david: "welcome to -- welcome to "bloomberg daybreak." alix steel.ere at reversing losses from yesterday, the goods a slightly weaker and relatively soft, although off the lows of the session. the currency market with the dollar continuing to be range bound. you are looking at dollar-yen at its worst month since 2009. the pound is about .5 of 1% off the dollar and you have -- excuse me, you have a little buy coming into the 10 year yield, reversed. i story of the day will be oil. you have wpi of 2% as the opec game continues. david: we will start with their story, opec split. officials remain far apart on an

agreement to cut oil production and russia will not attend the meeting. saudi officials uploaded the idea of not reaching an agreement at all. iran says they will produce more, while the iraq minister says he's optimistic. bearish on bonds. the trump dollar rally is stirring up emerging-market bearers. the most irish -- the most bearish for the year, caused by the collapse in commodity prices in china. donald trump announced just this morning he will nominate congressman tom price for health and human services secretary, this has retired david petraeus is considered for secretary of state amid open infighting among who to pick for the posts. that is what you need to know. will kennedy, managing editor for middle east and africa, coverage of energy, joins us from london.

at this hour, what do we know? we know that less than 24 hours from the meeting, there are still significant disagreements among opec leading members. saudi arabia is insisting iran raise the structure and iran [indiscernible] and iraq cannot agree whether it will cut production, so what we're waiting for now is for the inisters themselves to fly today and here at they have had to say in the final decision will come down to that closed-door meeting tomorrow. alix: closed door meeting, what does that decision look like? if that market was expecting out for cut country by country outline, what would we get in reality? get a totalht failure. i think a lot of people see the possibility that we see rivals and we are seeing some positioning as falling crude prices go after the meeting. there is only a 30% charge in

the deal. that could change once the ministers talk, but we need to be prepared for all sorts of an outcome. david: if there is a total failure, who stands to be the biggest loser? is in saudi arabia, the crown prince? isl: i think how do a bit the loser because of you look at the economics of the opec saudi arabia's position is needing higher prices than iran, which has a more diversified economy, and what we have seen in the last nine months is that saudi andia is really hurting have to go for a record bond issue. yes, i think you're right that saudi is the biggest loser. alix: it is crazy because it typically the saudis had this positioning. they say, opec, work it out and we will decide if he will take place in a cut, but iran and iraq have the upper hand in the

negotiation. will: they do. you should remember the saudi position. there is logic for them in leading everyone produce. while it will hurt them budget early and it will mean economic pain, at the end of the day, low production in the world and if they can take the pain for a bit longer and knock out some of those shale deals, it may work out for them in the end. they are finding the pain almost too much to bear. david: how much his business and personal? saudi's assume the country rival, the traditional shia country in iran, so how much is economic and other rivalries? will: opec has been a good job setting aside regional tensions and coming together on a businesslike basis. we had seen some of those tensions, especially between iraq and saudi arabia spillover into opec politics.

it is notable that some of the .hetoric is getting angry there was appears statement from the iranian oil minister last night, asserting his country's rights to grow oil production, despite saudi's objections. there is a danger that opec is becoming a little undiplomatic, and that may throw off the prospect of a deal. alix: all of this really hurts the algerian oil minister, who is the go-between. he is the go-between. here's the broker, trying to get the deal done. can you tell us who he is and how i got in the position and powers are?otiating will: i think algeria has emerged as a fairly mutual broker between the different factions and opec between the saudi's and the iran, venezuela, all at different angles. knows opecious guy, very well. algeria is interesting in the deal because it has one of the highest requirement oil to

balance its budget. it needs oil above $100 a barrel to balance its budget. we had a story today that showed ant is burning crude at amazing rate. he has the expertise, is trusted, and is interested in a deal. he has a key role. whether he will get it over the line, we will know tomorrow. alix: thank you, will kennedy. david, when they talk about what it means for the oil price, the differentials are staggering. you have as little as $20 from energy aspects. and as high as $55 from goldman sachs. if we do get a deal. david: and ramifications are profound. x ago stands to lose a lot. their economy is in tough shape and meaning that oil price up. alix: all of them really do need it up. at theto take a look

volatility and correlates to other asset classes. you can see the takes index volatility -- the vix index at volatility on the red line and the blue line's oil. you can see how much volatility is in the oil market in the last few days. we have felt like the markets would get the deal. now that it is in doubt, you can see the volatility has picked up. david: are the major storm with the most at stake? alix: it is u.s. shale producers. they are saying coming of this deal, you have the market flooding with oil but will they do that or be more disciplined? that is saudi's worst nightmare, that they open the floodgates. david: it is amazing how major a fact of the shale producers have become over the last five years. alix: if that. david: you have someone on the program. alix: we will be talking about aceto continental, one of the biggest shale players in the u.s. atid: and she is not excited

all. let's get an update outside the business world with emma chandra. emma: authorities in colombia now say at least six out of the 81 people on board survived the crash of a chartered plane that was carrying a brazilian soccer team. the 146 jet was on the way to new dublin and caring the brazilian's first division team. it was a few minutes and landing when it reported electrical problems. columbia investigators are looking into an account from one of the survivors that the plane nine out of fuel. president-elect donald trump has picked one of the original tea party focused members of congress to be secretary of pass and human services. republican tom price from georgia is an orthopedic surgeon and has been a not contacted legislation to repeal and replace the obamacare. authorities say it is too early to tell whether an attack at ohio state university was an act of terrorism.

a student drove a speeding car into a campus crowd and then got out and slashed people at the night, 11 were wounded during a police officer shot and killed the suspect. cannot this, the suspect identified himself as a muslim in a newspaper. the suspect identified himself as a muslim in a newspaper. alix: thank you. inching higher. pairing those losses but miners still getting hit. glencore off by 1%, rio off by 2%. perhaps the base metal rally we have seen could reverse. they have seen the most downside for nickel, copper and lead. recent rally was about specs. that could hurt european miners. i look at the kelly on and johnson & johnson, so the story is that they may keep them as an

independent company. that stocked on 5%. a complete takeover could happen later in the process. rounding out with earnings, tiffany's brenton sent to come up by over 2%. in store sales were down 3% but that was better than off by 4% that was estimated. u.s. coming in stronger, japan stronger. what they said about their flagship store on 50 7th avenue near the trump tower, it represents 10% of the adult quarter sales. they do not know yet if the barricades surrounding trump tower will have an impact on their business. interesting tidbit on the trump election and what it means for corporate america. david: york city's mayor said he doesn't really care if it hurts tiffany's. [laughter] in november route for the end, heading for the biggest decline in years. find out where there could be more losses. later, oil and skepticism on an opec dealer. preview tomorrow's

meeting. this is bloomberg. ♪

david: this is bloomberg. i am david westin. the yen's except for its worst since 2009. ubs says it is overblown and they were set for turnaround, taking the yen back up. the global head of fx spreadsheet things the opposite view, saying after short pullback yesterday, they could eventually take the yen all the way down past the dollar. joining us from london, stephen, take us through your thinking and why you are right in your counterparts are long? stephen: we think what is

rate is notexchange the japanese cut but the u.s. guide and it boils down to the expansion coming through from president-elect trump as you go into 2017. puthink that is going to more pressure on the fed and we think we are going to see some substantially higher yield in the u.s.. as a result, we think the dollar will depreciate and we think the biggest move is going to come against the yen. the key reason for that is we think the greatest policy the virgins or difference between policies is going to be between that of the united states and japanese. going to seeare zero on japanese bond yields and we think that cap is going to drive the yen higher. we are targeting 115 at the end of the first quarter and a very 128 i'd end of 2017.

david: compelling case, but let me probed it. the first thing that the temperament decision deals with his trade, and it is not fiscal stimulus, but trade, how would that affect your call? steven: this is the great unknown. happen, particularly, i would say with china. given what president-elect trump has already said he would like to do with china. having said that, we think there is room for a lot of backtracking. we think the whole point of the whole issue was labeling china a the current communicator as very big step. we think it is unlikely to come anytime soon. from our perspective, we think we are much over the market and a much better place to focus more on the fiscal stimulus and what that means for monetary policy and yield in the u.s.,

rather than any kind of shock coming from the trade side. alix: let's talk about the yield in the u.s. , the firstindex two-year real yield. differentials are key, but so are the real yields. is the bloomberg dollar index. is rising real yield moderating a touch, is there risk it could prevent another catalyst forward upside for the dollar? steven: it is an interesting point. what i would say is the market is not yet pricing in the rate hike as you go into 2017. that is probably a good thing if the market waits to see what happens. if you look at [indiscernible] can the 10 year yield in the around 3%, there is more upside, so certainly from our perspective, we would argue there is more potential or high

u.s. yields to be pressed into the market. david: what does it say about the euro-u.s. dollar cross? what to project? interesting question. on the surface, you would say this a similar story has japan, the ecb is [indiscernible] and we see the type of policy coming from the u.s. federal reserve. having said that, we think we cractart to see signs of in policy coming from the ecbk. the point we would make your is the upcoming december meeting is very important. we think, yes, they may extend qe, but they may start to pay for purchases. what we mean is buy less on a monthly basis than in the past. we think this could be the start quantitative easing ending in

the eurozone, and that takes a different picture to what is going on with the yen, where we still see easy policies from the bank of japan. if that is the case, if the biggest policy divergence is between the united states and japan, not only does the dollar-yen rally the most and the dollar gains against the yen, but you may see less depreciation against the euro. we would not be surprised if we see the euro-dollar comeback town, but we don't think it goes much below that. we also think that as the market qe,ts to price in intended the euro may rebound. i do not think that is going to happen soon. certainly, it is something that the market will need to think about, and that will probably dollar to aggressive depreciation against the euro. alix: changes those below parity cause. steven say well, t --

saywell, thank you. we also have to get through the risks, like referendum. david: there is that. three hundredp, billion dollars in 25 days. the biggest monthly gain in five if it fromey expend optimism over donald graham's presidential plans. are there had signs in the rally? torles peabody joins us next have an outlook into bloomberg. ♪

david: this is bloomberg. but i am david westin. s&p 500 financial sector as surge 12% since the u.s. election and has put five time since november. it is on to its best year in more than five years with over $300 billion going into financial shares since trumps win. this is on track for the most ever in a short amount of time. our guest warns that we should look closer at the expectations for financials under a trump administration, but this time

may be more complicated. director atody is compass research and trading. thanks. fascinating on this subject, let's take a closer look. thee are some downsides in top administration. take us through this. charlie: i am a big believer that it is the final arbiter and economic value added can come in book value growth. while people are focusing on the positives to the pnl statement, there are negatives developing and what is happening to book value with what is going on to currencies and bonds. --x: meaning they are used losing money on the bond beds at the end of the day? charlie: two things, there's some -- the stronger dollar is hitting book value with stronger adjustments, and then in the proposed, security there are unrealized losses developing, selling bank of

america's case, going from again to an unrealized loss in the fourth quarter in investment portfolios. david: it is different for different banks. there is dollar exposure and bank of america has a lot of bonds. could this be large enough to what out the expected upside from the profits? value,: in terms of book yes. bank of america's book value --pped from the 17 and $17.14 per share at september 30 and it will drop to under $16.85. alix: when you have to return for the financials, you have a severe fear of missing that when it comes to the financials. when did this start to matter? charlie: usually, these things take time before the matter. there is something we call otti -- other than temporarily impaired -- so they have to persist for an amount of time before the matter. we saw this in 1994, where persistent rising rate caused

the banks in the fourth quarter of 1994 to capitulate and realized the losses, but the rate rise started early 1994 and created problems at that time. alix: if you take a look at the bloomberg, this encompasses that missing out. you have the purple line with s&p 500, the white line is the 10 year in u.s., the blue line is the real yield. you can see how close it is since it has spiked up. it has been a little softer and the question is if this is going to pretend the potential downside of the financials. david: because potential inflation could cut into it. it is not just the yield curve steepening. it is the reduction in regulations anticipated. could that make a difference question mark -- could that make up the difference? charlie: i think you will not see more regulations, but i think existing regulation will remain in place, so this banks between $50 billion and $250 billion could have compliance

reduction efforts and that is one thing. if you go to a laundry list of what the market is focused on my now, it is improving that interest margin, reduce compliance, lower tax rate and right above msr mortgage and bytes, but there is a host of outtives that will playo over the course of 2016. will be reduced mortgage banking origination, normalized provisions, so it will not be as simple as what the markets say today. david: if you're right, or does the market missing? where did that the hundred billion dollars come from? charlie: at the margin is what we call the general as opposed to dedicated bank stock investors and the general the weight the bank coming into the election and they are playing catch-up, so they are driving it. they buy on mechanics and partly concept and that is that higher rates are good but that is not the simple story. alix: so you don't buy it cheap? charlie: if you look out toward

june, you would. i the rally could continue into the new year. alix: the rally could continue into the new year and the really get ahead index? charlie: i'm looking at profitability to be seen in the first quarter of 2017 and over the course of 2017. alix: great to see you, managing director of research. if you have commodities and you don't get in over seo, $20 oil, or does that do for big banks and their books? david: everyone will have to recalibrate. of, opecaking objections. oil ministers increasingly unlikely to agree to a deal tomorrow. we will preview tomorrow's meeting and discuss the fallout. this is bloomberg. ♪

alix: u.s. futures granting higher this morning. s and p futures up and the dow up by 29 points. stabilization in europe, the

ftse off by .41% because of what .4 ofs with the pound -- 1% because of what happens at the pound. overall, stoke the world of dollar range bound. dollar-yen 112 and the yen looking at the worst month since 2009. of theking up a lot downside, off by 2.5%. the bpi is getting hit more than friends on opec prospering. -- wpi is getting hit more than brent. david: russia says it will not even attend the meeting. saudi officials uploaded the idea of not reaching an agreement. iran thinks of producing more, while iraq says they are optimistic about the crucial talks. they are shunned bonds, the dollar rally stirring up emerging-market bears. u.s.

investors on the most irish since six-year lows earlier this year, caused by china's currency devaluation and collapsing commodity prices. he willrump is awhen nominate congressman tom price for health and human services secretary, this has retired david petraeus is reportedly considered for secretary of state amid open infighting on trump advisors under to pick the the post. the general met with the president-elect yesterday in new york. alix: now to your morning must watch. david: very special. alix: in my opinion come iea says it opec cuts production from u.s. shale producers will race to put links to work in flood the market with more oil. the ceo of, continental resources, is known for standing aggressively at any cost. this time, he says it is different. looked at what their next project is and a big opportunity when it comes to oklahoma.

almost $2 billion cash to billion barrels of oil waiting to come out of the ground -- 2 billion barrels of oil waiting to come on the ground. harold: we like to think we are the champagne of oil. alix: over the past chair, it has become one of the most prolific shale areas in the u.s. it is not texas that it is oklahoma. it is oklahoma. we are 60 miles northwest of oklahoma city and here are three rigs drilling up to 12 wells over the next year. 1.5 yearsl invested ago, in the middle of the oil downturn. >> its returns are really twice what you see in pretty much any other place going on in the u.s. today. by comparison, the production there is succeeding. in-stat, we're saying less than 10%, and that means more than 90% is oil or natural gas. alix: oil will start flowing in

the first half of 2017. once this will start producing, it will produce as much as 2000 barrels of oil a day and as much as 3 billion -- 3 million cubic feet of gas. >> predrilled on vertically, we drove the curve, turned sideways, and drew 10,000 people horizontally. we finished up on this well, just shy of 20,000 feet in about 19 days. about 1000ell is barrels, maybe 1500 barrels a day. production would eat a nice well and these are doing two times to three times that. alix: the area is so pressurized, the continental doesn't have to work that hard to get the oil out of the ground. they have 186,000 acres of stacks and most of it is in this over pressurized environment. >> date is equivalent to or the company was in 2011. alix: you triple production. >> yes. alix: continental is not the

only one who noticed. fodor's pouring into the permian basin in texas, where there is $58,000 an acre, and some is finding its way to stack in oklahoma. >> whatever we would have taken, we are at 250 to 500 range. today, they pay $20,000 to $30,000 an acre. alix: it makes up 10 years in inventory for continental. >> it may be downside when you go to an area that is not as printable as the bucket. >> it needs to be and will be a big part of who we are in the future. been 65ally, it has percent of what we have done from a drilling standpoint. i could see it getting more 50-50. -- that hasr risk been aggressive in their scoop and stack and disciplined in the downturn. >> harold will not sell anything for pennies on the dollar's. the flipside is he is the

wildcat mentality perry to give the old men one dollar, he will drill with that dollar and that is tight end up at companies with more debt and the balance sheet. alix: this time, stark says it is different. >> we will be disciplined, watching the signs and signals in the market. we have tremendous quality assets between stacks and it will feel that for years. alix: that was my trip to oklahoma, taking a look at continental. my biggest takeaway was that u.s. producers will keep producing, no matter what. disciplined or not, they are in there. david: and they have gone so much more efficient. let's go back to opec, saudi saying they will keep pumping and drive people out of business . they got so deficient and that is why they are in trouble. alix: and that well is an unbelievable number, so how does saudi deal with this world and how do they deal going forward,

whether there is a cut in the next 24 hours? david: two miles down into miles across, amazing. alix: pretty awesome. you have the opec deal in the air, but what does that final breaded mean for shale producers in the u.s.? -- what does that final decision mean for shale producers in the u.s.? >> still do. alix: i have to. has it changed? >> the markets are telling me it will not happen, but if the economics are correct, number one, think about the saudi's. if they pump 10 million barrels a day at $45, that is $450 million a day, so that is $9 million at $55 and it goes up by $50 million a day that they make . if they can make it rise by cutting 2 million barrels a day and make the press go to $65, they make another $100 million a day or something like that. economics are right and they're looking to monetize from their

bond sales. i was human we talked about that, the 17.5 billion dollar bond sale and they want to do an ipo with saudi remco. that becomes easier in an oil environment between $50 and $60 as opposed to $30. alix: what also get easier is continental, they drilled in stacks. dan: there has been a lot of talk about this sort of golden range of oil prices, you get a better return for the dollar for the opec members but you don't incentivize the shale players. as he said with their interview, he said he is not going to actually be drilling all that aggressively at $60 for oil. i believe they learned their lesson in terms of the ability to raise production levels and how much it impacts oil prices, biting off their fit to save their face. -- foot to save their face. david: talk about the cold and range, over $50, under 60 dollars -- $60.

they can extract it officially at that range. dan: there are some core areas of efficient at that range, but when you try to add production, you will go outside the core area and that is with the progresses and it is not worth it. there is a golden area that they hopeush prices, and they they are smart not to get this huge influx of shale production immediately. alix: basic it is actually a backwardation in the curve. dan: who taught you that word? alix: you did. this is the five-year curve. this is what goldman sachs is looking for, so the deeper negative it goes, even cheaper prices today than in the future. if they can get back to the positive territory, it is better than the future, and that is in essence what you are talking about. dan: they're a good. alix: the idea is, how did they do that?

inventories have to drop to get that. there is a rebalance. the saudi's have mentioned that even without a production cut from opec, there is rebalancing that continues to go on. we have a drop in u.s. production, close to 700,000 barrels a day, and at this point, it is close to one point 5 million barrels a day. production added from iran and the, i think there isn't that pushes it that much further. in the end, they will be some kind of production limit because it doesn't impact anybody all that much inside the opec coordinations in terms of production ability. david: there will be a rebalancing but when? our inventories really coming down? dan: they're coming down slowly. that is the point. again, this has always been the problem. when i first started studying this in 2014, when the best happened, i thought it would you

huge bust, tribe a lot of drive a lot of players out of the business. in fact, you have a shortage that would be appearing at this point in time. now, we are having a u-shaped cycle going on, so rebalancing is much more slowly, at least when you're behind what i thought it would be. qaeda's wife the sound is really needed production cut now. alix: that is like the saudi's really need production cut now. all of a sudden one year later, we had this exact same conversation. dan: that is true, but that the monetize assets in 2017. at least not right now. that rebalancing process, even though it is slow, time is what is needed. if they get their production

cut, that natural rebalancing move, that the general market is making, will make the difference into the last half of 2017 and 2018. i think six months is all they need. even if they don't get the drop of help from iranians and iraqis, they were cut the 2 million barrels themselves. it makes economic sense. alix: goldman says there is 20% chance of a deal. you just need to make it to the back half. david: irony i wonder is because it is so known how badly the saudi's needed, does that make it more difficult for the deal? iran is saying, we know you have the deal coming up, so that makes us tough enough positions. dan: the dynamic has changed. the saudi's have all the cards and everybody wanted the production, but they said they would flood the market and you can forget it for another year and now the shoe is on the other foot and the iranians hold all the cards and they can be as hard wall as -- as hardball as they like. if we get a deal, we see a

sprite in prices to what and what shale producers do you want to buy? spike over to see a $50. i think we will see that sweeps on around $55 and the show producers i want to have a rebate -- i want to heavier bader players, so continental, and higher bader names, baby oasis and even noble -- maybe oasis and even noble. david: always great to have you. alix particularly loves it. alix: [laughter] david: dan dicker, you can catch more from him during his webinar at dandicker.com. with thex's interview ceo later on this program at 9:30 eastern time -- michael 45 eastern time. the president -- 9:45 eastern

time. . the president-elect fighting over should be the next secretary of state. special coverage on the robin hood conference later, including with the starwood capital group ceo. this is bloomberg. ♪

emma: this is "bloomberg daybreak." coming up, details for men partner at case capital, live from the robin hood conference at 3:45 p.m. eastern.

alix: breaking news today, the african national congress secretary general is speaking in johannesburg and confirmed the south africa's president was asked to step down at the national executive committee but did not support the call. we are seeing the market react, the dollar range bound when it comes to the ren. they ran is getting hit, secession those off by about 2.2% versus the dollar on that. calls for zuma to assign a closed matters and the rand had rallied and seems to be reversing today. david: the real world version of "the apprentice" taking place at trump tower as having selections continue when retired david petraeus met with donald trump yesterday. here is what the meeting. about oneith them for

hour. he basically walked us around the world. showed a great grasp of the challenges that are out there and some of the opportunity, as well. very good conversation and we will see where it goes. joining us for more on trump's cabinet pick is marty shanker, bloomberg's senior executive editor for politics. then use this one had to do it health and human services and congressman tim price. tell us about that. marty: he is a favorite of the tea party, unlike others who poorjust called generally obamacare to be repealed, he has proposed legislation to do just that numerous times, so he has very specific ideas about how to pick obamacare and he is a surgeon, so he has real-world experience dealing with health care. retirede is a

orthopedic surgeon and an outspoken advocate for the dollar -- doctors position. he has advocated privatizing and relying on pre-enterprise. is this the new plan that the health care industry will take a look at? marty: that is what he plans to propose, something donald trump thinks [indiscernible] the problem is caused. he wants to move much of the oversight of health care to the states, away from the federal government, and there has been uneven results when you try to push down the administration of health care to the states. david: let's go back to the secretary of state position. he have this tool going on between mitt romney and rudy giuliani and then dark horse, david petraeus. tell us how likely that is. marty: a number of people think he is like a safe choice as an alternative to either romney or rudy giuliani.

trumpally, i think donald emotionally has this idea that picking romney would be a great thing to do. theill think romney is front runner. he is meeting again with donald trump today, which suggests he is looking for your sleep at mitt romney. david: he has this backfired going on with his own team, kellyanne conway publicly saying she thinks it would be an awful thing. saying she thinks it would be an awful thing. marty: it is unclear whether killian was speaking for herself ne wasn'tr kellyan sticking for her supper donald trump. it was a strong condemnation of him, and there is a difference of opinion. donald trump will make the call. david: donald trump did tweet how much enjoyed meeting with david petraeus. the retired four-star general, led the search, and at the same time, had legal trouble with confidential documents. barrier tose a

confirmation? marty: it will come up in a hearing if nominated. his sharing a confidential information to someone he was having an affair with will be related to the hillary clinton email issued that donald trump championed in his campaign. ultimately, he is so well respected then i think you would get senate confirmation. david: some of the people have pointed out that it is an interesting contrast, david petraeus stood up, took his medicine and admitted he was wrong, exactly what hillary clinton did not do, according to donald trump. monti: they're making that argument, but it would he on his merit for secretary of state and i think you would get senate confirmation. david: marty shanker, bloomberg senior executive editor for economics. alix: time for other stories making headlines. here is emma chandra. lyft as one added legal

anions that has led to airline flight, and it now poses a threat to the german earnings. for the fifth time in seven days. in the u.s., the federal judge holdingnded the order, packages for amazon. the strike is disrupting deliveries during the holiday rush. pilots have been told to stay on the job until december 7. the judge says it may be extended to december 21. some of the world's biggest automakers will join a european network of fast charging stations, electric cars. andncludes bmw, ford, mercedes-benz. they want to establish thousands of charging stations on european highways by the year 2020. that is your bloomberg business flash. this is bloomberg. alix: thank you.

they areachs says pricing in a 30% chance of reaching a deal on wednesday, a 6% price move on wednesday, as well. this is bloomberg. ♪

oil prices and up steam to the downside. off by over 2%. this is the deal, you have the poker been continuing within opec. saudi arabia saying they could buckling away from a deal, but iran and iraq calling their bluff. iran oil minister saying the oil output for iran is important to the will of the people. here is a chart to break down the issues in the market when it comes to the oil deal. the big question is if we do or

do not get the deal come what happens to the oil price? i have heard numbers as low as 20's, but that is a confusing point. brent the white line and is the blue line. bright around the could ties. brent at the record high. what if we see some kind of short covering rally if we get a deal and how steep can it be? the question, what happens to u.s. shale producers? this really is the saudi's worst nightmare, this is the correlation between the old oil prices and the oil rig count in the u.s. 5.1 butsitive barely, the idea is as oil prices rise, you have shell producers at riggs, particularly in the permian basin in texas and at the stocks in oklahoma. if you see an increase in riggs, you will see increase in production. this is the correlation that

makes the saudis a little bit nervous. the big question is the curve of oil. this is the one month and five-year curve of brent. the lower, the more you have prices a lot cheaper today than the future. when it rises, prices are getting more expensive now than the future. if it gets into positive territory, that causes backward nation and backward it is not only to put producers out of the business of patch incomes of the cannot lock it into the future, but it helps low cost producers fund themselves, and this is what saudis are focusing toward. david: next hour, we will talk oil. harold will be right here. this is bloomberg. ♪

david: welcome to bloomberg

daybreak on this tuesday. welcome back. we are live from bloomberg in new york city. jonathan ferro is often a. alix: u.s. equity futures are higher. flat,x is relatively making up from losses earlier in the session. that has to do with the stronger pound. it you can see the pound is moving much higher against the dollar. the dollar-yen is going nowhere fast area the dollar is up by 1% against the yen. the story is crude. it's now off by 3%. david: we start with that story, which is crude. opec is what. they are far apart on an agreement to cut reduction. washington says they would attend the meeting. i ran to examine.

iraq says they will be optimistic about a deal coming out of these talks. the dollar rally is stirring up those emerging markets bears. filling comes cabinet, donald trump announced he will nominate tom price for health and human services secretary. david trias is reportedly being considered for secretary of state. there is open in fighting over who should have the post. the general met with the president-elect yesterday. that's what you need to know it is our. alix: oil is off by 3%. joins us from london. what happened? you had oil off by 1.5%.

now it is double that. what happened? bill: not a huge amount. i expect traders are waking up to the fact that there has been very little progress. iran,in parties are iraq, saudi arabia. you guys can't take a deal with greenleaf. we are less than 24 hours away from the ministerial meeting and huge problems remain. alix: there are two scenarios a complaint out. they want to regain the upper hand when it comes to negotiating. saudi's trulyhe believe they want to walk away. what camp has validity? will: i think people are leaning toward the second scenario. we have seen a lot of commentary that says we think this deal could fall apart. there is only a 30% chance that

the deal is happening. that feels about right talking to people on the ground in the. not owing to do all the work here. we are not going to see them make a cut on their own without help or mother people. unless that is fourth coming, there is a significant chance they will be willing to let this thing fall apart in -- apart. david: it feels like to me the saudi's are letting the deal walk away from them. their partners are moving the other way. iran says we want permission to reduce more next year. iraq is not agreed and how much they are producing out. is there a deal at any level? will: i think there is a deal out there. iraq needs to make a small sort of token cut. that deal is probably there to

be done. the real question is if that is a deal worth playing or if they are better off letting the market do their work. i do think we will answer that question as we have the saudi energy minister in tomorrow. exciting 24l be an hours. with opec not agreed to a deal tomorrow, would we see a further selloff in oil? what does it mean for risk investing overall? hearing calls as low as $20 of we don't get a deal. >> i think you can't put a number on the oil price. as before. take back to last january. we saw the markets coming off aggressively. you saw the pressure on the opec countries.

divest andd to diebold some of their things. if we do see those oil prices go below 45 and back down to 35. i think it's very important. it's one of the reason why the u.k. is up. david: let's turn to europe. there is a lot of risk going on before they look at $20 oil. there is political risk. ian: we still want to be underweight in the eurozone. political risk is high. going into this italian election referendum this weekend, i think we would say just be nervous about that. we don't think there is going to be a major implication because renzi is not going to want to resign and have a general election. there might just be a government

that in place. the uncertainty is going to be there. risk premiums stay high. alix: if you get $20 oil, that just feeds the beast what if you get a deal and you get $55 oil? clearly, you've got a lift in the oil market and you get some of his commodity trades coming in. we will probably see something in the market area -- market. i think we would still be nervous about the impact on economic growth. stronger oil price in the eurozone is going to depress economic activity. david: you study risk. where do you put the risk at right now, of the euro. ian: we have been very strong over the last few years. we have said there was only a 15% risk. than atere is more risk

any time we have seen in the past and i think that is the big challenge that europe has to confront. they either pull together and strengthen itself or else the risk of it increases. alix: take a look at the bloomberg here. you can see the spread of rising there over 100 basis points. is this enough? ian: while we wouldn't be looking at the italian german spreads, u.s. treasury spreads ought to become closer. there is more risk here than in that environment. david: i find this fascinating. there are forces forcing countries away from each other. that spread went down. now it's gone up. that is the market saint we don't take you are all that united. ian: that is the case we would highlight. the italians priced in that risk.

we would have a trade on this in spain instead. david: thanks so much. he is a chief investment strategy person. he will remain with us. at news. a look emma: a plane carrying 81 people including a top silly and ball team has crashed on its approach into medellin in columbia. five people survived. jet was carrying the brazilian first division soccer team. the plane was a few minutes from landing when it reported electrical problems and declared an emergency. investigators are looking into an account from one of the survivors that the plane ran out of fuel. the embattled president of south korea has offered to resign if parliament decides that she should. she is caught up in an influence peddling scandal in her approval ratings have fallen to single digits. she apologized for the third

time since the scandal broke. think she lawmakers should be impeached. president-elect donald trump has named a staunch critic of obamacare to be be secretary of health and human services. is also anf georgia orthopedic surgeon. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. alix: equity futures are out a mild gain. brent is off by 3%. europe is down to $47. this is all getting hit. you, get itl up for negotiators spent 46 hours meeting and note deal happened. that sums up the last few days. the commodity rout extends into

some of the base industrial commodities. you can see that in the steel stock during u.s. deal is off by 3%. copper has its first down day in london. it's the first and about seven days. its rating on steel stocks. one earning name that is trickling out for the bell is tiffany. it beat the sales. it did that are in u.s. and japan than expected here in stores were down 3%. that was better than estimated. i was fascinated to hear what they said about the flagship store here in new york. a lot of luck aides are around the area. they don't know yet what the impact is of those barricades. david: you have to understand, the tiffany building is exactly adjoining come power.

there are barricades up. leads the way in november. there is a selloff in treasuries. later, harold hamm tells about his plans to adapt to a surge in oil prices. this is bloomberg.

david: this is bloomberg. in the three weeks since donald trump was like we have seen equity markets it record highs, the dollar strengthened, and bonds saw sharply. is this sustainable or an additional overreaction to a potential upside? in is still with us. memorex? al or

are concerned about is the reality that we have today is expectations have gone up. the currency has gone up. that's a monetary tightening. we have this easing that is driving the market. world, ifeturn it you've got profit in some of these sector trades, now it's a good time to be taking some of those profits. to back up your point, look at this. alix: this is negative territory. it's interesting because if this was a macro trade, this would be positive and not negative. shift, youget regime see correlations change. if we move into a stronger growth world, that's going to take you into a world we used to see when on fields though up.

in the last few years, we have been this world where if on yields no down equities go down. now, the question is can you sustain that? can he get growth going and employment down and driving up the economy? david: strong growth and higher inflation. we hope those come together, but they don't always. ian: with unemployment at such a low level in the united states, are you reaching capacity constraints? do you get inflation before growth? we know that is dangerous for equity valuations. a lot of investors are excited about these tax cuts for the corporate sector. how you value those earnings is the critical thing. when inflation goes up relative to growth, that kills equity valuation. david: i wonder about two

factors. one is trade. also frankly, immigration. he is still talking about 2 million people being supported. those are workers. ian: when you get that capacity in the major market, that is going to affect wages. thislly if we get regionalization along the supply chain that has allowed companies to reduce, we will be paying more. alix: you saw a 10% correction in equities. ian: that was three months ago. about down from the point we were talking then. it was such a short-term view. i still think the riskier is that we actually get more downside risk. unless we get trump actually

delivering that growth and unemployment declines. equities lose out relative to bonds. that has been the lesson of the last years. david: does that mean equities think wealued? ian: i are getting to a point where they are overvalued. unless you get much more momentum, i think it's going to be a dangerous place. i would not be chasing this rally. i would not be chasing stocks at this stage. the rotation, but a different one. ian: it may be the start of a great rotation. alix: great perspective. thank you very much. production cut a from opec cause shale producers to flood the market with more oil. we have an exclusive interview next. this is bloomberg. ♪

alix: they are picking up steam to the downside. iran and iraq are calling saudi arabia's bluff as saudi arabia pulls back a potential deal. they have 24 hours to make it happen and markets are anticipating less and less of a deal happening. we are focusing on energy. the ia has said that if opec cuts production, she'll producers will put rigs to work and flood the market with more oil. --y are known for being a this time, he says it's different. i sat down with him at continental headquarters earlier this month and asked him how the company's plans to stay disciplined if we get a world of the dollar oil. >> we would have no intention of employment a lot more rigs.

we are fairly act. we are an active operator now. we cut down to 19 rigs. alix: at 65, you're not adding 10 rigs. harold: there is a time where you might add a rigged or two. 65, that's the bend. what about the drills that are on completed wells. wind you start adding that? harold: we wanted to do a couple of things and we are doing that. play --ply and the demand balanced, that balanced in the second quarter of this year.

just as we predicted would. you can see it coming and basically calculate it out and it balanced. that alan's is there. prices that more stable are going to be the result of that. there is an inventory overhang. we have seen that come down drastically. that's coming down somewhat faster than people thought. we said when that occurred, we would start completing. that's what we're doing. alix: after you complete the wells, how do you go reduction? what's next? harold: we have a lot of good value in uncompleted wells.

we call it oil in the bank. as that production comes on, that will be there in 2017 and 2018. years of have two money in the bank. when you take a look at growing production after that, what kind of oil price do you need to see? harold: we have been growing production in some areas. we needed a better price for it. we have an growing production in southern oklahoma. it's been an offset in some of the decline we have had. stack?f you can do scoop harold: that's correct. we are in a different

environment here. very lucrative production. we probably before we put rigs of 60., we will be north minimum you the need for steady production? harold: we've done well at the range we've been in. we had a bare-bones budget this year. we need about 1.3 to have some growth in production. it's not a great deal more.

it all depends on price. that's what you can do with that. priority? those are your for options with the extra cash flow you are going to get. how do you rank them? harold: we are in expiration company. that's what we do. we try to do it within a cash flow. debt ratio that is acceptable. it gets on the high side if you're not careful. environment, we sought

to lower that some. we have been very effective. alix: production on that dividend is not going to happen? harold: no. david, on my trip, i learned they are moving and expanding. david: you wouldn't expect anything less. he personifies the wild that in america. alix: he has been right for a long time. coming up, emerging markets come out of hibernation. investors are betting against emerging markets. that's next. this is bloomberg. ♪

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that's a different story than monday. see how long equity futures can stay firmer despite that excel off we see in the oil market. in europe, we see the witness in the ftse. that is well off the lows of the session. oilhe currency market, continues to slide. this is the first revision to third quarter gdp can't. it came in at 3.2%. for the prior readings, gdp was to .9%. that has been revised higher. i want to look at corporate profits. what we werefirms saying. it's not just trump. a lot of this direction was happening before the election. things were turning north before the election. alix: that is an election --

good point. i am trying to find the correct number four corporate profits. up i 6.6%. in the second quarter they were up i 6/10 of 1%. that was a big game. on a yearly percent, it's up 2.8%. keep an eye on that as well. take a look at the market reaction. futures are holding on to their gains in the two-year yield is higher, up by one basis point. david: nice job. we're going to hear what he banks are looking at today. we are talking emerging markets. u.s. investors are the most harris. then it was china's currency devaluation that collapsed commodity prices. it appears to be the election of

donald trump as the next president. stanley,e from morgan e.m. currencies will likely threat. triple bear york isus now from new morgan stanley's head of emerging market strategy. explain it to us. the reaction of the emerging market bonds was negative. you think there is more to the stories and that. basically, you mentioned the externalities we have highlighted, the triple air threat of interest rates. we will think they will go up in the 10 year. we have the dollar correcting i about 6% next year and on top of that, we have the uncertainty

that has been created through the election. 2016 was a record year in terms of influx into the asset last. we think investors are exposed. to, a fundamental respect currencies look at her now. countries have done their homework and they have adjusted area we see current accounts the climbing. from external vulnerability perspective, the men -- e.m. looks healthy. we can avoid a disastrous selloff like we had seen earlier , as early as 2015. david: there is a race going on between the fundamentals and certain em countries and the results of the election on the other. what are you assuming about what the trump administration will do as opposed to what is anticipated? gordian: our best case is this

is going to be some measures that will affect global trade. as thenot be as severe campaign rhetoric has indicated. the problem that we see for emerging markets ended esters is there is going to be a long time of uncertainty. measures't think trade such as negotiating trade with beico and others is going to done in the first 100 days. we think it's that uncertainty that will keep investors on their heels. alix: when you have that uncertainty in the market, are you distinguishing between high and low yielding markets and which make it the most? gordian: the separation goes a little bit deeper. we like high-yielding, but we also look at idiosyncratic

stories. we continue to like brazil. that is an adjustment story, a double-digit yield. we like russia. it has a strong anchor. like easingies cycles priced into the curve. david: let's talk about a couple of those. we are mindful of the opec meetings and we thought the depended on oil. how sensitive are you to what happens in opec? gordian: opec is a risk. our best case is oil prices will stay in the 40 range and then drift tired to $60 by the end of next year. any deviation from that would take countries sensitive to that. russia doesn't really come up on the top of the list. they have learned to live with the sanctions.

we would actually see the likelihood of a credit event next year. about you upside? if you have $60 oil, what do they do with that money? do they say that? strongerend it with a emerging-market world? gordian: a lot of countries have been challenged on the physical. we have talked about the external adjustment on the domestic front. we find that a lot of countries are quite volatile. it would give them a little bit if oil wereng room to pick up in a meaningful way. we would appreciate that as a credit support mechanism. david: take us to the fx issues.

saying let's invest in hard currency, not local currency. gordian: we expect the dollar to strengthen and are certain vulnerabilities on top of that. if you are looking at the fixed income investors, you have a choice going into local currency or hard currency. it's going to is be fully absorbed by the negative move. there will be a steepening of the yield curve on the back of the higher. for local markets, we are now looking at a 2017 year the is you zero returns. external, you don't have to contend with the volatility. it's a cleaner story.

we think investors will be able to generate 4% on return, which is the difference. alix: thank you very much. coming up, it is opec's reality with oil slipping below or six dollars a barrel. they have one day to go until the meeting in vienna. hiswill be joining us with insight into what's happening in opec. check out the dollar. we have a third quarter gdp revision coming up. consumer spending and it consumer profits jumped 6.6%. this is bloomberg. ♪

emma: coming up in the next hour, investment officer joins us. alix: we are focusing on energy this week, this ashley opec's great divide. there is one day before the finalized production cut. things looked shaky. russia, has extensive a woman joined join talks in vienna tomorrow. iraq and iran continued to resist cutting output. saudi arabia may not reach an accord before leaving. what is the strategy for opec over the next 24 hours? we are

joined by tom petri. ,, take us behind closed doors. what happened in the last 48 hours? the comment you made, the bluff is being called. it was very counter intuitive back in september that the saudi's put on the table the idea that there were disproportionate cuts. they really weren't getting anything for that. that has been read as a sign of weak us. i wouldn't overdo it. wants tothin opec dramatically lower prices. i think the risk of it going down and staying down is quite low. basically, the saudi's i think you have an analytical case to argue. six to 12 months from now, this

is going to look a lot different barring a real global slowdown beyond what people can see today. if that is the case, we are close enough to balance. continue. we are really going to navigate the next six months to get to that position. david: take us to the dynamics. you never want to go into a negotiation if you can't walk away from the table. can the crown prince walk away best and mark if he doesn't get a deal, what does that do to the deputy crown's the prince. the crown prince has been very quiet. the deputy crown prince has put a lot of personal reputation on the line. he does have other plans. the whole program about

diversification with chemicals and the ultimate goal of bringing a portion of saudi public in 2018 is part of what he wants to do. that is it really in jeopardy. i really think he's got that option. he may well want it down in the low 40's as a way to remind everybody that it's in nobody's interest to do that. i don't think he wants to reciprocated unnecessarily. saudi arabia can handle it. you had some leon earlier today. the urgency from the saudi's when it's anywhere between six and 12 months in their grasp. tom: that's a really good question.

i have used a time where saudi arabia may know they are experiencing a degree of irreversible decline in their big fields. their openness to a that, a way to camouflage if you will. that is speculation. that may be part of your dealing with. in any case, i think we're going to be working to a higher price, but at a slower pace than we would of thought six months ago. alix: if you take a look at the bloomberg here, there is a seasonality to oil production. this is the five-year average. that just by normal seasonality, that will equate to as much as a $300,000 there'll

cut. it might happen anyway. david: they really don't have to change anything. take us to the other side of this. are thereof pressures on the iranians at his point? -- this point? tom: especially with the u.s. election out,, that some of their agreements on the nuclear accords may not be quite as strong as they thought they were or would of been under the other candidate. is iran is basically producing all it can right now. are of the numbers withdrawals from inventory. iran is more relevant in a three-year time when they can bring in some

foreign capital to develop new production. -- the argument that has been made is the saudi's are willing to say you can produce up to 3.7 million barrels a day. than 3.9.more daye is a $250,000 barrel a difference. i don't think they can get there and sustain it. they just want the flexibility. alix: it's going to be hard for opec to not come to a deal when they have been talk it up for months. what might we actually get wednesday? like?s a light he'll look tom: nobody is cutting but the saudi's probably. maybe others are making it sound like they are. ofwould be the standard case

saying one thing and doing another. right now, the propensity to cheat is focused on russia and since they are not going to the meeting, it's not really cheating. russia is up by 300,000 barrels a day. it's not clear to me that they have a lot more to bring on right now. they do have lands over the next two years to bring on another 600,000 barrels a day. those are fields that are yet to be completed. about becoming like the cheating we saw in the mid-80's where there was sleep rocking to shut in production. we may get a little bit around the edges. the other main party that has the notion of production is iraq. they have a few other distractions still going on. not, this is not

directly analogous to the mid-80's. situation where going to your question the outcome tomorrow could be a very nominal deal. the saudi's decide to support it. they contest with the others will try to test them. david: assume you are right. tom:o the markets react? somewhere between mild his appointment and a you on. i don't expect anything that is going to drive it to 60 in the near term. what they would really need to buy six months of time to let global growth show itself and we find out about decline and then we have a much better take on what the situation is. next spring is a real test for opec. alix: thanks for your insight.

great stuff. interview catch my that is coming up in just an hour. it's time now for other stories. emma: tiffany posted third-quarter earnings of the estimates. the demand approved in china and japan. three market may improving around the world. tiffany had been contending with weaker spending in asia. a federal judge has extended the order halting a strike by pilots. disrupttened to deliveries during the holiday rush. the pilots of been told to stay on the job until december 7. a former citigroup trader says the bank turned a blind eye to misconduct when.

he is suing the bank in london for unfair dismissal. colleagues would disclose arrivals if he benefited. he expects employees to it here to the highest ethical standards. that is your bloomberg business flash. david: coming up, pricing in political risk. how the market is preparing for italy's referendum vote this week in. it's next. this is bloomberg. ♪

david: i want to tell you that oil is lower right now. they are coming before the meeting to say they are not cutting production. they were never asked to production, just freeze it. oil is not likely.

we're going to turn to battle of the charts. lisa is joining us. lisa: i wanted to take a look at how much investors were pricing in the political risk of a no vote in the referendum in italy. you can see the blue line is the value of an index of non-financial brick bonds. this is germany, italy, france. these are the biggest economies of the european union. you can see this has climbed this month. possibly .8% are in it's not a massive decline. it has been a much a good decline of the non-corporate debt. this is italy. this is portugal. these are the less sound economies in that region. this has declined twice he amount of the non-peripheral

areas. this is from a bit of pricing and of the political risk from what's going on in italy, a possible exit from the european union. this is an increasing possibility. is this pricing in? there is a position for you david: it does illustrate the tension within the eurozone. it really puts a lot of pressure on the euro self. i amis one chart and alix: taking a look at the oil price. the blue line here is your generic brent pricing. you have seen a downturn in the last few days. there has been a rally over the last few weeks. this white line here is the spread. this is the six-month spread. it has been significantly weaker than the actual oil price. the fundamentals in the market

as illustrated by the spread means we are looking at a much weaker market. this is important because this is what the saudis want to address. this is where the speculative action is. you just look at the price. david: is this related to what you were talking about? alix: yes and no. that would be helpful. david: lisa wins. hour, next and the next this is bloomberg. ♪

>> welcome to bloomberg daybreak. it is november 29. i am alix steel alongside david westin. jonathan ferro is off today. u.s. equity futures losing a little bit of steam as you have oil continuing to slide lower. 1%.ftse off by 6/10 of this is the story of oil. crude oil off by almost 4%. will not accept any kind of oil production cuts in the currency market. you are seeing a relatively stable market. the end of the 1%. david: starting with that oil story, opec split. on anals remain far apart agreement to cut oil production while russia says it won't attend. officials have floated the idea of not reaching a deal at all.

iraq is optimistic a deal will come out. bonds under pressure. treasury suffers their worst rout in 15 years after from's victory and they are not quite convinced the worst is over. donald has announced this morning he will nominate congressman tom price for health and human services secretary as .etired general david petraeus the four-star general met with the president-elect yesterday and that is what you need to know this hour. alix: it is not just oil prices on the downside but industrial metals as well. aluminum off by one and a half percent, zinc off by 2%. the biggest downside could be copper and lead as well as nickel. not necessarily fundamentals, .hat hurting metals as well

in individual movers, we do have an upside. better sales out of u.s. and japan. carnival, that stock off by 15%. up, the store industries up by 10%. rv makers did by arrival earlier. these stocks on the upside. of a homebers out prices and they are mild disappointment. month over month they went up .37%. the us was 2.4%. was expected to be 5.2% and there was a slight revision downward from last month. it was originally 5.13% as opposed to 5.06.

earlier today, about gdp religions -- revisions, above what was expected. will kennedy, managing director and editor for european and middle east and africa commodities joins us now from london. it seems like every moment someone is coming out with some statement another. where is the state of play? >> we've got the oil ministers themselves. they are arriving in the anna thewe saw in the uranian -- a huge, that is not supply. when they cut production they want room to increase but they are clearly digging their heels in. saudi arabia need some kind of participation for iran and iraq.

some kind of compromise allows saudi to save face and iran to tap production but not cut it. alix: on those headlines, saudi arabia says they are ready to reject the deal unless all opec members except libya and nigeria participate. the algerian minister says, hey, talks are pretty good. we are making progress. what would be progress at this point? >> i think the algerian take is a little optimistic. it is going to come down to the meeting tomorrow at lunchtime when we have them sitting together and can they agree to a level of uranium production -- thatanian production allows them to cap it and satisfy saudi demands.

we've got the rock, which is consistently cutting production, that is participation as well. walk out ofill tomorrow's meeting with a deal but what the saudi's have been saying all week is that they are not going to do all the work. carry on pumping. alix: that leads us to the potential downside. by 4% energyff aspects but the downside potential and 20's. what are you hearing? >> what we have seen today is people are positioning themselves because of this change in tone, this bearish sentiment, we are seeing a lot of activity in the options market if a deal doesn't happen so we could see a selloff.

where that ends the fewest online will depend on the assumption of the market share , and this will be really disastrous for the market, people start edging up production again. david: will is our managing editor for europe and africa. he covers energy and commodities. we could see oil prices fly. as $20.aybe as low what does it mean for investors? lisa shallots, welcome back to the program. ift are the practical effect we do see oil fall below that $40 mark? >> we think it is critical that we get a deal and we do think we are going to get one. if we don't, given how quickly

rates have moved and how strong ae u.s. dollar has gotten, very weak oil price would actually hurt global financial conditions. one year ago, we had a strong the fed raising rates in december and oil prices were very weak and one of the things that conspired against markets were these very tight financial conditions. if oil prices actually breakdown into the 30's, we could find ourselves in a little bit of that market stress we saw literally one year ago. it is part of the theme we see in the last few weeks, if you have oil prices fall, does that killed the inflation thesis? >> i don't think it kill the reflation piece. low prices are great for consumers but emerging markets really do need more stable oil prices.

i think the saudi's are going to "make it happen." david: you set up these portfolios. but ifs no one factor you take one, does it mean it is good for bonds and that for equities? off, youcould go risk don't get an oil deal because oil could really exacerbate that strengthening of the dollar if oil prices crash through that $40 mark. when we have a strong dollar or quickly,dollar too that could hurt s&p 500 profits. david: you are expecting a deal of some sort. so we are going to have a $30 oil. of donald trump selection, it is fair to say, how real is that?

>> i think we understand the sentiment has clearly changed with the surprise outcome of the election but what we have really been focused on is the fundamentals. morning that u.s. gdp was actually revised higher and since october, we have seen a strengthening in overall economic data and that has really been what is driving the s&p 500 earnings estimate higher. one of the things we focused on, we were looking at an s&p 500 earnings per share of about one dollar 20 -- 120, 125 or now is moving 130, 1 35 which supports 2300 on the s&p 500. alix: yes, we've got the best gdp growth since 2014, we are also getting a stronger dollar on the back of that, what point does that cycle through financial conditions? >> it has but it has not been what we saw a year ago. it is because of this oil being

splashed in. if we get a very strong dollar in very weak oil, that combination -- which we haven't had in this last three or four weeks -- oil has been range that could break things and thought this rally out -- and thaw this rally out. alix: now for an update on news outside the business world, we go to emma chandra. >> in columbia authorities are trying to figure out why a charter jet carrying a brazilian soccer team crashed into a mountainside. five of the 81 on board survived. it was carrying a professional city.o game in the the crew declared an emergency. investigators are looking into an account from one of the survivors that the plane ran out of fuel.

government officers in cuba will be cleared for a second day of memorial. hundreds of thousands of cubans have been bidding farewell to their former leader and pledging allegiance to his ideology. donald trump burning the u.s. flag should be illegal. in an early-morning tweet he said "nobody should be allowed to burn the american flag. -- if they do, they should be consequences." the supreme court ruled that it is a form of political expression. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. alix: we do want to follow what is happening with oil. prices off by three and a half percent. now slipping into negative territory for this session.

here are the headlines that caught everyone's i. iranian oil minister says they will not touch production. they will only accept exemptions from nigeria and libya. they are ready to reject the deal if iran and iraq do not participate. david: we have a bumpy 24 hours ahead. every minute, things can change. ,oin us next is chris ailman owner of the largest pension fund. what is his strategy to find yields? this is bloomberg.

>> in the two weeks since donald trump's victory, investors have pulled $10 million in u.s. bond funds. worst of the route over or is there more to come? ,oining us now is chris ailman ceo of the biggest pension fund in the u.s., and with us is lisa shallots. ?s the 30 year bond market over i think it is >>. that about three years ago at the conference and was dead wrong. that long-term channel we have been in, i think that we are starting to see it had towards breaking in the upside. i think the long-term route is over. david: we are going to have a president and house and senate all of the same party. >> it might lead to some level of inflation. the world is more concerned about global deflation

before this. we are going to break out on the upside which is that for bond investments. >> if we are crediting everything to this trump win, -- this is my favorite chart of the day -- this is a bond and equity volume. if this really was a macro picture they should be highly correlated. >> i think as we talked about before the break, clearly, trump is driving sentiment but the fundamentals are still driving the bus. the fundamentals have been much much better in terms of economic growth as we saw with the gdp numbers. you see in the last couple of weeks, at a retail sales. housing starts. this is an economy that is slowly but surely powering forward and quite frankly, the

inflation data is -- again -- in a very lopez inching towards that 2% on target. we do believe that the underlying economy is normalizing and you are starting to see markets normalize along with it. weeks, theast few market reaction is basically two years with janet yellen's tightening. now, we have gotten that priced in which i have been arguing for years -- we need to get back to normal interest rates even if it is just 3%. >> as lisa points out, inflation data was started at just four dollars. but my question is, is that true in europe and asia? we seeing divergence in terms of the economy. >> we thought that was going to be a central bank divergence last year but now we are coming back to where we will be tightening.

i can't forecast what the uk's going to do but the u.k. and asia have to stimulate that economy. with opec in chaos we are not sure what will happen. i am saying is inflation is going to be high but it is going to get off the floor at least bem zero to two, which would helpful for the economy and change of the reception for long-term investments. alix: how do you place central bank divergence? >> i think what we would say is that what we want to do is have a global portfolio. because one of the things -- while we love the u.s. we need to be very careful that we are in the eighth year of u.s. equities outperforming the rest of the world. the u.s. dollar is beginning to meaningfully reflect that fact. it continues to strengthen and these weaker currencies outside the united states are going to

help some of these economies. to seepe, we just start our first positive inflection in earnings. european company earnings for the first time in five years. we are hoping for some hopeful news out of japan. so we are encouraging our clients to globalize. it is easy to fall in love with the u.s.. we all have a home country bias but we think there are opportunities in 2017 outside the u.s.. >> it is currency, currency, currency. that has been the volatility story and it is going to be going forward on an infinite rise bond yield. put this in your pocket. look at some of the currencies. it really is off the chart. most of the investors watching this show, we have a home country bias to the u.s. canadians are having a huge

impact on them and if you are in europe or a nation based fund you have to pay attention. david: what more could you want them chris aleman doing your work for you? >> thank you. david: thank you so much for being with us. still ahead, more with chris ailman on where he is finding returns. that is next and this is bloomberg.

alix: continuing to track these breaking opec headlines, crude oil is down. some are trying to talk it up. making the meeting successful, the uae minister says he is optimistic but iran is really putting the spirit in that saying they would not be cutting production. the saudi's say they will not david:hout iran and iraq .

you could put this in primetime. now we are going back to pension plans. earning 1.4%. that is the second consecutive year. --an interview in october this is unfair because it's before the election -- chris says "we chris ailman think you will see returns and a lot of accept classes -- asset classes." david: do you want to amend your statement? >> i do but not just because of donald trump. it is more of the bond market reaction and the fact that we are going to have, potentially, with a different white house and a different congress, a different plan in the u.s. and in the globe. after jim, everything changed after brexit. here we arey, almost six months later and we don't know what is going to

happen in europe. i don't know what happens in the usa even six months from now. we are talking about actions in washington dc. it is going to leave investment opportunities. we could easily get a 7-8% return on that equity. we are going to see some long-term investments, particularly private equity and infrastructure can be an opportunity for long-term investment. david: brexit was a risk situation. this appears to be a risk on situation which appears to drive up equities. does that change your investment strategy? > it does not change our investment strategy. we have a 10 to 20 year investment horizon and i would encourage anyone out there with a 401(k), you don't want to make wild changes. but we have a long-term asset allocation.

all this does is change our rebalancing policy. we need to create liquidity, how quickly and what do we sell. in the emerging markets, we are slowing that down. we are just slowing down our purchasing and moving away from the home country bias. that was our long-term plan. david: so the rebalancing, you are looking at it as more geographical than asset lasses. -- asset classes. >> within asset classes we are primarily launched from investments. usaave real estate in the for the past year and we will continue for the next couple of years in terms of still buying collectively but selling more than we are buying. investors, we are investing more there and

reducing that portfolio. investor,a long-term it doesn't necessarily hurt you because you are holding for the duration. we have a long bond in terms of a risk hedge. thatave some declines in but we are still going to hold and not sell it. if we could get back to something like normal interest rates, that is good for long-term investments. david: that would be good for you. , we will be staying with you through the market open. alix: performance away from the opening bell, u.s. futures have given up their days. unable to resist the lure of lower oil. generosity is its own form of power.

you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. david: this is bloomberg daybreak. we are a little under 30 seconds from the opening bell. let's look at the futures right now. , evennes and s&p futures

as we watch, there is a little bit of a change. this is actually an important point. news of what is going on in vienna, oil went down to new lows and it has taken markets back. let's look at other asset classes. slightly, that is a continuation of the patterns since the donald trump election. this is the big story. crude down. are they going to have a deal or not? apparently, a statement is coming out of iran. we will find out what is really going on in the markets. alix: here is where we are stacking up, flat across the board with the nasdaq eking out a slight gain. s&p relatively up. it is really about oil.

s&p not able to hold onto earlier gains. having its worst day since july, let's take a look at what it means for energy stocks. we are talking about oil here. exxon off by 1%. the oil services company off by more than 2%. the saudi's say they will not adhere to a deal if iran and iraq do not participate and you have t -- you will have iraq and the other syrian oil minister. the market is really zoning in on iran and what the saudi's are saying. david? david: telstra's has been a huge index investor. chris ailman says it is time to buy asset equities.

>> we have talked about this before>>. you said there is a role for both active and passive but over time you have shifted towards passive. has anything since the election changed? >> no. what has changed is we have been pretty range bound which has been a good market for active management. they haven't been the index so i think we are at the point where we are asking questions about the value of active management. people are really taking a hard look and we have been a loud voice for a long time. if you are a retirement investor, put the lowest option in your 401(k) right -- and ride alix:. markets long-term is it active management's job to beat the indices? at the end of the day, after trump was elected, you would

have wanted an active manager. >> you would have wanted it and now you would have a small allocation. underneathlity is are the asset classes to balance out the volatility in our portfolio. moved afterndexes the reaction to the news where a been catchgers have positions so they haven't been performed as well. an active manager is likely to be a little bit ahead of the market if they are really smart but they net up the cost of that service. david: is there performance in terms of the market investment or is it the fees? >> when you decompose the returns, it is the fees that do them in. toet management fees need come down dramatically. andtwo and 20 model infrastructure in real estate,

we need to compress those costs much lower because you are not getting the value-added. you will pay for a service and this service is not worth it. after a trump victory, what strategy would you appeal to? >> we are looking at global macro and trend following because we want diversification. those strategies, those are the only two that really demonstrate that they are not correlated with the equity market. has been our diversification. we still have some fixed income but we know we need to add to that. bet on the economy of the u.s. and the world. i need to diversify that with some other strategies. david: what about something in between? indexbout the so-called play, but tweak it. we have algorithms that overtime

teach us how to develop -- have to do better. >> i am following a cap weighted index but that is the way we define the market. the other beta ideas are very interesting and we are utilizing a few of those. they will be worthwhile to supplement what we are doing but is muchhe active data .ower cost that is why we think you are following an index. you are setting value and momentum. those are some of the long-term things that hold the markets. they are complex and there are not as many mutual funds but investors can't use those as much. the institutional investors are definitely adding that. alix: thank you for joining us. chris ailman. coming up, the export of

liquefied natural gas. taking the's new ceo top spot earlier this year, this is bloomberg. ♪

>> this is bloomberg daybreak. i am emma chandra. coming up, whitney tilson live from the conference. david: this is bloomberg. i am david weston. i'm sitting with the new york stock exchange and they are all up just slightly. the enormous amount took the oil prices down but the dow jones up to 100th of percent. of a percent.hs on the open this morning, that is where the market is that we do have some health care moves. pfizer. shares of the drugmaker are hopping. will benefit under

the trump ministration, growth will improve. united health care shares are at a record high. the management company is saying at an investment conference that they believe that the long-term growth will be between six and 9% for revenues. for health care winners here. alix: thanks so much. ask any energy trader weather focus is and they say natural gas. a huge part of the story is the u.s.'s ability to export liquefied natural gas through lng. from bloomberg's focus on energy, we have been wanting to highlight the first company escorting it to near energy. it operates in louisiana and texas. two trains are able to export and it has loaded over the 40

cargoes this year. a record nine were in november alone. we want to build seven frames and two at corpus christi. founder was let go in part because he wanted to expand into the oil world. inmate, jack russo took the helm of the company. years in a role in goldman sachs where he was responsible for providing training and marketing of the trading arm. jack joins us now from houston in his first tv appearance. it is a pleasure to have you. thanks for joining us. >> thank you. it is a pleasure to be here. i want to outline how much lng has been loaded within the last year alone. where is this all going? >> amazingly, it is going all around the world. is a bigave found

shift into cleaner burning natural gas from other sources, mostly from power generation. oileem to be displacing powered and coal powered worldwide. >> you would have thought a lot of the lng will be going to latin america. it is easy to get to. can you talk about the economics? blessed with well over 100 years of natural gas supply. very cost competitive around the world with any other sources of natural gas or liquefied natural gas. the asians have a huge appetite in demand against the generation. we are seeing quite a bit of our products headed to china and japan, specifically. does the economic shift into europe workout? shipments don't really seem to

ramp up as much. why not? >> they don't because of the from the russian natural gas. they have lower their costs significantly because of the threat. it is a worldwide market and we have to compete. alix: is there a point where you see that turning? where u.s. natural gas can become competitive? >> we saw the volumes pick up for natural gas fairly dramatically in europe this past summer. , we became very competitive with other forms of power generation. much like what we see here in america. i think the european demand will continue to grow. forecast fornd is the next 15 years so we feel really good about overall

natural gas and demand growth around the world. alix: you have been in the industry for decades. when you took the helm, what was the biggest surprise in terms of where lng was going? what was the big shock? >> it has all been fantastic. when i took over in may, we were just in commissioning with one of the trains. now we have two trains in operation. exceptional. i am very proud of what we have been able to do this year. i look forward to our continued success going forward as we have does code trains expected operation next year -- have two trains expected in operation next year. the most surprising thing to me has been more of the geopolitical aspect of lng.

and those countries that want it , they can diversify from their stores. that is for eastern and western europe. i wasn't expecting that aspect. can those areas pay you for the natural gas? >> hopefully, somebody can. right now, we have 13 long-term customers. they have spoken for 90% of our design out part of our train. we are just focused on getting those trains built and operating and making sure we can deliver product to those longer-term customers. alix: two of those trains were up and running but we have seen some back on train 30. shifted -- have you your first cargo yet? >> the first lng shortly.

schedules are is every six months we have a train in operation. i would expected to come on shortly. -- i would expect it to come on shortly. >> when do you lay on your first test cargo? say.would rather not but it will be eminently. alix: ok. when you look at overall, you need to get investment decisions for your trains of corpus christi. how close are you to making those final investment decisions? >> we have got seven trains under construction. , thoseot corpus christi trains are fully permitted and we are waiting to commercialize them. it takes us 49 months to go from decisions toment

operation. our customers need to be signing up now. dialogue.active with a lot of different utilities around the world. these trains is a big priority. alix: nobody wants to sign them right now. what do you need to offer? how much to you need to discount to get those signed? there is a lot of confusion right now. what can be done and what can't be done and what the true cost of capital needs are for the lng complex. i think that will rectify itself quickly. we are seeing a little bit of an oversupply based on some of the trains coming online. beingversupply is rapidly consumed and i would expect more

of a supply and demand about it and prices are starting to rise because of that supply and demand balance. customers really need a reliable, competitive supply of natural gas. >> as of today, you don't need to lower your fees. you don't need to structure different types of contracts to luer investors? >> no. >>i think they have been a leader in giving contract for its ability to our customers. we intend to continue to do that. we want our face to be competitive so we are looking for other technological solutions that provide lng, like a modular solution that may be cheaper. for ourlways looking

customers to feel good. it is a long-term relationship. we expect it to go even further. alix: in the short-term, you have to deal with the new administration in washington. you beh u.s. lng would able to ship under president trump? does it change the day? >> it is a little too early to tell but i think president trump is very business focused. overall, i am very optimistic that nothing material will change for a business under his a ministration. we have been very successful under the current administration. if some of the regulatory issues get cleaned up, it should be a net positive to us but we have all of our contracts that we

need for our growth in the long-term. alix: piggybacking on that question, you have a reach in the middle east and emerging markets. pullingare if anyone is back and waiting for political clarity? are you hearing any rumors about that from the people use the two? -- people you speak to? >> we are trying to beat or market our products going forward right now. i don't get a sense that there is any concern at this point. alix: i can't let you go without asking about the natural gas price. what is the range you are looking at? very is going to be whether intensive. short-term, its will be weather dependent. if it is a cold winter you will

ca demand increase. to meet the demand at this point for cold winter or a hot summer, it is going to be a little volatile. that is what we have seen in the short-term. $2.50 and $3.50. alix: thank you so much for your time today, jack fusco joining us. david: we have some breaking news in the m&a front. johnson and johnson is talking with the largest biotech company in europe. the stock price went down and now there are reports johnson and johnson is revising upward its bid. price has come back almost to the level it was two days ago. it is a major acquisition involving pulmonary hypertension. we will be right back. this is bloomberg. ♪

david: every day, all eyes are on the trump tower in new york in what is turning into a real-world version of the apprentice. trump interviews very publicly the candidates for his cabinet. yesterday it was retired general david the trias's term -- david petraeus's term. >> he walked us around the world, showed a great grasp of the variety of the challenges out there and some of the opportunities as well. a very good conversation. we will see where it goes. david: joining us for more is marty schenker, executive editor for international government and economics. there is a very public mass going on here. mitt romney and rudy giuliani and now david petraeus.

>> there is a big controversy within the trump camp on mitt romney. i get a sense that donald trump would really like to pick mitt romney to show how generous he is as a person, and given all the anti-trump rhetoric that came from romney during the campaign, but he is keeping options open. , and an in qualified between choice between romney and rudy giuliani. david: he has come out with a tweet where he says it should be a crime to burn the american flag. so is he deciding to take on the supreme court? >> it is interesting. the 1989 supreme court ruled that flag burning is a form of free speech covered by the first amendment. scalia, who the often

cited as being an admirer of, supported that decision. it is a curious thing and it sort of deflect from the seriousness of the transition. you have got to wonder why he is making tweaks like that. >> one appointment open, so maybe it will be a new litmus test. that is marty schenker, senior business analyst. let's look at where we are trading in new york. we are down slightly. this comes in reaction to, perhaps, the oil price going down. thank you for joining us. this is bloomberg. ♪

>> is 10:00 a.m. in new york, taiwan. i am vonnie quinn.

>> welcome to bloomberg markets. vonnie: from washington to johannes berg. first, breaking economic data in the u.s. julie hymen looks at consumer confidence. first since the election. julie: a last read was just before the election, so it is rising to 100.8 was the prior reading. it is coming in for a higher revision as well as higher than the prior months. consumer confidence of better than estimated. we saw this encompassed the election as well. coming on the heels of the gdp data that was better than estim.