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tv   Bloomberg Surveillance  Bloomberg  January 11, 2016 5:00am-7:01am EST

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francine: extreme market swing. china concerns as investors doubt the country's ability to manage the economy. larry summers warns policymakers should pay more attention to market fears. go --prepares an orang aramco, as geopolitics heat up in the region. surveillance"berg with tom quinn -- tom keene. whenwhen you think about
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you come to london, what we you talk about. we have so much to talk about. angela merkel is not going to die both is one of the talking is one-- demo's -- davos of the talking points. leader north korea's once a scientist to build a better bomb. he spoke to those responsible for collingwood north korea called a hydrogen bomb. it is his expectation they will advance their research. david cameron wants to reach a deal on the u.k.'s membership in the european union, paving the way for a national vote on whether to withdraw from the union. he wants to limit welfare payments to immigrants. syria's embattled president has launched an incentive, wooing asian powers.
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last week he met with chinese leaders who are taking a more active role in brokering with aside. the company's warring faction is not at the table. the taliban was not invited. their members say they will negotiate only with the united states. legendary british rock star david billy has died. he was 69 -- david bowie has died. he was 69. a statement on his facebook page said he had been battling cancer for 18 months. he rose to fame with "space
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1969." in he released his last album on friday. i am vonnie quinn. tom and francine, i am sure you both have great memories of listening to david bowie. fan.francine is a huge it was all about innovation. he was so out front. billy bragg said david boley was the only major star who embraced. -- embraced punk. francine: where are we now? tom: bring it up if you would. futures doing better and the tape in general doing better. a risk after a tumultuous last week. 32.67 west texas intermediate is the elephant in the room.
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you would think the vix with the higher but really 27 is way above that 20 average. under, like oil, sank, 200. we had an 18 print on mexican peso earlier this morning just for a bit but francine, i know have -- i know you have been following the south african rand. the emerging-market currencies are having a tough time. -- let's bring it up. tom: she is going to staying -- saying frampton and a moment. francine: i did want to look at rand because we are seeing a lot more weakness. , sos linked to commodities watch out for the turkish lira, new zealand and australian currency, and the japanese yen.
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chinese stocks extended the worst selloff this year following last week's 10% plunge, but joseph stiglitz says does not worry too much about the risk of volatility. joseph: it is not a cataclysmic, it is a slow process of slowing down. there is no real news. what this does remind us as market rules matter. the way you structure those market rules can either diminish the volatility or increase the volatility. what we are seeing here in a sense is a consequence of some market rules that were not as well designed as they could be. enda curran is in iran. pboc,e, when we look at if we look at these chinese moves. haseems that prime minister
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indicated no stimulus. know, it is like mr. stieglitz mentioned, there is a debate in china. perhaps what is happening is not as tightly correlated to the economy as the headlines might suggest. a credit demand has been stabilizing. the housing sector has shown some signs of stabilizing. metal prices are at historic lows. interest rate cuts, and a lot of targeted lending. the government has pumped in hundreds of billions of dollars trying to get things moving, and they are starting to have some impact. the government is keen not to add to an already large debt in china. they are trying to manage expectations. data over the coming days will tell us just how the economy has been traveling, and if indeed things are stabilizing. francine: how worried should we
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be about this capital flight from china? it seems every chinese millionaire and billionaire is taking money out. enda: this has got to be one of the biggest concerns in china right now. as the yuan has weekend, money has left china at an extortion rate. over 2015.llars it willt continues, force them to borrow from reserves and try to support the currency. it will weigh on investor sentiment and asset prices within china. it is a drain on liquidity and may force the central bank to cut rates further to watch that. francine: enda curran from hong kong, watching what we are seeing in china. our cohost --
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stephanie flanders. larry summers writing a great piece, but how much should we worry about these market movements? stephanie: we saw it last summer, with a concerns again at that time around the talking -- time of the stock market spooked global markets. at that time was this concern the chinese authorities were not really on top of the situation. that worried seasoned investors more than the ups and downs of what we know is a volatile domestic stock market. you see the same thing and how they have responded to the changes in currency market policy. it is clearly a work in progress. we know that countries historically have always had trouble, trying to move to more -- to have a monetary policy sovereignty. we know there is a problem.
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i think this problem that larry it is theghlighted, feeling of lack of insurance policies for the global economy. it is not that there is a fundamental downturn or a fundamental risk is posed. it is the fact that we do not have something we can do if something goes wrong. tom: i would this aggregate all of the noise of the weekend and the beginning of the year to the immovable force of copper and oil moving lower. when you talk to john morgan at a.p. morgan -- john norman at a.p. morgan, how do they associate lower commodity prices with all the stuff going on? stephanie: they have been so driven by what is going on in china. francine: we had a respite -- tom: we had a respite. stephanie: copper is maybe not as good a signal in this environment as it might have been in the past, but showing serious man side problems with the global economy -- demand
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side problems with the global economy. we know china will not be a big source of growth or momentum as it has been in some past years. the question is whether that slow down in the core industrial side is stabilizing and therefore emerging markets in the rest of the world can move forward. that is what i think we are waiting to see, and have not yet seen which is why it has become so easy to feel more downbeat. francine: what have we learned in the last week about the pboc? policy makers that know exactly how to deal with the economy, the impact on the rest of the world be that much more minimal. are they trying to figure out what they need to do to stabilize it? stephanie: a managed move and the currency is always a challenge, particularly if you are moving from a semi-fixed arrangement. i do not think they have shown the same kind of blind panic that you have seen from some of
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the authorities in china in the past. we sawcourse, the way the circuit breakers issues play out also spoke to a lack of understanding and a certain amount of panic. this is something, a b we will get a little more tolerant of their learning curve. it is imposing quite a lot of costs on emerging markets. at 27 shows how ugly week ended on friday, even with a better monday. francine: coming up next on "bloomberg surveillance" we are joined by hans werner sent. ♪
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francine: this is bloomberg "surveillance" with tom keene in london. he brought rain. i was in paris a couple of weeks ago, and it is much more bustling here. francine: angela merkel's open-door refugee policy has come under fire after the cologne attacks. greece has a new opposition leader. for more on all of this, let's get to hans nichols in berlin. we started the end of 2015 thinking the eu is better as a whole. what is the mood like now? hans: there a great deal of concern with what is happening with refugees. complaintsnumber of that have been filed on the cologne attacks and about 40% are sexual of nature.
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the conversation is dominated by this. of their today% show was dedicated to that issue of sexual violence. note, one of the leading search terms in germany, where to buy pepper spray. there is a sense of fear. francine: when you look at geopolitics in europe, angela merkel's popularity waning of it, david cameron trying to renegotiate the deal with the eu. what is the main risk? hans: i would imagine from the germany perspective it is the threat to shenzhen. what the free movement of peoples would mean if we had border checks. you are checking them and slowing them down. and all the, greece time we spent the summer in brussels seen small in
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comparison to what is happening with migration. francine: hans nichols in berlin. for more on all this, spring and hans-werner sinn. joining us from use -- nick. -- joining us from munich. the refugee crisis, angela .erkel's open-door policy how decisive will this issue be for the chancellor and germany? hans-werner: it occupies all the attention. it is very risky for the chancellor because her approach overall -- find overall support, not even in her own party. there is the bavarian branch of her party, the csu which is in strong opposition to what she is saying. they want upper limits on immigration. dr. sinn, i am interested
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in the german generational divide on these debates, not just in cologne but in general. your take on the generational divide across all of germany right now, how sharp is it? hans-werner: the generational divide, the older people are very afraid of these happenings which have been reported. cologne, hamburg, other cities, and it seems that the involvement of recent refugees has been substantial in these cases, so there is a direct link to miss merkel's immigration policy. in the moment, people can come to germany and seek asylum and then they are let in without any further control.
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i have a problem. francine: can you not hear us? we may have to continue this interview later on because hans-werner sinn is having some problems hearing us. he will talk about policy but the refugee crisis. september,nto october saying europe was much better going into the summer. ,e were talking about grexit but we look at 2016, we have a new opposition leader in greece. tom: it is about the domestic politics. if we can go back to dr. sinn, how threatened is the chancellor merkel right now? how threatened is her chancellorship? hans-werner: i do not think it is threatened.
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the official statement is she did not even plan to go to davos in the first place. that is not any information of importance. sinn, thank you so much for joining us this morning. stephanie flanders joining us with jpmorgan. has there been any change in the scale of a migration debate in europe? stephanie: there is an uneasy parallel with a single currency because the eurozone crisis, people were made to feel worried about their economic future because of the inability to maintain a single currency in a stable way. ace -- a key part of this. olds fundamental to the idea of european project to have freeze movement of people. risk is no immediate
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market moving event ike had with the eurozone crisis. or threenext two years, this could be threatening to the whole european project. it is difficult for people to gauge because there is pretty positive actions in europe. tom: stephanie flanders with us from jpmorgan. we will talk about the future of wall street and the city of london. coming up, george magnus will join us. george magnus on the challenges of china and particularly how they relate to the united states and u.k. bloomberg "surveillance." ♪
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tom: good morning, everyone. some market stability, that is what new york is enjoying. i cannot get over the golden globes. i have no idea what they were talking about. congratulations to mr. dicaprio. summers on volatility, as francine mentioned, markets understood the gravity of the crisis well before the fed. experience suggests that the best indicator of a country's future economic prospects is the
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decisions its citizens make about keeping capital at home or exporting it abroad." he has been on fire recently. stephanie: he has, and it has been one of those moments where it has been a helpful time for him to be on fire. i think he has certainly had a continuing influence on the fed as presenting that alternative case. there are people on the board who i know listen to him very closely. the point he is making in today's article, even he seems a bit torn because most of the time he would say investors do not know what they're talking about. in this case, he is highlighting the movement and markets as a sign of something to come. what we have seen over the last few weeks is he is right on this point about the lack of insurance for the global economy. we have the global economy moving along all right, depending on developing world
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consumers who have some drivers to keep them going forward. credit is rising. we have reason to be confident but with the knowledge that there is no safety net. if it turns out that china and the problems with emerging thing -- emerging market, the deleveraging, if that turns out to be more damaging to the rest of the world, we do not have a lot of places to go. tom: we both picked it out as our morning must-read. francine: he pointed it out in brazil where the markets were right and policymakers were not. we will be joined by roland ride, talking grexit and what david cameron can do to convince angela merkel. ♪ the only way to get better is to challenge yourself,
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and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. asia from hongin kong, a stable yuan, even if the stock market gave up a little bit. i will call it monday morning
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stability. and. let's get to our first word news. broke up ance anti-immigrant protest in germany over the weekend. actionrators demanded after hundreds of sexual assaults on women were blamed on immigrants. the biggest economic region in spain is taking another step to forming a government dedicated to seceding from spain. they have elected a new pro-independence president. the standoff at a oregon wildlife refuge is under its second week. a group of armed protesters say they will not leave until there was a plan to transfer control of federal land to locals.
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state police will hand out water bottles in michigan city where people cannot drink from the tap. let from old pipes contaminated the system months ago. tests showed elevated lead levels in some of the children. the u.s. wants to extradite the world's most wanted drug lord from mexico. el chapo was arrested following a shoot out on friday. last july, he escaped from prison a second time. arrest, seanhe payton -- global news 24 hours a day. as soon as the new tom saidnews broke,
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when we have that on surveillance? tom: i thought twitter did a great job on this. -- a of the next comedian lot of the mexican media came out and -- every single candidate on the sunday show was asked and that of them had an answer, they did not go there they just condemned it without making too much of a deal. francine: he may have been the link that led us to el chapo. now to discuss the implications of -- we heard over the weekend that -- chairman of business in europe is with us and also stephanie flanders, jpmorgan asset management.
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roland, when you look at the debates and we haven't talking -- t what exactly areuary is the month we being counted, will he have time to negotiate something substantial? roland: i think he will have time to negotiate once he -- what he wants to get renegotiated. to get the referendum as soon as possible, i make it is a very sensible time to have it done. he will get some major changes, the really key one he is having difficulty with, and a lot of officials will tell you this privately, is benefits. there will be some sort of compromise, but other things he will get in terms of reforming or making it more competitive, which will be good, not just for britain, but for europe, will definitely happen. francine: will he get enough to
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make sure that the people of his country vote to stay in the eu? and thei'm confident candidates are not complacent, but they are confident. john redwood made that absolutely clear, so some won't, but the majority of people, they will say that this process of reform is something that is a reversible, unstoppable and there will be another moment which is now, that there will be constant reform. the european union needs to reform, like any institution. is thesehe distinction as an movement of bodies across europe and the u.k., except for that issue, what happens the next day if written exits? exits?ritain this question gets the
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nub of the problem for the outers because they failed to alight on a clear plan for what it looks like outside. until they can do that, it is no wonder that a majority of people say is it worth the risk? for absolute know sure, but many businesses have made it clear they don't like the idea of that risk, the potential confusion and chaos, and there is a potential. almost everybody who wants out says we should come back into the single market. eu andwe come out of the back into the market on the same terms or perhaps better? there is no precedent for that happening. somehow, we have to come back in, but not on the same terms. wencine: one of the things have been looking at is due banks have to do individual
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contracts again, who would lose the most? is a currency or the businesses? stephanie: london as a financial center would have to work out how it's going to respond. the issue for those who are campaigning to leave is they cannot paint a credible picture of life after the eu, which does not seem to have all the downsides, even more downsides. bureaucracy that is associated with the single market is part of what people like. the idea that you could be in the single market without that bureaucracy seems very odd. the fact that we are talking about the summer tells you about the impact of the migrant crisis. if we talked about this six months ago, we would've said september. this one time were the poles
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have crossed in favor has been after the migrant crisis and really hit the headlines with people washing up on the shore. as long as the government is unwilling to take on that migrant issue, they are going to look like they are rushing into this in order to prevent a bad outcome. francine: one of the things this has an impact on is policy because the governor cannot be seen to do anything around the time of referendum, whether he hikes rates or not. i guess it is crucial we have that referendum sooner rather than later. there is a strong expectation that something will happen in early summer or autumn. it seems clear that it would push them into more they wait and see mode, rather than acting. clear: he was also very
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about the implications of coming out, that it could be very damaging to britain. francine: you would expect the campaign to stay to win the day because on that side, you have the president of america, china, and the governor of the bank of england. roland: and what a mere prudent for the outers -- and vladimir putin for the outers. [laughter] tom: thank you for joining us. us. clem is with bank of america just lower their terminal value forecast. ♪
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tom: good morning. -- securities are catching up with oil, bank of america with a terrific commodities team, bring down their terminal call, well under $50. everybody extrapolating from it. if i was to teach a course, this would be a chart to use. this is beyond elegant. it does not get much prettier than that chart, the way it is nestled up against that resistance line. the green box is anybody's guess the met of where we are supposed anybody's guess as to
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where we are supposed to go. on wall street, roland rudd with his is this for new europe and stephanie flanders with jp morgan. let's talk about the city. bustling thanre it was, but what is the critical mass you see in the city right now? stephanie: in terms of confidence, people feel that things are moving along all they are certainly attracted a critical mass of theviduals and talents and transport over those things are attracting people to london. i would say it is not just the financial sector, the parts of -- thenomy is not just internet october nervous, a
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scottish engineering firm that was moving to london -- those kinds of things. tom: what is the alternative to london in europe? , ii'm worried about brexit don't see the second-best alternative on the continent. that is true and one cannot be complacent because things do shift and change, usually faster than one inks. -- one thinks. you come out and immediately get banks worrying about how they will survive in the city if they will be headquartered here without the passports they have under the eu, so they would be thinking about moving their staff and headquarters. you have the same thing about a lot of companies that come to europe, about half of them, decide to relocate their european headquarters in london, most of them do because it is a gateway into the eu and london
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is nicer than the other capitals. they. would have to think about that. it would not happen overnight, but it would definitely diminish london's position. why would we want to threaten that when london is booming? francine: are they actually cutting investments back as we speak? is a 15% chance the country leaves the eu, but there is always that what if. roland: i think about 35% at the moment, which is far too large. francine: are they cutting back? roland: i don't think they are cutting back now, but companies that are thinking about coming to london are holding back. tom: have you seen any think tank work saying that this will happen? because we are in an
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environment where investments are hard to pick up those kinds of longer-term trends -- you have to do it partly on anecdotal evidence. important it is that we can make the case for the city within the eurozone in the context of more integrated europe, the there is an understandable fear of -- that there is going to start to be a cozy club where decisions are made in the eurozone that next london. -- that affects london. tom: i happen to think the outs are going to remain out, most of those who are out will remain out. it is a really important point most people aren't fixated on that, migrants and benefits, this area is going to be key. stephanie: being tied to the eu
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is how you continue to make that case. if you leave, we know the city is not going to get a good deal in europe. francine: sometimes when you're an outsider is we have not seen big businesses coming out in favor, so we were talking about the latest case from the politicians, where is big business right now? roland: you've had some large business leaders like the therean of pa systems and has been a succession of ones who have laid out very clearly why we should stay in. reluctancesomewhat from those who got accused by the messages being put out by number 10, should they shut up until we -- until the renegotiation takes place? should they speak out? a lot of this wants to be nice to the government. do you have debates as you
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get to the summer vote? stephanie: not like the u.s. does. tom: the prime minister will lead it. that is what interesting and we know, you have two out campaigns who barely speak to each other. you have a great division within u.k. and -- tom: we will continue on this debate, we are honored by our guests. deutsche bank and howard daisy will join us -- howard davies will join us. joint us -- they with us ♪ -- stay with us. ♪
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francine: welcome back, we are getting ready for data loss, but we get straight to the business flash.
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china does not appear to be -- this was bank is betting that now is as good a time as any to ramp up operations. search your armani told us the bank will double its -- in china over five years. an activist investor is -- has that letters to macy's saying even selling a small part of the property would send the stock price higher. the new star wars films have gained $53 million in its opening week in china. china accounts for more than a third of the global box office. analysts predict china will be the largest movie market in the world by next year. , talked about star
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wars, but have you seen it yet -- i know that francine had talked about star wars, but have you seen it yet, tom? tom: not yet. stephanie: we talked about copper in the past and now we know there is an oversupply, let's look at star wars tickets as a benchmark for the chinese economy. vonnie: that is a great idea. foreign minister is in the new york times, a pretty graphic editorial. i will quote when the lesser graphic paragraphs. the president and i have privatelypublicly and our readiness to engage in dialogue.
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this has fallen on deaf ears in saudi arabia. even a paragraph is pretty on point. let's go to our guests in our london studio. roland, how worried are you about instability in the middle east in 2016 as opposed to other years? is a huge where he and this particular stat with saudi arabia and iran is one of the worst we have seen in recent memory. everything that has been done to try to cool it down is really crucial because it is the last thing we want to see and i think britain has to stay engaged with saudi arabia. it is silly to chase short-term press headlines. we have a whole issue on the prison reform we were involved with and there were some bad headlines and stuff we did not like, we immediately said we were pulling back out. we should have stayed there and
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engaging. at the same time, with iran coming in from the cold over the nuclear deal, the west uses that influence, as well. there are other things at play, an oversupply of oil, but it teams the market has lost the geopolitical temperature. we are all weighing out the geopolitical headlines moving what the markets elements are, and it's often hard in the middle east to quiet the massive supplies of oil because the markets themselves occupy such a tiny share of the global markets. investors are starting to be precious about the saudi regime because one of the lessons of the last few years is that regimes have been -- that have been around for a long time can fall down very quickly
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without people even on the ground. they are trying to manage a difficult process of reform within the government. preparation for a lawyer -- lower oil income future. tom: a look at the work last week and there is real concern about saudi arabia and the royal family. this weekend, there was that shift in the press for there is a real focus on what is this younger generation doing? it was a very subtle shift. who are they and one of a doing -- and what are they doing? no one foresaw how quickly and how low it would fall last year. it goes to say that no one is
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going to see how quickly or how high it can rise, again. we should not lose sight of that because we are getting mesmerized that we will be in this low oil prices environment forever. the nervousness is that we do have some confidence in the fundamentals of consumption, yet we are having to source -- sort of reassure ourselves. tom: we have to leave it there. thank you so much. coming up, george magness, stay with us. we live in a pick and choose world.
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it shakes global finance to its foundation. volatility, george magnus on global confidence. good morning everyone, this is bloomberg sailor -- bloomberg surveillance. wonderful to be here. -- across the pond and the brexit. with the guests we have lined up, the linkages here of markets and international relations i think is a big deal. francine: and commodities and, of course, china. tom: we have the first word
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news. diplomats from foreign nations are in talks aiming to bring peace to afghanistan. the country's warring faction is not at the table. the meeting includes reps from the u.s., china and pakistan. representatives from the taliban were not invited. they said they would negotiate only with the u.s.. baltimoreof a second police officer begins in the freddie gray case. it ended -- the first trial ended last month with a hung jury. this officer is charged with second-degree murder. state police will hand out water bottles door-to-door in the michigan city were people cannot drink from the tap. they were all -- already disturbing water in went -- flint. the fame of a music legend will
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live on. ♪ david bowie is dead after battling cancer for a year and a half. he transcended rock 'n roll during a five decade career. his latest album was released just last friday. global news, 24 hours a day. had an off-broadway show running and continuing to run. tom: he did everything. vonnie: he was a renaissance man. each album was a different john raqqa completely -- was a different genre completely. he also had two audiences,
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a distinct u.k. success and a distinct u.s. success. let's go to our data check. we look at equities, bonds, risk, we have to bounce off of a horrific friday. oil,oing to go right to $32.56, oil. second screen, if you would, the vicks elevated off the friday close, not 23, but 27, that is getting up there. copper under 200 under the chicago measurement. andco at an earlier print remember he did not do that much
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. francine: we have seen a little bit of volatility in china. . i want to show you rand, this led to a slump in emerging-market currencies. this is china's effort to stabilize the yuan. you are dead on to focus on south africa among the many other emerging markets, because you do not know where that is coming from. francine: retail investors getting out of that market. tom: does everybody like how we are color-coordinated? francine and i are so tight with the red thing going. we have a great number of guests for you, this week. we begin strong with george magnus. we are thrilled to bring you oswald clint. he writes highly acute analysis
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of hydrocarbons and we are thrilled to have both with us, this morning. i will be rude and go to oswald clint. right is oil go -- where does oil go? are you rationalizing $20 a barrel? oswald: we are not going that low. you can analyze the cash cost of the company. you get a cash cost number of $40, that is a number and below that, people start turning off the lights and businesses don't operate. i can probably see about 50 companies that are under serious to rest and pressure. this is not a sustainable oil price. tom: i brought a george magnus
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chart with me, an approximation. this is saudi light going back many years, adjusted for inflation and i put in some goofy math to adjust for the rising income. with the collapse of opec and 86 and the price now below the nixon years, it is stunning where we are, given the wealth of the world. how will the oil economy adapt to this shocking low-price? george: what we are seeing at the moment is interesting. normally, we regard this as being something we should benefit from. you have oil producers, you have oil consumers. there are more consuming countries than producing, so generally speaking, this scale of collapse would normally be -- there are many
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reasons i would up -- i would highlight to. one is that our focus is on the loser is rather than the winners. braziln countries like and now saudi arabia and other hydrocarbon producers. francine: this is helping china, right? oil could look much worse. george: the matter of fact on china is little bit in the wash on the moment because lower prices are being offset by higher oil import volumes because they are building inventory. for countries like india, this is like christmas, a real boon for countries that are heavy oil importers. you were talking about how some companies would have to close shop. what is the probability of an oil shock? can we not the oil back at a
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hundred? that is the scenario we are looking at. oil demand was double what we thought it would be, last year. at the same time, we are delaying. tom: i love your beautiful front page of your research report. -- where is the supply responsiveness? nobody sees it. oswald: you see it in countries like mexico, colombia, kazakhstan. you see china slowing, but you see the u.s. is strong, norway and u.k. is strong. there was a handful of big countries that are still up from development. --: them in the currency they amend the currency.
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war,e in a currency adjusting to this commodity collapse? producersen oil experience depreciation because the revenues are drying up and they have to go out and borrow not regard this as something that is an active ingredient in an aggressive currency depreciation. it is a thin line between currency adjustment and a currency war. there was the story about all -- about a lot of the japanese -- nothing to buy if you are a currency that is linked to commodities. george: a lot of the focus
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really is on the losers and not the winners. continue as long as oil prices are down or failed to do what you said. oft could bring a little bit stability, but there are other things going on which are aggravating this fear that we have about competitive depreciation. ahead, have a full hour george magnus as well as audibled clint. clint.is well -- oswald we have wonderful guests to provide your perspective only on bloomberg surveillance. ♪
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tom: good morning. us, it is very cold. way below zero in switzerland. clouds in london. let's go to the business flash. the first time, volkswagen's chief will tell u.s. regulators how the company plans to fix if diesel powered cars. the ceo will meet with the epa. regulators want to know how bw will make its cars meet u.s. solution standards -- pollution standards. is --ent obama says he the industry was in danger of collapse when obama took office
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in 2009. record sales were reported last year. -- the president says he would do it again. oil couldnley says fall less than $20 a barrel. 5%.he dollar rises near $33.ing at much.ne: thank you so -- joining us now to discuss all of this in hong -- we are in the second week of the year and the second week where we are seeing a lot of volatility and some extreme market moves. is this the getting of what's the common next couple of months
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-- the beginning of what's coming in the next couple of months? >> we have some top-tier economic data coming up over the come of dead -- cap -- coming days which could change the narrative a little bit. last year, the economy was stabilizing and we were seeing some steady demand with oil prices doing ok. this week, we will have new data if therell get some -- was a sign of the economy is holding up this by what's happening in the market, -- for right now, it is really just on the china story. francine: we are all worried about a possible bubble. we had the news today as country leaders try to restore confidence that they are opening a new office to coordinate finance. how significant is that? is one of the most
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important issues facing china's policymakers right now. rushing to get their money out of the country and that ways on sentiment and prices. at the same time, it forces the central bank to cut interest rates. francine: thank you so much. we are still joined by oswald clint and george magnus. how concerned are you about this bubble in stocks extending to get where the real worry is -- to get -- debt, where the real worry is? many all of the financial turbulence going on in the stock market, and more importantly in the currency, and the offshore currencies, cnh and
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overnight interest rates kind of jacked up to around 13%. it kind of stabilize the currency market for the moment, but admits this turbulence, there lurks a credit crisis. a lot of us were equivocal for a little while. maybe they were going to try to plant things down and they took action against local government because thehe worst big conference that the government took -- held last december where they would go for growth, reforms got really short scripted. suggest -- this is a profound change, george has been doing this for many years. you are writing the chapter after the crisis, catharsis or chaos, mathematically defines a
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totalitarian regime and whatever capitalism, they can't do catharsis. they don't have a market structures to identify price to get to a responsible catharsis. you have to go the other way. george: that is a very profound comment. tom: it is only one of two. george: a lot of people get very excited about reform, but the stalled anda has be, incremental reform does not substitute for changes to the way in which your institutions function in the way in which your economy can respond to those changes. in both of these respects, i think things are looking much bleaker for china, going forward. have --: we policymakers still have a handle
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on the situation, which is better than nothing. oswald: what is important for china is gasoline and diesel and storage. diesel is a weak industry, manufacturing must be week as a consequence. car sales every month is caring to growth -- 15% sales every month is leading to growth. tom: the idea of capital intensity and oswald, i know you can see this but that rollover in china intensity and demand, but they will still move cars and still have demand. oswald: they're consuming 10 million barrels of oil a day and producing for -- producing 4 million. they will still have to import. thiswe will continue conversation through the hour. coming up, an important
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individual undemocratic politics. william daley. stay with us. ♪
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francine: welcome back, we're getting some breaking news. you are seeing pictures of the city of london. saying and 35% chance that the you cable exit the eu but he also believes that
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the eu will strike a bargain with the u.k.. ing, is that the poll right now? i think it has gone up a little of it because of the tension. tom: there is a vote in the summer. francine: they will try to , then aate by february possible vote in the summer. tom: prime minister cameron said the first week of july would be perfect, we can all come over and do a brexit week. it is time for my morning must read and it is by george magnus.
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we were talking a little bit about china before the break, but when you look at the reserves and the fact that there is a very big chance that we will see further declines, what does that point us to? george: this is going to become more and more sensitive, this year. week, we had an announcement that china's foreign exchangers fell by about $410 billion. china runs a surplus on its payments plus its direct investment of about $650 billion. they lost $500 billion of reserve, that means they must of had capital outflows close to $1 trillion. some of it is because of poor investment return, so that is because chinese residents want
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to get the money out of china and so on and so forth. the trouble is the banks and the swear could come to a head -- this is where it could come to a head. if the banks outflows and they run into problems funding ongoing loans. tom: that is where the shock could be. george: exactly. tom: we will come back and talk to george magnus and oswald clint. we are still running you david goldman. -- bringing you david goldman. bloomberg surveillance, stay with us. ♪
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francine: welcome back. live pictures from hong kong. it seems like it is nice in hong kong. china.go deep into
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at the mandarin hotel, center square. deep into china. francine: here is vonnie quinn in new york. vonnie: german police broke up an anti-immigrant protest over the weekend in cologne. demonstrators demanded action after hundreds of sexual assaults on women blamed on immigrants. angela merkel says she will try to make it easier to expel immigrants who commit crimes. a tornado leaves some florida residents with a daunting cleanup. a twister hits the west coast city of cape coral with 135 mile-per-hour wind. damage to about 200 homes will reach $6 million. no one was hurt. the gunman occupying federal property in oregon sent words that they need basic supplies. they have vowed not to leave until locals are given control of federal land. authorities say it could take
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months before joaquin guzman on is sent to the u.s.. he was recaptured two days ago after a manhunt that took two months. his lawyers are filing appeals to keep him in mexico. held in the prison he escaped from last july. -- ajournalists fascinating story. marco rubio and bernie sanders both did not have very nice things to say about el chapo. francine: it has huge implications for the mexican president. applause. it is another political embarrassment. you can see there are possible security breaches are you sean penn got to this guy first. was the twitter swirl of it
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not silly but i thought it was serious and a lot of people listed all of the dead journalists and others from druglords over the years. francine: worthy of a hollywood film at some point. tom: like the golden globes last night, i could not keep up. when you want to talk hydrocarbons you talk to sanford bernstein. a legacy of analysis of oil and gas that goes back decades. oswald clint is in charge of the show in london. we have eight ways to go but i want to go to your piece on what big oil is going to do. we will talk about our ramos in a moment. -- we will talk about aramco in a moment. oswald: they're going to come out fine. they going to this with a balanced sheet that is 16% geared. tom: they are under leveraged and they always cap
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their hopes and dreams measured and low. oswald: they do not believe in 100. they do not believe in 30. they prepare for something in the middle. francine: 50 to 60? tom: you go up to $70? oswald: we are not finding enough rock and complexity has risen year after year. tom: i think of andrew mellon. low nominal gdp on to can do is combine to keep the income statement going. how do you perceive the combination of small and into the big oil's? oswald: shales have decided to bg.ct the vertical integration is happening so that makes more sense to us. you will not see the big guys coming together. francine: what was your reaction to the aramco ipl? the most -- ipo?
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the most valuable company in the world. saudi arabia to want to open up to the world? george: it would be nice to think that it was a gesture of openness. i cannot imagine it is. rathering seems to be coincidently going for its biggest economic adjustment and threat since the 1980's. tom: i think of dan yergin and his piece on royal dutch shell. this is not six guys on camels across the desert. this is a sophisticated company. it is just as much about downstream as up stream. what is aramco worth? awald: i think it is downstream refinery.
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tom: they are accountable. these forilding gasoline and diesel for the asian markets. they are healthy refineries and they want to value them. get some of the rents for those through the stock market. what are they worth? one refinery there is worth $2.2 billion. you gross up for what they have you could get to $20 billion. tom: just in the downstream. george: if you thought the salaries thought our -- the salaries thought our oil prices were $70 to $80 in the not-too-distant future -- tom: why are we doing bloomberg surveillance with george magnus -- francine: this is what it is about. magnessld you give mr. and the rest of us by hold cell? oswald: knowing them, i feel
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they want to be diversified downstream, not just selling the crudes. they want to sell the high-value products. that is been a ten-year strategy and assets have been completed. i know you said coincidental. there's another way to look at this. that this would have come regardless. francine: will this be the most oversubscribed ipo? if you are an investor, what would hold you back? oswald: like some of the other integrated -- assets in cutter next-door. andhave cheap gas locked in secure margin. a good healthy return. you can do this with a saudi refinery. appetite would behind. high.ld be you got rusher wrong.
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adamson miski got rusher wrong. i cannot remember the details. it seems easy to get russia wrong. what is the mistry of the microeconomics of oil under mr. putin? oswald: it declines very slowly. if you are on sure things ball away slowly -- things ball away slowly year after year. 70 rubles to the dollar and add more supply. tom: currency depreciation of the russian ruble inspires the george bush's and independent oil people in western siberia. julie christie taught me everything i know. a weaker ruble jump starts domestic hydrocarbon production. oswald: you still have russian companies giving quarterly results with how many meters they drilled every quarter. drill more meters, collect more oils. tom: can we just do this for six hours today? these two.
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francine: coming up on bloomberg , we will be live from the north american international auto show. ford, ford's executive. tom: the detroit auto show, how cool. ♪
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francine: check out what we are seeing on the markets. we priced the 10 year with what we were showing you earlier. treasuries declining as yields rising from the lowest in two months. crude oil, 32.56. an important story because it is linked to commodities and a lot
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of these emerging-market currencies are not having a fun time. here is vonnie quinn in new york. vonnie: activist investors report we pushing macy's to cash in on real estate holdings. the wall street journal says starbird value is selling -- is telling macy's even selling a small stake would increase stock price. china does notin appear to bother ubs. the swiss bank is betting now is as good a time as any to ramp up operations. tv the told bloomberg bank will double its staff in china. ford wants to help people get around even if they are not driving fords. the company will launch an app that will help with parking and other services. forward pass will be available to -- ford pass will be
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available to anyone, not just for buyers. this morning at 8:45 eastern, bill ford. -- alans goes back taylor of 1997. george magnus with us from ubs. a single best chart on china's for exchange reserves. this goes to the heart of the trilemma debate. there is the boom in chinese reserves. slope matters. there is the rollover and the new decline in reserves. i don't want to get hysterical about it. the big gap between the red arrow and the present reserves is maybe what should have, could have, might have been. this goes to what sullivan taylor did, the impossible trilogy.
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the newtonian mechanics of economics do not work in place like china. interesting, the leveling off of that slope. stocks around 2011 -- big cut off for china. before, we had this announcement last week about the loss in reserves in 2015. reached thatve tipping point. the big discussion is how many reserves do you actually need. tom: do you have any confidence in what the reserves are? do we really know what is in the piggy bank? george: it is opaque. we don't really know. state administration of foreign exchange does not publish full details. we do not know how may treasuries they have got. we know how many foreign
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sovereign bonds are in the piggy bank but the liquid reserves, they could disappear quickly. if there were a determined attempt to spend a lot of money to support exchange rate -- tom: david wu at bank of america merrill lynch is looking for depreciation. the morgan stanley article goes to a today. francine: trying to figure out what the widening spread between .nshore and offshore also how a lot of these policymakers see themselves. george, if you had one question to a leading china policymaker, what would it be? george: i don't want to speak for financial markets. i think one of the issues financial markets is grappling with, what is the foreign exchange strategy? there is a plausible case to say baxley what china needs is a more rust exchange rate. do the adjustment on the
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domestic economy. transfer wealth from the state sector to the private sector and allow overcapacity to shrink and so on. the people's bank of china which people think is kind of -- has kind of a calm hand, other chinaries and policies in that will to cad valuation. a lot of noise we got last august, it is kind of left hands. we do not know who is calling the shots. tom: do we know the hydrocarbons in china? do we know their oil and gas? is accountable? countable. oswald: they report quarterly productions. tom: you believe inventory? oswald: the data is party good. it is robust. francine: i think we had a story
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about nine months ago looking at big china producers. peak in demand will 2017. that is awfully close. is it something that the market did not pick up on it that would be a sign of huge worries to come. ,swald: as i mentioned earlier that is holding up the demand complex in china. diesel is very weak, gasoline strong. if you are right, that would be a serious problem. i guess you do see monthly car sales. is ways for us to monitor that. at the moment, we don't see that kind of red flag. tom: i'm going to watch the currency as well as george magnus said moving to more of a fixed exchange rate would solve a lot of macroeconomic problems. further conversation with george magnus and oswald clint later this week from london.
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sir howard davies will join us. bloomberg surveillance, all week from london. ♪
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tom: good morning. "bloomberg surveillance." francine and i are looking at emerging-market weakness. peso, 18.02. owing better but it has been ugly, ugly, ugly for emerging-market currencies. oil under 33 on west texas intermediate. david weston from bloomberg go, always good looking and handsome. what you have? david: i am blushing over here. we have china down, oil down, the remarkable -- we're joined by jim bianca to talk markets. we will talk deals. particularly media deals. koff.for cough -- aria bor american version of
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the international auto show. we will be talking with bill hosn.and carlos g tom: in the united states it is a large week for politics. the president will deliver a final state of the union address and at the same time republicans will hold a final debate before their most contentious i will caucasus. with us with the implications for the united states and particularly abroad, george magnus with ubs. oswald clint with us as well. george, i'm fascinated with a view from london on the donnybrook we are looking at daily in the united states. it is like chewing glass, isn't it? george: it is. as you know, it is not huge market focus at the moment, but it will be as we go through the year. because it is, people are very -- they rush to judgment about the candidates and the primaries
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and so on and say this guy has not got a chance. the most likely outcome. we don't know. we don't know what kind events might happen between now and november. tom: i can't see anyone within the group, republican or democrat, going to berlin and giving the speech that president obama gave a bunch of years ago. maybe moren europe into with tensions in the middle east and it is probably a lack of foreign policy from the u.s. that impacts tensions so it is important for everyone around the world who the next president is. without getting into politics, if you are angela merkel or david cameron, is or someone you would prefer in office? george: i don't know. it is difficult to segregate what i think they think. i imagine what people would like to see is continuity. doing -- itnomy is is not great but it is ok.
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anything that would compromise or get in the way of continuous growth i think would be deemed disastrous. francine: just to zoom in more in terms of the impact on u.s. markets and i don't know if you want to think about it, but would it change in president make that big a difference to stocks or would it take to change in the senate for example? people my hunch is the -- i think there is an acceptance about the political complexion of the congress, even if it is a republican congress. the presidential position is one that a lot of people will focus on. before,d or alluded to safe hands is really what people like to say. whether that is hillary clinton, if she were to be the democratic
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nominee, which kind of looks like the outcome. i think republican candidates such as they are, not a lot of people outside the united states know a lot about them. tom: sort of a mystery to it. i great chart on polarity and other nations in europe of the right and the left. part of this has been the surprise that we have not lower oilfrom prices. a more inward america. what are your u.s. analysts saying we're going to do with our cheap oil money? -- last year you might know they were up 3% year-over-year. a phenomenal number. gasoline demand was up 3%. from our perspective, the chief rise of two dollars per gallon gasoline is working. -- the cheap price of two dollars per gallon gasoline is working. francine: 10 to 15 years ago
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opec was the leader in this. that historic time between saudi and the u.s. was so strong. how can the u.s. continue to influence oil prices around the world? is that a bygone era? oswald: who would be a better candidate going forward, our big risk was republicans come in, lift export bans, more crude flows on. we are through that event. prices have gone to parity. the shale oil is starting to slow. it is slowing markedly. in order of magnitude change. "hubris" is my book of the year. do you see humility within the chinese government? do you see humility and beijing over the mess they are and? george: i see the opposite. i see a determined approach to digging in, basically.
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if you look at the politics of isna nowadays, president xi becoming more stuc -- more determined to centralize restrictions and constraints and maintain the status quo. at a time when people thought it might soften. tom: george, thank you for coming in and starting the week. oswald clint, thank you as well. got a lot more to move onto. dennis gartman joining us on bloomberg radio. stay with us. "bloomberg surveillance." ♪
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stephanie: the volatility won't pbs from doubling its that there. we hear from the ceo. if the world largest oil producer really does go public,
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its refining empire maybe the real prize. bmw is in the driver seat. we go to one of the world's biggest auto shows for a preview of the new hot models. joining us, bmws ceo for north america. ♪ david: welcome to bloomberg . stephanie: back froa big football weekend. more of a rainy weekend. jonathan ferro's is here with us -- jonathan ferro's here with us. late too late to sell, too

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