♪ there is no gain from saudi oil talks. commodity struggle to find a bid. your and america show good, not great, economic growth. the debate over the brexit is a here and now debate. good morning. this is bloomberg "surveillance." live from our world headquarters in new york. i am tom keene with guy johnson and caroline hyde in

for body clean. here is caroline. : unlocking the iphone ters fromhe shoo california. technical assistance will be given to recover information from the phone. tim cook writes the government wants apple to undermine decades of security. cameron has won the support of angela merkel. she told german lawmakers she will do everything possible to keep the u.k. in the eu. development in the dispute over china and the china sea. according to satellite images china diploid and advanced surface-to-air missile on one of the islands in the region. china has "limited" capability

on the island. the u.s. is making a show of force against nuclear korea in the wake of the nuclear test and rocket launch through south korean airspace. the flight demonstrated the koreanity in the peninsula. president obama is calling the battle with the senate of the supreme court a test. he requires the senate to require his nominee to replace antonin scalia. says they will not vote on a nominee while obama remains in office. global news, 24-hours a day, powered by our 2400 journalists around the world. equities, bonds, currencies, commodities, what a .losing futures advanced. your own-stasis, crude oil is fascinating.

28.95. vix, 21 point 94. two-year german yield chilling the challenges in financial europe. was 32.ude i am watching mexican peso, nowhere near nine teen, but it is the emerging-market fracture of the morning. guy johnson, what do you have? guy: look what is happening with the dollar/en. earlier on, the end was gaining ground. a classic risk on risk working earlier. that is what is happening with the yen.

futures seeing your forming stateside and european equities looking fairly firm. look at gold, the other trade at the bottom, 1202. tom: we look at natural gas a lot. go to bloomberg and look at inflation adjusted. image, thetunning low in the 1990's. this is a long-term decline in gas and supply and demand issues. we have just broken down under two dollars and are now down to a stunning low, back a good 15-years to 16-years, and gas below $2 is something to watch. making it clear that this is an oversupply issue as a we find

all sorts of new oil. we have to look at asia and china. guy: as you said yesterday was a confusing day. the credit story confused a lot of people out of china. the current story of credit going up is ahead in china but is concerned about its relationship. chief asian correspondent, enda curran, joins us out of hong kong. are the authorities dealing with the problem when it comes to credits and mpl's, or are they delaying the inevitable while allowing the banks to keep pumping out money? enda: can i say a little bit of both. on the one hand we are seeing an increase from officials, they are making it clear they want to put a floor under growth. they want a big tool kit still at their disposal to keep the .conomy going

the government will spend extra money on infrastructure. they are considering measures to the eu bank provision for bad loans to take pressure off of thing's. -- off of banks. how can they go back to deleveraging and modernizing the economy? here we are with perhaps shades of an old school similar. that is the quandary. ultimate quandary, and --be the idea, ken normal can normal healing processes work in a utilitarian system? i think by all accounts china has taken a lot of credit for developing an economy. they have lifted hundreds of millions of people out of poverty, and have done well in some areas. the problem is going forward they will come across the same road bombs every other advanced

the same roadblocks every other advanced company has -- advanced country has encountered. they are not inspiring much confidence now because of the way they handled the stock market yesterday and to the question marks over the direction. in some respects, chinese policymakers are in the doghouse. guy: that's give more on this story with our guest of the .our, erik nielsen good morning. the situation in china is unnerving a lot of people. we are up to levels that we were in the united states before 2000 and seven. -- 2007. it is making people pay attention. erik: it is a make sure of two things. policymakers are never perfect. it is worrisome that they are

accumulating in areas where the bottom already is in a sense. it will give you some growth in the shorter term. you create hope for the best. bubblesare pumping out in china. bubbles tend to burst in some -- at some point. how long before we have a major problem? priced rigorous, but not completely priced for this. erik: if you look at the , five-years from now china will grow 3%. had you get from here to there? the economy is forecasted on a smooth path, and the reality is never that. the mixture of the policy measures in china increases significantly the probability the ride will be rough getting

to where you need to be one day. tom: i go back to the old phrase "don't fight the fed." we underestimate the power of beijing. as an optimist you say don't fight beijing and they will make sound decisions, or is the economic power more diffused? -- the last point is very good in the sense that i don't think very many people really know where the power in various policymaking lives in beijing. sense with a good yellen, but in china it is unclear where the policies are coming from. chinese onight the policymaking? you don't fight a central bank if it has a good foundation, but at the same time would we do is spot wrongcan

policymaking that takes you out of the path. tom: if we say don't fight , what in china is wrong about the hard landing theory. what do the hard landers get wrong? is tough to say how you forecast a hard landing at the end of the day. the chinese are holding leverage on the system. ideally, you would want them to do fiscal easy on the consumption side. ultimately, one of the big challenges for china is to investment-let economy to a consumer-led economy. you'd want to see them move over to a situation where you ease taxes on consumption, right? you wouldre the case,

lower the probability of a hard landing. guy: we will talk more with erik nielsen from that unicredit. attention turns to tehran as venezuela tries to win support to join the oil phrase. next, the head of research from bnp paribas. ♪

♪ back and forth we go on a clumsy tuesday and wednesday. brent crude lifting 33 point 18, west texas 29.67. let's get to our bloomberg business flash. here is caroline.

caroline: the labor market is tightening in the u.k., but that isn't doing a lot for paychecks. in the fourth quarter unemployment 5.1%. earnings growth slowed to 1.9%. the near zero inflation is keeping a lid on pay hikes. adler has improved a restructuring pack for capital. it has paid for the way for -- sachs has a deal to you free oil output will not improve crude prices. the agreement between saudi arabia and russia will have little impact on the oil market. prices could drop below $20 a barrel. that is your bloomberg's newsflash. guy: thank you. let's take with oil. joining us is the head of commodity market of strategy at

the bnp paribas. erik nielsen is also still with us. iranians --ith the the arabians want to play in this discussion? why would they want to go back to a shank shinned regime? -- to a sanctions regime? : we will look at the iranians playing along with the freeze at their official secretary,to the which is higher than it is one assessed by third parties. you play along but still have room to increase market share. that is the face-saving outcome. raising production at the high watermark does not help production. guy: did those discussions change the risk-ward of oil?

you have to be aware at the margin there are discussions happening, and it becomes more difficult. harry: given how low oil prices adding risk-reward positions, already risky long-short exposure has limited rewards. the market is trying to catch short covering rallies in the meantime. we are going to stay in the high 20's or lower 30's for wti. producer for operations or declines in the u.s. shale oil patch, we could rally, and this could be limited. tom: there are number of ways to look at oil. here is a recent snapshot with a 30-unit 30-day moving average. it is an elegant chart with the .erfect case, the blue circle tell me what you are looking for

in supply dynamics. what we are for is an adjustment and u.s. oil production. credit conditions are being tighter and banks will reassess their credit lines in the spring . the price of oil is at a level that makes most investment in shale oil uneconomic. real deal in terms of supply dynamics will have to come from the u.s. nothing will come from opec or the rest of non-opec. i wanted to where go. i think i get an idea of opec, it is saudi and a bunch of children arguing what to do next in the cartel. i don't know how adjacent is non-opec. is it every nation for itself, or is there organization? harry: it is a free market. every producer produces as long

as the price is above its marginal cost. it is more complicated in the u.s. it is you have 4000 producers in texas alone. in terms of the market outside of opec we have a competitive picture. it is a dilemma, who will cut first, and if you do cut, will it benefit to neighbor? so, you don't cut. in the u.s. we have seen this in the downgrades by the credit agencies. it will be tougher from the companies in the u.s. bnp space to finance themselves and keep drilling. it will become more noticeable by the summer. they'll be the first step in rebalancing the market. guy: comment volatility? will the prompt price go? volatility in oil prices are inversely correlated. if we overflow we could have a

correction pushing volatility higher. if we look at volatility on brent we have exceeded 80%. we will remain there and we will have a little room to go higher. where do we end up? only end up $35 or $50? relativelyill be range bound. lower 30's, high 20's. maybe $40 on an average basis by the end of the year. that depends on getting the supply side adjustments in on the u.s.. .om: thank you bnp paribas of paris, harry tchilinguirian. coming up, sir martin sorrell -- we could go for two hours or three hours. can we do that?

three hours with sir martin sorrell? that would be a good idea. this is bloomberg "surveillance." good morning. ♪

♪ financial new york city is paying attention to minnesota. is the president of the minneapolis said. -- minneapolis fed. we look at two big to fail new york city. london, i am tom

keene in new york. the markets are churning, that is a good time to speak to erik nielsen of unicredit. he was in that they can and then of the crisis, saying forget about it, they will do better. the green is the regression of the good times in europe. there is banking, deutsche bank, and a bank in italy that is struggling. gdp is not all that bad in europe. why are you guys feeling miserable? erik: i wonder myself. on a serious note, i think a lot because ofimism is the politics of europe. we have the refugee crisis, and there is no clear solution. there are some countries on the onepheral of europe, but if

had a sober look at the data, the gdp numbers, the per capita gdp numbers, which is what matters for the individuals, and that europe has less skewed income distribution than in america, there are not so big reasons to be lies the federal k talking about more policy? erik: inflation is too low. mario draghi has a clear mandate, undisputed. he cannot get it there it is forecasting period. throughout the europe, they are arguing that maybe you should take it easy. unemployment is coming down and growth is pretty ok. fears deflation. i don't think there is a big risk, but he is right to keep an eye on it.

it will be difficult to get out of. guy: we see that in japan. after the break, what happens next with the brexit debate. german papers full of what is happening with migration. brexit. sees it as a summit. to phillip blond. what kind of summit is this? that is the next subject on "surveillance." ♪

tom: a nice recovery off of the crisis we had a week ago with futures up at 12 and down futures down 12 with a risk.

let's get to our first work news in london with caroline hyde. only one there is major group of fighters in the syrian civil war back to by the u.s. and turkey is attacking it. firing heavyen artillery against kurdish forces. they say that rain kurdish fighting unit is a terrorist group. allies inare the fight against the islamic state. the ukrainian president has called on the prime minister to resign. the prime minister has refused and sought a no-confidence motion in parliament. it jeopardizes millions in foreign aid. the obama administration had planned a vast cyber attack against iran if the nuclear dispute led to military conflict according to "the new york times."

aimed atit was disabling communications, air defenses, and part of the power grid. for a battle set between apple and the u.s. government. apple is refusing a federal ofer to unlock the iphone one of the shooters in the san bernardino terrorist attack. haveeo of apple says they given the fbi data in their possession, but building a backdoor would undermine security for apple customers. president obama says the american people will not elect front-runner donald trump. they realize that being a president is a serious job, not hosting a talk show. global news, 24-hours a day, powered by news bureaus around the world.

guy: we have a summit in brussels. willig question is what they talk about? the germans see at as a migration summit. the brits see it as a summit where we will get a deal that will allow cameron to campaign on an end to vote. good morning to phillip blond. a weird entrance into the council building in brussels. trying to figure out what is happening with migration for germany. the brits are trying to get a deal. europe is not talking about the brexit? what is going on? phillip: europe is facing in a substantial crisis over migration, the germans in particular with angela merkel's .ecision to open the doors what is dangerous is they think

they can squeeze britain further, and i think that is a miscalculation. the polls show that of cameron campaigns for a british accent the vote to stay in will win, but if they take his deal which has been shredded by parties in britain and shred it further, the vote for staying in will be more narrow and contested and europe will miss a golden opportunity to keep its most mostous and successful country. ployon has made a clever that the vote to stay in his a patriotic and security vote. to defend europe against russia, a russia that is dangerous, and islam, and migration.

will he be able to come toe and same we want -- and say we want to stay in and they will vote for him? of the: this -- smart money says we will vote to stay in. the online polling says we will look at a vote to go out, the telephone polling says we will vote to stay in. it is a deal around security. we need cameron to step up to the plate with visionary ideas. what we need to set up along the north african coast, places with legal rights were migrants can and learn from europe that is secure. unless we do this, estimates say 40 million people will cross the -- across the mediterranean. that level of migration will shatter europe. we need a britain to show

leadership. if cameron can do that he can position himself as the leader of europe. wow. that is -- i am digesting that and trying to figure out -- there is no sign of that, whatsoever. phillip: that is the problem. cameron risks doing a pragmatism that could fail. if he followed with his own beliefs, and i think he is right to argue for the rights of non-euro men errors and -- non-euro members and create leadership around migration, he was right where merkel was wrong, and he said we need to deal with them in their home countries. why not strengthen that with visionary proposals? their ownigrants and countries and create an outreach policy?

they are talking about walling off greece. that is a tragic failure. talks about visionary british leadership about stabilizing migrants in their home locations, we have the answer to the migrant crisis. that is the way for cameron to win. it looks like a conspiracy of mediocrity which is risky, because the british might vote for a brexit. are one of britain's great thinkers. you were talking about charter cities. it reminded me of thomas cromwell and relationships between the cities of europe and the united kingdom. in 2016, is england's debate on brexit being led by what in america we would call a

?lutocracy, a gilded age elite are the pro-cameron people removed phillip: from the people of the united kingdom? all global trends show thealization has destroyed working class in the developed world. americawhy people in are going for donald trump. if you believe the clever people about the march of the robots, middle-class jobs will go. in the developed world, enormous purityc and economic and is what we are speaking to you. the people that are winning are the reactionaries, the negatives, the withdrawal candidates. we lack visionary leadership about what we should do. the british role, and britain has always been in herself, to step up to the plate and talk about a vision of europe and

written i can go together. the problem of those that are pro-eu is that they are making a narrow argument based on fear. europe is in an axis 10 choke crisis. -- europe is in an x the essential -- existential crisis. the elite -- of the basic idea, how does cameron attach those elites to the struggle of the people of the united kingdom that want to support their prime minister? what is your to do list? phillip: for the elites to go with the basic expensive patriotism of the british people . the british people have always believed that britain has a leading in world culture

to support your the way to win of the debate is to make it patriotic. the slogan is "lead, not leave." if you can say to the british people come you have been brave in almost every century, you can be brave in the 21st century because you have the most important city. why would you give out beating europe? give up leaving europe? no one is making this argument. we have a narrow economic argument. this is a terrible failure in the making. tom: one final thought. .his is so important the people of the united kingdom have one part they want to be in be one part they want to out. state the case for confidence in london that there is no

substitute on the continent for london. london is london, go with it and exit. state that case. phillip: the case for those who want to leave is the european union is a failing institution, economic, socially, and culturally. as a result we are prevented being ourng, from entrepreneurial selves. i think that is silly here the idea that the chinese would strike a free-trade agreement with us rather than a nation of .50 million people is farcical the real idea of patriotism, and the british exit of appeals to the idea we are being held back by brussels bureaucrats, people who want to give rights to terrorists, those who want to flood the borders -- but they

key to burton's greatness in the 21st century is leading in europe. people want us to lead. is franco-german axis not that powerful. what we have is a richard reid from british global leadership. that is our -- what we have is a retreat from british global leadership. that is our great failing. looking at is not this seriously. that is a view that you talk about in europe. is that your view? they are looking at migration, saying that is the threat, not looking at the brexit in the same way? erik: i think that is right. great degree of irritation in berlin, paris, and rome that cameron is using

europe to deal with a domestic issue. there is only so much you can do. about for small things. what are they? it is almost like -- our house is burning down, why aren't you helping? erik: you said it well. the british leadership in the world has almost disappeared. where has britain been with the is fallingment that apart? where are they with the refugees, with ukraine? it is not so clear that they will lead. they want to britain in. up thishave to wrap conversation. thank you, so much. tom: very good. thank you phillip blond with respublica. dr. erikontinue with

nielsen. on bloomberg radio, you know the name from stratford with the geopolitical futures, we will talk to george freeman about syria, turkey, and russia. ♪

guy: breaking news. another downgrade to anglo american, it has been cut to announcementg the earlier. the breakup that is happening. it is an interesting story. , mr. cache kari set up overnight. people worry about the extremely

right to do it. neel kashkari finding a friend and martin wolf. the banking sector has been battered. unduly or rightly so? erik: unduly so. their israeli smoke if there is no fire. is that as martin said correctly, the financial institutions are complex animals . we have been burdened by regulation to the natural chains we have to move through. then we have a flat yield curve. for a bank, ultimately, you live off of maturity transformation. been flat for five years or six years, and it is difficult to make money. guy: the possibility of further negative rates down is a possibility.

we are bashing the banks at the same time we need them to do better work. erik: it is not clear that what we have can live through the entire cycle up and down. when the problem comes there was a reference of too big to fail, but the german finance minister pronounces on deutsche bank. why do you think he said that? because deutsche bank has 52 trillion euros and derivatives. .hey are too big it is reality. tom: erik nielsen with unicredit . coming up, on bloomberg radio and television, he has made more than a splash as the newly minted president of the fed.eapolis neel kashkari stunned with his speech. we will speak with him. ♪

guy: glencore halted the volatility of the stock was extreme. they announced a refinancing package. trying to come to grips with the

balance sheet. the stock halted at 11.2%. that is a big story in london. here is caroline hyde. japan, prime minister shinzo abe predicts the central bank could increase economic stimulus next month. the bank of japan needs to change the countries deflationary mindset. jpmorgan said there is an increasing chance of more stimulus. in 50 years atime scheduled airline flight will be between the u.s. and cuba. as many as 110 flights will be allowed a day. currently, all flights between the u.s. and cuba are chartered. mercedes has given a three-year contract extension. it comes after the company reported record profits.

he has run daimler since 2006. the contract would run out by the end of the year. tom: celebrating his 40th .nniversary at one company i don't know that any other executive that can say that. there are new people coming in in research and development, but when someone thinks about mercedes versus bmw, it is see 43that this guy will years of a career there. or will we watch today or the next few days? important fed minutes. michael mckee is totally fired up over the january minutes. all combat watching paint dry. we will look into the minutes. -- talk about watching a dry. we will look into the minutes.

the housing starts. you wonder where that will be with the left there guy johnson is looking at european union states which will meet in brussels states. meetwill decide when to the next time. they are meeting in brussels. erik nielsen is with unicredit. always an optimist on the european economy. i don't know what textbook you fingersecon 101, but crossed is an economic worries that is central bank theory called fingers crossed. how much is janet yellen, mario draghi, kuroda, and the rest, how much do they have their fingers crossed on economic growth? erik: to a large extent.

less so than two months or three months ago. my impression from talking to people around frankfurt is that in october or november there was a greater degree of uncertainty about emerging markets then there is today. it looks like the u.s. is doing good, very well on retail numbers. in our of space is ok part of the world. the central europe group 3.5% out of last year. that is not so bad. tom: where are we in terms of the market bedding what the central banks will do. is the market in front or behind the debate? erik: i think the market got ahead of itself in terms of thinking that we could make or reverse the interest rate course in the u.s. or u.k. i think that is an extremely low probability.

it is a good probability that these terrible six weeks were a blip of a type and things will stabilize. they will raise hikes on the to 4.of they will not get i think the chances are that in a month or two we can think about another one or two hikes. has zero hikes at the moment. why are we not seeing tight labor markets fluctuating into wage growth? it is not happening. erik: i think it is because we theme.bigger underlying in a nutshell, it is your globalization story. createdll the jobs in america, it was financial

services. in the financial services we are paid less. in other services it is part-time jobs. there's a lot of stuff going on. for your time. erik nielsen from unicredit. the european equity markets are up strongly. 1.67%.o stoxx 600 the s&p up 1.65%. volatility, we from a must watch from global wall street. stay with us. ♪

. . we live in a pick and choose world.

choose, choose, choose. but at bedtime... ...why settle for this? enter sleep number and the ultimate sleep number event going on now. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore.

so your sleep goes from good to great to wow! only at a sleep number store. right now find our c2 queen mattress starting at only $599.99. know better sleep with sleep number there is no gain from russia-saudi oil talks. commodities struggle to find a

bid. last hour.in the there is agitation in a new markets, living with a new volatility. in march, april, september, and october, madness. good morning, everyone. tidjane thiathis is "bloomberg e ." this wednesday, february 17. guy johnson in london. guy, give me an update on where the eu banking crisis will post. guy: today's story -- we do not have a problem because the european bank is looking there this morning. people are worried. cas neeleard kashkari. tom: it is good you brought that up. neel kashkari will be on bloomberg today.

he stopped the financial world with his first made in speech, if you will, for the minneapolis fed. right now, our bloomberg first word news with caroline hyde. investigators will fight a judge's order. a federal judge told apple to give the fbi reasonable technical assistance to recover information from the phone. tim cook writes that the government wants the company to build a "backdoor" into the iphone, which would undermine decades of security advancements to protect apple customers. british prime minister david cameron is close to getting an overhaul in the membership in the european union. he has won support from germany's angela merkel. she will do everything possible to keep the u.k. in the eu -- keep germany in the you. -- eu.

china appears to have raised stakes in the south china seas. according to satellite images, china has employed a bit system in the region. i've looked -- it has limited defense capabilities. the u.s. is making a show of force against north korea in the wake of the rocket lunch. four u.s. fighter jets flew through airspace yesterday. it is to maintain stability in the korean peninsula. president obama calls the battle with the senate over the supreme court a matter of fair play. the president says the constitution requires the senate to consider his nominees to replace antonin scalia on the court. global news 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus around the world. i am caroline hyde.

tom: thank you, caroline. breaking news out of canada -- a earnings,ue miss on $5.5 billion canadian. whenis a big revenue miss they announced cutting 7000 jobs. we will get to our guest host in a moment on the real economy and how it fulton to the financial -- it folds into the financial. right now, let's get to a data check, equities, bonds, currency, commodity. nymex crude was up about 30, it shows what we have seen come onto the next screen if you would. 4.11,ic idea is the vix 2 not bad. brent crude $33.05. i am watching dollar-mexico as one of the emerging market

stories doing better than good this morning. guy, what do you have? now veryre risk on much. the flip you see in dollar yen, now trading higher, the yen was up significantly earlier on. the nikkei was down. stock up 1.61%. what is slightly interesting is the fade on the gold trade, which was higher a little earlier. much more positive on the session right now. tom: they're a good. guy johnson, thank you -- on the session right now. tom: very good. guy johnson, thank you. say go t boone pickens on demand. forget about demand. supply. by breaking down inflation-adjusted in today's prices well below 2.00, below where we were in 1992 as well.

one of the great themes from new york city is maybe st. john's will win a basketball game sometime this century. dean curnutt is their greatest export on volatility analysis, and he joins us right now. you were in the greek world of out for gamma -- of alpha gamma theta and all the rest of it. what do mere mortals need to know? dean: people underestimate the point of correlation. on any given day, we know what the five risk-on assets did in the five risk off assets did. it ultimately ties back to a fed and other central bank dominated risk-taking climate, which is not a healthy one. tom: we will set up the vix in this hour. bring up another way to look at volatility, and this is within foreign-exchange, cvix. it is elevated and on a long-term basis.

what does it mean when the litmus paper of a global system has such a day-to-day volatility? central-bankonous policy causes interest rate differentials to change quickly. that causes volatility in the fx market, spill back into credit markets, equity markets. again, when the central banks are so active in sponsoring risk outcomes, you create volatility, correlation. and then there are unintended consequences of risk-taking that from our perspective at mra is not a healthy climate to be in such a central-bank-directed risk-taking environment. guy: can i ask you about what is answering this up as well? the story that seems to be increasingly out there is what happened in the oil space. cushing falls, volatility in the oil markets, how is that feeding into the rest of the story? dean: we look at crude is really centric to so many other risk

outcomes. volatility acid at this point, moving sometimes 3%, 8% in a single day. think of an outcome in which crude gets cut in half. it certainly can happen. tremendous applications for credit markets. you take a significant increase in the false, you see central bankers almost robotically responded to faltering breakeven inflation's. they will probably do more policy, some of it not very welcome by the markets at this might. -- point. the other scenario in which crude could significantly rally, you have the makings of a small deal between saudis and russia. it might not be meaningful, but to the extent they are able to make crude go back up potentially in rapid fashion, that has significant implications for currencies like the ruble, currencies like the canadian dollar. the way in which the market

has priced the fed out of the game for the entirety of this year and even next year, maybe that is on the table. all of these outcomes are linked to crude, crude being so volatile, the outcomes themselves being volatile as well. guy: where is the firebreak ? if i want to take volatility out of my portfolio. dean: look at the nikkei. i would also look at the 2x leverage on the nikkei must've been up 16%, so these are big moves. take volatility out of your portfolio by resizing downward. tom: i want to make this clear -- there are different kinds of volatility, and we are not it isg mathy here, math-free wednesday. is volatility good for my investment portfolio, or is it good for my speculation right now? or do i want to get under the desk? dean: i think there is a certain

getting under the desk that you should be contemplating. it is not healthy volatility. ve feelsof move -- upmo good for one day. tom: everybody is pulling back on leverage? dean: yeah. unfortunately, the fed and other central banks have created this risk environment that products are built around stability. things like leverage etf's that reinforce back into prices and amplify it. tom: interesting. this dovetails nicely into our conversation later this morning. doing what he is done, whether hit us running for governor or working for pimco. he is now the home of the minneapolis fed. he has big shoes to fill. he had a speech yesterday that stops global banking. he will join us later today. ♪

tom: gorgeous day in new york city. everyone is focused on volatility. we are doing that this hour with dean curnutt from macro risk advisors. right now to london with our bloomberg business flash with caroline hyde. caroline: since the outlook is negative, a similar rating was released on monday. the company last three quarters of its value last year, anglo american. david einhorn cutback holdings in apple just in time. he reduced the stakes in the

fourth quarter just before apple started to slide. apple is down 8% this year. the market is becoming saturated. goldman sachs says it is a deal that will not revive crude prices. goldman forecasts that the agreement between saudi and russia will have little impact on the oil market. last week, goldman said rice could drop below $20 a barrel. guy: thank you, caroline. javier blas, rationalize this market for me. tradinghe prices higher. give me a sense of what is going on. javier: the meeting that is happening as we speak in tehran, the iranian oil minister also meeting with iraq and venezuela. you look at the markets, gives you a sense of where people are putting their bet, yesterday we had traders buying protection for march.

on the downside, they were buying puts. however, look at what they were demanding for june. prices going up to $35, even $50. guy: look at the scheme on some of the put options, the put calls, and they are huge. e volatility will continue. we are still building inventory. will be seeing huge screens and a lot of reaction to headlines. every time we see now a minister traveling somewhere, it is potentially a secret meeting going on, something that will move the market. are featuringe natural gas today, which is south, to be kind. does natural gas need oil to be lower? are they linked in any way? javier: the link is the shale revolution, which started in the natural gas market in the united states, and from there it translate -- translated into the oil market.

pushed oil has completely out of the power sector. are few power sectors fueled by oil. with macrournutt risk advisors, you mentioned earlier oil is the key volatile market right now. bring up the chart if you would. you can see the collapse we have seen, down in the $30's. is there a way to play this intelligently? dean: i think there is for look at crews, $65 volatility. -- crude, $65 volatility. translatede done is into the and locations for other asset classes, and one of them is the shorter end part of the u.s. curve. situations.e both again, crude collapses, the fed probably gets into the negative interest rate game. i think they are already ginning up their press machine to get

the public starting to think about their ability to do this. what we have seen in the eurodollar options market is the decembere call in trading. the only way that plays out is if libor is negative. you do not want to be short. the other side is very much in play, which is the market has so beaten down the expectations of fed policy not just this year but next year as well. soft patch.s a perhaps yellen is looking for the labor markets. oil so i want to sell derivatives and bring in that income and use it to play janet yellen? did i translate that ok? dean: something like that. tom: did you see that, guy? i have no clue what i am talking about. why we do cross asset, folks. dean curnutt is looking at oil as a play against central banks.

guy? guy: javier, let's do this a different way. oil stays down, and we're talking about volatility. how does that feed into the shell revolution into the states, feed that into the banking sector? javier: oil prices stay down, you start shorting every stock of u.s. regional banks. they will suffer big-time because oil prices stay down, we will have more bankruptcies in texas, oklahoma, north dakota. the small ones have been financed by local and regional banks, and those banks are taking significant provisions against potential default. that is the link you have come how you link the oil market, what saudi arabia and iran are deciding today could affect the share price of a regional bank in texas. guy: dean, what is the money calls look on regional banks? dean: banks again become making aage,

comparison to 2007, that time period, you see less leveraged. the leverage built around crude andexposure to commodities the downdraft in commodities is less than it was in mortgages. but banks are still uniquely a vulnerable part of the system and need to be watched carefully. arenside puts in banks extremely elevated in price and volatility. tom: javier, what is the next response from opec? we have this ballet, this nonevent with saudi and russia. what is the next shoe to drop? javier: now we have a meeting in tehran with iranian, iraqi, venezuelan ministers. that is the next step. not work, we will see the markets -- if iran agrees, we will see that in some sort of way. the next thing is monitoring

where the ministers are talking, and that will be critical, particularly with saudi arabia. that will be the indicator of what is the potential move. moment for key marke opec will be in june when potentially production cuts will be discussed. tom: very good. javier blas with perspective from bloomberg news. this is a real treat. tomorrow, we have no barriers to entry. joining us from harvard, michael porter. our annual visit in davos did not happen this year. we are thrilled to talk about his disruptive classroom. stay with us. "bloomberg surveillance." ♪

tom: we like to plan ahead. i picked this morning must-read yesterday around 10:30 a.m. larry summers, former secretary treasury, writing up in the "wall street post," "wall street journal" features it with john carney this morning. it is time to kill the $100 bill. tom: i would suggest the $100 bill is not the same as the 500 euro on conversion. dean curnutt with us with macro risk advisors. this gets down to cash in a

society, and your derivatives world has become key substantive for cash, except the bad guys still use cash, don't they? dean: yes, and a society in which leverage works its way to asset prices, again, a lot of it comes down to where the fed is and what it is doing to help people take risk. tom: i carry embarrassingly no cash. i know you always have a water full of cash in your par pocket. do you carry a lot of $100 bills? dean: not really. they are hard to break. tom: guy, do you carry a lot of cash? guy: very little. the bank of england is running this whole program at the moment, looking at why we should get rid of cash. if monetary policy is going to be more effective, you have a much greater control of it because you cannot horde money in these large denomination bills. it will also have a meaningful

impact. a lot of these 500's are in russia where you have a big, black economy. you can talk about that story and the geopolitics as well. says,s professor summers i urge you to read it, folks come in the "washington post," $500 euro goes away, there is a thing called the swiss to pick up the slack, right? guy: yes, and you will ultimately end up picking up boxes because we are in a situation where it will go from one to the other to the other, but it has got to stop somewhere. there needs to be a reserve currency. which will it be? the dollar is a big factor, the franc i do not know if they will do it. tom: three-day settlement. i mean, everything is split up

now. it is like a whole new world. dean: i think it also means monetary policy is in a world of unknowns as the economy becomes more cash free. tom: we forget about what a federal system, federal reserve bank system does as well. coming up, we are going to look at the college basketball. this is an important book, particularly for anybody within the into aa. the ncaa.a -- joe nocera to join us about the troubled ncaa. stay with us. "bloomberg surveillance" from a gorgeous new york. ♪

the european markets are having a good day. these stocks at the top selling positive. the risk-on, risk-off traded

certainly in evidence. as we approach the start of the u.s. session, risk-on seems to be the theme appeared let's get to bloomberg first word news with caroline. caroline: only one major side of the syrian war backed by the u.s. and russia, in turkey is attacking it. turkey has been fighting against kurdish forces. turkey says the main fighting group is a terrorist group. ukraine --crisis in most powerfultwo politicians are against each other. petro poroshenko has called on the prime minister to resign. the gridlock as threaten ukraine's economy and also billions inbillio foreign aid. the obama administration has reportedly prevented a vast

cyber attack against iran according to the "new york times." the paper says the plan was aimed to disable communications and part of it tower gr -- its power grid. the stage is set for a battle between apple and the u.s. government. apple is refusing federal magistrate orders to help the fbi unlock the iphone of one of the shooters in the san bernardino terrorist attacks. tim cook says he has given information, but building a "back door" would undermine security for customers. president obama thinks he knows who will not be succeeding him in the white house. he says americans will not elect republican front-runner donald trump. being president is a serious job and it is not hosting a talk show. global news 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus around the world.

i am caroline hyde. thank you so, much. kareem abdul jarell says -- kareem abdul-jabbar says it is a must-read. the victim is the national collegiate whatever it is. we know it as the ncaa. sharp,entured is a pointed exposé. joining us is joe nocera this morning, ben strauss, both with the "new york times." i once saw kareem abdul-jabbar come down, and you would have thought it was royalty. there is something about him. ucla, john wooden, and all of that. know kareem abdul-jabbar the present-day ncaa? joe: actually, yes he would. it has not changed much from then until now. kareem abdul-jabbar, i hate to say this, was on one of the most

corrupt basketball programs -- tom: the acclaimed and. joe: that is right. they had a fixer that ben did a lot of reporting about who took care of the players and dressed welcome other problems with the way, they had nice cars, and nobody said anything about it at the time except jerry tarkanian why is who said, "gee, it to those guys who are never in trouble have blue suede shoes and matching jackets, and our guys, who are always in trouble, or in sweatpants?" tom: it is a $13 billion business. march us get wound up for madness. when you watch march madness, what upsets you the most? of: watching the spectacle march madness and knowing the ncaa brings in about $900 million a year. peoplehotomy between the

making money and the people not making money is just so stark that you cannot ignore it. tom: but the benefits of those programs at michigan, for instance, goes out to michigan hockey and all of that. the other sports prosper off of this, right? they survive off of this. that is exactly what the ncaa says -- of the college basketball program is why we can have lacrosse and women's soccer. first of all, there is an issue of what is right. the upper-middle-class lacrosse team should be subsidized by the poor black guys on the college football team? i do not really think so. if the university wants lacrosse, they should pay for it like they do the history department. tom: ben, please. ben: these sports are not that expensive to run. if you did not have virginia

flying halfway across the country to play baylor, these would be cheaper to run, and if you were not building new facilities every year for the softball team -- you could regionalized these conferences and make them a lot more sustainable, and it would make a lot more sense. tom: what you have in your book, 5% go on to professional careers. even on "bloomberg surveillance ," joe, we can do the math. 90 5% end their careers. should they get paid a little bit? what is the amount you would pay a middle linebacker on a division ii school? joe: i actually have the answer to that. i believe they should be paid something, and i have a minimum salary cap idea of $25,000 a year. it will not make them rich, but it allows them to have the same kind of money that everyone else on campus has. but our idea, half the money goes to the minimum, and then the coach gets to use the rest in a discretionary form to help

recruit players, so ohio state will say we think you are worth $40,000 -- ohioexcuse me, "the" state, come on, joe. joe: money becomes part of the factor. just as money is the factor when you are trying to decide on where to go to school. tom: joe is writing, what, one article a week? ben, you are in the depths of this at the "new york times." what is the solution to get joe nocera happy? ben: there is a long way to go to get joe nocera happy. one thing i will to you about the idea is offering recruits money -- we just had the silly season of recruiting. michigan, their coaches spending $10,000 a day on a jet flying around to recruit these athletes. a school can say this is how much you are worth to me. you can get rid of all of these

antics, you can save a lot of money in recruiting because the players will know exactly where they stand with every school. idea --eally important and dean curnutt with us from macro risk advisors -- st. john's basketball program is what, worst in the world? dean: they are going to get there. tom: seriously, how do you resurrect a program? withfamous st. john's their famous heritage -- in your book with some alumni goes," an outrage, we have got to be better," how do you resurrect it? you get one or two terrific players with a terrific coach -- that is the foundation of it. you use your boosters not to help with facilities and get a pot of money that goes to the coach and kind of build up a program that way. and you go back to the heritage. i think st. john's -- you know, they had two kids who were

african who the ncaa made ineligible this year, one of which was able to come back after i wrote a certain column i isht say, and one of which out for the season, so they got a bad deal. tom: joe nocera, congratulations. ben strauss -- did you write the whole damn book? ben: joe contributed a little bit. tom: "indentured" is the book. it is blistering on the racket that is the ncaa. coming up from minneapolis, he has made an exceptional splash in his first speech. neel kashkari on "bloomberg " and on bloomberg radio as i am looking forward to this. stay with us. "bloomberg surveillance." ♪

let's show you the numbers. you can see a green screen. crude up 2.5%, european stocks up 2.5%. .1148dollar trading $1 right now. let's you caught up with caroline hyde from bloomberg business flash. caroline: thank you. shinzo abe for next central-bank could -- predicts the central bank would increase the meatless bank of japan needs to change the country's deflationary mindset. there is an increasing chance for more stimulus. one company says it plans to cut

several thousand jobs. it broke even on a per-share basis. t-mobile also reported fourth-quarter earnings exceeding analysts' estimates. the company says new emotions like video streaming have help the carrier create more than one million monthly uniqu users. they will have as many as 3.4 million new subscribers this year. given the chief executive a three-year contract extension after the company reported annual record profits. his contract would have run out at the in of the year. that is the bloomberg business flash. tom: as i mentioned before, caroline, great to see him get that extension. he has been criticized here and particularly versus bmw, and to see him extend a 40 plus career at mercedes-benz is remarkable. single best chart right now,

dean curnutt with us of macro risk advisors, we have to show the vix right now. the red is back in the 1990's, the green is the good feeling pre-crisis, and then these s,cent bouts, this spikinnes and then we come back. when we get fearful, we get fearful for a short time. why is that? is intendeds as him to characterize asset prices. the market gets ahead of itself as a risk-off. then people realize quickly that the risk of being underinvested is substantial and a world where frankly even the alternative investment funds like hedge funds are closet links to the s&p. everyone is tracking the s&p, and if the s&p is going up and you are underinvested, you had better get invested really quick. tom: bring up the chart again, karen, if you would. this is the present tense

measurement. guys like you are out in the forward space. you are looking at three months, six month, one year, even further. what do you see when you look into the bet on the future? ian: there are two periods look at some of the bull market and quiet. 2013, 2014, very quiet periods, ofy tend to sow the seeds their own demise. they tell the market we will guide you forward, forward guidance, and traders lean against that. everybody is in the business of trying to generate profit in the world where there is no parity to be earned, you have to get increasingly large in your size. suddenly when the consensus thes out to be wrong, underlying can be very rapid, and that creates volatility. guy: who will make the most money out of this? you go to any bank trading, and there is a risk-off standing over your shoulder saying you cannot do that because we cannot have that working for the bank

on a daily basis. so somebody has got to make money on trades itself. to myi will clearly speak company and others like us -- we business.oving we are helping to facilitate risk transfer. we are not taking the risk ourselves, but we are matching the buyer and the seller of those complex risks. it has been a very good period to be long volatility, to be long options is to effectively pay a premium with the hope that uncertainty -- it turns out to be very high, it has been one of those environments. so strategies that are effectively buying the vix and all of its corollaries, betting on uncertainty has been very profitable recently. guy: do you think the central bank is comfortable with all of us? dean: i think the central bank has got to be asking a lot of questions right now. i was troubled to hear both there isd draghi say

no limit to the amount of policy we can and will do. i think that sounds irresponsibly. there is a critical of the question right now. in other words, what they have done in the past has clearly guided markets, but if you look at what japan did with negative interest rate a week ago, the market turned very quickly. tom: let's bring you back to 401k 101. if i know there is a bunch of sophisticates -- you mentioned the hedge funds with closet strategies -- if the pros are out there doing fancy dean curnutt stuff, what does it mean when i invest for a boring retirement? dean: i unfortunately think the financial planning industry is one that is built on hope. hope is not really strategy. you see these folks doubling down and saying it is a great time to buy. it may turn out to be -- the central banks can always pull a rabbit out of their hat -- but the risk-reward is particularly unappetizing right now. there are too many of these almost unprice of all risk

factors. ceable risk factors. global growth is slowing at a time when the fed, while they may have been pushed aside -- tom: this goes to pricing. dean curnutt with us of macro risk advisors. coming up on "bloomberg surveillance," this is an exceptionally important interview. vivian lee is chief executive officer of university of utah health care. that barely describes her true expertise in the nation's battle against cancer. stay with us. "bloomberg surveillance." ♪

tom: good morning, everyone. what a beautiful view. and inire state building downtown, the freedom tower as well. we welcome you worldwide to "bloomberg surveillance. " forex report, risk-on, the yen pulls back with factional weakness, but nowhere near where mr. abe wants it to be. real tension on brexit.

this is a real pleasure. vivian lee with the university of utah health care center. that barely describes her contribution to our fight against cancer. she is a rhodes scholar out of ratcliff. her resume is too long to discuss. how long -- how well are we doing in our battle against cancer? vivian: we have made a lot of progress. we are saving lives of children, many adults are doing better, and we have tremendous progress need toicine third we make sure we keep the cost down so they do not break the national bank. much care andso research as well. i go nuts when i hear "a cure for cancer." vivian: it is not one disease. people have to understand there are hundreds of different diseases. those cancers are mutating and changing all the time to elude us, so we have to have better strategies to understand the biology and peace by pace make precision medicine for people.

tom: in davos, dr. biden spoke about this new initiative. tell me about your thoughts of the vice president. presidentll, the vice is really focused on bringing together the entire scientific community and all the n know-how, whether it is in genetics or immunotherapies. and i help to converge the medicine of the president with all of these specialized cancer areas of focus. line with thee to value driven care so we can do them together. i amone of the themes hearing at other cancer institutions around the station is the cost of drugs. $12,500 a month -- i cannot remember what the drug was about. who is going to pay that bill? we cannot expect any patient to pay for these very expensive drugs. vivian: right, but we are

managing to keep most of health care costs down except for pharmacy. tom: why is that? vivian: the drugs come to market at whatever the market will bear, and when you have a cancer drug, you will bear a lot of costs. in order to keep the costs down, we need to make sure the right people get the right drugs, that we do not just deliver these really expensive drugs to everyone, even though only a small subset actually benefit. tom: let me bring in guy johnson in london. guy: good morning. you talk with the cost. a lot made about low-cost testing in london. is that the breakthrough and that will be the starting point so we can actually focus the individual patient and the individual drug? vivian: absolutely. we need to develop what we call companion diagnostics, the diagnostic tests specific to individual so we know that they have the genetic marker

or predisposition. that is absolutely critical. right now for most of these high end cancer drugs, only 15% to 20% of patients actually benefit from them, and we need to be able to narrow that down by doing the right testing first, and then a limited the suffering from the 80% of those who are -- and thent not eliminate be suffering from 80% of those who are suffering but not getting the benefits. guy: some of the oncology departments here in london are basically on point trying to figure out how these things are changing and changing so fast. how do we get in front if that is the case? vivian: one of the things we need much better is good, real-time monitoring and feedback for the providers to understand who is benefiting and thats not, and tying in genetic information and also tying in the costs. if we can tie that in in real-time, we can be faster

about learning about which drugs are working to right now, it is very slow. whether it is obamacare, the a formal care act, whatever the topic -- nobody talks about the doctors or nurses. how are they doing? how are they surviving in our new modern cancer medicine? vivian: that is one of the things we are so focusing on at the university of utah is engaging our doctors and nurses to be part of the solution. we are now providing for our physicians and nurses real-time dashboard scorecards that show how are your patience during in terms of their outcomes and their costs. are providing our physicians and nurses real numbers of the actual cost of care. that is almost unheard of in the field of health care, but if you want to get a costs down and patients are getting value, you need to have that information in real time so they can make the best decisions. tom: dr. lee, thank you so much with the university of utah. dean curnutt with us, the final

thought here. after cancer, there is not much to say about the markets. general theme here -- i hear a caution from you i have never heard before. dean: i think caution, and the markets are questioning the efficacy of the central bank policy at this point. oppose qe, post zero bound interest rates, now wading into negative interest rates, we are not necessarily seeing the lift to inflation. and markets are confronting a growth slowdown. tom: dean curnutt, thank you so much, with macro is a visors. guy johnson, thank you for being with the watch and london. "bloomberg " is next on tv. tomorrow on "bloomberg surveillance" from harvard, michael porter. ♪

stephanie: investing tips from the stars. we will see what titans like warren buffett put their money in the fourth quarter. the job market is getting tight, so why aren't paychecks getting bigger?

that is what workers are asking in the u.k. and dress for success. we will talk about the opportunities for investing in distressed real estate with one of the game's biggest players. ♪ welcome. you are watching "bloomberg ." it is tuesday morning. we are here and bloomberg world headquarters in new york city. i am stephanie ruhle. david: and i am david wilson. you are back. stephanie: i have the nba all-star weekend. i did not have as big a weekend as donald trump. he has now reached his highest levels. david: no one can figure it out. stephanie: the donald can. david: