>> the golden era. china's president starts his weeklong visit to the u.k.. david cameron looks forward to nearly $50 billion worth of deals. slow and steady. the president of san francisco's federal reserve -- we give you an exclusive interview with john williams. and canada votes and justin audeau swept into office with majority, ousting stephen

harper. good morning, this is "bloomberg surveillance," i am guy johnson with tom keene in new york. i think i am most focused on the montreal canadiens who are doing everything good in the thisnal hockey league, election is a true majority. back 27 years when his father stunned the world with liberal theology for canada. it stuck up on us in the states. fors an important moment all elected officials, including prime minister cameron. this will be watched very closely and analyzed very closely in the united states. november 2016 -- it is the top story on the first word desk. here is vonnie quinn. vonnie: the biggest political

comeback. justin trudeau swept into office. the ousted prime minister stephen harper and his decades of conservative rule -- they won with 84 seats in the house of commons. >> this is what positive politics can do. this is what a positive, hopeful vision and a platform and a team together can make happen. former -- he the is the son of pierre trudeau. british prime minister david cameron says china's president has bought more than $46 billion in deals and investments with him. cameron says the chinese deals will create almost 4000 jobs.

than leaders say more 5000. administration has agreed to sell saudi arabia more cell four warships for $11 billion in congress could still block the deal. buyers to register drones with the government. the transportation department wants to come out with the rules by november 20. encounters with drones are expected to quadruple this year. media outlets are being asked when a to $50 to cover the events at the arena -- a relic of charging and access fee for the convention. news organizations say it is unprecedented and they are protesting. tom: let's do a data check.

exceptionally quiet markets. futures, negative eight. vix, 14.98%.e that shows that they are uncorrelated with the equity markets. let's look at dollar canada. i'm not going to overplay that. $1.30. tell me what to do with my bow tie here. vonnie: beautiful. double layered, i love it. her british pound. now this is how you turn out a government. pretty good, pretty good, ready good.

i would say this is mostly oil. global new it is the mediocre as well. but when you get elected, i really wasn't aware of how quickly the canadian gdp unclenched. vonnie: restraint is not what people are looking for. tom: the american translation of that is throw the bums out. guy johnson, what a great way to start "bloomberg surveillance" this morning. guy: thanks tom. michael mclouth is our guest host for the warning. one of the things that has come out this morning -- it is a little bit better than we thought it would be. what would you be doing with the data? was this a reason to carry on doing qe?

or are they saying that we have enough in place already? michael: it is good news. that lending has turned the corner. so yes, on that front, it has been successful. is,big debate right now yes, growth is improving -- but it has never been about growth, it has been about deflation. and deflation is back and inflation expectations are low. the euro is a little bit too strong. in the near term, the expectation is that we could do more related to deflation and inflationary expect tatian's. malta.ey are in ?hat should they do in malta should they pull the trigger on it now? should they go now, go early, go before the fed? well let's see which

way the fed is going to go. [laughter] the window that they have is to the end of the year. inflation numbers are going to look very worrisome for them and they don't have the luxury that the fed has. the fed has a very high rate of core inflation. core inflation in the eurozone is below 1%. the and look, we know that ecb is split on this. i think there are members that would go now, but they need to get a concept system. whenmportant thing is that they go, they need to go with a concept system to make it credible. so it may not be that they need to see another months inflation to see where need expectations go to figure out whether they want to pull the trigger. michael, state street is known for its allegation rhythms, what should we do with

our bond money? do we have a real risk of lower bond prices? so one of the things, as you said, we do track investor sentiment. allwe look at that across markets, including be fixed income market. and certainly in europe, investors were fearful of negative yields. they moved out of parts of the german curb, for instance, where there were negative yields. the one thing i will say now is that if the ecb is on because of program, the qe question will be, what do they do at the front end of the curb? yes, investors may potentially pull out of those bonds. how quiet it is in the markets if we are setting each other up for moves.

based out of the news. what with the new speed, michael? shocks the exhaustion is that you are watching for? interestinge is the thing. when we look at financial prices, there has been a massive panic and dislocation. when we look at investor sentiment, we don't cb same thing. investors have been quite calm. if we try to look through some of the recent bad things, i think that is in part because some of the price moves have been exaggerated. part, therealso in is a hope trend going on. is the fed israde going to go, the ecb is going to go -- and there is a hope that the central bank will get it.

so i would say the biggest risk is actually the fed, and perhaps they should do this, but they should stick to their guns. to your point, the muscle memory is there over the last few years. every time there is trouble, the central banks are there. ecb -- extent does the do? once you interact with those banks and get global growth, is the fact that the fed is tightening and going really slowly and we don't know what the duration risk is, how does the market think about it? do they focus on the fed's or the ecb? michael: the fed has been saying about this all the way through. don't worry about the first hike. that is almost an argument for them to go and get it over with.

when they go, there is going to be a dovish timeframe. we know that they have been flattening. it is getting mirror to the market all the time, they are flattening. but once that happens, and you get the first hike out of the way, the ecb comes out and the boj comes out. much more stimulus. butael: it does a little, because of what has changed in the last six months has been a much deeper concern about the emerging markets. i think the fed policy is far more important because of the depth in the dollar in emerging markets. so the fed is more important. guy: there is plenty more coming up. hour,oming up in the next the ceo joins us on the state of the consumer. this is "bloomberg surveillance," streaming on your

tablet and your phone. ♪

tom: we welcome all of you in europe, the united kingdom and around the world's as the prime minister visits london this morning. you have a clear day in hong kong. let's get to the business flash. here is the vonnie quinn. vonnie: the owner of kentucky fried chicken and pizza hut is reporting a major restructuring. gets more than half its revenue from china.

-- to sell itself off to western digital. capitalizationco of over $15 billion. it could be released this week. and the force isn't with star wars fans. so many are trying to reserve seats that they swamped websites in the u.s. and the u.k.. yesterday,t on sale two months before the movie opens. if you try to buy tickets on fandango, you might have gotten an error message. guy: i am genuinely excited about this one. i'm taking my kids, i'm taking everybody i can get tickets for. vonnie: no shame there. guy: no, no, no shame there. let's talk about what is happening with china. it is probably where the force is the strongest for the u.k.

right now. lastrime minister landed night, getting a red carpet reception. you can see the red carpet. cameron said the visit will bring $46 billion worth of deals and investments to the country. caroline hyde is outside , where shepalace will meets the queen and dine with the queen later today. over to you. -- hene: he will either will even stay the night with the queen. why? worthe of the $46 billion of deals that is expected to be announced. 4000 said to be announcing jobs for the u.k.. retailers will be winning over and it will be energy companies, will things, not just financing power stations but the building of them.

the designs are going to be chinese, we understand. this is big in word investment. london wants to own the hub of europe for the yuan. we want to be the hub for transactions. that is why we have the chinese central bank coming over to sell debt. we are looking to own and build up our financial relationship with china. guy: is there some concern that a little bitgoing too far in our relationship with china? we are handing over the keys of a nuclear reactor in the united kingdom to beijing. is that setting off alarm bells? i think there are some raised eyebrows coming from where tom keene and vonnie quinn sit, the united states. just a month ago, he was

visiting president obama and they were willing to discuss some of the human rights questions and the security threats. there was an agreement made between president xi and obama that would crack down on hacking. but the hacking is still going on by chinese companies. u.k. bowls out the red carpet and gives them access to our nuclear power and cyber security, as well. caroline, thank you. that was caroline hyde outside buckingham palace. right, let's talk to michael metcalfe and get his take. china asu.k. need to much as the government is letting us believe? michael: it is an interesting contrast to what we're talking about before. the reality is that china is still an extremely important player in the world's economy.

they are attempting to grow. the u.k. is a smaller economy, so we do need the trades and investments. guy: we will come at a little bit later and continue the conversation. also, we will bring you highlights with john williams. this is "bloomberg surveillance," we are on your tablets, your phone and on bloomberg.com. ♪

guy: this is "bloomberg johnsonance," i am guy

in london with tom keene in new york. as you look to everything this morning, what has caught your eye? -- always catches your eye. this is in his wheelhouse of economics. rich,lly, denmark is very something is rotten in denmark. vonnie, help me here. it is hamlet, i'm quoting shakespeare. guy: it wasn't hamlet who said that. vonnie: you are way ahead of me. from -- is tom: denmark is very rich but it's economy has taken a hit in recent years because its recovery from the global financial crisis has been slow and incomplete. realrk's 5.5% decline in

gdp per capita since 2007 is comparable to the declines in portugal or spain. op-ed. a really smart everybody should look at it as it compares denmark to sweden. and sweden did a lot of things right. including less austerity. what are your thoughts? guy: it is interesting on a day when you have seen canada do , they are kinde of saying, enough of the austerity already. we need to move on from it. tom: i think you are dead on there. liststaking the sluggish -- the sluggishness of denmark out. where are we going to be in a year from now? foure: denmark was down to point 5% now but it is still

grappling with the growth problem. we are hoping it will come in at 2%. tom: i think vonnie quinn just said it wrong. [laughter] guy: i think there are building blocks here. i guess you could use lego. lego, nice tiean in there. but there are interesting economics, particularly in the swedish the central bank. and the lessons we have learned from the austerity -- where is the u.k. on the austerity meter? i would say, not as far as the political story would you lead to -- would lead you to believe. but we will have monetary policy that will continue for quite some time. that is going to be the equation that we work with. tom: and we see it, folks.

a 1.99, even a 1.98 handle. nardelli will join us in the next hour. it is always good to talk to him. but with all of the stuff about volkswagen, i want to talk to him to-three weeks on from this crushing issue. he will join us on corporate leadership and governance. stay with us, guy johnson in london. it is tuesday on "bloomberg surveillance." ♪

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that is where we are. here is vonnie quinn. we are going north to canada. the son of a former prime minister has ended the rule of stephen harper. justin trudeau gained a surprising victory. formerhe son of the prime minister, pierre trudeau. he plans to get the economy going. the u.s. plans to sell for warships to saudi arabia. than $11d cost more billion. the saudi arabians asked the u.s. to help them improve their army. international observers are reporting that russian airstrikes killed 45 people in syria. the human rights group says they

targeted a group -- the free syrian army member is a purportedly among the dead. the fbi is investigating a computer hacker claim saying he broke into private e-mails. directorsme from the aol account. directorsde a list of with phone numbers and social security numbers. and the stars turned out last night at white house. president obama hosted astronauts, bill nye the science guy and students. among them, the boy who was arrested when his teacher thought he built a bomb. tom: there is so much glow there. you wonder if they could even see serious?

it is an astronomy moment, in the movie truman when the camera falls out of the ceiling. it is also a bright star off to the southwest, mr. president if you are watching. serious also happens to post bloomberg radio. go onet's continue to economics as vonnie quinn and i continue a big hole. -- they should raise interest rates in the near future, according to san francisco federal reserve president john williams. he sat down with michael mckean. is basically on the employment of mandate side. we have seen huge progress on the job market. unemployment is down to 5%. inflation is running below the target and that is a significant

consideration. we understand why that is happening, mainly due to a strong dollar. so i do see an economy that is strengthening. we are out of one of our mandates. there are risks and uncertainties there. but the important thing to think about is not just the first move to raise interest rates, it is that we are going to need to accommodate a monetary policy for the next few years. so even when we start the policy of raising rates, we will still have -- that are accommodative. --when you put it that way would you vote for an interest rate on the 28? john: we have started a process i have spent a whole week preparing for the meeting and we have a lot of material. i will listen to my colleagues. i will not decide on that today. vote for anre to

increase in october, it would shock the markets. is the fed willing to do that? john: we need to focus on economic fundamentals. see the economy going over the next couple of years. an important consideration is that it takes about a year or two for monetary policy actions to have the full effect on the economy. so we have to look through the front window and not through the rearview mirror. tom: that was john williams yesterday in san francisco. we are back to cheerleading. vonnie: it is all about whether it is 2015 or 2016. if you look at probabilities, there is only a 6% pollack ability -- 6% possibility about yellenening, but janet

also said that they do expect one this year. tom: this goes back to what you said earlier about the hope economy. yeah, to a certain extent a lot of people would like to get this done. but the question is, does the data support getting it done? metcalfe.g in michael where would you put the u.s. 10 year? is it higher than where we are now? what is going to happen in the next three months is going to change with the market is signaling versus what the fed is signaling? i think they will go and i think the 10 year will be lower. and that, to john williams point on inflation, we track retail prices on our project.

here is an interesting thing. inflation,it is in and it has continued into this month. of, if you take the impact energy prices out, which is a daily series which we can do, the annual inflation rate is close to 2%. and we know that energy prices and the dollar are volatile. so yes, current inflation is very low. ahead, the labor market is done. the market is clearly suggesting that they should hike. it is all temporary. guy: how temporary is it? it seems like it has been temporary for quite a long amount of time. extrapolate a series

forward in the internet measure ist you have got, what leading you to believe that that measure is going to go significantly higher than where it is now? why are we going to see inflation creeping back in? if you are checking out what is happening on amazon, a lot of stuff on amazon is coming from china. pric as welle don't use as a main street price. so we can match the inflation. but it will partly be a base effect. so the collapse in energy prices that we had was q4 last year. unless youhanically, get another big collapse in oil prices, inflation is going to turn. we are confident in that. surprise is because we had a second to dip in oil prices. and i think the second dip, that was the reason why we were

confident. tom: i'm glad you bring that up. bring -- i don't want to too much of a big deal to that, but where is your inflation allegation of equities and bonds? how do you nudge that? what is the nuance? let me give you a little bit more detail. interesting things there is that this is a sector .hat has been very unloved and we're just beginning to seat sentiment turn there. so that might suggest the global outlook on growth is not as bad. but in terms of equities and would tilt towards equities, because we can see an improvement. tom: let's continue.

michael metcalfe is in london with guy johnson. up, gary shilling reaffirming low interest rates. a gary shilling number -- always our most popular guest. he will be with us on bloomberg radio. this is "bloomberg surveillance." ♪

guy: this is "bloomberg surveillance," i am guy johnson in london with tom keene in new york. we are looking at the canadian dollar. the loonie is on the move in the wake of last night's election

and the surprising victory of justin trudeau and his liberal party. there is a little bit of a move to the upside, but really the big force that has been driving this over the last year has been what is happening with oil. you have a different perspective on this one? tom: absolutely. i'm grad -- i am glad you bring up the dollar canada. justin's back to father. trudeau.eau -- pierre dollar,weakness in the in the first bout of weakness on the left side was his week canadian dollar. and i bring this up because then it got ever weaker. then you have the big

hydrocarbon and china boom that is strengthening the canadian dollar. i walked by the canadian embassy in london last week in trafalgar canada has a most unique story in the shadow of the united states. schatzker is walking back-and-forth because i just said they are in the shadow of the u.s., but anyway. it is an interesting historical story on dollar canada. guy: let's bring in michael metcalfe. when you look at the victory, there are a number of ways to look at it. it is a huge commodity move, but is there anything the canadians can do? -- tapping into their reserves to figure out how to micromanage this. do they need to have cyclical policies? michael: i think it can help.

as you said earlier, it is a vote against austerity. the commodity wave broke just before the elections, so one interesting fault of the canadian dollar is that if they now go into policy, willie bank continue to -- and ironically, that could support it. , what therms of lessons are for everybody else if you are sitting in australia policyou are a commodity holder, how do you look at what canada is doing and think about how to extrapolate that into your own economy? michael: they'll have the same challenge -- how do you and howbute the games do you cushion the blow? so all of the economies are suffering this issue. guy: saudi arabia looks like a pretty interesting one. more stimulus. tom: is currency the solution

for most policymakers? is that just the easy way out for the policy conundrum? it isl: look, interesting. going back to your comments about denmark before. denmark doesn't have that option. and the longer denmark struggles, perhaps we can look at that. but i think more generally, obviously, the commodity producers -- the currency has been clearly the main mechanism for the way countries have tried to ease. even the non-commodity countries. look at the ecb. we talked at the start of the program about how lending conditions are improving but the question in europe is that, can they keep getting weaker by promising to ease? so yes, i think the currency is really an important part of policy. eurodollar's the

correct price? where is the proper euro price? values: look, at current it is probably not that far away -- the question really going forward is, how much can the ecb -- europe, right now, it is 1-1 .5%g, it will be next year. it needs an undervalued euro and i don't think we are there yet. i think that is why the ecb will continue to push and look devilishly -- dovishly. on bloombergp , we have penny pritzker, she is a cubs fan. beat the cubs.ot

8:00 in new york. a cubs fan. on bloomberg . stay with us, this is "bloomberg surveillance," from the home of the new york mets. ♪

tom: good morning, i am on "bloomberg surveillance," we greatly appreciate your attendance. let's get to the business flash. vonnie: united continental has appointed and acting ceo. he will run the airline why the ceo is on indefinite medical leave after suffering a heart attack last week. apple is expanding its retail footprint. ceo tim cook says it will have two dozen stores in china. and credited night apple's chief. >> we are on a rapid expansion in china. so when angela came on board, we only had a few stores in china.

ouraturday, we are opening 24th. vonnie: apple music has 6.5 million subscribers. spotify says it has 20 million subscribers. in june, deutsche bank mistakenly set -- mistakenly buyers.to hedge fund the money was recovered a day later. we need to bring and hans nichols now on something that i think has been misreported. know, this is not a joke. it is ageless. this happens all the time. $6 billionto be a mistake this time. but the mistake in hiding the fees in a trade is a huge deal.

hans: the tree looks like it was never settled. i got an e-mail from someone this morning to make that point. both sides would need to look at the account. it said the money would be sent back and it might not have ever been fully sent forward. so i think we need to make that distinction. not have frequently this happens, but i do think that one of the reasons it may be talked about so much is because it goes to all of the troubles deutsche bank is having. billion from a6 jr. executive made this transfer , even though it wasn't fully cleared and settled, because it was the gross and stop the net -- the problem is that full eyes weren't looking at everything. you didn't have a proofreader making sure.

settled is a very important word within trading. the idea of net and gross is the base idea that you want to hide the fees from the customer. years,g back hundreds of have struggled between the gross trade and taking out the fees without anybody seeing it. what are the ramifications here? obviously, it is embarrassing. but is there a to do list for deutsche bank? hans: there has been a list since tom crean came on board. in two weeks we will get the revamped strategy. we will also get deutsche bank earnings. so we will see to what extent they have been affected by volatility. this is just one more issue. guy: let me jump in. what caught my eye is that when

you run the math and figure out that let's assume, they got the money and they had $6 billion in their account overnight. and you look at the overnight lending rates and you do the calculation on how much money they would have made, it is peanuts. i'm sure it is a very nice lunch, but it is not much. let's bring michael metcalfe back on this one. from anterested in is different angle, how do you make money in such a low heeled environment. guy who madehis $25,000 on $6 billion. how are they going to make any money that will make a difference? michael: i don't know why you have lunch, by the way. [laughter] here in ae challenge , you say,ng world

what can you expect. but it depends on how much risk you want to take. some of the things we talked about this morning -- emerging-market assets right now, in part because the currencies have lost so much, offer great value. yes, they are volatile. but right now, because the assets have sold off so much on the assumption that china is going to collapse, and we are beginning to realize the collapse isn't as sharp as we had thought. so there is value their, a great value average and you there in some emerging-market assets. so yes, it is hard. thess you go right at credit spectrum, probably not. it is wrong to confuse the fact that in the low heeled world, there is value right now. tom: michael metcalfe, thank you so much. we will continue here over on many hours of "bloomberg surveillance" this morning.

guy johnson will continue with us in london. robert nardelli will join us to give us perspective on leadership in volkswagen. and also in investment in america. we will dress the shocking election and the results for justin trudeau. i love saying that, it is like my youth. nardelli. bob futures as -7%. we are looking at the 10 year yield. stay with us on television and radio as new york awakes. this is "bloomberg surveillance." ♪

soon and slowly, not

lower for longer. the san francisco federal reserve president -- he likes what he sees in america. from vancouver to st. john's, newfoundland, canadians do not like what they see. they toss the conservatives. young trudeau is very in. and president xi visits london. goes unmentioned. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene. guy johnson is in london. the headline was that the pope was not in london yesterday. when the president of china visited the white house, they were very -- they were barely cleaning up after the pomp and circumstance is of the pope attending. this is a very big deal for china, isn't it? we are definitely china focused here in london. it is going to be a week as well.

we will see the chinese premier as he tours the u.k., handing the keys to a nuclear power station. tom: how many people go to a state dinner? is it thousands? is it like a cate blachett movie? guy: a couple hundred. but i never been to one, have seen it being laid out. tom: we will have a full report from francine lacqua tomorrow on the state dinner. i like to get rumors started like that. let's get to our bloomberg first word news. here's vonnie quinn. vonnie: we are moving to canada because they are voting for an unprecedented turnaround in their government, the liberal party. stephen harper has been ousted as president and ends a decade of rule by conservatives. >> this is what positive politics can do.

hopefulwhat a positive, vision and a platform and a team together can make happen. theie: trudeau is 43-year-old son of prime minister pierre trudeau. britain's prime minister says -- xis visiting president jinping arrived yesterday. aboutvestment will create 4000 jobs, but british union leaders say 5000 british workers will lose their jobs because of the chinese deal. lawmakers are wary of the administration's plan. the transportation department wants to issue rules next month. there is growing concern about the risk to aircraft. drones istion of expected to quadruple this year.

300 students at the white house, including the boy who was mistakingly arrested. i presume there were telescopes in the crowd as well. tom: i can see a telescope up there, look, the stars are jet flyingt is a into reagan. vix says it all. put up the vix. it is something how equity markets have been resilient given all we have seen. ,e must go to dollar-canada schatzker with canadian dollars in his wallet. 1.3014. very exciting, particularly if you grow up -- if you grew up at a time. let me go to mac monitor.

here is the gdp year over year. this is how you turn the bombs out -- turn the bums out. unemployment is at 7.1% there. they are really feeling it. tom: right here is where schatzker went long the toronto maple leafs. schatzker once again lost the bet. vonnie: the policies the liberals want to bring in with fiscal policies with half a percent of growth. tom: the politics there is heated. i want to fold in investment into commodities, something to do with canada. the ceo ofelli is xlr eight. seen ae never

commodities debacle like this, have you? are facing the highest level of uncertainty where change the only constant. the ability to pivot every morning, it is like the quarterback at every time at line calling an audible. tom: nardelli goes through the aisles of home depot and says i remember. formally with home depot, how do you plan? robert: they are continuing to do a lot of private branding. it is up 17% to 20% now. more customer focus, more customer service. they are doing a great job. reallylmart is stumbling. it has an heir apparent from the family, he is in office.

is his job at risk, even with all the bentonville love? is the leadership at walmart at risk of going out the door? bob: i think it is a great question because today like never before, look at the activists involved. it is no longer the ability, if you go all the way back to some of these dynasties, where it has been father, son, grandson, i think today everybody is much more vulnerable to the market. tom: to the moment by moment. bob: if you look at where -- and what nelson just did with ge -- trojan horse, maybe. friend, i do not need to be on the board, just give me access. if you look at the 81 page document that was released, a lot of those have a ge template maybe without the logo. an: guy johnson, there was 81-page document with the actual trojan horse. jump in here.

guy: you said ceo's have to pivot and decide what kind of quarterback they want to be that day. talk about the consumer. when the consumer lives of the world in front of them and is trying to figure out how he or she should act, are they frozen in stasis because they are confused at what is in front of them? or are they looking at the picture in front of them and saying i want to get this, stay away from that? bob: i think the consumer today has more choices not only on price but on product. they have the ability to get immediate gratification and aspirational desires. if you look at the omni channel, it is a major change from when i was running home depot and retail. today they have the option to go online or they can go -- so it is birds and/or clicks -- so it is bricks and/or clicks. they are screening to try to get caught up.

waterskiing. like if you stop, you sink. you have to keep momentum, moving forward in today's environment. that -- where does that leave workers and wages? bob: wages is a function of a business. if you impose higher wages, two things will happen. they will have to pass that on to the consumer, higher prices. or they will have to settle for lower profitability. in today's environment, investors will not settle for it. vonnie: it is a no? bob: it depends on the business. -- j.crewst wages rose wages. they said they were better off paying more for retention then to attract, motivate, and retain employees. vonnie: but they will not be forced to. bob: it depends on the administration.

to: can i take you back 1914? henry ford says i will double the wages of everybody, take them up to five dollars an hour, and as a result i will not only get the best staff but i will have money flying around the economy and everyone will be better off. does that argument function in the u.s. today echo bob: if you think about some of the tax opportunities that have been out there, everybody thought we do these tax breaks and turn some money back to the consumer that they will spend it. a lot of them because of the uncertainty in the economy have tucked it away or used it to pay off debt. i do not think we have seen the same kind of response that maybe you were talking about in 1914 when henry said i will increase wages and give customers an option to have any ford car as long as it is black. tom: tell me about productivity and the gains that corporations have had.

the critics of bob nardelli and others say it is a plutocracy in a gilded. how do you respond? bob: if you are not generating at least productivity to offset .nflation, you are backing up you have to either get it in price or you have to get it in productivity. it does not always mean you take it out of the worker. you could work with your suppliers, with engineers, on innovation. you can do cost out, cereals .mprovement, substitution we always tend to think we are taking it out of the laborers, and that is not always the case. some people do because maybe they lack imagination and innovation. tom: there is technological progress. bob: technology is driving productivity. technology as a class is not creating the number of jobs we thought it would when we got so heavy into that market. tom: bob nardelli is with us.

we will speak about the disaster and volkswagen coming up. robert diamond ran a small shop called barclays. in the next hour -- i got an idea for you. bob diamond and i like the same book. i believe we will talk about " thisn "bloomberg morning. what book with that the? we like the same book. stay with us. in london, in new york. "bloomberg surveillance." good morning. ♪

-- theyre in chicago are in chicago -- they being the dreaded new york mets. penny pritzker on "bloomberg

," in a while, a diehard cubs fan when she is not a white sox fan. we are all well done about the new york mets. that is the empire granderson building there in that instance -- in that instance -- in the distance. bloomberg news says the company plans to separated u.s. and chinese divisions. there is a merger in the making in digital storage. star wars fans short-circuit the force. britain was trying to buy seats for the movie, out in two months' time. awakens" tickets went on sale yesterday. it up as just before christmas. tom: i will wait. it is just join or miss.

he dated princess leia in high school. paul sweeney is with us from bloomberg intelligence. we will get to yahoo! in a moment. cash transaction. they have had success after success, acquiring pixar, marvel studios, now lucas films a tom:. . filmsthey have several scheduled out for the next four or five years. there are tv shows, themepark attractions. movies scheduled out four or five years. yahoo!ve me an update on . it is ugly. paul: it is kind of the same old story. they are focusing on the alibaba spin out. was in "return of

the jedi." paul: it looks like they are going to move forward. tom: this is critical. every time you do a transaction because of tax policy, things go bad. discuss. paul: john malone of liberty is the king of tax-driven buying and selling of securities. yahoo! is new to this game. pre-approve it, but their law firm says we still think it will be tax-free said go ahead. there are two scenarios. under a positive tax scenario, the company is worth $45 billion. under a less positive tax worthio, the company is $43 billion. paul: that is the second issue we will talk about. can you ever stop growing the top line of this company echo you are in an industry that is

growing 15% a year. yahoo! will have another quarter with negative growth on the top line. there is no sign that marissa mayer and your team can reignite growth. bob: changes the only constant, and unless you are changing with the competition, you're probably backing up. guy: how long before the team gets frustrated? effectively they are working for a tracking stock. the rest of the business is not doing that great. they are alibaba tracking stock right now. is that where you want to be if you are one of the smartest kids in the valley? paul: yesterday another senior executive left yahoo! there is a long list of executives that have left. it is very difficult in silicon valley to attract talent if you are not growing equity value for your employees. this is a big issue. once the all obama spin takes place, the focus will turn back to the core business.

vonnie: cash flow is still positive. cash flow is at $5.7 billion. that is not nothing. paul: the company is still generating cash. there are one billion users worldwide on yahoo! that is a significant user base. challenge from an operations standpoint is mobile. facebook figured it out. they get 75% of their revenue from mobile users. yahoo! has not cracked that. nardelli, when do you say enough is enough? were looking at "the guardian" two days ago in london. the declining advertisement in london. when does the company say enough? when does marissa mayer say we are not part of this, we have to exit? bob: that would be tough to announce, that you have been

defeated. is getu have to do mobile going. she has got to get some new, innovative attractions. she has two. otherwise you evaporate. vonnie: so do you hire somebody to do mobile? bob: take a look at what happened to aol. they got bought out by verizon. that might be an exit for this company at some point. vonnie: who would be a buyer? be a mediald company. they have shown no real ability over the last three or four years to reignite the top line growth. investors are saying post alibaba, what is the catalyst? tom: do you realize the product placement disney got last night with mr. trudeau and his kids? paul sweeney on star wars and all yahoo! erik schatzker will join us

later to give us canadian wisdom. we will talk about the maple leafs and young trudeau as well. tomorrow we continue the conversation on yahoo! scott galloway highlighting headlines from when he was last on. this is "bloomberg surveillance" to start your day. ♪

tom: good morning, everyone. ."loomberg surveillance tom keene in new york.

guy johnson in london. time for a morning must-read on china. here's vonnie quinn. jinping issident xi in buckingham palace. the pomp and circumstance is much bigger than history to the united states and the simple state dinner we put on for him here. george magnus writes "for the financial times." his main point is that china ands the city of london would like its currency to play a bigger role. want london tos become the premier western financial center for renminbi trading, clearing, and settlement. this would be a departure for china. guy: london is where fx trades are centered globally. it makes sense for the chinese to do this. they played a caddy game -- they played a catty game.

they were not going to give this to you. hence we see the u.k. bending over backwards to make sure this actually happens. the issue of human rights, what is happening into bet -- in tibet is not front and center at the moment. there are going to be demonstrations. we will see something of this issue being raised, but nevertheless this is the u.k. making it clear that it feels he needs to be at the front and center of this story. vonnie: briefly before we bring the conversation back to bob nardelli -- were there any protests? guy: there will be. they will not be as part and parcel of the conversation. -- david cameron went to see the dalai lama, so the relationship went into the deep freeze for a couple of years. they are trying to avoid that, but there will be demonstrations in london. luckily, how do you

see china at the moment? i applaud the prime minister. he is totally focused on gdp and growth, making these trade missions around the world, trying to engage and develop a relationship. he is not being distracted by some of the things guy talked about. chinese hacking was a big issue the other day. we read about that. i think this gentleman is really focused on the need to grow the economy and to be able to spur money back into that country. tom: and again, the pomp and circumstance in london, as vonnie quinn mentioned. in our 9:00 hour this morning, jack vogel will join us on investments. stay with us. ♪

i just had a horrible nightmare. my company's entire network went down, and i was home in bed, unaware. but that would never happen. comcast business monitors my company's network 24 hours a day and calls and e-mails me if something, like this scary storm, takes it offline. so i can rest easy. what. you don't have a desk bed? don't be left in the dark. get proactive alerts 24/7. comcast business. built for business. tom: good morning, everyone. "bloomberg surveillance." let's get right to the bloomberg first word desk. vonnie: canadian voters reaffirmed their nation's

liberal tradition. and ousted stephen harper ended a decade of rule by the conservative party. justin trudeau is 43 years old and the son of former prime minister pierre trudeau. ships designed to operate in coastal waters could cost $4 billion. they are being sold to the saudi's. -- thetional observers human rights group says the attacks targeted a coastal province held by insurgents. airstrikes started three weeks ago. the fbi is investigating a hacker's claim that he broke into the cia director's private e-mail. online documents posted

came from his aol account, and included a list of senior national officials with their social security numbers. lordcar talk with bob l.a.. that is what we would like to do right now. nardelli.k with bob that is what we would like to do right now. what grades do you give volkswagen management? out they have finally come and admitted that they intentionally and willfully designed a mechanism to circumvent the epa testing in the u.s. i was with mary barra last week. ,ere is a ceo that took charge stood tall, and let it through a crisis. the ignition switch was very different in that it was not willful, and it is a much easier fix than what we are going to see with the emissions problem in the vw vehicles. tom: is the company at risk echo it is such a national

institution. it is a huge company. is the actual integrity and the future of the company at risk? bob: i think so. it is not an accident, not an oversight. it was an intentional work around. for them to fix this, they will have to introduce another tank in the car that is injected into the exhaust to counteract the emissions problem and not lose horsepower. tom: is volkswagen essentially as if we had gm and ford together in the united states? bob: it is huge. not only is it a significant competitor in the auto industry, it is one of the prime industries in germany. tom: guy, jump in here. guy: is the biggest risk that vw does not change here? there is rumors that the old chairman could be coming back and become the new chairman.

that is a rumor. are they at the stage where they future ofng of the the business and they have the old school still running it? is that the risk, that they do not go far enough? at the you look situation, you have thousands of cars parked at the dealership, so the dealers are certainly upset with this. they are upside down relative to their dealerships. if you look at the consumers that own them, what is the value and what is the length and the time it will take to fix their cars to get back to the market value that they thought they were buying in these vehicles? it is going to take bold leadership, somebody to stand tall, respect the past, do not live in the past, and recognize this was a major debacle that they will have to fix expeditiously. mary barra did that with general motors. she set aside, got separate investigation. that is what they need to do. they are not doing that quick enough. vonnie: there are another 3000

gm recalls this morning with ignition problems. vw is not vw, it is a collection of brands -- everything from a vw to a lamborghini. it is a bentley in there as well. when you look at this business, the sprawling empire that has been created, this huge car company -- is a too big? bob: there are two separate questions. in today's environment, everybody is getting pressure. we were talking about yum! brands selling off china. i do not think, from a management standpoint, it is too big and too sprawling a business. that gives you favorable leverage in being able to buy commodities and get the synergies of technology across the platforms. i do not think it should be broken up.

the investors may have a different point of view on that going forward. hasie: sergio marchione been busy for the last couple of days with the ferrari ipo, but he is looking at this. is there any way he can make hay from the volkswagen debacle guy: ?ob bob: i do not think volkswagen is in a position to reach out and buy them. unless sergio wants to peel off one of the branson gets separation that way, i think he is very focused on the ipo. tom: reports say it will go at the top end. should they take the brand down screen from 7000 units up to many more thousand units and essentially do a maserati? can ferrari go the way of maserati? the conflicthat

between sergio and the prior ceo? tom: is it like louis vuitton, chanel? can you get away with it? bob: i think there is enough demand to support from a 7000 to 10,000 level. tom: guy, you saw it at the dorchester hotel when i was coming cocktails with francine lacqua last week -- there were three ferraris in the parking lot. none of them were mine. bob: that was product placement, tom. parking theme there. the brighter, the more brash the car is, it gets parked outside the hotel. how can ferrari survive on its own outside of a big group when there has to be so much investment into electric vehicles?

and the whole basis of the industry is going to change in a short space of time? bob: when i was running chrysler, there was a loyalist group that were adamant about not advancing viper. they wanted to keep the traditional. they did not want radio, comfortable seats. they wanted the muscle car and the horsepower and not all the bling. ferrari is certainly in a different class, and in fact i think they will keep the heritage of ferrari. tom: who is going to buy the new ferrari yak the pressure has got to be tangible. bob: i think there is demand out there. it is an iconic car, it is coveted. i do not know with the current backlog is, but i am sure it is a pretty long list. what sergio sees is an opportunity of demand, bring the supply up, generate more revenue, and it could be profitable. vonnie: 10% of the company is

going public, and bob nardelli does not want in. tom: you would not be a buyer of shares today? bob: i am like you. i cannot afford that -- the car or the stock. tom: bob nardelli passing on for ari today. -- on ferrari today. coming up, an important conversation. after speaking with david focus landau last week in new york, we speak with peter of which a bank. -- of deutsche bank. an important view on what the fed will do. stay with us on "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." it is time for our single best

chart. ♪ o canada we bring in erik schatzker. for years, growing up in toronto, he is our esteemed canadian expert. before we get to the jokes, how big of a shock was this to the canadian people to see the sun appear-- to see the son and take over the landscape? erik: it is kind of like what we saw play out in britain earlier this year with david cameron take the majority. the same in canada. more at the expense of the party to the left of the liberals than the expense of the conservatives. tom: how much of this is the heritage of his father in the quebec independence movement? canadians, it is ancient history. for those of my parents'

generation, it is very much alive, but they are a smaller percentage of the voting public. jc, we have a photograph of of the commodity -- of the montreal canadiens. the strength off china and commodities -- what do the canadian people want? canadacanada -- a weak helps their exports, doesn't it? erik: if you were to chart the canadian dollar against commodities -- tom: lockstep. erik: pretty close. if you go back to the 1990's, it's very strong. he is a supporter of the tar sands industry. erik: but he wants to put caps on car emissions, which will hurt the tar sands industry.

guy johnson, i was walking by the canadian and the sea in .anada -- the canadian embassy the flags are right there in front of the lions at trafalgar square. i could not believe the canadians were overt in london, aren't they? guy: and the americans will stand by the railway. i put that out there to make erik feel better this morning. is this a scream against globalization? can trudeau deliver something to help them out? he talks about cyclical spending. with that lean against this wave? erik: i don't think justin trudeau, from everything that i know about the guy, is an isolationist there it but i do think it says something about what you're hearing out of europe. the need to spend money.

can do anything. the question is, can spending on infrastructure be done efficiently, or are we entering another era of porkbarrel politics? , 1-2,he toronto blue jays doing better than good against the kansas city royals. erik: they need more josh donaldson, more joey batista. tom: the biggest thing for toronto is with the blue jays they do not have to talk about the lousy maple leafs. cherry will be with us tomorrow as well with his perspective on canada. let's migrate to photos. are we doing an all-canadian ieu? vonnie: yesterday president obama hosted the second

astronomy night on the white house lawn. students with president obama. tom: very cool. remember the 14-year-old who built a clock that they thought was a bomb? he was in it, too. tom: how cool are the northern lights in canada? erik: spectacular. absolutely spectacular. tom: i have never seen them like you have seen them. ink: not in january, not february. june and july. vonnie: nasa releasing stunning photos. tom: this is what the president saw through his reflector telescope. vonnie: this is the sun. there was a jew mattox storm

storm.netic guy: yesterday prince william speech saying to boy cat ivory -- to boycott ivory. david attenborough was also a guest. erik schatzker, thank you so much for wisdom on canada. truly a really interesting outcome in canada. in our 9:00 hour, jack bogle a type ofus why investing is the way to go. from himet an update

on investing in my 201 k. dow futures -58. from new york, from london, "bloomberg surveillance." ♪

tom: i am going to call it quiet in washington. that is going to change, would be my guess. with the republican politics on the hill, but also budget issues. that is a production as we slide into november. what a shock that is, thanks to our washington team. the library of congress in the background. let's go to our forex report. underhem up, dollar-yen abenomics, worth watching here. euro-dollar does nothing, one big churn with 1.13. canada, 1.3009. the brazilian real, we are watching and emerging-market. a little stronger in the last few days off the friday

festivities. right now let's get to a business flash. vonnie: and acting chief executive officer is at the controls of united continental. the world's biggest private isity firm -- blackstone paying $5.3 billion. blackstone is excepting rent-controlled terms on nearly half of them. apple is expanding its foot print. has 6.5 million -- they are about 6% signed up after their free prior. and it. to rip up the script quickly, we have to ask bob nardelli what we talked to arthur levin about yesterday. what does a company do with illness?

the ceo of united airlines stricken with a heart attack. he said yesterday, we do it so clumsy. why is that? bob: it is interesting. you compare what happened 36, 37 days into the job, a heart attack. there was some slowness of a temporarynaming -- at guess they were waiting to see how severe it was. you think about apple and what happened with steve jobs. they kept it a secret for a very long time relative to his illness. there is a right for the investors to know when you have someone running a company. you have to get it out there. tom: should to be codified by the government, by regulators? bob: i don't think so. the board needs to stand tall, take responsibility, and make those tough calls. you cannot have a rudderless company. vonnie: in a case like this where perhaps we did not know or

the family did not know what the situation was for several hours -- tom: it should not be immediate, but there is a grace to it. bob: there is a grace -- that is a good term, tom. you do not want to push someone out who has accepted this and the challenge, and the stress of the job certainly played a part in it, i have to believe. thathere needs to be succession plan, the emergency letter. if something happens, here is what we are going to do as far as the next appointment. tom: let's switch gears to the consumption of america, the spirit of america. i was watching packers football. you are so popular on the show because you are not from some fancy zip code on the east coast or the west coast. you are from rockford, illinois and auburn high school, a huge hugeof america's -- and a

body of america is wistful about getting back to what you grew up with. where is the broad part of america? bob: we had a couple of panels last week on the millennials and how they are having a significant influence relative to the consumer and consumer buying patterns. they do not have land lines. they are comfortable buying online. they want to know your salary versus vonnie's salary. vonnie: i want to know that. bob: we talked earlier about this on the channel and the way they are -- about this on the channel therein they do online banking and internet banking and deposits and so forth. we have to learn from the past, but we have to learn from the future as far as how we are going to run these businesses. it is a whole different sound of -- it is a whole different set of values. the younger generation is not investing. vonnie: on the part of companies

companiesn't investing more then? bob: there is still scar tissue. vonnie: that was years ago, though. bob: a lot of them are hoarding cash, dealing with the uncertainty. but if you look at the activists , they were thing that happens when they go in, the company stops investing in r&d. that is a terrible thing to do because now they are going to over leverage, buy stock, and they will cut r&d. that is a terrible formula. tom: bob nardelli in new york. we need to go to london for some of the pageantry. guy? is happening right now. we are seeing the royal party greeting the chinese leadership. they are going to get in -- it is a four-star parade at one end of the street.

they are getting a carriage to buckingham palace. is goingnight, then xi to be staying at buckingham palace. the chinese officials want their leader to go have fish and chips in the pub. that throughe of the day on bloomberg television as well. bob adella, thank you so much. -- bob nardelli, thank you so much. next on bloomberg television, we continue on "bloomberg onveillance" on radio economics, investment, and international relations. dow futures, -58. this is "bloomberg surveillance." ♪

stephanie: a banking brave new world. it is off costs cuts and more regulations. we will talk with former barclays ceo bob diamond. seizure in paying london where

he may announce $46 billion in deals and investments. and canada, o canada -- a stunning election up north. the liberal party sweeps conservatives out of power. stephanie: from hong kong to london to right here in new york city, you are watching "bloomberg ." i'm stephanie ruhle. david: i'm david westin. it is tuesday. we have more coming up. helping us kick things off is chief barclays ceo, now executive at atlas merchant, bob diamond. great to have you here. xi jinping is at buckingham palace this morning. there is the queen going down through the color guard.