--jonathan: good morning and welcome to bloomberg daybreak commenting it down to the holidays with the market looking like this, you just go nowhere. looking at futures right now we are negative about three point on the dow heading for a seventh straight week of gains but into the longest weekly winning streak since 2014. in the bond market quickly, let's get you up to speed. we are switching up the board. the yields are down on basis point. david: here's what you need to know at this hour, a big sigh of relief, deutsche bank and credit to terms over the mortgage backed securities agreeing to pay a total of 12.5 billion dollars. barclays hangs tough in the doj takes it to court. italy is buying a bank moving forward to invest billions of euros. how much will it end up owning? what to the bondholders stand to lose? tweets that move markets, trump

takes to twitter again to say he may switch from lockheed martin to boeing for more fighter planes to the military. is he shaping policy or merely shaping the story? that is what you need to know at this hour. jonathan: said to express openness below the china growth coming in right now. will express xi openness to china's growth below the 6.5% target. some people don't believe the 6.5% anyway. david: do you think he is something? -- signaling something? jonathan: perhaps. that's the headline out of china. growth below 6.5% to get you up to speed on the news as it develops. the banks are front and center. we want to bring in the global team now. covers abuses at the

department of justice. ino joining us michael moore the u.k. on what it means for barclays and deutsche bank. the bloomberg managing editor for finance and investing in the region. carrie, quickly, the fine substantially smaller than the opening bid. how this is broken up is quite significant. basically, these are civil penalties for every single bank on wall street is dealing with these has settled on this. jpmorgan, bank of america, morgan stanley, everybody settles. typically split up in different ways for the most of it goes to a penalty paid to check theust write a never see it again. a lot of it is done on consumer release. basically, that is ways to provide consumer relief to people that have mortgages during that time. it is not directly related to

the securities that were sold but a way to try to deal with some of the domestic issues. jonathan: the way the market should view it is one is an upfront cost and the other will be spread over time. yes, it is not all cash. jonathan: in london, michael moore, barclays saying we won't play ball anymore we're taking this to court. was that a big surprise? achael: it certainly is rarity. you don't see it often among the banks. they tended to like to settle. there clearly was a big gap between what barclays is willing to pay which we reported previously was $2 billion or less and what the doj was asking . you saw deutsche bank bring down the doj over a number of months, but clearly barclays in the doj were still far apart. jonathan: we caught up a couple theonths ago talking about

prospect of deutsche bank at the time actually taking the doj to court. take a listen to what he had to say. >> you are saying, let me get dhis straight, that they shoul effectively raise his middle finger at the justice department and say i will see you in court? >> yes. every single ceo from jamie dimon to michael corbat not taken that option? you don't have that option. but if you are a foreign entity you do. >> is that what he is going to do? >> i think they're are ready to litigate which is why i think eventually with the administration leaving in the next 60 days and is in everybody's best interest to settle. jonathan: michael, this idea that deutsche bank would walk out, barclays can't walk out. tank.s a transatlantic how messy could this get for barclays if they pursue this? michael: it introduces a lot of volatility.

ofcould go in a lot different ways. they can't just step out of the country. but it does indicate some willingness to gamble and hope that the new administration perhaps takes a different track. going to court may not necessarily ruled out a settlement down the line. it shows that they're willing to play the game. be then: it wouldn't first bank to take the doj on but the consultant to review the loans called them -- it is there called ithey craptacular, with a hint of default. it doesn't look good quickly. >> that normally comes out anyway. pc these giant statements of fact. this isn't necessarily bad strategy for barclays.

there is a huge probability they will settle down the line. thee -- this is not equivalent of going up against the doj in a criminal case. these are civil penalties. this is like an antitrust suit and you can resolve these things. into the is no: sit higher, brendan sullivan, one of the toughest litigators in all of washington. they're sending a message to hang tough on this. jonathan: any christmas present, david? up this year so we can do the restructuring next your he has been talking about. jonathan: what is deutsche bank going to look like beyond the next year? david: he won't have the excuse anymore. jonathan: absolutely not. michael moore out of funded, thank you for the much. focus thisy banks in morning. david: we go to italy want again

facing the biggest bank nationalization since the 1930's. the government may need to step in now after the bank raised -- failed to raise the amount of money they needed. we are joined now from milan, we knowthrough what about this and what we don't know. how much would italy own of the bank? what happens to the bondholders ? >> the question is how much will it all worth because this is early days. we've known for a long time the bank was struggling and it was certainly going in that direction. what we've learned so far is that there is a large part up to 20 billion euros that italy is going to provide. of helping them with liquidity and with capital injections. we don't have that split, and don't know how much capital monte pasche will have to raise because it will go through a

restructuring plan probably with the ecb. it may be that the signing number is larger or smaller in the end. the type of investment the government will make will be important as well. as first the bondholders are concerned we know that there was going to be some pain because that is part of the european union rules have established for some the bondholders will be asked to swallow their -- swap their debt into equity. there are already proficient in place that would allow -- we saw investors potentially converting the stock into new bronze -- bonds and senior bonds. there was an acceptance of perhaps these will be sold to consumers. david: do we know whether brussels was already signed off and advance on whatever the italian government will do? elisa: yes, i think the headline for breaking that the eu is on board.

what we expect now is the ecb to comment on the plan potentially. i don't know how soon that is going to be. in the mean that even if we don't know what it is, brussels and rome no how much of a haircut the bondholders will take. i can't believe that brussels would've signed off if they didn't know that. elisa: yes, i think it would be not to of for the eu been on board. they're been discussions about some type of state intervention for months. the started right at the start of the year. there were various degrees of intensity in those talks but this is not a fresh topic. burn for thea slow italian banks. it hasn't been a sub and loss or a sudden situation that blew up. this is been a slow buildup of bad loans as the economy contracted. it has taken years to get here. david: thank you so much. reporting from milan.

fromlet's get it update outside the business world. which are two erik johnson now in london. italian police of killing man suspected of carrying out the fatal truck attack in berlin. the interior minister at a press competent rome says anis amri was fatally shot near a milan train station for stuff they say that amri fired on officers wheng a check and died police turn fire. a policeman was injured and hospitalized but his condition isn't life-threatening. amri wases believe behind the will of the truck that plowed into christmas market on monday killing 11 and injuring four dozen others. german media say the 12th victim a polish man identified as the original driver was discovered as a passenger with a knife and gunshot wound. state tv says two

hijackers on a diverted libyan aree had hand grenades and threatening to blowup the aircraft. that is according to the associated press. emergency teams have been dispatched onto the site of what airport authorities called "a unlawful interference on the tarmac." at least one hijacker is libyan. the plane has 118 passengers on board. russian president vladimir putin says whoever is responsible for cyber meddling in the u.s. presidential election is hacking from another country and not russia. at his annual news conference today, he said he agrees with the assessment of the u.s. president-elect to donald trump who says the true identity of the perpetrator is anyone's guess. the substance of leaked information is more important than who did the hacking.

news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. much.an: thank you very this is what we look like we're about an hour and 20 minutes away from the cache open in new york city. futures pretty much flat. let's get to some movement across to abigail. abigail: we have two pharma stocks trading higher. pfizer and after zeneca -- astrazeneca. receive $125 million in 2019 and royalties and milestones over the years. both of the years. both of these shares are trading higher on this news. fred, the grocery store is also trading higher on news that the active investor has taken a 25% stake. this comes after tuesday's news that fred's is buying rite aid

stores considered to be a good deal, somewhat of a discount. up 81% yesterday and the gains are continuing to they've also take a look at the banks, deutsche bank's trading higher on the news that it has over theith the doj mortgage backed securities back in the crisis area. credit suisse also made a settlement taking a $2 million charge related to this quarter. barclays were sued yesterday and a rolling the dice. david: thank you so much was a coming up he is the man who single-handedly put the issue of drug prices in the national spotlight. and at the center of the presidential campaign, martin shkreli, the founder of touring pharmaceuticals is he to tell us why he did it and what it means for health care regulation under a trump administration. that is next. ♪

jonathan: from new york this is bloomberg daybreak counting it down to the holidays. futures negative about eight point on the dow. theeven a single point on s&p 500 the goat know where that is her headline, david. the fx market a story of dollar dominance over the past couple of months. little bitsession a of dollar weakness against the euro. the euro accounting for a third straight day and the bond market with the yields lower by a basis point. david: thanks, jonathan. a wideshkreli has cut swath to the hedge fund and pharmaceutical world already. in he is already only 33 years old. he is best known for founding turing pharmaceuticals and raising the price on a drug by 56 times. call before congress he declined to answer questions about his pricing policies but tweeted

tyhat numbers of congress were imbeciles. aftersigned from turing being indicted on other charges. martin shkreli joins us live from new york. the focus of his drug pricing issue because you have been at the center of this in a controversial way. looking back now, do you have any regrets about how fast he took the price up or how public you are? -- were? was thehkreli: it perfect storm of a political season and it is easy to become a target for unwarranted aggression. if you look back one of the things that i noticed is that president obama and his administration said absolutely nothing about drug prices throw the entire time. i asked one of the people why he is staying silent on this and he said they are not running. populist issue. it was blown out of proportion. in terms of regret, maybe not

seeing that as acutely would've been a minor regret. but i don't -- that is the main mission to raise the price and have a generate increase revenue, that has happened so i am happy with respect to that. david: apart from the politics and perhaps you can never put it entirely apart but apart from that in the end did it benefit the investors in your company the way you handle this? would you made more money if you had not raised it as fast? martin shkreli: in that sense, do anythingcult to in terms of the investors from a cash flow perspective. it makes no difference you're better off raising it faster. from the perspective of things like multiples and exit opportunities and brand name there are certainly some damage done. i think that was somewhat .nexpected there was in the stores my raise the price 12 foot -- 20. jonathan: how do you pitch a

ideological pursuit in capitalism versus running a company. yesterday negotiate and dance around a successful company. can you do both be the ceo and the poster boy for capitalism? hard, orshkreli: it is talking what this criminal charges against the banks. we have an administration that it comeshuggish when to companies they look at as targets to shakedown. forcing justice is not their goal. their goal is to make a name for themselves to extract these billion-dollar settlements. you have to tread very carefully. that is what the biggest business people of got the lowest profiles. stronglyople feel about prescription drugs. regular voters out there which means politicians get involved and government gets involved. did you actually put turing at risk of the government coming in? martin shkreli: absolutely, and

learning at a young age that the government in many ways is an apparatus of vengeance to be cynical about it is frustrating. at the same time, nobody talks about the drugs that i licensed point,t hit its primary nobody talks about that or the quantities i put into the clinic. they want to talk about one insignificant drug at the end of the day. jonathan: let's talk about a trump presidency. you brought up the issue of populism and how drug pricing became a populist issue. do you think donald trump makes it a populist issue as well? martin shkreli: i think the media made it an issue. the populate -- the proposition talked about this, and it failed.

that is one of the liberal states in the country. mediaan: you said the made it an issue and i love when people come on the show and say that. bernie sanders talked about it. martin shkreli: he is an apparatus of the media. it is no secret that the media plays favorites. jonathan: i wouldn't go as far as that. martin shkreli: whatever. david: to some extent the media follows with the people are. to to the people who needed take it. it is terribly important if that is the case. if you are people out there that need to take this drug there will be consequences and that is just -- martin shkreli: there is an consequences they have insurance. 90% of americans have at our president forced us to get it. i paid a fine because i don't have it. it must've and great

because many people's health insurance doesn't cover 100% of the cost. martin shkreli: it is covered by every major insurance. but with respectable were talking about earlier i think trump will be a fantastic president and will bring more competition for drug prices and will solve it in a capitalist way. getting a generic drug approved takes five years. jonathan: let's talk about capitalism the ultimate problem for the health-care industries almost seen as monopolistic because it is so hard to get drugs through the fda. the pricing issue will get a whole lot harder to lift your prices if they do address that is in it? drug pricing is only a small part of expenditures. we don't talk about physicians their prices are rising faster and faster than drug prices. the best cost-effective solution for health care. whereas expensive things like how do you do a surgery or something is much more complex and harder to control. some: we should have

health care providers come in and defend themselves but there is no question the price of drugs is going up faster than the cost of living. as a presenter gdp in this country health care costs are 18% to my family towards 20. -- 18% moving towards 20. that gets expressed through premium sooner or later. martin shkreli: of course it does. as gdp grows, we are the leader. what happens is that we learned what we prize in life is our help. we will spend more and more on our health than ever before. that is a good thing. i think it is the mark of a civilized country. david: you would do it again? martin shkreli: of course, you have seen valeant castigated for their price increases for so they raise prices after thepf senate committee. pfizer raised prices as well.

so it is not like -- everybody is doing it. in capitalism and try to get the highest price you can for product. jonathan: doesn't damage her ability to run a company again? martin shkreli: it depends on how much money you have if you look at a guy like trump or ic ahn, they have done things that were unpopular. icahn was one of the most unpopular men in the 80's. i think that maybe in the short run there was some dislocations but i've also made a lot of fans in the free market world. david: you didn't make too many fans among the prosecutors. indictment from a different set of circumstances. what is that stand? martin shkreli: the trial will start in june. it will be quite an exciting circus. we will win by a landslide. david: a jury trial? yes.n shkreli:

the evidence is clear that i did nothing wrong. there were no victims in the crime. my investors in the christmas cards. david: it is a complicated case. martin shkreli: extremely complicated. david: juries often have a difficult time with that was it therefore do you have any concerns that it is -- this is the guy who jacked up prices on drugs a lot to will vote on that rather than try to sort through? my attorneyli: covered a guy called puff daddy, who was acquitted by attorneys. they get to meet the real person and when people read the headline about martin shkreli they hate him but when they get to meet him they love him. jonathan: do you enjoy this? martin shkreli: sure. is going to be fantastic. i can we do look at the government's face when they lose

this trial. they did something wrong, i did nothing wrong most of these poor people have a tough case ahead of them. david: you been involved in some charitable activities. on an shkreli: we did stock there were long that i thought was a short. the stock fell 50% in one day and never came back. we tangoed against each other. jonathan: martin shkreli founder and former ceo of turing pharmaceuticals thank you very much. we look at where the markets can prepare for the unpredictability they might face in 2017. ♪

david: it's his bloomberg and his what you need to know right now it takes high of relief credit suisse come to terms with the united states justice department over those mortgage-backed securities.

but barclays hang stuff in the doj takes it to court. italy is buying a bag. he tallied different moves forward with plans to invest billions of euros in monte paschi to save it. how much will it end up owning? what are the bond owner stand to lose? tweets can move markets, trump took to twitter saying he might switch from lockheed martin to boeing. is he shipping policy or merely shaping the story? that is what you need to know. jonathan: from new york let's get a market update futures are negative on the dow. we still had for a second straight week of gains. it is been a good two years since we have seen this long of gains. has a shortened a heading into the holiday. we finish flat. switch of the board in the bond market this is how we traded the moment. tight to alding

dollar and four cents. north of that three days of gains. david: we want to get back to those tweets coming from the president elect. it is not the first time is given us the source of our morning must-read. yesterday he tweeted about boeing and lockheed martin want to get. came back to the subject about the fighter program was at this time saying he might just turn elsewhere for this project for years in the works. injecting it more uncertainty about just what the new president is headed and what it means for the business world. he said "based on the tremendous cost and cost overruns of the lockheed martin f-35 i have asked boeing to price out a comparable super hornet." this was in the first time he tweeted about this and their stocks have been moving in opposite directions ever since the election was a turning is now -- the election. joining us now, once again the president-elect is tweeting but

people say it is way too late to be changing off of the f-35. is this real or posturing? >> one wonders what exactly donald trump has in mind. contract wasact -- signed over a decade ago. there is been billions of dollars spent in development. to turn around and find somebody else to supply those new generation fighters is rather difficult to say the least. david: is mr. trump thinking about these things? we talked yesterday to someone close in the somewhat he had to say when asked that question. this president-elect does nothing based on instantaneous temperament. or reacts heeets r is a constituency around him to advise sam on the efficacy of

that statement. the efficacy of whether he should tweet or not tweet is a different debate. knows donaldrrack trump or a willful celebs assume he is right. been thought through tweeting about the f-35. at the same time we are told it is way too late. by the way, one is a stealth fighter one is not. i don't think you just put paint on them to make them stealth. if he is not literally going to replace the f-35 is a new version than what is the policy here? what does it take to the boardrooms of lockheed and boeing today? marty: it means you have to be on your toes. this may be just a negotiating tactic, a way to try and get the costa down and make other -- cost down and make other

commitments that will reduce spending. it is rather extraordinary for the president-elect to be castigating defense contractors whenever so many other issuescos like tax reform and entitlements that he is not saying anything about. david: finally, as we look forward we also are hearing from him on the nuclear arsenal by way of tweet. they mightaying rebuild. this will be a major departure from u.s. policy going although it back to ronald reagan wouldn't it? .arty: that is right there are some surrogates going out there trying to redefine what he really meant. they're trying to cast this as really to guard against proliferation of nuclear weapons. tweet doescharacter not really explain it policy. he is going to it some point have to be a little more explicit about what he means. david: thank you so much. the story ofo

european refugees. one of the biggest stories of 2016 was the rise of populism throughout the western world whether it was the election of donald trump or the vote for britain to lead the european union movements to upset the establishment have gained power and momentum. this rise of populism was fueled in large part by increasing fear and resentment of immigration was of no where have we seen this express more forcefully than in europe which has been called among to take on hundreds of thousands of refugees from syria and elsewhere. david miliband has been on the front lines of the refugee crisis. currently humanitarian with the operations in over 400 countries around the world was to use the foreign secretary of the kingdom before that. take us into this question of refugees which we report on almost every day now. is the refugee situation going into europe destabilizing the political structure? david: yes, there is no question. the humanitarian crisis around

the world notably in the middle east notably across africa, this is the 25 million people have crossed national borders as refugees. 40 million people displaced within their own countries like syria, 5,000,012 crossed borders seven million displaced. these unintended humanitarian crises are creating a well of humanitarian misery that in the end of leads to the movement of people. 2015 two years ago saw the explosion of the refugee crisis out of the global consciousness seas to,000 crossed the go into europe. 2016 chose this crisis is not going away if anything it has grown because the scale of the destruction in syria and the upsurge of violence in places like south sudan and the continued boko haram in nigeria are all forces roiling and in the end these problems don't

stay in the middle east or in africa. they find a vent into europe. david: it is not going away. of it. through the arc angela merkel taking a break stance we will take refugees in and then really trimming back the they don't have as many immigrants coming into germany. david: it is different. most refugees are in poor countries not rich countries. and turkey, 2.7 million refugees. when you hear you estimated budget of the 100,000 or 80,000, you get a bit of perspective. i think the german situation stood up in a way that no other inder except mr. trudeau canada has done. to put yourself at the forefront of that and has been let down by her european colleagues. i was in berlin the month before last and germans have addressed this not at the national level

but at the state and city level. there are people living in gymnasiums again. ist is roiling the politics in the refugee issue but someone a first came into germany before the refugee crisis. obviously it is raised concerns. jonathan: this raises questions about identity politics how do you do with the crisis in the humanitarian way. david: you address the problem at the source as well as the symptom. if you say all refugees come to even managepe won't the policy or get elected. but the appropriate response is to say the least be more effective humanitarian aid in countries like lebanon, jordan, and turkey which need support. be a legalneeds to route for the most formidable cases to come to places like america or europe. the absence of hope for millions of people in the middle east and africa led them into the hands of people smuggling in 2015 and

2016. they are the people property -- profiting from this. it feel sometimes like we are moving exactly in the opposite direction. borders are going up and walls are going up as the donald trump talked about the wall. it was a major factor in the brexit vote. david miliband: what was the big protest about the brexit vote? it wasn't people come from africa or the middle east it was about other europeans and white catholic poles, 800,000 of them came into the u.k. there is a big immigration dimension but it was about europeans not about north africans or people from the middle east. i think what we face in 2017 is a massive choice. is there going to be the turning inward you are referring to? wetherbee continued fragmentation. the abuse of

international airlines are will to be a recognition that in the modern age in a connected global will the problems are going to be contained in the region to that is a massive issue facing the new secretary-general of the u.n.. jonathan: quite clearly government is failing because the first thing many people like myself do is dry clear distinction between the refugee crisis and immigration. and again,it again, and again. the electorate is not listening. why is that message not reaching the electorate? milibrand:brand -- it is a comes get a message. they're all fleeing for their lives. secondly, the fundamental reason is government playing catch-up. in 2012 and 2013 to be fair to the prime minister's of greece and italy who were the frontline state in this they were saying the needs to be a coordinated european response. thepe was focused on on

ukraine crisis and the euro crisis and didn't have the bandwidth to address the refugee issue. only when 800,000 people arrived in europe and get the attention that it deserved. playing catch-up on issue it is hard to hold confident and get the policy right. that is the fundamental explanation for what is going on. david: many topics to come from the president of the international rescue committee. vladimir putin addresses the world in his annual news conference. saying donald trump has his finger on the pulse of society. we examine the future of those relations that is next as we counted out of the holiday with markets pretty much doing nothing. ♪

jonathan: visit bloomberg

daybreak coming up the next hour the chief u.s. equity strategist joins us. talking with the equity markets through 2017. president vladimir putin's and of your press conference is still going strong in moscow right now. he displayed a lack of concern when asked about donald trump's talking a nuclear strengthening. president-elect there is nothing new in his election campaign. he kept saying that it is a need to consolidate the nuclear element. there is nothing new. are joined now from the russian capital of more on the news conference. familiar of us not

with this conference, the annual conference that he carry cell phones to give us a little bit of color. this is a big event. >> it is an annual event and it has stretched to four hours and 40 minutes that was a record set in 2008. last year it was three hours and 10 minutes. are at three hours and still going. majorone of several platforms for him. he isis another one were a televised link up with the nation which is very much on domestic policy. this is an opportunity to talk about foreign policy. the economy is an important part. 18 months to go befr election to which he is -- before election which he is expected to run for a fourth and final term. he give the same answer which is he even hated it -- evaded it

and will make a decision when the time comes. jonathan: these are pretty spectacular terms of the meat on comments of the press the alleged interference in the electoral process in this country, the netted states, what were his comments on that? > he said there is no proof who did it, whic is -- which is butposition he maintained said what was important was the information that was leaked to public opinion. then he also accused hillary clinton of being a bad loser anz russia was the only country that it actually predicted that trump would win. withhan: great to have you us live from moscow with this press conference. this is like a star wars type production for a news conference. david: he loves it, he loves every minute of it. forthan: if it is going on

four hours you better love it. david: you bring in david miliband, the former united kingdom foreign secretary. there is no question that vladimir putin has a profound effect around the world. into 2017, given where he sits right now, you see a force for stability or instability run the world? david miliband: i wish i been at the press conference because i would like to asked who is at the bombing of eight irc hospitals in syria this year. we are under bombardment from syrian and russian forces without any accountability. this is not underground hospitals these are hospitals marked on maps getting bombed for treating civilians in the middle of a civil war. a complete abuse of international law. ircd: eight hospitals from have been bombed. staffmiliband: u gai have still working there.

are is a leveraged affect their behavior. david miliband: who is meeting this week to carve up the future of syria? it is thean, russia, goto place now for a new middle east if not whose formal boundaries are being redrawn whose power structure is being read drawn. it is in flux. is it a force for stability? it is clearly a force for instability at the moment but not the only one. we have to remember the syrian civil war started as a populist demand for more -- a mutated into a regional conflict and now a great complicate in which the u.s. has been forced to decide. jonathan: is is the failure of u.s. foreign-policy? avid miliband: it is collective failure of monumental

portions to hold up the basic standards of international law. the obvious point about a vacuum his first of all that is filled by very bad nonstate actors. you've seen the rise of isis. sideve people on the iraqi and in syria people are fleeing will be a, which major site in 2017 of an engagement i think with isis. also state actors fill the vacuum. there is a sense -- jonathan: there is a sense that will be pivot in this country towards russia. if you're the foreign secretary again how to approach russia? it is obvious: there will be reset because the first reset did not work. whether hillary clinton vladimir putin or donald trump they want to find a new way of dealing with him. a couple of things are important. first, never forget the weakness of the russian economy first of

this drives everything in any long-term view. you can even argue that some of the intervention in the ukraine had added to root a concern on the part of the putin regime about his domestic weakness. secondly, russia craves respect. the idea it can become to sit in a super orton and status above the china -- ordinance stasis a bove the chinese host of the russians fear unity among those who are their partners and enemies. why are the driving european fragmentation? why is the head of the german intelligence service said russia is targeting the german election in the same way as the american? because the russians fear european unity. david: david miliband will be staying with us. time now for other stories making headlines. here is eric johnson with the bloomberg business flash. a sued general

motors local car unit for violations. they must pay a penalty of $29 million. of acceptingused minimum prices for dealers to sell some models monitoring them and then punishing those who sold more cheaply than limited sets. staying with china and president open to china growing below the target. that is according to a person familiar with the situation who said that is due to rising debt and concern about an uncertain global environment after the donald trump last month. alta lloyd has been bought at price of $2.6 billion. this after the earlier offer from the dutch insurer was rejected. to boost its scale and insurance sectors.

delta lloyd returned to profit in the first half after cutting costs. that is the bloomberg business flash this is bloomberg. up next, coming deutsche bank and credit suisse agreed to pay $12 billion to resolve u.s. investigations. we look at how these banks move forward throughout this program. counting you down to the holidays this is bloomberg. ♪

♪ jonathan: still with us is david miliband, there isn't a person of you came watching this program right now that is in asking this one question -- when will you go back and make a push for the labour party? in some people's minds, rescue it? david miliband: people can go visit our website at rescue.org for the end of the year. of course i british citizen and i care hugely about the future of britain. i own party is going through its own trauma. i have a responsibility to make

a contribution where i making it at the moment. that is the choice i have made. jonathan: that is the default answer but we don't have an effective democracy if we don't have an effective opposition. you don't have an effective opposition right now. david miliband: british policy has been turned upside down by the brexit vote. everything is been turned upside down. -- has beenscope is shaken. we haven't seen how it is settled it. david: given all the troubles how do you square them since the trump election? the markets are seen it was money to be made. those that are seeing the benefit of a potential trump boom are seeing the money come in. what i can see is that global risk is now associated around politics. that is the thing markets have to stop pricing and. jonathan: fantastic to have you with a summit program i expect

the default answer. i know what he really -- when you go back you let us now? [laughter] jonathan: still to come investors continue to look at the trump rally. with a bullish chief equity us with theoining 2017 playbook counting down to the final trading day. the london close looks like that. the ftse unchanged. the bond market as for us treasuries are concerned a half days trading with yields lower by about a basis point of 215. the euro stable. ♪

>> good morning.

welcome to our viewers worldwide bloomberg daybreak. i'm jonathan ferro along with david westin. where is the price action? futures -18 points. the s&p 500 points negative .1%. the london close unchanged on the session as we head toward the holiday. treasuries bid marginally lower by five basis points. a cable rates, a softer cable rate in time for my airport trip to change cash. david: you have to agree with the fx right now. at this hour, the sigh of relief. deutsche bank and credit suisse come to terms with the united states justice department over mortgage backed securities to pay 12 $.5 billion. barclays hangs tough in the doj takes it to court. italy is buying a bank. the italian government moves forward to invest thousands of

dollars in monte dei paschi to save it. what will they own and what do bondholders stand to lose. president-elect trump takes to twitter to say that he may totch on lockheed to boeing provide fighter planes to the military. is mr. trump shaping policy by tweet or merely shaping the story? jonathan? over the we are all banks. deutsche bank and credit suisse settling with the doj over mortgages. pushing back. -- barclays is pushing back. let's begin with deutsche bank. the opening bid was $14 billion. the offer, the settlement is below that. interesting --is the mix of the fine is interesting. 3 billion and change of a cash penalty, and $4 billion on consumer relief.

will becash settlement an up front cost. consumer relief obese be spread over a number of years. not as bad as feared a few months ago. if you had told investors $7 billion a year ago they might have been more negative. jonathan: an early christmas present for the ceo john cryan. this obstacle has faced him for a couple of months and he has not developed a strategy without knowing how much money would be on the table for the doj. how big is next to -- next year for deutsche bank? 2016el: they talked about eating the peak restructuring year and getting the deal done makes that the case. a 1.2 billiong dollar charge of the fourth quarter. that may make it a straight annual loss for the banks. 2017 is getting back to profitability and putting in the wants to do.cryan

the question is, the other legal costs they have outstanding. this was the biggest piece, but you have credit suisse analysts who say there could be another $5 billion in legal costs over two years from a number of different items. they are not out of the woods on the legal front. jonathan: maybe the biggest surprising thing is barclays saying no thanks, i will take this through the courts. what are the chances of success? is certainly a more aggressive stance than we have seen from other banks, all of whom to this point have reached a settlement, even when they started far apart. based on our reporting, barclays wanted to keep their settlement number at $2 billion or below. that was a big gap to what the doj was looking for. i would not rule out a

settlement down the road, but this is taking a gamble and going the court route. jonathan: michael moore, thank you. what a story for john cryan. seriously. or $2 billion on the table, then what? david: that story was the most read on the bloomberg for the entire year. jonathan: not trump or brexit. number one, john cryan. germany, switzerland, now to italy. that country is facing the biggest bank nationalization since the 1930's. the governor may have to step in after modded apache failed -- after monte dei paschi failed to raise money. -- a sense of where we are. how far along are we and when will we know more? it is slightly confusing, but

much better. the government put out a statement saying the plan is to help paschi. the details are that the will receive shares, and the government, we doubt have the exact details, will buy the shares and give back senior bonds. the problem is how it will work. if they bailout everyone, the eu will never go for that. if they only help retail investors, we presume there will be lawsuits from institutional's. -- from institutionals. it is moving along. david: three now when we will know the details of the plan? -- do we know when we will know the details of the plan?

>> we don't. the problem is that the eu could say that it is state aid and not possible. it is state aid, but there are different degrees. the government is not calling it state aid. there is a lot to do. they need to talk to the eu. the e.u. has to say it is ok. we will have more details as we go along. david: there were reports that monte dei paschi is burning through liquidity faster than anticipated. is there a sense of when they need to get the money to the banks to make sure they have the liquidity they need? >> they are burning through liquidity, but at this point it is ok. there is a sense they can hold on. that is why they are doing this before the holidays, even though it is not ideal. the government is already on vacation, parliament is closed. they are working on it as fast as they can. david: that is our rome bureau chief. jonathan: the cleanup at deutsche bank and others. the trump playbook has indicated

nothing but strength with banks leading the broader market since the election. how much is left to the upside in 2017? the chief market strategist at ecb, the bullet in the house? we talk about this before, i am shocked. i called 10% of the between now and the end of 2017. that doesn't seem that bullish when you consider interest rates and expectations are rising. up. profitability should be regulation is pulling back. 10% appears to be modest. people are skittish to put their next out there. forthan: we took the survey next year, surprise surprise, every one of them is polish. -- is bullish. you think it is behind the curve? why? >> the issue will be earnings.

looking at earnings growth, we had a drag on the energy sector over the last three years. he talked about the earnings recession, but it was oil prices collapsed. oil is higher than a year ago. you reversed the thing and it is a huge if act. the second issue, the fines on the banking sector are gone. the promise of regulatory relief and higher interest rates, making it easier for them to operate, and the rest of the market doesn't even have to do better and you will get returns close to 10%. david: there has been a fair amount of pricing, whether it is donald trump or the factors you in thecribing, marketplace. 10% above that? .> i will disagree a tiny bit wall street analysts, until they know what of the trump proposals and of being policy, wall street

adjust numbers. if you are an investor, you have to discount what do you think might happen. as an analyst, you are waiting or specifics before adjusting numbers. your pef appears to be getting higher, but it is not. at the stock look market, since the election it has gone up dramatically because the market was reacting. whether analysts told it to or not, it was reacting to trump. >> over the next 12 to 18 months, we think there will be a better earnings picture, regulation, taxes, slightly better interest rates, better consumer confidence. we have seen confidence small and large businesses and the consumer up. analysts had to adjust his specific pieces of data are saying which policy do i adjust my ford or ge stock?

a leave numbers stale waiting for details. a portfolio manager, you do not we'd for specifics, you make a best guess. the price goes up, the expectation earnings go up, but the official number stays stale. it looks like the market is getting expensive, it's not. jonathan: 21 times earnings on the s&p 500. analysts are saying maybe you should wait. why shouldn't market participants say you should wait? if we had discounted everything and mohamed el-erian said that, and we can listen to what he said. mohamed: we have priced in no policy mistakes or market accidents. issues ignored political . part of the reason why the markets are reacting so well is because we are getting an endogenous political disruption in the u.s. that appears to be positive. we will unleash congressional

action. you are getting political disruptions elsewhere that are not so positive. jonathan: this golden era is already priced in at 21 times realized earnings. is the truth somewhere in between where the market is trading and analysts are standing on the side? >> if we step back, the market started to take off not on the day that trump was elected. it took off in the beginning of july when interest rates bottomed and expectations rose. wages are going up at twice the three years ago. you have a president-elect pushing harder on a market that was already reflating. if it was only a trump rally and not in inflation rally, i would agree. he is missing that the market was ready for it to happen and

you are getting continuity. david: rbc capital markets chief u.s. market strategist will stay with us. we will go to abigail for movers on this eve of christmas eve. abigail: we have boeing trading higher, lockheed martin trading lower on the news yesterday that president-elect donald trump tweeted that he would like for provide a cross effective competitor to lockheed martin's s-35 jet, creating competition. one military analyst said this is "bizarre, late to the game, and irrelevant." perhaps this will reverse. one pharma stock trading higher that and they have an ebola vaccine to protect against the virus, the only one that worked. merck to the topic of 2017. the discount retailer trading higher on the news that a 25% safe not they bought 865 friday

stores. that is considered to be a good price. a discount, fred's scored 81%. the games are continuing. jonathan: we will go to the first deputized managing director. his thoughts on whether the pose a risk to the economy, china ratcheting expectations for its growth target lower. from new york, this is bloomberg. ♪

jonathan: from new york this is "bloomberg daybreak." not much price action, futures -17 points.

the dow, for the seventh straight reek has the -- straight week has the longest winning streak. the price action elsewhere, lack there of, treasury yields are lower by a basis, two 54. a softer pounded story coming even though gdp for the third quarter came in with an upside surprise. the euro is stable $1.04. david: we're back with the chief at rbcrket strategist capital markets. jonathan has the most bullish price target at 2500. let's go below the 2500 round number. let's talk about individual sectors, picking one at random. why hasn't take benefited the way others have? jonathan g.: the markets, there are five things the market is looking for. it wants to find the least stable and most volatile assets. looking at the business models ,f the googles and facebooks

stable businesses that don't need an economy getting debtor or worse. it is all about innovation. -- better or worse. it is all about innovation p are they want companies that are domestic to pay high taxes. a lot of the characteristics in tech are not a part of the story. david: it is a practical matter? jonathan g.: the real defensive stuff, staples, telcos, you want to avoid those. tech has fantastic fundamentals. they are fantastically valued, but you do not want intellectual property in a market taking off. you want companies that are broken with bad business properties because they are lifted out with a better environment. you want turnaround stories. david: that takes us to bricks and mortar retail. that fits your description. is that something you want to be in? jonathan g.: it is. apparelkohl's, or

companies, they say look at the pressure they will have from amazon. are you saying it will get better? i say absolutely not. if you have a pickup in pricing power, it helps lift all tides. because they are in a broken part of the market they are doing great. jonathan: what is the pricing tolerance of consumers now? jonathan g.: the answer is reasonably weak but getting better. the surprising story for 17, and we will talk about this in six months, is the consumer will be stronger than we think. ointment, wage inflation going up, and as interest rates go higher, people realized of problems they would have in retirement of not getting returns on assets is being bailed out by the market. jonathan: you are in the low rates for the consumer in general? was.han g.: i

i think the incremental benefit is enormous. david: on the spectrum of least and most stable, where our financials. they have come a long way up and where are we in financials in 27 teen? jonathan g.: compared to what they were 5-8 years ago, they ered and stable. they do well with interest rates rising and are the most over regulated industry. if you have easing, that is a benefit. they are levered to economic success. if consumers are more confident they spend more on their credit card and finance some kind of facility. everything seems to be clicking for financials, even though they are not in the low-quality basket. bulls in the big house, 2017 on deck, what is the biggest risk? jonathan g.: a failure risk and

a success risk. that's assume everything people think will happen happens. this economy is going to push interest rates higher than people think quicker. the fed will engage and the next recession will be closer. he aware of what you hope for. the failure side is we do not get as much as we are hoping for. the market fizzles. it doesn't fall apart. the economic cycle gets longer. it is good, but not explosive the way it is now. that is the way markets behave. jonathan: great to have you with us on the program. the biggest pull on wall street is not the medal you want? jonathan g.: i'm not sure why everyone is not more optimistic. jonathan: president-elect donald trump, in the pentagon planning. we look at where the markets can

prepare for the unpredictability on the table for 2017. this is bloomberg. ♪

.avid: this is bloomberg im david westin. president-elect trump returning to the lockheed martin fighter jet program saying "based on the cost overrun of the lockheed martin f-35 i asked boeing to price out a super hornet." been are stocks have moving in opposite directions since the election. now with the bloomberg news senior editor, marty. i want to ask at this point, the theuncement is communications team. how will the team deal with the chief communicator with a twitter account? on ae press secretary was talk show circuit this morning saying "get used to it" a sickly.

-- basically. he did not commit to a white house briefing every day. he said we will look at it. the communication apparatus for donald trump will probably be unconventional, like he is as a candidate. have individual businesses, carrier, lockheed, boeing, how does a business of aaders, ceos, respond to resident responding to the masses? marty: it is a fascinating subject. it is unprecedented that a president or president or president-elect is going directly to companies through this direct communication medium. i think corporate america will have to get used to it. he shows no indication that he will stop doing it. danger ofthere some

the boy who cried wolf? he goes out with big statements and it is not clear how much substance will follow it up. government contracting, you know, you do not on a dime turnaround a major government contract that has been pinned ring for many years. -- that has been planned for years. marty: his tweets on uranium stocks surging. his surrogates tried to explain the context. ly, investors will have to take his tweets with a grade of salt. become lesse will responsive if they see the policies do not live up to what he tweets. marty: people will question, is this the way we want to do business in a new administration, to basically ignore or through tweets. when hel tell if

actually becomes president if this will slow down. there is no sign it is. david: people are comfortable with it. marty: i guess so. david: thank you. d.c. s marty shanker from on the drug pricing debate, saying despite the backlash he would do it again. how does he think president-elect trump will take on the issue? this is bloomberg. ♪

jonathan: 'twas the night before -- no, i'm not going to do that. this is "bloomberg daybreak." i am jonathan ferro. ftse 100 closes a pretty much

where it started. that is the session in london wrapped up as far as equities are concerned. shortened trading day as we head towards holiday. down about 2 basis points to 254. david: jonathan come here is what you need to know this hour. big sigh of relief, deutsche bank and credit suisse come to terms with the justice department over mortgage backed securities. but barclays hangs tough and the doj takes of the court. italy is buying a bank. the government moves forward with a plan to two invest billions of euros in monte paschi to save it. what do bondholders stand to lose? tweets that lose markets. -- move markets. donald trump takes to twitter to say he may switch from lockheed to boeing. is mr. trump shaping policy by tweets or merely the story? that is what you need to know

this hour, jonathan. jonathan: what the key banks are looking at this morning -- we are joined by the jeffrey's chief financial economist from his office in new york. a topic of conversation for 2017 through 2018 is these open spots on the fed board. and upfront presidency could -- and a trump presidency could really reshape the board. how radically different could the fomc look in the next 12, 24 months? >> the fomc is likely to look considerably different than it does today. i think we will see a gradual move towards the fed that is less dovish than is currently constructed. when and if janet yellen decides to leave, she could stay on after february 2018, but if that is not the decision, she will be replaced with someone who is more inclined towards following policy rules, and that would

also be a major shift from ben bernanke and janet yellen feds. jonathan: there is a certain argument, strong argument, that low rates have been a problem for the u.s. economy -- in fact, for many developed economies. if -- is the avalon see more hawkish federal reserve? is there an inconsistency between achieving that end achieving the goals of the trump presidency? ward: not necessarily. if the recent fomc meeting and janet yellen's press conference and her speech in baltimore last week, we saw her a bit of an ,wakening by members of the fed especially the most dovish pontingent, that the trum presidency could mean the economy shifts into a higher gear and as a consequence they are preparing us for the possibility that rate normalization will move faster.

i don't think that low rates per se have been bad for the economy. i think they are the consequence of monetary policy and a period of deflation. it seems we are moving out of the deflationary period. growth will move faster and the fed will respond in kind. jonathan: how will inflation respond? doesn't it just mean significant behind inflation? ward: well, inflation has been headed higher. the year-over-year change in the cpi was zero and the most recent reading, 1.6%. we have seen an exhibition. it is still relative -- acceleration. it is still relatively moderate. the primary driving force is the behavior of commodity markets, which stopped going down in february. and we already have 3% on service inflation. as the economy continues to grow and commodity markets continue footing, reallid

import inflation from overseas and u.s. inflation will continue to accelerate. jonathan: the market has shifted towards that view. what do you think the risk is for next year in 2017 on the back of the trump presidency? ward: as far as inflation is concerned, we will see inflation at 2.5% and knocking on the door of 3%. as far as growth is concerned, it is clearly a priority of the trump presidency. we don't know exactly what he is going to get through you, but it seems like his fiscal policy proposals will be progrowth. in terms of trying to establish the absolute magnitude of the improvement in the economy, we really have to wait to see what he gets done. but i think we can be relatively confident that 2 things will happen. we will grow faster in the second half of the year, especially if we get tax cuts. and number two, it is going to be a very volatile year for the market because we have a president whose idea public pulpit is his twitter account.

--idea of a bully pulpit is his twitter account. jonathan: great to have you on the program. bully pulpit, we have heard that a few times the last few weeks. david: going back to teddy roosevelt. he has one now, donald trump does. martin shkreli granted notoriety by raising drug prices as much as 56 times and then calling the crime is men who called him to congressmenes -- who called him to test imbeciles. he doesn't regret any of it. here's how he has characterized the criticism from washington. perfect storm of political season it is easy to become a target for unwarranted aggression, and if you look back, one of the things i noticed is that the president obama and his administration said absolutely nothing about drug prices throughout the entire period. i asked one of the people in his camp, why is he staying silent on this? urtly,d very c

they are not running. it is a populist issue and blown out of proportion. in terms of regret, not seeing that as acutely might have been a minor regret. because the price increase has stuck, that is the main mission, to raise the price and have it generate increased revenue. that has happened. i'm happy with respect to that. david: apart from the politics, and perhaps in business you can never put it entirely apart from politics, in the end, dated benefit investors in your company, the way that you have a list? would you have made more money for your investors if you are not raised it as fast? martin: in that sense, it was difficult to do anything in terms of the investors from the cash flow perspective. it makes no difference. you are better off raising it faster, i think. from the perspective of things like multiples and exit opportunities and brand names, certainly some damaged john. -- is somewhat

unexpected when i raise the price of a drug on a full and there were not any stories -- 20 fold and were not any stories about it. jonathan: being the poster boy of capitalism versus running a company and going against the d.c., where you have to negotiate and dance around to have a successful company. can you do both? martin: it's hard, isn't it? can your prior segment you were talking about the criminal charges against banks. we have an administration that is very thuggish and bullyish when it comes to companies, that looks at them as targets to shakedown, and enforcing justice is not their goal. their goal is to make a name for themselves and extract these billion-dollar settlements. one has to tread carefully. that is why the greatest distance people have kept the lowest profiles. david: particularly in the pharmaceutical area because people feel strongly about their prescription drugs. politicians get involved in

government gets involved. did you put turing at risk of the government coming in? they will come down on you hard. martin: absolutely. and learning at a young age that the government in many ways is beapparatus of vengeance, to a little cynical about it, is frustrating. at the same time, nobody talks about the drug on the shelves of bristol myers quit -- bristol-myers squibb, a trial i plan with nyu. nobody talks about that. we like to talk about one basically insignificant drug at the end of the day. david: joining us now is drew armstrong, who has covered this subject and particularly martin shkreli over the years. he clearly is not apologetic and it sounds like he would be much do it all again. drew: i think that is true, and i have to give credit to martin -- is interesting to hear you guys talk to him a year after

all of this. he obviously has a degree of perspective on it. he obviously is a controversial figure but he has some thoughts about what went right, what went wrong, the risks he put himself and the company at. he made a number of points that show some of that perspective, saying that some of the best businessmen are not controversial figures. maybe his company would have -- or will be more long-term successful if you was in the figurehead. -- if he wasn't the figurehead. it is interesting to see him for that aspect of short-term profit versus however this may play out in the long-term, the consequences he may bring down on the industry as a result of his outspokenness. -- wo what he -- what he, uld he turn extend to a favor to the industry if he warned them that you cannot go too far, too fast on this? drew: the health insurers ended managers to control access to these drugs are more in power than ever and are pushing back

very, very hard. look at gilead, where they are heavily discounting medicines. you are talking about potential pricing legislation in congress that could happen, even under a republican administration that has traditionally been externally friendly to drugmakers. david: does the likelihood that kind of legislation goes down substantially in a top administration with a republican house --trump administration with a republican house and senate? drew: you talked about this with martin as a populist issue. he has mentioned several times that we have to do something about drug pricing. we see him attack individual companies, just as hillary clinton and bernie sanders did on the drug industry. trump has gone after boeing and lockheed. there's nothing to say he will do exactly the same thing as the industry. the hearings in congress on a drug pricing over the last year, those have been led by republican committees. they have been the ones going hardest at the industry. jonathan: here's the problem --

if the fda hears the drug producers and the drugs that effort encompasses almost a closed market. on a capitalist model it generates problems. there's not much price competition because you have to get through the fda could there are drug companies that have to spend substantial amounts of money to get drugs through this wall and is closed market system. the solution lies somewhere here, doesn't it? got to do something about this. drew: one of the things you are starting to hear people talk about is how do we return this to a proper market with fluid pricing and efficiency, not something with one tiny drug where people can take arbitrage opportunities or something like that, versus something where the drug is priced too high and the generic commended her comes in quickly and lowers the prices back down, that is what the issue has been here. jonathan: very thoughtful interview. he gave decent perspective and

he was to be deflection of capitalism, he offered a decent argument. -- flagship of capitalism, he offered a decent argument what is the conflict with some of the reporting you have done and martin shkreli, former ceo of this company? tow: i think martin wants control his own message, i'm sure, like everybody does. he probably disagrees with some of the focus we have given to drug pricing. bloomberg has reported a lot on drug pricing. on his broke the story arrest on securities fraud charges. he is out there tweeting, saying he is at war with us.i don't think he -- i think he doesn't like answering questions sometimes. i asked him after an interview if he was talking to the fbi about platinum partners, a hedge fund he mentioned several times. he gave a colorful no comment about that and we will leave it at that. tohink to an extent he wants stay the way he sees the world

and no other way. jonathan: drew armstrong, very diplomatic. ining up, record etf inflows 2016. we will look at winners and losers. this is bloomberg. ♪

david: this is "bloomberg daybreak," and you are looking at the hewlett-packard greenroom. lipsky.p, john ♪ fed'san: brexit -- the mixed signals forced investors to find safe opportunities in 2060 and for some, that was through exchange traded funds. who were the winners and losers and what is growth for 2017?

joining us is the bloomberg intelligence senior etf analyst. great to have you on the program to tap into what you know about etf's. let's start with inflows and the amount of money. billion, has$275 of today. they are on pace to hit about $300 billion. $40 billion over the past record. they are in record territory. index funds are taking and $200 billion, $500 billion into passive. active mutual funds with $250 billion. hedge funds with $100 billion. we are closing in on a trillion dollars swing from active to passive. etf's are not pure passive. when money goes into an index fund, it is just gone. but etf's trade a lot and they are being used to make calls on things. in terms of the flows, that is what we are seeing and we saw the big story was u.s.

if you look at all those flows, 91% of those dollars were in u.s.-focused stock and bond etf's. only 9% was going overseas. last year that was 50-50. and trump is a big part of it -- one third of the flows were since he won. i've never seen anything like it . jonathan: i joked to the other day, when we going to get a trump etf? eric: there has been talk on twitter about eight trump tweet etf. [laughter] eric: i'm telling you, that is a good case for an active one because you have to change investment on the fly. the etf that rebounds monthly cannot keep up with trump's tweeting. i can tell you that financials and industrials and in general just the u.s. etf's are doing well. the top three etf's all caps the s&p 500. a lot of people acquiring pouring it into plain-vanilla, low cost vehicles.

jonathan: big beta plays, how does that and? eric: depends on we you talk to. if you talk to john vogel or warren buffet, if you are a long-term investor, just put it in the s&p 500 etf or in next fun and you will be fine. it depends on whether you are the low-cost crowd or summary tried to make a better buck. david: one of the questions raised from is this cyclical or secular? is this up-and-down or something different? the fact that there is that kind of inflow after trump is elected, i wonder if that makes the case that it may be secular. if you want to get out of it because it costs so much money and yet the low return doesn't make sense, those days seem to be going away. eric: i think they are gone. someone was on here this week talking about active having a great year next year. beyond active to passive, huge trend, it is part of a bigger trend in which is low-cost. costl it the great

migration. every vehicle and mentioned at the beginning -- if you look at the flows and you isolate them from people are moving south. etf's, the etf that took in the most money had average fee of 10 basis points. the active mutual funds, there are some that are outperforming three years, five years, and a scene outflows. there are some that are underperforming that have seen inflows. vanguards are cheap. the expense ratio is the new past performance. david: blackrock is competing for market share by cutting costs. flattens or market goes down, you are going to see a major consolidation on the buy side, people teaming up to lower fees. jonathan: i want to touch on something you just brought up. there are many people who say it is not about cost, it is about performance. you put those 2 things together. active just hasn't done very well. there are active managers who have been tremendously well and yet the money is still left.

what is it going to do about that? eric: the thing with active is over the years people thought they bought on the chart was up and is disappointed later. they sort of red information -- there is a study saying that the rise of the internet is the reason passive got so popular because people have access to way more information, not just quarterly statements. as people have gotten more information, they have gotten more intelligent. smart beta is a form of active, and people who move etf's into certain pockets, percentages and asset allocation, that is a form of active and that will live on. david: eric, thank you for being with us. bloomberg intelligence senior etf analyst. time for the other headlines. here's erik johnson with the business flash. in saudi arabia officials presented the most detailed budget in the kingdom's history. it is part of an effort to convince citizens and investors that they can repair the budget and windy economy off oil. the government says it has

reduced spending by 16% this year. planned airstrikes by british airways cabin crew on christmas and boxing day have been suspended. the union says the decision follows a revised offer from the airline. the proposal will go to its members. on-demand services unit is close to securing $1.2 billion of funding for expansion . people familiar with the matter say it is getting backing from first-time investors including silver lake management and china's sovereign wealth fund. and that is the bloomberg "business flash." this is bloomberg. jonathan: thank you very much. the dollar keeps stretching to new highs but that could mean abrupt turbulence for u.s. equities. all that and more. from new york city, this is bloomberg. ♪

david: this is bloomberg.

i am david westin. time for the battle of the charts. bloomberg's mark barton versus danny berkowitz i will translate to english for you. mark: it is christmas, final workday of the year for mark orton. -- mark barton. chart of the year. sterling dollar. going back to 1992, this is the chart that matters. years ago, it was the -- six months ago, it was the brexit referendum. a percent plunge for the pound against the dollar intraday. we went down 11%. one standard deviation, two standard deviations from the norm. it wiped away the record loss. 1992, when sterling fell a mere 4%. it fell against all 151 of the major peers. the question is how much further has a got to decline.

analysts surveyed by bloomberg site 119 next year. 107 by the end of next year. 1130 chart of the year. david: you are making jonathan nervous as he is about to fly back to england, how many pouncey will get back -- pounds you will get back for his dollars. >> making me nervous, too. i will do my best but it is no black friday. i'm looking at vix and dollar positioning. it makes sense that these are following each other. these are risk on, risk off that look at this. they track each other pretty well. this is around august. remember the chinese currency devaluation. they both spikes. look at what happened as of late. it is pretty low. dollar stretching to

-- dollar stretching to new highs. switch from monetary policy to fiscal policy. david: that line is exactly at the election. 2 great charts. you, i would vote for because it is elastic but you left out the fact that it is the middle of the night and it might have been a mistake. i will vote with danny this time but you have to come back next year. jonathan: mark barton, i will split the vote for the first time ever. i picked that out as chart of the year six months ago. mark: there you go. jonathan: mark barton, i'm with you, mate. this is bloomberg. ♪

jonathan: for our viewers worldwide, good morning and

welcome to "bloomberg daybreak." i am jonathan ferro along with david westin. alix steel is off today. futures go nowhere. on repeat for the last couple days. futures, negative two. ftse unchanged as well. switch up the board on the bond market. yields down about a basis point. euro stable at $1.04. david: jonathan, here is what you need to know this hour. big sigh of relief. suissee bank and credit come to terms with the united states justice department over mortgage backed securities, agreeing to pay $12.5 billion. barclays thanks tough and the doj takes it to court. buying a bank. the time government moves forward with plans to invest billions of euros in monte paschi to save it. how much will it end up owning and what do bondholders stand to lose? tweets that move markets. president-elect takes to twitter

again to send he may switch from lockheed to going to supply new fighter planes. is mr. trump shaping policy or merely the story? abigail, you have movers for us. abigail: futures may be going nowhere and stocks about flat as well. one area where we have big weakness, base industrial metals all sharply lower. this includes copper, zinc, nickel, led. what of it reflects the fact that chinese stockpiles are growing. the bloomberg that exemplifies 3, we havev deliveries for china. recent deliveries have spiked to levels last seen at least the most since 1994. in orange we have copper. it is higher on the year. over the last five years, copper is still in a brutal bear market. all of may suggest that some declines are ahead for copper, dr. copper.

as for what is happening in europe, metals is dragging on some of the european metal and miner stocks. week, one can be on pace for its worst weekend months. jonathan: most read story on the bloomberg this year -- not brexit, not trump. though to bank on september 3, the story that -- deutsche bank on september 3, the story that has dominated financial markets, and we have the resolution. seven to -- $7.2 billion agreement on a resolution on his dealings with mortgage-backed securities. $4.1 billion in relief to consumers, far below the opening offer from the doj months ago. the stock trading high through much of the session, relief for the ceo. torture bank clean think -- deutsche bank clean things up. there is another bank that is doing something different.

how to do with the doj -- take a listen to this. saying -- let me get this straight -- that he should race his middle finger at the justice department and say, i will see you in court. >> yes. erik: why has every single ceo from jamie dimon to avoid blankfein not taken an option? ceo commutee a u.s. on have that option. --u.s. ceo, you do not have that option. erik: but if you are a foreign -- >> you do. i think they will litigate, which is white with the administration leaving, it is in everyone's best interest to settle. jonathan: barclays aren't settling this with the doj. they are going to court. david: they have a high-powered legal team. you have to understand, as a lawyer, litigation is negotiation by another means.

this doesn't mean they won't negotiate. it may well be that they litigate for a while with the justice department to bring down the price. it is not that we won't pay any price, just that you are asking too much. jonathan: people involved in the investigation, leaking some of the color, starting to spill out. this is their quotation, not mine -- called them crapta cular. said they bought the distinct aroma of default. this can get messy. the color just keeps coming out. a bad what you call document. the juror can get there head around that. jonathan: john lipsky, great happy with us on the program. the banks in europe, it has been a problem. are we finally getting over the hump? hn: i hope so.

this is one of the key reasons growth in the european economy has been so sluggish as the recession. balance sheet stash their cap for 80% of credit flows in the euro zone as opposed to 20% in the united states -- when the balance sheets are clogged with bad assets, the overhang of these large fines, like the one we were just talking about, obviously, that doesn't leave banks in a position to be aggressive about lending and helping to spur growth. jonathan: legacy issues are one thing and sometimes they are out of your control and outside your jurisdiction pick for the european monetary policymakers, regulators are there some leaders they can pull? john: the ecb, the central bank, they've been pulling every lever they can think of. not to total success. what is mrs. harry with a time banks, recapitalization, cleaning bad -- what is necessary with italian banks,

recapitalization, cleaning that assets off the balance sheet. david: as you say, it is one itng to put this behind her, is another to restructure balance sheet to succeed in the future. that is perhaps what is going on in italy. with the deutsche bank, maybe he is taking a good part of his legal liabilities, but how does he move forward? where are they successful in the future for european growth? john: that is very important not just for deutsche bank but for other banks and the eu creating a more vibrant securities market and having banks be a smaller part of credit raising in the future. jonathan: it is not an overnight story. brian 10% of the market, it doesn't mean the companies will change the cultural habit of going to the banks for loans. john: it will take a while because there's a lot of infrastructure that has to be put in place. way back in the 1980's, the big

bang in london, american firms moved aggressively assuming they would be in the forefront of developing the european-wide securities markets. that is still happening. david: you were a chief economist at chase. the imf has been taking out estimates for global growth pretty consistently for quite a few months now. are we going to see a change in that given the election of trump , perhaps some growth in europe? john: well, let's hope. the imf forecast for europe is actually a bit better next year on the basis of things like the banks getting worked out and other aspects. general, the advanced economies are moving along essentially at a more or less steady pace. what is notable is since the 2008,recession, since 2009, the growth in the advanced economies has persistently been well below the 30-year average from before that period.

the real problem is how to spur growth in the advanced economies. jonathan: it has been a flashing light in the background for global macro the last decade, maybe longer. his global trade growth stalling? we hear more protectionist rhetoric from campaign trails across the planet and the western world. does that concern you a lot? john: of course it does. since world war ii, growth in international trade has outstripped grow in gdp -- in other words, it has been a leader helping to push growth. since the great recession it has lagged even for the emerging economies. trade has turned into a drag. this is something that needs addressing, needs addressing on a positive and constructive basis. ncipale pri reason for sluggish growth in my view has been weak business investment. that has been uniform across all advanced economies including the united states. ,avid: when it comes to trade

is it possible we had to much of the nonsustainable kind of growth? you go back to donald trump's election in the united states and in other countries as well, people felt they were not benefiting from global trade. it was fine for some policymakers in washington and new york to talk about it but they weren't renovating. doing it to take a fresh look at growth in trade but on terms where the populace feels they are benefiting? for sure,, that is but the biggest growth in trade imbalance occurred in the 1990's. it is not that people did notice in the u.s. that we had a record trade deficit, but it was a company by strong growth -- accompanied by strong growth. ,ack to my point, similarly inequality in the u.s. economy grew rapidly in the 1980's. but similarly, it wasn't that no one noticed. as i is the overall economy was growing, these that problems -- jonathan: what thatcher always said about the left and she

didn't care about this, she cared about this. whereas the socialists wanted -- john: well, we can see, overall growth is slow, problems are big. david: john lipsky will be staying with us. still ahead, trump moving defense stocks after a tweet on jets --nd lucky fighter lockheed fighter jets. we talked to an analyst to says it is late to the game and completely irrelevant. this is bloomberg. ♪

jonathan: christine lagarde conviction on monday cast uncertainty over her ability to continue as the imf managing director. we are joined by john lipsky.

we caught up with mohamed el-erian, former chief of pimco. this was his view of the situation of the imf. think the board did absolutely the right thing in retaining her as the leader of the imf. but something else -- had that not happen, the board would have found itself once again stuck with an antiquated selection that is not transparent, not merit-based, it includes backdoor deals and elements of national prestige, and that undermines credibility of institutions. all i'm saying is, yes, absolutely right in keeping christine lagarde, right thing to do, but come on, let's move forward in modernizing the selection process. jonathan: here is the situation for many people. you know the imf inside out. i don't obviously could but my perception -- someone from the innocence runs the world bank and someone from your runs the

imf. is that going to -- someone from europe runs the imac. -- imf to is that going to change? john: that is the perception that mohamed el-erian is raising. you have to remember why these choices were made. that theis principal countries to these ideas seriously and not view them as just some decoration that we will have a nice cooperative organization. if you move away from that, you got a be careful to make sure everybody remains engaged, and that can be a problem. if they weren't engaged, they wouldn't be effective. david: is that long overdue at this point? when those concerns were relevant, it was the aftermath of world war ii, for goodness sakes. a long time ago. hasn't the imf got a track record that people were taken seriously if it were a mexican, korean? john: i think so. the rebalancing of the quota shares within the fund and the

world bank, the shift in the world economy, means there are a lot of big economies. of course, christine lagarde has done an extreme a good job as the -- extremely good job as the imf managing director and there is strong support for her to continue through the end of her second term. jonathan: you bring up imf credibility. let's talk about institutional credibility an increase in populism. is the credibility of these huge financial institutions like the imf and the world bank and the views of those come have they been damaged? john: well, it hasn't been great. sole all, remember, in the g-20 summit in a november 2010, there was a general agreement to rebalance the imf and, implicitly, the world bank, to take account of the changes in the world economy and make sure everybody thought they were getting a fair shake, fair representation in these institutions. the u.s. was, like everyone

else, supposed to ratify that by october 2012. the u.s. was the last of all the members to ratify, three years late. there have been 2 financing rounds for the imf since that time, and the u.s. for the first time has failed to participate. for sure, there is some question about the biggest country, biggest countries' commitment to make these institution work, not to mention the g-20 leaders process. this is an important question. david: and that challenge was under president obama. we now have a new president, president trump. i'm not aware he has spoken out on this particular subject, but in general and he said on the campaign trail would not give you encouragement for the future of the united states but is a patient. john: -- united states participation. john: i'm reasonably confident when the issue is examined closely, these multilateral institutions are critical to the continued progress in the world

economy come in a constructive and not conflictive context. jonathan: i will ask a cheeky question in my best english. should the imf stop making forecasts? john: no, this is important, because you need to have a context in which you are looking at policy. that is not just for the staff and workings of the imf, but understanding what the imf is doing. you have got to be able to explain it in a global context, and if you don't have the basis of forecast, what are you doing? jonathan: incredibly polite to my rude question. what is the biggest thing for the global economy currently? john: there are a number of them but obvious ones -- europe has to get its act together. institutionally and economically. china has got to make a success of its reforms. i think it is important that u.s. growth takes an upward turn , acceleration in the year to come. david: john, we really

appreciate your time. john lipsky, first lady director of the imf and pfister of j.p. morgan chase investment bank -- first deputy director of the mf and vice chair of j.p. morgan chase investment bank. trump revived an old rivalry by promoting boeing for an upgrade of a super jet. insight you can only get here on the numbers. trump tweets and the stocks move. we are getting used to that. from new york, this is bloomberg. ♪

david: this is bloomberg. i am david weston. president-elect trump took to twitter again on the lockheed program. he said "based on the cost overruns my vast boeing -- i asked boeing to price out a hornet."e f-18 super

the stocks have been moving in opposite directions since he was elected. with us is george ferguson, bloomberg intelligence analyst on aerospace and airlines, and on the phone, the teal group vice president. want to start with you, richard. -- georgen context comes sorry. how far along we are in this process, george. george: well, i don't know if we want to turn it around at this point so you 35 is in low rate initial production's, what they call the building blocks of these. they will wrap up the much higher production in future years, a long way to development. it is important to remember that the 35 and 18 are very different. the 35 is a stealth fighter. 18 is a non-stealth fighter. even the president-elect trump has asked boeing to price out a comparable airplane, there really isn't one.

we are well down the road on the 35.5 -- on the f- hard to turn it around here. david: richard, i saw a bloomberg report this morning on your comments on this. you understand this well and were pretty outspoken on how realistic or unrealistic it is for the president-elect to be talking about switching horses at this late stage. richard: yeah, the thing to remember is that there are three different f-35's. the navy for years has continued for for the super hornet -- continue to prefer the super hornet. past just noted this, the five years the navy has purchased the super hornets while the same figure for the f-35 is 22. b have no and

equivalent in the super hornet pretty much anywhere else. another problem is that the marines need a vertical jet and there are no other vertical jets in production. -- ifr force basically they had a super when it -- super hornet, conceivable going back to an earlier jet that they stop making those years ago and it is ancient history at this point. david: for those who don't follow this as closely as you do, it seems like you'd order more of the one and cut back on the other. one is a stealth, the other is takeoff and landing. you are seeing the f-18 couldn't be engineered to do that at all. it is an entirely different aircraft. richard: that is exactly right. debate is this whole the f-35 just for the navy, and

it is a tiny fraction of the f- 35 program. f-35were the weakest customer. this debate has no bearing whatsoever. david: george, if you are in a boardroom at lockheed or boeing, how do you process this? do we take the sharp pencils and save some money on the f-35? george: i think that is where president-elect trump wants to take it. operating under the latest contract where the government unilaterally imposed their terms on lockheed. lockheed is disappointed. they want to earn more money off the military aviation business. i get the sense that this is part of the negotiation that president-elect trump wants to engage lockheed and make them think there is competition out there. if you are going, you would --

if you are boeing, you would like to extend the f-18 blind. the navy seems to prefer the f-1 8. i don't know if you need a fleet that needs to be all stealth. this could extend the line into the 20 20's. 30,000 feet, looking down at all of this, we got military spending was going to increase under the donald trump presidency. all i'm hearing is cost cuts. where is this going? richard: he has a real problem satisfying his base. it is not just the stated plans, it is infrastructure spending, in, debtuts kicking likely to rise. the only way to satisfy the base that elected him for "fiscal sanity" is to start showing you will get tough on defense contractors via tweet.

i think 99% of this is image and aesthetic and red meat for the tea party base. jonathan: r bloomberg intelligence analyst for aerospace and are lines, and on the phone, the chill group--vp -- teal group vp. david: he is keeping us all off balance. the ceos in the boardrooms are all off balance as we approach the holidays. futures stable. tight trading range is the last couple of days. we bring you the open from new york. this is bloomberg. ♪ 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. ♪ jonathan: this is bloomberg. not much price action to speak of. the dow heading for the seventh straight week of gains. futures marginally negative.

here is the action. treasuries have been big throughout much of the session so far. you wonder how much volume is out there. yields down by about two basis points. 253 on the 10-year. king dollar the dominant story the last couple of months. curate of about 710 to 1%. you develop ringing in new york so let's get straight to it. abigail: we are looking at another largely unchanged the majors in the west -- in the u.s. all right around even. this is the third flat type of open. it follows the excitement tuesday we saw a modest rally that almost took the dow to dow 20,000. we are one month since the dow close about 19,000. as for the best person as reformers, dow has gained 4.5% over that time period.

the banks and financials are higher as rates of moved up. we have a 10-year yield at 20 paces over that time period. the dow is on pace for its seventh week gain in a row. year,p about 14% of the on pace for its best performance since 2013. that was the year of the taper tantrum. we have the dow rising. david: we want to go for more on the markets and where we are as we close out the year. we will turn to chad morgan. company.nicholas and take us into exactly where you see the market going as a going to 2017. where is your optimism or your concerns? for 2017 people in the market overall will be up. perhaps 6% or 7% on a total return basis.

a lot has to happen. you have to have the baton pass from a monetary stimulus market to more of it -- more of an earnings driven growth scenario where gdp has to go higher. one of the critical concerns i is the an everyone has protectionist rhetoric coming out of washington. it actually becomes reality. that will have a deleterious effect on u.s. multinationals, the financial markets, and the credit markets over the course of the next 18 months. jonathan: several weeks ago we had a guest who said he was so uncomfortable. are you uncomfortable by the amount of bullishness out there? jonathan goldberg said he was surprised the market doesn't have a higher price target. every strategist we surveyed is bullish. how does that make you feel? chad: i don't know how he came to that. with a forward-looking multiple of 17 plus times with optimistic

earnings expectations for next year, as well as revenue growth that is going to be up by the consensus of 6%. if a market cap to gdp is extremely elevated, you need to see earnings growth to explode. jonathan: we are due for a pullback. an investor it in the trump win and trump rally. listen to what he had to say. >> we are due for a pullback. we have had a straight move up. the question is how deep of a pullback. i think in the open varmint, they are likely to be shallower and shorter. allsure we are not in ourselves. chad, a world of hope. if you get a correction, is it a buy the dip scenario?

chad: we think you get a 3% to 5% correction in the u.s. this will be a fluid situation. we believe global growth will decelerate. the major contribution has been the china growth story over the last decade, over the last five years. credit growth has exploded and that has been what has ignited global trade. if you have the chinese economy that continues to decelerate, that will have a meaningful impact on the financial system on a global scale. david: let's get a little bit more granular. which sectors are you most concerned about? if you have the trade problem, which sectors will be hurt the most and which are more protected? chad: three sectors i would stay away from under that circumstance. one, the oil and gas industry is going to be vulnerable. two, industrials. and of course the third one we believe is going to be materials

as well. there is going to be, we believe, a heightened level of uncertainty in 2017. we are not bearish, but we would we arematic about saying exuberant about the markets. i think that is maybe perhaps optimistic. jonathan: let's get into the vulnerability of the energy sector. they are going to be hugely beneficial basis points next year. wet year this year, january, had a twentysomething handle on crude. we will have 50 as we start the year. they are not pricing in for you in terms of whether that sector is vulnerable. chad: the baseline assumption is for us is that you are still again having global growth that will decelerate. that will take the demand curve and perhaps lower it a bit. you also remember the third-largest producer now that

is going to be coming back online with fairly substantial output over the course of the next three years. i think that will set itself up from lower lows within crude markets, regardless of what opec does or does not do. david: the stocks you warned about in case there are trade problem of the the same was legal under infrastructure. you have materials, energy. how you handle that trade? suppose there is not the trade problem and infrastructure comes advantaged, orbe it there is a trade problem. chad: we don't have a full understanding of the u.s. fiscal stimulus plan obviously. the infrastructure plays have gone quite well over the course of the last decade. it is all tied to global growth. they are selling outside united states. let's say trump does get his wish. $1 trillion over 10 years. that is still a drop in the

bucket when you consider what china has done, $15 trillion, $16 trillion a credit -- credit growth. this is the reason i would be more balanced and not get overzealous with the forecast for revenue growth for the industrial sector as well as the materials sector. jonathan: give me a framework for thinking. there are two dominant paths of thought. civil -- some will look at the last two months and said the trump rally will get knee-deep into the initiatives that will come and what it means to markets. some will start in the summer and say it's one the bond market talked out and yields dropped down and we had inflation kick in. do you look at the rally is a trump rally or as a global reflation theme beyond the trump administration? chad: i believe you are right that we are starting to see that turn and added a shot of

adrenaline because of the trumpet administration coming in and getting that -- trump administration coming in. the market is pricing a big fiscal stimulus program. you have to consider you have to have business investment in the united states, productivity best of the of approved, and a labor force that is growing of which all three of those right now have been listless. jonathan: that is a long list. chad morganlanders. still ahead, digging deeper into settlements from deutsche bank and credit suisse. can you guess with the biggest story on the bloomberg was this year? it was not brexit or trump. if you missed it, that is next. this is bloomberg. ♪

♪ jonathan: this is bloomberg daybreak. hewlett-packard enterprise greenroom. coming up on bloomberg markets, colorado governor john hickenlooper. ♪ jonathan: 11 minutes into the session. guess where stocks are. they go nowhere, flat across the board. let's go across the abigail doolittle. abigail: modest movement. two health care movers. pfizer and after zeneca. pfizer will buy the unit for $550 million upfront, and an additional wanted $75 million in 2019, and an additional $850 million in the coming years.

up,her health care stock merck. this is the first such compound. credit suisse has added merck to its top take list for 2017 for one of the company's cancer drugs. health care is really lagging. this is 668 in blue. spy outperforming in orange. the health-care sector in white. the biotech sector that oppression all these health-care stocks. jonathan: what a year it is been in the european lenders. i want to take my bloomberg. these of the most read stories on the bloomberg terminal over the last year. some clientstop, pay back exposure. at of everything that is happened this year, that was number one. it was matt miller in berlin they give you that. david: we forget at the time

that john was having to go public and say yes, we can pay the bills if they come due. he had to reassure bondholders and can make the payments. jonathan: deutsche bank and credit suisse settling with the doj over mortgages. barclays pushing back the deal far below the justice department's initial request of deutsche bank. it's been their bondholders this year. get a break it down is our senior writer on the finance team. giving you a new title there christine. $11 billion the $14 billion number on the table initially. now it is $7 billion something. break it down. >> a couple of things to focus on. the $7.2 billion is not all caps payment. you have about $4.1 billion of that that is consumer relief over five years. they have said it will not happen that have a material impact this year.

the never to focus on for investors is the $3.1 billion they are actually paying out. of that about $1.2 billion ahead and reserve. that is above what the bank was expecting to have to pay. even though this have a number is $7 billion and of its lower and scary -- jonathan: even lower. >> it is a little higher than what the bank was expecting as far as the payment they are making. david: when you talk about this relief, consumer and community relief, will that overhang the earnings for five years? they will be making loans at lower rates in the other words -- otherwise the beginning. >> they will beginning some kind of loan forgiveness. david: writing done mortgages for instance? >> yes. overtime to could be some cost to that of course, but it is not a one-time cost. issuesve so many other that are coming up.

they had a lot of ongoing legal issues, including a review of their business in russia, they still not settled on the foreign exchange trading, and a number of other things. they still have things to worry about but it is definitely good news for investors that the -- that this settlement is behind them, or seems to be behind them. the one other thing every mention is they have said they are going to have capital ratio of 12.5 by the end of 2018. they are well below that. are they going to raise capital earlier in the new year? jonathan: there is a reason that story was such a big thread on the bloomberg. there was serious concern about the future of this bank. they were conversations with the german government needing to step in. sitting here now it all seems a little crazy but that's -- crazy that is where we were. looking at 2017 and the legacy issues, are we finally going to

get a strategy that most of the investment community understands, a strategy that will give them longevity and get rid of those doors for this bank will cease to exist in several years. >> maybe this carries part was the department justice thing, which is behind them. issue overhanging the bank is really profitability. european banks in general have profitability issues. they are not making that much money. interest rates are negative and that is not helping. they have been inching up in the west sorbents are benefiting and europe is not benefiting from that. they are ahe bank, big pawnshop. that is their expertise -- they are a big bond shop. that is their expertise. complicated mortgage backed securities is a part of this department of justice thing. those are not profitable anymore

and they are not treating and there is not liquidity. they have to find different things to do. jonathan: let's talk about another expense. going to court is costly. what do you think about them saying no thanks, we will take you to court? because that's taken before part of a negotiating strategy by the doj. we reported a while ago that barclays was taking this fairly aggressive line. they had a view of how much they wanted to cap their settlement at. our understanding is maybe they want to the doj with some sort of number as part of a it'siation and they said easier to just go ahead and sue and get this done and keep going back and forth. david: and to find out how the trunk administration will do with it, it will be a different justice department. i always's have trouble with your name. christine, thank you for being here. coming up it is bloomberg markets with mark barton.

and julie hyman. mark, on your last day of the year, what is coming up? mark: i feel good about that. -- will talkovish at the top. then we will speak with a professor, former director general of the italian treasury about monte paschi. we will talk about battle of the charts. we have a first. a three-way battle of the charts. berger versus hyman versus collins with barton judging. i cannot wait. david: i'm still voting for danny. thank you very much. mark: i'm excited about sterling. martin scalia weighs in on the drug rising debate. he said he would do it all of ei -- do it all again. how does he think a president trouble take on this issue?

this is bloomberg. ♪

♪ david: in case you missed it, martin's grilli said that the national average of a drug prices was blown out of proportion and largely political. he did concede he could've predicted blowback summit better. here is part of our earlier interview. ani think the media made it issue. if you look in california were people wanting past lower drug prices, they ran an ad with my name on it. my family was shocked to see it. the proposition failed. this is one of the most progressive, liberal states in the country. the proposition failed by a majority vote. jonathan: you said the media made it an issue and i love it when people say that. >> she is an apparatus of the meeting. jonathan: using the media to get the message across. exchange.deas

.i wouldn't go >> as far as that ok what -- >> ok, whatever. david: you say people follow the politicians are. if you have people up there that don't have a lot of money and they need to take a drug like this, there will be consequences. >> there isn't consequences. they have insurance. i'm not sure if you're familiar with health care insurance. 90% of americans have it. i paid a fine because i don't have health care insurance. i had to pay the irs a fine for not having health care insurance. insurance must of ingrid because a lot of people doesn't cover one of percent of the cost. >> as far as i know, it is covered by every major insurer. beltimately think trump will a fantastic president. he will bring more competition for drug prices and solve it in a capitalist way. right now it takes five years. jonathan: let's go back to

capitalism. for the health care industry it is almost monopolistic week it is so hard to get drugs through the fda. you think that will solve that? my question would be the pricing issue. it will get a lot harder to lift prices if they do address that, isn't it? martin: it's only a part of health case managers. we are not talking about physicians. their prices are rising faster. you wanted take on drug companies, is the best cost-effective solution for health care. they are algorithmic. expensive things like how you do the surgery or something is much more complex and harder to control. david: then we should have health care providers and defend that. there is no question the price of drugs is going up faster than the cost of living. >> yes, it is. david: as a percentage, it's 18% in moving towards 20%. much higher than any other developed country. when you have health insurers, pay high prices that gets

expressed through premiums sooner or later. it doesn't just go away. grow, and wep's are a leader by a longshot, what happens is we learn as a society that what we prize in life is our health. we will spend more and more on our health and never before and that is a good thing. is the mark of a civilized country. david: you do it again? martin: of course. you have seen valeant castigated for their price increases. they raised prices after the senate committee. pfizer raise prices of viagra 14%. i don't see anywhere where they need to keep up with 13% inflation. it is not like i am surprising and saying this, everybody is doing it. in capitalism you try to get the highest price you can. jonathan: does the damage your ability to run a company again? martin: defense of how much money you have. if you look at a guy like trump he bought an,

airline company and try to fire everybody. he was one of the most unpopular men in the 1980's. this takes time for people to understand and maybe in the short run there are some dislocations, but i also made a lot of fans in the free market world. david: you did not make too many fans among prosecutors. there is an indictment. this is from a different set of circumstances. where does that case stand at this point? martin: the trial will start in june and i'm looking forward to it. it will be quite an exciting circus. we will limit by a landslide. a jury trial. i have got my attorney and the evidence is clear i did nothing wrong. there are no victims of my crimes, unlike allegations revealed on monday where there were 600 investors out of $1 billion. my investors sent me christmas cards. jonathan: that was a fatter touring pharmaceuticals. he loves it, doesn't he?

he loves the spotlight. david: ideological pursuits. whether he is a good businessman or not, he is an ideologue. jonathan: he is the poster boy for drug pricing but he wants to be the poster boy for capitalism. whether you can reconcile that with your ability to run a company -- david: and if investors want to give him money to pursue the ideology is another question. jonathan: full coverage continues right here on bloomberg as we cap units of the holiday. 26 minutes into the session. stocks go nowhere. most people went home for christmas. virtually unchanged at the close. the dow unchanged as well. this is bloomberg. ♪

♪ i am julie hyman and for vonnie quinn. mark: welcome to bloomberg markets. ♪

julie: we are looking for some breaking economic news in the u.s. new home sales, the smaller portion of the housing market after existing. the numbers coming in better than estimated for november. 592,000 is the pace. 575,000 is what was predicted. that makes the month over month change 5.2% for the number. it looks like this could be the same phenomenon we have seen across the housing market, which is as rates rise and we see productions they will continue to rise we get some folks buying homes ahead of that increase. we have the final december read on the university of michigan consumer confidence. that's coming it at 98.2, which is much like the prior reading. the recent confidence swings we've