♪ scarlet: coming up on "bloomberg best," the stories that shaped the week in business around the world. european banks work through some jitters. >> that things happen. julie: donald trump takes a shot at janet yellen. wells fargo's embattled boss faces a clawback. disney may have designs on twitter. opec jolts the oil market with an unexpected deal. >> it is opec managing the global oil market, opec bringing barrels out to raise prices. scarlet: from policymakers to movers and shakers, there is plenty of food for thought in the week's top interviews. >> i tend to be in the camp of normalizing sooner rather than later. >> the economic consequences of a harder brexit will be more severe. >> there is always something to worry about. and at the moment, there are a lot of uncertainties. scarlet: the world's most

influential financial actors remark on insight into a local -- global bloomberg summit. >> i think it is tragic that we have taken rates down this far. >> i have not seen bubble prices in most assets. >> the pressure is great on everybody. and ultimately, you've got to produce. scarlet: it's all straight ahead on "bloomberg best." ♪ scarlet: hello and welcome. i'm scarlet fu. this is "bloomberg best," your weekly review of the most important business news, analysis, and interviews from bloomberg television around the world. let's start with a day by day look at the top headlines. the week began with reports from germany that created considerable worry for investors in one of the world's largest investment banks. >> deutsche bank shares dropping to a record low in germany today

amid further concerns about its financial stability, whether the government will save the bank if needed. for how long can the government distance itself from deutsche bank? >> well, so, it's a very complicated position, because we have an election next year, and we have ongoing talks with the u.s. over this fine, which, if it gets to $14 billion, everyone thinks deutsche bank would be pushed into a very painful capital hike. so the german government is playing it in a very complicated but potentially dangerous way by saying, you know well, it's an , election year, the potential game of chicken going on with the u.s., we don't want to put the taxpayer at risk. that is something that would surely lose votes and maybe encourage a steep fine from the u.s. deutsche bank is a huge bank. it has a huge balance sheet. it has $2 trillion in assets. there's no simple or logical backstop other than germany if ever it does find itself in trouble.

>> we are just over 40 days until the u.s. election, and last night marked the first of three presidential debates scheduled before the big day. one of the topics donald trump was not shy to touch on was yellen's fed. mr. trump: the fed is doing political by keeping interest rates at this level. and believe me the day that , obama leaves, and he goes to the golf course to play golf for the rest of his life, when they raise interest rates, you are going to see some very bad things happen. because the fed is not doing their job. the fed is being more political than secretary clinton. >> i think what donald is saying about the fed is that we don't understand. the fed by design was a nontransparent entity. it was designed to be that way. so the real issue to me is not a great person like janet yellen, political, because she is doing the best she can. is that the process is not opaque or transparent, and that makes it difficult for the world to understand where we are going.

>> is it political, the federal reserve, where you are concerned? >> no, it is not. that's a resounding no. keeping interest rates low is better for the incumbent party, meaning a democrat. that is absolutely not the case. the federal reserve is keeping interest rates low because that is what is needed to support economic growth, create jobs, keep us moving forward. and politics just simply do not play into it. >> josh earnest, the white house spokesperson, has just come out and said that the assertion that janet yellen is political is prosperous. you actually agree, you think there has been a politicization of the federal reserve. >> i don't think there's any doubt. it's a byproduct of the divided government and a product of the extraordinary policy stance of the u.s. central bank and central banks around the world. we are going now to almost our ninth year of what they continue to call extraordinary policy. at some point, it's no longer extraordinary. having said that, there has been a push from the republican hard

right to rein in the fed, if you will. i am not i don't believe that , legislation will be passed, but i certainly do believe if trump is elected, there will be members of the board who would ask themselves whether or not they would choose to serve, just he likely would ask whether or not they would like to go. >> opec has agreed to cut production for the first time in eight years. this according to a delegate familiar with the agreement, the group said it would drop production to 32.5 million barrels per day, down by 750,000 barrels per day. this certainly is history-making. >> it is. and the real country that is making history is saudi arabia. two years ago, saudi arabia instigated an opec policy that said, we have to grab market we have to defeat shale, we should produce as much as we can. that ended today. it is opec back, opec managing the global oil market, bringing barrels out to raise prices. it's a surprise, and it's a very big change.

for the oil market to adjust to. >> does it tell you that the saudis are desperate? does it tell you they want opec to have a bigger, bigger you know influence? or does it actually tell you that they really think prices can rise? >> well i think it tells you two things. one is that while the saudis may not be desperate, they want higher oil prices and they need higher revenues. the economy is in trouble in the kingdom. the second thing that it tells you the saudis really think that , by cutting a relatively small amount of oil, they can drive the prices much higher. >> now, the challenges are far from over, because they need to figure out how they are going to distribute these production cuts. so at the moment they are , targeting a range of 32.5 million barrels per day to 33 million barrels per day. they are currently pumping about just short of 33.7 million barrels per day. that is still unlikely to make a major difference, is what analysts are telling us. bear in mind that we also need to see what they say about the timeline when they need in vienna.

how long is this freeze going to last, and is this going to extend to non-opec? scarlet: the dow losing more than 180 points in all industry 11 groups in the s&p 500. health care financials were the big laggards. we have to talk about deutsche bank, a record low for its u.s. shares, because this news came out after german trading had ended. a number of funds that clear derivative trades with the bank withdrew some excess cash. this is all according to an internal bank document seen by bloomberg. matt: how concerned are you about deutsche bank? how much potential is there for this to spill over to the broader market? >> if it was ready to default like lehman, that would be a huge deal, but that seems at the moment a remotely likely outcome. what it seems is that shareholders simply don't want to own deutsche bank and bondholders don't want to own deutsche bank's credit. it is not clear that you see the kind of stresses you would normally associate with a major

firm failing. normally, when a financial firm is going to the wall, first of all, there is an asset that is causing it. mortgages with lehman, european sovereign credit in the case of mf global. and you start to see a host of other prices start to move as the bank concerns start to try to liquidate assets and raise cash. there is no obvious sign of that right now. at the same time, if you started to have a long run on the counterparty, if everybody started to pull their deposits from deutsche bank, then it becomes serious really quite quickly. in a sense, it's an artificial crisis at this point in time, but it has the potential to become a real one. >> let's get back to deutsche bank now. the stock is spiking at the moment. the adr's in the u.s. are up at 12.4%. and you can see in the vector, it is up almost 6%, trading above 11 euros. the latest news coming from agence france, reporting the bank is near a $5.4 billion

settlement with the u.s. if this happens to be true that it is something like $5.4 billion, deutsche bank can just afford to pay that out of its legal reserves, as we heard from chris earlier correct? , >> yes. if that's true, then that is a big relief. let's not forget that, for all of the noise, this already began with worries of a very big fine, bigger than expected, $14 billion, so it could end with a fine. it could end with a settlement. it's obvious that a fine of $5 billion is still a fine, but it's a lot better than $14 billion. and analysts disagree, but you know technically the , litigation reserves could cover that fine alone, even if there are more potentially down the pike. vonnie: if it can afford this, this would deplete all of its discretionary funds? like, it can't get into any more trouble for anything for a while? >> yes exactly. , there is disagreement over what the bank can spend before it gets into capital increase territory. you have got everything from $4 billion in the view of chase

morgan analysts to the view of $8 billion to $9 billion in the view of others. i think ultimately you won't know until we get a settlement. i think investors right now just that is whyi think investors right now just want a number. scarlet: still ahead on "bloomberg best," we have a powerhouse lineup of interviews, from cabinet members to central-bank executives. financial executives and legendary investors. the biggest names taking on the most pressing issues. up next, more of the week's top headlines, including the $40 million clawback from wells fargo's beleaguered ceo. this is bloomberg. ♪

♪ scarlet: this is "bloomberg best." i'm scarlet fu. let's continue our tour of the week's top business stories in silicon valley, where there is increasing talk that twitter is preparing to put itself up for sale. on monday, markets were

a-twitter with news of a potential buyer. >> the walt disney company is said to be working with a financial advisor to evaluate a possible bid for twitter. would this move make sense for the media giant? what exactly do we know? >> well we know disney is , working with a banker to evaluate a possible bid. this does not mean they have made a bid yet, but they are very interested in twitter as a media property. and we can sort of speculate as to why. i mean disney is getting a , little bit more into streaming. they have noticed the cord-cutters. they are trying to figure out how to distribute their video content. and for twitter, this is something they are into, too. they are repackaging tweets in video form first with their apple tv app and xbox tv app. they want to make sure people can get into twitter through live streaming. >> we are seeing an increasingly incestuous relationship between

the two companies. you have dorsey on disney's board. you have the two of them doing deals together on the content side through disney's investments in video streaming. so look, previously, we had said media companies are probably not the best to buy twitter because twitter has to stay agnostic, but i think disney could be the unique exception to that rule. >> it has been a tough year for hedge funds globally. and now we hear that the $11 billion hedge fund tudor investment corp. has closed its singapore trading desks. as part of a global shakeup. what background do we have here? >> it's a big story on downsizing and also restructuring. tudor is one of the oldest and most respected entities, biggest hedge fund industry with about $11 billion u.s. it has been in existence since 1980. it had phenomenal returns in the

first years after it started. however, the returns have been lackluster over the last year, and that resulted in pretty sizable investor withdrawals this year. as a consequence, the founder and billionaire, paul tudor jones, last month said he is going to cut 15% of the 400 plus workforce. and on the other hand, they are hiring quant traders. it's a bit of a change in strategy for the whole fund. they are cutting on the training activities and expanding on the quantitative activities. and singapore is always affected by those developments. >> harry capital will close its main hedge fund after three decades. in the letter today, the founder richard. wrote -- richard harry "although i continue to believe , in our team, this market environment has not worked well for us." we've seen a lot of these for a long time, hedge funds not being able to cut it in this environment.

this this fit a general pattern we have been seeing for a while? >> it is unusual to see that one of the founding titans of the hedge fund industry is going to throw in the towel the , proverbial towel. we've seen a lot of restructuring of other ones. tudor cutting certain teams, shuffling things around. howard the same. in terms of actually just calling it quits like this, this is quite a big one. and does, this was not a run on the fund, so to speak. it is not like there were no other options here, but to close, but it's clear that he made a decision that this was the best thing for him and his employees at this time, and for his investors to kind of unwind some of the, unwind that main fund. >> the big currency story today is the turkish lira. this is a wonderful wcrs function. all these currencies are rising against the lira today after moody's cut its sovereign credit rating to junk on friday evening.

it cited risks related to turkey's external financing needs and a weakening in its credit fundamentals as economic growth slumped. turkish assets today are falling the most since the attempted coup in july. how much pressure do you think the set -- the government will then pile on the central bank to deliver more rate cuts? what's the read as a result of this? >> that remains to be seen. it will be interesting to see how the central bank reacts. it has been an easing policy, it has been lowering rates since march. so will it be able to continue to do so if the lira depreciates too much? that is one question. the other is, what does this mean for turkey's growth? borrowing costs are going to rise. we know that banks will have to reprice their borrowing needs. it is also worth pointing out that a lot of funds won't be able to hold turkish assets after the downgrade. they require at least two of the major rating agencies to have an investment-grade rating to invest here. there will be some forced selling.

>> well, not so weak now is china's growth in the third quarter, mainly driven by the so-called "old economy." the latest survey from the china beige book says the government's attempt to wean the country off of manufacturing resources may have stalled. sure, they want to reposition themselves in the new economy, but what they are actually doing is going back to their old playbook. >> that seems to be the case. this beige book survey seems to reinforce that. overall, the rating isn't too bad. it's the competition that maybe is a bit of a worry. the old economy drivers are back in action, property-led recovery is boosting manufacturing, the property measure also, but it is commodities that are stalling. retail, services, transport -- all a little bit weaker according to this beige book survey. economist that we surveyed, are ratcheting up expectations for growth this year. 6.5% in them

previous surveys. they are also dialing back their forecasts for additional monitory stimulus. >> deutsche bank isn't the only lender wrestling with the united states resulting investigation into toxic mortgage bonds. credit suisse group and barclays are also in settlement talks with the justice department. that is according to people familiar with the matter. what do we know, and what kind of settlements are we talking about? >> this is basically the last set of banks going through the long-running investigations into how banks treated mortgage-backed securities leading up to the financial crisis and whether that harmed investors or other banks in terms of how they were packaged and sold. these are civil investigations. the penalties thus far with banks that have already settled have been very high. bank of america was close to $17 billion, jp morgan was close to $13 billion. goldman sachs settled for about $5 billion. so you do see very, very big numbers. credit suisse and barclays, along with deutsche bank, are now negotiating basically to

close this out and figure out how much they are going to have to pay for this. >> what happens next? >> well they have a long, , painful negotiation to go through at the department of justice, where the department of justice typically holds all the cards. >> commerzbank said today it will cut 9600 jobs and suspend dividends. this is all part of an effort to cut costs. >> is this what we expected, or is it more or less? >> it developed over the past few days. people were at first looking for something like 2000 to 3000 job cuts, and then sooner or later, it got clear became clear that , this was not going to be a job cuts or revamp program that we've seen in the past, which was kind of addressing small steps. it's rather the new ceo at commerzbank trying to bring an end to restructuring and make one great move to finish it up. >> i'm going to ask you one question. does this organization reflect you?

your charge? john stumpf: i am deeply sorry -- scarlet: turning now to wells fargo. we have been hearing obviously from john stumpf, really getting hammered. he has now given up $41 million that was clawed back. is that going to be enough to satisfy congress here? >> i think the biggest problem for mr. stumpf is that this obviously makes really good theater. a couple takeaways i would have they are calling for more , hearings. there were calls to have the fired employees come in for hearings, and some calls to have hearings of other bank executives to explain if they do similar cross-selling types of approaches. even putting some pressure on the board, saying, well if the board hasn't fired you yet, maybe the whole board has to go. and that is definitely going to raise some eyebrows among the board members, will take notice of the anger being represented here. >> we know that they have said something about this clawback of $41 million.

beyond that, he has not given up any ground in discussions of giving up his role as ceo or chairman of the board. >> yeah, you know, he is sort of plotting and saying that is up to the board, i serve at their pleasure. >> he is also the director of the board. >> exactly. exactly. clearly the clawback, and he agreed to that. it was not exactly a clawback. it was a voluntary forfeiture, that stock compensation. clearly that was something they wanted to offer to the house today to say, look, we are , you know taking this seriously , on being held accountable. i don't, i mean it's definitely , not going to be enough to stop the rhetoric. ♪

♪ scarlet: welcome back to "bloomberg best." i'm scarlet fu. a dozen years ago, raegan moya-jones was working in sales at "the economist." every night after she put her young daughter to bed, she put

in an extra hour of her beauty business. today she no longer needs the job. her company aden + anais, which , now brings in $50 million in annual revenue. it's the subject of this week's edition of "small to big." >> i started the company in 2004, a year after my eldest was born.n a -- anee i went looking for a blanket. it was very common back home in australia, and i was truly shocked to find out the nobody in america had ever heard of muslin blankets. so that was my aha moment. in 2006, i went to market the old-fashioned way, walking door-to-door to specialty stores, saying, i have this product, would you like to buy it? and i definitely got a lot more no's in the beginning than i did yeses. but the people who did take it,

the actually sold through literally within a week. then i started to attend trade shows. our first tradeshow that we did we got 86 retailers. access to capital was by far and away the most challenging thing in the beginning. i got very lucky in that the private equity firm that ended up investing in aden + anais came to me through a friend who had worked with seidler equity partners, and we just hit it off. and so they invested in my , business. seidler equity were my first private equity partners. i am now with a company called swander pace capital, whose focus is very much consumer products. the seidlers were instrumental in basically teaching me how to be a successful ceo, whereas swander has enabled me to truly scale. i want to get aden + anais to create a true global lifestyle brand within the children's space. we are in 65 countries.

i now have offices in tokyo, london, sydney, montreal, and brooklyn, new york. we actually have just incorporated in china because we have explants and plans in china as well. -- expansion plans in china as well. for the first five years, we doubled in size every year. we still have wonderful growth 10 years in, nearly 20% growth year-over-year. i don't see it slowing down anytime soon. i'm looking at acquiring companies now to continue with the growth. and i can do that now because we have such a strong brand. it is never a dull moment. that is for sure. scarlet: we've got plenty left on this edition of "bloomberg best," including exclusive interviews with jack lew, george osborne, and philadelphia fed president patrick harper. he provides insight perspective on the dissent at the last fomc meeting. plus, insight from bloomberg's star-studded global summit. stay with us. this is bloomberg. ♪

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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. ♪ sec. lew: we know there are a lot of people in america who do not feel they benefit from growth. you can win the argument on trade that the economy will grow. but people will say, what does it mean for me? what is the answer to that? the answer is we invest in the things people see affecting their lives. we have infrastructure that needs to be modernized. that creates jude -- good jobs, and it also tells people that we care you sit in traffic for two hours on the way to work. nobody enjoys being stuck in traffic for two hours in the morning. we know that people are worried about will their kids will have the opportunity they had. secondary education, primary education, technical education, we can help people get the skills they need. childcare, it is a burden that most working families struggle

with. we have had proposals to deal with all that. we have had some success. we need to do more. i think that if we send a message to the government, and governments around the world send a message that we are determined to have overall growth touch your life, we could get back to a place where there was a broad understanding there is a benefit from the interconnectedness. scarlet: that was u.s. treasury secretary jack lew in an exclusive conversation with bloomberg television's david gura in mexico city. now this week we had an , exclusive opportunity to speak with the former head of britain's treasury. george osborne served as chancellor of the exchequer until he was fired by the new prime minister theresa may following the brexit vote. in his first television interview since leaving office, osborne discussed next steps for the u.k. in its negotiations with the european union. george osborne: we didn't put it to the british people. what we now need to determine is exactly what now is the trading relationship with europe.

how do we make sure london will remain a major financial center in the world? how do we make sure britons can go and live and study in europe just like european citizens can come to britain, but have answers to concerns the british public have about that? these are all crucial decisions. no one at the moment has perfect answers to all those things -- which is not surprising, it is just a few months since the vote. we have got to work harder as the british government and british parliament to get the right answers over the next few years. and you know my broad view is we , should be ending up with a -- to use the jargon -- a softer brexit than a harder brexit. the economic consequences of a harder brexit will be more severe. >> there is a suggestion that prime minister may should wait until next year to trigger article 50. is that the answer to all of this, to wait a little bit longer, and in the meantime, don't you think that kind of uncertainty would damage the u.k. economy if we wait that long?

george osborne these are some of : the most important decisions britain will make since the second world war. it is absolutely vital we get them right. a point i made in a speech at the university of chicago just a couple of days ago is that frankly, europe is not going to be in a position to have this conversation with the u.k. until the french and german elections are out of the way next spring and next summer. so whenever you trigger article 50, the actual hard bit of the negotiation is going to have to wait for a new german government. forxperience as chancellor six years, until the german government has come to a decision, it is impossible to get a decision in europe. that is just a bit of real politics. scarlet: let's move on to more of the week's most compelling conversations, starting with another bloomberg exclusive. philadelphia fed president had -- patrick harker had never given a television interview before sitting down this week in dublin with michael mckee. they discussed a fed decision and division.

mike: three dissents at the last meeting, highly unusual for the fed. how divided is this policymaking group? >> i think people do have different perspectives on the pace of normalization. i tend to be in the camp of normalizing sooner rather than later. but i wouldn't say there is great dissent, other than the speed at which we move accommodation. but nobody thinks that we should do that quickly. it will be a shallow path. mike: tell me more about that. how fast, how far? patrick harker not clear. : that is a function of how the economy responds as we start to remove accommodations. mike: at least one of the dissenters, eric rosenberg of boston, said he is worried about bubbles developing in financial markets. and other members of the fomc have suggested the same. do you see monetary policy distorting financial markets? patrick harker i think there is : the potential for bubbles, particularly something we watch in the third district, commercial real estate.

we are watching really across the country. but the other thing i worry about again is the possible distortive effect we are having on corporate decision-making. it is much easier to do a stock buyback today to increase your share price than long-term investing in plant and equipment. i think that we have to reverse overtime. mike: how do you reverse that? patrick harker as the cost of : debt goes up over time slowly, that will naturally start to reverse. mike: is there a point where that happens? i am asking that because interest rates are so low, when does it start to actually have an impact on corporate decision-making? patrick harker don't know until : we start making that transition. i think a shallow path toward normalization, and then watching and be careful about not reacting too quickly. but let's see how that plays out as we make those changes. i think that is the appropriate policy. >> generally, the european banking sector is perceived as

being weak. lots of concerns about it. from an ecb perspective, what more ought to be done to restore , shore up confidence in the financial system? >> we would make several points. one is capital rates have gone up in europe. compared to 2009, 2010, the core capital has increased by several percentage points. number two is our ecb monetary market policy is a big lever at the moment, which is helping the european economy to recover. there are some side effects and low interest rates, but if we were not doing the kind of accommodative policy, the european situation would be worse. but we repeatedly say, and i think mario draghi said on friday, earlier last week, and i think today europe, if you like, , has an over-backed situation. there are structural problems. so european banks in general have to consider what kind of reforms do they need to do, what

kind of business model adaptation is necessary? so i think it is a mix of as the european economy recovers, bank profitability will recover with that. so our core is to make sure the european economy recovers. on top of that, there is a , if you like reform challenge, , which is primarily for the bank management, bank investors to lead in solving. scarlet: when it comes to monetary policy as a ecb board member, we are curious to hear what you think about what the bank of japan is doing with the yield curve control. it is certainly intriguing if not necessarily new. it would be difficult to implement something like that in europe. would you rule it out? would you say there's something europe can learn from japan? >> i think it is fair to say all of the major central banks look at each other all the time to pick up lessons. so of course we would look with great interest to have that unfold. the common element is the essential commitment to return

and place targets. kuroda is committed to coming up with different ways to show that commitment. in europe, we consider the current strategy to be working, but there has been overlaps since quantitative easing took hold in 2014. it is significant recovery in the european a country -- european economy. it needs to continue. it is not the case with inflation targets. we need to continue with that strategy. >> if there is a lot of uncertainty, you have the fed , you have viewed this election, and you also have brexit. when you talk to clients, what are they most worried about? >> the funny thing is there is always something to worry about. and at the moment, there are a lot of uncertainties. at the top of them is the fed, the elections in the u.s., the chinese economy. i would put those as the top three right now. but there is never a decade when there are not things going on. as business leaders, your job is to sort through that which matters from that which does not. not look for perfection in making decisions, but move your organizations forward.

>> you didn't mention brexit. i mean, that is what everybody is telling about. a banks in the u.k., do you move employees? you did not mention that. >> it is not the top three. it is in the top 10. first thing brexit happened, so , we are dealing with certainty. we know that happened. as financial institutions as the , rules unfold, we will see what we do in terms of where we keep people, headquarters, resources generally. but i don't it is not a crisis , thing. brexit is going to unfold over a couple of years. the election is going to happen. the fed will move or not move. and the chinese economy is the big enchilada. alix: you mentioned before brexit happened you might have to move 1000 workers. do you have a better estimate of what you may have to move if you do see a hard brexit? >> not really. we keep studying. there is no question some of our control functions will have to do out of the european-style headquarters.

whether it is risk, finance compliance, some of the sales , coverage positions you will not be able to do remotely. you will have to do that in-country. we are sorting all of that out. but london remains the key financial center across europe. scarlet: straight ahead, more insight from some of the biggest names in business at the bloomberg market's most influential summit. >> when i buy a bond, i do not think, what will it do tomorrow? scarlet: this is bloomberg. ♪

♪ scarlet: you are watching "bloomberg best." i am scarlet fu. this week, bloomberg convened a remarkable group of global financial luminaries for conversation, networking, and cross-border thought leadership at the bloomberg market's most influential summit, held in new york, london and hong kong. we interviewed many of the featured guests on bloomberg television. here are some of our more

interesting conversations, starting with tiger management's julian robertson. he shares his thoughts on investing in an era of historically low interest rates. julian: i think it is tragic we have taken rates down this far. i know that the federal reserves all over the world are trying to ensure prosperity. but in so doing i think they are , ensuring a huge bubble which will be pricked, and we will all be hurt very badly by it, i think. when i think of that the , negative rates completely stop saving, because you are not only not rewarded for saving, but -- not rewarded, not only not rewarded for saving, but penalized for saving. i don't think that is good.

i also think it has caused a huge bubble in the bond market because people have nowhere else to put their money unless they buy a beautiful piece of art, like a ceiling, or some pictures or something of that nature. tom where would you put your : money now? we will get to the hedge funds later, but if negative rates have distorted the markets, if central banks have distorted the markets, how would you be exposed today into the end of the year? julian: i think the only game in town are equities, and we have to play in the theater. >> talk about china. what opportunities do you see there? >> well now as you know, they are embarking on the stock connect program. they already have the shanghai-hong kong connect program. now they are doing the shenzhen-hong kong connect program. which will mean that we will be

more easily able to invest in the chinese market. and that is very exciting because the shenzhen market in particular has a lot of tech names, a lot of small companies that nobody knows about. and this will be a very exciting opportunity. >> do you think this new stock link will make it easier for china to be included in the mspi benchmarks? >> it will help. it may not do the job, because the mspi stock is very strict in ensuring liquidity and free flows. and with the restrictions in the connect program, although it is , there isn the qfii still a problem. angie: how long will it take? >> i hope it will not take more than a few years for them to really open up more. to be realistic, we are talking five years.

>> do we need consolidation in the european banking industry and will we get it? >> that is very -- i was interested in mario draghi's comment. i think he went on the record saying that there were too many banks in europe. it gives me the cover to talk about that. i think if you look at wells fargo, you look at bank of america, you look at j.p. morgan in my career, i was , personally involved in one of the largest mergers. those banks have been created largely through mergers. the thing with a merger is you can get too many features. you can extract cost-cutting and it is very significant. you create a more diversified, more stable organization. the differential impact on j.p. morgan's number of drops in equities, activities or fixed income is proportionate. they can solve it much more easily. clearly in europe, that has not happened.

>> do you believe europe is over banked? tidjane thiam i think it could : benefit from consolidation. it could benefit from consolidation. there would be a lot of upside. right now, every institution is trying to be on a very restrictive diet and shrink on its own. i am just arguing that is much easier to do with two institutions together, that kind of slimming down and taking out cost and inefficiencies. it is much easier to do. but you know i don't think it is , a realistic option at this point in the industry. >> because of regulators? tidjane thiam yes. : from the moment you say too big to fail, the notion you are going to create bigger banks is never going to be viable. people think that banks are already too large. you can't increase your balance sheet. that is an issue. but i think without the

policies, if you look objectively at the banking landscape, i think there is room for consolidation. >> you and i have compared the, i guess, continuum of a cycle to a baseball game. lots of people do it. in those situations, you were very much right in the last out of the ninth inning. where are we now? >> the upcycle, the good times are in the seventh inning. the seventh inning. in other words, the game is more than half over, the easy runs have been scored. when you are in the seventh, you could be in the eighth and don't know it. one of these days, we will be in the ninth. but i don't think we are there yet. i am not seeing bubble prices in most assets. >> you are not? >> i am not seeing bubble

prices. bubble -- the s&p for one indicator sold at 32 times earnings in 2000, and it is 19 today. there's a big difference between 19 and 32. >> what about the other side of the risk spectrum? treasuries? >> well, you see, i am funny that way. because when i buy a bond, i , don't think, what is it going to do tomorrow? i say, is it going to pay off? and so if you buy a treasure , today to get 1.5%, if rates go up, you will have an interim price decline, but you will not lose money if you don't sell it. if you buy it today at a yield of 1.5% and you hold it to maturity, you will get paid as you expect, and you will make 1.5%. the question is, do you want 1.5%? the strongest thing i argue is we should not buy 1.5% to get 3%. because that is folly. but if you are happy with 1.5%, today high-yield bonds yield let's say 5.5%.

if 5.5% plays a role in your portfolio, you can buy it. they may go down in the interim, there may be a better time to buy them later, but if you buy them today, and they turn out to be credit worthy if you have done the credit analysis or have a credit manager you will get , your 5.5%. today, 5.5% is pretty good. >> people say we are in a bond bubble. what do you say? >> the reason people say that is because everybody thinks everything is priced to perfection. right? if there is a problem, you're going to have real issues, and everybody is sort of reaching for yields. i get that. but at the end of the day, your choice is cash, which is zero, or invest, and you know people , have to invest.

erik: in some cases, not have investing would have produced a better outcome. look at harvard's return. >> yeah. harvard was down. some of you went to harvard, right? harvard is down 2%. somewhere around there 2% to 3%. , they should have stayed in cash. and yet, yale is up 2%. the pressure is great on everybody. ultimately, you have got to produce. so look, there is always opportunities out there. it is just -- people give you money. you've got to make the money. erik: so you are only charging on investment capital -- >> the vast majority of what we do is on investment, yes. erik: how much pressure do you feel to invest? how much pressure do you feel to invest? clearly, the pension funds are under pressure to allocate capital. they have got to generate a positive return. >> we don't feel that much pressure to invest because we are trying to invest in areas we know there's quite a bit to do. right? i think in energy, we think there is a lot to do. if you give us capital, we will

put down money, that will work pretty fast. i think i would feel under a lot of pressure if somebody gave me money to invest in areas where i did not think there is a lot to do, and then you sort of have got all of this capital, and what are you going to do with that capital? ♪

♪ alix: the favorite terminal chart here, dodge go i'm , bringing the terminal up to show the longer-term rate. the medium-term is the green line. that came down to 2.78% in the last fed meeting. scarlet: there are about 30,000 functions on the bloomberg, and we always enjoy showing you our favorites on bloomberg television. maybe they will become your favorites. here is another function you will find useful, it is quic. it will take you to our quick takes where you can get important insight into timely topics. here's a quick take from this week.

>> these islands do not look like much, but they are at the center of a simmering dispute about who owns them. in all seven countries have , overlapping claims to islands in the south china sea, and there is one common player china, which has been jostling , with its neighbors over maritime territories for more than a century. recent tensions have threatened to boil over, potentially dragging in the united states and even prompting talk about possible war. so here is the situation. china claims more than 80% of the south china sea within a border it calls the nine dash line, whose legitimacy it says is proven by a 1940's map. about a decade ago, countries started making formal claims under new u.n. rules. that led to a rush of moves from several nations to show ownership. china got the most attention. it started to build islands,

installing runways. and deepwater berths. that led to the philippines challenging china's claims in an international tribunal at the hague. the philippines won the case in july of 2016. china's reaction -- the order is null and void and has no binding force. the reaction of the u.s.? president obama: the united states will stand with our allies and partners. >> washington endorsed the ruling and called for peaceful resolve. beijing says it has no intention of preventing commercial traffic but is simply protecting its territory. 1000 miles north in the east china sea, china is also locked in a dispute with its age-old rival, japan over another rocky outcrop. china calls them a certain name. japan caused them a different name. the u.s. does not take a formal position on their sovereignty, but in 2014 president obama vowed to defend them. so far, the dispute has been confined to jostling for position by ships and aircraft.

here is the argument. there's one big incentive for countries like china and japan to stay friendly. it is called trade. the south china sea is a critical artery of global commerce, hosting $5 trillion of trade every year. on the other hand, given how quickly china has been building its military positions in the south and east china seas and how nervous that is making everyone, some analysts say there is a significant risk of armed conflict, perhaps as a result of miscalculation or mistake. the u.s. has responded to china's island building ways by upping patrols of its warships and surveillance planes. but greater resolve may mean greater risks to the u.s. and for the region. scarlet: that was just one of the many takes you can find on bloomberg and bloomberg.com, along with all the latest business news and analysis 24 hours a day. that does it for "bloomberg

best" this week. thanks for watching. i am scarlet fu. this is bloomberg. ♪ . .

>> this is the best oh bloomberg west. the unveiling of a old plan to colonize mars. weighing in on why he is concerned about donald trump. ad, jumping in the race with potential