Transcripts For BLOOMBERG Bloomberg Best 20170218 : vimarsan

What is hot and what is not. It is always difficult to actually predict returns. We see there is a delay in the of facts of brexit. Jonathan plus, we sought through earnings reports with reaction from the seasuite. All our businesses are making progress. Our focus on organic growth will remain. Jonathan it is all straight ahead on bloomberg best. Jonathan hello and welcome. Im jonathan ferro. This is bloomberg best. For much of the week, the focus of the Business World has been on washington, d. C. , as the active and embattled Trump Administration continues to dominate the headlines. Reporter President Trump and canadian Prime Minister Justin Trudeau concluding their news conference, where they discussed the need to tweak terms of the trade agreement with canada. Tweaking is a far cry from what he described on nafta, a tearing up of nafta. They obviously covered mostly trade, as you expected. Was there anything here that was surprising to you . Reporter there was what finally came at the end, tweaking a trade deal with canada, not necessarily ripping it up, the taxtype talk we have heard with mexico. A lot more auto production is done in canada than in mexico, by far. If trump actually really wanted to increase u. S. Auto manufacturing, he could go after the automakers in canada and say, stop investing in those plants and start investing in the u. S. I am not sure why he is doing that, but because the relationship is so strong and close between the u. S. And canada, i think canada is continuing to get a softer touch on trade than mexico certainly is. There is a lot of news out of today, from National Security advisor flynn leaving and treasury secretary Steven Mnuchin arriving. What happened . He quit, and obviously people in the white house forced his hand. If you cant trust your National Security advisor, you dont have a job. So he is out. So what do we read into this . Is this a story of disarray or a story of decisiveness on the part of our new president . Guest it is a little bit of both. The Washington Post has a front page piece on chaos being the modus operandi for this administration, and i cant disagree with that. Hours before Michael Flynn quit, Kellyanne Conway said he had the president s total support. So, it does seem a bit chaotic. I know a lot of people in europe, a lot of finance ministers, will be relieved that Steve Mnuchin has finally been appointed, because they know who to call if they want to talk about currencies. Do they know what his priority over the next week will be . Reporter behind the scenes, he is working on capitol hill to get some of these deregulatory processes on doddfrank in motion. He is also working with the president on tax reforms. He has emerged as the goto person to craft tax reform. Janet yellen testifying on capitol hill. Ms. Yellen as i noted on previous occasions, waiting too long to remove accommodation would be unwise. Potentially requiring the fomc to eventually raise rates rapidly. We went into this hearing today anticipating we might hear something about a march rate hike. What did we hear from the fed chair today . She did confirm the fed is going to be raising rates this year based on the information they have now on the economy. Too early to note what the fiscal impact would be of any proposals from congress or the administration. And she said all meetings are live. The fed does not want to take march off the table. They want the possibility of raising rates there. So while she would not commit to it, she did try to stress that you should not give up on it. A hiccup for the Trump Administration. Cke restaurants ceo Andrew Puzder is out for labor secretary. In the tweet, he said, i am withdrawing my nomination for secretary of labor. I am honored to be considered. Why could he not get confirmed . Republicans. Republicans support was deteriorating and the upper chamber. Yesterday, i spoke with tim scott of south carolina, and he was still having reservations about his nomination for the department of labor. Democrats cohesively rallied against puzders nomination. They said he was someone who was out of touch with the american people, and despite having the asport of ceos, such mcdonalds and other fast food chains, they were not able to get this over the finish line, a devastating blow quite frankly for the Trump Administration. The highest level of facetoface contact between the u. S. And russia since President Trump took office. Secretary of state Rex Tillerson counterpart russian lavrov today in germany. People have been very keen to see whether he speaks for trump and what the space of the u. S. Administration would look like. It was a little bit awkward, because it is customary when you do a joint statement or kind of bilateral with another leader, in this case sergey lavrov, his russian counterpart, to do a handshake, a couple of words. And as he started speaking, all the press were ushered out, foreignused the russian to ask why the press was being hushed, which is surely a little bit ironic. Tillerson made a statement to the press shortly afterwards where one important point he mentioned was the u. S. Is backing the minsk agreement. That will go down well with a lot of european countries. Trump the nominee for the secretary of the department of labor will be mr. Alex acosta. He has a law degree from harvard law school, a great student, former clerk for Justice Samuel alito. He has had a tremendous career. Who is he, and where does he come from . Mr. Acosta is the dean of the Florida International University Law school. He served on the Labor Relations board under george bush. He has gone on to have prominent jobs at the justice department. There are many published opinions we will be taking a look at. He also would be the first hispanic, would alleviate some of the criticisms of President Trump not nominating any to cabinet positions. Jonathan in the u. K. , Prime Minister tony blair making a series of headlines as he urged those opposed to brexit to stand up and fight back. The people voted without knowledge of the terms of brexit. As these terms become clear, it is their right to change their mind. Our mission is to persuade them to do so. What is he doing . I think what he thinks is that nobody is making the opposite case. And to a certain extent, john, he has a point. There is very little that represents the people who voted remain in the political discourse. I think he is hoping that there is a group of people out there not standing up, the silent remainers, that are not making their voices heard. He is hoping that maybe some within that group and i asked him if it would be him, he dismissed that quickly that somebody stands up and delivers. As you know, john, the joke at the moment is the pound is the only opposition to theresa mays administration. I think he is hoping that somebody other than the british currency is going to stand up. Jonathan still ahead on f bloomberg best highlights from , the weeks top interviews. The case that regulation is still a good thing, and tom keene sits down with stanley fischer. Plus, we march through another parade of earnings reports. Up next, more of the weeks biggest stories. Softbank makes an expensive acquisition. The question is, why . It is not clear if it stands is in his vision of the future. Jonathan this is bloomberg. Jonathan this is bloomberg best. I am jonathan ferro. Lets continue all global tour of the weeks top stories. In europe, swiss voters have their say in a referendum on Corporate Tax breaks. Swiss voters have rejected a bid to reform Corporate Taxes, a plan to keep the country internationally competitive. That comes as switzerland its Current Practice of giving tax breaks to multinationals, due to international pressure. The finance minister committed yesterday to convene a task force that will meet in coming days, and in a best case scenario, they might have a draft bill in parliament by the individual year, but exactly what the new plan will consist of, nobody knows. What does this mean for multinationals in switzerland . More uncertainty . Tax Experts Say Companies will probably be postponing investments or moving investments from switzerland to other countries. The saudi government telling opec it has cut production by the most in eight years, going beyond its obligations under a deal to balance world markets. Is this one of the problems of and deal struck by opec nonopec members, to cut production and elsewhere, other producing nations trying to fill in the gap . I think that is definitely the big concern for opec right now. One thing we have seen in the early part of this year is that shale production is coming back very strongly with these high prices above 50 a barrel. American producers are drilling again. They are producing more oil, and clearly that is limiting the cut. Impact of opecs it is the same story we were talking about, saudi arabia versus shale, and i think we will be talking about that for the rest of the year. The big story and nation has been softbank could it has agreed to buy Fortress Investment group for 3. 3 billion. Give us some background on this acquisition. Why is this happening right now . Guest just as investors and analysts begin to wrap their snd around Masayoshi Son investment thesis, you have a deal like this. Fortress is a fairly Traditional Asset Management company. They have about 70 billion of assets in their portfolio, half of that is fixed income, basically bonds. In addition, they have a rather eclectic collection of investments that includes a tv company, wireless spectrum, as well as some distressed assets like a Railway Company in florida as well as hotels in japan. It is not clear how it fits within Masayoshi Sons vision of the future. Fortress has the distinction of being the First Private Equity Fund to go public, back in 2007, but the shares are about a third of that price, so perhaps it is a good deal. News, Read Economic on consumer inflation coming up on terror than forecast. Check it out. Up. 6 . Economists surveyed were looking for an increase of half that,. 3 , so it is a sign of inflation. Retail sales for january, consumers out there spending. How much should we read into the cpi numbers, and how much should we not . I think this is significantly stronger than people expected on and also a bit more on the call. I think the call is significant because it is the core inflation number that the fed looks at. The uptick in inflation that the fed is looking for is coming. Coming soonern than expected. What does it tell us about consumers right now . People expected it to be a gift back in january, and that did not happen. In fact, december was revised up to a 1 increase. So what it looks like if you take the two months together, this surge in Consumer Confidence we have seen since the election does seem to be translating into higher spending and maybe a lower savings ratio. Taking the two things together, it looks like consumers are spending heavily, and retailers are taking the opportunity to raise prices. Money managers certainly and focus this wednesday, out with their latest polling from the Fourth Quarter. 13 f filings are revealing some interesting themes, starting with warren buffett. Buffett was busy, apparently, during this period. One of the more interesting moves he made was buying some monsanto shares. The reason that is interesting is because we think of buffett as a longterm investor, but he bought monsanto after a bayer agreed to purchase monsanto. And southwest, he is doubling down on the airline. I want to talk about procter gamble. Nelson peltz is company took a stake there. Bank of america, if you look across all the holdings, was the company saw the single biggest increase in investment from these money managers. Barra is inry germany on something of a Charm Offensive in order to win support for the sale of opel. It would be a real win if she could get rid of these divisions. They have been losing money for General Motors for almost two decades now. Last year, they would have been profitable if it had not then for brexit, so she wants to unload opel and vauxhall. They can become the secondbiggest carmaker in europe and hopefully use those economies of scale to boost margins. Snap inc. Wants to raise as much as 3. 2 billion in its ipo. That would give snap a market value of about 18. 5 billion. It would be the First Social Media Company to go public since twitter more than three years ago. What is the message from this company . Please dont treat us like twitter. Please see us as alibaba. When you think back on ipos, there are not been a lot of big high profile ipos. This is one of a few. This content consumption from millennials, is that going to work . Is it going to grow . Obviously it is popular, but is it a trend that goes away in six months . That is the real question. Is this something that has longterm potential . Samsungs de facto leader is in detention in seoul, arrested on allegations of bribery, perjury, and embezzlement. The company has issued a statement saying it will do its best to ensure that the truth will come out. This seems like a big deal. It is. I was there. I was in front of the District Court when the first appeal for the arrest warrant was made by special prosecutors. And the feeding outside the court was like this is business , as usual. They will reject it, and sure enough, the court did reject it. But special prosecutors have come back with more evidence, and in the last couple of hours, the court has ruled in favor of issuing the arrest warrant, perjury, embezzlement. Shares of june leav surging proposal for , a craft and time to combine, unilever rejecting it, but the company is not giving up. Is this round one . It seems like it is, but it is interesting that those shareholders are optimistic. Unilever does not seem to be optimistic at all. They are saying there is no strategic benefit to this proposal, no equity rationale for this proposal. They are almost saying, please, go away. Is that reflected in the u. S. Shares . Do they doubt this is going to be successful . Yes, and also with the u. K. Regime, you need to remember that they have until the 17th of next month, because you have 28 days, a put up or shut up period, by which time kraft needs to come back with a better offer or go away. We could see further negotiations, but right now unilever does not look like it wants to sit at the table. Jonathan you are watching bloomberg best. I am jonathan ferro. Just last week, Federal Reserve governor Daniel Tarullo announced he would be stepping down a month from now. He was appointed by president obama and became the feds point person for designing regulatory structures in the wake of the 2008 financial crisis. He talked about regulation and more in an exclusive interview this week on daybreak america. You came in and a lot of things were broken. I think almost everyone would agree. What remains broken after eight years, in terms of the regulatory structure . I dont know that there is anything so severely broken that we should worry about immediate consequences, but i think two areas on which we tried to concentrate over the last eight years still need attention, and the first of those is the largest firms that have been characterized as too big to fail. There has been a lot of progress, but there is more work needed. And secondly, the nature of the crisis in 2007 and 2008 reminded us that the nature of funding in a Financial System in which traditional lending and Capital Markets are so integrated is just as runnable as in the 1920s, when big deposits were not insured. It is a different form of funding now, repo, securities transactions, but the runability of that funding combined with the big drop in key asset price housing was what produced the crisis, and we need to be constantly on the lookout for vulnerabilities with runnable funding. And i think that, by the way, is an ongoing exercise. You are not going to get to the point where we say, now its done, we move on. One thing i will say, david, is when someone comes to you with the too big to fail problem, thats when you should get worried. It is almost in siebel by insoluble by definition. Because the Financial System adapts so readily and so expertly and a lot of ways to create new opportunities for making money, the financial regulatory system needs to be attentive to those changes and to evolve with it. By the way, that is what did not happen in the precrisis period. I do wonder if we are getting into a cycle where people are forgetting the financial crisis . Mr. Tarullo that is an excellent point. If we go back to a decade or 12 years ago, what was the state of the Financial System, including some of our biggest firms then . One, even though Capital Markets and traditional lending had been integrated, when firms price or a lot of the instruments in which they traded, they did not take into account the credit risk in embedded in those instruments. Mortgage backed securities are the best example. Two, they were not attuned to the possibility. You could have a liquidity squeeze. Three, in many instances, they did not know what their own risk was. In 2009 whe