tv Bloomberg Best Bloomberg June 23, 2017 8:00pm-9:01pm EDT
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♪ coming up on, bloomberg best, the stories that shaped a week in business around the world. the u.k. and eu gave talks on brexit. china takes a landmark step into global financial markets. saudi arabia announces a succession shakeup. oil stumbles into bear market. >> the sentiment is relatively negative. >> too much oil in the market. >> the person -- springs of economies across the globe talk about the targets and challenges. --i don't think it's time monetary policy. >> at the end of the year will go into market. going to best not
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satisfied with 2% growth. >> some of wall street's most respected voices offer perspective on investing pretty >> it makes no sense. >> having a very attractive moment here. openss a vase book share up in an exclusive interview. >> technology is replacing jobs and can also be used to grow jobs. >> straight ahead on "bloomberg best". >> welcome, i am shery ahn. this is bloomberg best. it's week marks the one-year anniversary of the brexit referendum. on monday, the u.k. and eu finally began talks to emerald
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the divorce. brexit talks have finally begun in brussels, amid confusion guest -- what the u.k. government wants. this on the backdrop of a mounting domestic crisis in the united kingdom. a mood shaken by several deadly tragedies. >> the clock is ticking, the window is narrowing. ,hey have decided to go ahead even of the u.k. position hasn't been recently if i do few will. >> today marks the start of a journey of the united kingdom and the european union. >> there's a long way to go but we are off to a promising start. >> the key negotiator on behalf of the eu said -- in the statement after the press conference, but he was not in the mood for making any sort of concession. interestingly, the consequences of the decision are substantial. it doesn't seem that they were trying to talk about the positive being the tracking of this. early deal is what both of them
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is seen to be uttering. there were 4.5 million people who do not know what their -- at are in the moment the moment, who need to know what their employment looks like, what the residency looks like. >> mark carney send the pound lower this morning after saying -- seeing -- saying it is time for a rate hike. is of financial services will result in poor e quality, higher-priced product, for everyone concerned. >> the pound sliding for a second today. walk us through the various factors causing this selloff in sterling, pushing the gilt yield. >> mark carney was a big factor today. he pushed back devilishly against expert -- dovishly.
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in the long-term, there is brexit. are unknown at this point. investors do not like uncertainty, spending on out not -- -- unknown outcomes. >> oil is the big market mover today. it went below $43 a barrel at one point, with the drop today. if you look at where oil has come back on february 23, it looks like we are now in a bear market for oil. it is down by nearly 21%. >> i do not understand the move today. >> none of us do. [laughter] it started early this morning in london. i would argue it is more technically driven. broaderit represents a movement in the price, in the sense that the sentiment is relatively negative right now. we look at prices it retraced the gains they achieve after
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that opec production cut announced in november of last year. we think about opec production, when we think about shale, in the context of that, the shale increases are not worrisome. he regained market share in 2018. the weakness in the time spread -- most people's concern in the negative sentiment. >> it allows us of the fed, that you will raise in the short term. >> technology is perfect. gainedese stocks have direct entry to msci's benchmark index for the first time marking a milestone to should define a moment here in beijing. efforts to draw international funds to the world's second-largest market. >> we're talking about a small weight 0.7% is what they will
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make up. it's part of emerging markets index. in terms of the process, inclusion will start the process in may of 2018. the second stage will be in august of next year trade in the is a form to out -- that is a hope included overtime. >> we end up talking to over 100 institutional investors from all reaches of the world. there was strong support with the proposal that we put in place. we were able to get even stronger support to revise its to a larger number. >> msci also added saudi arabia to its watchlist, meaning it could get a potential to emerging market status in 2018. how quickly could this actually happened?
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>> in the past 4-5 years, they've reclassified only to emerging markets. we generally say the averages between 3-4 years. -- most recent inclusion was of pakistan was done in a year. the quickest it would be would be a year based on that example. >> saudi arabia has announced a major change. king has been just 31-year-old son as crown prince. he is also defense minister -- and is the chairman of counsel for economic and development affairs, is spearheading the 2030 fiscal reform program. he replaces his cousin as next in line to the firm. >> what does this mean for saudi arabia's reform efforts? presumably, the new crown prince comes in with leverage on that front. makes clear that these reforms are here to stay, but there's danger -- no danger of
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it in your first anytime soon. he's in charge, has more authority in power than that. >> senate republican leaders finally unveiled a closely held plan to replace obamacare this morning. >> senator mcconnell speaking on the floor having had a conference with republican members, many of whom were saying the text of this bill for the first time. what did we end up with? >> similar in many respects to obamacarepassed replacement bill. it's similar in its structure and cuts medicaid steeply. of thehets back a lot obamacare tax subsidies and makes them more generous, text cuts. there are differences in terms of the regulations states are able to opt out of. these 10 essential health benefits that the affordable care act requires -- requires
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insurance can -- the senate version does not allow insurers to charge people different amounts based on their health status. another key difference, length of the medicare drug down. the senate bill does it over three years in 2020, slower than the house bill. starting in 2025, it cap's medicaid and moves to a slower rate of growth, which in the health care effort -- experts think will not keep up. mcconnell has to get 50 out of 52 members in the senate on board, not easy. >> different sectors and their performance today, it is clear that there is one outstanding mover here, health care stocks. the health care group, that sub index, is at a record high, gaining more than 1% as the senate unveiled its version of the health care overall. >> what was in the bill that investors reacted positively to? of half foris out health care stability over the next few years.
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we have a bunch of subsidies being funded. in theireep people insurance at least over the next few years. longer-term, maybe some cuts. mayrime minister theresa told eu leaders at a summit in brussels, that the most all three emailing -- 3 million eu living in the u.k. will be able to continue living here after brexit. >> my first impression is -- lower our expectations. >> that was a good beginning. i'm trying to word this very carefully. it was my breakthrough. summit is about doing a whole lot of other things, addressing trade proposals, russian sanctions, talking about where regulators should be located.
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although they are discussing through lot, especially the press, they are not talking about it directly to each other. >> still to come, as we review the week, the push for tax reform from steven mnuchin. plus conversations with economy ministers from south korea and greece, portugal, and mexico. witharoline hyde goes 1-1 facebook's share sandberg. but up next, more of the weeks top business headlines. investigators he was another week -- legal blow. >> it adds to a list of misconduct, will come to light in the nine years since the financial crisis. >> this is bloomberg. ♪
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this is "bloomberg best". but continue our to her of the top -- business stories with elections in france. voters give a boost to the new party led by emmanuel macron. in france, microns republic on the move, and its allies have one of 350 seats in the national assembly, the biggest majority in 15 years. >> it to large majority. pass reformsle to in the parliament. especially against candidates who offer yet. he mixes in parliament. also you that the leader of the national -- emmanuel le pen --
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elected for the first time after four times to get at the national assembly. she managed to get one last night. also elected for the first time ever. >> tesla is said to be close to an agreement to produce vehicles in china. it would allow the electric carmaker to avoid an import tax --the price of vehicles come competitively in the world's largest auto market. how significant is this deal? >> huge. plant in one auto fremont, california. if they want to sell 500,000 cars a year by 2018, they will need additional facilities. if the first isn't -- outside of the u.s. is china that would be significant. onford is doubling down china. for exports to the u.s.. >> potential timebomb.
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the global president for ford is saying, americans by iphones, they are all made in china. ford is an iconic american brand. for us taking a gamble. they say they can save up to a billion dollars in production. change the focus and exporting starting in 2019. what's barclays -- they have been charged with his piercing to commit fraud over the banks 2008 from qatar. ceo -- former chair from the middle east, robert -- richard jenkins, richard post, and another chief face charges. probes is a five-year that we've been looking into. the context being that the apocalyptic time and's bailout.
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they will avoid that, do fundraising, deter investors -- these charges relate to questions around the arrangements with qatari investors at that time if they agreed to pay to receive money. thatat's in the misconduct has come to light in the nine years of financial crisis. comes a bad time personally for the ceos as well, under investigation. these issues have still not been solved. ceo travis kalanick steps down from the company. he helped found -- after more than billions of dollars, company investors -- he is still a member of the board and has a lot of voting shares. >> this is something that seemed unlikely because of the controlled voting share.
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we see a lot of startups, whether it is zynga or upon, all the way up to google, with a different class of voting shares . we expect that that is probably what is going on for over. travis kalanick wasn't going to leave this company until he was ready. surely, his investors are ready to have him go. startedng -- something in 2010, 30 $5 billion valuations. that's amazing. they have brought in a professional class of investors. it's not just people like benchmark capital that made money for the beginning, but you have investors who came in late who do not want to risk screwing up what has been an amazing thing. loworsening -- following a $35 a barrel now. all concerns about rising supplies. there are opec attempts to train the global -- >> it seems that opec compliance is 100%. is it too much on the markets?
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the key factors the u.s.. the growth of the u.s. pipe oil is not 100% on what opec expected. you are looking at 800,000 barrels per day growth, higher production from libya, nigeria, pakistan. is it too much in the market ?they've seen a 700,000 barrels per day cut in opec. >> american airlines saying qatar is interested in buying 10% stake in the company, valued at more than $800 million. america says it didn't solicit the proposed investment. >> the curious thing is, these two airlines have been at odds trade qatar has been at odds with all of the u.s. airlines. the u.s. airlines accuse qatar as well as ever us and -- other big middle eastern airlines of
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floating the markets with flights -- with generous subsidies from their middle eastern governments. one would wonder if perhaps qatar is trying to quell some of u.s.ontroversy between the and the middle eastern airlines. >> one of the chances american airlines says, we do not want it? onwe don't know, but based previous statements, you would think that it's pretty good. been one of the leaders in the charged against the middle eastern carriers. -- to thebuffett will rescue home capital -- recuperating, trying to disrupt property markets. 38.4% inc.. about 1.5 billion u.s. dollars credit line was given. why would warren buffett taking a stake in this mortgage lender? such a large one. a the simple answer, you get
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price he was interested in. this is straight out of his playbook. he said a couple of years ago that burger halfway -- his firm, has become the one 800 number and a market crisis. but we are seeing is just an example of that strategy treat he has done it time and again. these deals are structured in a way that burger halfway not only debt a high-yield on the part of the transaction, and it often gets some sort of equity in the mix as well, which serves as a kicker. if buffett is right and these battles -- return to investors, then he makes a lot of money in the process. banke largest u.s. cleared, the first round of federal reserve stress test, examining their ability for economic shock. key test comes next week, when the fed will release findings from its competence of capital analysis and review. those test will be watched by
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investors as they determine when theyenders can increase -- go through the banks for me. >> the numbers look good. i did a rough back -- single impact calculation. the 34 banks covered, they have according to the fed, about 500 alien of access capital above stress levels they have -- are required to keep severely adverse scenarios. jpmorgan'sk side, and regional banks, have about 360 billion of that. a lot of buffers there. obviously that's positive. week,ans them we see next we see how much of that capital is going to -- the fed will allow them to give back to shareholders over the next 12 months. could be a big number. ♪
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>> welcome back to bloomberg best. this week, caroline hyde spoke exclusively with facebook's chief operating officer sheryl timbered dutch their conversation covers a range of topics, including the social networks responsibility to help businesses create new jobs. >> what we are seeing is more reduction of the mobile -- mobile platform. their 70 million small businesses that are using facebook on a monthly basis. it is our pre--- free product. on and stir graham we have it million profiles. for the largest company -- that's where people are spending their time. >> are we seeing jobs being
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created? releasing brands spending money? could you give us a gauge as to what you see out there? thatal is to see businesses spend money and get a return. it matters for marketers when they spend on marketing, it brings a cash register online and off. that is something we are really working on. we also see small businesses play an important role in the global economy through the majority of job creation around the world is small businesses. even the most off-line businesses can use the power of technology. when i was in berlin i got to visit a company, a furniture manufacturer in berlin. that's a very traditional business. familyame in to the business, didn't change anything about manufacturing, but started marketing on facebook and through mobile. they grew their business, now they have opened five more
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locations including outside of germany, creating jobs and growing their business. so technology can power innovation in the core of the business and support any business out there. >> icing the other point of view? >> technology is changing the economy, replay saying the jobs. it's our responsibility to help -- small businesses -- so they can grow jobs. >> you can see more of that exclusive interview at bloomberg.com. coming up, more conversations with leaders in politics, policies in the market. reports has advice for investors who feel they have to buy today's hottest stocks. >> couple of problems, and it's
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[ laughing ] it's driving me crazy come on. [ spitting from tongue ] time for my secret weapon. sports, movies, tv, ah, show me music to distract a minion. [ voice remote click ] oh! [ pharrell starts to play ] [ minion so happy to see screen ] ahh! i'm pretty smart. ahhh! [ lots of minions ] [ mooing sound ]
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show me unicorns. [ click noise for tv ] ahhh! that works too. find your awesome with the xfinity x1 voice remote. see despicable me 3. in theaters in june. the world is not these four countries. we have a lot of new things we are launching. we will expedite those lunches, continue to grow. we do not get intimidated. we will find new markets and as many markets that are longing for us to fly into their reports. near-term, the having operationally in terms of running the business? >> disruptive influence on our network. but, we have successfully been mitigating this disruption. we have seen already that there
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is an upward trend in passengers starting to book on qatar airwaves. of peoplelittle bit -- to think that it's a war zone. it's not a war zone, this is an intimidation game buyer neighbors. ceohat was qatar airways speaking with guy johnson at the paris air show. war leaders, fiscal and monetary policy, joined bloomberg television for interviews this week. start with south korean finance minister -- who said found ame conference. >> are you concerned the trump is considering renegotiating the free trade agreement between korea and the u.s.? officialhas been no request coming from the u.s. government yet. i understand the nafta negotiations. crazy strong outfit
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-- advocate of free trade. we are concerned in the type of protections. -- outas been evidence of fta. those of an reciprocal so far. >> can we ask them to be raised? >> if the economy continues as it is today, and if the supplementary budget is fully implemented, there's a possibility that the gdp estimates could be higher. also that there are uncertainties such as the u.s. rate hike and international, economic, financial situations, we still need to be careful about revising of the gdp estimates. road tonk we are on the recovery. the growth rate has been -- by most likely, given to my
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contacts here in the u.s.. there was investors, other people very much interested. it looks like it's achievable. >> when do you think greece might be able to go back to capital markets with a bond issuance? >> i think the expectation is by the end of the year. he and of this year -- beginning of next. see, the spreads -- dropping dramatically. two-year bond as well as the 10 year bond, so it would depend on where we are after the program begins. ratescond-quarter growth on the third quarter will be substantial in increasing the cause of terrorism. believe that at the end of the year, we will be ready to go into markets. >> we look at the ecb every month.
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wilson to mario draghi, but whether they may start tapering or tightening monetary policies. how much would that affect the portuguese economy? otherit would affect all european economies. but we are not seeing signs of increased inflation justifies the tightening of monetary policy -- what we are seeing is what's important to zero is -- in several countries. i'll think it's time for monetary policy -- it's not the time in portugal to do fiscal policy, but i think two and reboot -- unleash austerity which is what is happening, it's a good sign that there's more confidence in investors. , what's important to -- good place to create -- this place for recovery. we've seen some signs of this, very positive signs of that already happening in portugal.
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we're leading this recovery, but i think we are going to see it recovering all over europe, which is going to be also positive for portugal. >> last year candidate trump and then president elect trump said about the largest free market trading zone in the world, trading $20 trillion, quadrupled since 1994 north american free trade agreement signed -- he said he would rip it up. he said it was a disaster. t the worst over now -- >> we are in the process of modernizing it. some other objectives to it -- if one looks at the american, the airports -- highways, electricity, oil and gas pipelines, the north american region -- to which when
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you look at the infrastructure, it's difficult to identify the borders. that camegue whether about because of mastiff -- nafta or rather nafta came about because there was a dynamic for north american regions the may defense -- they have a lot of free trade agreements. but they've resorted in integration -- of north there's nothing that complements our economies will. nafta brought it to life. it's difficult to argue that was just nafta. there are core dynamics between our economies that make it reasonable for us to integrate, have markets. to participate in the global economy -- a block. continue forlock the for seeable future -- the
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north american economy. think this is to modernize nafta -- so we can do better. maybe things are happening today it would be natural position original integration program. -- the abilityot to put this on the table. the iraqi year left -- we had a rocky year last year. a lot of the correction taking of --has been the result things we have done and the monetary side, the foreign-exchange side. basically, or going into dynamics -- consistent with inflation shock. we are expressing some confidence.
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it will be sufficient for from now on until next year. turn to say. >> renault the volatility in the , bysury market and the peso historical standards is right now very low. is the market optimistic or realistic? >> you would have to ask the market. i think in general, markets have been -- we have been doing. think that we coincided many aspects. sometimes markets are two pessimistic. sometimes markets are exuberant. what we need to do is keep a good head.
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>> you are not unsettled at the markets areat the doing right now, is that correct? > >> i would agree. i'm not optimistic. >> steven mnuchin and also sat down with her television this week. select to us -- investment summit outside of washington dc. asked him how is making progress on some key policy initiatives. >> is the white house saying there is a date by which we will have tax reform? speaking with one voice on the tissue? >> we've been pretty consistent in saying, we are working every week very closely with the house and senate to have a joint plan when we come out. the idea is to get us all on the same page so when we release the combined plan, it will get past i house and senate and the
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president will sign it. it's our focus to get that done this year. it's critical to the economy and we are working every day to get that done. >> what's your relationship like with lawmakers on capitol hill? >> we've got relationship. effort.it's a team i think the good news is, we understand what we want to do treat who want to get growth in this country, we want to have tax reform. it hasn't been done in 30 years. want totical -- we simplify personal taxes, create middle income tax cut, make business taxes competitive. we have one of the highest tax rates in the world, with worldwide taxes and deferrals, which leads to trillions of dollars left offshore. >> you bring the subduction say that's a theme of this conference. i talked to half dozen conference -- every day. they disagree with projections you have that it's three-percent. what are you saying that they are not? >> i want to put this in perspective.
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when obama came into office he was rejected of 4% economic growth. we have one of the lowest growth rates in modern history. we just not going to be satisfied with 2% growth. we will work every day in the some ministration to do everything we possibly can to unlock economic capital, to create jobs, better wages command get growth above prefers -- 3%. >> people in your position have been advised -- federal reserve. how is he solicited your advice on who the next fed share should be? >> on financial regulatory positions, gary cohn and i are working closely together in making recommendations to the president. he end i have interviewed all the people come and have joint recommendations to the president. what your speaking, think the president should be looking for in his next term for fed share customer >> we haven't made decisions on the fed share, whether we will have a new one or not.
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global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. >> you are watching bloomberg best. -- berkowitz as its fund manager of the decade three while it's fund has underperformed in recent years, the investor known for his contrary an approach has a lot to say about the current market environment. he spoke exclusively with eric chester about the flood of money going into etf. investing, to an extent, is a good idea. the idea of being -- you benefit by the growth in the u.s. economy, he us economy improves,
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marketing -- markets improve, etf's go up in value. an etf is only as good as the constituents within the etf. then't take into account logical extremes. there is a point where it makes no sense to buy etf, and general markets are overvalued. capitalized -- etf. that a lot of me blind decisions are being made, thinking of being delegated to a mathematical equation, then everything should average out ok over the long. the last time people can't -- -- this, was up on 13-14-15 years to recover. that's from not thinking about the evaluation of what you are buying. >> are we at that point now, where it doesn't make sense to
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buy an etf because the undersigned valuations? >> doesn't make sense to me. i'm not a growth investor. i am not a visionary. looking to buy a dollar for $.50. if i'm wrong, i get my $.50 back. if i'm right i do a lot better than the dollar. >> when you look at the most owned stocks, facebook, amazon, apple, netflix, google. some of the other have fire stash what do you see? >> ic companies that are priced for a rosy future. >> if it's a great rosy future, people will do well. problems, andf it's going to be difficult for investment over -- to recover overtime.
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>> for more insights into the investment landscape, a reporter traveled to the second annual goldman sachs leveraged finance conference in southern california. a roundup of interviews begins goldman chief economist. and 30 stashive this spread is under 100 basis points, lowest since 2007. when you look at that, how do you interpret that? >> the main one is the term premium continues to be very low. i think part of that is a policy of long-termgs bonds by the federal reserve. over time, probably starting in september-october, going to be run down. as an important factor -- the other factor is that the inflation risk premium which accounted for a steep curve, high term premium situations of
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the 1980's-19 90's, that's extreme. factor an important trade maybe a final factor -- for monetary policy, the fact that the doj are still running some and policy -- agree pushing investors in those markets, and to longer securities in the u.s.. >> talking about low rates -- say nearly about inflation targets contribute to low rates. we have heard from janet yellen, not mentioning inflation targets, but last week didn't rule it off the table in terms of discussing raising it. what's your thought? >> think if you started from scratch and had to decide between -- inflation targeting 3%, you could make a good take -- case of a 3% inflation target would be better. you could say, it doesn't really potentialuch to the
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price setting inefficiencies in the economy. a duration --d to price signal to a significant degree, but at the same time, gives you more way to cut rates in the economic downturn situation. you can make that case from scratch -- whether he would want to go from a 2% target to a 3% target at this point in time, it's hard to say. to be nervous about trying let the economy overshoot long-term employment by a lot to get inflation up to 3% at this point in time. so i'm not sure it's a great idea now. it's a question for academic research. i think that was janet yellen's point. >> buyers and sellers. who has the power? it's a robust market right
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now. most markets getting priced tightly -- spread tight. coming into the year, people would have expected a rising yield environment, rate environment, given the feds behavior. it has been a better environment to issue paper and the debt rockets broadly, the leverage finance base -- the market is wide open. modehaving an attractive here. >> in particular sectors that have robust demand and issuance versus some that are more closed. >> consumer and retail space is an area more cautious worried given disruptions going on, probably across a pair of foods -- obviously -- a good disruption coming across all things consumers. that's an area i would highlight, one has more caution on new issuance. broadly speaking, most of the other areas across the economy
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are pretty robust. >> goldman was one of the two big banks that would be bridge loan for the deal. do you think amazon will offer bonds? >> i don't want to speculate on what they will do. we haven't bridge loan for them to finance transactions. you can assume there will be a takeout leverage loan come into the marketplace at some point in the near future. great transaction for them and us. >> to feel like that many deals are back on amazon question mark or is this a one-off question mark >> we have seen actually volumes flat year-over-year, country doesn't 17 -- volume is 1,000,000,000,005. we are running 15% below the pace of 2015, which was extraordinary. 2015 was marked by much more large to -- large scale consolidation. we haven't really seen as much big deal activity since 2015. if you look at the underlying
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in the is our energy bloomberg, relative rotation. don't to start here in the leading squadron. these are the sectors doing the best. not surprisingly on a day where these are performing at -- outperforming index. the leadingnd away sector. >> up on 30,000 functions on the bloomberg. we always enjoy showing your favorite television.
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maybe they will become your favorites. here is another function you will find it useful. it will take you over quick takes, where you get insight into timely topics. >> everyone is listening to you now. he came by the tens of millions to become part of a historic movement, the likes of which the world has never seen before. donald trump'snt victory is part of a new wave of populism sweeping through democracies of the world. what differentiates a populist from politicians is a claim that they alone are present will of the people as a whole. that allows them to dismiss opposition to themselves or policy as an attack on the popular will. modern populist spots -- often take this approach as they tap into backlash in a globalized economy that many voters feels left them behind. here's a situation.
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lean left to not right or the center. to the foreign nationalist marine le pen and france, the united faster -- was politics. according to one author, their requirements for populist. the they make an appeal to people. keep a rigged system in place. i alone can fix it. used --ist also manufacturing to justify recalls for results. lastly, inflammatory language is used to shock the establishment and proof politicians credentials as -- one of the people. >> this scum who make the streets unsafe. >> here's the argument. because populism -- populists make a promise is to shake up society, they tend to bump up
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against them credit checks and balances, and particularly because of the media, designed to limit what governments can do, then temptation big -- is to become to declare these institutions part of a conspiracy to bought the people's will. >> i have a running war with the media, and among the most dishonest human beings. >> there's a reason why populism -- populists emerge. the promise a correction to democracies that seem to have lost their were presented to power commands they offer a fresh start. the challenge remains for mainstream politicians to address widespread economic abuse. otherwise the drop of populism is not going away anytime soon. possible ifis enough decent people are prepared to stand up against the establishment. thank you very much. >> that was just one of the many quick takes you can find on the bloomberg treaty can also find them on bloomberg.com.
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