Youre getting ownership of a company, some are higherpriced, shorter duration. You may buy something at 85, if they refinance, everything trains up to par. We also have some securities that came out of distressed, become equities, but they have done really become darlings of the mutual fund world yet. That transition creates a value gap that is quite tangible and large. Erik what is the stupidest place to take risk today . Josh that is a hard one for me to say. Im not sure i can give you a good answer but i would avoid being in very longduration low coupon bonds of any sort, particularly of investment grade. There is not a lot of upside remaining in highgrade longduration bonds. Relationshipric between the upside and downside. How do you think things will evolve over the next couple of years . If you were to cast your mind for 12 months, where would you be deploying capital . Monthsver the next six it is hard for me to look out an entire year. You dont know what accident will happen in the market that will create a great eyeing opportunity. In the debt markets, it is the Balance Sheet repair stories. Thingsequity markets, have gotten interesting. One of the reasons is antitrust uncertainty is the highest it has ever been, so it takes a long time for a deal to close. Along the way, the stock market has run up so much. The index is up over 50 since the deal was announced, but the deal was at a fixed price. It is hard to see that closing at that price without renegotiation on the upside. So the upsidedownside of these transactions have changed because of the market. Erik you are doing more of that, as a credit fund . I know you double in other things. W the tax law is a big benefit. You could liquidate the shares and pay a 21 tax, yet the discount inside the Corporate Structure is more like 27. Erik what is the one thing that you are in right now that feels most like that yahoo alibaba trade . Josh we like the time warner, at t trade. Were not concerned about the antitrust issues. If the approval does not happen, we still like the fundamental value of the stock, particularly in light of what happened with fox and disney. I mentioned qualcomm and nxpi. Erik always great to see you here at davos. Josh friedman, the cofounder and cochairman i guess the comanaging partner as well all of the above, canyon partners. Based in los angeles. Right now, however, it is time to go to mark barton and vonnie quinn. Fantastic interview, thank you. Definitely we do some digesting of that later on. We will be heading back to davos in a little bit. Lets check in on u. S. Markets and how they are doing early this thursday session. An interesting day in the markets, a big surge around the old in, the dow and nasdaq up half a percent. Moments ago, lower averages except for the dow. Mix trading action now. Sort of like yesterday where we had intraday volatility. We may see more of the same. We also have a new home sales print for december, a miss, coming in at 625,000 new homes versus the survey at 675,000. That represents a decline of 9. 3 . Not much of an influence on the markets but todays tory appears to be this volatility story. We are seeing volatility among individual movers. Lam research had been up sharply, now down. The semi cap Equipment Company being forecast. Or. Ping still, klatenc the view for lam research has a do with strong memory helping macron. Another interesting area in industrials, caterpillar, Union Pacific. Caterpillar had been howard, now down to present. They Beat Estimates but they are talking about weakness in china in the second half. Investors not liking that. Union pacific down 5 , after the company had an earnings miss. Also lower on the day, the dollar. Lets go into the bloomberg to look at this chart. Dollar indexg daily move. More down days than not. Down about 4 already this year, down for a fourth day in a row. Yesterday, it was Steve Mnuchin talking down the dollar. Today, mario draghi talking up the euro. The dollar on pace for its worst four days since those four days. Another start of week is for the dollar, down 9 last year. Volatility definitely the word of the day. Mario draghi reinstating that morning. , he did notity express any concerns about the level of the euro. What i can tell you, strong euro, weak stock market. The head of the Ecb Press Conference we saw the stoxx 600 rise by a quarter of 1 , but now all 19 Industry Groups lower, down by about half of 1 . This is a chart showing you how strong euro stoxx banks have fared today and ahead of todays meeting. Bond yields rising. The blue line is the euro stoxx index which has risen through its 2015 hi as the yield curve steepens as evidenced by the white line, which is the german 10year 2year yield spread, which is widening today. Lack of comments about the euro positive slant on the euro zone economy. Lets get to the euro. The headline was what he did not say. He mentioned volatility but did not talk about the euro level. Consequently, it went through 1. 25, highest level since the end of 2014. He also said the ecb does not target exchange rates. Its important for growth, inflation. Highest since the end of 2014. The analyst median forecast for the end of this year, 1. 23. We are above that now. Commerzbank is the most bearish 1. 12. 1 expects more cause to stay at present levels until well past the end of net bond purchase. Made upbeat about the strength of recovery. Sees very few chances at all or rate increases this year. I want to so you the german 10year, another fascinating chart in the wake of the ecb news conference. Above 60 basis points. We have risen by four basis points today, breaking through to the highest level since july 2015. Historians will remember that tweet earlier this month from double on capital who wrote in a tweet the yield for the german 10year of bund above 6 would be maximum bearish. We have broken through it and change. We are up to 63 basis points because of the positive slant on b, euro zone economy, because of the lack of commentary on the euro. Will be talking about that but it is back to davos now with President Trump. One of the major topics, trade. Especially important for some of canadas Top Investment firms as nafta negotiations continue with the outcome far from certain. Lets get back to Erik Schatzker. Ceo of am here with the quebecs pension fund. Michael, always great to see you. You are a longterm investor, Everybody Knows that. At the same time, even a longterm investor doesnt want to commit capital at stupid valuations. Tell me how you see the world today, and what asset prices say about that. I think we live in this really interesting paradoxical time. Very paradoxical. On the mud hand, you have the economy, markets, on the other hand we have politics. Economics and the market, things look pretty good, to be honest. Synchronous across the world, rates are moving up, but still pretty low, Business Investment stepping up, wordings are good, wages are starting to come up finally, which is good. You look at that and you say this is a pretty good outcome, pretty good situation we find ourselves in. Of course, how long can this goldilocks a jewish continue . That is an important question. In the face of that, we are long this can continue. The economic fundamentals are there. That causes us from a market point of view to think prices, valuations are high, but if you are selected, there are interesting opportunities still out there. The other side of the ledger, politics. There, i think there are some really significant issues. One, everything that is going on in the world of trade, which i think is a big overhang, represents a risk. All the issues about the distribution of the benefits of trade, equality, one government will do or not do about those things. Those are major issues, potential overhang on the markets. These are big, big issues. From my point of view, in terms of thinking about economics and the market, what you need to keep your eye on his politics, you need to keep your head up. This is not a time to be complacent, to be overconfident. This is a time to be vigilant about whats going on in government. Erik trade, lets talk about nafta. Canadian economy is doing quite nicely. What happens to the canadian economy if they dont reach a deal on nafta . Michael well, i think the updating and renewal of have to is in everyones interest coming in the interest of canada, the United States, and mexico, for a variety of reasons. , let me makeg said a few points. Aret, these economies fundamentally integrated now. A protectionist impulse on one side of the border or the other is not something that will disintegrate these economies, they are integrated. That is an economic fact. Number two. When nafta was done, it was 25 years ago, structured as a jobs and growth plan for a different kind of economy than the one we have today. So canadian Economy Today as many other sources of growth and job creation, new industries that have grown up over time. Nafta is important and we should certainly work toward its renewal, but it is not what it was 25 years ago in terms of its core values. It is important and we need to get in on, but let me make one other point. And supposing we did not, for some reason we did not get it done and i think that would be unfortunate, and we fell back to the wto tariffs. Is that going to cause these economies to disintegrate across the three of them . I dont think so. All that says to me is that canada should continue to do what we are doing which is negotiating from a position of strength. That is the position that we have. We have to get the right deal, not just any deal. We have to get a deal that would be good for the next 20 years. And that takes some patience, and indeed, if that takes the u. S. At one point saying we want to move on to something else, so be it. Economy is strong, we can withstand some uncertainty. What matters is taking our time to get the right deal. Erik i want to ask you a question that confronts every institution like yours. There is a flood of liquidity these days, coming from sovereign or clause i sovereign institutions, particularly from the far east. How do you compete with all that she capital . Michael we think about that a lot. Paradigmicapital is a tc commodity. What you do is differentiate yourself. That is what we are trying to do, we are trying to be a different kind of investor. That means we need to focus on some of our Core Principles is always focus on the real economy, invest in the real economy. Critically important when you invest, think like a builder. As an investor, we need to contribute to building the real economy because in the long term , that is what will be good for us. You need to think about building the real economy, not taking things from the real economy. That building is important. That is what we do in our real estate business, infrastructure withess, when we Work Companies to help them expand globally, do m a, it is thinking like a builder and being a good partner. Erik michael, great to see you. A pleasure. A few from one of the worlds most sophisticated pension fund managers. Another great interview. Later. Om erik coming up, we are going back to davos to speak with joseph kaiser. They may shift strategy to streamline the business. This is bloomberg. Vonnie i from new york, im vonnie quinn. Mark from london, im mark barton. This is bloomberg markets. The german industrial giant siemens is waiting through some uncertain times. The company has been winning sales of various units in order to streamline the business. Lets bring in Francine Lacqua in davos. Thank you. I am pleased to welcome to the program mr. Josef kaeser, the siemens ceo, one of the most influential global ceos here, also a veteran. We talk about protectionism. , whoard President Trump arrived this morning, talking about terrace on solar panels, washing machines. Do you worry that 2018 is the year of protectionism . The jury is still out, but the fact that he comes to davos, global trade, global economy, maybe a good time to reconsider that global trade is maybe a better way to go. Time will tell. Forcine what does it mean your supply chain, do you need to look at it, do you move things around, doesnt take a big lead time . Josef at the end of the day, the white house is not buying our products, it is our customers in the u. S. A 24 billionhave revenues in the u. S. , 60,000 people working for our customers every day. Bit more mindful about is how our customers are being affected by potential limitations of the trade, so we need to see who is affected, how we can help them, what this means for the Global Supply chain, trading of goods and services. You see theere do most strength when you look at the global economy, where do your customers do better . The u. S. Seems to be benefiting from the tax overhaul. Josef tax reforms so far is nothing but looking at it from tax liabilities. That is something on the Balance Sheet. We move on and then we see what actually that does to investment in the United States. , the a trickling event intention of the tax reform to do business in the u. S. , in a more efficient way. We will see how that goes. When you invest, there is growth. Today, there is growth everywhere. India in china, 7 gdp, is getting it this time, infrastructure development, reforms. There is always still the ortunity, sometimes geopolitical tensions arising from those areas. I think the world is in good shape. When you talk to people here in davos, i have hardly seen such optimism anywhere such as this time. Francine is that a worry . Josef i would be mindful of the fact that the brightest hour is before us. Francine talk about some of the trends you are thinking of. We are thinking a lot at bloomberg about the future of transport. You have said in the past the move to electric vehicles could erase 30 of the value chains in cars. What does that mean for the way that you will sell your products, the way that people will buy them . Josef not only the car internet but when the reaches the industrial world, there will be fundamental productivity, value chains will become more effective. More effective value chains means less resources, which is good. There will be a lot of jobs being lost. But by making the value chain more efficient, you can create more demand. So there will be more jobs actually being created. So the task of political leadership, entrepreneurial these peopleday, today are being affected and to give them an opportunity to be retrained to the new way of doing business. The opportunities are definitely in ecommerce, so you bring goods and services easier to your customers, they can buy more, can buy easier, so you create more. Secondly, you look at health care. Only about half of the population receives health care today. If you make health care more efficient by artificial intelligence, by software analytics, you can actually bring a Cheaper Health Care to the next one billion people who have the same diseases, same needs of health. Now they can afford it, so you create growth. I believe is important, if you look at the value chain, how gdp you can create with the force of the industrial revolution. Jobsu only create 300,000 by taking away 500,000, making the value chain more efficient, for the company its great, but the lawns that lost the opportunities, it is not that great and society does not benefit. So we have all reason to be optimistic but we should not be blindsided that growth will be unlimited. We should not be blindsided about the fact about the internet of things, digitalization, which is binary. 1, 0, in, out, winning, losing. This creates a lot of tension in the societal divide. That is something we need to be aware of. The last thing we want is that, unlike the first three industrial revolutions, the fourth one becomes a real revolution. We want to have efficient cars on the streets of a driverless cars, but not burning cars on the streets. In that sense, we need to be very careful about. Francine there have been questions about things you have said in the past, including things like large gas turbines dont have the synergies, factories could benefit from being more independent. What are you focusing on . Josef the Industrial Court is the value chain from creating a necessity and bring it to building. Manufacturing and engineering more efficient. When i talk about large turbines , it is not that this is not a Good Business. It is going to be different in the future. Use of energy, you need less big machines as a backup. You need more flexible machines to back up volatility. That is what we are focusing on. I believe there is a lot of growth. But our customers, they dont wait for the ones that dont get it. Francine talk to me about thunder. You bought it in 2005. Slender. You are reportedly selling it for less than you bought it. Did the you do not meet your expectations, were you disappointed by it . Josef i read the interviews this morning that siemens plans to sell slender. So i need to check. A lot of things are going about. This is about mechanical drive. This is one of the areas where we had this really Good Business providing drive for the wind energy. Now, through innovation, siemens has been the first to replace ss. Gearboxes, to have gearle that is good for customers and cheaper prices. That is something we need to look at because it is a structural change. Nobody in the company said that we would sell slender. Speaking thank you for with us, josef kaeser, the chief executive officer of siemens. Back to you in new york. I will have to practice on my german. Francine i think it is just fine. Vonnie that is Francine Lacqua in davos, switzerland. Still ahead, tom farley. How far will his Exchange Chase the saudi aramco ipo . That is next. This is bloomberg. From bloomberg World Headquarters in new york, i am vonnie quinn. I am mark barton. This is bloomberg markets. Lets get to the European Central bank in frankfurt. Mario draghi expressing convention expressing conviction the area would revive. Joining us is maxine of bloomberg economics. Draghisiting for commentary on the euro. It seems that if he was attempting to stop the euros diss