♪ on bloomberg best, the stories that shaped the week in business around the world cricket president xi tightens his grip on china's congress. a gamble pays off before shinzo abe. the ecb turns its focus to tapering. >> the decision today is for an open-ended program. david: some of the financial world's most important figures. >> there are places we can invest and improve our market share. >> i don't think one chilling dollars is too big. >> we are in a whole different environment. david: earnings reports from

banks in silicon valley in the spotlight. >> we are swimming upstream. >> market shares are hanging in there. david: it is all straight ahead on "bloomberg best." ♪ david: hello and welcome, i'm david gura. this is bloomberg best, your weekly update of important analysis and interviews from around the world. let's begin with a look at the top headlines. of atday, the results snap election in japan delivered a boost to the ruling party. abe'sme minister shinzo gamble on an election may have paid off. he comes out of this with a stronger mandate. what does that mean for abenomics? >> it was a victory based on one

crumbling opposition. and a referendum on abenomics. we have on employment below 3%. the stock market this up in areas we have not seen since the 1990's. we will likely see a continuation of abenomics, as well as mr. abe's plans to hike consumption tax, but not until 2019. and also, slow moves to revise the constitution. >> what are the most significant ramifications of the win? >> it has to be ugly -- a green light for the stimulus program in japan. the abenomics. it would be a green light for the bank of japan to carry on with their massive asset purchasing program and a green light for abe to go ahead with the consumption tax. the point being, he wants to

raise taxes to tackle the deficit and improve education. we may also hear more calls for greater urgency in japan and pushing through structural reforms. those will be the key challenges for mr. abe going forward. >> china's communist party has approved a charter hearing under xi'guiding principles. s >> this is the clearest signal we have had up to this point that president xi is going to have a grip on the party, the government, and a china, well beyond 2022, possibly for decades beyond. tarik, archaic form of wording that is put into the charter, but it is consequential. xi'sare saying president

characteristics are going to be enshrined in the constitution, putting him on the same level in terms of respect as mao zedong. it is significant. easing ping has -- president xi has ms more power than any leader in a generation. -- amassed more power than any leader in a generation. that opens up the prospect that the president can stay in office beyond 2022. >> the politics of it are clear. it is not clear where he will go on the economy agenda. will he be involved into shaking up the state owned sector? economy?o hard on the if you look at the personality demoted today where similar

is --ers promoted, it ecb president mario draghi trying to head for the exit, but draghi emphasizing the central bank will proceed with caution. >> the decision today is for an open-ended program and it will not stop suddenly. it is not going to stop suddenly. matt: we got exactly what the market expected, 30 billion euros in bond purchases per month from january through september. that is a cut of half of where we are now. also, the ecb maintaining figures where they are well past choosesof qe is draghi to end qe at that point. >> stuck by the technicals. he could have had an earlier

stop to it if you give himself the flux ability to carry on for longer and possibly increase if needed. jonathan: those third-quarter results showing trade revenue found more than expected of the two institutions exceeding the incline. >> it is a difficult revenue environment. we are swimming upstream and a market that has seen shrinking revenues, particularly financial market revenues. their,et shares held in given what other banks have done. we expect a return to normal levels of volatility and revenues in the investment banking >space. >> you are putting more risk on a fairly unknown period in history. the barclays shareholder price

is the cost delivery. barclays has given us new range. target.e lowered their they are doing a good job on costs. the motion is adopted. >> the house has adopted the senate budget resolution. this unlocks a fast-track process to achieve republican goal to cut taxes by the end of the year. big news come up budget just passed! house willans in the unveil their official tax proposal on the vendor first, next week. november later -- on 1, next week. are on pace for tax relief by the end of the year. that is good news for investors, but how they will pay for it remains to be seen. to think welistic

will get done by december 31? >> we have a 1000 page bill coming. we have a ticking clock in the background. my sense here is that we are going to get a bill on november 1 and they will start a markup the following week, but the market will continue into markup will continue into december. at the earliest. passagecould get actual at the end of the first quarter, beginning of second quarter next year. catalan lawmakers voted for an independent republic. the parliament, the results of the elections on the 27th of september, has taken a long-awaited and long fought for step. the great majority of politicians fulfilled a mandate, which was validated by elections. >> the spanish senate voted to revoke catalonian autonomy. bonds dropped, pushing yields

the whitest in a week. that he came under a lot of pressure to do this and they are going to get power over the region starting with the catalan government. the question market is with what the response we will get from catalonia. says this has to stop. what are we going to get in backlash over article 155? >> the catalan government is they don't have control over the administration. they have not established the authority takes precedence over the spanish state. they want to make a gradual takeover of catalonia. the byword throughout the process is that we should be a promotional response. they want to avoid the violent scenes they saw in october.

they need to restore their authority and quickly. still ahead as we review explains david solomon how goldman sachs is building its business in your. plus, a conversation with ray dalio. up next, more of the top business headlines. carlyle group announces a secession plan and they put thought into it. >> having this inside outside balance is interesting. david: this is bloomberg. ♪

,avid: this is bloomberg best i'm david gura. let's continue our mobile tour in europe, where officials are having trouble establishing

common ground in brexit negotiations. >> u.k. chancellor philip hammond wrapping up testimony in the house of commons after council president revised the idea of the uk's staying in the eu. while speaking to matters of the parliament. the outcome was fully in the u k's hands. >> they think the cabinet is divided on what the u.k. once as relationshiping with the eu and the eu knows until they decide, they can't come to an agreement. brexitey talk about no or no deal, does it mean everything will fall apart messily? what does he mean that somehow things will get reversed and the you kate will stay after all? u.k.of those would need -- will stay after all? both of those would need --

nobody knows how this is going to end. excess of nonperforming loans could derail the recovery in italy's financial system according to the country's finance minister. >> this is vital for our economies. bepoint is that we must careful in getting the speed right, the timing right. if we do it too fast, we could derail the system. >> it is interesting to hear him talking about the speed of dispersal's. it occurs to me that that is not the and necessary issue. it is markedthat at a price way above it would trade in the market. an order for the banks to dispose of these loans, they , or theyccept a price need to find a buyer will and to

pay over the market price. the only buyer that would be able to do that is the state and unfortunately, that is in breach of the european union. traderggling commodity agreed to sell its oil does this to this group. >> if we knew it use a medical analogy, is it off life-support? where is it, using medical analogies? >> i would say it is still on life support. we have had clarity on key things. the number one thing is the extension on the waiver. that is critical. they have sold of the oil unit, but there are so many conditions attached. so many if this scenario. how much is going to come out of it in terms of cash? is an interest in certain bits. it is not entirely clear what it

is worth. it is not clear what the trading business is worth. there are a lot of question marks around it. it helps cement its edition as a world class oil trader. spree continues. dealapped up rod soft in a at $1.9 billion, expanding software and of the cloud, a huge priority for the company. talk us to the terms of the company. >> it is a reasonably large premium. if you look at its prospect in august, it is a fairly healthy premium for the sector. it is not a huge deal by cisco standards, but it is there 200 takeover in the history, a phenomenal number. we usually see cisco do smaller numbers.

understand, it was a competitive process. there were other people interested in the asset and that is reflected in a decent premium cisco ended up paying. >> apples iphone x hit stores next week but a new report struggles is clouding the rollout according to japan's nikkei. initial shipments will only be around half of what was expected this year after it has been battling technical issues. news, we hearden about the display technology about a year ago, that we dug into the story about the 3-d sensor. that is the biggest bottleneck that can't get enough components. making thee people

modules that go into the phone. they admitted it would cause supply constraints. there is increasing concerns that they would be slightly worse than a lunch quarter. carlyle announced a secession plan. co-ceos january 1. his partner bill conway will become co-executive chairman. what will this mean for carlyle? >> you have this pair of guys, one of whom has been at the firm his entire adult life. he joined in the mid-1990's and seen the growth of carlyle since it's inception in the late 1980's. birdddenly is a rare because he did most of his work at another firm. he joined carlyle a few years ago.

having this inside, outside balance is interesting. run banks, thee government pledged to inject $32 billion into the lenders. is catching everybody by surprise but making a rare headline. >> they are increasing the efficient capital by 10 fold has cut everybody by surprise. it is ae already said positive move. equity markets are -- this move. tanks clear up bad loans -- help banks clear up the bad loans. this will help them clear the add more loansnd to the economy, which will help reviving the economy and

profitability in the next couple of years. firms can accept research payments from eu clients. 30 months reprieve to u.s. firms on the -- coming into effect on january. this is what wall street brokerages have been pushing for in washington. they got the sec, wall street's made regulator to step in and tell them they are able to accept research payments, as will be required under european rules, for the european clients, and it will not have to register as investment advisors. that would heap on a bunch of additional requirements and it could be costly. they did not want to do that. they are getting a reprieve today and the brokerages are happy. and a half years from now,

we don't know. we will see. >> president trump is leaning toward appointing jerome powell to be the next chairman of the fed. this according to three people familiar with the matter. we will hear for definite before november 3 according to the president himself leaving for asia that day. what will he bring to the fed that janet yellen hasn't got? bring thatld he janet yellen hasn't brought? probably nothing. he is not an economist, so he will be following the policies that were set in place, and then be influenced by the staff or anybody who is appointed as vice chair or who would replace yellen if she decides to leave the board. asbably, you would see it yellen-light. she keeps wall street on the

same course. you don't like to deviate and maybe that is what trump is thinking. ♪

♪ welcome back to bloomberg best i'm david gura. president david solomon sees great potential in his firm to expand their business in europe. he discussed those opportunities with my colleague, alix steel. >> there are places we can add market share and one of the things you know is that a portion of our growth initiative is focused on places receive market share opportunities in equities, or was he claimed gaps marketes where by adding resources, we can influence market share. we have strong market share across europe. we have good market share in

sales and trading equity business and investment management business. but there are places we can invest and improve our market share and position. we are focused on making those investments and making sure we are creating growth opportunities. it is in banking, too. one of the things in banking we have looked at is that we have broad market share and abroad footprint, but there are places we can grow that footprint. there arecap expense, more that could be under the radar screen. we are looking at our footprint and our investment management business. we invest in that business and private wealth area -- wealth. >> you brought up lending. you unveiled this good plan and it seems you are focused on that area analysts are looking for how they judge it. if i am a market participant and

i look at goldman and say, are you delivering on your promises, what do i look at? >> there are different things you can look at. if you look at the lending business, it is a broad term and touches a lot of activities we engage in. on one hand, we have made a push to broaden our debt capital markets capability and we improved our market share oe. ,f you look at our performance it is a record for the firm. that is a form of lending. we have corporate clients making acquisitions. we are looking to purchase companies in the market. we are lending into them to support the business. >> that means revenue. tric.venue is a me one of the things i know you are

aware of, a consumer platform. it is a new area of expansion for us. this is a business where customers who have credit card debt can manage that debt more effectively with a fixed rate, no fee loan. we are excited about the product. we have been rolling that product out in the early stage. we are on track to have $200 billion in loans, but that is a business that will be a nice conservation to the firm. there will be more as the business progresses. david: coming up on bloomberg best, you want earnings reports? we had earnings reports. a very busy week. plus conversations with a star-studded conference in saudi arabia. plenty just ahead. >> i look at the 2017, 2018 very differently at how we received

2007, 2008, 2009. david: this is bloomberg. ♪

♪ boj will behe importing some reflation from the rest of the world in the next year and that will help them as they comfortably stay on hold with their yield control target. adaptingc. boj policy to what has been a growing economy? slight growth. inflation is stubbornly world -- stubbornly low at .7%. >> that is the point. we have seen there is a difficult process in using growth as a tool to get out of the deflationary psychology japan has been in. we will be sitting here in a

year from now with core inflation below 1%. getboj is looking for it to to 2% and that will be a story that says the boj will have to stay here and hold its policy stands for a long time, even in the face of what we expect to be good growth. we don't know how far it will run before you jumpstart the economy in terms of reflationary dynamics, but it seems to take more than a year even with good growth. david: that was jpmorgan chief was cast meant discussing the snap election. that was and i swiss interview with stephen engle. exclusiveter -- an interview with stephen engle. several of those influential guests sat down with interviews with bloomberg television. >> there are some european

challenges which require european responses, like migration, security, growth, and it jobs. -- that aretional sufficient and we need to integrate them with a higher policy. more work there is that needs to be done to slow down the trend we are seeing? these are structural problems. >> and there is a window of opportunity to deal with them because the economy is growing at a healthy rate and there is lots of job creation. let's talk about the italian economy. growth projections are 145%. is there a chance -- 1.5%. >> it could be stronger. there are upside risks and in the coming two years. certainly there are in our forecast. yousef: how much more do you

think the economy could grow? >> if all the reforms were implemented and if all the resources mobilized for public investment were fully spent, we can go up to 2%. ago, wolfgang schaeuble, the outgoing finance minister of germany, suggested that the rising amount of debt could trigger the next crisis and he was spot on. are we at that point yet with the intimidation of debt, particularly in markets that are not as visible as they used be too financial regulators? that the commission of debt is getting to a point where we could see another crisis? >> i look at 2017, 2018 very differently than how we 2008, 2009.07, the financial institutions were

so much more levered and less transparent in the 2007-2008 period. financial institutions have had an enormous improvement in balance sheets and we should take comfort. people are using leverage and there are investors and institutions that by long-term assets with short-term liabilities, yes you should scratch your head over that, but that is an institutional issue. i don't think that is a market risk, but more an investor risk. >> blackstone has intentions, plans of doubling its assets in the next five years. $8 billion. for the past five years. they are planning to continue on the same pace of growth even though they have become so much larger. what is carlyle find to be in five years? >> our firm is in very good

shape. our quality of investments will continue to be good, that i do not have a number. >> it is possible by son will become a trillion dollar firm. is it possible for an asset manager to be too big? >> i'm not sure. 20 million thought was too big. i don't think $1 trillion is too big. oron't know what blackstone carlyle will be, but i don't know if it will be too big. blackrock is six trying dollars under management. who would have thought that would happen. it is hard to say. >> in principle? >> we are very ambitious and we think we can do a good job for our investors. we don't have any limits. david: not every wall street superstar was in wall street

this week. ray dalio paid a visit to bloomberg surveillance and share his insights on the market and economy. from 2008 until 2017, we were in a certain type of environment , and that environment was one in which there was a pushing of interest rates down to the point of creating negative interest rates with a positive carry by doing quantitative easing to push money into the system. transition of an ending of that around the world and we are entering a new era which there is going to be a raising of interest rates and dissing of quantitative easing. that action produced significantly bad real interest rates. tenure real interest rates are

about .5%. >> next to nothing. >> next to nothing. and a breakeven is about 10.8%. those numbers are low because of economyon to get the to do that. we are in a transition. that is the equivalent of the late stage of a cycle. tightening has become progressively more concerning because as you move along, they are more difficult to get perfect. >> how much does percent of the matter at the federal reserve? what do you think he or she needs to focus on when it comes to the health of the economy? >> it can matter a lot. policy,the pace of fed the pace of an unwinding of the balance sheet. i look at those numbers and i don't think they will continue that pace because it is the equivalent of 2.5% gdp. if you have that happening at

the same time of increased to deficits, we can have an increase of 1.5% gdp, a big number in the supply demand of bonds. there will be that amount of effective selling and credit by the federal reserve -- >> are you predicting with the tax reform opposed as douglas keegan talks about, going to 5.6% port 7% gdp? >> we will almost certainly have a significant move in that direction. you can even see it had market action. on days where it looks like they are making it more progress, making less progress -- there is going to be a larger deficit every that means more selling of bonds. moree same time, there is selling of bonds by the federal reserve. cycle, it isof the

very delicate. ♪

♪ david: you are watching bloomberg best, i'm david gura. another week, another round of corporate earnings reports. a blowout earnings quarter for big tex. amazon, alphabet, intel, and microsoft beat wall street estimates. the wholewondered how foods acquisition would fare for amazon and it looked like it fair to favorably. >> it was mostly about how much amazon would spend on it. investors i spoke with were pleased amazon make money. even though they were -- they had integration plus one time and that was an indication it out ofot be as costly

the gate has some of them feared. >> walmart is stepping up the competition. is there any signs it is making a dent? >> the message to investors be doing walmart might a lot and innovating a lot and grabbing a lot of headlines, but amazon's growth continues to roar along strong and they are projecting a very strong holiday quarter. >> 47% paid click growth is extraordinary for a company this gigantic and feels like it has been on the present for years in our life. going up against facebook and amazon, nearly 50% growth is extraordinary. >> it is a global phenomenon and the search part of our daily usage of the internet remains robust even though we are spending more time on amazon and facebook.

the court search function, even in our daily mobile life is seeing 50% increase in clicks. the pricing is down double-digit's. when you put that altogether, it turns out topline growth for alphabet is extraordinary. >> microsoft pushed into cloud-based software seems to be a push. what does this say about the rest of the earnings season? >> microsoft has a history in the pc-based computing along with intel and other companies. it has struggled to move beyond that in a number of cases. some of the years have been rough. they were able to show that they can shift customers over to the broad-based services they have and it signals investors are getting positive signs as there are concerns about evaluations of tech companies. they are getting data points to reassure them there is growth to go in these earnings.

pressureshares under under the extended session after sales or cast fell shy of estimates. they are attempting to alter course after a difficult for 16. difficult 2016. >> baidu hast to find a new place to make money from. it is putting its eggs into artificial intelligence being the future. that is where it is trying to convince shareholders to stay the course and don't sell shares just yet. we can actually make this into something worth doing. the capital but has rebounded in the third quarter while investment units toward -- sword. -- soared. policy, iital return

mentioned in the past, we reached capital levels needed to fulfill regulatory requirements for 2020. capital buildup is done. we are looking to continue to implement our progressive policy on our cash dividend and eventually complement it with capital returns to share buyback , but it is too early to talk about it. >> we are coming from a disappointment last quarter. investors are reassured to see what drove capital lower last quarter was not repeated. we have seen a reversal above expectations. at this point, that is what investors have been looking for for the model to now deliver the the higherdend, dividends they are not getting from the banks. >> general motors released its

earnings over 30 minutes ago and it beat estimates. you beat revenue and earnings per share. that is a nice story. what is the real story here? there is softness in the vehicle market. >> from our perspective, the third quarter was on plan when you look at production downtime we had and production being down 26%. within that, we generated solid enterprise-level, $2.5 billion profit. billion america, $2.1 and 8.3% margins, which demonstrates the resilience of the business, even in a quarter where production was down 26%. we took a big step toward getting our dealer inventory in mind as we go through fourth quarter and we now expect our dealer inventory at the end of 2017 will be lower than 2016, which will set us up for a good

start in 2018. >> ford announced its third-quarter earnings, beating estimates on revenue and earnings per share. how much is topline growth and how much is cost control? >> the vast majority is good cost management. over $7 million of good news in terms of cost, inclusive of $300 million in commodity costs. the team did a good job in terms of delivering strong cost performance. itwas encouraging because was among many aspects of cost and very important parts of our business. we see that as a down payment on our efforts to improve the fitness of the company. boeing, the big performing stock on the year. eps is beat come at the forecast is better. what is driving it? >> the big concern with boeing

is that as they put their legacy plane off the market and shifted to newer production, people were worried we would see a hit to cash. whenever you launch a new plan, that requires a significant amount of upfront. that is not happening and boeing has shown significantly better cash flow than what investors were expecting. that is what is getting people optimism. people aalso giving look at their newest jet and that is making people more comfortable with the fact this strong aerospace cycle will continue to be strong. a big third quarter miss for chipotle. eps came in at 69% -- $.69, well below estimates. >> we also had the virus in virginia.

that is a big part of what happened. they also got it down for the fourth quarter now based on their for your guidance, they are saying it will drop 1%. part of it they are planning on the hurricanes in florida. that is below the 2% we were expecting. the virus is having an impact and that is what we thought, it would delay the recovery moving forward. >> when investor getting burned by two poli is billionaire bill ackman. sincehas been there december 2016 and we have seen a lot of turnover in management and directional changes. he has been a part of all that. he has been working with the board to implement those changes. ishink he believes he effecting change. some permanent structural changes that will improve the direction of the company. reported earnings

that beat estimates. they reconfirmed its outlets since 2017. manus: it has driven for the first time in three years. >> i feel good about the quarter. it to mid to the growth. , we haveines division a couple of new drugs firing on all cylinders. our generics business, despite competitive and pricing pressures in the u.s., also grew. the best part about the quarter was that our outcome business grew sales 7% and profit almost 20%. i feel good about where we are. we are positioned as a focused company. we have a strong pipeline for the future. itsli lilly reported third-quarter earnings. they also took up its forecast of earnings for the rest of the year. >> the performance was very

strong coming driven by new products. 9%, drivingwth at 90% growth. we kept productivity in place and only group operating expenses 3%. this is the story of pipeline watching. 20% of our than revenue base and growing rapidly. that is giving us chairman to's financial performance. in theable to reinvest next wave of innovation and deliver value to the shareholders. big oil dealt with third-quarter earnings. exxon mobil topping estimates and aging higher well chevron posted a miss >>. most of the majors had a dark in september. they are jettisoning their nonperforming assets and turning back towards giving shareholders value by delivering habitability not- profitability and delivering.

of those is exxon. they killed it on numbers but they are increasing, against the trend. francis to tell says the balance between crude, supply and demand is finally dissipating as opposed to the highest earnings from pumping oil and gas in two years. italy's has production will rise to a seven-year high later this year. that the by to tell was a slight miss. nobody is excited about the numbers but there is an actual story performing. they are reaping the rewards of fairly conservative else sheets, cutting back on spending, delaying projects, and is now feeding through to the bottom line. ♪

♪ we hopped back into the bloomberg and use the queue rv function to look at relative valuation. even after the huge move trading at 11% discount, also trading at 80% discount -- 18% discount. these blue dot to just the stocks are valuing on most metrics trading toward historical lows.

david: there are some 30,000 functions on the lubricant and we enjoyed showing you our favorites. here is an affection you will find useful. quic go. here is a quick take from this week. >> there is a global trend taking place, a lower percentage of people are smoking cigarettes. this is forcing tobacco companies to create products to give them probable. the answer might come in the form of an alternative to smoking, invading. does that come with its own issues? a chinese pharmacist and smoker developed the e-cigarette in 2003. the device uses no tobacco. the battle -- battery heat nicotine liquid and exhales a vapor. they do use tobacco, but it is heated to a much lower

temperature than a regular cigarette. they are said to have a taste traditional to cigarettes. a boost better than e-cigarettes. there is no burning tobacco in both devices and thus, no tar. fda embraced invading as a way for smokers to quit. the market for which is estimated at $7 billion a year and growing rapidly. here is the argument. some health groups say visiting products might be a gateway for kids to smoke cigarettes. a government survey showed e-cigarette usage increasing since 2011. the rise of counterbalance by a drop of use in conventional tobacco products. , theying to a 2013 study think might be as effective for smokers trying to quit. be a too new to

significant body of research on long-term health effects, but a review of the evidence concluded they think is 95% less harmful than smoking. it is early to say, but they think might be the breath of fresh air smokers have been looking for. that was just one of the many quick takes you can find on the bloomberg. you can also find them on bloomberg.com with the latest bloomberg business and analysis 24 hours a day. thank you for watching. i'm david gura. this is bloomberg. ♪ retail.

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