sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. closesshanghai composite at levels not seen in months as china pledges to do more to boost growth. deutsche bank is said to have identified $4 billion in suspicious transactions related to its russian operations. turkey central bank is expected to take janet's lead and hike. is "bloombergthis

surveillance." withuy johnson in london tom keene in new york. i heard you on the radio this morning. you sounded good. good, you let me know what was going on. you sounded great today. guy: i feel a warm glow of appreciation. today feels like a weird day. is adding stimulus. oil seems to be stabilizing. what seems to be going on? clumsy tuesday. we have oil on a bid but we have smart guests to get us forward. john silvia will be joining us in the hour. guy: looking for to that. let's get everybody up to speed. vonnie: the white house is calling the killing of six u.s.

soldiers in afghanistan cowardly. they were killed yesterday while on patrol. they were targeted by a suicide bomber on a motorcycle. the taliban claimed responsibility. two other u.s. service members and an american contractor were hurt. of tech raises the number service person killed this year in afghanistan to 21. the versatility is confirmed in the china landslide. rescuers pulled a body from the pile of rubble. as many as 81 people are still missing and some may still be trapped under 30 feet of mud. buildings were damaged or destroyed. a man-made pile of debris triggered the landslide on sunday. a human rights lawyer will be freed. he received his sentence yesterday in court. he criticized the communist party. he won't go to prison but he may

no longer act as law. president obama plans to host a u.n. summit on the refugee crisis. the u.s. ambassador to the united nations says he wants to push other countries and the private sector to increase the amount of humanitarian aid. ford and google could mean that they will be the first to put a driverless car on the road. a top google official has said that the company aims to put an autonomous car on the market within five years. google has hundreds of people working on the project in detroit. executive the forward -- the ford executive to head the program. and triumph for spacex. the rocket return to space -- returned from space safely. orbitlcon nine went into

and the tramp for elon musk comes months after the explosion of the unmanned cargo rocket last year. that is the first word news. you everybody take shots at on musk and i have questions about what he is doing but this is technology advancing. vonnie: the next frontier. i want to pound through the data check. we have an important guest. not much going on in the markets. it is always news when there is nothing going on. while gets a bit. 34 handle yesterday. let's keep this short. to .95%.ield back royale is up. we're talking about the turkish lira today as well. guy: the turkish lira is

certainly on the agenda. , u.s. futureser and fair rally on the terminal telling me we are down on the s&p. the australian dollar is reacting to the story, the turkish lira is weaker going into the rate decision. and the euro-dollar is trading up by 1/10 of 1%. tom: the correlation with the liquidity -- over to the bloomberg terminal, we keep it simple. our commodity index is on the chart. year twor chart of the months ago because this is the chart of the year. eisenhower, 1956, down we go. china boom. -- lehman brothers low. getreally wonder, when we down here, does it extrapolate out? vonnie: exactly, how far does

this continue? tom: industrial metals all and all. of course we see carbons. today, that chart is the chart of the year. guy: it is. if you take one chart away from the year, it will be that one. that leaves us on to the next story. china's leaders have been signaling that they will take steps to support growth fiscalng widening the deficit and stimulating the housing market. let's get a sense of what has been said. nic joins us now. thatis an annual meeting takes place. what did they say? rare that the chinese government actually telegraphs its policies for the year ahead. they are saying is that they will step on the gas. they will lobby deficit to get bigger and they will use a more

flexible policy. we interpret that to mean more interest cuts. full steam ahead. they will really try to stick to the target for next year. guy: what does this mean for the growth? the switch from an industrial policy to a server-side policy? tell us what we can read between the lines? : i think the big conclusion there is that we are not there yet. the government has raised a lot of concern about the new normal of stable growth, growth that depends on consumers and not infrastructure investment. the latest amon makes it clear that high target is important to them. and if the target is and managed properly, they're going to keep pumping in liquidity. and adding to the deficit. tom: i like how you call that

manage. let's bring up the chart on the chinese equity market. up 60% or so from the green circle. it is called the alive cat bounce. nick: clearly, whenever the market goes a little bit down, the government has shown itself very willing to get involved. ban can ban companies, state-owned companies from selling shares. so they have a great deal of control. you pick the chinese stock market in your 401(k)? nick: definitely not. this is not a market for value investors. tom: there a good. investment advice from nick wadhams this morning. guy: let's bring another voice in. joining us is marvin barth. good morning.

let's talk a little bit more about china. the chinese are going to manage this story. of the going to use all levers at their disposal to make sure that we don't get a significant falling off the cliff. the last couple of days have seen the currency stabilize a little bit. can we expect these wider process to include the continuation of the d.c. creation -- of the depreciation? is the we think that likely case. especially against the dollar. they do have a mini depreciation. and they said look, going forward, they will move towards a focus on the real effective exchange rate. that is going to mean that it will depreciate. we have been forecasting that dollar will go to six 80. by the next year. we see upside risk to that.

they are trying to manage the economy. we see a lot of downside risk to that. they have done an amazing job of managing the economy over the but the problems are getting much more severe. and more difficult. the size of it is larger and it is more complex. that means there are more risks. go for a minute -- where are the known unknowns? think there are big questions on both. the biggest unknowns are associated with how china is going to handle this policy. and in particular, how they will open the economy as they have suggested. and have the sdr basket they are moving towards opening the economy. that is opening a whole can of forms. we see this in every other economy. you get to the stage and you

open up the capital accounts, that is when you run into potential problems. and we don't know how big they might be. discount, we shouldn't the risks from the fed side as well. one of the things we have talked before about is the idea of miss inflation. that there is no inflation. this is what we heard about from janet yellen and that is what could posh the fed off the projected dots. tom: what is your yuan call? where are you? marvin: we are at $6.80 at the end of the year. we see significant upside risks to that. tom: we have the bowtie turvey -- derby. very few people could pull that off. knot.at his not as my

professional versus amateur. marvin: my daughter claims i look like a clown. tom: it is gorgeous. it is 19th century. can you see a difference? and amateur. hour, johnn the next silvia is joining us, an important interview with the chief economist from wells fargo. ♪

guy: welcome back, you are watching "bloomberg surveillance." not looking christmasy, it looks springlike because it is so warm. this is "bloomberg surveillance." you up to speed with what you need to know. here is vonnie can -- vonnie quinn. chinese leaders say they will take more steps to stimulate growth. they are trying to put a floor under the company slowdown. the central economic conference said that monetary policy must be more flexible. .nd fiscal policy more forceful carlos slim had the worst year according to the bloomberg index. he lost about the size of the hunters economy. giants arecations headed for their biggest decline since 2008.

he is now the world's fifth richest person. bank has identified as much as $4 billion in suspicious transactions related to its russian operations. people familiar with the banks tell bloomberg that the account is in addition to $6 billion in trade that are under examination. $10half-life as much as million in trade that may not have been vetted for money laundering. that is our bloomberg business flash. let's get more on the deutsche bank story. how egregious are these transactions? they are just being investigated at the moment but they do look suspicious. jonathan: this isn't a new story. they were talking about this on the second quarter called. there is a of press conference coverage. to $4crease in scope

billion, that is the big question. is this about money laundering and does this become a sanctions violation? standard chartered in the past beenaid a solidifying and required to implement a lot of new compliance steps internally, some of which have failed. so this is a very big issue. i don't think this is big news yet because the investigation will continue for a while. guy: how does it end? fine at someh a point and with new requirements and a 3-5-year time of steps for the banks. look at deutsche bank and they go from 9 billion u.s. dollars of operating income and you tell me, down to the vicinity of $4 billion? this is an ever smaller and smaller and cooperation. would you explain where deutsche bank will be in 12 months or

five years? they will continue to try to be the investment banking champion of europe. the retail approach has been dismissed and they are shrinking while they focus on fixed income and commodities. they have increased their capital position. they have been widely flagged as the last man standing. tom: to your work and the work , sheer,r of many others will be european banks do better against the two big to fail american banks? jonathan: i think market share wise, it is difficult to argue why they would. it was lending and that was the fixed income opportunity. it hasn't happened, two thirds of u.s. corporate is funded by the debt capital market. it is one third in europe.

it was supposed to shift. talking about the european opportunity but those numbers haven't changed. until that changes, i don't think it will happen. tyce, thank you so much. have chris perrone -- chris

tom: 70 degrees tomorrow. it is beginning to look a lot like christmas. it is warm here and in london. nobody needs a winter coat. i overdressed this morning, i'm sorry. 70 degrees tomorrow in evil new york city. here is the morning must-read. piece want to bring out a that is in the telegraph this morning. i have seen similar pieces elsewhere. , the quote atin the beginning of this caught my eye. "spain risks months of political paralysis and a corrosive showdown with germany over fiscal austerity after insurgent movements smashed the traditional two-party system leaving the country almost ungovernable."

i want to take a look at a chart side-by-side. it shows you how expensive spain is getting versus italy. spain has been getting a little bit on the wrong side of this one for a while. when you are in the green it means it is expensive over italy. barth is still with us to talk about this. are we overdoing the spain risk? you have a smile on your face. [laughter] i can't believe you'd even suggest such a thing. i think it is. at the end of the day, spain is borrowing tenure on one dollar 78. the funding cost is still very low. as your chart showed, the spreads have been wider earlier this year. we have seen increase in the increased because of uncertainty.

we will try to go through a time to see how someone will form a minority government but there is no other path and the key message is that there isn't a clear path for the radical markets to take heart of that. guy: do you think there will be an issue with that first is -- issue with that versus germany? marvin: their growth is looking affluent. 2.6% growthting over the next year. the economy still seems to be doing well and that is helping them. in terms of increased fiscal revenues and putting them back on a sustainable pass. but is not positive news relative to what we thought at the beginning of the year when it look like -- was potentially going to be a force in government, not as bad as what could have been.

tom: quickly, is it all clear for greece as we go into next year? marvin: i don't think it is ever all clear. a country that is highly indebted and has its own political issues -- always done is effectively kick the can down the road. -- wew that there is the know that there is going to be change. tom: i don't give a dam about greece. i just want to stay employed until may. john silvia is with us. he had a miserable year. john silvia on the american economy. ♪

tom: iron ore did better over the next couple of days. a better price and chinese equities are doing better. there is gorgeous hong kong. let's get you to the first word news. vonnie: talks aiming to find it and to serious deadly civil and -- civil war will restart this month. geneva andather in the peace proposal was crafted by russia. it doesn't mention what to be done about the syrian president. russia backs him. to host aobama plans u.s. summit on the global refugee crisis. the u.s. ambassador to the united nations says he wants other countries and the private sector to increase aid. their population has grown to more than 60 million people.

americans were killed yesterday by suicide bomber in afghanistan. two other servicemembers and a contractor were hurt. the attack raises the number of serviceman killed this year in afghanistan to 21. the man accused of buying rifles used by the san bernardino killers is being held without bail. a judge ruled yesterday that enrique marquez was a threat to the community. prosecutors say he illegally bought the assault rifles used by the shooters in the san bernardino attack that left 14 people dead. a murder charge will be filed against the woman accused of ramming her car into a group of pedestrians in las vegas. the 24-year-old intentionally drove her car into a crowd along the las vegas strip. the district attorney says she could also face multiple counts of attempted murder. fo and googlerd

could mean that they will be the first to put a self driving car on the road. they will announce the partnership next month. a top google official has said the company aims to put an autonomous car on the market within five years. there are hundreds of people working on the project in detroit and california. that is the first word news. guy: thank you very much. let's talk about commodities. we may be in the sin bin but we are not out of the game. what is the story going forward? >> we do think that to the 16 will be a difficult year for the commodities markets. forstill looks oversupplied most of the year. but we are looking for u.s. contraction and supply to start to take a serious toll on the surplus that is there. by about the middle of the year. guy: there is a lack between everything else. michael: i would say oil looks

like the best position even though we do still see h one as being difficult. and then last is the cold. tom: good morning. we are thrilled to have you on. a minsky is doing the killer spreadsheets on supply and demand. wrong, itt russia so was breathtaking. what is the greatest uncertainty in supply dynamics on your spreadsheet? certainly, we do think about where we might be getting it wrong. one of the things is, coming up the opec meeting, some people say that the saudi arabians could be looking at increasing their production. that would be a key risk for us at the moment. i don't see that as the central case. the only time that they have maximize production is when

prices have been exceeding their target range to the upside whereas this is not the case now. tom: what is the certainty of the iranian throughput. do you have a clue about what iran is going to do? michael: i think certainly the government estimates of one million barrels a day is high. we think they can get 300,000-400,000 barrels a day in the initial stages but beyond that, they may well invest from outside and take outside expertise in order to take a number -- in order to make the most out of aging exports. tom: where did the markets clear? can you give me a calendar date? day, month, week, our? we do see almost the entire year of june then 16 being in oversupply.

it will be difficult for inventories to draw down significantly until 2017. so we still see the risks to the downside. but it looks like i the middle of the year we could be getting the contraction in u.s. supply, being quite significant. we look for that to be the main turning point for the market. shouldat's dollar number michael be plugging into the spreadsheet? marvin: swiss currency. euro-dollar, we have raised our near-term forecast, 1.03 by the middle of the year. we are still at .95 by the end of the year and we are thinking of getting a deeper drop in the euro-dollar because the ecb won't take as aggressive in action as we have expected. it looks like the dollar has topped out versus the yen. what number do you plug into what it costs into your

spreadsheet? i want to know about the storage story. michael: i don't have an exact number for you but what is interesting to see is that the brent contango did reach the level that it needs to two incentivize floating storage in a q1 of this year and in august. but now when prices have gone troughs, these deepest -- is not high enough to incentivize floating storage. so there are two interpretations of that. the bearish interpretation is to say look, we're not there yet. and the bullish interpretation is to say that actually, even though prices are lower than they were, the physical market isn't as weak as it was then and therefore it doesn't need to incentivize the storage. tom: can i ask my dumb question of the week? does will get old when it is sitting in boats and in silos by

airports? i mean, i'm not an operational expert but yes. there are issues about separations of various components of oil after time in storage. i wouldn't be able to tell you exactly how long. tom: did you see how he did that? you have to go to stamford to answer a question you don't know the answer to. he nailed that. he had no clue what the answer was and he killed it. that was great. [laughter] guy: stay with us, we have plenty more to talk about. marvin barth is going to stay with us. have rita send -- amrite sen. ♪

guy: welcome back, you are watching "bloomberg surveillance." bank is expected to begin its shift towards a single engine mark interest rates. we are expecting the latest rate decision, it isn't just an hour's time. justinet more from kerrigan. done itey we have suggest that we make it a move today. yes, we are looking at a , at least the consensus is, about 50 basis points on the repo rate. aret forget that there three interest rates that prevail in turkey at the moment. a lending rate, a borrowing rate

and the repo rate. the lending rate is at the upper end. if we had a move on the lending rates that could be very lush. if we have a move on the repo bullish.will not be so the question is, which part of policy he is going to use. guy: can he manage both market expectations and government expectations with this decision to keep everybody happy? justin: we will probably see at the end of the day a decision that really doesn't have much effect on the overall borrowing with in turkey. what the president would like to see is a cut in rate to keep the economy growing. better thantly expected growth in the economy in the most recent quarter and

the government is doing well in handling the budget deficit. day, what end of the anyone would like to see is lower rates, despite the inflation that turkey is grappling with, to keep the economy growing. more of an economist and he hasn't always seen eye to eye with the president. where does the imf fit into this? i'm assuming that they wanted one rate turkey or a two rate turkey. do they need imf assistance? justin: you are right. everybody, investors particularly, would like to see a return to a more comprehensive and understandable interest rate policy within turkey. the three rates are a source of confusion for investors and i think that the circumstances

that brought these about when happenedcial crisis and turkey brought in the regime -- that is not there anymore. so the investment community and the imf would like to see a little bit more visibility and transparency within the rate scenario within turkey. so investors know where they stand. vonnie: that is quite a big spread between the three rates at the moment. where is the central bank trying to skew the incentive? to the borrowers, to the overnight market? justin: they're trying to skew it to borrowers. what turkey wants to do is reignite the economy. and as iceland earlier, they want to get the growth in turkey sustained in a meaningful way. momentarly days of the and they have other issues to deal with.

wo had just come out of t elections. the second election gave -- the mandate that he needs. have theviously political issues in turkey with the problems on the border with syria and iraq. we have also had unsettled markets to which turkey has been no less exposed to. guy: thank you very much. one hour and 50 minutes until their decision. marvin barth is still with us. there is so much going on in turkey at the moment. you have what is happening with , plus youe broadly have the central bank story. put it together for me. where do we go with the turkish lira? marvin: it is more complicated than that.

we are looking for further depreciation from here. of thoseo all different factors, the increased uncertainty associated with the politics, although at least we now have a government. issues --eopolitical there is this brought attention in the emerging markets. you see it not only in turkey but also in brazil. we are starting to see institutions that people thought and were converging towards developed market standards and they clearly aren't there. this is the real problem. it is putting pressure on all of thee currencies versus dollar. tom: you have been looking at developed companies versus the turkish lira. let's bring up the chart. you have some weakness but some strength nevertheless above the normalized line.

the dollar lira gets absolutely crushed. does the devaluation assist the government? marvin: they think that he does. and clearly they also think that lower interest rates help but it will, the cost of inflation which ultimately makes the economy less competitive. so you get a short run gain, and longer run pain. that if youblem is look even in places where you have seen significant sweden,tion, japan, look at most is asian economies, you still haven't seen the export gain. part of that is because demand has been weak. this is the wrong time to pursue the short run gain. leave it there. we will come back to you shortly. marvin barth is joining us from barclays and michael hsueh is

joining us as well. coming up later on, we have seth merrin. it will be interesting to get his take. the conversation comes up at 9:00 in new york. ♪

tom: good morning everyone, "bloomberg surveillance." what do you need to know about new york city and the warm weather? gases down 39% this year. dollarsell under two for whatever the measurement is. that is all you need to know. let's get to the bloomberg business flash. vonnie: thank you. another bad day for toshiba. shares fell to the six-year low. have a $4.5 billion loss. there was a decline of 10% monday and the -- has lost

market value over the last two days. mcdonald's japan fell be most in nearly five years. the u.s. parent is planning to cut the state in the company. they are struggling to recover from the series of food scandals. speaking out against a proposed u.k. surveillance law. it is not a law to watch surveillance but it is a bill that would strengthen law enforcement ability to view the online browsing history of the u.k. citizens. apple says the threat to national security doesn't justify the security. it makes it comfortable that in the future somebody could be browsing my search history. guy: you took my joke on the surveillance law. vonnie: great lines they are.

guy: i need to be quicker. massive story over here. you have to walk across any road and see the number of cameras that are on you to appreciate how big of a story it is and how the high level of intrusion is part of daily life. anyway, we will talk about that off-line. we will talk about the jokes as well. let's talk about the dollar and what happens next. marvin barth and michael hsueh are here with us. i asked earlier about what number we should plug into for the dollar next year. are we down to the fed on this one? how many hikes are we going to see? is that a pivotal factor? michael: yes, i do think so. research, we are not quite as on the ball with our analysts are

looking at three hikes next year. guy: when you build a spreadsheet, what number do you put into that model? euro-dollar for oil and gold, probably not so important. the dollar index for gold is. the third in terms of the three financial -- that we look at. -- on the dollar index? we are looking at 6% appreciation. tom: that is a modest amount. marvin barth's, do you agree with that? marvin: i am feeling a consensus now. i think we are at 6.5%. so yes, roughly the same. is it about dollar strength or is it about the currency war that we are living? marvin: you are spot on.

currencies are always a beauty contest, in this case, it tends to be more of an ugly contest. and the u.s. is the least ugly economy out there. it actually looks good. whetherbiggest worry is you can do three hikes or for hikes, that is not a very risky economy. on why the call dollar continues to appreciate and trend is because the returns to capital are much higher in the united states than anywhere else. looks like the least risky place to invest. however you want to approach the problem, this is what is driving the dollar trend. three orhe fed does four, it won't affect the trend. we make it a surge but it won't affect the trend. guy: fair enough. terms, wen currency

are here sitting in the poundstone, there is a eurozone. from a currency point of view, what is the story next year? how big of a shift are we going to see next year? if i'm sitting in frankfurt, what does the story look like? where am i going to get the best advantage on a commodity basis? michael: based on our forecast, we see more in the euro versus the yen. we are probably along the same lines. marvin: you may be feel very good. guy: well next year looks like what? eurosl: i mean, oil in has a bigger impact in sterling. for me, when i look at more is where the impact commodity prices are. and for me, it is gold that would get hit more seriously than oil.

i see fundamentals winning out. tom: the shock of the year came out of riyadh. what is the likelihood of a shock to straighten out the oil prices? michael: in terms of a supply shock, it is something that is built into the market to a greater extent than it is now. obviously it is difficult to say , but if you were to try to take a stab at quantifying it, it is pretty close at the moment. and upside risk. tom: thrilled to have you on. michael hsueh and marvin barth. is thatneed to know marvin barth has an outlier bowtie. john silvia has a consensus bowtie. he will join us next. ♪

tom: chestnuts roasting on an open fire. no need for a fire with these warm temperatures. the american economy adjusts to know winter. houston, we have a problem. let's count the takers setting off used in. it is not a good thing when the stock of the moment underperforms. tim cook, do something now. i am underwater. good morning, everyone. this is "bloomberg surveillance," live from our world headquarters in new york. where did the year ago? guy johnson is in london this morning. i thought that was great, with michael hsueh of deutsche bank, longer with oil. guide: the headline tells it all, doesn't it? i think another factor -- there was a lot less

yesterday than i expected. right now the barometer is to get updated on the first word news. here's vonnie quinn. bonnie: thank you so much. -- vonnie: thank you so much. the previous proposal is classified by russia. it does not mention much with syrian president bashar al-assad. year, the war has killed a quarter million people. a number of refugees crossing in topped one million, many of them from syria. it is four times higher than last year. -- 3700ur/five of them have drowned. plans to hosta the yuan summit next year on the global refugee crisis.

they were targeted by a suicide bomber on a motorcycle. the taliban claims responsibility. the attack raises the number of u.s. service personnel killed this year in afghanistan to 21. the first fatality is confirmed in the catastrophic china landslide. rescuers pulled body from the massive pile of rubble in shenzhen as many people are missing. at least 10 people died in the crash of an indian military plane that went down near new delhi's maine airport. the plane belongs to the country's maine border patrol. -- to the country's border patrol. vonnie: a remarkable triumph for

spacek. for spacek's. the touchdown at cape canaveral last night. it carried 11 small satellites into orbit. the explosion of an unmanned cargo rocket last summer. that is our first word news. pretty phenomenal. how about a data check? let's get through it. there is no news going on today. it is always news weather is no news and technology. chris verrone is taking the month off. nymex crude with a modest bid. guy, what do you have this morning? think volume is really drying up at the moment. we are absolutely flat. fair value off the terminal is down -- has the dow down .4. the s&p down .2.

in under an hour's time, dollar-turkish lira falling in terms of the rate decision coming out of turkey. now, notdy cares right much going on today. there is something on toshiba. it is an iconic name. may be cut further as well. after tog that call shiva had a very difficult time over the last few days. muchow it ended the day lower in the tokyo session, down 12% over the last day. tom: there it is. that gets us started this morning. we have two smart guests for you this morning. from strategic -- from chrisgic's research, verrone.

and john silvia joins us with a consensus bowtie, after the stunning 19th-century effort by marvin barth from barclays. right?heasant, john: yes, it is. is an honor to my dad. he and i used to go pheasant hunting. tom: john silvia is with us. is the economy next year 3% or do we underperform? economy.is 2.5% i think we will underperform again. there is a lot of uncertainty in a political year. tom: we will focus on that later. is there anything that says to you turnaround or umpgh to get you to double digit moves long in any asset class? chris: not at the moment. internal acceleration that you and -- that you tend to see early, it just was not

present. yesterday was a good summation of the whole year. the s&p was up 15 points on a very meager breath. that for thee jargon alert. chris: we need better internals to get us up and out of this range, and we do not see it yet. likewhat is the story look -- what does the story look like in europe? are we in a better place? chris: this year has been about sentiment swings. the price action out of europe, particularly over the last week or two, we are not excited about. we have the dax reversing yesterday. -- in the ibex in spain terms of consensus positioning, europe seems crowded, and it is not working. guy: that is interesting.

how much of that trade is already done? we started to see some of the exiting of positions. we are looking for maybe another leg on that. chris: as we move into the first quarter, both in europe and the u.s., there probably one more leg lower. what is curious about europe, particularly over the last quarter, it is one of the few spots of the world where small caps are outperforming. we have seen all caps under performing in the u.s., doing better in europe. i wonder if that is a reflection that the more domestic oriented companies in europe are more insulated than perhaps what is going on in the emerging markets. tom: what strikes me, john silvia -- and we talked to one of your strategists yesterday that was constructive on single digit performance -- every house 2015 wass toward sluggish, 2016 is going to be

sluggish. do you buy that? on a nominal gdp basis, is it a move forward? john: when you look at the data over the years, that regency bias, which means , it doesecency bias not work with gdp. there are mood swings among the american consumer, which remains two thirds of the american economy. when you look at gdp over a five-year trend, it is 2%, 2.5%. when you look at it year on year, there is a lot of volatility. it turned out not to be a scramble. john: not at all. now the debate is, are we talking about three moves, four moves, something more aggressive? a lot of that depends on inflation and inflation expectations. tom: where is gold? market,old is in a bear

and it wants to bounce here. we need to look at the constant -- at the context of january. you tend to get lagging in the first quarter of the year. here withinat 1150 a bear market, and that is the distinguishing factor. guy: the dax was basically overlaying a serious of -- a series of previous, quite long periods. is there any kind of comparable that it's obvious looking back? the u.s.,ticularly in when you look at 1994 and 1999, there are some similarities in terms of the narrowness of the market that we see. 94 would be the bullish outcome, because in 1996 the barkett -- the market was higher. those are the two comps we are the two comps we're looking at. i think the jury is still out.

know 1994 is something economists look at. do we have a mirror image to the massive indecision and mess up of 1994? john: i don't think so. the fed was pretty clear as to what they were going to look for an pretty dedicated. they have learned that aggressively pursuing in the just rate has increased in this environment. tom: i agree few strongly that it was chaos in 1994. john silvia and chris verrone are with us. houston, we have a modest problem. that would be the supply of louisiana floating in the gulf of mexico. that is something we will talk with andrew cosgrove about. under two, oil in modest bit this morning. stay with us. ♪

guy: welcome. this is "bloomberg surveillance ." i am guy johnson in london, tom keene is in new york. 15 degrees centigrade is the temperature in london. let's get you up to speed on what you need to know. here's vonnie quinn with the bloomberg business flash. vonnie: we do not even understand what that means over here. i think it is the high 60's, 70's. deutsche bank has identified as much as $4 billion as a business transaction related to russian operations. the account is in addition to $6 billion in so-called mirror trades that are under examination. that means germany's largest lender has flagged $10 billion in total trades that may not have been vetted for money laundering. it is getting increasingly dire

for toshiba. the company is being cut to junk. shares have fallen to the lowest in six years in tokyo today. 12%, thenished down lowest since march of 2009. the japanese company was given a loss of $2 billion. and chipotle mexican grill is being investigated. the cdc says five people in kansas and north dakota and oklahoma have become sick with an e. coli strain. all of them are eight -- all of them ate at chipotle days before their illnesses. this is an insidious little disease. it seems to be popping up in various -- tom: what do you do when you walk by a chipotle? are you going in there?

no, there's nothing funny. oil, where are we? vonnie: joining me now, andrew cosgrove. we want to talk more about oil and natural gas. .atural gas is down 50% what is the outlook for natural gas as opposed to oil? andrew: unfortunately, we have not had the pole on the demand side from the weather this year either. industrial demand is humming along at a decent clip, but on the manufacturing side -- vonnie: can they separate? andrew: 30% of oil production comes from gas, so you have that relationship, but it is not a one for one link.

tom: we could go for an hour on this block on oil. this is the charter really look at. the tv charts we make simple. a lot of this is from a guy named j welles wilder in 1978. chris verrone, you know this cold. talk about this. here's the price of oil, and all you need to know is we barely come up in tested. this is incredibly elegant, the way this oil behaves against this moving average. down here is a separate analysis, and all you need to know, we are nowhere near a reversal, chris verrone, on oil. chris: this has been a lesson in trend following. we think it is a bear market and it is not over. are to sell,nities not to buy. tom: andrew cosgrove, what is lower longer mean for the oil industry? andrew: unfortunately, more pain.

as we look to 2016, we will be oversupplied to the tune that we entered the year with. tom: what do the balance sheets clear on the corporations? andrew: sometimes 2016 a lot when hedges rolloff. vonnie: this is critical. this is clearly a benefit to the american consumer. overtime it is the american consumer that benefits from lower oil prices. for the u.s. economy it is a positive. guy: to answer your question about the european market and gas, heavily supplied by russia and the contract relationship that exists between oil and gas on our side of upon. how problematic is it going to be? every sign -- every time we see it dip lower, that has a lag effect into the gas market. walk us through what russia will see next year.

analysise just did a -- we just did a capex analysis, and unfortunately on the gas and oil side, you will have brazilian production for both hydrocarbons, and that will translate to a potential cap on markets. is speculation having a meaningful impact on the price? clients,en we talk to we notice investors are still eager to call the bottom here. i think given the trend, we are not in that camp. i also want to divorce the idea of a low-end price in the start of the next bull market. when you see this type of damage down 50%, 60%, there needs to be a significant repair time, even though -- even once the low is in place. -- howtural gas under 2

big of a deal is that under the industry? operators are adjusting to the new norm. tom: andrew cosgrove, thank you so much. come back when you have good news. i kid. -- andrewst groove cosgrove with vince piazza. the view on brent. stay with us with john silvia and christopher verrone. ♪

guy: welcome back. you are watching "surveillance." a live shot from hong kong. we are going to deal with fahrenheit and centigrade again. 22 degrees in hong kong. nice and warm. even warmer than it is in london in hong kong. we go to the morning must-read with vonnie quinn. vonnie: i have to pick out this op-ed by robert jenkins in "the times." he's a writer and fellow at better markets and talks about nominatesay -- he john cryan of deutsche bank, unfortunately given the news is being bank investigated for $10 billion of transactions. here i quote.

thate: he begins saying john cryan is probably the best candidate. then he comes back to john and says he is basically part of a new breed of competent, no-nonsense executives. wait until dominic constant walks out the door. it is that simple. vonnie: can you have a statesmanlike banker? tom: i will give you statesmanlike. is this going to play in london, gives to the bottom of the piece. he talks about the bank relators that's the bank regulators in a drive for capital requirements. who are they supporting here? statesmen?ere to be

are they there to manage their investments? you wonder whether or not we are slipping into an era in which we -- you are ank investor with particular banks on this. 101.surveillance i will not get sylvia into this because john is going to have a coronary. a technical analyst at one of these firms is making 182 220 base pay with a $200,000 bonus and somebody wants to cut the bonus because of morality or whatever. he leaves, right? chris: he leaves. vonnie: in a latest book, he says that the two goals are not incompatible, that there is a way -- tom: within a competitive environment, he is totally right. he wants to get a payday, he goes to work for jason trennert

and gets free cigars as well. i don't get it. guy, help me here. lines in a the commentary that comes with this at the bottom, "statesmanlike oxymoron."ls a lot of people will take that line. tom: jamie dimon, take a moment. do not lose john norman. it is not a good thing when the stock of the moment underperforms. apple computer. tim cook, get off the 60 minutes" with charlie rose and do something. stay with us. "bloomberg surveillance." ♪ bring your family and friends together

to discover the best shows and movies with xfinity's winter watchlist. later on, we'll conspire ♪ ♪ as we dream by the fire ♪ a beautiful sight, we're happy tonight ♪ ♪ watching in a winter watchlist land, ♪

♪ watching in a winter watchlist land! ♪ xfinity's winter watchlist. watch now with xfinity on demand- your home for the best entertainment this holiday season. guy: 29 minutes past the hour. welcome back, you are watching "bloomberg surveillance."

this is the first word news with vonnie quinn. vonnie: the army sergeant who afghanistanle in six years ago will face a military judge today. bowe bergdahl will be arraigned on charges of desertion and misbehavior before the enemy. he was held by the taliban for five years. the free him last year in exchange for five guantanamo prisoners. the army says he will face a general court-martial, and the misbehavior charge carries a penalty of life in prison. the white house is calling the killing of six u.s. soldiers in afghanistan cowardly. they were killed while on patrol . they were targeted by a suicide bomber on a motorcycle. if caliban -- the caliban claims responsibility. one was a new york police detective serving in the air national guard. members and ance american contractor were hurt. the number of

americans killed in afghanistan this year to 21. a man in china will be freed. he criticized the communist party. he loses the right to practice law. the man accused of buying rifles used by the san bernardino killers -- it was ruled yesterday that in recap -- that enrique marquez -- the attack left 14 people that. a poll shows ted cruz gaining on tunnel trump in the republican presidential race. trump has a score of 20% nationwide. the texas senator is four percentage points behind. that is our first word news. tom: we are getting on there. "with all due respect" gives us industry-leading coverage.

john silvia is with wells fargo and uses charts every once in a while, but nobody does it by christopher verrone. he is a strategic -- a strategic as research partner and he believes the trend is what matters. forget about the mystery of so cast experience chris verrone looks at the trend in a year where there has not been a trend. the s&p has crossed the flatline on 26 different occasions. that is a record going back to 1927. we have seen how narrow the market got. if you own the 10 largest stocks, you are up 13%. tom: what is the signal for next year? chris: number one, there is a liquidity problem with the market. if liquidity drives stock prices, the narrowness we see is a function of a sign that liquidity is more than it was

last year. there is vulnerable ground heading into 2016. tom: i do not do a lot of work with volume. i keep volume separate from my technical analysis. -- what doeslity volume in liquidity tell you? i am not sure we are going to get a big signal from volume. we have seen it start to take up the last 18 months, so perhaps that is a reflection that more volatility is coming back in, but as far as the technical thing, i do not think volume holds the same utility it once did. guy: i want to look at the market more broadly. what is causing this issue with liquidity? story?he etf order for me what is having the biggest impact on liquidity. chris: i think it is credit spreads.

about 500 basis points over treasuries. when credit conditions to recount forward market returns tend to be below average. that. has driven we have seen energy spreads lead -- leave the market wider purdue we have seen industrial spreads wider, material spreads wider. even health care spreads have moved wider. --nie: i was going to ask the tent spread has spiked a little bit. and we haveto you not mentioned that spread since 2008. vonnie: is it just a function of the fomc move? -- ourour hunch fixed-income analyst thinks it year-endtion of the around the fed last week. in underscores the weakness in credit we have seen is just not contained. it is broader.

tom: guy, you have to jump in here. i cannot talk. guy: let me ask a question. chris, when you look at correlations, what do they look like this year and what will they look like going forward? i remember the years of risk on, risk off, where everything was tight. chris: it depends on where you look in the world. correlations among u.s. stocks have come in particularly over the last eight or 12 weeks. in underscores the idea that this market is less about being involved in more about what you own and what you do not own. on the other hand, en correlations have risen meaningfully over the last 12 weeks, so the market is not ing between this en and that en. tom: the apple fell from the tree. apple computer -- come on, chris. dog of dogs, the red line of inle, massive outperformance

july, and it comes right back down and joins the s&p in mediocrity. what does it mean to have apple underperform? chris: what does it tell us that the biggest stock of all cannot work in this environment? is out of the 90 question over the next number of quarters. 86% of analysts have a buy on it. it is crowded. let's talk newtonian mechanics. seriously, the momentum of the economy. there are vectors on the charts that you look at, the vector of nominal gdp is challenged. the vector of oil is wicked challenged. that is a boston phrase. what is the momentum telling you now about the sluggish economy? john: i like to point about nominal gdp. the momentum the last 15 or 20 years has been slower, on the

downside. that means top line revenue growth on the economy, especially in s&p revenues, are more limited than they were five or 10 years ago. the s&p you belong on 500 right now, chris verrone? chris: i cannot. looking out bigger picture, i think there are missing pieces, apple being the largest. tom: like the doctors say, get a second opinion. miss yamada, louise yamada, will not get up early enough. she is exceptionally cautious on your equity markets. that will be on bloomberg radio. ♪

guy: welcome back. this is "bloomberg surveillance." guy johnson in london, with tom keene in new york. warm it is in london this morning, around 60. i will put that in american for everybody. let's get to the bloomberg business flash. vonnie: that was very thoughtful. thank you, god. china's leaders are signaling they will take more steps to support growth. that includes lightning the fiscal deficit. released at the end of the government were conference says volatility must be more flexible and fiscal policy more forceful. ajudge has declined to order mental evaluation of sumner redstone, citing the media mogul's privacy life. contends heriend cannot make decisions for himself. she was in charge of his care in

october when she was kicked out of his home. sumner redstone control cbs and viacom. the bloomberg billionaires index carlos slim has lost money. saying they are headed for the biggest decline since 2008. he is now the fifth richest person, down from third earlier this year. that is the "bloomberg business flash." tom: our single best chart combines the expertise of john silvia of wells fargo. chris verrone is with us from strategas research. left, upr is over the we go and down we go. do we know that we have a diehard yankees, diehard red sox fan gekko john silvia, jimmy

defined the early boston red sox. this economy is not the same as when jimmy piersall range is right field for the red sox, is it? your let's go back to point about nominal gdp. if you look at that graph versus the 10 year treasury, you're getting the same kind of feeling that overall economic growth in terms of the nominal growth has slowed over time. so we have pretty much beaten inflation down to 1.5% to 2%. we have declared victory on that, but it also means much harder challenges for companies. tom: chris verrone, there is no chart with a commercial force -- with inertial force like paul volcker. the lesson is going back to the 1950-1951 period. when you were coming out of the

war and the long yield was anchored at 2%, even though you have liftoff in 1951, it took a decade to get the long yield from 2.25 to 4.25. i think we are in the early innings here. the 1950's were also characterize as a closed economy and we were the only show in town. tom: and then the dodgers moved to l.a. john: and the game changed. guy: has the fed done enough to change that chart? the long-term story -- you think about the lessening that has been done in the extreme measures that have been applied to the u.s. economy to try to generate a pivot. you have to wonder whether or not we have done enough to get that moving. the: we are asking question, has the ecb done enough? has the bank of japan done enough? youquestion is, how much do

want to do in terms of raising inflation over time? tom: so is olivia plan chart correct -- so is overly blanchard correct? -- so is olivier blanchard are correct? john: i would disagree with that. vonnie: do we want the long end of the currency up at 4.5 percent? if we do, that means we have a roaring economy. the difficulty with meaningfully higher long-term rates coming of earnings that are down to flat this year. john: and are these real rates or nominal rates? are we discounting inflation? is inflation the real story driving the 4%, 5% long rate? vonnie: where did we see the dots go? are lower in 2017, 2018.

long-term, the fed will fund the rate at 3.4% -- at 3%, 4%. it is still high. i think inflation picks up this year, but it does not accelerate into 2017. guy: which is the anomaly? the middle of that chart or the end of that chart? if you think about an economy and where it is going forward from here, that downward trajectory obviously is something we would be focused on for a long time. but if you look at to the becky in the, the middle of the night -- at the back end of the 1980's, which one is odd? of 1875 --, the toe to 1981 --of 1975 since 1994, since nafta was first put in place, inflation in the u.s. by the pce deflator has averaged a little bit less than

2%. that is the globalization, global trade. that is the world we are dealing with. tom: was it due to charts when i have revenue -- what does it do to charts when i have revenue struggling? can you see that in the charts? chris: we have seen over the last year and a half with the high revenue names with the more domestic oriented stock. picturealy in that looking back historically is the middle part of that chart. yield has spent a lot more time below 5 than above 5. tom: what you will learn from louisiana mod what you're learning from chris verrone is so true. the number one mistake of -- whatl analysis is you will learn from louisiana yamadahat from louise

and chris verrone is so true. there are number one mistake of technical analysis is short-term looking. coming up, a debate -- yankees or red sox? you make the call. ♪

tom: good morning, everyone. bloomberg surveillance, forex report. the brazilian real is down at the bottom with the 401. brazilian real, like a turkish lira and others, weaker up top. yen.ger sterling, i can afford to go to london. very cool. vonnie and i at harrods. we will try every restaurant. -- david westin joining us from "bloomberg ." david: we will be digging into the report that deutsche bank may be having as much as $10 billion of suspicious trades, might be tied to money laundering. have the ceo of liquid net, talking dark pools and high-yield.

tom: we will digress here. date wayll be a huge -- jersey will be retired. we are excited about that. it is real simple. in that photo there, he was with the new york yankees. is there any understanding in new york of his red sox heritage? chris: he won his only world series in the city. tom: but it is very cool. he defined an era, didn't he? john: he was one of the first players that set the red sox in a different direction. they were committed to winning, focused on developing a team over time that made a big difference. tom: very exciting, may 26. we should be at that with other

red sox fans. he played emotionally, which is great. for those of you watching in europe, this is a guy who hit singles and doubles by putting the bat on the ball. guy?u know wade boggs, guy: not a clue, tom. you and i will have a long conversation one day about the rules of baseball and the rules of cricket. tom: i listened to a cricket with myce, vonnie, and eyes closed cricket sounds just like a baseball game. vonnie: it does sound great on radio. tom: let's get back to the u.s. economy with chris verrone and dr. sylvia. where is the american consumer? i know we have warm weather and codes are not selling or by last year we were complaining it was cold. is doing veryumer well. probably not a strong on a year-over-year basis as in 2015,

but 2016 looks good. wages and salaries continue to improve. consumer confidence continues to rise. lower gas prices allow the consumer to drive more and go places. what has changed is people are buying a lot more services and a lot less commodities. tom: that is the second day in a row i have heard this. which sector looks best? the internet retail group looks better than brick and mortar. what has surprised me with respect to wages going up, perhaps the reason why the host cell stocks -- why the hotel stocks have not acted well, given pressures well. but those are two spots of weakness in otherwise decent consumer space. john: you want quality service and you want to pay for the employees to deliver that service. do companies raise prices? it still seems to be a big issue. you have the whole productivity

puzzle that you have to figure out. we get wages up and get everything to move. in tandem. do we need a kind of forward moment where we suddenly see wages jumping significantly higher and we start to get a circle? people are prepared to pay more for their goods? is that what we need in the american economy right now? john: it is a division between , and thoseties-based prices are not going anywhere. they are pretty flat. competition,t of and commenting on amazon, it is driving that price competition. seeme in the united states to want more. they are willing to pay for quality. so when you see inflation in the ,ervice sector up 2.5% to 3% what you see in commodities in the last two or three years is deflation. tom: we have to ask you about the banks. to-fail banks.

how do they look next year? chris: jpmorgan is on the road to getting better. we are not there yet with citibank. what i do like about bank of america, it is finally getting back to the upper end of the range. you're finally getting back to 65 for jpmorgan despite the negative headlines and a flatter curve. we like things that can behave well under adverse circumstances. tom: chris verrone used the word "elegant" like i did earlier. you wonder about the elegance of the dollar next year. what about cash, chris? is it a prudent thing to do to allocate more in cash in the short-term? chris: i think it makes sense. there will be some setback in the first half of next year. every rally we have seen back to 20.70 5, 2100 on the s&p, has been an attempt to reduce exposure. tom: this has been great.

the low point was chris verrone on wade boggs. other than that, it has been great. chris verrone, come back may 26 and we will talk about wade boggs. thanks for your comments on twitter today, and a particular thanks to marvin barth of our place. guy johnson, thank you so much, in london this morning. we have lots going on. ok,date of this morning is, 35.99 on oil. i guess that is different than 36.00. ,bloomberg " is next worldwide. it will be 70 tomorrow in new york. that is stunning. ♪

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sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. to discover the best shows friends together and movies with xfinity's winter watchlist. later on, we'll conspire ♪ ♪ as we dream by the fire ♪ a beautiful sight, we're happy tonight ♪ ♪ watching in a winter watchlist land, ♪ ♪ watching in a winter watchlist land! ♪ xfinity's winter watchlist. watch now with xfinity on demand- your home for the best entertainment this holiday season. >> oil hovers near a six-year low. putting in doubt a major deal in the energy sector. deutsche bank is flagging $10 billion in a suspicious russian

trade. more than previously reported. guns and tobacco are proving sinfully good for investors but at what cost? ♪ david: welcome to bloomberg go. stephanie: i am stephanie ruhle. i wish you were with us moments ago when this microphone and i were in a wrestling match. [laughter] david: we should have started the show early just to see that. we had megan murphy with us. andlso have barry ritholtz andrew