vonnie: waiting for the fed, new zealand cuts rates for the fourth time this year. the biggest miner is reeling from commodity prices. glencore cuts. vw take center stage. has his first news conference since the scandal broke. good morning, this is bloomberg television. tom: i love what you did in the

opening, comparing and switzerland. and theynd is drowning defend their domestic economy this morning. i know jon ferro -- where is he? somewhere lost with an important conversation. francine: lost in the outs about about the-- alps franc. british warplanes will target islamic state in syria, including oil pumping facilities and emma dumps. thel recently infrastructure targets have not been hit because of the kurdish ground troops. at the climate talks in paris there is a dispute of who will pick up the tab. developing nations will receive

100 billion a year. china insists when it comes to climate change it is a developing nation itself, so they will not be contributing. india and pakistan have agreed to resume peace talks. the two countries have a disputed border and increased fighting and the region has made it difficult to get talks going again. in washington, congressional negotiators are moving closer to a deal that would make a series of tax breaks permanent. they will heat up talks on the spending bill to keep the government and operation. republicans want to avoid a repeat of the government shutdown in 2013 and will likely pass a spending bill tomorrow. -- other world leaders have denounced trump for his proposal. netanyahu says he will meet with

trump even though he rejects his comments. to get more on these and other breaking stories 24 hours a day at the new bloomberg.com. tom: caroline, thank you so much. let's turn to the markets this morning, a little bit of a left. the euro goes nowhere but really order.two 110 is in oil has a bid and i am going to call it. please rightard now if we can. i spent the whole morning thinking it was wednesday. birthday overload. 5.71 showing some of the angst in the market. here is the keynote. nothing going on with the two year which really lacks in -- blocks in two janet yellen on

december 17th. francine: you are right. this is a picture of european equities and a lot of the focus is still on commodities. the ftse is down 2.028%. this is the kiwi, the new zealand currency. we have seen it stronger after the central bank act there, and awaiterling, 151.77 as we the boe. we are not expecting it to be that much. tom: also have a terminal chart. 16. is the move to december i am not a big fan of confidence statistics but here is bloomberg consumer comfort, here is what the pros look at every week. here is the boom of the previous decade. down leg go. i think a lot of people do not

realize we have come back. and then recently just this little avenue and flow. -- eb and flow. francine: we often say, what does it mean for the global economy and the emergent that janet yellen is confident enough that the u.s. economy can withhold it. joining us is the managing director at blackrock investment institute and one of the smartest minds out there when it comes to geopolitics and markets. as we wait for the fed, is there any chance that they do not hike? does it make a difference if they hike by 0.2 or 0.3? ewen: i think no chance, and no difference is the answer to that. i am not quite sure whether 5% comes from. this should be the least

surprising rate hike in history. francine: it should be but the markets have this little thing called volatility. are we expecting it to be smooth? ewen: tom was talking about it earlier saying it is approaching the 20 year average. it has been below that average for quite some time. 50 two-year has risen from 292 in the last couple of months so i think a lot of the immediate trader response, that is not to say there will not be people pushing out churns of stuff, but the trader response i suspect is not going to be enormous because it has been so well prepped. the centrala that bank of the world can ignore the world's economics, would you please explain how a u.s. central bank can work in a vacuum? ewen: i would love to be able to do that because i think we have

a two speed world. a two speed world in terms of geography and sector balance. it is very simple, the emerging . you pointed out yourself on consumer confidence. like you, i am not a big fan of those displays, but it has been rising for a fairly long period of time. i think this is the first time in memory we can see the fed raising rates when the isn is so low but i think that is how the economy has changed. tom: with how the developed changed, are you willing to write that this is in asset bubble? ewen: i don't know that there are huge bubbles around. the business cycle is lagging the financial cycle by a long way so by definition, we have borrowed returns from the future

. if you simply took valuations as your sort of guide, you would hardly say a lot was extended other than the obvious points where governments have bought in a lot of assets, and that is the bond market. francine: your strongest call? ewen: follett tillery is going to rise, it is going to be a year where -- volatility is going to rise, it is going to be a year where profits are hard to come by. question, suppose in 2016 we look at an outcome throughout the year where the european growth is running roughly similar to american growth. aboutne: when you talk volatility, and we have an index volatility will happen in emerging markets because they

borrow so much money. ewen: it has happened in emerging markets. if i can look at one crisis and try and work back from that, it , probablyhe dollar not the dollar against the euro, the dollar against sterling. the asian dollar index because if the u.s. dollar strengthens again materially against the asian dollar index that puts china on the spot and leads to more potential for a chinese devaluation. it puts the hammer down on the emerging markets again. conversely, if it goes the other way we will see an asset switch back toward the must maligned and hated asset class. i would love to know where the asian dollar is a year from now. plus, the lottery numbers for friday. tom: i agree with you on the asian dollar.

what have you observed in the asian currencies away from japan in the last couple weeks? i cannot make a direction of it, a vector of it, can you? .wen: not particularly i prefer to focus on the fact that some of them have declined then duringeir peak the financial crisis. i am not calling the rupee up but we have seen a lot of this already. what would drive the next leg i think would be disorderly capital flows away from those countries, and potentially obviously also, a stronger trend by the fed and more rate rises. tom: let's look at the chinese remembering right now. i think this is an important chart to bring up. the sharp devaluation of the .emember the -- remember the

francine: we are doing a chart. ewen: i can hardly say that it is weak. it has weekend and the last couple months -- weekend. if you look at it against the , the tight, or any of those currencies, it has been extremely strong. this is sucking the blood out of a lot of the rest of the world through the deflation. onncine: coming up also "bloomberg surveillance," you vw ceo.r from the yourberg tv streaming on tablet, phone, and bloomberg.com

where the conversation turns on economics, finance, and business. ♪

tom: good morning, everyone. it is thursday morning, a quieter market for gorgeous new york city. wherever you are in the world, you need to know that temperatures are not normal in america. i am not going to say it is paris, it is climate change. i can say the ice in central park is a threat to doing pre-hockey it is so warm in new york. francine makua in london, i am in new york. here is caroline hyde. alcor has agreed to

pay $2.9 billion to the owner of the luxury fairmont hotel lines. walmart will start letting shoppers pay with their smartphones using the chain's own mobile app. they will offer this service at stores near its headquarters. a nationwide rollout is set for the first half of next year. this could put walmart in head-to-head competition with apple pay. reports indicate the momentum in the british housing market is not going away. $441,000,e price is up 6% from a year ago. the number of properties being put on the market fell. francine: thank you. tom, you want to say something. tom: do you have lululemon in london? yes, we do have it.

there was a scandal. --danaa tells the her outperformts on lululemon today. she calls the recent news disappointing but importantly, she is iconic at bear stearns a couple years ago, she really is her outperform on lululemon. she says it is completely because francine makua darken the door repetitively. not aoki but we have -- a yogi. we have had some news from glencore after they have announced they will reduce debt by $18 billion or $19 billion by 2016, and is considering the

possibility of an agriculture offering. year --javier, glencore needs to reduce debt. why do you spin off something else that is different? javier: they are trying to sell as many assets as they can in a very difficult environment is prices are very depressed. they have been talking for the last few months that they wanted to sell and minority stake in that business. now for the very first time today they said they would also open to the possibility of doing an ipo. francine: does it tell us that what they are left with is something they may consider taking private? javier: in a way it is indicating that everything is on the table to try to reduce debt as quickly as possible. this is not something glass and berg would do if he was not in deep trouble and the fact that he is doing it shows that he

needs to reduce it as fast as he can. tom: when you look at the chart and anglo america, i understand there is a spin to this. what is the level of sweat and panic this morning? it is an ugly chart? javier: tom, you are absolutely right. let me give you a sense of how ugly it is getting. during the conference call with glencore, one of the top managers of blackrock has taken the very real step of publicly asking him what he is going on with the nickel business. them going publicly in a conference call, this is a company that could just grabbed the phone and say, can we have a private conversation? it is an indication they are getting very nervous. tom: the room to move on reducing capital expenditures, is glencore boxed in or can they

take a couple billion out of irther question mark javier: think they can but that is going to have an impact on growth. companies have been telling investors, we are going to reduce cap x but will continue growing. we areure growth, and talking about what these companies are going to deliver in terms of future production in 2016 to 2020, that is going to be a handicap. francine: blackrock is turning up the heat on glencore. ewen: i will make the point that a company such as glencore, the mining industry, has to decide whether it strategy is is,ivable growth and if it then maximizing cash flow becomes a really important, and it gets proportionally more important in the mix. as an aside, it is extremely rare that we would make a public statement of that nature.

francine: when is it going to get easier? these are extremely bloated companies because in the good times they probably overspent, profits are down, we do not really see an end in sight to the glut. javier: it is true for the whole natural resources sector. it is going to get better when china gets better, and the demand for commodities recovers. if that does not happen, it is going to be a very painful prices because lower prices, lower investments. a bit of an increase on demand, and that takes time. turns around very quickly, the natural resources sector needs to be prepared for a long drive. we are hunkering down, and i think that applies for the whole sector. it is hunkering down for a long period of low prices. tom: that is the first intelligent thing i've heard from them. are they going to reduce

production? javier: glencore has started to reduce production. tom: that is really cool, they actually reduced reduction. francine: we have seen it in the price. they are in debt. is, glencoreroblem has been so far alone in production the company has cut too little too late. we do not see other minors cutting-- miners production. everyone is trying to increase production and trying to float the market. it is a race to the bottom and it is not working. francine: we are very transparent on bloomberg tv. aoomberg chairman grauer is executive at glencore.

thomas jordan, they are still saying the frank is overvalued. this is "bloomberg surveillance." ♪

francine: welcome back, it is time for the morning must read. i picked out something from the financial times, the free movement of ease citizens -- the british public's asked over

migration is so great that it justifies surrendering the huge economic benefit that britain receives from being part of the block. if you look at the great unknowns for 2016, donald trump for president. brents at 27%. donald trump for president, i will leave that to the americans. pen.ine: and le ewen: i think immigration is a hot topic across euro as it does europe as a whole. francine: we will talk china and more about the kiwi. we will also speak with the vw ceo. ♪

♪ tom: new york. gorgeous in london. but the clouds there. it is a most mild november and

december. caroline hyde has our first word news on a busy thursday. morning. caroline: in syria, the government has strengthened its hold as a cease-fire was declared allowing rebels to leave. officials in beijing have lifted the red alert imposed two days ago because of the smog. the roads were opened. group sayss hackers it is responsible for the crashing of japanese prime ministers website. a tweet from anonymous says they did it to protest whale hunting. one of the shooters in last week's california massacre may have planned an attack three years ago. -- ofnd of sayyid farouq -- also in the

u.s., the pacific northwest has been flooded. tens of thousands of people have lost power and neighborhoods have turned into links. felln five inches of rain in portland, oregon. you can get more on these and other stories, 24 hours a day at bloomberg.com. i am caroline hyde. mueller heldthias his first extended press conference. hans nichols was there. he has been speaking to him. it is a very rare interview. we heard from him. what were the main lessons? speaking here in just a moment. we spoke to him moments ago. he is laying out his vision for the company and updating

investors on the -- investors and the public on where volkswagen is. here's what he had to say when i spoke to him. >> when it comes to co2, the situation is different. looks different than what it did look earlier. we had 800,000 vehicles were affected. we initiated a number of the fish a number of investigations with the german authorities. i cannot say our initial suspicions of 800,000 vehicles affected was unfounded. hans: this was a wide-ranging vehicle -- this was a wide-ranging interview. he said they would not be disposing any of the 12 brands of the volkswagen group.

volkswagen.brand, there have been hints if this company tries to cut costs, they million -- they may sell some assets. he is sticking with that cost-cutting plan that was implemented by his predecessor. it did not give any real updates on how much they expected to cost because they are still waiting for the regulators to approve their plan to the regulators and plan, the states. thoseproposal to fix 800,000 diesel vehicles in the states. to gett your train ready. head down to washington. that is going to be a committee hearing worth your while on capitol hill. tom: hans, can they compete with toyota? vw, small and narrow.

are they so derailed they cannot compete with toyota? hans: -- hans: toyota has gone heavy on hybrids and hydrogen. they do have great brand loyalty. vehiclesand porsche are selling the slowdown in china. that is a question for volkswagen. do they want to be number one? that was always a goal of martin winterkorn. in some ways, those were the seeds of the scandal. they want to grow too big to quickly, especially in the states. what we're hearing from this ceo is there going to be a premium on quality control and changing the culture. francine: the scandal is

narrowing on what? what are we expecting to find out apart from the figures? hans: the key question is will they bear -- will the plaintiff , will they fly by the regulators? engines could be a software upgrade with miner technique -- with minor technology with a filter on top. it is going to cost the company a lot less money than they provision for. they've got to meet regulatory muster in the states. , we have these costs the engineering costs, central regulatory five, but then you have civil litigation. that's the part one can quite put their finger on. tom, you asked about toyota versus volkswagen. is seeing look at it

what is going to happen with currency wars. that euro is going to stay week for some time. that is all the indication that mario draghi has been given. it cuts both ways. fencing, this is an important point -- francine, this is an important point. the strong dollar in the united states. francine: you are right, tom. when you look at the exports. this is something the french have been vocal about. tom: one of the key observations on bloomberg really -- on bloomberg radio. adamant there could be elements to take us back to something like the plaza accord dollar strength of the early 1980's. he did not predict that but he said there is a set up to get the weak euro with significant

dollar strength back to another era. toncine: and brings us back stop talking about parity. hans nichols with a great interview with the ceo of vw. let's get back to you and cameron watt. -- with ewen cameron watt. it probably more a repetition story. here is vw, they are going to be engulfed by this. , when the car industry is about to go through another major technology change as it moves toward driverless cars. i can't help wondering how much of vw's corporate attention is going to be sucked away from that important product of elements. to the ceo. speak

he joins us live from switzerland. this is number experiments -- this is bloomberg surveillance. ♪

francine: this is bloomberg surveillance. i'm francine lacqua. tom keene in new york. we have been talking about china and the fed. this get back to our guest host, ewen cameron watt from lacqua -- from blackrock. i caught up on something about china. wanting to be normal. the basis for everything you have written is that china will not go through a hard landing. ewen: it is going to a different

landing. the manufacturing and investment side of the economy is concerned. the consumption services side is moving ahead. there are two china's. stress. one of the most economic that's one of the most enormous economic transitions in history. they are trying to move away from a model into the next stage of it. they are doing it with enormous overcapacity. a massive hurdle of debt dragging them down. becauseall eyes on this the years ahead. francine: how do you make money next year? when you look at 2015, very binary. you can make money in equities. ewen: the currency point is

important. it would've been different if it was a euro-based portfolio. up.s&p 500 is 1% it is up 13% in euros. this year, the european markets up 12%. it is getting your currency right the hedging and on hedging. i think that the dollar will remain big against the asian currencies for the first half of next year, potentially also against the yen. the shortage of euros around here at what could be -- around. what could be an inflection point?

if it swings marginally under the pressure of the fed raising rates. under that circumstance, then you have people saying let's get past this. what is going to happen next? toward the more hated stuff. the momentum is worthless here. they have been right about this stuff for a long time. there is going to be a momentum shift from time to time. francine: i did you a chart. i want to look at the slide and in rand.nd rant -- ewen: it is an extruder decision. you take the finance minister and you sack him because he is virtually no financial profile. francine: or international exposure.

ewen: i am not so worried about that. at a very stressed time in south african history. francine: as an investor you would pullout? human call -- when the ewen: currency gets completely tress, that is an interesting time to -- completely trashed, that is an interesting time to bargain hunt. you always make money in emerging markets from a local currency. you don't from a high currency point and a high growth point. tom: it was back in january when the swiss national bank when they acted in a stunning fashion mr. jordan have talking to jon ferro. he makes headlines as we speak. really pushing janet yellen to make that rate increase. when you're thomas jordan of the swiss national bank, is janet

yellen your central banker of the world? ewen: you want someone else to take up the heavy lifting. the fed is right front and center. the u.s. economy is in its cycle, rightly so. , janet yellen is the central bank of the world. that is one reason you saw mariota draghi soft peddling last week because the last thing they want is the dollar to be too strong going into next week. -- on theto be any fed side. thinko you and blackrock we will be a year from now removed from negative interest rates? ewen: in europe, no. in switzerland, no. --'re talking about negative a concern would be the inflation remains so subdued that we get a rise in real rates in america

without normal rates moving. tom: you heard from esther cameron watt. it -- from mr. cameron watt. it is about nominal versus real rate. coming up, we'll have mr. ferri with mr.rsation thomas jordan. with futures up 11. now futures up 75. this is bloomberg surveillance. ♪

tom: good morning. bloomberg surveillance. francine lacqua in london. i'm tom keene and new york. it is up 83. let's get to bloomberg business flash. here's caroline. caroline: commodity trader glencore is feeling the pinch from the slumping metals and other raw materials. glencore was to cut its net debt down to $18 billion. try to sell off assets. going for has cut its dividends

and raised its debts and raised $2.5 billion in its share cells. -- the number two on the desert in u.s. cut spending on drilling and other projects. chevron will focus on investments that will bring profits. london'scies in financial industry felt by one third less month. the firm blames economic stability -- economic instability due to terror attacks. that is bloombergs business flash. francine: live from the international headquarters in -- aa, we welcome the ceo new report out today saying they will have a record profits this year. , thank you for joining us.

40% of thebe airliners costs. what is that figure now? the -- fuelstill in price coming down is still the biggest airline costs. to 40 and tom 18 possibly 30. is there not an automatic repercussion? or do we have to fact that they are locked in to go away? tony: it varies. if you look at regional trends, the u.s. carriers will behest a lot less than the european -- will behead a lot less than european carriers. generally speaking, the impact will become an off as it grows

between whether the fuel price fails. i really longed your report . i know you are an industry group. y have theantl capacity growth expected. are we back to the old days where they are going to put on more planes and run themselves into the ground? tony: i don't think so. growthse the significant and capacity plan by many airlines around the world, a lot of aircraft being ordered and a lot being retired. airlines i'm short learn lessons -- i am sure learned lessons. it makes it impossible to fill the aircraft.

having said that, demand is growing. we are looking at the .5 billion passengers a year this year. -- at three .5 billion passengers a year this year. the are people there to fill these seats. tom: i know tony, they are bringing to backs on board. i don't have any place to put my little surveillance bowtie. in your grid, north america has four of five times more internationaln carriers. can you explain to everyone in america why u.s. air travel is so lousy? tony: it is not lousy. that is wrong. u.s. carriers are making the kind of returns that would be taken as normal in any other industry. itsindustry is returning

cost for capital. it hasn't done it for year. -- it hasn't done it for years. anything about the luggage at terminal c at laguardia? you can do everything else. tony: i am doing anything i can for that as you know. issue,general infrastructure has to keep pace with the demand. that applies not only with terminal c at laguardia, that applies across the industry. in many places, government is not doing enough. francine: tom is just teasing. do to help the industry guard against incidents that we have seen in the last 10 months? tony coleman if you look at some of the rings that have happened ofthe last year, in terms

the airline industry itself, we saw the outrageous shooting down of malaysian aircrafts over the ukraine. the dutch safety board has issued a report which said what happened. identify governments being responsible for maintaining the safety of their airspace and for communicating information to airlines. that is the government's job to tell the airlines what is going on. shouldn't make risk assessments. brought down by a bomb. terrorist outrage. it is the government's responsibility to keep these things safe. we need to learn how to this was achieved. it was an inside job which some indications seem to -- we need

to do something about that. francine: tony tyler there. bloomberg surveillance continues on bloomberg tv. -- airlines for the future. tom, that was the word of the day. coming up, we have plenty more on politics. talking about china, central banks. we have two great interviews to bring you. to the ceo ofe volkswagen. they talked about the emissions -- hans nichols spoke to the ceo of volkswagen. they talked about the emissions scandal. ♪

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tom: watch what they do, not what they said. this was national bank will not

relent, they will defend against europe's responsibilities. glencore, they race to retire assets and debt. can janet yellen ignore the commodity implosion? future inis a great plastics. thank you, dustin hoffman, dow and dupont. good morning, everyone, this is "bloomberg surveillance." we are live from new york. francine, a squishy day on the way to december 16, isn't it? francine: in europe, we were just european stocks are up. volatility i think is the name of the game. tom: and my supposed to focus on the bank of england at 7:00 a.m.? what will they do? francine: they will talk about currencies and interest rates and interest rate hikes will come next year. is thursday, here's

caroline hyde. caroline: funerals for the 14 people killed in the california massacre will begin today. services are scheduled this afternoon for san bernardino county worker who died in the shootings. friends and family members of those killed visited the shooting scene yesterday. investigators said the gunman and the friend who brought the a thought -- bought the assault rifles were related through processednd they have it attacked years ago. in syria, britain's defense minister says it includes oil pumping facilities, and modems, and supply routes. they have not been bombed until now because coalition forces were supporting coalition -- artist troops thereby. the climate talks in paris, who will pick up the tab? developing nations will receive $100 billion starting in 2020 to ease the effects of global warming. china won't contribute, insisting it is still a developing nation itself.

congressional negotiators are close to a deal that would make a series of expired u.s. tax breaks permanent. lawmakers hope that will speed up other talks on spending bills to keep the government open. republicans want to avoid a government shutdown in 2013 -- like in 2013. three dozen israeli lawmakers are demanded prime minister benjamin netanyahu refused to meet with donald trump. they say other world leaders have denounced trump for his proposal to block muslims from entering the u.s., but benjamin netanyahu says he will meet with trump even though he rejects -- rejects his comments about muslims. you can get more on these and other breaking stories at the new bloomberg.com. tom: thank you. let's get to the data in the terminal quickly. we have an important guest in the future of global wall street. 10 year yield does nothing. euro does nothing. nymex crude captures a bid but that red on the screen is a big

deal. that is the first red in two days on american west texas intermediate. you really wonder where we are going with oil. onto the second board. come on, let's get it up there. to your yield does nothing. -- two year yield does nothing. i guess that is friendly for janet yellen as she goes out six days. francine, what do you have? at oil,: when you look racing games. the euro dropping. tom: look at you with the kiwi as well. francine: do you like that? tom: i want to know what it means. francine: it is all about the fed them with these economies will do in preparation. tom: there it is. every central bank, how they're reacting this morning. quickly to the terminal and the picture of american confidence. of precrash.oy we have made it back with a

little bit of rollover. we will have that data across the bloomberg terminal earlier this morning. what is the future of the city of london? what is the future of wall street? michaud has a great view, i will call it by his 14 years of service from september 2001. tom, wonderful to have you with us. there's so much we could talk about but to me, it is the arch is the city in london and the wall street in new york, has a become a utility? >> there is been a dramatic change in the industry since the crisis, and especially for the biggest institutions. the story of the last several decades leading up to the crisis was really how big these big institutions became. and since that time, regulators have been thinking about what they're going to do about it and i think you're starting to see a reverse and the biggest institutions are getting smaller, which has had a dramatic impact. tom: i think of market

economics. ed is taken out by roger altman at ever core. niche businesses. or you have ever core. is that the future of your new york? >> the growth is happening away from the global sissys. i think it is exciting. i think there are a lot of midsized, very good companies that will continue to pick up market share and i think the -- they will go where they think the growth is best. tom: i have a trouble with the way the media covers the bonus. it is about tuition payments, making payments on summer homes. it is about remittances to parents, to keep their parents go. what will be bonus from be like in february? >> i think it will be very company happen dependent and lumpy. up in upon each institution and i think there are some very -- i think it will depend upon each institution. others are still adjusting their business models. very hard to give one industry

an answer for the whole industry. tom: francine, jump in with a view from the city. francine: actually, i was going to talk about company-dependent, when you talk about dramatic changes, who is going to wind up on top when the landscape changes? there will always be 2, 3, 4 banks that will be number one. >> i think you have to look at this whole class of global 29 sissys. central bank's around the world have identified the banks as must be too big to fail, and i will look at that class versus the rest of the industry. and i think the rest of the industry is continuing to show growth. i think there is some great talent in that sector. when i look at where the demarcation point is, it might not just be one company. i think you will see a big shift between the class of the global sissies and everyone else. francine: when you look at the european banks, they are

retrenching on the investment side. what does this mean in europe? >> i think europe is to the same thing with the u.s. with the global sissies. you will see many of these companies be smaller. as the capital requirements continue to go up, we are calling for more development. -- divestment. of you notose connected to global wall street, deutsche bank with the changing of the guard, and it is been controversial to say the least, adamant that you are paid too much. there is a huge -- huge mail off of this. busy scoring any points with you about, we've got to bring whole level of compensation down? >> i will tell you what, we are trying to run our shareholders. we're trying to do it -- tom: but you have seven guys you can't lose.

your like everybody else in the business. >> absolutely. if we still want a system that is a meritocracy, you will have certain folks that are better able to do than others. you need a management team that seems it is fair for shareholders and you're doing the right thing for the shareholders. tom: are the german models strapped with two boards of directors? >> the amount of regulation, both europe and the u.s., it is very, very heavy. personally, i prefer the american model of not that much governance because i think it hasn't necessarily gotten them to a better place. we talked about new york and london, here we have one of the biggest u.k. banks, hsbc, possibly moving its headquarters with this turmoil regulation here in london and u.s.. >> i think long-term, there is going to be terrific growth in those markets. i think those markets need to have key institutions that are headquartered there.

while there will be some regulatory arbitrage that happens around the world, i'm not sure if just where you put your head at the end of the day is ultimately going to determine your success. at the end of the day, yet to run a sound business, so that maybe an assist, but at the end of the day i don't think that is the singular answer as to what companies will ultimately be the successful ones. tom: in the old day, the banker showed up on monday, tuesday, play golf on wednesday, hit rotary and went home. that model is destroyed. for thethe new model thousand or 2000 things out there? nobody ever talks about the backbone for small business in america. >> i got to tell you, in all of these businesses, the principle is this -- take care of your clients, add value, and give really good advice. what happened or the crisis was i canrld is angry and, understand why they are angry, but unfortunately, the reaction

was to throw legal industry the one model of perception. banks in, 90% of the america are less than $1 billion in assets. that is a staggering number. when you think of those 90% -- tom: will they consolidate? >> absolutely. we're seeing it right now. the consolidation stories underway, but it is happening across america. tom: what did you learn this year? i know you're not competing with them, but what did you learn? >> investors are still angry about the crisis. they want to know that their interests are coming first. by the way, their interest coming first doesn't mean you're maximizing profited every minute of every day. i'm a believer you want to add value unsustainable basis for long-term. they want to make sure wise decisions are being made. i think the shareholder battle was a hangover from the crisis when brian wasn't there. he got in the middle of the crossfire. tom: i strongly agree, it is not all about brian.

>> in that particular case, too, the board did a light to take aggressive action to promote him in a way they did. they didn't necessarily have to do that. i think it was in some cases unfair for brian to be in the middle of the cross hairs he wasn't the ceo at the time we went into crisis. chaud, the mystery toward 2016. there is no mystery about du and dowpont. an expert on chemicals. wiser. make us in thisto get a fiat transaction. good morning. ♪

tom: good morning, "bloomberg surveillance." every single office let you see pays a retainer. ud, new york is gorgeous. gorgeous, i say. i was on the corner of 5th avenue and 57th street last night. all of the decorations are up. >> there is no place better than -- in the holidays than new york. i think francine would disagree with you. she is in london with the business flash, the decorative caroline hyde. detroit products finished further down the track for safest cars. the insurance institute for how a safety says 48 vehicles had the highest rating -- toyota, honda, subaru had the most winners, 23 combined.

the chrysler 200 was the only u.s. car to win that rating. europe's biggest hotel operator will get bigger. paying $2.9 billion for the swiss hotel brand. -- g the sellers starting today, some walmart shoppers can pay with their smartphones. stores in the kansas headquarters will begin accepting the mobile app. nationwide rollout is planned for next year. and that is the bloomberg business flash. francine: thank you. let's go to germany where hans nichols is on the ground. miller beforeto he is holding his extended press conference since the emissions rigging scandal broke. we don't have a figure on the scandal yet, but what he had to do you is that he is keeping all 12 brands. that means he would be able to pay for anything without having

to sell off assets. : this is a confident ceo, one would a look at it. when you look at the challenges they face, they have some 300 brands out there, 12 different assets. he made it clear to me they would not be disposing any of them. have a listen. 12 quite excellent brands, i should add. in their entirety, they make up what we call the volkswagen group and we're very happy and glad and nothing will change in the coming year. hans: he is still speaking this press conference. we're learning more. what we had in our interview before the press conference is plans to appear maybe even before congress, to have conversations with regulators there. that will be a big part of the discussion going for. in terms of the 9 million diesel vehicles here in europe, they

seem to think they're pretty close to a fix. they haven't adjusted any of their cost estimates. we're still do when with the 8.7 billion euros for a cost estimate. we haven't got an update, in part, because they have not heard from the regulators. that is the next way for this story to move forward. it is a cold, blustery or day -- blustery day. they think they could potentially be turning the corner. tom: what is the business structure of vw bonita ceo that makes the headlines? tell us about the structure of the company. is it ceo is king? was previously. he had 30 reports reporting into him. so 30 direct reports. for any ceo, that is quite a lot. ueller announced he would have 19 direct reports. , ducati, man trucks

maybe a potential new vehicle that they will be unveiling a geneva. my own personal favorite to show you just how sprawling vw is, they only soccer club down the road, the business in munich, and they make their own curry. they need to pay for david prices new outrageous contract. thank you. we have breaking news. it is market moving news. we see oil move off opec headlines. opec crude production of the bloomberg terminal rising to its three-year high in november. francine, we revert to 36 print on west texas crude. i'm going to call it a little south on oil right now. thisine: actually, what means, members have been pumping

as much as they feed despite the global surplus. an indication from the iranian oil minister. what we have been hearing from the markets and what we have been hearing is saying, look, the cartel doesn't really have any power anymore because every -- trying to balance the books, so they pumped oil even if there is too much out there, they need to make sure -- tom: right. francine: replenish the coffers. you handle banks and you really handle texas banks. are we going to see a midland, texas? >> i think you're going to see some challenges grow for the texas banks. we love the state as far as being a community bank and original bank. tom: business-friendly. >> yes. but you will start to see more classified assets from the energy sector. and what is going to happen, some banks that are overexposed are probably going to see greater challenges. you will see the banks that are more cautious have an

opportunity to take market share. of 1 a.m. a time isaac were they take out 30 banks in a weekend? >> no, no, no. the industry has its most capital it has had in 30 years. i don't think you'll actually see banks go that far to sell off this cycle. tom: we haven't seen a catharsis in commodities. it has been ebb and flow. how has it changed your banking discussion, the commodity banks? >> we have had an unbelievable march toward great asset quality and loan quality in the banking industry, something like 25 straight consecutive quarters of improving nonperforming asset ratios. that is going to turn. this is the first time in a long time we're talking about loan quality. i think that will reintroduce that fact into the conversation. even when you see things like widened out,eads

you see the development corporation stocks trade, investors are starting to think about loan quality again. they haven't done that in a long time. tom: do you get awesome seats to the dallas cowboys? tom michaud. coming up, and important conversation. dennis gartman of the garmin letter, he is the kenyatta for the street. -- kenyatta for the street. hedging gold and japanese yen. he will be with us in the 7:00 hour on "bloomberg surveillance." ♪

morning, "bloomberg surveillance." oil ebbs away, mixed right now. how about a morning must-read? smart, smart, smart. here he is riding on du and dow pont. thomas with this, this is in ancient battle of, do you want to be diversified or be focused? >> i have to tell you, i'd bet my career i'm being focused. it is where i have been for 30 years. i think our great benefits to that. i think what it comes down to,

tom, is size. when we talk to our investor clients, they care more about shareholder return, adding value over the long term. i think they are less interested just in size. a lot of times, this diversification comes along with size. tom: how do investment bankers make fees on transactions like this? that's life, right? >> i will tell you, it depends. are you in the sprint or marathon? we bet on giving advice for the long term -- to: you are advising both punt and out. we've got to run. we will come back. tom michaud with us. stay with us. ♪

sure, tv has evolved over the years. it's gotten squarer. brighter. bigger. it's gotten thinner. even curvier. but what's next?

for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. tand that's what we're doings to chat xfinity.rself, 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: again, oil. headlines just out, oil fragile right now.

here is caroline hyde. caroline: investigators say one of the shooters and they san bernardino massacre may have made a plan years ago. he and a friend had plans in 2012. the friend brought the -- bought the assault rifles they used in last week shooting. funerals for the 14 killed in the massacre will begin today. services are scheduled this afternoon for the san bernardino county worker who died in the shootings. friends and family members of those killed visited the scene yesterday. i knew analysis of the stampede last september and saudi arabia puts the death count and more than 2400. the associated press as it is the worst disaster ever to the annual pilgrimage to mecca. the vehicle -- victims were trampled when the crowd panicked. western intelligence officials -- a hydrogen bomb with group claims they have

hydrogen bomb. you can get these stories 24 hours a day from bloomberg.com. you so much.nk this morning, jonathan ferro thee to the president of swiss national bank. here is what he had to say about the currency. situation for large front of the economy remains very, very difficult, so those firms who export or are under pressure because of import competition, for them, the situation remains very difficult. this was frank remains -- the swiss franc remains overvalued. national bank was this morning leaving interest rates unchanged at a record low, maintaining off its pledge to intervene if needed to push back against pressure from the significantly overvalued franc. jonathan ferro joins us. great interview. credit suisse responded saying, action, mr. jordan -- president

jordan is being way too optimistic. jon: it is a good point. i think they have breathing space for what happened on thursday with the ecb, the market disappointment, the draghi disappointment took the pressure off them. week, butnhappy last not happy at all. if the s&p wasn't pleased with 120, they're certainly not happen with -- happy with 110. the central bank governor, when they say something is quickly said that, if yellen it draghi said that, what do you think would happen to the currency? look at the euro-'s was. -- look at the euro swiss. the s&p is really up against it. say the s&pu would has missed an opportunity to show it is determined to weaken the franc? jon: i would say that, but i think a lot of people would say that.

they could have moved today. the point is, and the bottom line, let's have a look at where rates really are. -.75% they have very, very limited options. there may have been a small window to get on the front, but the bottom line is, there ain't much left. if they come into a vicious downturn in 2016, and they have already exhausted everything that on a table, they are even worse position. the analysis we do it surveillance is the number two value middle at the mcdonald's next to our office in zürich. it is outrageous. what does this mumbo-jumbo mean for the swiss people? aren't they drowning in europe's your responsibility? expensive for you, but not for them. they've a strong currency. if you look at headline inflation -- gdp at 1.5%, this economy is not falling off a

cliff. this was are doing ok. they would not swap their economy with the spanish or even the german economies. it is just going in a downturn. it is fragile, but not falling off a cliff. i think for that reason, the s&p is so much more comfortable with 110. if euro swiss was pushing parity -- i have to say the sense i got from the meeting for says this summer, there are little bit more optimistic this time around. at 110 euro 10 at 1 -- give some breathing room. tom: are we going to see a shock like in january? jon: i don't think so. they had a cap. the only shock that could come is they have that much more aggressive with monetary policy on rates, -.75%. , below 1%, that would be a shock for the market. we had the shock in january step it is probably chart of the

year. euros was falling off a cliff and coming back. i have to say, my final point, if you did not want to be one single central banker, i guess tom michaud might be it. he is a really tough job. tom: jonathan ferro, thank you. really shows the international ramifications of what the central bank or the world does. tom michaud knows who the central bank are of the world is. you really need janet yellen to normalize your banking world to summer 16, right? >> absolutely. for the banking industry, it was not built to do well with zero interest rates. i think the big point of what the fed will do next week is not that they are moving away from an accommodative policy, they're just removing emergency measures that have been in place for probably too long. tom: why are we struggling with this? >> mainly i think because we haven't been raising rates and is new.s, so it

to get in normal or something that is not accommodative, you probably have to move more than once. francine: tom, you are expecting -- this is the point, tom, we have been talking about, is that so we get december 16 out of the way and then we have to get to a comfortable place for the markets to understand what the fed does next year. is it going to be gradual and is that what janet yellen will be at pains to try to make sure the markets understand next wednesday? >> i think that's right. i think with an 85% probability in the futures, very likely will see the 25 basis points next week. i think will be about what is the pace from there. my own opinion is it will be very data-dependent and probably a very slow rate, which is why i think the response to this increase is not going to be terribly dramatic. tom: very good. tom michaud with us. fisher.p, peter

always interesting, peter fisher a blackrock. that will be most importantly american economy. from new york, this is "bloomberg surveillance." ♪

commodities.out all there is to it, struggling with oil trying to find a bit this morning, hong kong is paying attention to the commodities space. let's get to our bloomberg business flash. motors paidneral less than $600 million to settle clemson into its faulty ignition switches.

the final cost was less than the carmaker anticipated. gm pay damages on fewer than 10% of more than 4000 claims. accidents blamed on the defect killed 124 people and injured 275. airlines are forecast to extend the record winning streak next year. the airline trade group i out of says earnings should rise tim percent in 2016 to set another record. more than $36 billion. carriers in north america are leading the way and account for more than half of the total income. in boston, health officials have found traces of norovirus at chipotle. college from boston have become sick. the restaurant has been temporarily closed. that is the bloomberg business flash. tom: thank you. if you care about dupont or dow, this is the interview of the week. has a phd in chemistry out of notre dame and truly expert on the distinctions between these two companies,

calling it the mother of all dreams transactions. i don't buy it. we will talk about it with jonas oxgaard. tom michaud also with us. you call a dream deal. that tells me andrew is getting bailed out. what does this mean for dow chemical after the train wreck of a decade? >> because the pieces fit so well together. tom: and they don't overlap too much. >> they don't really. there are few individual product lines, but i frankly, the rest is him completely -- , amerco assigns. dow is a commodity-based producer. can they make money and profit in a commodity business? >> absolutely. >>i think the dow commodity side is so misunderstood. primarily based on polyethylene, a consumer commodity. polyethylene, about 50% doesn't do packaging like food reps,

plastic garbage bags. at thisn't actually hit point. demand growth is still going strong. china still gore and -- going strong. fair, he is running a different business in the red line, which are the fancy pants guys at wilmington, delaware, to point. they perform spx. dow likes behind. is this being driven by shareholder activists? and this is not a done deal. getthey really play fair to in m&a transaction done? >> good question. everything is speculative until the deal is approved by shareholders. i think that is the sticking point. it seems like shareholders expect more than 50% of the share. that mathematically won't work. it is unclear what the final offer will be.

reasonably, they have been talking for quite some time, long before the dupont share price started rising. and upon is up 35%. if they started talking about the day of brings succession, it is unclear what terms they been talking about and have been revising it as time goes on. francine: away from regulatory approval and shareholder approval, these are two mega companies, they merge and then split off into three various companies so that we understand, this is meant to unlock shareholder value. a which is the company out of the three new ones that will generate the most interest? >> that is a good question. i think all three are in a better position than they were to start with. and that is really what unlocks tell you. final think any single one of i thinkuniquely better at tyco, the one everyone was

excited about, but i don't think there is one. you have three companies. company that is still strong, but still number 22 two too -- still number monsanto. francine: there is not one that commands a higher premium? we also your today from glencore. they may be looking for the theirtime it ipoing agricultural business. it seems a lot of companies are divesting assets and trying to make them and alone. this feels like a crowded space. >> i see what you mean. i would expect the specialty division or the performance remain -- that is probably the one that will have the highest multiple. now, that to some extent, will depend on who is taking over that company. breen has a lot of cachet, dupont has gone up tremendously, largely on his taking over,

promising cutting growth. and whatever party takes over will probably be the best situated. the name of synergy, the name of the game, 116,000 employees between the two of them. my quick math is 12,000, 13,000 people are shown the door. how many jobs will be lost? >> also good question. tom: you know the math. how many jobs? >> we haven't sized the number of jobs. we looked at the synergy in terms of dollars. tom: please. largely on top of because cutting programs. , in importantud question, is this good for america? >> i, at the end of the day, come back to the shareholders. i think if it is right for the shareholders, consistent return and have a company that attracts capital and confidence, i think that is a good decision because i think, ultimately, it will grow better rather than having

something that is less efficient. tom: we see beer mergers. plastics, chemicals, mergers and synergy. will this trend continue into 2016? >> i see no reason why not. the typical response to a downturn in the economy -- tom: low revenue growth, etc.. what is the model revenue growth of these three companies when they get through this thing ballet? you should know, representing dupont and dow. what is the revenue growth? >> for dupont, a little bit gdp plus. tom: fair. dow? very heavily on what happens in the commodity markets. dow's growth is a function of crude price, which sets the theirl price, and expansions. they are expanding quite

dramatically. that comes outside of the gdp picture. >> how do you feel about timing? when is the market going to start getting more information as to exactly what these plans are, in your opinion? rumorsn only report the at this point. "wall street journal" -- tom: rumors? i'm shocked. that is outrageous. you can tell is that 10:00 a.m. on friday we're going to get an announcement on this deal? >> alas, no. i wish i could. tom: jonas oxgaard, thank you. his expertise with dow and dupont. tomorrow, we will get the polls of the global economy -- kohl's of the global economy. always interesting. look for that in the 6:00 hour tomorrow, sir martin sorrell. "bloomberg surveillance." ♪

tom: given on a need to know basis, washington and you need to know in london is a hockey puck of the washington capitals. francine lacqua has a hockey puck of the washington capitals.

that is a great and beautiful thing and why we show beautiful washington this morning. let's get to the foreign exchange report, 108 on the euro swiss. jonathan ferro without market moving interview with mr. jordan of the swiss bank. we do see the strength this morning. weakness in mexico. breakout above where they are is most important, important research note yesterday, bob sent watching yen carefully for yen strength. right now we need to migrate over to bloomberg . what do you have? the top of theat program, bank of england will come out with its rate decision. we will also have hans nichols in europe sitting down with vw ceo talking about their troubles, and joined by peter

fisher of black rock, telling us what the like rock outlook for investment opportunities in 2017. -- 2016. tom: thank you. let's do a single best chart. we do that with tom michaud. bring up the puppy. we make this up this morning. ugly sausage making. i had to put in the green arrow, a post birthday green arrow. i said, i'm only making one mark on the chart. this is the dollar. that is the dollar strength coming out of 1995 associated with secretary rubin, up to 2001, 2 thousand two. dollar strength, really across all groups. long-term dollar weakness. we have come back mightily and that doesn't affect the financial business as well. what does dollar strength mean for our big banks? be theink will derivative of what it does to the economy. if you see slower economic growth in the united states because we have -- because the

dollar has appreciated so much, i think that would absurdly a big impact on the banking industry. jeffrey immelt said, all we need is 3.5% gdp. your friend is out looking for that? >> we are more cautious than that. 3.5% would do a lot for the banking industry and i think a lot for the market. i think the story of the overall market is that you -- really, the last couple of years, we have spent that year, and i think in most sectors, cutting earnings estimates as the year has gone on because we haven't had that sort of breakout gdp moment. that is what i think would be really, really strong for the market if you could have an improvement in gdp growth. bouncing around 2.5%, i think is what has priced into the market today. tom: i was thunderstruck on a trip to london and into paris, the boom in london in construction and housing debates you people have in london about rents and such.

it is honest like a bubble economy, isn't it? francine: it is. you have cranes everywhere you look. part of that is foreign money, a lot of emerging market money, a lot of chinese money. that may be put into question, tom, if this country -- if there is a general feeling lonely go to vote for referendum on whether the u.k. stays in the eu are not. there's a feeling it may tip the other way. my question to you, tom michaud, when you look at london, when you look at the volatility of the market and when you look at the political risk, is 2016 point of the above the right than 2015? we know what we're watching out for terms of risks, but there is still that unknown risk of politics. >> i think we are some big moving pieces because i think monetary policy can only go so far. we are seeing that right now. there's been a lot of talk about negative interest rates, certainly in parts of europe. monetary policy can only cure

the economy so far. you're going to need fiscal policy to come to the aid and i think as you go around the world and here in the united states, we have an election coming up. we still have a budget crisis that needs to be dealt with. i think we need to see what happens on the fiscal policy side to determine whether or not we're going to be a little breakout from the slow growth. tom: digital banking, every major bank or i talked to says they've underestimated digital banking. what happens to the branch architecture you guys did a banking deal on? it's your fault. >> i think wells fargo has a great response to this. they've said smaller branches, bigger signs. that is going to be the response. i think branches are not going to go away, but they're going to be used differently and they need to be managed in a more profitable way. so i think -- there's something

for folks in times of crisis, nice to know your bank range is there. also, what we find, the big moments in a consumer's banking relationship, pride often happen in a branch, opening an account or possibly doing a big transaction. but i do think their role will change. a big moment in a banking relationship is when the kids get their first charge card. tom michaud, thank you so much. particularly, the discussion on global -- francine, this has been a most interesting show. it will be better tomorrow. larry hathaway joins us. stay with us, we continue on "bloomberg surveillance." ♪

sure, tv has evolved over the years. it's gotten squarer. brighter. bigger. it's gotten thinner. even curvier. but what's next?

for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. tand that's what we're doings to chat xfinity.rself, 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. volkswagen on the rebound. we will hear from the vw ceo on regaining customer trust.

after the emissions scandal involving 11 million cars. rescuing the unicorn. this is good belly on trainer -- basilica in valley entrepreneur who is trying to save her once highflying company. >> welcome to "bloomberg " i've had a big 24 hours. i was serving as an upper he said crossing guard yesterday. for anyone on park avenue between 86th or 92nd, that was me is the crossing guard. david: was anyone injured? you did a good job. perfect record. bloomberg doesn't work out for me, i've something else will stop we're going to take you to mark barton