governed as a pragmatist and was able to pull fractions together. The difficulty is that he has now gotten into difficulties from his experience while he was president. He was the person that was responsible for the current president , rousseff, becoming president. She was his chief of staff and minister in his government. This is not a good legacy. While he was there, he pulled the country together well. Francine the economy in brazil is on its knees. What we think when we look at the polls, the majority of brazilians were backing the impeachment of rousseff not only because she was lenient on corruption but because she mismanaged the economy. What kind of person do you need to lead brazil . Reforms, confidence, jobs . Robert they need all of those. They need a lot of her forms. They need to get their dependence on energy lower than it is today. They need diversification, more openness to Foreign Investments, they need a lot of internal structural reforms. The correction factor undermines confidence, undermines it severely. Petrobras, traditionally, has been well run. Engaged in the politics. Pulling petrobras out and enabling it to work as a company on market principles would be a step in the right direction. Francine is the Vice President the person for the job. He is a career politician from the same party and a constitutional lawyer. This is about unifying and rallying the troops. Robert that will be the challenge. He was a teacher, a lawyer, he is from sao paulo. Is from an important city and played an Important Role in the city. Can he pull the country together . There are a lot of factions. If he can do that, and he is a temporary figure. We will see if he stays or if there is pressure to really clean house and put people in. That will be the challenge. Tom i assume you have thrown a piece of chalk at the Fletcher School who wideeyed freshman who want a perfect noncorrection world. You know as a pragmatist it is out there. Prime minister cameron working with his anticorruption panel in the United Kingdom. We solve the queen with the archbishop of canterbury and Prime Minister cameron talking about corruption in nigeria. How do you shift a brazilian people toward less corruption . What is a tactical to do to get that done . Robert it is a big problem. In many of emerging economies, they have done well for a time. People want their share of the action. They are not sure how sustainable the recovery will be. It is not a notion of an orderly and sustainable tom there is not a rule of law. Robert for a role of morality either. It is law and morality. Part of the morality is get what you can while you can get it and the law in bent. Tom have you seen an ability to shift a nation to a better role of morality . Robert in countries in western europe, there is a rule of morality now. Japan, when they had scandals people take responsibility. They are forced out of office. Japan has a very moral system in the way that they run the country. They take responsibility. Part of the problem is that if you make a mistake you do not bear the responsibility. Therefore you get away with it and someone who works for you or in another office decide they can get away with it, too. You have to have a strict set of attorneys general and prosecutors. Had a lot of they scandals there were bold italians who stepped forward to deal with the issues. Tom we got through the first 10 minutes without talking about trump or clinton. We will shatter that record. Coming up, importantly, bob hormats on oil. Joining us, Adam Sieminski. Looking forward to Adam Sieminski and Robert Hormats on saudi arabia and the suppose it death suppose it death of opec. This is bloomberg surveillance. Francine i am Francine Lacqua in london, tom keene is in new york. Lets get to the bloomberg dismiss flash with nejra cehic. Nejra a lifeline to mr. Bg voters. Mitsubishi motors. Of 2 manyconomy data cars. The stake has a market value of 2. 2 billion. Firstquarter profits fell with earnings at the french bank retail unit that plunged 32 . Trading revenue also fell. They said they would sell stakes and three dozen regional banks to simplify its structure and reinforce capital. Electricntroduce an self driving car in five years. It will supplant the series as the german automakers flagship car. Are responding to challenges from tesla motors and mercedesbenz. There are expected to lose the top spot in luxury car sales this year for the First Time Since 2005. Francine thank you for that. We want to focus on corporate news. Front and center in the United States is the collapse led by the macys shock. Usan murphy will try to get through this thursday. She joins us from washington. Tax slap get to the and romney. I believe there is a meeting between the speaker from wisconsin and someone else. What is going to go on . Megan we have this meeting today. It is another Inflection Point as we like to say. Ryan and donald trump. We will see donald trump in a series of meetings in an effort to be clear to Republican Leaders i am the nominee, i will take this party forward, and you better get comfortable with that. People call this a more of a get to know you session. We will see how much policy is on the table. Tom i spoke to jim weber, the congressman from minnesota. What are they advising ryan . Megan he is in a tough position. You only have to look at the margins in places like west wasinia, where trump won 77 of the nominee. This is a popular nominee that has a Broad Coalition of support. Establishmentthe need to get behind him and figure out what they are comfortable with, or this could be a disaster in 2016 with the senate as well as the house. Francine paul ryan is looking for loyalty . He wants donald trump to say that he is loyal to conservative party principles. What are the chances of trump leaning toward that . Megan very low. Trump has compared this issue to i have won the pennant im going into the world series, why would i change my strategy . The rhetoric he has used has got him this far. He has shown little application to change his strategy now. Francine what would it take for paul ryan to actually endorse, if it ever happens, to endorse donald trump . Megan i think he will have to endorse him. It is unsustainable that we would have an election that is important to the republicans to keep their majority in the senate for this big around the house to endorse the candidate. It is unsustainable to keep the party around a unified agenda. If we do not have that that would be extraordinary to go into a convention with no endorsement from a leader like paul ryan. Tom i do not know Donald Trumps tax return. Is that a big deal for the beltway . Megan i think people are chuckling to themselves that mitt romney of all people are leading the charge. He had his own issues. Donald trumps tax returns, we assume they are messy. He is saying it may not be released until after the election. Tom thank you. We are honored to go to someone who has been through this group eulas moment of analysis through cause a likeblic Robert Hormats. I cannot imagine the vetting you went through to serve in the Obama Administration. Should donald trump release his tax reforms . Robert everyone has to give the federal government their tax returns. And many other pieces of information as well. Transparency is considered critically important for Government Employees so that people know where they get their their where they put returns, what their Balance Sheet looks like. Transparency is part of a credible and thriving democracy. That is why the Government Asks potential employees for it. It seems the voters need to have transparency about their candidates on a variety of things, taxes being one of them. Tom Robert Hormats with realworld experience in the vetting for public office. Afternoon, we go to a most interesting with all due all due a 4hour respect at 5 00 p. M. In new york. That will be something on this thursday. Francine this is surveillance. I am Francine Lacqua in london. Tom keene in new york. In the last 40 minutes the Brazilian Senate voted to suspend president Dilma Rousseff from office, meaning there will be a new government after months of political turmoil. Joined with the latest. Is out. Is in, rousseff what happens after today . Most rheumatiche days you will see in any major democracy. It is fascinating. She will remain president for the next three months, or as or maybe as long as that. Of thel be informed decision and will hold a press conference at 10 00 a. M. Local time. We do not know what will come. You might resign or she might stick to the note of defiance about a coup. At 2 00, brazil time, Vice President temer will become the acting president. Francine what are the chances of her coming back into power . John very low. You cannot rule anything out, but if you look at the scale of her defeat in the senate, 55 votes in an assembly of 81 it is very hard to come back from that. React, other governments argentinas Foreign Ministry the they respect institutional process in brazil. Isnt argentina one of the examples of the to do list for brasilia . That they shifted governments drastically over unhappiness with the argentinian process and brought in a new regime . John if you look at what investors hopeful come from brazil, you can look at argentina as a potential model. They are feeling more comfortable about what is happening in buenos aires then they have for a long time. You will see temer trying to come out quickly and reassure investors that he is the man to trust. Evens will move quickly today. At 2 00 he will become the acting president. Fancywill be no swearingin ceremony. At 4 00, we will get an announcement of the cabinet. A delicate moment for secretary kerry. I know that he is stepping lightly. What would be your advice to secretary kerry to project stability to brazil . Argentine said, that we respect the procedures for dealing with issues like this. Let the brazilians take care of it. External advice will not be helpful. They have a constitutional process which they are working through as we speak. Tom it seems to be working. A 3432 vote. Ot it was 5522. Argentina there was an election for a new president , they are now transitioning from a former to the same party. It is a little more murky. Tom good morning, everyone. Francine lacqua in london, tom keene in new york. A big day on international relations. Here is nejra cehic on brazil. Nejra in brazil president Dilma Rousseff has been suspended from office and faces a trial in the senate. Senators voted to impeach rousseff, who is accused of illegally using loans to cover a budget deficit. She will be suspended for of two 180 days and it is unlikely she the trial. Many expect the change to Vice President temer to be permanent. Inherit the worst deficit in decades. As bad as the terror attacks in brussels were, they could have an worse. Solid police work before the attack lessened the impact. The investigation found there was disarray inside the terror cell. In the attack. Donald trump meets with Speaker Paul Ryan today. Paul ryan is saying the business of unifying the party of around the likely republican nominee may he difficult. Todling a lifeline mitsubishi motors. They have agreed to take a stake in the company. Mitsubishi fakes fuel economy cars, two of which are provided to nissan. The nissan ceo spoke to bloombergtv in tokyo. I am confident about the fact that with a good estimate made by professional people we should have a more clear assessment about the risk. At the same time, we are doing Due Diligence and will dig into the risks. Risks, but also opportunities. So that we will have a clear idea of where to go and have good evaluations about the potential. Theow need to go deep into specific action plan and exchanges in order to make this happen. Nejra theyre taking advantage of a 40 drop in mitsubishi. Global news, 24hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. I am nejra cehic. He did notrd that mention which is in the story from tokyo is the word synergy. This has to be the mother of all synergy transactions. Francine he did a similar transaction with nissan back in the day. Investors are questioning if he can do the same with mitsubishi, or if this will be the thorn in his ankle. He had a real challenge, and the emmisions scandal hit. This could be the deal or loss of his life. We are thrilled to bring you with bob hormats of Kissinger Associates, Adam Sieminski. He is the administrator of the energyinistration information administration. Adam sieminski, the eighth administrator of the eia. You have been on the watch for a couple of years. What is a distinctive feature of Global Supply now . The distinctive feature in Global Supply is how renewables next 20 tog over the 25 years. Particularly in the generation of electricity. Other key factor is that Overall Energy consumption looks like it will rise at 1. 4 per year, a little faster than population growth. What is really driving that is industrialization across the developing world. Tom within that industrialization, i remember speaking about the shock and awe a something the russians did which was not within the Deutsche Bank spread sheet. What is the shock you are most focused on . Adam the biggest sources of uncertainty, i think, run around the economic outlook. Lots ofve been problems, not only in the United States. Five years or six years ago europe and now recently china, when you look at in economyal growth and energy use in asia that is a big factor. Another one is technology. Technology keeps changing. It is very hard for any model, and anyone doing the modeling, to get a firm grip on that. We have to look at different scenarios. Francine you talk about renewables. It seems that American Consumers are going back to buying large suvs or pickup trucks. What is the implication . Are you worried about a setback in the fuel economy . Adam the fuel economy is on a longterm trend. It looks like with the existing law and regulation, it will be on a downtrend. In the near term, last year and this year, a lot of things are helping. Unemployment is down, gasoline is less expensive than it was two years ago, and as a consequence people are buying more cars. They are driving more miles. That has an impact in the short run. If you look out over 10 years, i think we will see a continuing improvement in auto fuel efficiency, probably also in diesel trucks. Talking about shocks, do you expect changes in the oil policy with the arrival of the new oil minister . Adam i think the saudis have been good in making transitions in Senior Leadership and within the oil area as well. Have beenthe saudis emphasizing they do not want to give up market share to other major opec producers. You can think about iran and iraq. That is leading in the short run to more Oil Production coming from opec. Tom that is where i wanted to go with you and ambassador horm ats. This is Oil Inflation adjusted for the rising wealth. It is an approximation of oil. Know 1986 right here. For saudi arabia now, what is the difference between now and 1986 . Adam i think that if you look at where the saudis are, their economy is broadening. Oil is still very critically important. These low risers are probably not going to last forever. Prices arethese low probably not going to last forever. We have been a lot of cycles. Prices are down now, but i expect him to go back up again. Tom economic politics with opec in saudi arabia is opec dead . Robert it is not dead, but it is weaker. That is largely because there is a a lot of additional and unanticipated production in north america that was not anticipated several years ago. There is a greater degree of efficiency and use of energy in north america and elsewhere. , there will be a lot of renewable production and greater efficiency, which seakens be a bit which weakens the ability of opec to function. Pumping a lot, but if they push back it will decrease the supply somewhat, but the other suppliers would begin to produce further. Francine saudi is pumping a lot. Byns production took some surprise. When will the oil market find balance . When will it come back to that . In our shortterm energy to look at how the markets are rebalancing. We are seeing that occur now. Inventories on a global basis of oil are building, but that will slow down dramatically over the next six months. As we go into next year, inventories should the declining. That would be a pretty firm indicator that the markets have rebalanced. Francine were you surprised by how fast iranian Oil Production came back online . We are back to pre2012 sanction levels. Adam we did work on how quickly iran could come back. It is a combination of production that went off line the sanctions and stored oil that is being sold on to the global markets, floating inventories. That combination i do not think has been a huge surprise. The next big question will be, now that that has been done, what kind of Foreign Investment maintainattract to this level of production or grow it more . Tom that is the heart of your Public Service the administration, trying to cajole free market investment in some of these job of fees. Are we doing better . Put hisi think adam finger on it. In iran, will for an investors come back . A lot of European Oil Companies want to come back to iran or have not left. They want to come back and bigger. They have to negotiate positions in a government which, in some cases, is in favor of Foreign Investments but some factions are not. Then you have the presumptive african production off the coast go u. S. Companies, do they back to opec . Robert they do not go in at all. They are still primary sanctions on American Companies going into iran. European and asian ones can go in. There are certain exceptions for doing business with iran for aviation Companies Like boeing and if you are sending humanitarian goods. Most companies are still prohibited from investing in iran. American banks are prohibited from engaging in transactions with iran. They cannot get financing for foreign oil. Thecine when we look at oil market, sometimes we take a shortterm view, but the problem is that it is clear there has been a drop in upstream investment globally. Do you think that this will fuel the next crisis, which will be a spike up in the next couple of years . Adam whether it will be a ofsis and how big the spike will be is a long debate. The drop in Capital Spending is likely to continue for a little longer into this year. I think it will indeed slow down Oil Production in two years or three years. That will be a factor that the market. I think it is very attractive to put money into the Permian Basin in texas, north dakota, utica, pennsylvania, ohio. That will be hard to beat. The resiliency of u. S. Be a factor that will moderate that spike we are talking about. Robert that is a good point. The u. S. Is an attractive place to invest. A lot of places have energy, but it is riskier. There are political risks. The u. S. Will be an important factor. Francine what a great conversation. Hank you and also thanks to Adam Sieminski from the u. S. Energy information administration. Coming up, danny blanchflower. This is an important meeting for the boe. We are not expecting news, except mark carney laughter tread carefully when he talks about the brexit and the referendum. Tom all eyes on london, on on the washington capital. Paul ryan will meet with mr. Trump this morning. Ets get right to it timothy obrien, who knows more than all on mr. Trump. Writing a scathing piece yesterday, poker night at the treasury department. Mr. Trump seemed to suggest he would put the reputation and credit of the United States of america at risk by telling global Bond Investors that he plans to cut our National Debt i giving them trillion dollar haircuts. Of his book. Cause it is extraordinary. This is definitive on early trump, trump nation. He is the expert. Ou are fired up about this it is not Global Investors that will take the haircut . the sanctity of the federal debt has been in porton since the beginning. You wrote the book on this. That thehas been clear death of the federal government and states during the revolution needs to be repaid. After the civil war we had a higher debt. It was in the constitution. In the 14th amendment, it says the federal Debt Repayment should not be questioned. It is in the constitution. Tom esther trump is questioning it . Robert this is what people miss. He talks about the chinese. The chinese hold one . 2 trillion of american debt. The biggest is 1. 6 trillion dollars. If the value of the federal debt is degraded and you pay back at a discount, that takes a huge chunk out of the Social Security systemor retirees. 800 billion of federal debt treasuries is held by the military retirement funds. Tom up to 3 trillion. Robert if you pay the debt back at a lower discounted value, buying it back, the Social Security system has less money and the military retirement has less money. Lets focus not so much on china, though they are important, but on our own people. Tom you are quite close to secretary clinton what should the gop establishment do today and in november with mr. Trump . Robert i hesitate to give the republicans advice, but on the subject of this, the integrity of the federal data is important. If they have a plan for reducing time,deral debt over which will be difficult, or reducing deficits over time, which has been the case deficits have gone down considerably. There is little recognition being given to that, but deficits are considerably lower. They should have some fiscal plan, and not some notion that you can borrow and repay the debt at a lower level. Hormats, thank you so much. A data check. The 10 year yield 1. 75 , that is not a discounted yield this morning, at least. On brazil, nothing matters foreign exchange. We do not have trading on all herreal. 3. 45. This was the floor level of couple of months ago, a significant real appreciation. A heavy news day. Coming up shortly is bloomberg with david westin and Jonathan Ferro. You will have a packed show. Jonathan starting with brazil, a historic moment for the largest economy in latin america. Arguably a poisoned chalice that the next government inherits. We will discuss that here it at the top of the hour is the Bank Decision and forecasting the on forecast will the unforcasta ble with brexit. Danny blanchflower later in the program. Francine Jonathan Ferro with bloomberg go. It is dominating the news agenda, what does that mean for mark carney when when he presents the new forecast. At the top of the hour, hour Bloomberg National correspondent. Mark carney cannot be seen to have an impact on the vote, yet it has an impact on forecasting the economy. Tears come close to getting involved. A would not be surprise to say that mark carney is in the remain camp. U. K. Economy going to take a hit if it votes for the brexit . Difficult to predict what the boe will do. If there is no brexit vote, they hike, and if there is no brexit vote, is there automatically a cut . for inflation to go higher, the question is can they cut . There is an assumption that the boe would cut or provide the quiddity soon after. Tom you have done wars of duty in washington and london. I am struck at how different you type it how different the United Kingdom is. Net is the explosion of debt. How austere is the United Kingdom right now . Simon the u. K. Chancellor is not as austere as he said. Certainly last year he wasnt. The push is to clamp down on. Hat debt he has a bank of england supported his efforts and given him room to squeeze fiscal policy little. Tom how badly does the European Union need a constructive ending to the brexit . Robert given all the other problems that eu has, the exit of britain would be a big future difficulty for the whole european structure. Parts of europe would go on. Ints and germany would be the center, and italy. Britain, the size of the eu matters in terms of its influence. When you take out one of the bigger economies that reduces. He overall influence of the eu and the british proatlantic notion is very important in keeping the eu focused on the atlantic, otherwise there is a drift to accommodation with the russians and others. Swinging back back toward the west and the Atlantic Ocean . Robert there is a notion that some of the right method right wing party believe that they can play footsie with putin. Them. Encouraged you need a solid area of a british membership to keep the. U more focused on the atlantic it will not be easy, but britain role. At you want your strongest ally, or one of your two strongest allies in the game. Tom we will continue this. Francine lacqua and simon kennedy, thank you. Jonathan ferro on to the bank of england next. Jonathan jonathan exit stage left. A new government said to take command. The bank of england decides. Governor carney attempts to forecast the on forecast will. Jonathan a warm welcome to bloomberg. I am promised that david westin will be back imminently. A couple of seconds away from a decision with the bank of england. A decision that many expect to remain unchanged. The bank of england is holding at 0. 5 . They are voting 902 keep a spare. Amanda mark barton is standing by to break down what were seeing. Mark interesting. The bank of america and Merrill Lynch said we could had we could have one member voting but that didnt happen. This is the biggie. It has cut the growth forecast. It has lowered the 2016 gdp forecast. T