Transcripts For BLOOMBERG Bloomberg Markets Middle East 2017

Plan enters a crucial week. Can the president get a policy win before the year is out . 4 00 a. M. T 00 a. M. , if you are in london. I am tracy alloway. We are at the start of another trading week here in the uae. Let us take a look at how u. S. Markets closed on friday. It was not a bad day for u. S. Equities. With the spx closing up about five points, helped by u. S. Retailers. It was black friday in the u. S. We saw the Retail Stocks push the index up, including macys. Macys is the sixth best performer i on friday. Amazon was the second best. Let us talk about the dollar because the dollar continues to slide. Since been sliding wednesday, now at its lowest level since eight weeks. He opposite story for the euro the euro now at the strongest in about two months. It looks like germany might be able to get past the political impact we were discussing last week. Fascinating moves. Here are some other Asset Classes we have been having our eyes on. Take a look at u. S. 10 year. 34, modestly lower than a shortened session. Crude oil gaining some strength. It looks like a deal taking shape. 63, of 86, half of 1 . We have been in that range for the third week now. Trading out almost double the 100day average according to the latest data. South africas longterm local currency was cut by s p. Moodys gave a warning, but we might see more of a reaction later monday. Tracy were going to be talking about that later on in the show. You have lots of e. M. Stuff together. Definitely. Let us look at the first word headlines from around the world picking up with abu dhabi. They may raise as much as 2 billion from an initial Public Offering. That is according to people with knowledge of the matter. They say the company will price the ipo in a range to two spot 35 22 spot 95. They valued at between eight and nine. Tracy speaking of oil, markets are gearing up for thursdays crucial oil meeting in vienna. Bloomberg learns that opec and russia have crafted an outline of a deal to extend the Production Cut to the end of next year, although both sides are still hammering out the details. Moscow is said to want the extension to include new language that was linked to the side of the curve to the health of the oil market. Pakistan has called in the army to patrol in the capital city. Authorities say the military deployment is a preventative measure after two policemen were killed and several people injured. The government has also suspended the broadcast of all nonstate television channels. This all comes days before pakistan attempt to push through crucial bonds. Tracy Angela Merkel says any Coalition Partner would have to support a balanced budget and broadly probusiness policy. In a speech to members of her christian democratic union, merkel reached out and the clearer terms to the social democratic party. She says the two parties did a good job and worked well together. Ministerk. Prime theresa may has a new offer on brexit if she wants to break the deadlock negotiations before the end of the year. Tusk has have weighed in. May is planning to dine with the European Commission president , saying that now is because they critical milestone for this brexit conversation. President trumps tax plan is entering a crucial week. Senate Republican Leaders plan a make or break floor vote on their bill as soon as thursday. Democrats are expected to try to delay or derail the measure. The gop must hold together at 52 vote votes from its majority in order to prevail. Trump is scheduled to address Senate Republicans on tuesday afternoon about taxes and the legislative agenda for the rest of the year. The Global Ratings have cut south africas global currency. To junk. We pointed to this at the beginning of the show. S p said south africas economic decisions have largely focused on the distribution rather than the growth of national income. The consequence is as a an external connecticut competitiveness has eroded. Egypt has raised security alerts to the highest level after it emerged the Islamic State may have been behind the mosque attack that left more than 300 people dead. This is the most lethal thing single assaults in the countrys recent history. The attackers had the isis flag during the attack, carried out by 25 or 30 militants. Let us get some more perspective. Good to have you on the program. This is a country that depends heavily on tourism. It depends on remittances from abroad and the suez canal or by train. It is sensitive to a bent of this magnitude. Before we get into the economics, i want to talk about the political side. Is this possibly an inflection point, given the number of people who have died . Sure. It is a truly shocking event in terms of the death count that has come out of it. Egypt has gone through things on the Security Side of the religious side. For now, i think we should view it as an isolated event and see where things go. They came out very strongly and said they will ramp down hard on this. I think we should just take a moment and see where things progressed from here before sort of jumping to too many conclusions. The question becomes how investors should look at this story. You are saying look at it as an isolated event. I went back to see the last major event in 2015 2016. It is kind of an interesting one. If youre looking at it and you go back a year so well must have to view this as a timeline back, egypt a year or very few Foreign Investors have advertised for egypt. On dollars controls you have capital controls on dollars out of the country. The security situation was a mess. Just over arves year ago work at 20 billion. Today they are at 36 billion. The 12 billion program, half of it has either been dispersed or approved. Things are looking good. Even if we talk about ourselves as a house, we participated in both egyptian securities on the equity side and on the fixed income side we participated from august onward into the local market, the treasury options. Every week, there are two treasury options. On a tuesday and a thursday. Interestingly, today is the ninemonth option. That would be a key once a look at in terms of foreign participation. Week, the yield on those was still 18 and local terms. That would be an interesting one to watch. We will both be watching that one. We know the egyptian president has already shuffled his top security. What are the chances these Security Issues become a distraction for him . And it means maybe he takes his eye off the ball for some of the reforms that he is been pushing for. Lets the danger is always that danger is always there. If you look back to the other story you covered this morning, pakistan, they have a similar situation in terms of security. One of the things that has helped pakistan over the last few months to a year has been improving the security situation. Agrees one thing that i with you. He cannot afford to take his eye off the ball in that sense. That is where we have to see if this remains an isolated event or if there are more things here. You are staying with us. Trillionad, trump 1. 4 plan. T we discuss that later in the show. All eyes are on oil ahead of thursdays big meeting in vienna. We will break down the different scenarios and the details that go along with that. This is bloomberg. Loomberg. This is Bloomberg Markets middle east. I am tracy alloway. Let us get you up to speed with the latest business flash headlines. The latest firm to boycott the tobacco industry. The french bank will hold transactions related to this sector and aggressively disengage from relationships with tobacco clients. Bank of new zealand is also shutting sectors they think are unethical or socially responsible. Tracy jeff bezoss fortune has hit the 100 billion market thanks to black friday. His worth shot of 2. 4 billion jumped. Nline retailers analysts estimate Online Purchases for the day are up 18. 4 over last year with amazon taking an outside share of spending. Billionaire to build a 12figure net worth since bill gates back in 1999. Isa chinese conglomerate facing swiss regulator rules that it provided false information and failed to disclose its executives theyve been asked to look if the group complies with minimum price rules. That was your Bloomberg Business flash. Let us talk a little bit about the oil markets, specifically about what is going on. Theres a lot to cover here. Tracy we are so much going on. We have that opec meeting in vienna. Closer to home, we do have news that adnoc is planning this ipo of its gas distribution business. We have sources telling us the initial price guidance overnight , it looks like they are aiming for a valuation of 8 billion to 10 billion. The question is how do you value a company that has a virtual monopoly on this particular market and has no listed peers . A lot of people were saying if you look at the numbers you should be getting a valuation closer to 5 billion. That does not factor in things like taxes. The monopoly position in the market. In a nutshell, so many factors to discuss here. Let us discuss them with our guest. We have the Senior Executive officer. Joining us is the founder and president of nasser sadie and associates. Maybe to lay the groundwork, you can tell us how important is this for abu dhabi . This is huge. If you think about it, we or theou look at the adx, market or the index is very heavy from a banking and real estate point of view. This is the first real petroleumlinked market or issue that has come to the market. That is, huge given this region is all about oil. I know we try to diversify. This amongst the investors and Retail Investors is huge. Point, the monopoly. Ituation, this makes it a real absolute cash cow the issue is what plans does the company have in terms of growth Going Forward . Heres what i struggle with. We have them develop an ipo which did not meet expectations. It was disappointing to say the least. You look at the general environment in this part of the world. His investor friendly if you come here to this how is this a convenient time to go ipo . I just do not get it. I completely agree with you. This would take years in the making or at least months. If you take a step back and look ago,four to six weeks everything seemed rosy. Since then, geopolitical tensions have risen. Those of clouded things for sure. The if you look at developments ipo, when the book started building, it looks very rosy. They got it over the line. This one i feel is slightly different. I think just because of the nature of it and the fact that not many investors can get exposure to that sector, hsould should make this go a lot easier. Tracy letters from you into the discussion. We have the opec meeting coming up in vienna. Markets definitely expecting a deal to get extended. If you look at the positioning, we still have close to record longs in brent. How are you viewing that meeting . Is there a possibility that markets get disappointed if they do not get exactly what they want . The choices are very limited. You have russia a russia opec coalition now, and they do not have to expand. Otherwise, i think you will see oil prices starting to decline again. The big factor, of course, is not so much opec and russia but it is really shale oil in the u. S. Last week, u. S. Production was running at 9. 7 Million Barrels per day. Shale is up, u. S. Is exporting. I think those are the important factors. Opec and russia have got to look at who is gaining from their lack of contributions to the market. If it is iran, iraq, libya perhaps coming back. Above all, it is the u. S. The longer you tried to withdraw from the markets, the greater the share of the number of producers. Give us a sense of the project three of oil prices. 1. 8 for runs last week. We pulled this up here. This is for wti. Is reachingthe ban, the upper limits, it could be a sign that it is reaching this territory. It is a fantastic indicator. Also that the advance it has probably gone too far. If they go ahead with an extension, where do oil prices go . I think the extension is already priced in. It is already pricing in the fact that they expect opec to take a decision to keep them where they are. U. S. Producers do not have to take that into account. Neither do other producers, like canada or other nonopec producers. I think your chart is right. I am not a technical analyst, im an economist and we do not believe in these things. That is a very strong statement. Nasser i prefer to look at ai. The trend is very clear. An eye we have to keep on is shale. When you talk about Oil Prices Running 60 per barrel, they are making over 20 per barrel. That is compensating for any losses they made. Tracy you have already seen a lot of them walking in profits. N the future up next, we look ahead to a big week in the u. S. With trump suffer a test and the latest reading on economic growth. This is bloomberg. Tax plan is trumps entering a crucial week. Senate Republican Leaders plan a make or break floor vote on their bill as soon as thursday. Democrats are expected to try to delay or derail the measure. The gop must hold together at least 50 votes from its thin 52vote majority. Meanwhile, we have the second reading of Third Quarter readings on wednesday. That is expected to show that u. S. Growth is stronger than expected. Its expenses come in at 3. 2 . Tracy the confirmation hearing for jay powell begins in washington on tuesday. Powell favors gradual interestrate increases was nominated by President Trump this month. He will replace janet yellen as head of the central bank. S. T us bring in our guest, nasser, let us start with you. Im curious. It feels like inflation is sort of the wildcard for the u. S. Outlook. If you look behind me, you can see the fed has consistently failed to deliver on its 2 target. What are the chances powell has better luck here . Nasser i do not think you will see inflation picking up rapidly in the u. S. Very soon. I think the fed is going to have to be more realistic. Nobe there talking about longer an inflation target, theyre are talking about gradual increases in prices in might be the beginning of a change in policy. We are not think Commodity Prices or cpis. Whether you are getting the inflation is on acid prices. Assets prices. The liquidity has just meant that depth stop another asset prices have risen, including housing. Look at that. That is where the inflation is. S have never come around to agreeing on whether the inflation targets or any other central bank should include assets prices. Increasingly, we should be looking at asset prices as well as cpis or ppis is a target. A good chunk of the euphoria we saw in u. S. Equities came off the back of the promise of u. S. Fiscal reform. Enzi regulation as well. In terms of the tax cuts, you look at what the folks of jpmorgan are saying, theyre saying investors out there are only giving it a 20 or 30 chance of tax cuts passing. They say that is too pessimistic. Where on the spectrum do you stand . On the tax reform side, the markets are kind of not sure where it is going to go ahead. 20 or 30 seems a bit like on my side. I think some kind of reform will go through. We already sell the house version of were ready saw the house version of the bill. What we are thing on the markets becausepective of that, the rest of the fundamentals are so strong, the market is just powering ahead. It doesnt seem to be anything that puts a roadblock in its way. This week, a whole series of with verye come out positive outlooks for the 2018 market in their eyes. For the tax reform. That is definitely exacerbating the ongoing pain with the yield curve. Metric in terms of the story around u. S. Treasury sets it to end tenure spreads. Spreads. D 10year is that going to continue narrowing . Nasser i think so. I think you have a very low, longterm yield curve. What is happening now of course is that qe is no longer in place. Withdrawing. Where they are withdrawing is at the lower end of the yield curve. These treasuries are being bought again. What i think youll see is a graduate opening up of the yield curve, no longer the flattening you have seen. Tracy very quickly, your take on the yield curve. This is a question we ask every guest. Particularly in the recent weeks, that has been the buzz everywhere. People are looking and seeing what is happening. What you are seeing is the 10 year have come down 10 basis points and the two year has gone up. The flatness has come in very quickly. The idea was or the thought was when this new administration to cold, Steve Mnuchin came into the treasury, that you would be seeing a lot more of a long issuances. That has not happened. If you look at the options that have come through, the average maturity has been around 17 months. Just shy of six years. Like nasser was saying, most of the issues have been of the shorter end. Tracy both of you, stay with us. Coming up, from bad to worse and could the threat of yet another downgrade for south africa lead to a global selloff or just not emerging markets . This is bloomberg. Youre watching Bloomberg Markets middle east. Let us check in on the first word headlines from around the world. Egypt, the country has raised its security alerts thehe highest level after Islamic State may have behind the mosque attacks. This is the most lethal single us all in the countrys recent history. It shows the attackers wasting the flag during the attack. It was carried out between 25 and 30 militants according to the Public Prosecutor office. May raise as much as 2 million from an initial Public Offering of its fuel retailing unit according to people with knowledge of the matter. They say the company will price the ipo in a range of 2. 35 to 2. 95 a share. Based on that, the unit is 8 billion anden 10 billion. About crude is holding at 63 a head of the crucial oil meeting. Bloomberg learned the cartel and russia have crafted the outline of the extender custody of next year. Both sides are still hammering out the details. They want extension to include new language that would show the side of the curves to the oil market. The german chancellor says any Retail Stocks<\/a> push the index up, including macys. Macys is the sixth best performer i on friday. Amazon was the second best. Let us talk about the dollar because the dollar continues to slide. Since been sliding wednesday, now at its lowest level since eight weeks. He opposite story for the euro the euro now at the strongest in about two months. It looks like germany might be able to get past the political impact we were discussing last week. Fascinating moves. Here are some other Asset Classes<\/a> we have been having our eyes on. Take a look at u. S. 10 year. 34, modestly lower than a shortened session. Crude oil gaining some strength. It looks like a deal taking shape. 63, of 86, half of 1 . We have been in that range for the third week now. Trading out almost double the 100day average according to the latest data. South africas longterm local currency was cut by s p. Moodys gave a warning, but we might see more of a reaction later monday. Tracy were going to be talking about that later on in the show. You have lots of e. M. Stuff together. Definitely. Let us look at the first word headlines from around the world picking up with abu dhabi. They may raise as much as 2 billion from an initial Public Offering<\/a>. That is according to people with knowledge of the matter. They say the company will price the ipo in a range to two spot 35 22 spot 95. They valued at between eight and nine. Tracy speaking of oil, markets are gearing up for thursdays crucial oil meeting in vienna. Bloomberg learns that opec and russia have crafted an outline of a deal to extend the Production Cut<\/a> to the end of next year, although both sides are still hammering out the details. Moscow is said to want the extension to include new language that was linked to the side of the curve to the health of the oil market. Pakistan has called in the army to patrol in the capital city. Authorities say the military deployment is a preventative measure after two policemen were killed and several people injured. The government has also suspended the broadcast of all nonstate television channels. This all comes days before pakistan attempt to push through crucial bonds. Tracy Angela Merkel<\/a> says any Coalition Partner<\/a> would have to support a balanced budget and broadly probusiness policy. In a speech to members of her christian democratic union, merkel reached out and the clearer terms to the social democratic party. She says the two parties did a good job and worked well together. Ministerk. Prime theresa may has a new offer on brexit if she wants to break the deadlock negotiations before the end of the year. Tusk has have weighed in. May is planning to dine with the European Commission<\/a> president , saying that now is because they critical milestone for this brexit conversation. President trumps tax plan is entering a crucial week. Senate Republican Leaders<\/a> plan a make or break floor vote on their bill as soon as thursday. Democrats are expected to try to delay or derail the measure. The gop must hold together at 52 vote votes from its majority in order to prevail. Trump is scheduled to address Senate Republicans<\/a> on tuesday afternoon about taxes and the legislative agenda for the rest of the year. The Global Rating<\/a>s have cut south africas global currency. To junk. We pointed to this at the beginning of the show. S p said south africas economic decisions have largely focused on the distribution rather than the growth of national income. The consequence is as a an external connecticut competitiveness has eroded. Egypt has raised security alerts to the highest level after it emerged the Islamic State<\/a> may have been behind the mosque attack that left more than 300 people dead. This is the most lethal thing single assaults in the countrys recent history. The attackers had the isis flag during the attack, carried out by 25 or 30 militants. Let us get some more perspective. Good to have you on the program. This is a country that depends heavily on tourism. It depends on remittances from abroad and the suez canal or by train. It is sensitive to a bent of this magnitude. Before we get into the economics, i want to talk about the political side. Is this possibly an inflection point, given the number of people who have died . Sure. It is a truly shocking event in terms of the death count that has come out of it. Egypt has gone through things on the Security Side<\/a> of the religious side. For now, i think we should view it as an isolated event and see where things go. They came out very strongly and said they will ramp down hard on this. I think we should just take a moment and see where things progressed from here before sort of jumping to too many conclusions. The question becomes how investors should look at this story. You are saying look at it as an isolated event. I went back to see the last major event in 2015 2016. It is kind of an interesting one. If youre looking at it and you go back a year so well must have to view this as a timeline back, egypt a year or very few Foreign Investors<\/a> have advertised for egypt. On dollars controls you have capital controls on dollars out of the country. The security situation was a mess. Just over arves year ago work at 20 billion. Today they are at 36 billion. The 12 billion program, half of it has either been dispersed or approved. Things are looking good. Even if we talk about ourselves as a house, we participated in both egyptian securities on the equity side and on the fixed income side we participated from august onward into the local market, the treasury options. Every week, there are two treasury options. On a tuesday and a thursday. Interestingly, today is the ninemonth option. That would be a key once a look at in terms of foreign participation. Week, the yield on those was still 18 and local terms. That would be an interesting one to watch. We will both be watching that one. We know the egyptian president has already shuffled his top security. What are the chances these Security Issues<\/a> become a distraction for him . And it means maybe he takes his eye off the ball for some of the reforms that he is been pushing for. Lets the danger is always that danger is always there. If you look back to the other story you covered this morning, pakistan, they have a similar situation in terms of security. One of the things that has helped pakistan over the last few months to a year has been improving the security situation. Agrees one thing that i with you. He cannot afford to take his eye off the ball in that sense. That is where we have to see if this remains an isolated event or if there are more things here. You are staying with us. Trillionad, trump 1. 4 plan. T we discuss that later in the show. All eyes are on oil ahead of thursdays big meeting in vienna. We will break down the different scenarios and the details that go along with that. This is bloomberg. Loomberg. This is Bloomberg Markets<\/a> middle east. I am tracy alloway. Let us get you up to speed with the latest business flash headlines. The latest firm to boycott the tobacco industry. The french bank will hold transactions related to this sector and aggressively disengage from relationships with tobacco clients. Bank of new zealand is also shutting sectors they think are unethical or socially responsible. Tracy jeff bezoss fortune has hit the 100 billion market thanks to black friday. His worth shot of 2. 4 billion jumped. Nline retailers analysts estimate Online Purchases<\/a> for the day are up 18. 4 over last year with amazon taking an outside share of spending. Billionaire to build a 12figure net worth since bill gates back in 1999. Isa chinese conglomerate facing swiss regulator rules that it provided false information and failed to disclose its executives theyve been asked to look if the group complies with minimum price rules. That was your Bloomberg Business<\/a> flash. Let us talk a little bit about the oil markets, specifically about what is going on. Theres a lot to cover here. Tracy we are so much going on. We have that opec meeting in vienna. Closer to home, we do have news that adnoc is planning this ipo of its gas distribution business. We have sources telling us the initial price guidance overnight , it looks like they are aiming for a valuation of 8 billion to 10 billion. The question is how do you value a company that has a virtual monopoly on this particular market and has no listed peers . A lot of people were saying if you look at the numbers you should be getting a valuation closer to 5 billion. That does not factor in things like taxes. The monopoly position in the market. In a nutshell, so many factors to discuss here. Let us discuss them with our guest. We have the Senior Executive<\/a> officer. Joining us is the founder and president of nasser sadie and associates. Maybe to lay the groundwork, you can tell us how important is this for abu dhabi . This is huge. If you think about it, we or theou look at the adx, market or the index is very heavy from a banking and real estate point of view. This is the first real petroleumlinked market or issue that has come to the market. That is, huge given this region is all about oil. I know we try to diversify. This amongst the investors and Retail Investors<\/a> is huge. Point, the monopoly. Ituation, this makes it a real absolute cash cow the issue is what plans does the company have in terms of growth Going Forward<\/a> . Heres what i struggle with. We have them develop an ipo which did not meet expectations. It was disappointing to say the least. You look at the general environment in this part of the world. His investor friendly if you come here to this how is this a convenient time to go ipo . I just do not get it. I completely agree with you. This would take years in the making or at least months. If you take a step back and look ago,four to six weeks everything seemed rosy. Since then, geopolitical tensions have risen. Those of clouded things for sure. The if you look at developments ipo, when the book started building, it looks very rosy. They got it over the line. This one i feel is slightly different. I think just because of the nature of it and the fact that not many investors can get exposure to that sector, hsould should make this go a lot easier. Tracy letters from you into the discussion. We have the opec meeting coming up in vienna. Markets definitely expecting a deal to get extended. If you look at the positioning, we still have close to record longs in brent. How are you viewing that meeting . Is there a possibility that markets get disappointed if they do not get exactly what they want . The choices are very limited. You have russia a russia opec coalition now, and they do not have to expand. Otherwise, i think you will see oil prices starting to decline again. The big factor, of course, is not so much opec and russia but it is really shale oil in the u. S. Last week, u. S. Production was running at 9. 7 Million Barrels<\/a> per day. Shale is up, u. S. Is exporting. I think those are the important factors. Opec and russia have got to look at who is gaining from their lack of contributions to the market. If it is iran, iraq, libya perhaps coming back. Above all, it is the u. S. The longer you tried to withdraw from the markets, the greater the share of the number of producers. Give us a sense of the project three of oil prices. 1. 8 for runs last week. We pulled this up here. This is for wti. Is reachingthe ban, the upper limits, it could be a sign that it is reaching this territory. It is a fantastic indicator. Also that the advance it has probably gone too far. If they go ahead with an extension, where do oil prices go . I think the extension is already priced in. It is already pricing in the fact that they expect opec to take a decision to keep them where they are. U. S. Producers do not have to take that into account. Neither do other producers, like canada or other nonopec producers. I think your chart is right. I am not a technical analyst, im an economist and we do not believe in these things. That is a very strong statement. Nasser i prefer to look at ai. The trend is very clear. An eye we have to keep on is shale. When you talk about Oil Prices Running<\/a> 60 per barrel, they are making over 20 per barrel. That is compensating for any losses they made. Tracy you have already seen a lot of them walking in profits. N the future up next, we look ahead to a big week in the u. S. With trump suffer a test and the latest reading on economic growth. This is bloomberg. Tax plan is trumps entering a crucial week. Senate Republican Leaders<\/a> plan a make or break floor vote on their bill as soon as thursday. Democrats are expected to try to delay or derail the measure. The gop must hold together at least 50 votes from its thin 52vote majority. Meanwhile, we have the second reading of Third Quarter<\/a> readings on wednesday. That is expected to show that u. S. Growth is stronger than expected. Its expenses come in at 3. 2 . Tracy the confirmation hearing for jay powell begins in washington on tuesday. Powell favors gradual interestrate increases was nominated by President Trump<\/a> this month. He will replace janet yellen as head of the central bank. S. T us bring in our guest, nasser, let us start with you. Im curious. It feels like inflation is sort of the wildcard for the u. S. Outlook. If you look behind me, you can see the fed has consistently failed to deliver on its 2 target. What are the chances powell has better luck here . Nasser i do not think you will see inflation picking up rapidly in the u. S. Very soon. I think the fed is going to have to be more realistic. Nobe there talking about longer an inflation target, theyre are talking about gradual increases in prices in might be the beginning of a change in policy. We are not think Commodity Prices<\/a> or cpis. Whether you are getting the inflation is on acid prices. Assets prices. The liquidity has just meant that depth stop another asset prices have risen, including housing. Look at that. That is where the inflation is. S have never come around to agreeing on whether the inflation targets or any other central bank should include assets prices. Increasingly, we should be looking at asset prices as well as cpis or ppis is a target. A good chunk of the euphoria we saw in u. S. Equities came off the back of the promise of u. S. Fiscal reform. Enzi regulation as well. In terms of the tax cuts, you look at what the folks of jpmorgan are saying, theyre saying investors out there are only giving it a 20 or 30 chance of tax cuts passing. They say that is too pessimistic. Where on the spectrum do you stand . On the tax reform side, the markets are kind of not sure where it is going to go ahead. 20 or 30 seems a bit like on my side. I think some kind of reform will go through. We already sell the house version of were ready saw the house version of the bill. What we are thing on the markets becausepective of that, the rest of the fundamentals are so strong, the market is just powering ahead. It doesnt seem to be anything that puts a roadblock in its way. This week, a whole series of with verye come out positive outlooks for the 2018 market in their eyes. For the tax reform. That is definitely exacerbating the ongoing pain with the yield curve. Metric in terms of the story around u. S. Treasury sets it to end tenure spreads. Spreads. D 10year is that going to continue narrowing . Nasser i think so. I think you have a very low, longterm yield curve. What is happening now of course is that qe is no longer in place. Withdrawing. Where they are withdrawing is at the lower end of the yield curve. These treasuries are being bought again. What i think youll see is a graduate opening up of the yield curve, no longer the flattening you have seen. Tracy very quickly, your take on the yield curve. This is a question we ask every guest. Particularly in the recent weeks, that has been the buzz everywhere. People are looking and seeing what is happening. What you are seeing is the 10 year have come down 10 basis points and the two year has gone up. The flatness has come in very quickly. The idea was or the thought was when this new administration to cold, Steve Mnuchin<\/a> came into the treasury, that you would be seeing a lot more of a long issuances. That has not happened. If you look at the options that have come through, the average maturity has been around 17 months. Just shy of six years. Like nasser was saying, most of the issues have been of the shorter end. Tracy both of you, stay with us. Coming up, from bad to worse and could the threat of yet another downgrade for south africa lead to a global selloff or just not emerging markets . This is bloomberg. Youre watching Bloomberg Markets<\/a> middle east. Let us check in on the first word headlines from around the world. Egypt, the country has raised its security alerts thehe highest level after Islamic State<\/a> may have behind the mosque attacks. This is the most lethal single us all in the countrys recent history. It shows the attackers wasting the flag during the attack. It was carried out between 25 and 30 militants according to the Public Prosecutor<\/a> office. May raise as much as 2 million from an initial Public Offering<\/a> of its fuel retailing unit according to people with knowledge of the matter. They say the company will price the ipo in a range of 2. 35 to 2. 95 a share. Based on that, the unit is 8 billion anden 10 billion. About crude is holding at 63 a head of the crucial oil meeting. Bloomberg learned the cartel and russia have crafted the outline of the extender custody of next year. Both sides are still hammering out the details. They want extension to include new language that would show the side of the curves to the oil market. The german chancellor says any Coalition Partner<\/a> would have to support a balanced budget and broadly probusiness policy. In a speech to members of her christian democratic union, merkel reached out in the the socialrms to democratic party, who are remain opponents. She said the parties had done a good job and works well together during the grand coalition that governed germany for the past four years. Theresa may has days to come up with a new offer on the brexit divorce bill if she wants to break the deadlock before the end of the year. Donald tusk wade and read he is giving her until december 4 to make extra efforts to discuss this. As is planning to design a critical milestone for brexit. Tracy President Trump<\/a>s tax plan is entering a crucial week. Senate Republican Leaders<\/a> plan a make or break floor vote on their bill as soon as thursday. Democrats are expected to try to delay or derail the measure, and the gop must hold together at least 50 votes from its thin 52 vote majority. Trump is scheduled to address Senate Republicans<\/a> on tuesday afternoon about taxes and the legislative agenda for the rest of the year. Lets talk a little bit about what is going on in terms of Political Uncertainty<\/a> in emerging markets. First, what is happening in south africa because the Global Rating<\/a> cut the countrys debt score to junk on friday. Hey threatened to follow suit pakistan can also create a sense of unease with overseas bond yields days away. They are calling the army to tackle as long as islamic protests. The story of south africa, arguably exacerbated once again from the domestic political and economic challenges. Nasser i think it is a matter of politics. You need a big change in south africa on the political side. The story is about the stories about corruption and abuse of power are still there. That is affecting economic outcome and investments. Investment is down at practically historical lows. Real investment. Political uncertainty has to be resolved. At the emerging markets, specifically some of the more recent developments, coming out of shockwaves from south africa to turkey and to some of the others over the last two weeks . Salman this is been a great story. No question about it. On the debt side as well as the equity side. It is fantastic. Remainlook continues to on a fundamental basis pretty most of the houses that are coming out were projections for next year and are still this. G vessel remains there but yes. Uncertainitically point of view, whether you are looking at egypt or pakistan pakistan, for example, they just got on the roadshow and are looking to issue the bonds. This is a country that has had problems in the past from a Security Point<\/a> of view but from a Security Point<\/a> of view has been very stable. Now you have issues coming up over the weekend as well as the finance ministry being replaced while he is gone on leave, so to speak. What that does to derail things ittle bit, you have to go we will have to watch. That is one of the things that always remains a risk with em. These uncertainties that might crop out. Tracy speaking of risks and the astounding rally we have seen so far this year, i put together a little chart. This shows stocks measured, emerging market currencies, and the bloomberg dollar denominated emergingmarket Corporate Bond<\/a> index. All of these are up in an astounding amount this year. This is absolutely remarkable. Im old enough to remember two decades ago in a bunch of African Companies<\/a> countries were burned by their overseas borrowings. In terms of those liabilities, should we be worried about being able to pay that back . Are things really different this time . Nasser bachelor only tells part of the story. That chart only tells part of the story. Remember when e. M. s were sold compared to the developed market. The 2017 story is a story about europe, which is growing again, and the story about ems. In e. M. s, what we missed out on was china and asia an. What china is doing in asia is not sure of a phenomenon. Where looking at Political Uncertainty<\/a> in egypt. The real story on emerging markets is in asia. Asia is keeping up. , if you look at all the countries which are strongly integrating into chinas economy, they are doing extremely well, thank you very much. The debt side is perfectly understandable. You have record low Interest Rates<\/a> on a global basis. There is still an enormous liquidity. Be, a bit rich in terms of pricing, but they are benefiting from historically low Interest Rates<\/a>. Tracy what about the soft dollar . How does that play into the e. M. Rally . Salman part of the reason e. M. s has struggled historically, or if we go back in history, as the markets have sort of grown, what ends up continue is ems barring borrowing in bigtime dollardenominated debt. As interest goes up, that is where they struggle or get into trouble. The revenues are coming in local currency, and you have to pay in dollar. This time, what a lot of these countries have managed to do is while they have been growing, they have donned the reforms on their side. Firstly, i think an increase in dollar will not likely to hurt them as much as it has in the past. Secondly, the absolute levels of where the Interest Rates<\/a> are are much lower this time. Youre not going to get to the high singledigit levels anytime soon. This ties back to what is going on in egypt. That is our top story and were watching the ongoing development. You are saying earlier during the break that you disagree with some of the earlier comments. You think that what we saw over the weekend in egypt is much more significant and should not be seen as an isolated incident. Nasser it is very simple. You look at the demise of isis more or less in syria and iraq. Were talking about 40,000 fighters. Hardened fighters. Militants, extremists. Those are likely to spread across the region. Expect trouble, not only in egypt, but maybe in other surrounding countries. I do not view this as an isolated incident. Terroristto happen is what is going to happen is terrorist attacks all over. What i think is most interesting is for once in the past six or seven years, we now have a Political Coalition<\/a> between saudi, uae, turkey, egypt, and others to turn the wave against extremism. I think this particular act is going to mobilize the efforts of all of those countries to fight extremism trade that is a very positive thing for the region. Good to have you on the program. Founder and chief economist. Thank you, as well. Senior executive officer. Let us get you a preview of what her is to come. What there is to come. How one of the worlds oldest securities is holding up. Bitcoin goes ballistic. This is bloomberg. Is bloomberg. Bitcoin has had a stellar year, to put this mildly. The cryptocurrency soared more than 700 . Some investors are not even calling it real gold has had a far less impressive year, but it is still on track for a strong year relative to its performance over the past five for 10 years. Nothing compared to what we saw in the bitcoin fronts. Let us get more respective on the story perspective on the story and try to get an answer as to whether investors should be putting their money into one of the oldest or newest securities around. Aaron oliver joins us around the table. Precious metals consultants. Thank you both for coming on. This is impressive but theres no telling what the volatility in bitcoin. Bitcoin could easily come back down again. Definitely volatility is something. Right now i think one of the things you see is a lot of money coming in. That is really what is driving it up. You see some people that are taking some money off the table, but there is a lot of money coming into this crypto world. You really see it longterm going up, but there will be saturation at some point. Tracy i have to ask the classic question. So much volatility in the bitcoin. I think there is a roundabout 240 billion or 200 50 billion 250 billion around cryptocurrency. Compared to gold, it is still very much a baby. I think it is around 8 trillion worth of physical gold in the world. I think it is still the elephant in the room. Tracy i am wondering if we will have to put the divider between you if youll fight it out on set. Let me see if i can get a little more reaction from you both. The chart behind me is ounces of gold required to buy a bitcoin. I feel a little bit silly every time i bring up this chart, because what is a bitcoin compared to gold . If you look at the amount of bitcoins that will eventually be in existence, 21 million versus 700 2110 trillion worth of gold in the ground. Bitcoin would have to get to 350,000 per coin to equal the amount of gold per ounce. That is what i spent my morning doing. That particular calculation. What do you say to that chart and to the argument that i just made . Aaron one of the things that we just talked about was is new. When it is new, that means money comes in. Gold, money is already there. You see people looking at gold and say maybe this Digital Currency<\/a> is a better way for me to store value. It is faster to transfer, not necessarily bound by borders where you have physical gold. It is something people are trying out. As you see, it is succeeding. Lets take a look at the perspective for our viewers. We put together a graphic to show a has been happening with one of the cryptocurrencies, specifically this one that set a new high last week. Despite that game, the second biggest cryptocurrency trails its two rivals. Bitcoin and bitcoin cash, which has could do bold in cash since it has been created. It has more than tripled. It has been the best year to take bet. How should investors really look at these types . Most people would associate with bitcoin, but there are many others out there. Are we going to see some consolidation or is there no need to consolidate . Aaron this makes it interesting and you talk about cryptocurrencies. Were talking about bitcoin a lot, but that is not the only cryptocurrency out there. While bitcoin was designed to be transferable, the thing about a cerium that is fantastic it therium is that it was designed to be used. There can be tokens, security, as it has been regulated in some of these markets. There is a security behind the token. There is lots of utility behind the newer cryptocurrencies. If you want to revalue, you are looking to invest how things are outside of traditional borders or others that are utility that could be used to buy services that are going to be available in the future. Tracy what about the security question . Last week, we saw a 31 million hack from tether. It is in the cryptocurrency we have seen a history of hacks. That said, i remember gold in the 1930s, the government confiscated gold. That is not necessarily safe either. How should we be thinking about bitcoin and gold as a safe haven . Jeff for me, gold has been a safe haven for 5000 years. Today, it is as relevant. I remember when it came to define the late 1990s and people were saying, the Younger Generation<\/a> in india, they will not be interested in gold. This is a new world. Every indian that gets married, they have a lot of gold. Gold is that safe haven, fundamental store value. Im quite interested in the cryptocurrency, as well. Some people say gold was the original crypto. Maybe it was. Ive no problem with bitcoin. Ive no problem with any of the other cryptocurrencies, because theyre an alternative to paper. It is not an alternative to gold. Actually, i see it is complementary to gold. What i like about the Bitcoin Development<\/a> is that it is a block chain in the instant transfer of ownership. I think if you take golden at a block chain to that, you have a very interest in topic great tracy some people have been doing that if we talk about it we will be here forever. Your response to the hacking issues. Aaron i think security is something that is definitely on the minds of everyone right now, especially whether you are an investor or if you own your own cryptocurrency. If you own your own bitcoin,. You can hang on to your private keep it is incredibly secure. It is not about the security of bitcoin. It is about the security of where your bitcoin is and who is providing your services. If you notice the hacking is actually taking place at individual companies, again, securely, tracy but to the wrong person. As long as you hold onto your private key and do not manage to lose it. Andk you to jeff rhodes aaron oliver. Brickandmortar chains are coming off a generally positive earnings season, Even Department<\/a> stores are finding reasons for hope. Macys and its peers rallied earlier this month after giving an upbeat outlook. Emma chandra spoke with a man who has been steering the turnaround at macys. It is the ceo. we start comparing for the Fourth Quarter<\/a> and black friday is soon as we finish the previous line trade we spend a lot of time previous one. We spend a lot of time making sure we have the right products and convenience. Of nullityings is an to transact online, on a mobile device, and instore. The third thing is having the right experience. Black friday is this national pilgrimage, and having great value but also being in the beat were shopping shopping is happening in the stores, 70 of america shops during the black friday window. Will the customer expect to get deals throughout the year . A number of retail analysts have expressed concerns about pulling in promotional environments and the impact that will have on markets. Does that concern you as well . Jeff macys end of the Third Quarter<\/a> and a very good inventory position. We do not have any carryover of inventory. The concept we have in the values we are giving our all plans and i feel very good. Our inventory is in great shape, and we have good gifts assortment out there. Of retail is higher than last year. We feel good about our offering this year. Emma macys, like many other lightingal retailers, sales. You mentioned your earnings and said they were down for 11 consecutive quarters. What are you doing to turn that around, or is that the client inevitable decline inevitable . Aaron i do not jeff i do not think so. We have had declining store sales but we think we can get a moving again in the right direction. We are focused on that. We are with this wrong digital business. With a strong digital business. That goes back to other things i was saying. Convenience. This customer wants the option if they want to pick up an item in store and have it same day delivered, whatever that might be. We are really focusing on if we have people in our store or all the things she wants to do. If she to pick out something in store the sheep online and if she wants to buy Gift Certificates<\/a> or anything, it is that experience. Customers want to go to a store. The sights, smells, sounds. How you can create that in a department sir is a unique opportunity. Emma what does that experience mean for you . Jeff when you look at this store, this is a Great Laboratory<\/a> for us. How many starbucks do we have . How many different eating locations do we have . How many places where you can try products on . If you want to have your hair done, you can do it here. There are places in communities where they come to the Department Store<\/a> in the have the opportunity. For the community to come together and storms like opportunity for them to come together. Stores like this can do that. Emma you have been closing some stores. You said if year, macys was starting again, the magic number would be more like 225. Can we expect more store closures . What are you doing to make better use of the once you have . Jeff when you think about the types of stores that we have, we have about 250 stores that are in these premium malls. These are malls that are going to stand the test of time. Theres lots of experiences in them. All retailers within the small are the mall are investing in the customer expects it. We of communities across america that are profitable for us. The customers want us to be in business and stay in business. Were focused on how we will grow in those stores too. Two years ago, we made a big decision about closing doors and getting down to the right portfolio. I feel good about our real estate portfolio and where we stand. Emma we should not expect to see more closures . Jeff we announced will close 100 stores. We close 70. There are 30 more to go. There may be properties here and there we will close, but we serve nationally in all communities as a macys brand. The interplay that goes on between Online Business<\/a> and the bricks business is really important. Were a national, on the channel retailer. Expect us to way that very carefully. Weigh that very carefully. Emma theyre looking to unlock value in stores. One of the things they want to see is something you will be doing, perhaps giving over some floors two different businesses. Jeff what i want you to look at is the vitality of this building. This is a premier shopping destination in new york city. Are going too, we do very carefully. We look at every inch of this building and we are looking to monetize it. We or shareholders a great plan. It is a complicated building that will take us time, but i also want to emphasize that our overall real Estate Strategy<\/a> is a work in progress. Let us talk about the other story were watching for you. Abu dhabis stateowned oil maker. They raised 2 million from an initial offering. The company is said to be looking at a pricing in a range of 2. 35. Us get more on the story. Let us get more on the story. Finally some more details. After the development disappointment, how much of site are we going to how much upside are we going to curb out of this . A lot of them are telling us that this is quite a unique type of stock that you can buy in the market. Here in the uae and in the region as a whole. While we did see some sort of stroke or struggle to Price Development<\/a> units here, we saw the stock tankingng in its initial days. Here in dubai, we hear people are quite interested in having this. Especially investors from the uae. To have the stock in the portfolios because you do not have any options in the oil field, especially in abu dhabi. The Stock Exchange<\/a> there, we see very low levels of trading. Liquidity is not very high. This could be an opportunity for us to see revised liquidity. Tracy very quickly, there is another ipo which seems to be experiencing trouble. What is going on with the mall . We have news from bloomberg this week. Mall unit expected ipo is not going anywhere right now because the main person of the group is detained in the ritzcarlton. We should not expect news on that. That is affecting the stock prices of the retainer group traded in riyadh. We saw the stock tanking in november. To10 last week. It is still down quite a bit in the past month and a half. Excellent reporting. Thank you for coming on the program. Let us get you some additional ideas as you gear up for the trading day. Dubai investments will be one of the companies to watch. Sale and transactions. It is part of the trend to acquire real estate assets that focus on the education sector. The value of the deal was not disclosed. Also, keep an eye out for egyptian cigarettes. That is part of the broader story coming out of the egyptian Stock Exchange<\/a>. Shares soared a most a percent on the final trading day last week. Questions remain is that momentum will be sustained. To being will be close added to some of the key global benchmarks. We did not really get much into the as an he the s p story. They used a new model to detect tactical allocation signals. That is generated by quantitative tools. There is take away. Within equities, the model is suggesting the reduction of u. S. Stock allocations from 10 to 20 and increased exposure to government bonds. Tracy they have historically been a bit more bearish on u. S. Equities. We still have guys that are seeing 3000 by the end of next year. We will see if that happens. That is a for this edition of Bloomberg Markets<\/a> middle east. Up next, we have bloomberg real yield. Do not go away. This is bloomberg. I am jonathan with 30 minutes of fixed income. This is bloomberg real yield. Jonathan coming up, the Federal Reserve<\/a> losing conviction in 2018. Europes economy moving but bond yields refuse decline. A route in the chinese bond market as china continues its leveraging push. We begin with a big issue, the treasury curve. 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