♪ francine: theresa may has just a week to find the conflicting issues over the irish order. when the tax bill make to present that by the end of the year? bitcoin bruma. the cryptocurrencies moves past $9,000. -- bitcoin boom. moves pasturrency $9,000.

i'm francine lacqua, let's check on your markets. european stocks are a little undecided. they were lowered today following things in asia. we saw a little bit of a volatile session for the japanese equities. opec meets on thursday. , peter oppenheim or joins us shortly --peter oppenheimer joins us shortly. morning, wen the will speed to british billionaire investor david harding. we will talk about artificial intelligence and its impact on market performance. here is the first world news. of julius baer has resigned.

bernhard hodler will replace him. he has been a member of the executive team since 1998. in the u.s., republican lawmakers are scrambling to lock up the votes needed to put a tax bill on donald trump's desk by the end of the year. the cbo estimated the effect of the bill on the deficit that has not had time to look at employment or economic. a federal judge will decide which of the two people runs the consumer protection bureau. english, deputy director english -- liandra

asked a court to block mick mulvaney. theresa may has a week to find the compromise of the conflicting exit demands from the north and south of ireland. northern ireland leader wants brexit will not lead to new checkpoints. some say the you take -- something the border can only be settled with a trade deal. amongst, confidence deal producers waned. meanwhile, sentiment among small businesses improved. the country's leaders underlined a shift to morse venable economic road rage and push the reforms to cut pollution and financial risk. china's economy is on a long-term lowdown even though output has seated expectations.

south africa's local currency that score has been cut. this raises a risk of a selloff from global indexes. to bb+. en lowered keep ins onr to baa. iraq may offer bonds next year to raise $2 billion to finance his budget. the 2018 budget it's will be to. 2 billion? -- >> 2 billion? >> 2 billion. >> have you hired banks? >> we have to get approval of

the budget first. nejra: this is bloomberg. francine? francine: thank you so much. too late for goldilocks but too soon for the best. for equityst right markets driven by central-bank policy and a weaker u.s. dollar. interest rates and monetary policy are still far from normal. to asill conditions lead we head into 2018? peter oppenheimer joins us. todayelighted to have you because it's her first time to come out to talk about this. i find it extremely interesting. when you look at 2018, are risks to the upside? peter: i think they are. thank you for having me. think as you said in your

introduction, this year has been in a remarkable year. it's been a year where global expert nation continue to increase. the first time since the financial crisis that inflation expectations have remained very stable. overall you have seen very low volatility which is health. we do expect the global economic cycle to can 10 you through next year or even the year after, making it the longest postwar economic recovery. we do expect the pace growth to start slowing a bit. the combination still quite some origin of risky assets. francine: this is something that could go wrong with monetary anything that would put equity markets in the back of it? peter: we do expect investors to price higher rates in the u.s..

although the markets are pricing a rate hike in december, they are only rising a couple of rate hikes next year, we have nine consecutive rating raises by the fed through the end of 2019. more than the market is pricing. that may dampen expectations. growth is really what the market will focus on. as long as the rising interest rates is reflective of the continuing economic cycle, we might get low return but still positive returns. francine: this is a simple ssdge -- chart charting the . it has the second correction, the financial crisis. you are quite positive on growth. how much to zero strength factor it's anr: -- peter:

interesting chart. can see how remarkable the recovery has been. that was an environment with low economic growth in europe. very little profit growth. until this year, european profits have been flat years. same thing in asia. this is the first year that profits have really start to grow. the u.s. is different. the economy was stronger. you had more to contribution through technology. it's of my daily think, in europe and asia, we get profits continuing to drive most of the return moving forward. expansione valuation and more actual profit growth. that's reflective of his better cycle. francine: would you buy the

ftse? peter: we don't have much differential in terms of our forecast with in europe. in fact, returns geographically have been very low. most of them have been from sectors and stocks. we do think there's a short term opportunity to be positive of the ibex versus the mid-. of focus on a lot the negative attention risk just recently. we think that will turn a little bit. is a relative catch of opportunity there. as a look out over the next year, intel to return terms. most of the returns that we bought ross the regions are quite similar. francine: let me bring into my second favorite chart of the day. this is a spread between 10 year the u.s.

you said that it was a sweet spot. what happens to this yield curve going forward? peter: it's interesting point. we haven't shifting upwards and flattening. we have these fed funds tightening in the market is pricing. they are anchored by low rates in europe and japan. in europe, we have the yield curve steepening of it. we should be looking at their markets and the trigger of those. what are the factors we find that contributes to bear markets is a flat or inverted uber. we don't have those conditions yet and we don't forecast them by flat the yield curve is something to watch if we're focused on downside risk.

is there anything in the u.s. that looks overvalued? peter: evaluating -- valuation is something that does look stretched. many years of having close to zero interest rate. valuation is at a high side. each returns will be lower. you also have growth momentum. that's followed by a slowdown usually. you tight labor markets in the u.s.. usually that's associated with rising wages and tighter policy. usuallywe should be alert to poe risks. the crucial thing that's missing is the tightening of policy which is enough to dampen future growth expectations. thank you so much. peter stays with us.

keep it on bloomberg surveillance. the preview what could be a pivotal weekend washing it. washington.eek in this is bloomberg. ♪

♪

francine: good morning. i'm in london. let's get to the bloomberg news/. cl of julius there has -- baer hasf julius resigned. hodler will replaced him at the top. he has been a member of the 20cutive of julius baer for years. bitcoin is quickly closing in on five figures. its market value is soaring is again greater mainstream attention does i warnings of a bubble. it has climbed 40% over the past loan.

-- past two weeks alone. --edith has agreed to kill has agreed to purchase time magazine. the koch brothers now have a foothold in the struggling magazine in the. attrategist is looking germany's commerzbank. they set a bid to buy all of the bank is not likely. francine: we are looking ahead to a could be a pivotal week in washington. lawmakers have to lock up vote to finalize a tax bill that resident donald trump could sign by the end of the year.

the battle over the head of the consumer financial protection bureau could or. -- could go to court. and how will basis his -- and powell faces his confirmation in front of the senate. let's bring back in peter oppenheimer. >> the consumer financial protection bureau was set up after the financial crisis to crackdown on people getting defrauded. target of the republican party since it was set up under the dodd frank bill. is thatent standoff

apparently utterly got frank bill, the outgoing elector -- director has the authority to name the new director. trump does not accept the letter of the law and says his authority trumps all else. nominated his omb director as a temporary director. francine: does he want to shut it down? people are saying he wants to shut it down. it was set up by legislation. you can't just shut it down. he has been highly critical of it and whether they actually do with their supposed to do under him remains to be seen. francine: i have a million questions. stocks, tax? are we going to get it by the end of the year? it's not far-fetched but

there's very little margin of error. there are at least half a dozen senators have criticized the bill from one angle or another and it's a very tricky balancing act. satisfy one and you might create another opponents. because it's so existential for the republican party, this is why how they rationalize roy moore, who is accused of sexual indiscretions with a minor. that's the rationale for ,ringing him and endorsing him to have enough votes to pass the tax bill. you can see how important is to the party. 55-45obably give it a chance of passing. you are bullish on

equities. what is congress fails to pass this tax cut? we think they will, if not this year the next year. we put in 80% chance. we have profit growth next year at 14%. that's boosted in part by unexpected tax cut. we think that would boost profits by around 5%. that's why we feel the u.s. market can make progress through the next year. francine: it's quite a figure. peter: a strong rise already this year. for that, wet would be having slower profit growth and in some of the other markets where you are getting a catch-up from a lot lower base. with a tax cut, similar profit

growth to u.s. best to europe and asia. without it, it would give less profit growth to our forecast. priced in aas reasonable expectation that it will get past this year or next year. francine: let me bring you to my chart. this is the generic 10 year yield. they're kind of tracking the same. i don't know if the tax that would actually be. what help with earnings are also inflation and margins? is it is no ball effect? -- is it a snowball effect? would boost earnings overall. the tech sector will benefit less because it's already low marginal tax credit. it would affect gdp.

with thensistent current policies. francine: any foreign trips with the president a time soon? he's just back from asia and he likes to stay close to home and his various golf courses so not for a while. francine: when you look at what the markets, looking at the csi 300, the nikkei under pressure the last two weeks, is this a signal is something worldwide? the conditions we have are reasonably benign for emerging markets in particular. we have a relatively stable dollar outlook. interest rates are moderate.

from 2004 until 2007 we saw 17 consecutive rate increases. conditions are quite benign. we think they will ease a bit for emerging markets over the course of the next 12 months. china, which is had a remarkably strong year, we see as being quite positive is a market. india and korea as well. a positive backdrop. are the tech stocks -- doing this? markets technology makes up about 25% of the s&p. makes up about 27% of the asia index. europe,ompare that to it accounts for about 5%.

for the asian markets in , china especially, has a big technology component which is seeing topline growth. are we setting the powell hearing to go smoothly? he's a fairly noncontroversial choice i would expect too many fireworks. -- erms of politics summit francine: seems kind of smooth. it we have a good idea of what he stands for? are expecting him to be a continuation of janet yellen? you worry about communication. leaving and dudley quite a few people joining. the issue with medication

i do not think is forefront in our minds. ofwill see a continuation forward guidance and communication. the goal is to maintain market stability and low volatility. francine: what does dollar do from here? peter: we think the dollar will remain relatively stable. over the course of the next 12 months. there are a lot of tweets from the president. time magazine was the most interesting. whether he was ever called and whether he refused an interview and therefore is not meant the year. -- the man of the year. >> many people in the know piled onto netsuite and my favorite tweets in the hall tweet storm, i don't ever launched it, but it

was along the lines of, we don't have to make this a story when you have such a needy person. francine: do you follow tweets? you can't make investment decisions on tweets but you can't ignore them. peter: i don't personally fallen by hear a lot about them. it's an amazing an important new medium that you feel talking -- that gets people talking. francine: they do so much. peter stays with us. up next, theresa may tries to solve the irish border policy. we think we're seeing a little bit of movement on pound. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance. i'm francine lacqua in london. here is nejra. republican lawmakers are

scrambling to finalize a tax bill that can make it to donald trump's desk by the end of the year. the nonpartisan congressional budget office released a statement, the cbo says it has not had time to fully analyze it very double as economic growth or employment. a u.s. federal judge must decide which of the two people holding claims to run the consumer financial protection bureau has the authority to guide its oversight. a federal judge was asked in declare, and to block donald trump from installing another. matching the mood among international investors, meanwhile sentiment among small businesses improved according to

indicators as country leaders shift and push through reforms to curb financial risk. the world's second-largest economy is on a long-term slowdown even the output in 2017 has exceeded expectations. south africa's debt has been cut. to/levelstening facing a selloff from global indices. level currency rates, one below investment grade and placed on a stable outlook, moody has opted to keep both readings, putting them on review for possible downgrade. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. u.k. prime minister theresa may a week to find a compromise between the conflicting demands from the north and south of ireland over brexit.

the prime minister wants written assurances that there will not be a return to checkpoints and towers along what will become the border. ireland's democratic unionist party which is propping up theresa may's government has rejected a solution and says it can only be settled in tandem with a trade deal. first of all, how will this be resolved? is there a plan that makes more sense than others? >> yes. theresa may is caught between a rock and a hard place. the irish government wants a written commitment to a hard saysr, belfast, the cup it rejects the simplest way to do that by keeping northern ireland. right now, she is trying to find a solution successful to both sides and that is probably a nightmare. francine: we were talking about

snap elections on friday. where are we on that? >> we will enter the fourth day of talks today. there is willingness on both sides to try to find a compromise and avoid an election. people don't want an election. the brexit talks are coming up. there is a willingness to avoid an election but on the other hand there is difficulty in finding a path through. time is running out. 36 hours left. on friday we spoke to eileen foster, is she talking to the irish government directly or just through theresa may? >> absolutely not talking to the irish government directly. relations between belfast and dublin are bad. there was megaphone diplomacy.

her channel is through theresa may. this confrontation between the government, she holds all the aces. argue she is almost more powerful than theresa may at this point. francine: thank you so much. what does this mean for u.k. assets? peter oppenheimer from goldman sachs is still with us. how much of a political analyst you have to be, these scenarios, what happens if labor government's next? a convenient agreement with the u.k., a bad agreement with the eu? are those the scenarios you model your equities on? >> i think the most important thing for equity markets is what is happening to growth. the growth is slowing in the u.k.

different assets will respond in different ways to that. when we look at equities it is important to understand, they don't reflect the domestic economy in the u.k. at least the major indices. the 1500 which is the most liquid index has 80% of its revenues outside of the u.k. affected directly although there is a risk premium for uncertainty. not directly affected by domestic economic conditions, it is affected by movements and currency. which is why it has held up so well in local currency terms last year. is more risky but that is exposed to outside markets. what we have been recommending and still do is to be more negative, a specific group of companies that are entirely u.k. exposed. we have a basket of those. that has underperformed a lot, so the domestic weakness in the

economy is certainly being reflected in the way that stocks are performing. we would expect that to continue. francine: let me bring you to my chart. the difference between the ftse 100, and the ftse 250 in white. there is a selloff in the 100, is it a good buying opportunity or is it too late? too dependent on the pound? peter: it would be a good opportunity to buy into the u.k. if the ftse 100 selloff. there are different factors which drive that. exposure to the rest of the world, doing pretty well. we should be clear there are sectorial affects that have played out over the last year. higher rating, the most indices in resources, basic resources. we are quite positive of those sectors moving forward. ,oth will see raising turns

cash dividends being paid for example in the oil sector. that makes that index quite attractive. we like banks which has quite a big exposure. francine: let me bring you over to the other chart, the ftse 100 in dollar terms. the dollar in blue, the pound and white. what happens to pounds depending on trade in december? peter: currency is the asset that is most closely exposed to the politics and the uncertainty to the issue of whether we get trade deals are not. our expectation would be, ultimately there will be a trade deal, we have expected the pound to be weak as it has been. but i think that is where the tensions will reflect most immediately in the sense of u.k. assets. seems, i don't know whether you think the rate hike -- the last one was a reversal

of last august or this is a trend? peter: i think this is the start of a moderate trend. as we have discussed in the u.s., we expect further rate toises over the next, reflect the slightly higher inflation. moving away from low interest rates. francine: do you like anything in germany? the flip side of the brexit debate, angela merkel could be weekend, they don't have a government yet, if, is it a buying opportunity? you don't focus on country specifically but -- peter: we have felt, there hasn't been a lot of alpha opportunity to differentiate between countries. most of them have performed in a close pattern because the underlying fundamentals have been similar. similar valuations, earnings outlook.

we are positive of the outlook of the german economy, it will continue to be quite strong. as with the rest of europe, moderating its pace of growth in the next year, and the german market has some very attractive areas. also, it is relatively underweight and some of the sectors we like, for example, banks. we balance these things out by looking mostly at sectors and stocks. the country view falls out from that. francine: what do you like banks at the moment? peter: a deep value opportunity. we should say, the global economic activity is strong because a weak pricing power. there are very few companies that have got strong topline growth. we like strategies but we also like value, falling dividends in recent years, but are starting to transition to dividend growth and still have attractive

relative valuations. we think banks fit in to that. a slightly steep yield curve will help. less regulatory headwinds. we would look at other deep value sectors as being, for example, oil, autos and utilities in europe. we think those have decent dividend yields and prospects. francine: peter, thank you so much. what a treat to have you on today. chief global equity strategist at goldman sachs. opec and allies are expected to announce cuts to oil production. for how long? we discuss that next. this is bloomberg. ♪

♪ good morning everyone. this is bloomberg surveillance, i'm francine lacqua. when opec meets this week they will not be able to declare mission accomplished. the producers are expected to extend cuts. arabiayears since saudi battle for market share and led to an agreement, u.s. output road to a 30 year high. -- rose to a 30 year high.

this shows no sign of ending. we have the chief global economist at ubs. paul, great to have you on the program. let me bring you over to my chart. ,t is one of my favorite charts we will explain what this is. you can see the new kids on the block, the shale producers dominating as soon as they ramp up the price of crude oil, updating, opec will never win this are they? >> crude oil in the united states isn't being exported necessarily around the world. opec has a lot of influence outside of the united states in terms of supply. weights of oil as well. different refining is refinin -- different refining is required for different types of oil. opec has one to a certain extent , stopping the oil being at a

alarmingly low rate. from an economic point of view, this is a break even rate for most governments. struggling with fiscal policy, they need oil to be more weighty. they can probably avoid the $40 a barrel, which would be damaging to their fiscal position. francine: these cuts, do they need to be put in place because, as soon as they stop cutting production, the shale producers turn? paul: we are seeing continual increases in demand. demand is falling for oil at the moment. francine: from emerging markets? paul: that and the united states. the united states for a developed economy is inefficient. china is an inefficient consumer of energy. aboutime we can talk solar and renewables and the impact of that overtime and on a 20 year view is a huge issue for opec.

over the next three or four years, the global economy is israting on trend, growth we areng, when considering supply and demand, the supply is somewhat curtailed. you can achieve a degree of stability. francine: the connection between lower prices for oil and the impact on retail, is the link a strong in the early 2000's? youew up being told that if pay less at the gas pump you spend more in the shops but? paul: it is not quite that simple. l ofdy pours a barre crude oil into their car. you use refined oil and the creates tax. manyuropean consumer,

asian consumers are less sensitive to the oil prices because of the tax. crude is a small part of the overall part they pay. the great american consumer filling up the family fleet of sport-utility vehicles on a regular basis, they pay a lot less tax on their oil so they are more sensitive to fluctuations in the underlying crude oil price. there is a somewhat bigger impact. we have to recognize for example, the younger generation are driving less. particularly in the states. they are perhaps less sensitive to the oil price under consumption patterns are less affected. alternativeeeing means of power in cars, greater efficiency in terms of fuel consumption, changing efficiency in terms of heating oil. that also has an impact. i would say the sensitivity is there but it is diminished from what it was. francine: paul, thank you so much. staying with us, a green black friday.

net worth surging to over $100 billion on the strength of a weekend for amazon. we talked the health of the consumer next. this is bloomberg. ♪

♪ good morning everyone. this is bloomberg surveillance. i'm francine lacqua in london. let's get to the bloomberg business flash. nejra: resigning as ceo, joining privately owned company in geneva mid-2018. he has been a member of the banks senior executive team since 1998 and has held various positions including chief operating officer and president of the management committee. bitcoin showing no signs of slowing. than a weekless after topping $8,000 and quickly closing in. the price of a largest cryptocurrency by market value is soaring as it gains mainstream attention despite

warnings of a bubble. bitcoin has climbed more than 40% over the past two weeks alone. inc.ing to buy time publishers time to get bigger. the billionaire koch brothers, who agreed to support, an injection of $650 million a foothold in the struggling magazine industry. francine: cyber monday, companies will be hoping they can continue black friday. revenues jump over 100 billion. u.s. spending climb to over $5 billion on friday, companies are getting ready for what could be the biggest online shopping day in u.s. history.

jeff bezos may be feeling good but how strong is the consumer? paul donovan, is still with us. first of all, we will have a different conversation about amazon, making sure the shoppers are there. how much do you look at consumer spending to say, this is growth that is here to stay? paul: it is critical. consumers are over 70% of the u.s. economy. the foundation of the economy. one of the issues we have now, with employment, consumer spending equals business spending. people use their personal phones for work or personal computers or whatever. that blurring of distinctions mean some of this is investment spending. overall we have to be careful about just looking at retail. as economies advance and we see changing lifestyles, it is not just stuff that matters anymore. it is experience.

particularly with the millennial generation, there is a greater extent of -- a greater incentive. this does not necessarily appear in retail data. people are spending on experiences rather than just the latest gadgets, that is a shift. francine: in europe this was the first sign there was growth. i remember speaking to an economist three years ago, everyone was gloom and doom about the european economy. people were going out to shop and that was the first sign that things were looking up. paul: once you get stability in the labor markets, people feel more confident and secure that they will not lose their job, the precautionary savings rate comes down. we don't need to keep saving 5% of our salary every month. we can afford to skip a couple months and get the flatscreen tv that we need for the children's bedroom. start to see that sort of spending.

in the u.s., we are in a very strong labor market, full employment. we are seeing wage growth come through. the wage tracker index -- francine: not as much is expected. paul: if you look at average hourly earnings, no. that is useless at this stage of the cycle. you need to look at the way income and wage publishes, which gives a much more reliable picture of whether people are getting pay rises or not. it might come in pay, self-employed dividends. francine: that would suggest the fed it goes full-time this year? paul: we think the fed will go in december. i cannot see any reason why they would not. if they want to maintain the real interest rate, inflation ti been taking up -- cking up. year,certainty is next

four vacancies on the fed in february. that void needs to be filled somehow. until we fill it it is uncertain. titan they will. -- tighten they will. francine: paul, thank you so much. bloomberg surveillance continues in the next hour. we will be talking to british billionaire david hardy. machine learning, artificial intelligence, that of course impacts the way hedge funds work. this is bloomberg. ♪

francine: the clock ticks for theresa may, the u.k. prime

minister has just a week to find for brexitsolution demands over the irish border. washington gets back to work. lawmakers finalize the tax bill. will it make it to president trump's desk by the end of the year? what role does artificial intelligence plate in hedge funds? good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua and our new european headquarters in london. tom keene holding strong over in new york. we are still live on air, which is a good thing. tom: it is a good thing to get up on air. the photos on twitter are extraordinary of the new building. let me cut to the chase. how's the food? francine: the food was great. the environment even better. it is a very open space. a bit noisier than before. but you meet a lot of people that you would not otherwise. look at that.

i cannot wait to escort you around the building. tom: great. does my plane leave out of terminal c or terminal b? it is gorgeous. there is saint stephen's of walbrook. that is the acclaimed walbrook street. there's another foster building to the right, as well, isn't it? francine: exactly. i think this was a project that norman foster had for 10 years. it is the most sustainable city building in the world. they have done everything so that it is as bio and light-saving as possible. looking forward, francine, to being with you in london tomorrow. in my dreams. beautiful. spectacular. francine: we are waiting for davos. let's get straight to the first word news. taylor: francine, tom, germany is edging closer to getting a new government. beenellor merkel has

negotiating with the social democrats for a potential partnership. she said any coalition partner would have to have support to balance budget and pro-business policy. theresa may has a week to find a compromise on the conflicting brexit demands from the north and south of ireland. the irish prime minister wants assurances that brexit won't mean a return to checkpoints and towers on what will become the eu's frontier with the u.k. her political allies in northern ireland city future of the decided withly be a final trade deal. a new study underscores how much the senate tax bill would increase the budget deficit. the congressional budget office says the tax cuts without $1.4 trillion to the deficit by 2027. republicans are trying to lock up the votes needed to pass the bill and move it to conference with the house. the goal is to get the measure to president trump by the end of

the year. in indonesia, a volcano on the island of bali has erupted and authorities warn a bigger eruption is possible. that has led to the evacuation of 100,000 people from one of the most popular tourist locations in asia. global news 24 hours per day powered by more than 2700 journalists and analysts to react -- analysts. this is bloomberg. tom: thanks, taylor. how about a data check off the holiday? an extraordinary week for washington and a lot going on in brexit. curve flattening. not down to new flattening, but nevertheless. 59 basis points gets your attention. the vix, 9.96. the buoyant equity markets. euro.en showing stronger francine? francine: this is what i'm

looking at. stocks in europe erasing some earlier losses. the dollar extending a decline. investors focusing on the u.s. economy. tax reform, little changed on euro. we seem to be closer to germany having a new government. i put in oil for good measure because opec meets on thursday. tom: that euro-dollar gets your attention, as well. trade weighted euro. we usually don't see this chart. it is interesting given the x number of nations in europe. this is stronger euro. it is different than euro-dollar. down we go. the weak euro trend since the crisis here. we are really out two standard deviations. and we break out of here into a stronger euro in 2018? francine? , i wanted to go to

my chart, but for the people that watch "the royals" in the u.k. -- the royals in the u.k., prince harry is engaged to meghan markle. something the tabloids will go crazy for, i'm sure. tom: should we blow up the show? do we just blowup the show and throw the guests out the door and focus on the royals? francine: maybe next time. [laughter] francine: let me bring you over to my chart, tom. i wanted to talk about a little bit of retail. this is my chart. this is jeff bezos becoming richer in the last few days because of black friday and all things related to amazon. -billionaire,ti which means he is worth $100 billion. this is a fun way of looking at the retail story through the eyes of a billionaire.

now on to all things brexit, not royal. theresa may has a week to find a compromise between the conflicting demands from the north and south of ireland over brexit. the irish prime minister wants written assurances that won't be a return to checkpoints and towers along what will become the eu's land frontier with the u.k. when it leaves the bloc. rejectedgovernment has the solution and says it can only be solved with a trade deal. george osborne and paul donovan. paul, thanks for sticking around. rupert, welcome to the program. how do you deal with ireland? is there a chance this gets sorted in a week? moreis issue has become high profile over the last couple weeks. we all assumed the big issue is going to be money.

i thought the money issue would be resolved. this big is uncertainty over whether ireland will push this to the wire? i do think that is unlikely. people who look at irish politics will tell you all of the incentives for the prime minister is not to push it to to push it to the line, there is no incentive to back down. but that is not really how european politics work. if the other states are happy with the deal, i don't think the irish issue alone will prevent movement to the next stage. francine: what is the way around this and where do you put the border? i haven't had a sensible kind of plan. rupert: this is a very difficult issue because the irish are intellectually correct that to really keep a smooth, open border is much easier if northern ireland stays in the customs union.

that is basically unacceptable to the british and particularly to the democratic unionists. that effectively puts the border in the irish sea, which is anathema to northern ireland politics. i think there will be some kind of fudge. some mixture of a customs agreement, some technological solutions. i think in the end, i think it will not work perfectly and there will be leakage across the border, but everyone will ignore that for the sake of an orderly brexit and the irish peace process. it's not a deal, but the nature of the solutions. rupertul donovan, give advice on gdp 12 months out. we've heard a lot of different opinions on "surveillance." paul: the u.k. economy is doing all right-ish. the u.k. economy has clearly slow down and that is likely to continue to be the case. we are not going to see the u.k.

accelerating with the rest of the world necessarily. the u.k. is not in recession territory. rolling around 1.5% next year is quite plausible. the consumer is basically doing fine. in the sense that they've got a job. and no one outside the financial markets or politics is paying attention to the brexit negotiations because they are indescribably tedious. nobody cares in the real world on a day-to-day basis until a deal is done. you've got very little negative coming from the brexit negotiations now. in the future, that may not be the case. you have reasonable employment, reasonable wage growth, that is sustaining things going forward. i think we do ok. tom: what that tells me is we just delayed into 2019. what is the constraint to getting anything done in 2018? rupert: the constraint is counting backward. you've got to get a deal done by automotive 2018.

-- autumn of 2018. it's got to be ratified in the british parliament. that is absolutely correct that for now the negotiations are not really affecting the consumer side of the economy. i do think they hang over the corporate investment side of the economy. change anduld all consumers would notice if we had a disorderly brexit. i think all of the players in this negotiation are very key to nagoya that -- keen to avoid that. i think we will get progress in december. i think we will get a significant market reaction if we get that progress. i think there is significant upside for sterling if that happens. francine: what is the market pricing in at the moment? i hear in the core doors that maybe brexit -- corridores that maybe brexit doesn't happen. rupert: i think there is still some hope around that, but not

much. i would play that down a lot. i think there is denial out there thinking we can put this off. it is going to happen barring totally unforeseen. i think the market is too gloomy on the u.k. generally buried there is a premium on all assets. -- generally. there is a premium on all assets. if we get progress in december, i think that will change sentiment significantly. there is slightly lazy gloom about these negotiations. francine: we will be back with rupert and paul. they both stay with us. coming up later this hour on "surveillance," we speak with david harding from winston group. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. magazine publisher meredith has agreed to buy the struggling time incorporated. billion ins 21 $8

devbt. $2.8 billion in the koch brothers are supporting the deal. a change at the top of julius baer. the ceo is leaving. he will be replaced by the deputy ceo. under the former ceo, julius baer expanded in asia. that is your bloomberg business flash. tom: thanks, taylor. it has been a three-day weekend, the president returning from florida to washington. we need to get a monday brief on what will happen thursday and friday of this week, i'm guessing. we number guess -- never guess with james hertling. jim, what will you look for this week from the senate? m, it is going to be very

noisy for sure. we have at least half a dozen senators we know of that have if not outright objections, then certainly criticisms of the bill as it stands. there will be a lot of horse trading. ofis quite a sensitive house cards. it is a fragile house of cards. you move one piece and another piece may fallout because there is not a lot of wiggle room on the fiscal side. tom: i want to drive the zeitgeist forward. jim nailed it. "politico" coming out with a number of senators in question. in my right to partition those six or seven votes into those that are exiting, corker, plague, and others, and those ?hat are staying there are almost two groups of dissenting senators. james: that is a very clever way of parsing the group.

, for theher hand departing senators, they remain republicans and for the republican party, this tax bill is probably the most important piece of legislation they will have done in a generation. francine: washington has a new flash point, the consumer financial protection bureau, it is pretty ugly. james: yes, it will be interesting to see how it plays out. it is yet a test of executive power versus the letter of the law. it will be interesting to see what judge a lawsuit lands in front of and that will tell us a lot about how the situation evolves. tom: paul donovan, when i look at the washington mess and it looks like we are going to have a lot of it again at the end of this week, does that filter into economic growth or the expectations of american investment? thing abouteat politics is politicians are not nearly as important as they think they are. [laughter] paul: economists are important,

but politicians are not generally in the short term. when we are talking about the brexit situation, tax reform, merkel's government, this has indications for the trend rate of growth -- implications for the trend rate of growth. they are not going to affect gdp forecast for 2018. they will perhaps effect longer-term trends -- affect longer-term trends. in the near term, people care about, do i have a job? buy? afford what i want to that is what drives the consumer. that is what we focus on in the short-term. most people don't read newspapers and i hate to break it to you, most people don't want bloomberg, either. francine: come on, that's not true. [laughter] paul: most people are not as invested in politics as those of us in the financial markets are. long-term, it matters.

short-term, i don't care. francine: tom? thomas crying. tom can't get over it. people care that prince harry is engaged. tom: all my children watch bloomberg. jim, thank you for not crushing me like paul donovan. we will continue with mr. harrison from blackrock. stay with us. this is bloomberg. ♪

tom: "bloomberg surveillance."

from our new studios in london, francine lacqua. well-lit, sparkling in the . i'm tom keene in new york -- well-lit. sparkling in the new lights. i'm tom keene in new york. really good math on the dollar. the summer trend down. the movement up. can you call weaker dollar into 2018? i think as we go through 2018 the dollar will come off. i think we will see the world economy supported by the consumer, consumers spent in euro, not in dollar. but that is next year's story. for the moment, we will probably be more range-bound and that is what the dollar has been doing. it has been a rapid descent, francine.

we have seen significant dollar weakness over the last three weeks, to say the least. francine: we certainly have. rupert, what does that mean for trading? rupert: i would slightly disagree. i think there are some strong upward forces on the dollar. i think of tax cuts do past, one of the implications will be stronger dollar, you will get more upward pricing of fed policy for the short-term. i think it is difficult for the dollar to rise significantly while global growth remains strong. global growth is keeping these other currencies pretty strong. then one of the big stories next year, we just had this beginning of noise around doj policy, you may see -- boj policy, you may see stronger yen. francine: we need to talk about bitcoin. this is our morning must-read. the title is really catchy. the best explanation for the record busting price, enough to buy a gallery full of velazquez

paintings. paul? paul: the problem with cryptocurrencies is that they are not currencies. francine: what are they? paul: you cannot force someone to accept these as a medium of exchange and they have no natural demand. you are not required to pay taxes, which is 34% of the developed economies, you are not forced to pay taxes in bitcoin. the other problem with bitcoin and other currencies, this is the fatal flaw, the supply of cryptocurrencies can only ever go up. it can never go down. if you've got something were supply can only go up, but demand can go up and down come of that is not a good store of value. when you get drops and demand for these things, the value

demands -- collapses overnight. some of the comes along, creates the donovan cryptocurrency next --k, good idea, catchy title that is obviously superior to bitcoin because it has donovan in the title -- the value for bitcoin collapses because demand reduces. francine: thank you so much. rupert harrison of blackrock. paul donovan from ubs, thank you for coming on. pick up the latest issue of "bloomberg businessweek." if you are not tired of thanksgiving, we take a look at the food of the apocalypse, it is a fun issue. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. tom: good morning, everyone. "bloomberg surveillance." right to it on a monday. here's taylor riggs. taylor: it is the biggest online shopping day of the year in the

u.s. e-commerce on cyber monday is expected to rise almost 17% from a year ago to $6.6 billion. online spending during the holiday season is projected to make up more than 11% of total retail sales. that is the most ever. a federal judge must now decide who is temporarily running the u.s. consumer financial protection bureau. the woman who served as deputy to former director says she should be acting director. she has asked a judge to block president trump from installing the white house budget director as interim chief. the longest serving member of the u.s. house of representatives is stepping down as the top democrat on the judiciary committee. john conyers is being investigated over allegations of sexual misconduct. .e has denied the claims he says he won't resign from congress. wedding bells will be ringing for britain's royal family next spring. prince harry is now engaged to

american actress meghan markle. the announcement came from the office of his father, prince charles. prince harry is fifth in line to the throne. meghan markle is best known for her role on the series "suits." i'm taylor riggs, this is bloomberg. tom, francine? francine: taylor, thanks. tom, i'm sure there's a business angle. if you are a british grants and you marry an american actress, i don't know whether more americans will come and see the palace, but it certainly sparks a lot of interest and i think there is a new royal baby coming up next year. busy year for the royals. tom: francine, for our unsophisticated, unwashed american audience like me, let's be clear, he can't -- he's not the next king. the other guy is the next king, with boy george. francine: with prince george, yes. these things, i'm kind of up to

speed the you ask me a lot about it. tom: i know. it's embarrassing. francine: at the moment, i think it is prince charles and then the duke of cambridge. tom: and there, folks -- francine: a lot of interest. tom: a little bit of interest. yes. very much so. francine: there you go. in 1994, a young trader authored a paper laying out what he saw as the intellectual frontline of investment research. his name was david harding. he went on to establish winton group, one of the world's largest hedge funds, in excess of 30 billion pounds. david harding joins us on set. rupert harrison is still with us. thank you so much for sticking around. david harding, welcome to the program. david: thanks very much. francine: we are excited to have you here. if you do machine learning and artificial intelligence, the

role that it has on your sector, how big of a role is it? david: i guess the way i feel is that the world has come to us a little bit. we started using computers to read prices and to make sure -- to see if we could make inferences with them. i guess they have worked well enough to create a track record of consistently making money and was given more credit than it should have been, i'm not sure. francine: the world of hedge funds in general, how much of an influence will it be? david: back in the 1980's and 1990's, there was a big dispute about it was kind of computers versus humans. we did not believe that computers would ever be very good at investment, we believed investment was an art form. systematic traders got used to being bullied the big boys in the classroom.

inhink it has been a hare the tortoise race. the tortoise unsystematic research -- of systematic research has cracked along until people are saying, well, these computers are really good. a lot of the hedge funds are systematic-driven. we have borne up to the pressure much better, we and our ilk. francine: how much is it height -- hype and how much is it real-time? david: this is the third a.i. boom since the 1950's. things go through hype cycles. when you consider that a lot of the current excitement is about deep neural networks, that is 70 years after the idea of neural networks was invented by a latin american psychologist.

i can remember the name of the network from the 1950's. all of the neural networks failed completely in the 1990's. i was very skeptical. i was very skeptical for a long time. i have been kind of won round. this stuff does move forward. computers have gotten a lot more powerful. we have lots of people working with aspects of neural networks and things now. i would say that our field always has been machine learning of a sort. tom: david, wonderful to have you with us. if we can take your quantitative -- there is the idea of their always becomes a one-way bet. is the short vix trade now -- bring up the chart -- this is the chart of the year -- i understand there is a time decay on the chart -- nevertheless,

the short vix persistency, is ?hat the new one> are we getting ourselves into a very small box with the inertial force of the quiet? david: we don't trade the vix very much. it is a derived quantity using an equation. it is based on the idea of market efficiency which i don't agree with. i don't agree with that branch of mathematics, which gives rise to the vix. i think the vix is not an entirely safe thing. if you had speculated it might be involved in some future financial problems -- perhaps in that respect, it is a bit like bit kind -- bitcoin. it is very poorly understood. i would not be surprised to see it involved in some future accident. tom: if we are not in this predictable space, what are the fat tails you see right now?

david: i don't tend to make forecasts about the future because our investment management method is based on great humility that we don't know what is going to happen in the future. we can only ever with air methods have a slight forecasting edge. we never make forecasts on the character of the market. "the market is going to be up 10% by the and of next year." when u.s. me, i think -- you ask me, i think the s&p is going to plus or minus five points. i always get a huge laugh. it is a huge laugh at the truth. nobody knows to within that range of error with the future is going to be. there you are in the entertainment industry, you are not in the serious forecasting industry. francine: rupert has to make calls. rupert: i wish i didn't. [laughter] rupert: i think fundamental

investors are increasingly using ai in their process. many people are running to try to catch up with trends. francine: is ai difficult to sell to clients? really aware of there being funds called ai funds at the moment. you do occasionally read on bloomberg about some of the calling it ai funds. funds like ours have been around 30-40 years. ai.ever billed ourselves as people would have laughed at us once upon a time. anyone who builds themselves -- bills themselves as an ai fund, there is a bit of hype involved. does the future of investment management involve using

computers and the scientific method, is that an important aspect of the future investment? i think so. tom: david, you mentioned earlier the idea of not trying to predict out, not trying to extrapolate into the future. a lot of people are writing about this weekend -- the path of volatility or agitation -- what is the impact of a jump condition or the likelihood of a jump condition? does it matter if on the vix, which you don't like, but let's use it as a proxy, that we go 9, 11, 13, 15, 19, or are you worried about a jump condition where we abruptly moved to more volatility? about i'm always worried -- the thing that markets are most worried about is a crash. discontinuity. if there is a big jump in the , it would be because of a

crash. -- leverage crashes is always implicated in some way. it was in the 2008 crash. ,ittle-known to was all perhaps it was hidden inside the very institutions at the heart of the banking sector. none of us knew those guys were all 40 times leveraged. none of us knew that. even the queen of england did not know that. when the queen of england went around, she said i'm a did nobody for see this coming? the queen of england is smarter than most bankers. [laughter] tom: there we go. maybe he is just working on an invite to the wedding there. [laughter] tom: thrilled to have david harding on your physics monday here on "bloomberg surveillance." you need to be briefed in your car coast-to-coast. "bloomberg daybreak." in new york, washington, boston.

also on sirius xm. a briefing in your car. bloomberg radio. ♪ ♪

tom: "bloomberg surveillance" in new york and london. our new studios in london. francine lacqua breaking things in. right near mansion house. david harding with us. wonderful to have the giant of quantitative finance with us from winton group. rupert harrison with us, the giant of -- taking good photos of our new headquarters. rupert, i love your photos out on twitter this morning. there is the volatility and their is physics and then there is the reality.

blackrock has to deal with the quiet in the market. and you going to the meetings and you have all that brainpower, jeff rosenberg, mr. hildebrand and the others, what do you talk about about the quiet in the vix, the quiet of market volatility? rupert: we talk about this a lot. i would caution against the assumption that just because the vix is very low, it must be some sort of instability. if you go back over the long history of this data series, it is a regime-switching model. you get a low volatility regime. in technical terms, david i think would agree that these look past dependent. it does not affect the probability of switching to a high volatility regime. if you dig into what is -- what are the triggers for that switch sometimes, it tends to be based around some kind of external macro volatility. one of the other things we see in the world at the moment, very low volatility in macro data. that tends to be a mid to late

cycle phenomenon. we have this coordinated global recovery. the volatility of the macro data -- until that changes or you get kind of desks some kind of external stimulus you can have low -- some kind of external stimulus, you can have low volatility for a long time. tom: are we looking forward to the regime change of quantitative tightening? thoset become one of outside conditions? rupert: look, it could be. certainly, if you've got an increase in rate volatility, that is at the bottom of the stack in many ways and you could see that propagated through the markets. thinking about the cycle, you normally get volatility starting to pick up when corporate margins get under pressure. you get into that late cycle period when credit spreads start rising, when volatility starts picking up, even when activities can continue -- equities can

continue to do well. activity in late cycle of markets could be trigger for a high volatility regime, but we don't see that yet. francine: david, i want to talk to you about a strategy that winton group specializes in. they seem to be under pressure because of poor performance. can they still be relevant? david: we started out very much as a cta. we are still one of the biggest managers of cta funds in the world. the cta is often synonymous with trend following. that is what we've always done. rather improbably, it's worked for the last 40 years. i say improbably, it was all conventional theories. the market is basically efficient, as you know. in the last 10 years, it has not worked as well as it has done previously. there is more money being put into it. i don't forecast the future returns from the cta trend

following strategy as being as high as they have been in the past, but i don't forecast them necessarily being zero either. in other words, we continue to rely quite heavily on trend following. it is a strategy which has stood the test of time over a long period of time. it does not tend to correlate with other asset classes with long the stock market or long the bond market. .t is not correlated the rational is huge. the demand exceeds the possible supply for winter. francine: 2018 will be better for cta's? david: we certainly make those -- don't make those kind of forecasts. [laughter] managers are always trying to tell you how they are going to do well for the foreseeable future, so i feel like i'm letting you down. we forecast allocating to our

strategy. we don't think it is that good from trend following. that is why we try to use expenditure he -- expanditory variables, what other people would call "reasons." not reasons we pull out of a hat. we have no advantage in understanding politics, no advantage in understanding current economics. as for the long-term relationship between asset returns and things that might affect them, then we might have an advantage. francine: you had to cut fees this year. are you still seeing pressure on them? david: i would not say we had to. we chose to. to cut fees. our fees have been declining over the years. is 0.9%.

our fees have come down over time as the volume has gone up massively. a huge fund manager 30 years ago was $200 million and today, we have $28 billion or something like that. obviously, they are economies of scale. it is fair for us to recognize that. if we make loads of money, we might put our fees back up again. francine: there you go. we will be back with david .arding and rupert harrison rupert harrison a blackrock. david harding of winton group. they both stay with us. if you are a bloomberg customer and we hope you are, go to tv and leave us questions. we will focus on china and emerging markets. this is bloomberg. ♪ erg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. opening our new headquarters in london. chinese shares are resuming

their decline this morning. hit. -- technology companies among the hardest hit. rupert harrison and david winton with us. how does china deal with the debt? it is not going to be an easy task. rupert: if you look at the governor's outgoing comments, they really show that the concerns around debt sustainability leverage have become embedded in the senior ranks of the regime. the president himself now very focused on this. i think people are underestimating the sense to which chinese authorities are determined to get to grips with this issue. they understand it is an existential threat to their development model and the market is underestimating the short-term impact of this tightening is going to have, particularly in the property sector.

we have seen these movements over the last couple days, there are idiosyncratic areas, but also underlying it is this steady tightening of financial conditions in china, which is a very deliberate act by the authority. francine: do you have access to chinese data, david? if you were to crunch the data on china, i guess the returns would be invaluable. david: we have had an office in hong kong are many years. we opened an office in shanghai. we are one of the biggest foreign hedge funds in china. we manage money in chinese markets for chinese citizens. , we don't take money in or out, but we have the biggest hedge fund probably in china, foreign hedge funds. we started 10 years ago, we have built up very slowly. i'm particularly proud of our success there because it has taken me by surprise. tom: david, you have been doing it a while and china can have a hard landing with predictions

come a what to the young turks of the hedge fund business get wrong right now? what is it that drives you nuts when you see guys going out of business? is it concentrated trade? is it putting too much money into one bet? , you know, the thing that is frustrating is when other people claim to be a will to do what we have demonstrated that we have done over 30 years and they claim to be able to do it with no reputation and they claim that there is no skill involved in it. there are people who will sort of simulate our track record and say, "there we are, therefore we can do it." that is kind of annoying because it is giving no credit to the fact that i've been running this sort of business the last 30 years. it is basically saying there is no skill or expertise in what these guys are doing. where were you in 2008? you did not actually make money

in 2008. you are running a structured derivatives desk and then that went wrong and you lost money and now you are doing something else and now you claim you could have done what we did back then. that is the kind of thing that is annoying. one needs to be zen. tom: david harding, thank you so much. greatly appreciate it. with winton group. rupert harrison, thank you so much for stopping by, from blackrock, as well. in her next hour, we begin to look to the fed. julia coronado will join us on the quiet conundrum of the holidays. where is the inflation? i know where the leftover turkey is. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. tom: it is a critical week of the year for republicans. can they, will they get a senate

vote to move tax cuts forward? all eyes on corker, flake come a johnson, -- flake, johnson, and mccain to name a few. ireland's government -- possibly a snap election. if you are lost, you can look to iowa. "time magazine" sold to des s' "better homes & gardens." i don't get it. good morning, everyone. a little bit of media chat. paul sweeney joins us later. speaking of chat, it is all the rage in the food court in london. the photos of our new headquarters are spectacular. francine: it is a beautiful new building. we inaugurate it today with our new studio. it is also stable. the most sustainable office building in the world.

can you see the lights? this is meant to actually reduce our light consumption by 40%. tom: it is beautifully situated, folks. on youromething to see next her to london. the beautiful way it sits on walbrook. next to mansion house. across the street from the iconic state -- saint stephen's church. francine: it is a fun studio to be in, tom. this is the new address. please don't go to the old one. it is now officially shut down. tom: there it is. it is beautiful. i love the brown tones. there is a roman ruin in the basement. we did "surveillance" back then as well. we found some artifacts in the day. -- dig. taylor: germany is edging closer to getting new government. chancellor merkel has begun negotiating with the social democrats over the terms of a

potential partnership. merkel says they would have to support a balanced budget and pro-business policy. british prime minister theresa may has a week to find a compromise on the conflicting brexit demands from the north and south of ireland. the irish prime minister wants assurances that brexit won't mean a return to checkpoints and towers on what will become the eu's frontier with the u.k. political allies in northern ireland say the future of the border can only be decided alongside a final trade deal. a new study underscores just how much the senate tax bill would increase the budget deficit. the congressional budget office says the tax cuts would add $1.4 trillion to the deficit by 2027. republicans are trying to lock up the votes needed to pass the bill and move it to conference with the house. the goal is to get the measure to president trump's desk by the end of the year. wedding bells will be ringing for britain's royal family next spring. prince harry is now engaged to

american actress meghan markle. the announcement came from the office of prince charles. prince harry is fifth in line to the british throne. meghan markle is best known for her role on the legal series "it." -- "suits." i'm taylor riggs, this is bloomberg. tom: taylor, what do i get them for their wedding? do i get them a gift certificate? talk about the couple that has everything. francine come away in on this, please. let's rip up the script. we don't need to talk to julia coronado. what do you think? francine: i think if you look at the receipts, how much the royals have added to the british treasury thanks to the wedding of the duke and duchess of cambridge, i imagine what this couple will do. prince harry is one of the most liked royals and married to an american actress, tom. tom: excuse me. julia, help me here. francine: i'm sure it is a

business angle. tom: would a french actress have been different? an italian actress? francine? [laughter] tom: married to an italian actress. that would be the lock wall -- lacqua house. let's save ourselves and get back on script. we will talk about the stronger euro. it gets my attention. the next screen. the vix well under 10. i would note movement in south africa. ahn this stronger r morning. printing? francine: i'm looking at some of the market moves. european equities are down. dollar slipping with treasuries. oil slipping before opec meets. then the euro, little change.

nudging lower. germany seems to be moving closer to a new government. tom: let's look at a different view of the euro. easy to do on the bloomberg and i might point out. for those of you in a -- with a terminal in your car or near the christmas tree at home, a weaker euro. standard deviations. this is very interesting to see the euro trade weighted with all of its trading partners. francine? francine: this is a fun chart. it is a very simple chart. it is basically how much jeff bezos is worth. this is how much he is worth thanks to black friday. i know we will talk retail in a second. billion.00 he is the only centi-billionaire in the world. this is on the back of black friday. tom: joining us now is julia

coronado, the macro policy perspective. she has been an important voice on weaker economic growth. she has pushed against the optimism way before president trump's optimism on a bigger, buoyant economy. julia, let's look back. it is sort of the end of the year. when you look at all of the enthusiasm, what did those people get wrong that you got so right? julia: this is a recovery that has a lot of structural issues to it that are still with us. high debt levels. to which we are going to add federal debt now. that has restrained the growth potential. that has meant that low rates are probably a feature that is going to be with us for a long time globally. tom: i want to bring in this chart. you know this, julia. this is a real fed funds target rate. down here is the election.

down here is stan fischer speaking to the economic club of new york. we are not even back to the zero inflation-adjusted rate. do you just assume that occurs next year? julia: i mean, it could be delayed. if it is, i would expected to be delayed by inflation, which i just don't see is going to be popping up higher anytime soon. i don't think these are transitory forces. i think they are persistent forces. into wageu link that growth? and consumer prosperity? julia: yes. i think there is a lot of self reinforcement between wage growth and inflation right now. we become very entrenched in this low nominal world. justine: julia, is it flagging? does it pick up? julia: i think there are some cyclical forces. i do expect wage growth to gradually move higher and that puts some cyclical pressure on inflation. but if you look at a lot of the

forces acting on inflation, be they health care, which is a very democratic structural force -- demographic structural force. if you look at technology, global competition am of these are forces that are not cyclical. they are not going to update. will the cyclical forces overwhelm those? i'm more skeptical that that is going to be the driving force. mean for what does it fed policy? do they stay put or go in december? julia: i think they go in december. they have telegraphed that very clearly. i think right now the goal on the fomc is to get closer to a neutral stance, to get that fed funds rate up another hike, another two hikes and then to look around and see, where are we? they have agreed to take time on inflation to see how transitory some of these forces are. by march and june, we are going to know. tom: i want to get to this right now. over the weekend with a raging

debate, do tax cuts -- over the weekend, the raging debate, do tax cuts generate economic growth? do you find that in your research? julia: not really. we already have expensing of investment. the marginal tax rate is not really going to be transformational in terms of investment decisions. it is not going to change the cost of capital dramatically. it does affect valuations. we are seeing that in the market . in terms of the tax liabilities that corporations face. but is it going to change their plans, hiring plans? i think it is going to be relatively muted. tom: very good. julia coronado with us this morning for macro policy perspective. what an interesting week for tax cuts. greg elio published his note. we will get that to you in a moment. an important conversation that we will do here in a bit. tom keene in new york. francine lacqua, i knew studios

in london. this is bloomberg. ♪ ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. magazine publisher meredith has agreed to buy the struggling time incorporated family of publications. the price is $2.8 billion including debt. acquire titles including "time" and "sports illustrated." whens less than a week ago

bitcoin hit the $8,000 mark and now it has blown past $9,000 with no signs of slowing down. more mainstream attention despite warnings of a bubble. it has gained more than 800% this year. a change at the top of julius baer. leaving.ince 2009 is he will be replaced by the deputy ceo. under the previous ceo, julius baer expanded in asia and the region will account for a third of the bank's business in the next five years. that is your bloomberg business flash. tom, francine? francine: thank you so much. the u.k. prime minister has a week to find a solution to the conflicting demands of the north and south of ireland over brexit. they want assurances that there will not be a return to

checkpoints and towers along the new eu land frontier with the u.k. when it leaves the bloc. itresa may's government says can only be settled in tandem with a trade deal. joinsreau chief in dublin us. when will we get order detail? we are hearing from the irish foreign minister that more clarity is needed before we moved to the next phase. >> right now, we add the countries in talk of a possible election. basically, what will happen now is theresa may is caught between a rock and a hard place. you have written guarantees on the border, then you have the dup saying guarantees our artificial and nothing should be done to interfere with the union. theresa may needs to chart a course between those two demands.

the ball on the border issue is in her court at the moment and she has a hard time squaring the circle. francine: ok, so how can she square the circle? any: we have yet to see evidence that she has a plan, but i suppose that there could be two elements of this. if we are going to move forward to phase two in december, we could possibly be looking for some bunch on the guarantee -- to then the guarantee irish government. the second thing would be a rolling veto. in order to move on, ireland could end the process if it is not happy with how the border is being handled at any time. that is a difficult position. i'm not sure that alone, this rolling veto, would be enough. we are probably looking at a rolling veto. i would not underestimate the difficulty facing theresa may to find the solution. tom: i'm sure for a global

audience, there is the mythology of ireland, northern ireland, the history, the terrorism, the peace that came as well. what is the border actually like ? i know it is not checkpoint charlie in berlin or the canadian border up at the st. lawrence the way. what is the border actually like? dara: that is a very good point. the border is not like anything. it is absolutely invisible. as things stand, you can cross into northern ireland and not realize you are moving into a different jurisdiction until you get to northern ireland towns painted see curb stones with union jack colors or you see union jack flags flying. for all purposes, it is invisible at the moment. you can go from one jurisdiction to another without even knowing. tom: yes. dara, how on the same page is dublin with brussels or dublin with chancellor merkel, all of

the different names in europe? is dublin removed or is everybody on the same e.u. page? dara: that is a very good question, tom. at this point, it seems that the eu and ireland are firmly aligned. you can see dublin's handprint in most of the documents. there has been concern in dublin at the u.k. is trying to peel off individual countries, try to tell individual capitals that this irish issue is not important. there are no signs that the solidarity the eu is showing to ireland is fraying. that could change if, for example, we get some progress on the bill, on the border issue being the only one remaining to make progress, then we could see that alliance fraying. at this point, absolutely no sign of that. tom: terrific briefing. dara, thank you so much. with us on the set, julia

coronado, macro policy perspective. i look at this, to bring it over to ireland, the idea of american companies having a good jillion lion dollars over there, does the tax-cut help with economic growth? mostsearch tells me that of the money goes to shareholders. julia: i think most of the money goes to shareholders. this is one of the many political issues that companies have to grapple with. i don't think that that is going to be transformational in terms of where the company sets up its operations or does business. in fact, if you are looking for , is the, low tax havens u.s. still going to be the desired location when you factor in labor costs and other costs of doing business? there are still other alternatives. looking for cheap places to do

the low cost part of your business. tom: while the trade numbers will change, g20 six, madison square garden, u2 darkens the continue with julia coronado. coming up on bloomberg .elevision and radio a conversation on the state of information that you want private. this is bloomberg. ♪ mberg. ♪

economics, finance, investment. this week, you don't have a choice. we do politics, as well. an absolutely critical week for republicans. a combination of senate votes. tuned to bloomberg across all of our platforms, radio, television, our important political team, for coverage of this historic week. certainly for republicans. we say good morning, as well. francine lacqua in our new studios in london. francine will be over at the nickel bar after the show today celebrating with our team, no doubt. with that, they will be looking to cyber monday, black monday, black friday, this monday, that tuesday, that wednesday. julia coronado with us on the state of the consumer in america. i don't know what tuesday is or

wednesday is or thursday is this week. is this all manipulated? does the consumer that point? julia: consumers are fine. consumers are doing well. wage growth is not spectacular, but consumers are feeling good. they are not responding as much to the stock market as they might have in the past, but they are on very solid ground. they are doing great. tom: here's my thing here. i've got to get messages -- here's my thing, this is the new toy. i got the case in the back. the reason i bring this up is i was inundated on the internet because they know what i'm thinking of buying. that is a lot different than you and me picking out a trench coat. julia: the way consumers are shopping is transforming everyday. that is why amazon is doing well. for traffic estimates were down on black friday. black friday does not mean the same thing as it did come in

either the -- as it did, that it is cyber monday. a lot of it is seamless. the way consumers are shopping will continue to change and it is all about the phone in your hand and all the data you are sending them right now. francine: yes, he is buying me my present. julia: that is good. francine: tom needs a bit more time than other people because he needs to get it delivered to london. talk to me about london. how difficult is it for retailers? amazon can be selling, but if they are selling at cheap prices, then you are not getting enough money in. julia: that is absolutely the case. the retail landscape is extremely competitive. we have seen a lot of people go out of business, a lot of traditional retailers, because of the competition and the business model is very much deliver the same good for less, better, more efficiently, faster. it is not the traditional monopoly.

amazon is running the entire world and yet they are not using that market power to raise prices. they are using it to gain more and more and more market share and deliver more for less to the consumer. it is a very difficult margin environment for consumers. i don't expect that to change anytime soon. francine: thank you so much. we will be back with julia coronado. she stays with us. themore stories, pick up latest issue of "bloomberg businessweek." if you are not tired of thanksgiving, we take a look at the food of the apocalypse. it is a really fun issue. this is bloomberg. ♪

this is "bloomberg surveillance." tom, we have a pretty packed show. so far, everything is working

great. let's get straight to the bloomberg first word news. hi, taylor. taylor: it is the biggest online shopping day of the year in the u.s. cyber monday is expected to rise 17% from a year ago to $6.6 billion. online spending during the holiday season is projected to make up more than 11% of total retail sales, the most ever. a federal judge must now decide who's temporarily running the consumer financial protection bureau. the woman who served as deputy to the former director says she should be acting director. she has asked a judge to block president trump from installing the white house budget director mick mulvaney as the interim chief. the longest-serving member of the u.s. house of representatives is stepping down as the top democrat on the judiciary committee. john conyers is being investigated over allegations of sexual misconduct. conyers has denied the claims.

he says he won't resign from congress. est realworld's prici estate market shows no signs of cooling off. hong kong prices have risen 11% as the government is trying to rein in the market. home prices are expected to rise as much as 10% next year. global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: thanks so much. on thanksgiving i was watching football and read 10 articles on the jackson form. this is an inside baseball article which i think is below the radar. center the liberal cpbb, on policy and budget priorities. obscure provision, the bill provides a huge, permanent incentive for corporations to shift profits and even investments offshore, a 12.5%

tax that might be grandfathered. thatkers are signaling many of the scheduled revenue raising provisions of those multinational companies will face -- are gimmicks to limit the bill's apparent cost. this is new wants inside baseball, and it shows you what is beneath the radar. text,e an expert on the who has read cover to cover the bill. i get the end of the week there is a vote. what happens tuesday and wednesday about the inside baseball stuff like we just showed? >> there is going to be a full-court pressure from the white house and from the leadership in the senate to try to get all of these wavering sixtors on board, five or who have not voiced their full support for the tax bill. they have issues about the ones you just raised, the impact on

, budget gimmicks that make it look less expensive than it is. they will try to solve all of those questions before they get to a vote. tom: but other than throwing them on the rack in the dungeon of the tower of trump, they are not going to do that. torture is not going to be used. what is the method for the senior senator from arizona, the senator from tennessee, or those staying including collins and johnson? >> well, the message for some is a political message, basically saying you have not gotten any major legislation done all year, so it is do or die. for some of the jayhawks, the message is all you have to do is get .4% in additional gdp growth, and this pays for itself. they are making the argument that if you get closer to the average gdp growth of the last 50 years, you will be able to pay for all the cost of this tax bill. they are trying to push that

message through and say this is not as expensive as it looks. it will spark the kind of growth we haven't had for the last decade, and that will make it more fiscally conservative than it looks on paper. francine: do you think the president will have a finalized tax plan on his desk before the end of the year? >> it is going to be very hard for them to thread the needle. you have a lot of various issues they have to deal with before the end of the year, including passing a budget and taking care of the dreamers issue. it may be something that pushes into early 2018, but that political pressure is very strong, to get something on the board by the end of the year, and that may be enough to get it done before christmas. tom: thank you so much. right now, out of ohio, we are joined by the man who writes hyper-minutia things, we can blame all of tarp on him.

remember the uproar over tarp? and that was 10 weeks after tarp occurred. are we going to have the same then happen with tax cuts, seven weeks later we will wake up to the ramifications? >> yeah, i think there is something to be said for the concept of selling the news once they do get a deal done, because this deal, i truly believe, will get done. it will bleed into next year but there will be a tax bill. your point is one that is worth highlighting. there is no one in d.c. who fully understands all the ramifications, all the details, on the minutia in these tax packages, and this is what happens when you move at a breakneck speed to overhaul -- tom: you nailed it. on a bipartisan basis, why would the polling i saw over the turkey,with my leftover when i was putting down the cold turkey sandwich, everybody hates

chris thing. why can't they slow down? >> d.c. is people and process. the people of the gop congressional leaders who want the win, and the process is the budget reconciliation deal. if you put those together, i think that is a part of the story. the other part is the senate race in alabama. there's a race on december 12 with former judge roy moore, and i think there is real fear on the republican side that either they will have judge roy moore in that see who could be expelled, or the democratic candidate doug jones, who would be an unreliable vote for republicans on tax issue. so i think you take the normal political issues that dominate the city and add into the mix the alabama senate race. isaac, when you say there is a 65% chance this gets

done either by the end of the year or the first quarter of next year, what happens to the other 35%? does it actually hurt gdp, because people are pricing in and expecting it? >> yeah, i think there is, at least from our client conversation, a degree of optimism being priced in. really, in particular, we are talking about smaller banks who would be key beneficiaries. i think there would absolutely be disappointed in the market if something does not materialize. amountaution that a fair of our institutional clients are worried that this is likely to lead into next year, and they can make all those changes retroactive if necessary. i think we really have until most likely april before the market and those of us in d.c. throw in the towel. francine: is there one senator or a couple senators you were looking at to see whether this

can get passed? >> today we went through 10 gop senators who are on or near the bloomberg's think reporting is spot on, in that it is down to the deficit hawks. it'smccain, it's corker, langford. at some point this week, we are going to get a macroeconomic jct report that will hopefully show some degree of growth that will because by this bill. at the end of the day, there are three issues that we will get -- tom: i don't mean to interrupt, but this is so important, what you just said. you are the grizzled pro on this, reading the data because we are too lazy to. have you seen a legitimate study which says there will be this much economic growth over tax cuts, heavily migrating towards the upper 5%? >> no. and i don't know -- tom, all

models are wrong, but some are useful. i think the gct's model will be useful to the congressional gop leadership, because it will show some degree of growth. tom: this has been wonderful. isaac boltansky. there is a guy in the weeds of this legislation. somebody at the fed is doing the same job. how does it adjust fed policy, if chairman powell presumes the glide path to the deficit and the aggregate debts of the nation? currentnk the fed's strategy accommodates this tax bill very easily, which is gradual normalization. they have taken the wait and see approach to the whole trump fiscal possibility, and that has been the right thing to do. tom: agreed. >> even if the bill passes, they don't need to preempt anything. they are on a gradual path of normalization.

if things pick up faster or don't pick up, they can respond accordingly. tom: what is your call on gdp? you can't get to 3% aggregate. >> i've got just below 2% next year. 1.9%?ou're at >> i think the trend is closer to 1.5% in the u.s., and that is factoring in decent productivity. we just don't have population growth. tom: the president is up here. they can do this at the new london studio. the president is up here, you are down here. >> the difference have to be productivity, because i think the president -- i don't know if the president understands that you need population growth to get to 3% gdp, and we don't have a lot, and if you get more restrictive on immigration you will have even less. that is a core building block. if you have little population growth, it requires an absolute explosion in productivity, i am

assuming productivity is around 1%, better than we have seen through most of the recovery. like most people, i am more optimistic going forward than taking the last five years, but to get to 3% on a sustained basis with no population growth? you would need a massive capital we haveg and i think seen better investment numbers. investment looks ok, but we would need something many, many, many quarters of double-digit investment growth. if yougot on twitter, so get a tweet from the president, you know where it came from. really important demographic economic insight there on population growth. francine lacqua in london, our new building, thrilled we are working there. thanks to the team for making the switch's work. coming up, coast-to-coast, radio london as well. the midday briefing for radio

london. ♪

francine: this is "bloomberg surveillance." let's get your bloomberg business flash. taylor: oil is trading near its highest on the even of the big opec meeting. 24% since september on speculation that the cartel will extend production cuts. opec and russia have come up with an outline of an agreement to keep curbs in place for next year.

this could be the biggest ipo and the united arab emirates in 10 years. the abu dhabi national oil company wants to raise as much as $2 billion from the public offering as a fuel retailing unit. the sale would value the unit as much as $10 billion. and cable companies have a new strategy when it comes to streaming video services like ouellette. if you can't beat them, join them. according to people familiar with the matter, comcast and chartered are in talks to offer hulu through set-top boxes. pay-tv companies want to use the streaming service as an existential threat to the business. that's your bloomberg business flash. tom: thank you. you have to grow up with "time" magazine on the coffee table, sneaking reads of it in 10th grade history class as you are bored to understand what the impact was. we each have our own stories about an icon from another time.

now we have the idea that better homes & gardens, or whatever it madmen henrythe louis magazine. it is difficult to believe for 3.8 billion. --l sweeney, do you have digit did out -- from another time and place? "time"ticed that the magazine i saw yesterday was only 60 pages, and they used to be 90, 100 pages. this shows you what has happened to the magazine business. tom: everyone is trying to save the business. they went back to nudge this thing forward. meredith just waited and waited and waited. why now? >> because they got the backing. they got equity funding from the koch brothers to finance the deal. banks were not willing to finance magazine transactions of this size, so they needed

equity. if you are meredith, you are doubling down on the magazine business. it is a bold move, i'd argue risky. the magazine business continues to be in decline in terms of circulation and print. the question is can digital safe it? tom: it was on the airplane, what is the digital strategy when i see "the new yorker," "the atlantic," others scrambling to figure out this calculus? 15%hat they see is a 10% to decline in print advertising, but they also see a double-digit increase in digital ad spending. they have to go smart, and they have to go video. tom: that is just for ad revenue, right? >> it is the fastest-growing part of it. i don't care if you are bloomberg or "time" magazine, you have to put more video on your website. they're going to make a go of it.

tom: taylor just killed it on the business flash with hulu. hulu, but aeople do lot more people do netflix. if you are comcast or chartered, you were trying to make sure you have all the apps your customers need to keep them in your ecosystem. butcher hoops like i did? [laughter] tom: let's go to tv . you can do this at your desk, you can go to tv . you can come over here and look at this smart chart. this is bloomberg. ♪

francine: this is "bloomberg surveillance." coming up shortly, its "bloomberg daybreak: america's" with jonathan ferro and alix steel. alix, i know you are focused on cyber monday and black friday.

alix: aside from baking, all this weekend i was online. we will talk to the person you want to hear from in that shopping environment, the former hudson bay ceo, currently the ceo of storage advisers. he has a good read on what retail is doing and all the debt . you will break it down with him. tom: did you bake lasagna, alix? alix: no! homemade cinnamon rolls! i kneaded the bread from scratch. it was really good. tom: alix steel thank you,. i will be over for leftovers. julia coronado is with us. ise exports, take imports, something change of the financial crisis? we just sort of leveled out on trade. who do you blame it on? >> the whole globalization trend has sort of leveled out a bit.

that was partly china becoming bigger and less low cost producer. tom: is this a worry for the president? is this a question of multilateral seizures or bilateral features? >> i think it is very much at the heart of politics. i think trade and the way that we have lost production was at the very center of his campaign and is still at the center of his policy. we are still renegotiating policy. it is front and center for a lot of companies, it is still very front and center with brexit negotiations and in the united states. are we going to see a breakdown of the global order? it's still quite an important question that is unresolved. francine: thank you so much. were going to radio with julia coronado. i will be joining them shortly.

we must talk about bitcoin, or the royal wedding. but we will talk about bitcoin anyway. $9,600 and the global response to the cryptocurrency has varied but the conversation is largely dominated by security concerns. we discussed this with ed robinson, a bit of a next her when it comes to sin tech. trackn is definitely on to hit $10,000. >> by dinnertime. i think we are seeing that seem mainstreaming, we are getting investors, the number of coin-based accounts, digital wallets, has multiplied by thousands in the last three months on a daily basis. you are seeing a lot of newcomers in the market saying i've got to get some of this bitcoin and that has to be what

is driving the price. francine: how to put this delicately, paul donovan of ubs butng it can go up and up it is just going to be many more cryptocurrencies. automatically it will be tough. >> yes. bitcoin accounts for about half of the $300 billion market cap of all cryptocurrencies right now. it is attracting a lot of investors but let's not forget thanbitcoin was at less $3000 just in september. at this time next week we could be talking about how bitcoin is below six. know, thatt we don't is so volatile. >> how do you do your reporting? can you think there is something innovative? >> it is hard to look at fundamentals inside crypto, it's

all this momentum and psychology play. it is becoming so expensive and there is so much electricity having to be committed to new bitcoin transactions that that is the metric you have to look at in terms of how sustainable it is going forward. francine: ed robinson. at, is what we are looking markets are a little bit shy. we just saw a reversal on european trade, and i am looking and a lot of the focus is on tax reform in the u.s. and whether we will get it -- is it a potential market catalyst? we will discuss that next. this is bloomberg. ♪ is this a phone?

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another make or break week in d.c. for the republican effort to push through tax cuts. the political standoff in germany, as the social democrats haggle over terms. and bitcoin rallies to another all-time high. the cryptocurrency has a tenfold surge, sprinting seemingly towards $10,000. from new york city, to our audience worldwide, good morning, this is "bloomberg daybreak." i'm alongside david westin and alix steel. let's look through the market action. .10%es are firmer, up after closing friday at an all-time high, the best week of gains so far in november. the dollar is just a little bit at 1.1938. we stay the yield curve just a little bit flatter by around the basis point. 2.35 on the tenure. alix: you are looking at 58 basi