I am Jonathan Ferro joining you and london with tom keene london. So much news. What takes your fancy . Up we go, we will re liquefy. Navigate that, and at the same time is tweaking communication. We will discuss that. Lets get to vonnie quinn with bloomberg first news. Ta recall of defective airbags is more costly than the multimillion fine. They will no longer use takata airbags. That was their biggest customer. Honda says that they misrepresented and manipulated test results. They say that theyll use a more inflatedemical to its airbags. The other airbags caused eight deaths. Say that the fine could be a record. The russian jet apparently had no warnings of trouble before it crashed in the egyptian desert. Includees black boxes no discussion of mechanical or system problems. All 224 people on board were killed when the airbus crashed. Most were russians returning home from vacations in egypt. Bodies were burned. Most of them will be identifiable. News of a diplomatic salt between china and taiwan is pushing shares higher on the island stock exchange. They get a sixmonth peak. Taiwan had a high level, the highest since july. Investors are encouraged by the historic meeting between the leaders of china and taiwan. It is the first such meeting since the civil war seven decades ago, a milestone with a political twist. The taiwanese president has been relationsr better with china. The changing of the guard in canada. Justin to go will be sworn in as the nations 20 third Prime Minister, leading the liberal party into power and ending a decade of role by Stephen Harper and the conservatives. He is the second youngest leader ever. A quick data check. Markets on the move. You hire. You can see it. Where moments away from a 3 yield in the 30 year futures, they are up nicely. Futures are up nicely this morning, of 2. The vix, 14. 54. We will talk about this in the next hour. Lets go over to the bloomberg terminal. The 30year yield, back to paul volcker and the idea that we go down. Is 2008, we are on trend, if a little elevated. We have ages to go to a reflation. They say it is the shorter end of the can of that reacts to the Federal Reserve. Tom this was the benchmark, then we went to the 10year yield. From volcker to now, the 30year. You wonder what that does two assumptions you will see with institutional wall street. Jon ferro, 4 will become what 6 or 8 was a decade ago. Top i want to get to the story this morning, the biggest ipo of 2015, japan delivered a its tokyo debuts. Brian, this is not the royal mail. It is different. The postipo pop for the japanese government was critical, wasnt it . It is a big deal. It will kindle a lot of risk appetite. Most of the deals when two individuals that they never invested in before. Now the bank is hiring people to help it diversified. A 1. 7 trillion portfolio of assets. Jon a fascinating company. It cannot lend to households. Are the regional banks nervous about what a privatized to pen post looks like and what it means for the Banking System in japan . Brian good question. First, i would point out the domestic lending market in japan is not a great place for making money. Most of the big banks doing well are benefiting from their acquisitions in recent years. Having said that, the regional banks of share prices, they were mostly down. The bank of yokohama. I think most investors were spooked about the impact it could have on them. Jon lets continue the conversation. Nobelg us is the prizewinning professor christopher p cerritos. Pissarides. Er sir pissarides the post office was something much more. Raelonged to the earlier e of japan. It employed millions of people. It was more like a social institution. The previous Prime Minister tried to privatize it and failed because of opposition within his own party. It is a big thing. It will not only bring a kind of oria to Asset Holding been 10 years in the making, that speaks to the slow recovery in japan. For investors watching, it could be critical. 1. 7 trillion in assets. We could see a shift for a more aggressive Asset Allocation . Sir pissarides exactly, wheres the money coming from . Most from small investors. There must be having their money somewhere. Eventually, you take your money out of the banks, they have to cash in big assets. Might see big Financial Transactions and restructuring taking place. Tom professor, good morning. We welcome you to bloomberg surveillance. It is an academic question, but it is upfront and important. Interestt with higher rates in the bank of england and the fed, can we exit with stability within the central banking and stability in the markets . Do you have a confidence of our institutions can keep order as they raise rates . Prof. Pissarides i think so, yes. It has been a long time since the rates were raised, but they are mature institutions, they know how to handle it. It is important that we have been expecting it for a long time. I do not think it will be a big change, it would be gradual, small changes. At least now, they realize that when the change takes place, it will not reverse. We have been waiting long enough. The economy is ready for it. Im not convinced the change would happen. The answer to your question, if Financial Institutions are ready to take it, i think absolutely, yes. Tom i love that we have a Nobel Laureate doing market economics. Absolutely. Amanda know something about the labor market, as well. We can discuss that in a little while. Up, an important conversation. In israel, we will speak to elliott. A timely interview in an industry in massive transition. With yields higher, the 30 year bond, 2. 99 , bloomberg surveillance. Tom and the bank of england tomorrow, a rates higher regime. Get your attention. She has been away forever, she is back with our business flash. Here is vonnie quinn. Sonie shares of volkswagen more. Faulty pollution ratings were found in gasoline powered cars, a first. So far the problem has been limited to Diesel Engines. Vw says the new findings of fact 800 thousand cars. Software tricks admission tests. Did becomemiller bearish on stocks, the reason is Monetary Policy between the u. S. And europe that started in may, 2014. The billionaire investor, as one of the best track records over the last three decades. His Duquesne Capital management had an annual return of 30 through 2010 from 1986. Accidentally, confusion began when the bbc posted comments from its governor saying that a link prof. Pissarides a really fascinating thing about that. I spoke to richard frost of bloomberg. We have to send them a fax, the pboc. They replied with a text to clarify. If you didnt know before, it is not the Federal Reserve. The pboc is another tom it is bizarre. You have a good morning mustread . Jon it is the Financial Times and is critical. He writes americas labor market is not working. The relentless decline in prime age u. S. Adults in the labor market indicates a significant dysfunction that deserves attention, analysis, and action. Luckily i have professor Christopher Pissarides. I can ask him. The participation rate, longterm unemployed, is it cyclical . Has. Pissarides the debate shifted in america. It is the first time we are seeing this in the United States. We saw it in europe starting in the 1980s. Through hard work and Government Departments, we know how to deal with the problem in europe. Went past americans. They thought it was a european problem, they dont have to think about it, and they didnt. They are now facing the same problem. You ask if it is cyclical or structural. It starts cyclical and then become structural. That is what is difficult about dealing with it. Aey are thinking, am i facing cyclical problem . A structural problem . It is both. Jon does the Federal Reserve have a role in addressing this problem . Prof. Pissarides i would say no. Now the problem is structural. The Government Department has their own it is Something Like the problem of unemployment or acting employment, active labor market policies that would target the longterm unemployed, retrain and give Training Programs give them tutoring about reentering the labor market. Professor, on we look at the american economy, and he goes to the United Kingdom as well, should we aggregate and look at it as one economy or do we need to look at a bimodal system of haves and havenots, something that has the attention of alan krueger at princeton . Should we go more aggregated or should we start partitioning our economic experience . Prof. Pissarides when you are looking at the federal bank of englands Monetary Policy you have to look at the aggregate because it affects the entire economy, it does not discriminate. You should always, at the same time, follow targeted economies the most affected by the recessional structural problem that we have. A bit of be doing each. Now we have techniques, we have to deal with that. Is not that difficult of a problem. Martinsd not read column. Vonnie quinn did, she is here with a question. Vonnie something you would consider a positive turns out to a negative. E is the fact the u. S. Has labor market flexibility means younger workers and workers past 65 are getting jobs more so in the middle section. How would you fix that . Labor market flexibility is something european economies are striving for. Prof. Pissarides matt is a very interesting issue that martin wolf has raised. Particularly. The way to deal with it is not to try to have that labor market so this does not happen, but trying to make prime age workers, men and women, more competitive than they are now. So far, especially in regulated markets, trade unions always put more influence on prime age workers. That gives them an advantage, a competitive advantage not a competitive advantage, but for the structural labor market and being favored by unions. That is not right. It is not a good thing for the operation of labor markets. Having more flexibility and letting people compete on a level Playing Field is much better. What they need to do in the states is to bring back the prime age workers into the market. Providing them with training. Rograms with the whole group of active labor market policies we have practicing in europe, and which have been written about in paris, and even with instructions on how to do it. Jon we are so lucky to have Christopher Pissarides with us ahead of a payroll sticker on friday. Coming up robert corey joins us, live. Om bloomberg surveillance. The bank of england tomorrow is a busy time for economics, finance, and investment. Im waiting for the sun to come out for the first time this november in london. Jon ferro is cloudy in london. Jon it is also cloudy for vw. Only about Diesel Engines, it is about gasoline powered engines as well. Hans nichols joins us. Implications, the the deepening scandal, how significant is the new news . Hans volkswagen estimates this will cost 2 billion euros. They discovered irregularities in Carbon Dioxide emissions on 800,000 vehicles. A small number, only the 1. 4 liter engines, are petro gasoline powered engines, the rest are Diesel Engines. The rest have a problem with emissions. Oxide this is a significant stockade, we have seen that take a pounding. We have seen volkswagen trying to get to the bottom of the scandal. To what he had to say. This is the new ceo from porsche. From the beginning, i set out to set out that we mercilessly clear up the situation. It is a painful process, but there is no alternative. The scary thing for volkswagens they dont know where the end of the scandal is, but they are trying to get to the bottom of it. Is scary for investors as well. They are asking, how deep is this whole . Also, what is the reputation question are quilted impacts sales . Do we see it in the numbers . Hans we saw their sales stay flat in the u. S. They were up 0. 24 . The rest had a banner month. Best month the in the last two years. Theyre staying flat in the states. Audi was up by multiple digits. We see huge jumps by general motors, so they are losing market share. The market prices and stock erosion. Who else is involved . In your reporting and studying, is this singularly discrete to vw . How you depends on define the scandal . Is it that advertised omissions are not the same as road test emissions, then everyone that produces a Diesel Engine could be affected. If it is simply installing software to trick regulators, it is contained to volkswagen, their suppliers, and whoever helped them build the software. It could affect the entire european auto industry. Japan made a bet on hybrid vehicles, europe went toward diesel, it looks like that was the wrong that. It could affect all of these oh industries. Tom hans nichols nailed this about an extension of the crisis , beyond diesel old. I think hans was on top of this two weeks ago. Jon no and to this. It also implicates portion now, that is the company unit that the ceo came from. Tom discussion on a recession or no recession. I just had a horrible nightmare. My companys entire network went down, and i was home in bed, unaware. But that would never happen. Comcast business monitors my Companys Network 24 hours a day and calls and emails me if something, like this scary storm, takes it offline. So i can rest easy. What. You dont have a desk bed . Dont be left in the dark. Get proactive alerts 24 7. Comcast business. Built for business. Jon this is bloomberg surveillance. I am Jonathan Ferro with tom keene in new york. Good morning from london. A diplomatic milestone for china and taiwan is producing financial dividends. Their Exchange Closed at the highest level since late july. Mainland china investors hit a six month peak. Investors are encouraged by the meeting between the president s of china and taiwan. They will sit down on saturday in singapore. It is the first such meeting since the civil war seven decades ago. A milestone with political ramifications. The president of taiwan has been pushing to restore relations with china. He has an election two months from now. Ta has nowup taka lost its biggest customer. Ill do no longer use their airbags. It is a surprising reversal. Under owns a small stake in the company. Manipulatedt takata and misrepresented test results. They will now use a more stable chemical to inflate airbags. U. S. Regulators say the exploding airbags caused eight apps and 98 injuries. The fines in the u. S. Could reach millions of dollars, a record. Tesla motors investors are still excited despite a thirdquarter loss. They are writing off expenses and research costs. The tesla ceo is dismissing negative reports, saying that the new system cause some drivers to go off the road. He says that some driving cars are still the way of the future. Economy,hat have full any cars that will be made to do not have full of taunting me full autonomy will have negative value, it will be like owning a horse. You own one only for sentimental reasons. Theyre on track for the model three in late march. This is an important interview. It will be 50 years next year where the world is changed in 1960 six. They did the unthinkable. Generic penicillin. From then on, it has been generic. Corey outbert of the university of pennsylvania. Elliott . Elliott it is great to have you with us. One reason for that, that would encourage investors, you hold 12 of the stock. Hear, will that be enough . Im confident we will get over 50 . That i thinkg about where we are today is that the value has not been disputed. What we are paying for the company, and a substantial accretion, 80 plus. It is not something that i believe investors are going to pass up. In terms of premium, the Closing Price last night, a 14 , is worth 200 dollars a share of the last 12 months. Why should they just sit tight . I believe the word premium is fictitious. Tradeprices do not differently daily, they trade differently by the second. Premiums are moving around by the second. I think what we need to look at is multiples for the company, and 19 or 20 times multiple is huge in this industry. That is undisputed. If you really want to look at premium, and you really want to talk talk about premium, you need to talk about what the potential hypothetical unaffected stock telling me repeatedly that this is a bad deal for shareholders, and criticizing your corporate government. Why is he wrong . If it is such a bad deal, he had six months. I wont say anything bad about joe. He is. Had six months to demonstrate what a bad deal this is. Is he says the way to do a bad deal is to do a better deal, that is what he told shareholders. If you really did look at other deals that were bad deals, they had to be worse than mine, therefore my bad deal may not be so bad. In terms of corporate governments, ive offered for him to come to the table. I am wide open. In my release yesterday, we made it Crystal Clear that upon completion this combined company will have a different profile. This warrants an ongoing dynamic dialog of what is appropriate for the government and country. Mainly makesigo overthecounter medicine, given the overlap how do you propose to get longterm synergies that justify the deal . Synergies we said the would come from both sides. It is what makes this so attractive, the fact that perrigo does not do the same thing as mylan. One of my big issues was the lack of industrial logic. That more of the same was not going to bring value. I understand the financial having a strategy, god blessed them, maybe gives them a twoyear extension, which is not my strategy. This is not more of the same. This is a highly complimentary very strong assets coming together to do more for the customer than what we are doing separately. Elliott if mylan fails to win perrigo, what is plan b . On coury we are not reliant external activity. Our Balance Sheet