kingdom. president trump: i think it will be a fantastic thing for the united kingdom. i think in the end it will be a tremendous asset, not a tremendous liability. >> theresa miaa is the first foreign leader to meet -- may is the first foreign leader to meet officially with trump since the election. scientists say a border wall would be bad for the planet. engineers at n.y.u. and university college-london say concrete is a potent source of greenhouse gases and the wall will need a lot of it. more than double the amount in the hoover dam. another scientist says a thousand-mile wall would release as much as carbon dioxide into the atmosphere, more than the annual emissionses from every home in pittsburgh combined. prum is scheduled to make his -- president trump is scheduled to make his first visit to the pentagon as commander in chief later this afternoon. "the new york times" is reporting trump will ask for a plan within a month to more aggressively strike islamic state. and there's going to be tighter security on some european trains.

belgium has sealed an agreement with the netherlands and france to draw up passenger lists and introduce passport checks on international rail services. the move will tighten security on the trains and help track criminalses who might be using them. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ♪ scarlet: u.s. stocks slipping from record highs but they still notch gains. u.s. stocks slipping from highs that were made this week. but they still notch gained for -- gains for the week. joe: the question is, "what'd

you miss?"? scarlet: at a joint press conference today with the british prime minister, trump stressed america's special relationship with the united kingdom. on the same day i held an hour-long phone call with the president of mexico that follows the mexican leader's decision to cansal meeting over trump's plans for a border wall. plus, president trump says he still has not made any decisions regarding russian sanctions. ahead of a scheduled phone call with russian leader, vladimir putin this weekend, the first week at the white house coming p. reporter: once again going into the close, not a lot of action for u.s. stocks. we have the three major averages or the dow, s&p 500 and nasdaq, all trading about flat. down ever so slightly. most of the day, flipping between small gains and losses. so not a lot of action once again after the two-day rally earlier this week that did of course put the dow above 20,000. the dow remains above 20,000.

and we are looking at weekly gains for u.s. stocks. leading the major averages to the down side by just a little bit, the dow transports. we have the dow transports down more than the major averages. and this right here is largely why. we have an absolute collapse in the airline stocks today. led by jetblue and american airlines. american airlines did report earlier this morning they beat estimates, but their forecast is disappointing due to rising costs, including fuel and labor. jetblue reported yesterday, down even more than american, and jetblue is on pace for its worst day since -- in about a year. nearly a year. there are two downgrades there. wolf research and arch and argis, argic citing rising costs. we were told yesterday that they weren't pleased with the capacity numbers there. it was a bit bearish. today we're seeing a sellout here. when we take a look at this, this chart may suggest that there is some down side ahead for the airline sector.

this is the s&p 500 airline index over the last two years in relation to its 200-day moving average in yellow. there are a few times where it's been really above that 200-day moving average by more than 30%. back here in 2014 and 2015. and now we're 31% above the 200-day moving average, plus an r.s.i. that's showing a series of lower highs. that happened the last two times. and we can see that there was a reconnection to that 200-day moving average there. could be some continued down side for the airline sector. one sector or some wins that are are doing very well today, the semiconductor, the chip. we have the stocks up nicely. up 1%. at its highest level in about 16 years. this comes on a string of bullish earnings reports, including maxim. intel also beat estimates, morgan stanley raised its rating to an l perform, despite the fact that the guidance could be somewhat disappointing and it could be that intel report

that's helping inindividualia climb more than 1.4%. some weakness in the airline but night strength here for the chips. joe: thanks. "what'd you miss?"? chinese premier league penned a letter in this week's issue of bloomberg business week. and even though he did not mention president donald trump in the 640-word column, it cuments as trump takes action to re-examine trade agreements like nafta and the trans-pacific partnership. he writes, the world is a community of shared destiny. it's far preferable for countries to trade goods and services and bond through investment partnerships than to trade barbs and build barriers. should differences arise, it behooves us all to discuss them with respect and a keen sense of equality. joining us now to discuss china's stance with the trump administration is our bloomberg intelligence chief asia economist. great to you have on the set. this letter in business week comes after the appearance in

davos. how would you carningize china's strategy -- characterize china's strategy on the global sphere right now, particularly with the u.s. perhaps pulling back away from trade? guest: i think the key thing you have to remember is that china is the biggest beneficiary of the status quo. exports have been a huge driver of china's development. they're less important now than they used to be but they're still playing a big part, a big positive. china doesn't want to shift away from the status quo necessarily and that's why we're seeing a very measured response from china. they're certainly noting and responding in official press to things which donald trump and the new administration is saying. but equally they're not escalating. scarlet: there is an opening for them here, right? the u.s. withdrawing from the t.p.p. gives them some room to negotiate their own trade partnership agreement across asia. guest: absolutely. to the extent that the u.s. draws down its trade and security commitments in asia,

china, as the region's biggest economy, clearly is one which has the space to move into the gap. the question is, is that a positive or a negative? for china? the consensus seems to be good news, china wants to play an expanded role. the reality, in my view, is that china's actually been benefit , been free riding on the u.s. security guarantee. which is underwritten in the free flow of trade. if that's withdrawn, china's going to face more frictions or more costs. joe: one key difference between china and the u.s. is china or the u.s. runs a big trade surplus and china doesn't. or sorry, the u.s. runs a big trade deficit, china runs a big trade surplus. can china fill in the role for the other asian countries that the u.s. would, given that china's trade position is different? guest: i think that would just have to happen over a really long period of time. because the savings investment balance in china, the balance between savings and consumption in china, just isn't going to change overnight.

joe: could china use this -- use this as a moment to start thinking and accelerate the process of shifting more to a domestic consumption-oriented yes -- consumption-oriented economy? is this the moment where that accelerates? joe: i think the reality is that this is going to be a 10-year process for china. not a one-year process for china. what i do see, though, is the potential for a win-win between china on domestic reform and trump on trade. the sects that are are most sensitive for the u.s., like steal and aluminum, are also the sectors which are the kind of the poster boys for inefficiency, for energy intensity, for credit intensity in china. so domestic reform win for china in accelerating the overcapacity in metals could be a trade win for trump. scarlet: of course investors are watching very carefully on what happens between the u.s. and china. including the founder and c.i.o. of heyman capital management. he joined bloomberg earlier. let's take a listen. >> they've recklessly built a system that's going to need to

restructure. that just so happens to be metastasizing right when trump becomes elected. so it's going to be -- the world's a multivariable equation. what's happening to china is going to happen on its own. on top of the fact that trump is going to get a better deal for the united states. those two things concurrently are going to cause profound change in china. scarlet: he sees profound cheney in -- change in china. you say china benefits from the status quo. what steps is beijing taking in the back drop here to prepare itself? guest: the goldilocks scenario for china is they can benefit from stronger global demand. the u.s. consumers are coming back, unemployment is low. absent trade measures, china could have stronger he can ports which would give a bigger cushion to facilitate painful domestic rebalancing, painful domestic deleveraging. to the extent that the trump administration is aggressive on trade and china doesn't benefit so much from that stronger global demand, maybe even takes a hit from exports. those painful domestic moves are going to be even more difficult to accomplish.

joe: one interesting facet of china's relationship with the rest of the world has been, there's a lot of money coming out of china. it often finds itself in major property centers, in vancouver, australia, the u.s. and so forth. there's a great story on bloomberg this week talking about how some of these markets have been cooling down, some of that money isn't coming out as fast. from your perspective, has therein there been a meaningful -- has there been a meaningful shift in terms of china clamping down and preventing buyers from going overseas? guest: one of the key challenges for china going into 2017 is how to manage the yuan and capital flows as the dollar strengthens. what we've seen so far and what i expect to continue to see is a kind of aggressive muddling through strategy. partly through slightly higher market rates in china. partly through aggressive intervention in the f.x. market. partly through controls on cross-border capital flows. we're already seeing those cross-border capital flow controls starting to bite. and that, i would expect, to

have some impact on the real estate markets where china parks their funds. scarlet: when china cracks down on its citizens using f.x. for real estate, where does it want that money to go? what is its preference for what happens to that money? guest: i think long term china would like to have a more open capital account with more opportunities for chinese corporates and households to invest around the world. that's a key part of driving more efficiency, tapping down on asset price bubbles in the mainland market. in the short term, though, the reality is the priority is managing the yuan and tamping down massive capital ice flow -- flows. that means they're trying to stop money going offshore. joe: speaking of preventing money from going offshore, interesting chart here on the bloomberg, showing that the last reading did show an increase in china's capital account. so maybe some of those measures are working. tom, chief asia economist at bloomberg intelligence, great to have you here talking china. thank you very much. scarlet: we have some headlines here. j.p. morgan talking about his

meeting at the white house. he tells reporters that he met with trump advisor, formerly the president and c.o.o. of goldman sachs. and again we know that jamie diamond entered the white house about an hour and 10 minutes ago. he's chairman of the business round table. so that might be one reason why he's making appearances at the white house. jaymonny dim ombing n saying he met with gary cohn. joe: some notes about what dimon said. he said people are trying to do things to get the country to go faster, get more jobs for americans and we want to do our part to do that. there you see jamie dimon having just met with gary cohn. scarlet: coming up, we'll hear from what former u.s. trade representative has to say about the potential implications of a tariff on mexican imports. ♪

scarlet: it is time for the bloomberg business slash. look at some of the biggest stories in the news right now. defense secretary mattis has ordered reviews of the fighter jet and boeing's plans to build new air force one presidential aircraft. two high profile defense contracts that have been heavily criticized by the president. the c.e.o.'s of boeing and lockheed, america's two biggest defense contractors, are set to promise cost reductions after meeting with the president at trump tower. the leaders have sold more bank stock than insiders from every major u.s. rival since the trump election triggered an industry-wide rally. regulatory filing showed 15 bb&t officers unloaded shares since november 8. larger than any other company in the bank index. the index has surged 24% since the election. jpmorgan, the world's biggest investment bank by revenue,

boosted its 2016 bonus pool for traders dealing in government bonds, swaps and other assets tied to interest rates. according to people with knowledge of the matter, the increase was about 20%. another person said rates traders at bank of america got increases that averaged more than 10%. and that is your business flash update. joe: what did you miss? as we reported, president trump and mexican president nieto say they talked for about an hour over the phone today after pena nieto canceled his schedule visit to the u.s. next week. former united states trade representative is tonight's guest on "charlie rose." the two discussed possible tariffs trump may levy on mexico. >> it's challenging because both under nafta and under our obligations in the world trade organization, we cannot impose that 20% tariff and not leave the door open to other companies -- other countries to retaliate. so if we do that, we're violating our international obligations, it means that

mexico could raise tariffs on our exports and mexico is our, i believe, second largest export market. we export hundreds of billions of dollars of goods to mexico every year, supporting u.s. jobs. whether it's in manufacturing, in agriculture, or in services. so it's the beginning of a trade tit for tat that hopefully will finds its way toward resolution. charlie: what would happen to mexico? would it then say to the united states, we'll sell that stuff we were selling to you to china or some other market? >> companies will have to reorder their marketing, will have to try to find new markets for their products. any of the broader issues, really three-fold. it's the risk of retaliation. of mexico raising that are i haves on our products -- tariffs on our products. it's the risk of imitation. mexico or other countries say, well, if the u.s. can violate its international obligations, we can raise tariffs on american products as well. and since 9 a% of the world's consumers live outside the

united states, 80% of the world's purchasing power is outside the united states, we need access to those foreign markets to support jobs here. and then thirdly, it's taxation. when you raise tariffs on mexico imports, that means you're imposing a tax on the consumers of those imports. low-income americans spend a disproportionate amount of their income on tradable goods. clothing, foot wear, food. so you're raising the cost on the people who are least able to afford it. in that regard, it could have pretty broad implications, both economically and in terms of our relationship with other countries. charlie: why was the t.p.p. good for the united states? >> it was good in many respects. one, by all of the economic analysis, it would have added more than $130 billion to our g.d. . it would have increased exports $350 billion a year. we know that exports -- charlie: how would it do that? >> by opening other markets to our exports. we're already have very open market. we have low tariffs.

we don't use regulations as a disguise barrier to trades. other countries have higher barriers. we have a 2.5% tariff on autos. if a company comes into the united states, there's a 2.5% tax slapped on it. unless it comes in from a free trade country. vietnam has a 70% tariff on autos. malaysia has a 30% tariff. charlie: if you sell an auto to vietnam, they put a 70% tax on it? >> yes. t.p.p. would have eliminated that. charlie: would have eliminated the tariffs in malaysia. >> as well as other barriers they have. these are some of the fastest growing markets in the world. vietnam, 09 million people, growing 6% a year, an emerging middle class. they want what america producers. whether it's autos or tractors or high-quality, good-nutrition agriculture, or our services. so for us to be able to get into that market helps support good jobs back here. we have a market like that, 90

million people, you really have two choices. if they have a 70% tariff on autos and you want to sell autos in vietnam, you can either tear down the barrier, keep your production in the united states, and export the product from here. or you can close your factory here and move it to vietnam to serve that market. our view was that it was better to tear down the barrier, to keep production in the united states. >> that's the argument that donald trump used in the campaign. that these trade agreements are not fair and american workers are losing their jobs. >> i think anybody who actually looks at what's in the agreement, who's in the agreement, what the provisions are, if you look at what president trump has said, he's said we have this unfairness that other countries have barriers to our exports. that's exactically i will what t.p. -- that's exactly what t.p.p. addressed. 18,000 taxes on american exports eliminated. >> it wasn't only donald trump. it was hillary clinton. and it was bernie sanders who opposed t.p.p. and the president couldn't get it through congress. >> it was never formally introduced in congress.

>> he had a head count. you think it could have? >> i think there was more support in congress than meets the eye. you never have the votes for something until you actually introduce it, the leadership mobilizes, you have a whip operation. but i spoke to a hundred house republicans individually, i spoke to the democrats who were supportive of trade, i think had it been introduced in the right environment, it could well have had -- >> [inaudible] -- >> opposition of hillary clinton and bernie sand. you had to depend on republicans. >> trade bills are usually passed largely with republican votes and a critical mass of democrats. we had a critical mass of democrats. the same ones who voted for trade promotion authority last year. the big difference this time is a lot of mainstream republicans, seeing the effects of candidate trump during the campaign, became wobbly on trade. joe: that was former united states trade representative, michael froman with charlie rose. you can see the full interview

tonight. scarlet: coming up in the next hour, we'll continue the conversation on trade. we'll be sitting down with the ambassador who form early served as a u.s. trade representative. ♪

scarlet: the mexican peso the best performing emerging market currency for the week but traders are betting on more losseses for it. the white line is a spot price of dollar mexican peso. the peso has lost 12% of its value versus the dollar over the past year. the line going up, of course, shows the appreciation in the value of the dollar. the blue line is the peso risk reversal. you can see that after the election, the vertical yellow line, they've completely diverged. that widening gap shows investors are overwhelmingly betting on more losses in the peso. traders continue to buy -- put options, which are bearish options, over calls, which are bullish options, to protect against down side risk as a

crowd into dollar positions. as we've seen, the comments out of the white house and mexican officials could, move this currency pair into any direction on any given day. joe: so many people argue that on a fundamental basis the pes posey -- peso is cheap but people are worried about the relationship that they're paying a lot for protection. scarlet: the headline risk and tweet risk. joe: here's some more -- here's another currency that could be affected by tweet risk. and that's the u.s. dollar. the u.s. dollar seen as like i i will one of the big winners so far this year. but in fact, it's really not doing well. in fact, it's on a five-week losing streak. despite the expectation of higher growth. despite the expectation of policies. like a border adjustment tax that would their ethically benefit the dollar. other noises coming out of this administration suggest that trump and the treasury don't like a strong dollar, would like it lower. there's some real tension here. and of course as we know, long dollar also very crowded trade. perhaps some of that is coming out of it. something to watch.

the dollar not doing so well so far this year. scarlet: richard was writing that it's not so much the dollar's losing ground is other currencies are making up for lost ground. they're catching up. it seems like the dollar's losing out. joe: you could argue that the dollar never moves. everyone else revolving around it. scarlet: the market close is next. take a look at the major indexes with less than four minutes to go before the close. the dow coming off its record high. losing 16 points. the s&p 500 off by three points. little change here for u.s. stocks. also, we are awaiting president trump at a ceremonial swearing in of the secretary of defense, general james mattis. this is a live shot of the hall of heroes at the d.o.d. we will take you to his live remarks. president trump's live remarks, when and if it happens. he is scheduled to show up there soon. this is bloomberg. ♪

scarlet: we're moments away from the closing bell.

u.s. stocks ending the day, little changed, but near all-time high as after stronger than expected earnings and fresh policy signals from the new dministration. joe: if you're tuning in live on twitter, we want to welcome you to our closing bell coverage every week day from 4:00 to 5:00 eastern. scarlet: we begin with our market minute. record setting week, if you look at the dow. the s&p and the nasdaq. over the five-day period. the dow breeched 20,000. little fanfare compared to the 10,000 marker. we did end the week near record highs. but on the day, kind of -- they just hung around the unchanged line. joe: nothing happened in stocks today. scarlet: if you dig inside and look at the sector performance, come inside the bloomberg, this is g.r.r. 1 go. you can see health care and telecom and tech were the only gainers and of course lots of tech results for investors

through there with google or alphabet reporting yesterday, along with microsoft and intel. energy shares, the big laggers here. some of the names here that we're keeping an eye on, chevron reporting its first annual loss since 1980. deficit ofng about a $497 million. for the year. spectrum, i was thinking southeastern, because the ticker's s.c., but it's spectra energy off by 3.75%. the head of ferk resigned so that could mean delays in pipeline approvals. that's how investors are interpreting that. and juniper down as much as 10.2% in trading today. certainly came off its lows. third quarter, adjusted earnings per share outlook, missing analysts' estimates. joe: let's look at government bonds starting with u.s. two-year and 10-year. not much going on domestically. down a little bit on yield. buchek out what's going on in greece. significant move higher in greece two-year yield. the last thing probably people

feel like they want now is to have to start worry being greece again. yet again, however, there are stalls in negotiations about unlocking more money. traders are getting nervous. i don't know. usually these things get smoothed out. but pay attention to greece. very significant jump. .7 there on the two-year yield. keep an eye on that one. scarlet: maybe rearing its ugly head. in currencies, the yen weakened a second day. it's targeting the yield curve now, trying to contain the rise in the 10-year yield. the mexican peso is best performing emerging market currency today and for the week. testing that 21 level. it got there. and then backed off. it ended this week with its first weekly gain since december 9. and of course we know that president donald trump and mexican president pena nieto talked by phone after they canceled their meeting jointly or unilaterally. that's still undebate. white house also walking back that 20% import tax as one option to fund the construction of the wall. and the turkish lira, we're

keeping an eye on this one. another record low. the question is whether a downgrade of turkey will come because fitch is the only major ratings company to rate turkey at investment grade. we know the central bank has been tightening liquidity to support the currency. as the president has warned against raising interest rates because he says that would adversely impact inflation and the economy. joe: finally on commodities, not a wlole lot doing. the big gaynor today was silver shooting up in the middle of the day. gaining 1.7%. oil losing, you see west texas there still above $53 a barrel. not a lot of change there. that hasn't moved in a while. and gold basically flat. so another fairly quiet kay i in the commodity -- day in the commodity front. scarlet: those are today's market minutes. we're awaiting president donald trump at a ceremonial swearing in of new defense secretary general james mattis. you're looking at a live shot at

the hall of heroes at the pentagon. we'll take you to the live remarks when it happens. in the meantime, joining us now is our reporter at the white house. investor director and fund manager. let me start with you, guy. on this day, that we were anticipating that certainly the u.k. had been anticipating -- talk to us about the context and the reality of this quote-unquote special relationship that the u.s. and the u.k. share. on twitter it was noted that sky news was wall to wall coverage of theresa may until the u.s., whereas it was not even worth a mention really on fox news until the news conference. reporter: yeah. [laughter] i think the u.k. always likes to perceive this as being a special relationship. it's certainly very notable. but you do see a spike in coverage of the special relationship at the beginning of every new president's term. the u.k. likes to get in early and talk about the special relationship. i think what theresa may delivered today was a

conversation with donald trump about how to maybe think about the security architecture of the world. to go out there and get engaged with nato, with some of the other big international bodies that exist out there. and apparently now the president is 100% on board with nato. it's going to be interesting to see what the new secretary of defense has to say about that. scarlet: 100% in so far as he didn't challenge the statement when she made it. joe: trump has been the president for one week. extraordinary busy long week it would seem. as a fund manager, what's your takeaway from the first week of the administration? reporter: we really have to get used to some new rules. certainly new rules have developed. it looks a bit more like emerging markets. we have the mexican peso the other week. one of the reasons it rallied was on some reports that one of the senior mexican financial officials is close with jerrod curb measure, trump's son in law. and then there was a report that

jpmorgan just sent out counting the number of tweets that trump has sent out about trade policy versus the number he sent out about physical stimulus and obamacare, with the result being that obviously trade policy is a priority. this is not normal. scarlet: this is not normal. everyone's adjusting. include the media as well. for theresa may and the u.k., what would qualify as a success for her? does she go home feeling that this was a successful trip and a successful conversation with the new president? reporter: i think she probably does, yes. it was a very short press conference. that was interesting in itself. given the kind of week that we've had. but i think she probably does walk away with some degree of success under her belt. she did get the president to commit to nato or he didn't disagree with her when she said that. they talked about trade. it gives her the ability to go home and say that there are other options.

she talks about the u.k. being able to trade on the global stage. the united states is a friend. she announced there was going to be a state visit, that donald trump, the president will be visiting the united kingdom. so i think by and large it was a successful trip for theresa may. it will be interesting to see howed europeans reakt -- how the europeans react over the next few days and whether or not they regard her as a beach head into this new administration. or whether or not they see her as being the exact opposite, i.e., walking away from them and towards the united states. joe: from the u.k. perspective, how does -- whales the view back home of when this kind of appearance for theresa may? are people enthusiastic or are they skeptical? what's the -- what's your sense? guest: we've already split at the moment. there's the leave camp and the remain camp. the leave camp are very much -- very enthusiastic about trump. he's got a lot of the same agents -- agendas as them. he's pro-white people, shall we say.

there's an awful lot, you know, not great about integration as well, not keen on globalization. so the idea that we can get a trade agreement done quickly in the u.s., although if you talk to anyone who knows about trade, that's a bit of a fantasy. it's something which -- joe: the story about this week about any potential trade deal between the u.k. and the u.s. being stymied by lack of negotiators on the u.k. side. guest: this is the problem. most experts are on the remain side. so the quite hard to get people lined up to negotiate deals. plus most of the u.k.'s trade arrangements at the moment are through the e.u. so the negotiators are in brussels rather than london. scarlet: do we know if the true that until the u.k. actually leaves the european union, it's actually legally barred from entering a trade deal with any country, so whatever agreement the u.k. makes with the u.s., it would be actually fairly symbolic and not have that much of a big impact on the economy because they can't do very much until the u.k. extricates it self from the e.u.

reporter: the u.k. can't do anything until it exits the customs union. that's the critical part. you could sign a deal the next day after that. so in theory, you should start negotiating at a that point. but let's be realistic here. negotiations in some ways started today. they'll start at a vegas level, they'll go on from here. the u.k. can't officially do. this as we know, the rules are there to be maybe bent a little bit, despite what the french say. joe: bloomberg's guy johnson at the white house. thank you very much. and paul macnamara, fund manager, will be sticking with us. we're going to talk russia and other emerging markets next. this is bloomberg. ♪

>> let's get to the news this afternoon. president trump's plans to overhaul the tax system and increase infrastructure spending should accelerate growth in the u.s.. the economy over the next two years. she said it's too early to predict how trump's other policies might impact the economy. cyberterrorists could be planning to undermine elections in france and germany. that today from the european union. with a nationalist in the running to become french president and trance color merkel fighting off anti-establishment forces as she seeks re-election in germany, the e.u. sates it's -- says it's try tal that governments shore up threats. and severe weather in the southeastern united states has claimed another victim. officials in southwest georgia say a 77-year-old woman has died from injuries she suffered when a tree fell on her home last weekend. at least 21 people are now

confirmed dead after the outbreak of tornadoes and powerful thunderstorms in georgia, mississippi and florida. global news 24 hours a day, powered by more than 2,600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: president trump will be holding his first official call with russian president vladimir putin tomorrow. trump had said it was, quote, very early to discuss whether sanctions against russia should be lifted, but investors are not wait aing. they're piling in. take a look at this chart on bloomberg. it looks at week lynette fund flows since the u.s. election. and investors piling into russia there, there's that latest, most recent data point. it's certainly been the case over the last couple of weeks. still with us is paul. investment director and fund manager. usually in london but joining us in new york today. when you look ahead as an investor, looking at e.m., what kind of conversation should trump look to have with vladimir

putin to make that country a morin vestable location for you? guest: i think there's zero chance of russia becoming a morin vestable location. the putin regime likes things the way they are. they have a huge amount of control that they can pick off companies, allocate them to the people they want to run them. as far as we can see, the instructions are really going the other way. it seems, you know, very likely, for example, that sanctions will be lifted very soon. we've heard talk about maybe some sort of big picture missile treaty. but our best guess is that we're going to see sanctions lifted and not much going the other way. joe: you mentioned in the first block that what you're seeing in the u.s. is fairly familiar to you as someone who has followed e.m. that some of the political shifts here are more characteristic not of a, you know, emerging markets. so walk us through what that means. this is old stuff for you. what are some of the things we should be lookinging for down

the road as the e.m.-fication of u.s. politics happens? guest: what we try to look for as investors and what the rule has been in the past is keep things predictable. have principles and rules. what you tend to find in emerging markets is it's much more ad hoc. if you want oil prices lower, you instruct people to lower the oil price our have very, you know, tightly targeted changes in subsidies or you have companies that you control to move around. it all becomes -- ad hoc is kind of the nature of it. generally peeking -- speak, e.m. has been going the other way. with a couple of exceptions. if you look at poland furks look at mexico, brazil. most countries have been becoming more transparent, more principled government. you have the philippines where the president has, i think, been accused of feeding people to crocodiles. as kind of the extreme. you've got turkey, which i think has just been downgraded. but broadly speaking, it's almost a step back toward the

1990's what we're seeing. and i think the key here is very specific targets to achieve in a way headlines, rather than principles to run the economy. scarlet: i'm glad you bring up turky. the turkish lira is declining. it took another lower in terms of value after fitch lowered the rating of turkey to junk status. fitch was the last holdout in terms of rating turkey at investment grade. there's the turkish lira spot. there's a leg up for the dollar versus the lira. joe: when do things turn around in turkey? guest: not soon. we say that turkey looks like an accident waiting to happen. it has all the classic -- huge amounts of foreign debt. joe: what does that mean accident? is that a specific term of art? it looks pretty bad. if you look at the -- ma a what crosses over from bad to an accident? guest: where the currency is dropping 3% or 4% a day. where you have bankruptcies. not in turkey, but the threat to the sovereign credit worthiness. a very serious event, which --

where things spill over from finance, to actually tect -- joe: does do they have any policy levers at this point to stop that? guest: yes, and he's keen that they not be used. the overwhelming feel something that turkish interest rates should be much higher but he's on record as saying, if you look around the world, where you have high interest rates, you have high inflation. therefore higher interest rates cause inflation. it's very hard for the central bank to act on that. what they did this week is they kept their main rate unchanged. which was a disappointment to the market. one of the reasons we're seeing selloff. but they raised the ceiling for interest rates which allows them to squeeze interest rates higher but they can tell the president, we didn't raise rates. it's a comic aspect to it. scarlet: it's all a game, right? it becomes is he man tim ticks -- is he man ticks. guest: it's a game but it's people's livelyhoods. there are people who are suffering from higher interest rates, a huge amount of foreign debt, so the crashing currency is very bad for people. scarlet: you mentioned transparency earlier on and how

some e.m. countries are more transparent now than they used to be. we don't get enough information from eing markets, some of them. with the trump administration, that seems to resemble emerging markets sometimes, there's too much information. there's information flying around all over the place. hey distract people. how, as anvester, do you paris through that. do you strip out the noise? guest: we're learning by doing. we're only a few days into this administration. there's an awful lot that's changing. we haven't seen how much influence mr. ross will have, mr. money chin, the buzz word i've heard is adult supervision. is there anied a ult supervision within the administration? the one key thing is that they need 60 votes in the senate. for example, you know, rewrite the federal reserve act. so there are certain breaks. but it's impossible to say. i think that just means uncertainty and when you get

uncertainty, people are cautious. joe: you had a great quote. i want to go back to rush yafment i found this quote that you were quoted in a bloomberg story the other day. until we have evidence to the contrary, we work on the basis that trump is in russia's pocket. we think sanctions will be lifted soon. russia aside, you already talked about how you didn't see that as investable. if, as you think, trump is in russia's pocket, what does that mean for emerging europe? guest: it's defining what is russiaia's sphere of influence. russia thinks its sphere of influence reaches out to germany where nato goes right up to the border. the huge concern within the central european countries, obviously you have russian troops in ukraine. and also the middle east, i think, and that's probably going to be more of the target, we think, for the trump administration. we've seen no indications at all that the trump administration is, you know, is in favor of the recent expansion of nato, that it sees that it has a stake in kind of stabilizing --

>> joe: you'll have to take theresa may's word for it. guest: quite. scarlet: as we await all these very important elections across western europe, do we presume that russia will influence or attempt to influence those elections the way that it is accused of doing so in the united states? guest: i think that's very likely. we've seen things like breitbart, whether or not you regard them as -- it's all part of a group who are very -- who have very common values. they're expanding into france, germany. we're beginning to see wikileaks begin to comment on merkel and so on. so i think not necessarily specifically russian, but that whole group i think is going to try and influence european politics. scarlet: paul macnamara, thank you so much. you're going to stick with us because we have more to talk about with you. in the meantime, there is a live shot of the hall of heroes at the pentagon. president trump making his way over there. there's going to be a ceremonial swearing in of the new defense secretary, james mattis.

from new york. this is bloomberg. ♪

scarlet: president trump posting a tweet on his facebook page a moment ago. there it is. you can see at one specific part of it, with respect to payment for the border wall, this is according to donald trump on his facebook page, both presidents recognize there are clear and very public differences of positions on this issue but have agreed to work these differences out as part of a comprehensive discussion on all aspects of the bilateral relationship. so they acknowledge that they are on opposing sides when it comes to the border wall, but they will discuss it further. e: we're back here with paul macnamara.

this speaks to something that i think is important. so the -- you're not very -- you don't sound very optimistic about the trump administration. the optimists would say, trump's a deal maker. he just likes to say something far out there and then he really enjoys getting on the other side of the table with someone. and then he hammers out a deal. so they would point to something like this and say, yeah, it may look like he's really inflammatory toward mexico, but he just wanted to get in there and strike a deal with pena nieto. what do you think about that framework? could it be that there's a method to his mad snns guest: it could be. but this is such a tricky area. it's a red line for both trump and for the mexicans. trump, every rally, who's going to pay for it, you know, mks could he. it was absolutely dead center. it's hard to walk this back. this isn't something he can say he was misunderstood about. obviously for the mexicans, this is a president who's seen as anti-mexican. demanding that they pay for -- there's no -- nobody is going to pay for that wall in mexico and

get elected. scarlet: that's one thing that's .otable joe: that seems like -- scarlet: everyone from the mexican side says he's uniting mexico. and pushing this. i want to bring knew the bloomberg here to take a look at a chart. this is bloomberg data putting it together. the mexican bolsa is back. it's climbed back to pre-election level in peso terms. the election being the red line. it's made its way back. the bottom panel shows the valuations of it. analysts heaper, as revised up their earnings expectations for the next four quarters. that's because of a weaker currency. do you touch mexican equities right now? guest: we do. this patent is actually very similar to the u.k. -- pattern is very similar to the u.k. if you deval enough, yurek which es go up in local currency

terms and go down in dollar terms. it's just an impact to the devaluation. the fact that they're cheaper on p.e., that's the thing to take away. scarlet: it's cheaper on p.e. and the currency helps it. but is that reason to be more enthusiastic about the company? whether you're buying debt or equity, do you -- has your outlooked improved? guest: not if you're spending dollars. it's the value of the dividends they pay. it's the value what have you sell it for in dollars that's going to matter. it's the only reason the price is high, because the peso is cheap. that's not a reason for a dollar-based investor to buy mexican or british stocks. joe: i want to talk about europe quickly. you mentioned in the last segment the breitbartization of news anxiety that's provoking among u.s. allies. the french-german 10-year spread has been on the rise. people are concerned about la pen. from your perspective, is it, i mean, do you see this so-called populist wave continuing across europe? guest: i think it's the risk. i think if you told us 18 months ago the u.k. will leave the e.u., that donald trump will be

elected, we'd bet heavily against it. i think -- and for this reason. people are just very, you know, no matter what the polls say, people are not willing to take it on trust that ms. americalogical win, that -- ms. merkel will win, that ms. le pen won't win. it's got to be point where people are listening to see what le pen has to say about a new currency for france. that's not kwlealt for french yields -- healthy for french yields. joe: extraordinary times. paul, great to have you on set. scarlet: we have some headlines here. sean spicer, the press secretary of the white house, says that donald trump will sign an executive action on extreme vetting and he will also sign executive action on rebuilding the military. it's not clear if we're talking orders or cktive presidential memoranda. both are executive action. they would be on extreme vetting and rebuilding the military. and you're looking there at a live shot of the hall of orders where general mattis will be sworn in on a ceremonial basis shortly. this is bloomberg d. ♪

♪; but get to first -- emma: this would at $15 billion to u.s. debt. that is according to the committee for responsible .ederal budget, both the white house and the kremlin confirmed that vladimir putin will speak by phone with donald trump tomorrow. the kremlin said they have not spoken since donald trump won the election. next round ofe syrian peace talks in geneva

will be delayed until february. they blame clashes between rebel factions and al qaeda militants. to remove assad declined to meet in moscow. back to scarlet. thanks, emma. we are watching mike pence, the vice president, speaking at the ceremonial swearing-in of james mattis, the defense secretary. sean spicer, the white house press secretary, says that the president will be signing an executive action on extreme that in. vetting.t to see -- joe: the most interesting moment was when trump was talking about torture. he said he believes it works,

waterboarding works, and james mattis does it. knows said james mattis what he's doing, and he is going to follow his call. it is very hands-off. joe: delegation. scarlet: and we're listening for the cabinet nominees views on different issues, and instead what you are finding -- normally, the president imposes his opinion on them. instead, the president will listen to what his delegates have to say. joe: for now. mike pence president introducing james mattis at his swearing-in ceremony at the hollis euros at the pentagon. earlier today, president donald have anid he would "fantastic" relationship with prime minister theresa may. lencan billionaire carlos also weighing in on this deal

with the u.s.. here 2 a.m. is ambassador miriam schapiro. in ifs -- here to weigh ambassador miriam schapiro. thank you very much for joining us. already an extraordinary few days on the trade friend. what you make of these actions you have seen so far? guest: it has been quite a week. we are one week in now. i think the visit with prime minister may went very well for both the prime minister and the president. on the mexico front, things did not start off very well. we need a reset almost immediately. i think it is good news today that the two presidents have spoken and put out a statement and tried to calm the waters there.

as someone -- scarlet: as someone who was privy to negotiations, do you take what trump says about the immigrants illegal commit or the wall, do take them literally or metaphorically? guest: what we need to focus on really is finding areas where we can work with mexico. tradingur closest partners, our southern border, and because of the last 20 years, along with canada, the relationship has integrated the economies. if we start a trade war with mexico, it will end up hurting the u.s. economy, particularly consumers and economies you want to export and continue to export to mexico. joe: do you believe there is a way to update or revise nafta and a way that will be beneficial to both the u.s. and mexico? so.t: i do think the tpp, the transpacific partnership, it included both

mexico and canada and was one way of updating nafta, in addition to boarding -- forging a strong partnership with all of our asian pacific trading allard eyes -- allies. but we have an opportunity now to do nafta and tried updated to reflect digital rules of the labor andove environmental provisions, and i think we need to work with both partners to do that. scarlet: this is a lie shot of james mattis. is beating secretary up a hall of heroes. wass making some remark -- just sworn in at the hall of heroes. he is making some remarks. miriam,, what do you think about

nafta? guest: if you rip it up, we would hurt it best us more than anyone else. critical player in terms of south america and central america and u.s. interest. we have to find a way to update the agreement. if you could sit tight, we will bring it to president trump,. pres. trump: he is a man of honor, a man of devotion, and a man of total action. he likes action. he is the right man at the right time, and he will do us all very, very proud. i am honored to stand here today among so many patriots. you are the backbone of this country, and the spirit of this nation in every sense. the men and women of the united states military are the greatest

force for justice and peace and goodness that have ever walked the face of this earth. your legacy exists everywhere in the world today, where people are more free, more prosperous, and more secure because of the united states of america, and you have earned an insured -- children theor our glorious birth right of freedom bestowed upon us by god. we stand today in the hall of heroes, a testament to the of those whoge wear our nation's uniform and who have received the highest distinction, the medal of honor. this is a sacred hall, the soul of our nation lives between these walls. ofse walls tell the story

those intrepid americans who gave everything, risks everything, and fought with everything they have to save their fellow warriors, and warriors they are, believe me. warriors they are. and to save our wondrous liberties and to save this god blessed land. they shed their blood and poured out the love from their hearts to protect our homes. we are in off of their valor -- valor, tremendous valor. and we pledge their dedication to every single family serving our country and our flag. that is why i am signing to executive actions -- two executive actions to ensure the sacrifices of our military are supported by the actions of our government. they will always be supported by

the actions of the government, believe me. first, i'm signing and executive action to begin a great rebuilding of the armed services of the united states. plan for new planes, new ships, new resources , and new true -- tools for our men and women in uniform. i'm very proud be doing that. [applause] pres. trump: as we prepare our buzzer request -- budget request for congress, and i think congress will be very happy to see it, our military strength will be questioned by no one, but neither will our dedication to peace. we do want peace. secondly, i'm establishing new vetting measures to keep radical islamic terrorists out of the

united states of america. we do not want them here. we want to ensure that we are the countryg into the very frets our soldiers are fighting overseas. we only want to admit those into our country who will support our country and love deeply our people. we will never forget the lessons of 9/11, nor the heroes who lost their lives at the pentagon. they were the best of us. we will honor them not only with our words, but our actions, and that is what we are doing today. i am privileged to be here with you, and i promise that our administration will always have your back. we will always be with you. [applause]

pres. trump: i want to thank you very much. i want to extend a very special congratulations to a great man, and that is sugary terry mattis -- secretary mattis. i think he will lead us so brilliantly. he is a tremendous soldier, always has been. he is a general's general. every general i spoke to, i said he is our favorite, but they did. [laughter] he is our favorite. so i want to bless him, and god bless you, and god bless america . secretary mattis, i have no doubt that you will do an outstanding job, and think you for excepting this responsibility. thank you. [applause] -- thank you for excepting this

responsibility. thank you. [applause] scarlet: that was president trump at the hall of heroes. he is going to sign to new executive actions to expand the military and increase vetting. speaking after the ceremonial swearing-in of secretary james mattis at the pentagon. in the meantime, let's return to our guest, ambassador miriam schapiro. thank you for being so patient with us. we now know that mexico and the united states will continue to negotiate to try and figure out on trade.ceed down -- they agreed to back channel. what would make that effective? guest: we have to approach the discussion with a little more respect for mexico and the importance of the relationship

that we have. i think the resident -- that itt signaled today is important to sit down and assess what your interests are and what the other side's interests are, and you find a win-win situation. to try and impose our will on mexico or any other country, it will not end up with a deal but a deadlock. having a about constructive negotiation if people wake up to provocative tweets? guest: it's funny. we were seeing some ruling by twitter, and now we are seeing some diplomacy by twitter. there is no substitute for picking up the phone and having a discussion, as the two presidents did today. --hink even though we saw what we saw that came out of that discussion what they

positive side -- was a positive sign. nafta going to play into the security? guest: we want to make sure our border is pure as possible. possible.as we also want to make sure we don't have instability on our southern border. so a strong, economic, and egypt partnership with mac -- --ategic with that partnership with mexico is in our best interest. finsburyam schapiro, -- head of finsbury office in washington. thanks for coming. guest: great to be here. as you heard, president trump said he would block radical islamic terrorist from entering the u.s.. last week, i spoke to the author

of a new book called "the way of the strangers: encounters with state."- islamic >> they have their own current c. -- currency. on a day-to-day basis, they are dinars, oring iraqi u.s. dollars. but they have an idealized version, something minted just for them. joe: how does the existence of the gold dinar fit into the overall ideology? overall, many islamic countries do not -- have fiat currencies, they do not have gold currencies. the islamic state feels this is the only way they can be

faithful to his richer. they look at a profit and say we have to do the same thing. joe: you talked to various --thesizers and supporters sympathizers and supporters of the net -- islamic state. is there a broader sort of ideology, ortitank one that is more scripture-based? guest: they both believe there is no other proper way to be a muslim. it is what god is saying to do. but they think it will also cause human flourishing. that works a society properly, you have to get rid of innovations like interest, things that go beyond the seventh century of islam. joe: and this might seem like a controversial point, it is hand-in-hand with a monitory -- thinkry utopianism people

about, where people lament that they could get rid of the banks, currencies, if we do that there would be a great flourish of the economy. guest: they are on the same wavelength as a lot of people, who believe the world's financial system is rotten and needs to be replaced in a radical way. but what they think the replacement should be is extremely antique. by doing that, we will get rid of all sorts of social problems, no vampire banks that are roaming death robbing the common people of our goods, and all the occupy wallied -- street was interested in. dinarsey show these gold in some of the propaganda videos, but they do not exist outside of the islamic state. someday, when we see them

they will be very expensive, ironically worth more than the ball they are minted with, but they are used in a limited way and has limited export. joe: speaking of exports, the islamic state is not self-sufficient. they do have to interface trade with the rest of the world. how does that work? guest: there are many different types of trades they have. there is official trade in with the- oil, largely syrian government, aside. they will -- and assad. they will begin in cash for smallerl, there is also economic activity and people taking on their own economic activity and skimming off the top. that is how they make more money

than with the oil, taxing personal economic activity. joe: what about fiscal policy? guest: they will tax people beyond a small amount of exclusion. you are taxed on income and wealth. heart of it is taken for it isable -- part of taken for charitable purposes, attacks in islam known as zak kat, and in the rest is taken for the islamic state. joe: do they look at scripture for this? guest: they do. these are old policies. we have seen plenty of innovations in islamic countries and elsewhere. in and -- in essence, they end up with a flat tax on wealth.

we are watching to see how well these work. joe: one of the controversial points that is the essence of your entire book is that contrary to people who argue that the islamic state has nothing to do with real islam, -- youok, and you talk say it does. -- an extreme version, but the entity is well grounded in scripture. guest: if you ask the 1.6 anlion muslims if it is extreme version of islam, they will say yes. some say it is not islam at all, but they are looking at islamic scripture, history, and the policies are not plucked out of the air. precedentpresident -- they think they are always you can enact things best in their society. joe: i want to bring you a new

post from mark zuckerberg from about 15 minutes ago about donald trump. regarding some recent executive orders. he said it might -- my great germany,nts came from austria, and poland. i'm concerned of the recent impact of the executive order signed by donald trump. we need to keep this country focus on we need to people who actually pose a threat. he says more optimistic stuff, thatg he was glad to hear president trump was going to work something out for "dreamers who were brought to this country at a young age by their parents. "

joe: what did you miss? let's look at turkey, where on inflation and unemployment cap find -- have climbed to levels we have not seen in years. it is above 20, the combined measure. it has rarely been higher over the last five years. during our show, downgrading the credit rating on political risk. were talking to paul mcnamara. there are tools to fix this, but the president is not interested in any of them. joe: -- you have toause raise interest rates. he does not want to do that. he thinks that will lead to more

inflation. joe: in the meantime, the economy is not doing very well. inflation is already shooting higher, so the turkish central bank is doing these half measures were they cut the them -- causing all sort of positive -- problems. for investor is it is very nerve-racking, because this is a sign of what might happen in developing markets. in unilateral action and pressuring the main to do one thing or another. joe: coming up, what you need to know to europe for next week. -- you're up for next week.

in french politics, they decide on their party on sunday. and the british house of congress trickling -- triggering article 50 next tuesday. joe: and we will be looking at articles from the federal

reserve, including job reports from the trump presidency on friday. most of it includes the 10 days in january that he was president. watch those central bank decisions, including the feds not expecting a hike, but it will be interesting if they set of march. scarlet: and we get more earnings. we get earnings releases from facebook, amazon, and apple. this is with the nasdaq near record highs. no shortage of market capitalists for next week. that's all for us, think -- thanks for watching.

retired marine corps general

james mattis was officially sworn in today is the 26 u.s. secretary of defense. the president had said earlier that he believes hearts interrogation techniques are effective. theident that is has -- president and james mattis have ordered reviews of the f-35's. meanwhile, the president and british time minister that prime minister have kicked off a new era in u.s.-u.k. relations. they held a joint news conference at the white house they stressed the importance of the special relationship between the two countries. maher is the first for leader to meet officially with trump since the inauguration. an confirms he accepted invitation from queen elizabeth for a state dinner. and mexico's president may have put some of their differences behind them. they spoke today on a mutually arranged phone call for one hour.