Price, model three production woes means tesla is burning cash at 8,000 a minute. Betty what might be one of her last appearances as the chair of the federal reserve, janet yellen is speaking now at the nyus stern school of business with the former bank of england governor mervyn king. Lets listen in. I think the other thing that i learned or discovered was important is very careful deliberationsd among participants in the in order to carefully think through a strategy and try to develop a consensus before presenting it to the public. October, we began the process of shrinking our Balance Sheet, but getting to the point of starting that process involved well over a year of discussions in the committee about how we could do that in a way that the public had in mind,and we how we would use our Balance Sheet, and to do it in a way that wouldnt be disruptive to financial markets. Far, so wood, things so good. Few central across bankers as well prepared as you. [laughter] the key seems to be that Central Banks must keep open a willingness and ability to be selfconfident about saying, weve changed our mind and learned. Yes. I think that is absolutely right. Very important things about how arentnomy functions constant over time, and its important that we adjust our thinking. Can i take you back to your first day four years ago . What actually happens when a new chair rises . Is there a swearing in . Who swears in the chair . The morning of february 3, 2014, i was sworn in by the most senior of my colleagues who at the time was dan tarullo. We had a very small ceremony in our board room, just a handful , and i took the oath of office and got to work. About six weeks later, there was in,rge ceremonial swearing which was a large event. The family came. The staff of the fed came. That was more of a celebratory moment with speeches given. Champagne . Its a workday, after all. Thats what i meant. [laughter] we saved that for the family treat in the evening. I got right to work. Washe real first day, i slated to testify before congress the very next week. Is thatur traditions the fed chair has to give Monetary Policy testimony and send it to the Senate Banking committee and house financial everyes committee february and every july. That is mandated by law. Week, i was slated to go testify. Its a rigorous process of preparing that. We were at a point of having to ,ake some significant changes so i quickly started meeting with staff. One of the things i recall doing on the first day in the office was preparing a video message for our staff. When there is a change of leadership, i think its important that people throughout the organization begin to feel connected and know what the values and priorities are of the person who is going to be at the helm now. It probably wasnt any great surprise to the staff. Ive been in san francisco. Inas a staff member earlier my career. Nevertheless, i did prepare a video message in which i talked about the values of our organization. Our commitment to professionalism, public service, acting with integrity in a nonpartisan way and commitment to a Strong Economy and financial system. First fomc meeting, what is the atmosphere like at that fomc meeting . The transcripts are made public five years later. People must be conscious of that. Is it formal, or do sometimes people say things that surprise you . What is it like . We are in a very elegant and historic room, seated around a massive board table, and i think the elegance of the room and its gives people the feeling intensified the feeling that they would in any event have that we are here to do important business, and the decisions we make our consequential. Certainly, there is a sense of seriousness. We have been listening to fed chair janet yellen. She is speaking with former boe governor mervyn king, kind of just giving a recap of some of the memories of her career at the fed as the chair. Have comelines that out, her saying, so far, so good on the Balance Sheet rollout off rolloff. Just a reminder that while we are taking a short momentary break, you can continue to watch fed chair yellen on live go on the bloomberg terminal. If you want to continue to watch the conversation, log on to your bloomberg, and you can do so. Lets have a quick conversation about what we are hearing so far and about the legacy of janet yellen. We have kathleen hays. Also, bluebird businessweek editorerg Businessweek Peter coy. Largely speaking, her legacy will be seen as positive. Peter i think she can leave with her head held high. She achieved a lot. In a veryed it resolute, steady way. Look at what she did. She took the economy that was recovering from the worst financial crisis we have had since the Great Depression and kept it on the track and fought off people who said, lets end this. There were people who were worried that the economy would be overstimulated. Because she was a prominent labor economist with deep knowledge of how the labor market works, she had the selfconfidence to say, no, i dont think that is the right thing to do. We should keep the stimulus going, both on the Interest Rates and the quantitative easing, long pass the time when other people said, we are going to have soaring inflation. Inflation is still below the 2 target. She has been proven right on that multifull. Betty she has been. Its interesting. This conversation clearly is , butof a retrospective market watchers are still looking to see if she could say anything that will move the markets. Kathleen they are starting on where shes been and what its like to be at the fed. That is interesting. Now she will be able to talk we hope she will write the book, talking about the inside story, but i expect as this conversation continues, and we are going to be monitoring it for the rest of the evening on Bloomberg Television i think mervyn king will be getting into some of the big issues. She said, we cant get trapped by our forecast. The forecast has been for inflation to go to 2 . You will see that there is a redline that shows the 2 target and a blue line that shows you the headline inflation rate, and theres a white line that shows you the core rate, a long way from 2 . Let me show you another chart here. See i think i can switch it myself the expectation is that labor markets are so tight that inflation has to rise. It still isnt happening. Unemployment is low. Inflation is low. As janet yellen gets into these final few weeks of her time, as she speaks to mervyn king, if the labor market side of her doesnt come out more, and janet yellen might get onboard with ben bernanke and others who say, we have to rethink this inflation target. As fed chair, she he would to that path, hewed to that path. Some are saying, maybe thats a good thing why jayt y powell is coming in. Its interesting that she mentioned how important it was for the fed to keep an open mind. You have to look at the yield curves in the u. S. As well as europe. I have a chart that shows this. If we take a look at the german yield curve against the fed, five years forward, mario draghi going through a better strategy at keeping his cards close and winning this race in stoking those Inflation Expectations. When it comes to fed transparency, is it really, less is more . Peter excellent question. My feeling is that janet yellen strongly committed to the idea of open communications. Before she became chair, that was her commission. She was assigned by ben bernanke to lead that effort. Her speaking to congress, speaking to journalists, constantly being out there. I think that might have been one of her strong points. She has brought along a potentially fractious committee. Ith her as you can see as she sits there, she is a calm person, steady. I would not predict that she is going to say anything in the last couple of months that is going to surprise the markets. Shes feeling like shes coming down to the end of her term. Shes going to hand over the baton to jay powell. If anything is going to happen that is new, it will be under his watch, not hers. Yvonne stick with us here. We are may be going to dip back into that conversation at nyu stern business school. That was kathleen hays. I also want to thank economics editor peter coy. Later on bloomberg, we are discussing issues around rising populism and the perceived threat of globalization at the global asian global dialogue. Bloombergence adjoins to share his views on the growth of developing countries and the convergence between advanced and emerging economies. That is at 10 10 hong kong time, 9 10 eastern. Then james bachus joins us to discuss the role of the wto in globalization. Thats at 11 40 hong kong time. We will speak with dr. Patrick low on the role of the forum and how he sees trade tensions around the world developing. This is bloomberg. Yvonne this is daybreak asia. Yvonne im yvonne man in hong kong. Lets get a check on asianpacific markets of the headline over night was the s p hitting yet another 100point milestone. We are looking at comments coming out from janet yellen at nyu, saying they are reasonably close to their goal. Favorablying markets benefiting from the leadin that we saw from wall street. Take a look at the australian session, just getting underway, and we have seen the aussie, in particular, hovering around those fivemonth lows. Stocks are up about 0. 5 . Robeard from rba governor lowes saying there is not a case to move rates. Lets take a look at how things are setting up for japan, as well as korea. Checking futures in chicago, it looks like we could be seeing another good rebound in tokyo. Dollaryen, we are seeing yen strength overnight, 112. 47. Betty lets take a look at the mexican peso quickly, because it is falling on headlines coming out from the u. S. Trade representative light highs are saying, theres no evidence that canada and mexico will seriously engage in nafta talks. This is a statement he released after the fifth round of negotiations caused a stalemate parties,all three mexico, canada, and the united states. He says he still hopes for meaningful nafta progress before the end of the year, but still, a lot of issues to contend with, the socalled rules of origin. Thats a big issue between the u. S. And mexico. Some analysts are saying its because lighthizer and some of the senior officials have not been part of the negotiations. That is partly why you are seeing this stalemate. To themeantime, we turn latest record close on wall street and the lack of progress on nafta negotiations. In su to bring keenan who has more, and Goldman Sachs is sounding bullish . its interesting that they were among the last to take their projections up. 2800. Re now saying above we looked at the market close, on track to rise above 2600. There are new forecasts, which we will get to. If we go into some of the big movers, earnings continue to be this rise. , as does you are seeing a lot of the chip stocks come on strong. Its interesting to note that time warner, even though there was a bearish story coming out on the Justice Department coming in and putting blockades up, the case was assigned to a judge viewed as mergerfriendly who approved the comcast deal. Bloomberg, inthe ,ine with the goldman forecasts they are citing an expansion of profits and valuations as a reason to take things higher. You will see that s p forecasts from strategists have been moving higher. This is the blue marked as the purpleprice estimate is where the s p 500 is now, and you get forecasts from strategists as a whole in the middle. Goldman is saying investors can be reassured by the durability of the current economic cycle. A lot of the things we are seeing, goldman says, are in keeping with the rebound from a financial crisis. Yvonne even convincing some of the bears that this rally has serious legs. Hewlettpackard enterprise, after hours, they missed on earnings, but the big news was that the ceo was stepping down. Su this came as a bit of a surprise in terms of the stock initially going lower, although it rebounded as we got into the details from the conference call. You will see the stock up i about one third. A lot of the news out of hpe, this is the Enterprise Hardware unit to that was spun off, had to do with the profit view missing estimates, so that is why shares were down initially. The estimate from analysts was . 27. Ceo meg whitman will step down on february 1. She is going to be succeeded by president antonio neri. The estimate was for 7. 77 billion. Its interesting to see how that will play out for u. S. Trading. The stock has had a lot of crosswinds. Lets take a look at signet jewelers, which was a big mover, down from 30 . What you are looking at is the shrinking market for macys. Comparable sales have declined for 11 straight months. Macys does have a plan that makes it somewhat optimistic about the holiday season. Yvonne thank you. Lets get back to the Nyu Stern School of business where fed chair janet yellen is speaking with the former bank of england governor mervyn king. Talking about the risks to policy, which yellen said are twosided she said tightening too fast could strand inflation below 2 . Inflation expectations may be drifting down, and she doesnt think expectations have trusted down much, that she mentioned hiking too slowly also has risks , which could overheat jobs, and she doesnt want a boombust policy. Say the objectives are twofold. First, a powerful, independent institution that controls key Economic Policy tools in a Democratic Society has an obligation to communicate to the public and to members of congress to make clear what its doing, what the objectives of policy are, and what the logic is of the policies that are being followed. This is a matter of transparency, accountability, and legitimacy of an organization that has been given a great deal of responsibility and independence to carry it out. Second, i would say communication is extremely important in making policy effective. What Market Participants and members of the public think the future holds in store matters andtly to how they behave actual market conditions. Its important to communicate clearly to markets and the public so that the expectations that Market Participants form are one attempt to enhance the effectiveness of policy. Communicating clearly that we have an inflation objective, that we are committed to an inflation objective, that its 2 , most Central Banks these days do that, but i think a record of good performance and that clear commitment has helped anchor Inflation Expectations around 2 . ,hat has been important because not only has it helped to keep inflation stable in most advanced economies, but its also given Central Banks much more freedom to use Monetary Policy to focus on employment. For example, if you have a negative oil shock, one that raises oil prices and temporarily boosts inflation, it would be a bad thing if the central bank had to tighten Monetary Policy because of a burst of inflation that is temporary. That is janet yellen. They are speaking at the Nyu Stern School of business, talking more about the markets and the economy, of course. Shes mostly stating that tightening too fast could strain inflation below 2 , continuing how to keep an open mind and not be hemmed in by forecasts, and also saying persistently low inflation leaves the fed fewer tools when it comes to a crisis, a crisis we have not had since 2008. Is tesla facing a crisis . Tesla is building a new sports car that goes from zero to 60 in under two seconds. Bloomberg data is saying that tesla is burning money at about eight thousand dollars a minute to ramp up production of the allimportant model 3, and at that rate, it would exhaust its current cash pile by next august. With us is our reporter who helped to crunch those numbers. 8,000 a minute why . Its a lot of money, isnt it . They are trying to ramp up production of this model threecar to 5000 a week, and they are trying to build the machinery that is required, the tooling, the services around it. That is where a lot of the money is going. Real quickly here, should investors be worried about these numbers . If you are a debt investor, definitely, you should be worried. If you are a shares investor, you can ride the train longer. We have to remind people this company has missed a lot of targets. Whether they get to that number by the time they say they will, who knows . Yvonne thank you, nabila ahmed. Weve got to keep that stomach when it comes to some of the volatility when it comes to the cash. Plenty more to come on daybreak asia. This is bloomberg. Yvonne 7 30 a. M. Wednesday in hong kong. Youre 30 minutes away from asias first major market open. Beautiful blue skies this morning. Yvonne. Orgeous, it is 6 30 p. M. Tuesday in new york as we prepare for our thanksgiving feast on thursday. Markets did close higher today, and of course, we are continuing to monitor janet yellen and her remarks at nyu. I am betty liu in new york. Yvonne im yvonne man in hong kong. You are watching daybreak asia. Lets get to the first word news jessica ica summers p hewlettpackard slumped on news that Ceo Meg Whitman is leaving. She will step down on february 1, to be succeeded by president antonio neary. Whitman became ceo in september of 2011. Hpes fourthquarter revenue missed estimates, and its firstquarter earnings per share forecast was below analyst expectations. Pai hasrman ajit proposed and a Net Neutrality rules, handing a victory to broadband providers like at t and comcast. Pai set december 14. That includes a ban on fast lanes and gives Quicker Service to content providers willing to pay extra. The Trump Administration has sanctioned three Chinese Trading Companies to disrupt the funding of kim jonguns nuclear program. Treasury secretary Steven Mnuchin says action is being taken against one individual, 13 entities, and 20 vessels. Nine of the firms sanctioned are publicly traded. A senior minister says singapores Wealth Management industry has not seen