♪ . the ecb dilemma as mario look at theres to euro area inflation. inflation is unchanged. twice.from janet yellen the u.s. jobs report on friday. nbn, we get the iaea report on iran today. good morning. this is "bloomberg markets."

i am francine lacqua. we have tom keene. we have mario draghi tomorrow. let's get more on euro-area inflation. let's go to our international correspondent, hans nichols. pointthe survey was 40 two, this is below, 0.1. it shows no inflation and will increase pressure on draghi to do something big and bold with quantitative easing. one of the guys at talking about his expectations and sees it expanded to another half a billion euros for a longer duration. will they do about the deposit rate? this will be talked about when they meet in frankfurt tomorrow. erik: what do you see in the of europe as it

knocks on what mario draghi will do. is it improving or slowing? hans: when we look at all of the eyes, it seems the german economy is a little stronger than the inflation numbers filtering through. wage increases in germany. we have not seen that happen with the headline inflation number. the core inflation is up a looke, that they like to through that as well. the core was one point one, factoring out energy costs. you may have more accurate numbers with the terminal right in front of you. francine: we're just going through it. that means that mario draghi will probably do more tomorrow. major benchmarks in france and germany of a quarter of a percentage point. david cameron makes his case

before parliament that the uk's should extend its airstrikes against the islamic state into syria. the debate is expected to last several hours, and cameron is likely to win the vote. the opposition labor party, jeremy corbyn, will argue against the attacks. air will poster turkey's defenses, and they are not reacting to russia. jet shot, russia had a out of the sky by turkey russia responded by bombing i have star gets near the turkish border. one latin american delegate at the climate change conference said there is a disconnect with and whats from leaders is happening in negotiations. they will try to work out differences by december 11. tourent xi jinping is on a

of africa, the country that has suffered most from the country's slow down. chinese officials say that is only a temporary condition caused by plunging commodity prices. for the first time in days this guys over preaching is blue. .he smoke and smog is gone it is still hovering over northern china. cars are the biggest contributors to beijing's smog. you can get more 24 hours a day at the new bloomberg.com. three days of job coverage in the united states who preceded by what mario draghi will do. let's look at equities, bonds, commodities. quiet currencies. a weaker euro off of what we saw from hans nichols. 1.06%. the same with oil, a bit weaker.

onto the second stream, the idea equityvix better markets, getting near the old complacency. negative german yield. this was getting near the zero bound. that is a 15-year swiss maturity, inside baseball on what negative yields are doing. wanted to be very european so i put in dollar-ruble to impress people. a weaker ruble. it goes with my orange bow tie. francine: i love that you looked at swiss bonds. the ecb doesatever tomorrow will affect negatives. tom: this is original mathematics. you have never seen math like these negative yields. francine: this is european euro-dollar, i want

to talk about inflation. zero point 1%, a little below what we expected. core inflation, taking out food, alcohol, tobacco, that is how they calculated. weekis on the back of construction figures in the u.k.. the u.s. economy is weaker than our next according to guest. he is eddie perkin, the manageve office at vance -- at eaton vance management. do worry about negative rates? you are basically safe. edward: it is something to worry about. there has been a lot of talk about the divergence of monetary policy between the fed and ecb.

there is a divergence in the economy is. if you look at pmi and german data it is steadily improving. in the u.s., the backward looking data, the jobs numbers and gdp data, the backward looking trailing indicators look good, but the leading indicators look less good -- like the pmi saying we are still slowly on the upper trend, but we are expecting so much from the ecb. it seems like it should be the other way around. the two central banks are out of sync with each other and their own economies. it is unusual with data weakening in the u.s. we will get a tightening policy, and in europe where things are looking better, we will get more qe tomorrow. tom: first i thought it was the excellence in tax management, blue-chip stocks,

which all of our listeners want i own -- are you suggesting don't need to buy ibm's, that value is in the large blue chips of europe? edward: there's better value in the european equity market. tom: this is not an advertisement. tax law in the united states on actual funds is bogus. a million years ago one mutual fund house said this is ridiculous, we will manage for taxes. they were the first to do it. a cheaper dividend and better valuation. edward: cheaper dividends, friendly central banks, and european profits are closer to top levels -- tom: why is mario draghi doing -- doing what he is

doing? .dward: i can't explain it i think the central bank policy makers are backward looking. i think they are wrong. francine: could we see a policy mistake? if draghi does more, only working on currency, it makes a lot of the stocks seem more attractive. edward: the exporters it makes see more attractive. i think the euro is near a trough versus the dollar. the long dollar bet that so many people have is overdone. oi i though policy is g the office of correction, it is so known by the market we may see the dollar weakening into the new year. francine: you'd probably think the fed has to reverse next year, that hiking is a mistake. edward: we would get one hike this month, assuming the jobs numbers r.o.k. on friday.

tom: you mentioned charles evans ' comments, everyone is backtracking from one and done. the idea of, should i manage for currency? should our listeners and viewers, in our thinking for investment, should we worry about the dollar specifically, or is it an economic curiosity? edward: it affects asset classes globally. it is difficult to forecast the dollar, but at eaton vance we take the stock in the positioning in the market. when things reach an extreme, we fade that sentiment. i think there is asymmetric payoffs going the other way. we would look at stocks a weakeningrom dollar. it would be domestic european stocks rather than exporting.

francine: thank you so much. he will stay with us for the hour. david serra, with algebris investments. him aboutlk to bonuses at 6:00 a.m. in new york, 11:00 a.m. in london. this is "bloomberg markets." ,n bloomberg tv, bloomberg.com and streaming. ♪

francine: welcome back to "bloomberg markets." can see secretary john kerry briefing the press after a nato meeting in brussels, saying every alliance member has expressed backing for the

efforts of the syrian support group. he is gratified a number of allies are bringing more to the to increaselanning their contributions. the secretary is calling on every nato ally to step up their support against the islamic state. is sendingt the u.s. ground troops. let's get to our business flash. the owners of volkswagen have broken their silence about the admissions scandal. the family that owns the majority stake says that volkswagen will get through its crisis. they're speaking to workers to dave. saudi arabia's oil minister will listen to other opec members in vienna. saudi arabia is expected to defend market shares, rather than support prices. iran and venezuela want opec to curb production and force prices higher. a new standard for

philanthropies. giving away all of their shares of facebook. the plan innveiled an open letter to their newborn daughter. will retain control of facebook. when he writes the first check for preschool for $30,000, he is going to change. he is going to be like, no, we are not going to do that. $40,000 for to go, " a fully rolled at a fancy montessori school? " .oing viral last night wait until they have a second kid. you remember the first kid? oh.he third kid hero like,

congratulations to the zuckerberg's. mario draghi. up stimulus. we are joined by the chief economist. and eddie perkins is with us as well. have you read this information, a little bit below what economists were inspect -- were expecting, but not bad at all. i think the inflation report is actually a bad one. the headline numbers were unchanged. .he core of fell services and inflation, the best page of domestic regeneration, it fell 1.1% from 1.3%. it is not disastrous, right? does it mean we will get

something big from draghi tomorrow. tom: let's which over to eddie. he is bloomberg and intelligence because we cannot hear his microphone. they will fix that. we look at the inflation battle in europe, bringing it to the united states. is that stopped? andyone was massaging managing a story, all of a sudden you have someone from boston and evans from chicago, why are they doing that? edward: there is a debate within the central banks and the fed. there are number of downs that think it may be a mistake to move at this point. we are going to find out what the decision is. tom: he nailed this earlier in that by definition the central banks go after the fact. they are an unexposed institution. that is what governor carney has provided leadership on by

waiting for inflation. francine: we know that charles evans is on the dovish side. you said that he looked nervous about doing the liftoff in december. is he dovish in the fact that -- i know he is a voting member -- but someone like that in the ecb? someone should take more note. tom: in the united states we know where mr. evans is. i would defer to mr. powell and the battle of the presidents, chicago versus richmond marker. is on a theoretical construct right now. there is no foundation to work from. david: i would say that we have seen that in europe, too with draghi versus bike men. led by their president. we know that yellen is more on the side of introducing that first rate hike, as draghi is on

the side in the euro. please come back and we will have the microphone work next time. speaking of leaders leading and speaking, chair yellen will be speaking. we will be on the watch with the fed and strategically going into draghi's press conference tomorrow. janet yellen, an important speech at 12:30. "bloomberg markets." ♪

,rancine: i am francine lacqua in london with tom keene. a rare occurrence. not only is tom keene in london, but the sun is out. it is a trio of prayer and good events. tom: that is lovely. it has been very gray, hasn't it? francine: it has, but it hasn't rained. tom: from boston, massachusetts and london, with the esteemed eaton vance, eddie perkins. providing leadership in equities and value. after a four year bull market. edward: i think it is outside the u.s. i say that as a u.s. value investor. marketsomy and emerging offer a good value, but there is no near-term battles without the u.s. dollar weakening that i was talking about earlier. gdp, all boatsl

rise when a nominal gdp -- bring up the chart. the basic idea is that we had an r.o.k. nominal gdp that has gone soggy. what is that do with the top line of blue-chip stocks? edward: the top line revenue of multinational companies draw from the economy. when a nominal gdp goes soft, it hurts the top line and corporate earnings. particularly in the u.s. because margins are so elevated, you have to have the topline to drive earnings growth. tom: mergers and acquisitions candidates. m&a -- are you managing guessing who will be taking out? launched a union investment trust that looks for m&a targets. tom: was that a shameless plug? gave me one earlier,

you gave me the opening. i think you have to be careful. you cannot put all of your eggs into a mini thesis, that if you companyood fundamental that is attractive, you can get a takeout premium, you can have that as an additional reason to own the stocks. francine: talk about china. wait two or three years until the volatility and craziness has subsided? underway china and emerging markets portfolio. i don't think it is as bad as the bear say. they talk about the shadow banking system and credit losses -- they have such huge reserves they could recapitalize if they need. it is still good growth in china. francine: it is not a hard landing that we should worry about? edward: don't bet on the extremes. bet on middle-of-the-road, like

everywhere else in the world. idm: what you do with an that is stumbling in a cloud? we haven't owned that stock in years. i can understand why they are a value investor. it is such a challenging business model. tom: we look at value stocks into 2016. 1.0ght on "bloomberg studio " the chairman of sequoia will join emily chang for an important discussion at 9:00 p.m. in new york, 6:00 p.m. in san francisco. stay with us, "bloomberg markets." ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. tom: an exceptionally busy three days ahead that begins in europe. that is where it is morning, and evening in hong kong as they look forward to a presser

tomorrow by mario draghi, the in the american labor economy on friday. we will be in paris on friday for important discussions by mayors on climate change. british prime minister david cameron will ask parliament to back expanded military action against the islamic state. he wants to extend airstrikes into syria. he is likely to win the vote in the house of commons. the opposition labor party leader, jeremy corbyn, will argue against the attacks. secretary kerry says a number of nato allies will step up the fight against the islamic state. the u.s. will send a new force of special operations troops to militants.mic secretary carter says the unit will conduct raids, free hostages, gather intelligence,

and capture is linux they leaders. -- and capture islamic state leaders. a city in egypt's airport is closed for evacuation. themonsoon rains are heaviest in decades. their speculation and via will cut its growth rate for the economy for 8% next year. that may be cut by half of a percentage point. the head of templeton emerging markets group says that india's central bank may be spurred to act. >> i think there is room for them to lower rates. they could go lower if reforms are implemented, which we hope will be done. things are looking up. vonnie: yesterday india's central bank kept rates unchanged. these andget more on

other stories 24-hours on the new bloomberg.com. francine: it is time for my morning must-read. this is not one we get every day or year. president assad spoke to check tv earlier this week. havedo not think they show the real intentions, just because the russian intervention has changed the battle on the ground. groups -- iff the you want to do anything to put off the success. i don't think it will change the balance. the work is continuing. , there is noupport way back in that regard. francine: talking about the new

position that russia is taking in the middle east. we want to welcome digby jones, the former director of cbi, and also the director of eaton vance. when you listen to president is sought, he warns that france should have learned their lesson. does the solution come with president assad, or without. digby: i think it is secondary. about islam or syria, it is a group of people liberal,aten tolerance, freedom of worship, assembly, speech, and orientation. any country on earth, of any religion, that stands up to those values has to help sort this out. burton is probably the beacon. we are the most liberal, tolerating society on

earth. right to say it is that president assad is right or wrong, president putin is right or wrong, i am keen we go for a coalition of the willing. not about syria, but to sort out -- website or you are an? are you in favor of the values that built a free, tolerant, liberal society or not. asshould not be seen anything that has to do with christians, jews, anything else. i see this line in between iraq and syria, where we have been bombing iraq for a year, but there is a line drawn by the church in 1915, we can go that side. i want to take the nationalism out of it. it is about the values for which men and women died for a hundred years. cityfour churches in the

andive the blitz of 1939 1940, which was more widespread than most americans knew. we are now trying to do surgical warfare. we are trying to be clinical and surgical. is there any experience with that works? they: without doubt, technology was led to the blitz could be seen with a parallel, but the technology that gives purses and bombing its name is different. i could remember watching channels in the 1990's going forward. in telephoneople boxes saying a missile was going down to a ventilation chop, and that was 25 years ago. of course it is different. this will be sorted out typos those on the ground against those on the ground.

this asing part, i see more symbolic about being together about whether it is surgical or not. francine: we have a very important vote today. tom: i see it everywhere within the debate of england. francine: it is a debate that david cameron lost in 2013. digby: not one newspaper has commented on it today. obama to believe that he would be on his side going in. for a last minute political advantage he pulled the rug. if cameron would have known that, he wouldn't have risked it . i think it is a bit ignorant in that respect. francine: you think you will get support today? digby: neither of us know, do we? that means that i am in the second house of legislature. we are not democratically voted

in. we are appointed. you'll find people of all political or -- political persuasions and walks of life. there are 200 of us. it is not aligned. i've never belonged to a political party. growing up in the land of gerrymandering, the gridlock that you and i see in the united states is an entirely different gridlock here. lords, you should see us as the nonexecutive director of the nation. we advise and revise. we have no democratic mandate. we are not the senate. we'll come back with eddie

perkins and lord jones to continue our discussion. we will discuss dean mclean in the next hour. we are pleased to bring you all we are pleased to bring you an expert on debt and world economics. stay with us, "bloomberg surveillance." ♪

tom: wage aggressive from economics, finance, and investments to show you the heartthrob of francine makua, steve mcqueen. great escape pre-completely reinvented the triumph motorcycle company. why do we bring this up?

jones, the chairman of triumph motorcycles, which defines british manufacturing. do not tell rolls-royce. are you moving units? year to 6400 the countries. tom: what is the distinctive feature of triumph versus harley-davidson in the united states? digby: i was going to say why we are better, but i better not. harley has the majority of the american market. thead the majority of european competition. you should never rubbish your competition, you should learn from them. harley is a brilliant marketing machine. i'm trying to be fair. reliabilityt on the track and win back shares. what we did was we used to the brand, built it forward.

mr. mclean had a big thing to do with that. francine: tom keene on the trial motorcycle. tom: it goes back to manufacturing. francine: are you concerned about the strength in the pound? digby: yes. i'm very heavily involved in three or four other major manufacturing of consumer products sold around the world. i wear the union flag every day. the pound does not help. i want to show you this pound chart. at what level does it hurt the manufacturers you are involved in? already? digby: already. it is not about whether 150 hertz you against the dollar, it is about whether the dollar and the euro sell in another market. tom: we saw that in ism

manufacturing yesterday, weaker exports in the united states. advise lord jones in the effect of dominant currencies, the success of janet yellen and mark carney, what will that do for manufacturing? edward: the strong dollar is hurting u.s. manufacturers. harley is an example. .hey have struggled overseas on the other hand, it is very good for competition. what makes you better in life is competition. triumph is a fabulous example of the new british manufacturing in the world. i am proud to share it. we need markets protectionist. tend toy get in, they close the door. u.s.ine: i will defend the

they are going through a brexit referendum. talk about protectionism. this country comes out, will it hurt trade? digby: i'm absolutely neutral. i can put up 10 arguments why we could stay in and why would she come out. it has nothing to do with protectionism. i see protectionism as people who say you cannot come into my market and compete with me. the u.s. does that quite a bit. francine: will it hurt european manufacturers? digby: not with the free trade in the european union. in britain, they sell half a million cars a year. the ever free trade agreement with europe. tom: this goes over to your pro-europe attitude. do you care that britain is or

is not part of the european experiment? digby: i think you want those economic ties. the political nature of those ties is up for debate. europe is a huge economy. you need access. if i were american, i would want to be in the european experiment. we are not very open. the drums for free trade. francine: the opposition party, led by jeremy corbyn, is not the most market friendly person. matter ast does not long as you have a prime minister, does it? there's what kind of chance? francine: 15%?

how much would you put it? to become anve alternative prime minister, and he has an ocean to go to get there. the labourve 70% of party in his favor, but 400 50,000 people do not elect a prime minister and he has not reached out. if i was in america, i would not concern myself if jeremy corbyn would ever lead this country. we will talk about investment. and optimism. it is nice to hear that with all of this. later, chair yellen will have an important speech. at the economic club of washington. she will do that later today at 12:30 new york time. we are having an interesting debate on the future of europe. stay with us. ♪

♪ good morning. "bloomberg surveillance." a perfect day in london. timeirst sunny day since

began. it is beautiful over millennium bridge to st. paul church. we need to get to our business flash. wille: yahoo!'s board consider whether to sell off their main internet as according to the wall street journal. directors will discuss options, spinning off the stake in alibaba. they will work out the drop to 8% this year. yahoo! was up 6.5%. citigroup will leave its bonus unchanged from last year. j.p. morgan chase plans to maintain its bonus levels. that will give them an advantage over rivals that may cut compensation. star boards trying to give advice to yahoo! igm: yahoo! news is b news, but looking at the

december calendar, jpmorgan and citigroup are taking the high ground. francine: we have davide serra for the next hour. when you are european banker, you're thinking, should i moved to new york? when i have to pay more? for an hour. go on we will do that, but this is a big deal. the statement that mr. diamond made. francine: we will get more, but let's talk about oil. it is one of the main movers, or it can be in the next couple of days. opec ministers arriving in vienna to talk production. vienna.ined from reportlook at the ia coming out, and opec, which one will influence oil prices more? >> the atomic agency will be the most important.

that will mean more oil coming into the market. whatever opec decides on friday. more oil from iran, more stockpiling, that will mean lower prices going into 2016. now?what is going on right this is european global oil, not affected by the downstream dynamics in the united states. over 20 years, the boom, then it falls over. perkins sold all of the axon at the top of the market. what is the sweat factor in vienna? >> i think that the main problem right now for saudi arabia is that the opec companies that will be arriving in the austrian capital, we try this for one year. it isn't working. barrel -- we are

at $45 a barrel, lower than we were expecting. if this continues, we have a problem into 2016. maran not into friday, the important opec meetings in vienna. injured friday, the important opec meetings in vienna. -- edward: i thought that at the beginning of the year. i'd no longer do. i think it is time to start nibbling. tom: i saw goldman sachs moving yesterday to one of the tar sands properties. that is an indication. edward: valuations are increasingly attractive. if you get a little bit of weakness in the dollar, it will help all stocks, particularly oil. francine: we were talking about opec and you were shaking your head.

this is about politics? digby: it is, and i fully understand that. he of what does america become self-sufficient? the indication? this is about saudi arabia. it is about its clout and how it sees the next 10 years. it has a complicit ally in the united states because it is hurting president putin. at the same time you have the china slowdown. put in, and from whom does china by the stuff. in thetainly brings proxy board between iran and saudi arabia that you see in yemen. there is a geopolitical fight going on. the price of oil is in the middle. if you talk to politicians around the world, they see a different agenda. on the agenda in vienna, iran is not a contender. it won't be talked about.

the americans have put a lot of stock in two, let's do a nuclear deal, then in iran will be -- single viewer is bombarded by international relations. we want to do our investments in a rational environment. shift through the political economic makes into making intelligent continued decisions? award: you have to have mindset of embracing the volatility the market provides. income,care about volatility, and taxes. volatility is the number one concern. one way to address that is to be fearful of volatility and run away. tom: how do you pull the trigger and nine atof the states? do you wait for a cathartic event? edward: you track the sentiment.

when it becomes negative, that is when you buy. dollar cost is a great way to buy, because you can smooth out. tom: that was perfect the way the you said dollar averaging. it was perfect. a great: what conversation. we will have to get you both back at in. did that go fast or what? we have a great our coming up. we will be talking to davide serra of algebra's -- of algebris investments. tom: stay with us for another hour of "bloomberg surveillance." we say good morning, futures up 3. ♪

tom: european yields drive ever lower.

bonds are bid in front of tomorrow's important ecb meeting. citigroup -- they will join j.p. morgan and pay the troops. wall street has a deeper bonus pool than the european bank. the city is crying -- that was a joke. how do we unwind all that debt in this hour? good morning, everyone. from london, "bloomberg surveillance." francine lacqua and tom keene to we have to set of the show. we have to talk about wall street compensation in that important conversation with paul de grauwe. come and what i noticed in the last 48 hours is that the market moves abruptly on any little bit of news. francine: and that goes back to the fact that communication has tom: maybe a little bit to the end of the year, they be

less liquidity. right now with first word news in new york city, here is vonnie quinn. the attorney general of illinois wants and internal investigation of the chicago police department, widening the controversy of the shooting of a black teenager. city and police officials withheld video of the killing and sold the investigation to others. new will bolster turkey's air defenses, but the alliance says it is not reacting to russia. turkey shot down a russian or airplane -- a russian warplane last week. plans to send british planes to a turkish base. president obama wants to close guantanamo bay but does not want to break the bank doing it. the white house told the foragon to revise its plan shutting gitmo and building a replacement in the u.s. 107 prisoners are still being held in cuba.

pakistan executed four men by hanging for an attack that left 151 people dead. prosecutors say the men belonged to a group linked to the telegram. the attack last december argeted -- flooding a stranding tens of thousands of people in a southern indian city. an airport is closed. rains are the heaviest in decades. and here is one for you, tom. the red sox will pay david price $191 for every hit. you,t as much as we pay tom. he is the richest pitcher in baseball history. this, vonnie. he is wonderful. he is fabulous. he is worth every single million dollars. he is 0-7.

postseason. the vonnie: they need something to beat them. they should have played him in south africa or something. it is depressing. it is terrible. francine: you're sitting here and i still do not understand. tom: let's do a data check. for $217 million. yields are in in the last two or three days. that is important. nymex crude having struggles this morning, down $.45. this really bears watching, tick by tic. earlier we were looking at some of the earlier negative interest rates and the impact it has had. watch for the ecb tomorrow. inflation coming in pretty much as expected, but it is stuck near zero, which reinforces --

european stocks up, 1.0591. tom: let's start out with a discussion, you're-end on economics, but particularly finance and investment. we will discuss compensation of global wall street. -- david a sarah -- right now the melding is pretty ugly. i would suggest, with great , that the announcement yesterday is not a one-off. there are a lot of hedge funds on return money. do you agree? dobby daycod -- davide: when you love or something five years, 20 business points, and best you

make one point. think those strategies are basically gone. --: we are going to talk it we are going to talk market drawdown. you have high fees 2%. if your hedge fund goes down in ,alue to get to the hurdle rate get back to the hurdle rate with in,% -- where the 20% kicks it becomes literally an impossibility, right? you're talking about a function of global regulation. banks used to provide cheap viancing to these guys repo. then the fed and the ecb and the bank of england started to say, hey, banks, if you do this fear repo, we are going to charge anyway. so that is not a surprise.

strategiesbal macro posted zero return at best. there is a handful of them. 20y are all in the range of billion, 30 billion, 40 billion. of basicallyon zero rates, zero yields makes them unattractive. madee same time, when they a lot of money was in 2009 and 2011 because basically if you invest in credit, what you want is basically -- now that yields are at zero, you want massive defaults. if you do not have a massive financial crisis, it is hard for them to make 10, 20, 30 points. francine: are we going to see many more reductions? davide: when 10 year

yields locally are around 30 or 40 business points, you cannot charge that much. 1%? under do they get down to mutual fund fee flow? it is very simple. when i started in the industry 10 years ago, the rate was 3% or 4%. tom: where is the risk free rate right now? davide: 30 business points. you should charge 15 business points if you are -- rate,ou have a risk-free folks. you can charge a fee below that which was ok. has comeisk-free rate down, down, down, and there is no wiggle room to get that core fee. this is even more

important. if we think about pimco, they now charge the average management fee of 40 to 50% -- of 40% to 50% of the inspected bond return. you one100 and it pays each year, if you charge 50 basis points for management fee -- half of what i am getting has been taken. tom: active management debt? view, the active average, long fund manager will be disappearing. it is much cheaper to go basically passive, cheap, with a stronger research on asset allocation. you have lots emerging on discrete asset classes, which are going more and more where the passes cannot go. then you have the barbell approach.

this is already happening for the last 7, 8, 10 years. hedge funds actually got to a pretty good start for the first time in 2015. the dow and some of the other indices -- it was the second half that hit them hard. more volatility or less for 2016? davide: the huge allocators have started looking at alternatives. return.t a bond proxy everybody tried to converge, and the way to converge is to have -- increase the gross. bet will expose you to all in the same boat. that is what happened in august. my view is the large asset allocator will have to understand that if they want to deploy billions and billions, as an alternative they need to peak strategy.

some of these funds might have just gotten too big, and the reality is that you cannot just become -- from a hedge fund you cannot become an asset manager. aancine: is it going to be less volatile environment once we get to the interest rate increase from the fed? once that is out of the way? quality -- volatility will go up. the 10 year yield goes up and down like a ping-pong ball. tom: this is critically important. martin gilbert of aberdeen in "the journal." "the exit of sovereign wealth money." what will that big money do? do you continue to see outflows of these -- of this hugee institutional money? david: petrodollar -- take a

country like qatar. they did not know where to put the money, and the only way they could go was to go big liquid. big dollar is u.s. equity, u.s. bond. china is a closed market. happens, my what view is that with petrodollar, basically disappearing and now redeeming in saudi arabia, and qatar -- what happens is i think you will see in 2016 a challenging to the market in the states. all that money went in the states. serra is with us. friday, fran and i will travel to paris, broadcasting from the cop21 climate talks. what cities will do into the future, particularly on climate

and global warming. stay with us. "bloomberg surveillance." ♪

francine: welcome back. this is "bloomberg surveillance ." the pound is at 1.5044. let's get the bloomberg business flash with vonnie quinn. up price points at 7%. off its main sell internet businesses, according to "the wall street journal." directors will discuss several options, spinning off its stake in alibaba, and analysts forecast yahoo! revenue will drop a percent this year. -- become's owners

but he will survive the crisis. he and other family members are speaking to workers today. and mark zuckerberg raises the bar for philanthropy. he and his wife are planning to give away virtually all of their facebook shares, worth about $40 billion right now. the company unveiled -- they , tackling air plan wide range of global problems per that is your latest "bloomberg business flash." presents janet yellen to the economic club of washington. michael mckee joins us now. secretary yellen speech comes at before herime, a day testimony before the economic committee of congress and two days ahead of the crucial december jobs report. what is she going to say? michael: we tend to forget how little she talks about policy.

the last time we heard from her on the economy was september 24. clearly she had something to say. fran, to paraphrase your former prime minister, margaret thatcher, her market -- her view was "markets do not go all wobbly on us." no matter what happens on the jobs report, she wants markets to stay where they are. they are priced to move and she is going to try to reinforce that. keep the markets from going all wobbly. she has been a fed chair who has talked about policy before. ishael: the j ec meeting really going to reinforce what she says today. today she has a friendly audience, and she can make her case, which is likely to be that the cumulative effect of the economy, progress that has been

made, justifies a rate increase, almost at full employment. inflation is going to go up as oil prices stabilize. it is time to do something. francine: i love you for sitting -- for fitting in margaret thatcher when we are talking about janet yellen. are going to hear from 12 fed officials, and last night we heard from a governor who said that she does not think the fed should raise rates at this point. she says with the global economy slowing, productivity down, there is a new normal in the economy, and this new normal is likely to be characterized by a lower level of interest rates than in the decades preceding the financial crisis, which councils a cautious and gradual approach to adjusting monetary policy. whether she dissents or not will be an interesting question, because that could give the markets some of the concern if she does not go along, it's janet yellen does not have the entire fed with her when they begin the tightening process. francine: when i read this this

morning -- charles evans, a voting member, says he admits to some nervousness about the upcoming decision. should i be nervous? how much are the markets pricing in? michael: they are pricing in one move. the yield curve has flattened. they are expecting low and slow, and that gets us back to janet yellen and her message today. she wants to tell people that is the policy. we will raise it once but we are not going to do a lot in 2016. they do not want the markets to price too much in. francine: michael mckee, thank you so much. slow and gradual. what does that mean? is it 1, 2 interest rate rises in 2016? if i were her, i would say this is not business as usual. basically that is -- francine: what is that, 12.5?

dobby dayco since i have been looking at markets, my point is it would signal we are slow, we are slow, we're hiking, but because of the conversation of strong, demanding job growth and the global picture, we will get a compromise. she has the option, if it were to go to the second or third rate hike, that immediately in my view will lower the curve. the expectation is they raise too fast, too long. if the normal cycle used to be 5, 7 years and you had the five percentage points, right now you are going to for a 15-year period and half as much. talkwe have so much to about, particularly the focus on finance and investment within the hour. the chair will speak today at the economic club of washington,

widely anticipated. janet yellen, with so many pushing this way and that way as we just heard from michael mckee. stay with us. from london, "bloomberg surveillance." ♪

vonnie: -- i am francine lacqua, playing host to tom keene in london. the sun is out and we have a great "morning must-read." tom: there are eight or 10 children that we admit to at

this desk this morning. megan mcardle hits a home run. this is required reading, nsa essaystarts strong -- an that gets better and better. parents --ddle-class and by that she means upscale -- and especially parent to jobs are the result of the degree rather than three generations of , no longer feel they can afford their children the luxury of temporary setbacks. this is the must read worldwide today. american,high strung, new york, london madness. do your kids need to know linear algebra? davide: they do basic math. some of the most successful americans drop out of school, they were bright.

microsoft to apple, zuckerberg himself -- they all had very different paths. and particularly in london, people want to have it all the same. i never suspend the family holiday for some exams because that is crazy. kids are supposed to have fun, and they should not be slaves to this. francine: helicopter parenting. we look at it in the economics of italy. the average age of when people leave home is something like 35. i will let you get to what that means for entrepreneurship in the country. tom: we are all living it and doing it. we have given up the ability to teach our kids how to fail. when i grew up, it was ok to get a c. folks, i got a c in thermodynamics. i am sorry.

there were a few others along the way. we have given up this idea to fail, which is too bad. hereine: a lot of people in europe are not having enough kids because you shower them and you take care of them so much, you have a population problem. with less jobs, less ,ash, suddenly what happens is with women not working as much as in england and the states, if your mom did not have a job, you could afford another child. tom: i cannot say enough about megan mcardle's tour de force. coming up, paul degraw. ♪

>> welcome back. this is "bloomberg surveillance ." i am francine lacqua, with tom keene, in london.

let's get to the bloomberg first word news. here's vonnie quinn. vonnie: nato will bolster turkey pot air defenses, but the alliance says it is not reacting to russia. turkey shot down a russian were plane last week, saying it violated turkish airspace. russia responded by bombing rebel held areas along the turkish border with syria. nato will send planes to turkey. john kerry is taking part in today's nato meetings in brussels, and he is scolding germany -- he is holding germany .o commit service members john kerry: in order to facilitate syrian-led negotiations for a cease-fire, and for political transition in keeping with the geneva communiques. cabinet okayed's a plan yesterday to commit 1200 troops to noncombat roles.

a highway bill would revise the import-export bank for american products to be sold overseas. the highway bill must be passed by friday or agree to another temporary funding extension. the fbi says it received more requests, 5% more than black friday last year. a new study shows high school and college players may risk the same brain injuries as pro football stars. the mayo clinic researchers studied 66 men who played contact sports in school. one third of them had a congenital brain condition called cte. a number of nfl players has had that same condition. you can get these and other breaking stories 24 hours a day at the new bloomberg.com. tom: thank you so much. it is time i announce my book of the year.

describe then to importance of this book. there have been 422 books written on the financial crisis. this is by far and away the clearest exposition of how we -- io 2007 and how we cannot talk enough about it. to talk about it is paul de grauwe, also of the london school. the author talks about how we got here and the humility that we need. what did you learn, up to 2007, and to the crisis you have written about, of the new humility that we need? know,the crisis, as you has very much to do with euphoria, optimism in good times, and people not seeing the risks and therefore doing stupid things. and when the crash came,

realizing that this was hubris, too many things believing that there were no limits. in that sense, i can certainly follow the idea that we need humility, realizing that these returns that existed or that we thought existed in the past, are just excesses. tom: the chart for the moment for me, going into tomorrow's meeting with mario draghi, is the great transatlantic distortion. it is a lack of humility. we have this massive distortion right now in the two-year yield space. what does that signal? paul: to me it signals that the u.s. certainly is ahead of the recovery. if anything, that is what it shows. in the u.s., there are signs that the economy is picking up, is going to continue to pick up,

while the believes in the eurozone are that this will not happen. that is why these interest rates in all maturities remain extremely low. that is the story that i get out of this picture. and to paul's point, it is all maturities. if you look at the distortion to germany and italy, it seems pretty crazy that they are not that far apart. 30% of the fed acquired gdp insecurities. europe, less than 7%. my view is that you is like antibiotics. it is not in the store currency market. with the unemployment in europe, 5% unemployment, huge. we'll have longer unemployment for much longer. when the ecb -- as a result, they have a much

bigger impact than they did in america. francine: what about negative deposit rates? i made an inflation chart. tom: you made an inflation chart? francine: there you go. tom: oh, my work. de gr that, professor auwe. paul: we do know the following. ,f you are in a liquidity trap staying close to zero, then pumping in more liquidity, we only have limited effects to lift the economy. you have to lift the economy, increase demand. but injecting more liquidity will not do much anymore. the way to do it is to take fiscal policy -- that is, start investing. but the investment has to take

over for monetary policy. tom: it changed next year. year, ast change next paul krugman and others advocate? paul: i do not see any willingness to boost public investment. that is the key right now. we will not be able to lift the out of in the eurozone this slow growth except if we are willing to invest, and there is no willingness to do that because we are all somehow affixed in these dogmas. tom: can somebody like italy, with a new government, can they be the ones to jumpstart it? francine: we were promised six or seven months ago that the juncker plan -- we had not even heard about it. paul: there was the hope that itsprivate sector, in

enthusiasm, we just follow up. and of course they will not. tom: it is peanuts. at -- in if you look europe, there was a lack of investment, and the recovery here is slow. but it is there. davide: it is simple. the ecb increase its -- increases balance sheets. the ecb no point -- if thereses balance sheets, is no new money, they do not invest. putting more liquidity at the same time you're draining out of the private sector -- i call it the merkel plan. we came out of the second world war with a marshall plan. what is the merkel plan? in my view, it is putting investment through europe -- technology, health care, the refugee crisis -- and to be

honest, the citizen's highest return of investment, building new homes across europe. you are only going to have 10 times the problem. i think as a result a better plan would be to say the juncker plan was a failure. this is vonnie quinn in new york. what is stalling the fiscal process? they change governments, they change leaders. with balance. why is the fiscal process of change stalling out? paul: i think the problem we face in europe, and in particular in the eurozone, is that somehow we believe in dogmas that make it impossible for us to act, and the dogma is -- noment should not be

well-run company will do that. good investment projects, you should issue bonds of debt or equity, but we are not doing that. as a result, nobody wants to do it. had tocause of time, i this all-important question. this is the mathematics of finance. we see ever lower interest rates, ever negative rates in denmark, in switzerland, across much of europe. you you have the confidence that when we finally reverse and move those negative rates back to normality, that we will do it with stability? paul: we will do it -- tom: will it be a sustaining process? paul: that is a difficult question. tom: we never have been here, have we? paul: if we fail to act in terms of public investment, all these

to bets that are waiting started, we will not be lifted out of this slow-growth situation, and this will lead to lots of political implications. we see in many countries people are fed up, and we really have to do something about it, otherwise it will not a stable. but stability, in terms of political stability. tom: in the politics as well, as we see in france and other have said that we need to clear debt markets. that thanser to doing we were three years ago? paul: you have to clear your debt markets, but that can only come through growth. the debt levels are there. if we do not grow, they are not sustainable. tom: professor, thank you so

much for being with us again. grauwe grow a -- paul de , with the london school of economics. tomorrow, an important announcement. a very important conference tomorrow. this is "bloomberg surveillance ." ♪

francine: a comeback. these are live pictures from the house of commons, where david cameron, the prime minister of the u.k. is starting to make the case for extending the british airstrikes against islamic state. he is asking parliament to back military action. that debate will last 10 hours.

lost that vote in -- now let's is get to the bloomberg business flash. here is vonnie quinn in new york. vonnie: saudi arabia's oil minister says he listens to the concerns of other opec members when the cartel meets in friday -- meets on friday in vienna. saudis back that idea. -- the european central bank reason to increase economic stimulus. a disappointing reading today. month istion last unchanged, just .1 of 1%. mario draghi has been trying to get prices to rise. leave -- jpans to

morgan chase also plans to maintain its bonus levels. that will give the two banks an advantage in recruiting rivals give compensation. francine: this is something that tom keene is extremely concerned about, and this is the difference between investment .anks in europe davide, to tom's point, there is a concern that by cutting bonuses we lose key talent to u.s. firms. firms over the last 10 years have been generating a return on equity that is -- in europe, those terms only have the compensation of the american firm.

to take a large bank over the last 15 years, 90% of the returns went to management and employees. nothing went to shareholders. it eventually shareholders said that is it. the pressure from , you want to pay your american peers, that is ok, make the same amount of money. europe cannot have a similar number, just a different size of economy. tom: do you see combinations occurring to allow for an attempt at renewed profitability? davide: i think there is, but less player. think about it, you had four or five investment banks. france, england, each wants to have two or three players. it makes no sense. in europe, doing business costs

more. you have 28 languages. year for016 a seminal -- a la banking, law the challenges mr. cryan is getting at european banks? francine: where do european banks actually end up in two or three years? davide: take the u.s. how much profit before tax goes to employees before -- goes to employees as bonuses? europe, 80% of that profit was actually given to employees. which city has more momentum, london or new york? davide: london. tom: london? really? francine: we have to take a

break. tom: coming up, we will have a different view. nigel wilson is the chief of his firm.icer "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." a quick foreign-exchange report. all in all, a churn to the markets the last few days. blend the dollar index back above 100. asia dx why, that is what the pros are watching. toht now we churn over "bloomberg ." david westin is getting us started. what do you have? david: we will talk about janet yellen. we will also talk yahoo! and all the stories about possible restructuring. we are joined by steve ratner, who will talk about puerto rico and the u.s. auto industry as well and hedge funds. stephanie ruhle sat down for .nterview with ceo marc benioff tom: and a guest from london.

vonnie quinn has someone of great interest on our set. where happy to have the ceo of legal & general with us. everything from insurance, pensions, real estate, and so forth. let's start with legal & general's multinational businesses and how well you have done. how have you stayed ahead of the pack in terms of stock performance and so forth, in such a difficult growth environment? -- i think it is a great global environment. we focus on investment. obsession -- we should be talking about how we get more investment in our economy to drive economic growth. making a real difference in the u.k. economy.

vonnie: francine? francine: nigel, we have you on the show regularly. i am always fascinated to know whether you are thinking of m&a changes. nigel: we have been incredibly welcomed over here, and we are seen tremendous growth from our businesses. we would like to accelerate growth here in the united states. bolte are very much a buyer, not an industry consolidator. vonnie: are you looking at real estate? nigel: we are looking at acid businesses, to drive jobs and real growth here in the united states come as we have done successfully in the u.k. back ground isr in economics, and particularly out of m.i.t. in cambridge. all of your world is backed up by economics. i look at the performance of

legal & general's stock as a performance of everyone within this asset bubble. do you mean to say, thank you, mr. carney, and thank you janet yellen? nigel: i think that has been helpful. theave had big wins in corporate sector, management, share buybacks, lots of things that have helped drive eps growth. basics andgo back to using investment to drive economic performance. equities should be used to drive economic growth and business growth. it should be put into companies to help them grow. what we see his equity withdrawn from companies, which is hindering that growth. tom: we will continue this discussion on bloomberg radio. dominates sara -- davide serra is with us. what an interesting conversation today about where we are going. to me, the backdrop is lower nominal gdp.

if -- is the united states becoming a europe? are we getting not so much the negativity and euro sclerosis, but since the dampening effect of lower sustained growth? plateaus indp productivity, growth cannot diverge massively. you see that with china. today everyone percent of china growth equals 2.5% 10 -- today every 1% of china growth equals --provide percent growth there are interconnected inevitably. hence i would expect the global to growth to normalize similar levels in the next two years, particularly because of monetary policy's massive intervention. francine: it is incredible what we have been through. china volatility, the greeks. would you be buying, and that

what discounts? davide: the answer is no prayer and we are one of the key players in italy. in italy, it is a staggering 20%. we will invest in italy, not in greece. tom: this has been wonderful. thank you so much. dominique -- davide serra with us. we will brief you tomorrow morning. looking at the investment off of the mario draghi announcement. and eric nielsen of unicredit will join us. stay with us. worldwide, "bloomberg surveillance." ♪

>> after liftoff, what is next? we may get a sense after janet yellen speaks today. the board meeting to consider

selling off its main internet businesses. what does that mean for ceo melissa meyer? mark benioff on leadership, what is wrong with ibm, and how to win the race for the cloud. ♪ david: welcome to "bloomberg ." stephanie: we tried to say we would give information that will make you more competitive. we have a roundtable that will do just that. bloomberg intelligent economist, and on the market. neighbor, i want to point out and cofounder and managing director of funding circle. if you have a business you want to start, this is the guy you need to impress.