s "show me..." ♪ experience nbcuniversal's coverage of the olympic winter games like never before with xfinity. proud partner of team usa. ♪ >> coming up on "bloomberg best," the stories that shaped the week in business around the world. the white house puts out an a -- put up a budget on infrastructure, but push back. >> i hate to say it, but it is irrelevant. >> markets work through jitters as inflation jumped. jacob zuma gives up his grip on power. ray dalio raises his short bets against european stocks. >> all the conditions are in place for shorts, a countercyclical view. >> market swings have some investors frowning but two of the biggest names in banking explain why volatility is making them smile. >> it is a much better

environment for our clients. >> while some of the sharpest minds in finance and investing share their insight. >> one diversifies, re-balances. >> what should happen at the end of the day? not hour to hour. >> asia will be one of our growth engines. >> the growth is well spread over all the categories. >> it is all straight ahead on "bloomberg best." ♪ >> hello and welcome. i am nejra cehic. this is "bloomberg best." your weekly review of analysis

and interviews from bloomberg television around the world. on monday, equities coming off their worst week in two years, president trump made two major announcements, unveiling his 2019 and unveiling and infrastructure plan. ♪ >> president trump seeing his 2019 budget proposal cutting $1 trillion from entitlement programs like medicare. is there anything that will emerge from this proposal? >> every budget is dead on arrival on capitol hill. the president proposes, congress disposes. he wants $23 billion for border security, $18 billion for the wall. republicans will push the for -- will try to push that. the budget calls for cutting medicare, $237 million and $1.7

trillion in entitlement spending cuts. those will not be adopted. >> it is irrelevant as the omb has said because it does not incorporate the agreement signed into law just last week, so they are going to have to come up with brand-new numbers during the next 4-5 weeks. very little of this will see the light of day, except for the defense increases. nejra: after campaigning on a promise to rebuild america, president trump released his infrastructure plan, pledging at least $1.5 trillion in new investment. the president called the proposal bipartisan and common sense, but it is still looking like a tough sell. >> it is tough to say how they get infrastructure done ahead of midterm elections. this has even alluded democrats and republicans. it is something they say they want, but they have yet to reach their goals on this. >> it is looking to make a

permanent fix to what it sees as a broken system for funding and building infrastructure in the united states. they think there has been an overreliance on federal funding and that states and localities need to find more of their own revenue sources. the permitting process takes way too long and prevents projects from getting built. >> the world's largest hedge fund led by ray dalio has disclosed a $682 million short bet against unilever. the stock has dropped after the disclosure of these wagers.

>> we had these that's against an italian banks that seemed very specific. as you said, we have been seeing this large buildup quietly building up against european companies, unilever, adidas, total, across industries, but one thing to keep in mind is that when you look at these shorts, at least at the very largest companies, this is a re-creation of the european index. these positions are built on the larger the company, the bigger the weight in the index, the larger short position they are expressing. >> u.s. consumer prices rising more than estimated in january, adding fuel potentially to the fed's fire. >> it is clear inflation is moving higher, especially the last six months. inflation is moving at 2.6% per year. january is a month where you get upside surprises at the discounts we saw. i would not read too much into one print, but there is a clear acceleration in inflation, and people should start rethinking traditional relationships between stocks, bonds, whether they should have real assets.

there should be a big rethink in markets. >> the data today is largely in line with what the fed has been hoping for. if anything, it takes in that 75 basis points people are looking for the year. that is what traders are saying. they are bringing themselves up to the three quarter-point rate hikes for the year. you are not seeing any real panic. david: south africa is changing leadership after jacob zuma who has ruled the country for nine years had resigned effective immediately. parliament is meeting to elect an interim president and tell elections are held next year. >> jacob zuma resigned, this coming from the ranks of the ruling anc. many members of the ruling anc say they want their president to really come in and steer

government into a new direction. we know president zuma's tenure was marred with allegations of corruption and scandal. the ruling party wanted to regain some support it lost ahead of the 2019 elections. roma. 2019 elections. he will be sworn in today as the new interim president of the republic of south africa. >> it is a new era in south africa. there is a huge amount of confidence and hope about where south africa is headed with a decade ahead that will look unlike the decade we have been through. >> have bet against some of europe's largest companies has run to $18 billion at bridgewater. >> one of the rationales i have heard around this is that all the conditions are in place to start getting short. it is a countercyclical view. we have growth on all cylinders,

so perhaps that is the rationale, and that makes sense. >> the senate hitting a wall in the search for 60 votes, failing to advance any immigration plan today. >> the motion is not agreed to. >> i think president trump is the key to getting anything signed. the sweet spot in the senate seems to be as we have seen with these other proposals a daca six combined with border security. the reason these failed is that president trump wanted additional cuts to family-based immigration that democrats were not willing to give. we are stock. >> robert mueller and diving an announcement of an indictment. >> the defendants conducted what they called information warfare

against the united states with the stated goal of spreading distrust towards the candidates and the political system in general. >> i was truly expecting mueller to do something like russian collusion, and he delivered on a grand scale with incredible details that go beyond the social media efforts to defy this country. it talks about unwitting members of the trump campaign were approached. it points to something that may go beyond this indictment. there are references in here to a conspiracy with people known to the grand jury and unknown to us involved in this effort. we don't think it ends here. nejra: still ahead as we review the week on "bloomberg best," insights into market swings with lloyd blankfein, steve schwarzman, and others, plus a barrage of earnings reports. up next, the week's top business

headlines. this may be the moment when diplomacy became an olympic sport. >> clearly whatever the charm offensive or propaganda machine they instituted over the olympics, it has worked. nejra: this is bloomberg. ♪

nejra: this is "bloomberg best." i am nejra cehic. let's continue our global tour of the week's most important business stories at america's largest private equity group. >> another management takeover on wall street, blackstone, naming john gray as chief operating officer. tony james will transition to another full-time role as executive vice chairman.

>> this has been one of the worst kept secrets in the world of private equity. john gray has long and considered the likely successor to tony james, and the founder and ceo of blackstone. gray has distinguished himself as one of the world's leading real estate investors, so this completes the puzzle for the private equity business as an industry transitions to a new generation of leadership. >> barclays has said the serious fraud office has brought charges against its barclays bank operating unit in a case linked to a 2008 fundraising at the peak of the financial crisis. we thought barclays had faced charges on this. explain the second leg we are seeing here. >> in june, the serious fraud office in the u.k. charge the

holding company and four of its top executives, including the former ceo, so what has come up now is that the operating company here is being charged as well. all banks receive their operating licenses based off the operating units, so that is why people really care about what is happening to the operating company here. >> on to the fight, comcast mulling another bid after its initial offer was turned down for a deal with disney. >> if comcast wants to come back him a they will be a credible bidder. i think rupert murdoch and 20th -- 21st century fox people prefer the disney deal. one, they believe it has less regulatory risks than a comcast deal. comcast is not the most well loved company in washington,

d.c. i think rupert murdoch prefers to own disney shares. he and his family will be the largest owner of the walt disney company, and i think he likes that position better than comcast. >> north korean leader kim jong un has invited south korean president moon jae-in to meet, a dramatic gesture that may raise prospects for easing tensions on the korean peninsula. the invitation was delivered by kim's sister. will the charm offensive work? >> i think it has. considering that there are calls for talks with kim jong-un. clearly the local media here was all over her visit. she overshadowed the olympics. forget about the opening ceremony. a few hours ago, vice president pence in an interview said the

u.s. is willing to engage in talks with north korea without the precondition there were before, that the u.s. would not talk with north korea until they have started dismantling their nuclear weapons program. clearly what ever the charm offensive or propaganda machine they instituted over the olympics, it has worked in a practical sense because there is diplomacy now. >> a record bet on i.t. that could shake up the defense industry. general dynamics has agreed to buy csra for $6.8 billion, the largest ever acquisition as it looks to expand its i.t. offerings. >> csra has a footprint in dod, homeland security and other federal agencies. gd has some in those agencies,

but it is concentrated in the defense sector. the other thing that may be going on is the federal government is about to announce a huge cloud contract. this could be $10 billion for 10 years and it may be is looking to position itself to get that. >> there is an important story around economic growth in japan. it slowed sharply in the fourth quarter, expansion just 0.5% for the previous three months, half of the 1% estimated, and down from 2.2% growth in the third quarter. where does that leave the boj? >> even with the conditions and the labor market as tight as it is, they are nowhere near their inflation target. i think all the indications are that they will stick to the course.

don't forget, we have the expected appointment of governor kuroda coming up, which is expected to serve as a double down, and no sign it will change materially anytime soon. manus: shinzo abe nominated governor kuroda to beat the boj for another five-year term. abe also appointed to deputy -- two deputy governors. >> we should see monetary stimulus continue aggressively for at least the next few months. we have another meeting in march. nobody expects any change. there will be a great deal of interest in april with the first meeting with the new leadership in place with the two deputies alongside governor kuroda. perhaps moving into this new term will give him a chance to rethink, recalibrate, and we will be watching with a lot of interest, especially the april meeting.

♪ >> the cleveland fed president is said to be among the contenders for vice chair. you have a fresh fed chair. would it be best to surround him with established figures to be able to guide him through the first year? >> i think loretta is an excellent person and would be a good choice. she has been in the federal reserve system for some time and knows the system well, so i think that it is a good power duo. >> the tories began their roadmap to brexit in a series of public speeches outlining hughes on how britain should leave the eu. boris johnson gave the inaugural address entitled "a united kingdom" attempting to reach

out. >> a few things became clear, he might still be interested in the job of prime minister. on the transition, he says everything can stay as it is. he does have red lines. he wants divergence. -- >> some of the biggest fund managers in the u.s. are reporting what they bought as well as sold last quarter in their 13f filings. >> the fangs have been souring. >> it looks like investors are slowly selling out of the fangs, and this has been an important area for stock pickers because they have lamented the rise in growth stocks, while value has meandered higher with the stock market.

we saw a lot of managers sell out of some of their fang holdings. >> warren buffett has just about had it with ibm. it cut its stake in the company by 94% in the fourth quarter. >> we don't know to what extent it is warren buffett, his investing deputies, but you saw in this quarter he boosted his apple stake while reducing ibm. it raises the question of may be warren buffett is trying to figure out how the world is changing as he is adjusting his businesses. >> he is adjusting towards teva as well. >> that was the first time we had seen that stake is closed. you are wondering if he is betting on his turnaround or there are other things drawing him in.

>> no deal, qualcomm rejected broadcom's latest offer to buy the company for $82 a share saying "it materially undervalues the company." >> it depends on how firm the last and final is. this is old-school negotiation. if you look at what qualcomm and broadcom are saying is that it is interested in keeping its business together and feels $82 a share is unequivocally low. broadcom on the other hand believes this stock is trading at $65, earnings week, this will be a long, drawnout process. qualcomm investors, take your money and run. ♪

♪

nejra: you are watching "bloomberg best." david westin spoke with lloyd blankfein in washington, dc and discussed the sudden return of volatility to markets and what it has meant for the trading business. >> things are going to happen. there will be something that happens in the world the world. someone will get elected that should not happen. there will be a natural disaster. something will happen that will cause the relationships of one asset to another to readjust against each other. it has been unusual that that has not happened. people are not sure the reason why. my own best guess is that when i look to assets people will say

that because of qe and central banks around the world buying risky assets, as much as they could get almost as fast as debt was issued, they bought them, that tends to be a blanket over spikes in asset prices and that probably kept things low. as the market and people anticipate that coming off, i think we will see more volatility. >> this is your job. contingency, you are planning for the possibility. is it fair to infer that goldman is doing pretty well right now in trading, commodities, fixed income given what has happened with volatility? the problem with trading was a lack of volatility. >> this is a much better environment. look, we sell insurance to people. we take risk away from each other. if there had not been a hurricane on the east coast for years, people stopped buying insurance, and those that buy insurance don't want to pay a lot. if you have four hurricanes, the next year everybody buys insurance and pays whatever we

ask them to pay. not that the risks have changed that much, but their sentiment and anxiety has changed so it is a better environment for our client franchise, and the answer is a better environment on any given day we could be positioned wrong and have to position inventory based on the best guess as to what our clients will want the next day, week, or month, so it may not work right every day, but the environment is good and gives us a chance and makes this valuable to our -- makes us liable -- makes us valuable to our clients. >> coming up, another view on volatility from the head of another leading investment bank, the credit suisse ceo. and, how much do computers have to do with sharp selloffs in the markets? >> did they cause the selloff? no. are they a part of the volume

going through the market? yes, absolutely. nejra: this is bloomberg. ♪

♪ >> how worried are you about how the brexit negotiations are going at this point? what is your biggest concern? >> i have been an open book as far as brexit is concerned. i felt it was a disaster for the u.k. and sad for europe. i believe now that it is becoming clearer what a disaster brexit is going to be. and it is the very people that voted for brexit out in the rural areas of britain that the latest research has shown will

be hardest hit by brexit. i am still hopeful that when all of the facts are on the table in front of the house of commons that people realize how damaging it is going to be for great britain. that britain does what ireland did and they change their mind at the last minute. nejra: that was richard branson expecting his hopes that the u.k. can reverse its exit course in a conversation at the goldman sachs 10,000 businesses summit. -- 10,000 small businesses summit. another european business leader sat down with bloomberg this week. the credit suisse ceo tidjane thiam saw that market volatility would give the bottom line a boost. -- >> -- two jean:

volatility means that people see it as a negative. it creates opportunity. but the people we work for will see that as a key part of the strategy and that it is really working. they understand markets. and recognize volatility as a part of trade. we are increasing our trade revenues. if you take asset management -- 16 billion euros -- two thirds of that come from our national connections. >> are there people saying they

do not want to transact at the moment? >> we see a lot of activity in the secondary market. but the primary market issuers are reluctant to issue volatility. things seem to be settling down now. we do not believe that what we have seen is a major disruption. the correction was on unwinnable in-- was unavoidable equities. investment grade -- has held up very well. you have not seen a contagion which means the fundamental economy is healthy. unemployment is at a historic low. company earnings are going up. we do not see a downside scenario in this economy. >> did you expect a contagion? >> we believe credit markets will hold because the economy,

the underlying economy is so strong. there is no prospect of defaults. you do not see any indications of such negative developments. nejra: our conversations about market volatility brought out quite a range of opinion. let us start with jason kelly's interview with stephen schwarzman. >> is this volatility we have been seeing normal? is it a new normal? >> i think it is like pretty normal. if you look at the world -- the developed world will probably grow around 3% this year. i could be wrong. it could be 3.25 or less. the stock market was up about 7.5%-8%. one month. multiply that by 12 months. what do you get? stock market performance if you

annualized that somewhere in the 80%-90% with 3% growth and that is simply ridiculous. you had to stop that kind of compounding or else you have almost a whole year's performance in one month. what is going to happen in that scenario? it has got to go down. and then it will go up and then down. it will be a more volatile world. i look at what should happen at the end of the day. not hour to hour. i think with the economy looking so good around the world, that we will have an up year. they cannot be hugely up because we already did huge last year. >> do you think more dealmaking or less in terms of private equities?

>> generally, you have more deals when markets feel good and people are confident in prospects for their own business. you seldom buy someone else's business if your business is having trouble. as business confidence remains high, you will probably see more activity. >> people are playing a psychological game. it is not just patterns of earnings. they wonder when other people will sell. that is hard to model or predict. what you do as an investor? diversify, and stay away from faddish things. >> you did not really want to own treasuries because they cap selling off. same with gold. utilities were hit because of higher yields.

if you need to rebalance, how do you do that? >> you will rebalance across sectors, stocks, and countries. the u.s. has been recently the most expensive stock market in the world. and i think that is not a reason to avoid the u.s. but i think it is very much time to consider whether your investments in u.s. stocks have become overbalanced. >> last week, the default response from so many people before even looking at the numbers and the data was blame the machines. why can we not blame the machines on the actions of last week? >> was there selling by ctas last week? absolutely. they came in long risk.

that was the wrong positioning last week. were they doing some reshuffling of positions? yes. did they cause the selloff? no. >> did the narrative exacerbate the selloff? >> the answer is if you buy when markets are going down, you decrease the selloff. why wouldn't you sell positions when the market moves? they are not doing it indiscriminately. the same as humans would do it. i would say history does not

tell you that buying dips is the right answer. when volatility in the market increases, you should run less positions. when volatility is low, you can run bigger positions. it is about taking the same amount of risk all of the time. >> some of what happened last week was related to volatility funds being overly aggressive. i think there is more of a regime change going on. from monetary stimulus to fiscal stimulus. we think that ultimately will transcend and go global. >> we were talking to steve schwarzman earlier this morning and he said this level of volatility feels pretty normal. do you agree or is this an aberration? >> i agree that you have more volatility in the equity market. what is changing is you are losing the cover of the federal reserve. we have had the fed protecting us for quite some time and now they are clearly changing interest-rate policy. we have not seen that in europe. in japan, we had the opposite where they are still very accommodative. i have a slight difference in

that there is a shift in monetary policy leading to more volatility. we are seeing it in interest rates right now, not necessarily in credit. that makes sense. this is more about changing the rate than the conditions of corporates around the world. a lower tax rate in the u.s. probably makes corporate profits stronger this year. ♪

♪ nejra: you're watching "bloomberg best." i am nejra cehic. it has been another whirlwind week. a roundup of results starts with -- >> nestle posted full-year sales that rose to the slowest pace in more than two decades. revenue was up 2.4%. the swiss food company was

aiming for a 2%-4% increase this year. >> all categories contributed to growth. we expect the same thing to happen this year. it is one of the strongholds of nestle. that will remain the same. within that framework, geographically speaking, asia will be one of the growth engines. and we have categories such as coffee and pet care. the water business should also recover. >> is this going to be still challenging in 2018 in terms of a pricing environment? >> both volume and pricing we were somewhat soft last year. we are optimistic in terms of 2018 and beyond. >> credit suisse shares trading at more than 3% higher.

the market swings in the past week have a negative impact on the advisory unit of the bank but he could not be more pleased in the performance of the trading businesses. >> the start of the year has been very strong. global market revenue is up 10%. q1 last year was very strong for us. more than 10% on a very strong quarter. >> front -- posted a fourth quarter revenue that beat estimates. fueled by trump's tax cuts. especially in the u.s. the lender reported a 7% trading decline in terms of equity and fixed income. smaller compared to the drop of some of its european ears -- peers.

how do you describe the first few weeks of 2018? >> compared to what they were at the end of 2017, we say that volatility wise, one of the reasons for the slowness and the return of volatility is because of the opportunity for banks like ourselves to help our clients. we see very good activity since the beginning of the year. >> -- saw a better than expected increase for 2017. the swiss asset manager saw inflows of almost 6 billion francs beating estimates. the results -- one part of your business in particular -- what has been driving that? >> clearly, the demand for a strong risk oversight product that can navigate an environment where everyone is afraid of

rising interest rates. we delivered. stable, foreseeable pattern in an environment that becomes ever more choppy. >> let us get straight on to airbus and shares there have jumped the most in almost six years after the company promised an earnings growth of 20% in the current year. this comes despite engine issues slowing the production and a charge against its military transport plane. >> we found out last week about the latest problem with the whitney, do you have the visibility to have confidence in those targets? >> yes, you are right. the guidance we have given the market in 2018 is dependent on amongst other things, that our engine partners deliver the requisite engines. but that was not different in

2017. we have had more problems with the new engine -- very fuel efficient engines. bright side. yes, there is a new glitch that was discovered roughly a week ago. we are assessing the implications. this happens early in the year and i am quite confident that we can work through this and recover whatever needs to be recovered in terms of deliveries throughout the year. >> cisco surging to its highest level in more than 17 years following stronger than expected earnings including its first revenue increase following the one-time charge. the company is revealing some big plans increasing its dividend by 14% and a $25 billion stock buyback. >> we are not a capital intensive business. we had said the three areas that

we would focus on as we got tax reform would be to reduce our share count through the buyback which you saw us announce yesterday as well as continue our capital strategies of returning cash to our shareholders. we increased our dividend yesterday by 14% and we also left ourselves plenty of dry powder for ongoing m&a activity that lines up with our strategies. >> heineken is the world's second-largest brewer. it has reported and adjusted output that beat analysts' expectations. this year, it will be below target after integrating a resilient business. is this the case where you will try to invest a lot, expand the business, take market share away from the number one contender in brazil? >> the acquisition in brazil is putting our strategy into action.

winning in the premium segment which we have been doing in brazil with the heineken brand. and then, if we want to play with a full portfolio, having a number one or a strong number two position in the market. together, now, we are covering the full gamut and we are ready to deploy the next aj. >> let us have a look at shares of rising. we were up 3%. 2.6% now. competition is starting to head to a lot of the prices across most of these contracts. you have contained your guidance. the math tells me we should expect a slight moderation in your earnings. >> i am going to talk about earnings over the full 12 month

period. the earnings guidance range is sound. and we recognize some of the things that we have to implement as part of the regulators' decision will cost a few million pounds as well. >> rising 50% in the third -- the profit rose 52% in the third quarter beating estimates earnings. the company is going ahead with its corporate transformation program. are you sitting with the previous timeline? give us an update. >> i can confirm that. at the end of last year, we could not reach an agreement with our union. having said that, what we are still working on is the due diligence and on the other side,

agreements with the unions and workers representatives. those need to happen to come to a signing. we will stick to the timeline. signing early 2018 and closing expected by the end of 2018. >> guccis all comparable sales rise 43% in the third quarter of 2017. >> it is spread across all of the categories and all of the geographies and over all of the clienteles. it is very strong. what we have put in place in terms of supply chains will help us compete on production. without any lack of being demanding for quality. this is all in place. it is very efficient growth. i am not concerned that we will be able to continue at that momentum of 44%. >> could gucci become bigger in

terms of sales? >> i hope. why not? >> acceleration in the cloud. demand for digital and cloud services show growth in the fourth quarter. business seems to be ok. what do you think the biggest risks are in the next 12 months? >> i would underline that in the fourth quarter we accelerated growth, notably in the u.s. the u.s. was the weak point at the end of 2016. now, we have fully accomplished growth there. we ended in the fourth quarter with more than 20% growth. for us, digital is the engine. and it now accounts for 40% as you just said. when you speak of risk, maybe

protection is something we should be talking about for a while. ♪ ♪

♪ >> i have got inspiration this morning. this is your 3-d yield curve. what you have, if i turn this around is the -- off the curve. nejra: there are about 30,000 functions on the bloomberg. we enjoy showing you our favorite functions. here is another one you may find useful. quic go. quicll lead you to our takes. here is a quic takes from this week. >> there is a global trend taking place. a lower percentage of people are smoking cigarettes. this has forced tobacco

companies to create products that can keep them profitable. there answer may come in the form of an increasingly popular alternative to smoking. vaping. does that come with its own set of issues? a chinese pharmacist and smoker developed the e-cigarette in 2003. the device uses no tobacco at all. a battery heats nicotine liquid. there is another product. they are said to have a taste and nicotine boost comparable to a traditional cigarette. a boost that is better than an e-cigarette. there is no smoke or tar. the u.s. food and drug administration admitted in 2017 -- essentially embracing vaping. the market is estimated at $7 billion a year and growing rapidly.

here is the argument. some help groups believe that this will help kids start smoking cigarettes. the u.s. government survey -- however, the rise was counterbalanced by a drop in usage of traditional tobacco products. according to a 2013 survey, vaping may help smokers trying to quit. however, a 2015 independent review of the evidence concluded that vaping is 95% less harmful than smoking. it may be the breath of fresh air that smokers have been looking for. nejra: that was just one of the many quic takes you can find on bloomberg. you can also find them on bloomberg.com along with all of the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. thank you for watching.

i am nejra cehic. this is bloomberg. ♪ retail.

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>> welcome to bloomberg businessweek. julia: we are inside the magazine headquarters in new york. this week's issue -- a new model for the u.s. health care system. marvel unleashes the black panther at the box office. that is ahead on bloomberg businessweek. ♪ carol: we are here at the editor in chief's office