>> coming up on bloomberg best, the stories that change the week in business around the world. the fed kept a close eye on nervous markets. >> everyone can cake -- take a deep breath and stop freaking out. >> apple sees slow growth ahead. up itster shakes executive rank. aig rolls out a brand-new strategic plan, but will it get results? >> i would like to see aig regain some of the strength and statute it had. i do not see it yet. >> heavy hitters join us to talk business and politics. >> this is what he does a

country, you want to crash it. >> prediction swing for the fences. >> jeff bezos will be the richest person in the world than five or seven years. -- he week's most thrilling it is all straight ahead on bloomberg best. ♪ ,etty: hello, i am betty liu welcome to bloomberg best. a look at the biggest news and analysis from bloomberg television around the world. market volatility continues this week with investors looking everywhere for signs of stability. as we take a day to look at -- day to day look at the top headlines, the dominant scene is change. twitter shares are tanking again, closing down almost 5% after the company lost for key members of its executive

leadership team. , katiee'll had a product jacobs stanton had -- head of media. what do we know in what don't we know? at -- in addition to these departures, a board shakeup is coming. >> we know that these people have left twitter. the head of fine has left twitter, that is the fifth person this week. we know that they are adding two members to the board based on information from sources, we also know they are getting close to hiring acm. >> what should we make of the departures? >> in any transition, you see this time where -- you see this in pretty much every company. this is twitter, and lives in a public space. we have -- we have a bigger glare on them now. i don't think this is anything unusual. if it was any other company, no one would notice. >> let's get to the big changes

at aig, following pressure from carl icahn, the insurance giant is taking action. will the changes satisfy carl icahn? visiting a sense of research. what's get your reaction to what we heard today, not what carl icahn wanted but is it enough to satisfy you? >> you want to be sympathetic to management, they have been dealt difficult hands. -- it haseeing this been challenged for more than a decade now ever since hank greenberg left. ultimately, today was sort of a bunch of incremental news generally positive. we don't think they went far enough. isdamentally, the challenge this a time for bold action. there are a lot of opportunities management missed. >> let me return to the number. how feasible is it for the coming to get to that number? >> i think it is actually, we

would have double that number. that was doable with the next couple of years. what they didn't do was choose to pursue an aggressive path to simple five the firm. it would make it time sense. they were very clearly focused on defending their status. ultimately, it is an unusual position to be taken. it is regulated by the fed. the rate remains unchanged, the fed would like you to know that they are watching things. they see what you see and everyone can take a deep breath and start freaking out. -- stop freaking out. they have been saying that economic activity was expanding at a moderate pace, what they see now is labor market conditions continue to improve with the jobs this month. economic growth slowed at the end of last year. here is the key language. everyone's concerns, we are closely monitoring global

economic conditions. we are assessing them for the labor market and inflation and the balance of risk. >> do we have an idea of how much the market, the dollar movement, child -- china's problem will affect the overall balance of risk? >> i don't think we know yet. information is coming in every day. the stock market is mainly relevant to the fed for what it does to wealth and therefore for consumption. also a little bit about business investment spending. china is relevant mainly for what it does to the whole world, not so much china per se. us chinese stock market is -- is as close to a relevant as you can get. >> amazon delivered its best earnings evers. the company surprised investors who might've been hoping on more profit in the quarter. shares --

shares of $35.7 billion. these numbers are not the kind of profitability that investors might hope for at the end of the third quarter. right, if you look at the stock in the aftermarket, it looks more like ebay. the fundamentals are much different. the fundamentals did not protrude -- parties the same yield that they had on that upside. in this attempt recorder, they blew the numbers out. from expectation. this december, it was at top end and i want to emphasize, the reason why they did not blow it out is that they had higher-than-expected unit growth , 26% adjusting for prime day in the september quarter. an acceleration get margins in the december quarter. >> so they made less because they sold in value? >> the incremental units that come at the very end are expensive for them to fulfill. they have to put their only just it to work.

the incremental cost of delivering that hurts them. >> this is a great quarter from amazon, not what analysts are expecting. to see thissting topsy-turvy, we will do a little bit of profit and growth, analysts were thinking once they showed a profit, they will keep going with that profit and amazon never made that promise. , japanave breaking news has announced its latest policy direction. 5-4, a very slim margin to adopt negative interest rates. .1%.have adopted a rate of they are coming up forecast for gdp for this year, one half percent -- 1.5%. they will also delay the timing of when they think they can reach this 2% inflation target. >> the negative rates is the big

thing. why have they done it? we have corporate japan sitting on lot of money. right, they're trying to mobilize the cash reserves that are sitting idle in the economy. it might be bank reserves or corporate cash reserves. the surprising thing is that they did this because a, there is a risk to be passed on to sabres at some point. japan is a graying economy, death there are still savers. you do not want to harm them. the other thing that is surprising, there are still suspicions that the boj is running into resistance buying bonds. below are deposited makes it harder for the boj to pry these bonds free from the banks who are holding these bonds and should sell them. it might make qantas eight -- quantitative easing more difficult. on aig'sl have more

restructuring later, i talked with peter hancock, i also sat down with chief executive hank greenberg. to find out what he thinks of the new plan. up next on bloomberg best, learning from earnings. lots of companies reported this week, highlights and analysis straight ahead. ♪

♪ betty: welcome back to "bloomberg best," i am betty liu. some of the biggest companies reported quarterly earnings. our wrapup begins with apple. beneath those numbers, concerns over softening demand in china. bloomberg tv asia took a deeper look. are affected by the

slowdown broadly speaking in china. >> it is a big problem. >> how big is it for apple? >> they are relying more and more on costs in developing mac in china. it is the second marcus -- second largest market for everyone. we look to china as that bit of an extra boost. havee march quarter, we the chinese in a new year. it is a time when a lot of people buy presents for themselves or a loved one or bosses. companies giveaway presence at that time of year. we know the economy is slowing down a bit. we do not want to throw around money too much a china to seem to be giving away money. there is a patriotic, nationalistic thing to buy chinese products. coming in inthat china in the last few years with people becoming very patriotic to their own goods and adding in the economic pressures in china

that we are just starting to see, china is grown very strong commitment rest the world. of -- ind it is really hard to look at this quarter and what apple is telling us and see really any positive fines for this year. if there is an upside, it is that we kind of knew it was coming. facebook crushing and we mean crushing fourth-quarter earnings as the economy continues to rake in at -- ad revenue. overall revenue was 5.8 billion dollars, up 57% year-over-year. nearly $1.6 billion and -- what surprised you most about this? >> i wouldn't say it surprised me, but facebook's executing extremely well. the trend i look at is the growth and engagement of facebook as they've shifted to mobile. in 2009, half people -- half of

the people used facebook everyday. that has gone up to 65%. 90% of people who use facebook everyday use it on their phone. >> what is their biggest challenge? what is the one thing they have to worry about? parallels toot of google in facebook. they have amazing business in facebook and they are trying to find the next huge business. google found things like android and a bunch of multibillion-dollar industry -- businesses, you can see that in facebook event -- facebook's investments. they are using the cash cow to look at ai, internet.org. oculus and virtual reality. it will be interesting to see which of those play out, which of those turn into the big business the company's -- the company hopes it will be. a -- t in time for

here to talk more about the earnings and huge plans is bc europe ceo. i have to ask you a broader question, we are living in financial tension. does that get reflected into anything that you do? does it have a meaningful impact at your company? does it bleed into what you think and do? >> everything impacts consumers. because we're winning over cash. --visas for fisa art are convenient. our numbers keep increasing. >> moving towards a cash society what it means for monetary policy, sweden a good example of monetary policy that is far along the road. who else is close? nordics are almost cashless societies.

that the u.k. is getting there. growth was really amazing. one in every seven transactions was done face-to-face dish for visa it was one in 25. there is a revolution and things are going on. a win for alibaba this morning, earnings reported a 32% increase in sales and that income more than doubled. let's bring in bloomberg news contributing editor paul could draw ski. >> the alibaba numbers in general, this is an exceeding -- and it ist comparable a very loose comparable is the mix of paypal and amazon. you have a merchandising business, a cloud servicing business and a payment business.

merchandising side of the business came in slightly ahead of expectation, payments did considerably better and the cloud service side of the business, which is quite small was up more than 100%. slight --, it was a fairly positive across the board in a very difficult company to pull together in value given the moving parts. -- you want to0 weigh in? beginir strategy seems to us your money, but we don't know what to do with it. to come out of the gate with this huge ipo and turnaround and say oh, the market is up, we want to buy back shares shows confusion of what the company wants despite of the success that they have had. hollywood seemto furtive rather than thoughtful. i think it will leave the

investing community a little bit concerned and confused about what this company wants to be when it grows up. >> samsung shares have slipped after missing earnings for the fourth quarter because of growing demand for high smartphones. the income came at $2.7 billion. heidi here to go throw the numbers. we heard this from apple, now from samsung. >> i don't think anyone is surprised. none of this is particularly optimistic. fourth-quarter net product -- net profit down. that --lion under shut under shock that expectation. unsurprisingly driven by the mobile division. that saw an incredible decline. 31 to -- percent in operating profit. so not only are they not selling enough of their own high-end models. ,ll of this is trickling down

they have the benefit of -- the low-end china manufacturing story continuing to lose market share to the likes of molly. themsts have criticized for having too broad of a product range. no focus on the high-end or low-end. there is too much going on. they are not winning on either end. ♪

♪ betty: you are watching "bloomberg best," i am betty liu. dealer network. conduct initial public offering of its mortgage insured's unit and cut costs while returning

$25 billion to shareholders in the next two years. will this approach stave off interference from carl icahn? i asked peter hancock about the plan. out this morning is what we are going to do over the next two years to make this company more focused, more profitable's and return 25 billion dollars. that is to all of our shareholders, policyholders, all of our regulators and stakeholders. i'm sure we will not satisfy all of them, but we need to deliver a sustainable franchise if we are going to make the right decisions long-term versus short term. >> why not break up the company? is a much more focused company than it was before the financial crisis and we're focused it down to what can deliver value to our clients. our business is absorbing the risks of our clients and managing them.

to manage those risks, we need to use diversification. diversification is critical and if you were to break up the company, you would lose between five and $10 billion of divers occasion benefit at the minimum. that is in the eye of agencies. >> it is the tax asset? >> this is simply risk diversification. this has uncertainties, balanced by the -- from a tax perspective, that is further reason why splitting the company would be very expensive. 1.3 billione dollars per year in foreign tax credits if we split. it is an annual cost that we dust incur and if that cost to us is about a 10th of us. the tax benefit is roughly 10 times the cost.

that is another reason that the diversification issue is a much greater issue. >> carl icahn and others will say that that diversification hasn't worked as a return on equity lagging behind your peers. how does his new design that you unveil going to bring you back to double-digit returns on equity? >> what we have done in this disclosure is help people understand our return on equity by dividing it between operating businesses and the legacy businesses. more than a quarter of the company's capital is dedicated to legacy activities. things that accumulated over deck -- decades. either through sale or just gradual runoff. that has an rog between three and 5%. by breaking out the operating business, there rog has present a very competitive. hours after speaking with

hancock at the new york stock exchange, i sat in this very built with the man who aig, hank greenberg. i asked what he thought about the direction the company is taking. betty: what did you think of the plan? aboutgree with peter breaking it up into three companies. i think that is a mistake. say it is too big to manage, it is a fraction of what aig was. betty: it is smaller than the company you ran. >> maybe by half. betty: so the size is not the problem. >> it shouldn't be the problem. it sold off some of the best assets, aia. deep in the foreign field as it used to be. we were in 137 countries.

not just there, but doing business and growing in these countries. betty: but they are underperforming still? particularly against their peers. do you think the plan today went far enough? not how farpoint point only, it is a question of how they will implement it and whether or not they can execute it. all of that remains to be seen. betty: some of the critics have said that you should separate for instance, separate out the life and the pnc. part of that has to do with the systemic important designation on aig. why not get rid of that the way metlife did? >> it's a different company. metlife is a different company. i think that is a mistake. both classl, having of business gives you a better balance, one supports the other when the other is a little soft. betty: that is what hancock

said, too. >> well, it is true. if you are running your business well. in any event, it seems to me that aig should be contesting the designation. they are half the side that they were. a, why are they being held to size that they are no longer at? betty: is peter the right person for aig? prove that hee to is. until he does, there is a? . betty: it sounds to me like you are doubtful. he does it. i would like to see aig regain some of the strength and statute it had. i do not see it yet. betty: have you talked to carl icahn at all? >> no. betty: and you don't agree with what he outline for the company? >> it does not make any sense.

as a manager of the company, this makes no sense. betty: would you ever have any interest in coming back to aig? >> no. i'm busy doing what i'm doing. building a company that is going quite well. building star companies in the insurance field. continue to cover this aig tsonga on bloomberg tv. here are some other business stories that caught our attention around the world this week. >> this is a big day for xerox. the company beat fourth-quarter product forecasts and is splitting into two different companies. one will manage its hardware operations and another that will handle its services business. what brought you to this stage? >> what made you decide this was the best decision? to what extent was it outside factors and to what extent did mr. icon play? >> it is a big decision for our company and it is a decision

driven from analysis of what's happening in the market, around the world, what customers, investors and quite frankly our employees are actually driven by. what has been reported is that this was driven by mr. icon. interestingly enough, it was not. the board did its analysis and came to its conclusion without talking to icon. he is a large shoulder debt holder of our shares. he agreed with the outcome that we reach. on a go forward basis, he will be involved from a perspective when the company splits into two, he will have some governance input into the services business. he will not being with the document technology business or current xerox business. as i said, i am pleased the fact that we came out in a place that is strong for the business and happen to align with carl icahn as well. >> saudi arabia is considering an ipo of the world's largest

oil business. they've ruled out selling out there of reserves. a little bit of news coming to this morning on this story. what is the latest? >> our a couple of interesting things. at the same time saudi arabia will not cut production. stampuld be selling off a state -- selling off a stake in .he oil industry the other would be selling a stake in the parent company. both those options delon the table. he did throw a little bone to international investors saying if there is an ipo, they are looking at listing some of those shares outside. >> the corporate story here,

shareholders rubberstamping the fiji taker. the question simmering in the it paid toois has much given the 50% slump in the price since the deal was announced last april? >> if oil prices remain with a -- where they are today, shell is going to have to work very hard to make this acquisition function. in all probability, oil prices won't stay where they are. they go down in the short term. in the immediate term, we go high.l prices to it is a long-term deal. things change over to long-term. if we take a long-term view, and shell is taking a long-term view, they will get this to work. it may be harder in the short-term.

betty: there is another merger taking a well-known american company to ireland to lower its tax bill. the walkie based -- milwaukee-based johnson controls is combining with tyco in a multibillion-dollar deal. what this means for both of the companies and also what it means politically. let's bring in joe lovington. why does this make sense? >> it gives johnson control come to sell more. protection, moderate thing, they can add that to their bronze -- broadened their portfolio. from a financial standpoint, there is anemic growth, maybe 1% or 2%. m&a remains red-hot because you can take out cost savings and build growth through cost savings over the next couple of years. those two items combined with the tax savings out of the inversion of the three main

drivers of today's announcement. betty: ford will shut down its operations in japan. >> is about market share? is it about failing to gain sales in indonesia? >> for ford, that contributes to this decision. for last year, and japan sold less than 5000 cars. they did roughly the same amount of sales in indonesia. in indonesia, you have a situation where the market is dominated by the japanese players. ford never put a ton of investment into that market in terms of producing locally. which has some impact. in japan, it is really a matter of struggling to gain market share. a market that is expected to be in decline going for it. the writing was on the wall for this move report. ♪

betty: welcome back to "bloomberg best." i'm betty liu. our review of the week's most interesting conversations start with guy johnson. the interview with the finance minister of greece. >> greece is continuing to sink. we miss this chance collectively. creditors, lenders come a the european union, we miss this great opportunity that we had to stabilize this and take it off the headlines so you don't have a problem with greece again. >> you are giving it to fix greece? >> god and his angels could not fix greece.

>> god and his angels are not as fairly in charge. >> even if the angels were in charge, given the constraints that let's be practical here. can a broken economy like greece the amended by pushing every good and service? can we possibly fathom recovery when businesses, small, medium, and large, were forced in the last couple of months to prepay 100% other tax for 2016 in 2015. that's what you do to a country if you want to crash it. it can expected to recover. betty: i want to read one excerpt where you discussed the direction whether we can go up or down here.

you say, the direction involves restoration of high inclusive growth. the other road is one of even lower growth, persistently high unemployment. there is equal probability of these two very different outcomes. i read all that and i say it is , only a chance for either/or? >> i would love to say that it would be this or that. there isn't enough evidence right now. the key issue for policymakers is thatze the road we are on right now is going to end. central banks will not follow growth borrow or borrow growth from the future. either we produce that through a better policy response, or we have to give it all back. it is up to us. why is his current road ending? betty: why is it ending?

because it is used. it is run escorts -- its course? >> the predictions and underlying predictions are around us. we are seeing markets become more volatile. we are getting less growth out of the system. we are seeing political moment -- movements become more extreme. wherever you look, the tensions are there. these are typically tensions with a regime that is ending. >> it's been a good year and we wee delivered on everything promise a year ago when we raised capital. >> can you put that categorically to rest heard that you will not raise more capital? >> we will not raise more capital. this was published by the eba and we gave out a press release

before christmas where it is 280 basis points. that is 60 million euros. in september, we committed to be about 11% by 2018. given the capital generation, organic capital generation after , paying dividends, after funding growth, we are comfortable that we can achieve the target of being above 11%. that puts us in a place where we would have a good management buffer against what we believe would be the minimum. >> tell us as you look at the democratic race, what you see. >> i think i was going to be very close. i think that my suspicion is expectationsanders have probably risen. i think hillary clinton will be strong and on a uncounted spirit i think she will be strong

throughout the state. i think bernie sanders has run a great campaign and has outside strength. what really matters is march 15 is probably separation tuesday. i think bernie sanders would have to win a lot of states up until that point. you have four, ohio, north carolina, it is amazing the big states that are happening that day. it is hard to see a scenario where hillary clinton, even if she stumbles, does not secure a nomination with strength. >> you need investors to believe in your company, in order for you- >> you know what, investors will believe in your company when the trailing fax -- and they have to trail for a while. whatever reason, you get crump. >> crumped?

the new word.s trump and crumbs together. facts will tell. >> unless your amazon and investors believe in you. >> the facts at amazon are astounding. meaning, from the various first and of the day, what amazon jeff bezos has said, is we're going to build infrastructure to serve customers. we don't care about anything else. so it is an endless. of investment. i will make you a prediction. jeff bezos will be the richest person in the world within, i don't know, certainly within 5, 7 years. betty: coming up on "bloomberg best,"serious subject. -- serious talk on a serious

subject. could turmoil in the markets be a sign of an upcoming recession? ♪

betty: you are watching "bloomberg best." i'm betty liu. good today's market volatility come tomorrow's financial crisis? this week, bloomberg television examined the question, is the u.s. economy recession bound? in a special edition of what you miss -- what you missed. >> you just heard scarlet outlined a profit recession scenario, does it have the potential to lead to an economic recession? >> usually it is the other way around. truthfully, if you took out energy, you would not see that profit decline. energy is a big plunger here in terms of the decline side. they would tell you, production

declines, employment declines, and income declines. human beings are making more money. we have had job growth. even on the manufacturing data, the isn has dropped below 50, or reached 5014 times since 1990. 11 of those times did not become recessions. three times did. 11 beats three, almost to a four to one ratio. and in that sense, if you want to have a negative narrative, it is really easy. >> recession watchers point to weak any factoring for the downturn. today's durable goods report showing the biggest drop in 10 months. >> the weakness in manufacturing is not widely dispersed. if you look at subgroups, water

motor vehicles, appliances, only five of the subcategories are down euro beer. if you're to say manufacturing recession, you have to see and a broad-based way and if that -- that does not appear to be the case right now. >> it is that gap and services and manufacturing. it illustrates just how wide it has been. how long is this kind of cap sustainable? >> look, i think in about three quarters we will be talking about service sector slowdown manufacture recovery. this is one of those things -- >> so you meet in the middle. >> yes, recession is not recession unless it is bill into the labor market. >> if you look at all the consumer confidence measures, they all seem to be going up and he may question is how long can that last? when my date rollover? >> one of the tricks is you don't need to see it make highs to be in negative of an

expensive -- expansive economy. you do not see an economy on the precipice of recession or entering a recession. >> it is great to say that consumer supplements is measured by surveys, but actual and consumer spending. were kindetail sales of meh. are we going to see what the prospect is for actual spending? measured inles are nominal dollars. it looks much more robust. it does not look like it will take off to the moon. we were not expected to. we also don't see the kind of demand collapse that you would see in real terms on the way to a recession as we have in the past. off chinasy to write

as weakness in china, right? at what point, what is the tipping point when china intervenes with the u.n. and it has a negative feedback loop to the u.s.? i think it is related to commodities and oil. -- and inticular, particular, the question for the u.s. economy is this a high-yield problem? something that will be curtailed to a story or become mainstream or a credit problem? so far, you are seeing the credit problem being quite contained. i think if that changes, the little piece changes, their something different going on here. it is investment grade credit. that is the problem. problem -- probability of a recession? >> i would say at

40%. >> you're looking at the account deficit as the dollar has strengthened. >> the big inflection point was at the and of 2013. we had a real recovery up to that point. it was very tepid, but it was a recovery. that was a recovery in our current accounts. we actually saw huge benefits from energy because we are no longer importing much energy. certainly in a couple of years we probably won't be importing any. as a practical matter, everything else increase. it increase very substantially over the last year. we are looking at current deficit levels that are -- valent that is a big problem. >> i am not saying we will ever have a recession or can't have a recession. current data does not support the idea of a recession. there is a whole bunch of data that you normally look at that don't support it. there is fear in the markets, and as a result, any piece of

information sees a narrative. ♪

♪ betty: as we wrap up this edition of "bloomberg best," let's take a look at some of the charts that hold his tory of the week in business. >> take a look at this. and slightly outlined in pink, is the crude price. i just put the wdi in pink. the blue lines are opec's output. we heard from saudi arabia they're going to continue pumping capital into their wells are there going to continue to bring oil out of the ground. it climbs because this is the department of energy's outlook for opec. in can see where oil fell 2009, opec that their output commensurately in a have done that every time there was a real

serious drop in the price of oil. except for now. now we see brent coming down to record levels in wti. they continue to pump out more, which district -- which is interesting. that is the reason you have the big fall there i have a surprise element in this chart. that is this green line that looks like a dragon rearing its ugly head over the chart. this green line is saudi arabia's foreign-exchange reserves. there has been a lot of noise made over the kingdom is running out of money. that is hogwash. take a look at this going back 10 years, declines up, up, up. they have a little $100 million -- $100 billion in foreign exchange reserves. they can afford to do this much longer. >> betty, what is going on with european and u.s. bank stocks? that's the big question i imposing today.

because bank fear in europe is the worst performing. this is a year to date chart. any number minus below 100 of course is a negative figure. the stock 600 index -- green line, is down by weight for it -- wait for it -- 15%. is 183 million euros. only one bank stock has risen this year, betty. i would give so much money if you guess which one. i can't waste time, betty. commercial bankers of the czech republic. european investment banks are being pummeled, betty. tougher financial regulations and rising costs tied to compliance. the big decline has been italian lenders.

for the record, european banks are valued nine times estimated earnings, which is the lowest since the summer. this index has fallen by 11%. the second worst movie -- monthly performance since 1990. last month, investors were bullish on u.s. financials. what has changed? low -- slow economic growth concerns. fear of rate hike concerns. analysts are advising down there forecast from this industry. by the way, u.s. financials are valued at 12.8 times earnings. the big question is, is it time to buy? betty: that is it for "bloomberg best."

remember, you can always get businesses from around the world at bloomberg.com. -- business news from around the world at bloomberg.com. i'm a betty liu. thanks for watching bluebird television. ♪

francine: welcome to bloomberg's davos debate. i am francine lacqua. where is the chinese economy headed? with the new five year plan being presented in 2016, how can the world's second-largest economy shift gears without stalling its growth engine? and what does all the market volitility tell us about the perception of china, and the task facing chinese regulators? well, we have, i am pleased to say, an a-star panel. thank you so much for coming on. jiang jianqing, chairman of the board of the industrial & commercial bank of china. chst