Skip to main content

tv   Bloomberg Go  Bloomberg  September 27, 2016 7:00am-10:01am EDT

7:00 am
mrs. clinton: i have a feeling by the end of the evening i will be blamed for everything that has ever happened. mr. trump: why not? mrs. clinton: just join the debate by saying more crazy things. >> hillary clinton and donald trump trade jabs over trade. the u.s. economy and foreign policy in their first face-to-face debate. reboundsxican peso from a record low, a sign investors see hillary clinton as the winner of the first debate. x: oil lower after iran says it is not willing to freeze output at current levels. jonathan: i am jonathan ferro alix >> there was a lot of drama, i must say. you had to appointing --
7:01 am
opposing forces in the market. the young moving higher. still a lot of issues in europe. deutsche bank getting hammered again. jonathan: are they really going to use the mexican peso as the proxy for who won the debate? >> there will be holes coming out. don't worry. alix: we will have guests break it down through the program. we are looking at former u.k. chancellor of exchequer george osborne. he will be joining us in his first tv interview since leaving government. it is a bloomberg exclusive. will join usrack for the full hour. and before the u.s. open, a discussion of all things election. a little bit risk on, a little bit risk off. jonathan: we are up about a third of 1%.
7:02 am
0.8%.x down by record close for deutsche bank. -3% on the session so far. the ftse 100 in london also soft. we talk about the peso in just a moment. abouter dollar, down by 0.25%. in the bond market, look at the front end of the yield curve. we are about three basis points away from an all-time yield -- all-time low on yields. as for opec, check this out quickly. look at this in the market. iran turns up to the meeting in algiers and says, we are not here. we are not here to make a deal on anything. alix: it feels like a redux of what happened in april. here is the proxy if you want to look at how markets are
7:03 am
interpreting the debate last night. here is the dollar mexican peso. the dollar takes a nosedive as the event happened. you have it up by over 1%. there are a couple of reasons you would use the mexican peso as a proxy for politics. rhetorictrumped particularly slow. this is a high beta emerging market currency. the peso is going to be one of the first to be felt. in terms of the relationship between the u.s. and mexico, the u.s. was responsible for 40% of the foreign direct investment into mexico, so any paring back of that would have a detrimental mexico's growth and trade deficit. that is why this currency pair can be so important. -- thesince the debate entire world was waiting and watching. the numbers are not in, but most
7:04 am
suspect it will be a record audience that tuned in. we saw a sharp contrast between the candidates at hofstra university. at times, it evolved into accusations and blame on everything from race to foreign policy. mr. trump: president obama and secretary clinton created a vacuum the way they got out of iraq, because they should not have been in, but once they got in, the way they got out was a disaster, and isis was formed. mrs. clinton: donald supported the invasion of iraq. mr. trump: wrong. wrong. mrs. clinton: that has been proved over and over again. but the larger point -- he does this constantly -- is george w. bush made the agreement about when american troops would leave iraq. not barack obama. the african-american community has been let down by our politicians. ,hey talk around election time and after the election, they said, see you in four years.
7:05 am
they have been abused and used in order to get votes. mrs. clinton: it is really unfortunate that he paints such a dire negative picture of black communities in our country. mr. trump: she does not have the look. she does not have the stamina. i said she does not have the stamina. and i do not believe she does have the stamina. mrs. clinton: this is a man who has called women pay, slobs, and dogs, and someone who has said pregnancy is an inconvenience to employers, who has said women do not deserve equal pay unless they do as good a job as men. for more, let's bring in washington bureau chief megan murphy. give us a sense of what you saw in these candidates. megan: you saw a battle of preparedness. that really came through. hillary clinton came through as having really done her homework. we know she did. we know how much she mock debated.
7:06 am
we know how concerned she was about not making a mistake that could derail her candidacy. for donald trump, i think his campaign will be disappointed in his performance because he did come across as unprepared on key issues. and there were moments in that debate where he had a chance to score points and instead he took the bait. he got riled up by her and was not able to respond to that challenge. about women -- that will stick in a lot of voters minds. had firedonald trump a woman, and she had a name. it was a powerful moment that encapsulated her message of the night, trying to get across who she was as a candidate, and a positive measure -- message of what she would bring to the american people. david: this is critical, because nobody expected hillary clinton to not be prepared. the question was the pathos, the
7:07 am
emotion, the genuine quality. did she get that across? megan: there were moments when she really broke through. trump'sherism and inability to separate himself from the damaging controversy -- last night, he was given a chance to say, i want to move beyond that. i take it back. instead, he fueled the controversy. there was a moment she said quite a multiply to the camera, "i know how hard president barack obama took this. i know how deeply personal, deeply insulting it felt to him as the first black president." it is a moment that people remember when they are evaluating the candidates not just on where they stand on jobs, but what they are going to bring the american people. the remarkable question was if donald trump could do this at all. he had never had a one-on-one debate for 90 minutes. he got through with no major gaps.
7:08 am
in the first half hour, he seemed disciplined, focused. he on some points in that he did not have the huge explosion we are going to replay over and over. i think what his campaign will is, we did not have our greatest performance last night. we have got two more to go. let's see if we can get better. let us see if we can show the american people what we can really do. david: you have been up pretty much all night long. that is megan murphy, washington jural -- bureau chief. he is a friend and supporter of donald trump and has spoken about why he thinks mr. trump should be our next president. is the founder of a big financing firm, but we are going to talk with him about what a trump presidency might look like. the debate last night was a big event. what did you take away from it as a term supporter? tom: i think megan pretty much
7:09 am
nailed it. what i took away was pretty much the same as what we went in with. which is, donald, especially for is normal base-- supported him being the way he is. hillary is terribly accomplished. she is very good. i think she proved it again last night. she is a superb debater. she was incredibly well prepared. she was composed. she did not get riled. she baited him beautifully. but the bottom line is, she has had 26 years to do what it was that she says she would like to do, and he has had no time. at the end of the day, nothing moved. hillary supporters were still for hillary, donald supporters were still for donald. miss a lot of
7:10 am
opportunities, but it is his first time in the saddle. hillary is very qualified. if you like what happened in the last 16 years, it will probably be more of the same. donald is a bit of untested disruption. we have to start diving down into what is that disruption exactly. david: from your point of view, what opportunities did donald miss last night that he might want to pick up in later debates? tom: it is the same message time and time again. what is the purpose of a debate? it is to array differences in issues in candidates. his gigantic advantage is that hillary clinton is a proven commodity who was secretary of state and in the senate. if you go to those facts, it is not really a debate about what is in the future. it is what actually has happened, so parking on that again and again is the key. alix: trump says, look at the tax cuts and the spending that
7:11 am
will pay for the stimulus i want to do. disagreedome out and with that, saying the government would have to borrow can try in .ollars -- $10 trillion have you had conversations with mr. trump about that situation? tom: it is a continuing conversation with economists. alix: they do not have the mind of trump. does not have the detail of the 90,000 pages of tax code that have to be analyzed in an international marketplace that is buoyant. i do not think anybody can say what that is. the bottom line is, monetary policy has not worked. we are at negative interest rates. only you can explain what negative interest rates really are. this policy is going to have to start being enacted. you see that happening in the world. jobs first,f same
7:12 am
manufacturing first, back to america first, stimulus first is going to involve fiscal policy. there is a very low gdp rating today, but if that goes up i $10 trillion, nobody is going to notice. you will send another $3 trillion of debt to china and move on. policy,: on monetary how naive is it to start going off the markets? what i mean is, how naive is it to start talking about replacing the red chair, knowing the possible implications in financial markets when you do that? do you think that is a mistake? i do not think it is a mistake. i think it is a tactic. across the board, a delicate balance between trade and that, and the currency fluctuations. when you look at the peso as a proxy -- it is a message.
7:13 am
the message is time out. we are going to have a stronger discussion on a lot of these issues. america can survive without international trade if it had to. it is a startling consequence to our global partners. i think what trump is saying -- we are going to have a startling consequence unless we bring this to the table. bringing them to the table is an impossible task. 129look at trade, we have commissions. every congressman and senator is their own negotiator for their local constituency manufacturing the glass or the top or the computer. and you have wto. you have thousands and thousands of people. having one statement is an i agree.e task, it is, what do you do to actually move that ball?
7:14 am
i think all of this is a bit of posturing as a businessman to say, we have had several discussions. i am not going to allocate this responsibility so deep into the bowels of a gap that has been in existence. i think the last round has been going for 14 years. ridiculous. david: we replaced it with regional agreements, actually. rack is going to be staying with us, i am delighted to say. jonathan: round one of clinton-trump is in the books. charges and counter charges over trade, the u.s. economy, and more. our guests give their recap and market applications, up next. ♪
7:15 am
7:16 am
7:17 am
onathan: donald trump takes the fed and janet yellen in the first of three presidential debates. doingump: the fed is political by keeping the interest rates at this level. and believe me, the day obama goes off, and he leaves and goes out to the golf worse for the rest of his life to play golf -- when they raise interest rates, you are going to see some very bad things happen, because the fed is not doing their job. the fed is being more political than secretary clinton. jonathan: joining us now is donna peterson, citigroup managing director and economist. i'm also joined by a global head of rates and affect strategy. this reference to the federal reserve -- do we really face the prospect of fed chair janet yellen not getting a second term as the chair? has indicatedmp that potentially janet yellen
7:18 am
would not experience a second term. do we think he would try to oust her in the first year of his term in the last year of her term? most likely not. but we would expect that he would most likely choose a federal chairperson who might potentially handle monetary policy a little bit differently. less usage of unconventional policy tools and more clarity in terms of the policy path. jonathan: i guess rather ironically the fed has become more of a democracy over the last 10 years. it is not the greenspan-volcker fed. it seems to have been a fed that is not led from the front by the fed chair. does that make a material difference if chair yellen did the part and was replaced by someone else, given the federal reserve as it currently stands? that is a great question. we have a lot more downs.
7:19 am
yellen has shown herself to be quite dovish. the members who actually vote has been the core, and the core has been quite dovish. if we still have that complement a very dovish core members in likely the next chairperson would have to contend with that and find some balance between the hawks. we see with a lot of the commentary from fed officials weeks, youst few still have the dovish members who are concerned about the economy, but it seems like yellen is starting to acquiesce a little too the hawks, who want to see at least one rate hike this year. alix: when you look at the fed for 2017, they will likely have to preside over some kind of recession. where is the rift in the market, as you have a presidential candidate talking so politically about the fed, looking down the road?
7:20 am
is not an easy question for the fed. i do not think mr. trump is helping the fed at all in terms of winning credibility. at the point where already the fed was challenged, because of all the imbalances that we see in that week recovery -- weak recovery, income distribution in particular, that is not helpful. that being said, this is a topic for 2018. for now, the fed in 2017 will still be run by ms. yellen. i do not think the market implication would be dramatic. i do not think she would change the way she runs monetary policy just because of that political pressure. what we get with mr. trump, if he wins eventually, is probably a more proactive fiscal policy ly implies aal
7:21 am
higher fed policy. jonathan: i will to the fiscal policy. i want to pick up on something. why isn't this a 2016 issue, given that we have a meeting in november just or the election? does that put pressure on them to say it does matter? vincent: i am not sure. i think really the fed will try to stay away from that political pressure and political debate. ms. yellen, i think, has been very clear the fed does not have a political agenda and is going to do what it has to do to keep rates low and try to get inflation higher. that weit is unlikely will get anything from the fed before the election. a live not likely to be meeting.
7:22 am
david, it is that issue of monetary policy and this delicate balance with fiscal policy as well, and trying to communicate that what you really want to see is a articulating it in a way where you do not mess around with markets. that is the risk i think donald trump runs right now. david: it is a very delicate balance. everyone is going to have a problem, every country. i want to pick up on what vincent said in terms of tom barrack. apart from who is running the or, don't donald trump's post policies on taxation and trade mean there will have to be increases in interest rates? are we looking at higher rates under donald trump? : i think nobody knows. i think what donald is saying about the fed is that we do not understand. the fed, by design, was a nontransparent entity, designed to be that way. the real issue to me is not, is
7:23 am
janet yellen lyrical. is she doing the best job she can? it is that the process is not opaque and transparent. that makes it difficult for the world to understand where we are going. eventuallyst rates rise? hopefully. in a deflationary pancake, where the world of central banks has used monetary policy to try to balance the economy, this is the problem. economicing dictated growth, whether it is tax or trade, primarily by central bank intervention, not by a real economy. between a real economy, jobs, growth, productivity, which is all very difficult, is being counterbalanced by things normal people do not understand. quantitative easing, currency fluctuation abroad -- it is all terribly complicated. that balance is quite delicate. if interest rates go up, that is a good thing. it is not a bad thing.
7:24 am
markets anticipate those moves. look at what has happened to japan this morning. the day, youend of still have a lot of liquidity in the system. 's you go by donald trump stimulus plan, we still have a federal deficit, more borrowing happening. talked abouthas the double. you have talked about the bubble. are we at risk of a trump spurring more bubbles in asset markets? economists have a much better answer than i do. , you need atoiling bubble. if you do not have a bubble right now, the antithesis is something you are not going to be happy with. we have to bubble out of this and then have a long run away. -- you talky, jobs about infrastructure and borrowing. the average person does not
7:25 am
understand we do not have a gold standard, a silver standard, or full faith and credit behind our obligations. t ofn outrageous statemen the donald saying casually, maybe we will restructure our debt -- if you are dealing with china 10 years out, the owner of $13 trillion of debt, and you adjust our currency or do not have the ability to repay, you only have two choices. debt andese things of how we finance our trade deficit are unbelievably complicated. the president is not a dictator. he can only consult, advise, lead. congress has that ball. all the statements on both sides are just thoughts and ideas. it has to be a consensus through a congress that is representing the people. the fed is doing the best job they can, but it is like the wizard of oz. all of us look at the golden throne and say, these are really smart people. i think they are well-meaning.
7:26 am
they have a very complicated job that none of us understand. bys balance is going to come understanding, in my opinion, exactly what is happening. this debate is great for america no matter what happens, because we are concentrating on issues we need to address that are not going to be solved by the president. they are going to be solved by all of us tightening our belts, working harder, accepting less, and understanding entitlements are really where this game is going to be played. rrack is obviously a very strong donald trump supporter. talks to him regularly. alix: coming up, talking makes an investment strategy, plus iran says no to a deal. algiers with the latest. ♪
7:27 am
7:28 am
7:29 am
hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. ♪ ."ix: this is "bloomberg i am alix steel. here is what you need to know at this hour. donald trump and hillary clinton leveled major charges and
7:30 am
counter charges in their first face-to-face debate. therent that showed different personalities and vision for the nation's future. paired their gains after rising more than 2%. it has the worst performance among its major peers in the past month. it has lost about a third of its value in the past two years. largest group of creditors struck a deal to fund a reorganization of the caesar casino unit. the new year pays away for two years. power and global management tpg capital. that is what you need to know at this hour. john? jonathan: let's check out the markets. some are looking better than others. i am told the mexican peso is something to watch after the debate last night.
7:31 am
i will let you decide if that is the way of doing things. in europe, they are divorced from what is happening in the united states. it is a banking story once again the dax is down. -- once again. the dax is down. we are testing new lows in today's session. in the fx market, not much price action. the bloomberg dollar index showing it down by about a 10th of 1%. look at the bond market in europe. -71 basis points and just three basis points away from an all-time low. you are looking from that yield tantrum from last year and we are rolling over in terms of yields all over again. in the commodity market, this is the same. down now, brand is about 2%. opec members are in algiers ahead of a meeting on wednesday.
7:32 am
the iranian oil minister has said that iran is there to have a formal meeting. he spoke to bloomberg in algiers. it is time for the opec members to exchange views and get something ready for the next opec formal meeting. >> are you ready to free production at -- freeze production at current levels? no -- >> no. not at the current levels. for more, we are joined by yousef in algiers. so, they are just there to talk. is that we can assume will happen this week? yousef: it comes as a bit of a surprise, to be honest.
7:33 am
we were expecting market to at least freeze production. one of the totals would have included that. that has not really materialized at the moment. at the moment, none of the proposals appear to be getting any traction. the saudi arabian oil minister spoke earlier today. he made some broad comments about the market that he was seeing some rebalancing underway. we also heard from the general secretary of opec. he underscored that there is a rebalancing that is happening. we also spoke to the algerian oil minister. he gave us some interesting perspective on the conversation that is happening on the sidelines of this meeting. he said that there are several proposals on the table. nothing it has been decided. at the end of the day, it does not really matter if they freeze or not. at the end of the day, there is so much oil out there, he said, that they really just need to reassert their credibility and have a production cut. they say it will take more time,
7:34 am
because who is willing to take a cut in production? the algiers oil minister said they would not cut on their part. we heard the same thing from the iraqi oil minister as well. so, there is plenty of oil out there. we are waiting to see more consensus. yousef, thank you so much. back to the presidential debate. donald trump took on janet yellen calling the fed political. he also tried to make the case that the economy will lead to higher rates. tom barrett is still with us. on one hand, you have the chance of inflation for the economy. on the other hand, higher rates may, with that. how does that change doing business for you? tom: it is all at a marginal profit basis. i think every business takes into a fact that the marginal
7:35 am
adjustment of interest rates is directly proportionate to your ability to borrow debt. the balance between debt and equity fluctuates with what that interest rate is and the availability of debt. one of the criticisms in the u.s. is that the banks have become bigger and better, and the lending has become more restricted. in spite of the interest rates. so, the interest rate really governmentsnce -- buy back their own assets. businesses are having a difficult time with the top line not the bottom line. gross revenue and productivity are the problems. i do not see interest rate has the problem. the market is good at establishing and acknowledging and prescribing. -- when you get underneath it and you talk about trade and what is happening in the middle east and china, those are the issues that affect business. -- when youesidency
7:36 am
say that the issue with isis is hundreds and millions of young boys and girls that have no hope , and you have allies that have been our allies for four years ,- israel, saudi arabia, qatar they all have great young leaders that are asking for help. they want a direct warm policy, and they say they will help you eliminate these fundamentalist radical groups. how do you do that? you do that on a long-term aces of giving these young people hope. the you give them hope is you give them jobs and education, money and a future. that is trade. the misalignment of every allete we have had -- -- of every ally notave had -- israel is such a strong ally with us anymore. we also have ironic on the other side -- iran on the other side that no one understands.
7:37 am
so, you are making long-term agreements with someone that has traditionally been an enemy. and you have china. the problem with ttp is that it did not address china. you cannot have world prosperity in trade without an agreement between china and the u.s.. ttp never address that. it addressed detecting the ocean's, and it left china out of the equation. so, china starts its own ttp. the trump presidency would do the same thing that nixon did. middle-market consumers in china that we cannot avoid. you cannot avoid it. that is what business has to do. david: i think you misspoke. he said israel is no longer an ally. we just signed a record arms deal with them. tom: i meant to say we have strained that alliance. david: let's talk about
7:38 am
earnings. so many assets come from overseas. it donald trump presidency getting tough on china and mexico, there is going to be some low back. there is no such thing as a free lunch. how does it u.s. business feel about that? you first of all, it give amnesty -- there is billions of dollars in capital overseas, and if you bring it back over with a one-time tax -- something like italy did, and along with that you have a tax credit and an investment tax credit program that says, once you bring that back you invest in jobs. for those jobs, we will give you investment tax credits. the number show you move up 4% or 5% in gdp easily. the balance in multilateral trade agreements is impossible to adjust. we have totally free markets. america is a totally free market. the taxes we impose on every
7:39 am
good coming in are limited. the beneficiary what is happening is merely for financial services. --is not on election intellectual property. i think what donald trump has to do on trade is what hank paulson did. you need to go to congress and say there is one place we need a trade negotiation. there is a u.s. trade representative. he has hours to a certain extent. how can you negotiate a trade agreement with china when you say that you are the and bassett i'm here to negotiate come of the first any to go back to negotiate with my people before we can move forward. david: so donald trump becomes resident -- president. does world trade go up or down? tom: up. david: how can that be? tom: the world needs us as a
7:40 am
marketplace. if you look at the marshall plan, it had nothing to do with jobs or manufacturing. he had to rehabilitate a dying europe and japan. that is what we looked up -- looked at as a cost. the world then adapted. whatever barriers you put up in the united states, you say that all you want is a fair deal. we want a fair deal, and we will allow you in our markets and you will allow us and your markets. that is not happening in china. something has to change. intellectual property, piracy, currency manipulation -- currency manipulation is the biggest trade violator in china. it takes five years to go through the process of objecting. there have been only two cases that have been won. alix: that's a donald trump presidency true -- change who are major trade partners are? where do you see the dynamics? tom: mexico.
7:41 am
if you think about where you are going to resettle a horse, you need cheap labor. mexico has a variety of cheap labor sources. you have north america surrounded by sees which have protected -- by seas which have protected us forever. you have to make a deal with china. they are our largest trade partner. and canadagh, mexico are our closest, biggest trade partners. you have to do with the threat of china. a ttp with china is an allusion. barrick, inc. you. tom will be -- tom barrett, thank you. tom will be sticking with us for this hour. will up next, tom barrick unveil his existing holdings in
7:42 am
the rates. that is up next. this is bloomberg. ♪
7:43 am
7:44 am
♪ alix: this is "bloomberg ." i am alix steel. coming up, we will discuss the economy, rates, and the u.s. election with our guest. ♪ bloomberg your business flash. try to figure out how big a penalty can be imposed on volkswagen without putting them out of business. the government and vw are trying to reach a settlement on the emissions scandal before a new
7:45 am
president takes hold in january. they have already agreed to pay over $16 billion in the u.s. the u.s. labor department will conduct a top to bottom later investigation of wells fargo. the probe was asked for after the bank was caught creating over 2 million fake accounts for customers. they believe the bank may have put undue pressure on employees. edutainment -- entertainment has reached a new deal with its creditors. the deal ends two years of court fights. that is your bloomberg business flash. this is bloomberg. david: thank you, and i. you,arrack is -- thank emma.
7:46 am
tom barrack is still with us. he's going to talk with us about his business here. how bad a rate hike hurt your business? help theould overall real estate business. supply and demand is always the key in real estate. it has been in balance. that is what usually causes a real estate crisis. the flood of capital in search of yields has been a windfall in that everyone is looking for capital preservation. real estate operators have been the highest performers. they have learned how to better operate with better transparency. functionthe physical of financial obsolescence real estate, it is changing the fabric of yield dramatically. i think real estate is a postage
7:47 am
stamp of value. a proxy is a good investment. assets are priced to perfection. they are very expensive. contracting rates have led to positive yields. .any are going to development they say there is no yield, but there are residuals. david: charts are showing the differences in yields and the 10 year treasury. you can see how it has climbed. them very attractive as you are saying. jonathan: i would be asking about the word of law. london, it can rule out the word of law in the market. narrative emerges around brexit that the money would come back out. no sign that happening yet. under a donald trump residency,
7:48 am
the capital would flow into the united states with the state market is at low risk. it would reverse on issues like protection. tom: i think it is always a concern. the reality is that our u.s. tax law now is not overly friendly to foreign investors. we have a holding tax that is exclusionary to real estate as opposed to stocks and bonds. foreign investors have navigated through that process. i think, without regard to glitter ligation -- clinical eyes asian of what has happened, america has -- without politicalization of what has happened, america has such a rich market. foreigners are still looking for the best proxy they can find regardless of what we might put on that fabric of what is the best real estate market of the world.
7:49 am
the u.s. and london have benefited from a very friendly tax environment. this of have a very understandable legal environment. david: you have done well with a single-family lending environment in this country. what is the future of that business in the united states? tom: single-family rental housing as opposed to all the family rental housing. single-family rental housing came out of the great an crisis as we were reapplying that inventory of previously foreclosed homes. the amazing thing is that these houses -- you have three big , we have a company and there are a couple of other public companies -- the user is a family. the average rent is around $1200 or $1300 a month. the amazing thing is that the family -- as home renter ship
7:50 am
homeownership has decreased to about 60%. when you look at what the average american knows through 48 hundred dollar a month -- for ain -- four hundred dollar a month increase in mortgage, it is a struggle. so, the rental market is on an upswing. as an asset class, it is now defined. expensehought the ratios would be extraordinary. reallyok into what is happening with the average american, the average american and millennials no longer believed that they are going to make more money in flipping house than they are working. there is a component of their -- as a- renter ship component of their income, renter ship is a better choice.
7:51 am
if you want a decent car, the bank can put you through hell. however, if you want to borrow money for a condo, they can give it to you tomorrow. donald trump has spoke about how homeownership in the united states has rolled over. you would say that is not a bad thing? tom: homeownership is the only way out. what makes housing is us subsidizing and selling mortgage-backed securities. by the way, that is not guaranteed by the full faith and credit of the u.s. government. that mortgage-backed securitization in the market of qualified mortgages is what stopped homeownership. the aftermath of the great financial crisis has stopped the lending. interest rates are very low. for those that have been
7:52 am
foreclosed on or have had problems in the past, the availability of that mortgage is still not available. that is the problem. barrack, thank you for joining us. he is a stalwart supporter of donald trump. it has been great to have you. jonathan: coming up, we dig deeper into the liquidity problems that the bank of england might face. that is up next. this is bloomberg. ♪
7:53 am
7:54 am
♪ alix: this is "bloomberg ." i am alix steel. the other big event today is that the bank of england will be buying corporate bonds are the first time. they want to buy sterling corporate bonds over the next 18 months. it is time to start looking at some of the liquidity issues. this chart comes from us -- --es to us from
7:55 am
supply, it at that is dwindling all the way down to 2016. there is just not a lot of company bonds left to buy. in fact, u.k. companies only have about 28% of their outstanding corporate debt noted in pounds. it was 50% back in 2009. the question is how much can they actually by -- buy? well, the numbers have been crunched. it took a look at size. they found that utilities would benefit the most. 25%.onsumer about communications at about 14%. becomes, whation country is the bank of england going to be lying bonds from -- buying bonds from?
7:56 am
10% for the united states. a percent from germany. -- 8% from germany. at&t is on that list including ge capital and u.k. funding. the question is, can it really be effective in the corporate bond market? or is it about holding the spread down? jonathan: yes, it could be a big sacrifice to supporting the credit. it is a conversation for us, i am sure. zentner willlen join us. more from new york coming up. this is bloomberg. ♪
7:57 am
7:58 am
7:59 am
♪ >> i have a feeling that by the
8:00 am
end of the evening, i will be blamed for everything that has ever happened. not?rump: why >> hillary clinton and donald trump traded jabs in their first face-to-face debate over a variety of topics. >> is there a sign that investors seek hillary clinton as a winner of the first residential debate? alix: no freeze oil deal from iran. we are in algiers ahead of formal opec talks tomorrow. david: welcome to our second hour of "bloomberg ." jonathan, we are all searching for certainty now. we are looking at the peso, everything. jonathan: yes, and what i will say about complacency, have you learned anything last night of -- have you learned anything about how you will position your
8:01 am
portfolio after the debate? i am not so sure. alix: the peso is not only moving higher, but some other currencies are moving higher against the dollar. you have this mentality in europe for the third straight day that seems regardless of what happens here in american politics. david: whatever happened last night, you still cannot take donald trump off the map. it is still not clear who will be the next president. alix: yes, and we will continue to cover that. jim keenan will join us later. you'll want to hear his call about the u.s. treasuries. later, the former u.k. , george osborne, will join us for a bloomberg exclusive. this is his first interview since leaving government. first, jonathan, you are talking about markets. yes, you're seems kind
8:02 am
of divorced from what is happening in the united states. in europe, this is the thing. banks are lower, but deutsche bank got hammered once again at -3%. in the fx market currently, the bloomberg dollar index down by .2%. the potential for a production freeze of oil, but iran says they are just here to talk. the risk aversion story, you can see in the bond market. look at the two-year. it is down by two basis points. -71. it is the all-time low on to your notes. the all-time low was -74. we are very close to that. alix: not to look at that proxy we kept talking about. that is the dollar-mexican peso.
8:03 am
here, you have the debate, and the dollar is sharply lower while the peso is rallying. the peso is now off its highs from the session. first of all, it was very short. liquid,e of the most high beta, e.m. currency. you have what might the trump -- with the itmp presidency -- he says really is about to rape you about their trade deficit, as well as foreign and direct investment. about 40% of investment into mexico has come from the u.s. since 2010. it could have severe impact on the economy and the dollar-peso. the you also have the new zealand dollar moving higher, as well.
8:04 am
it has a developed risk on fx. david: alix, thank you. the first debate between hillary clinton and donald trump presented a start contrast between the two candidates. it devolved into an exchange of acquisition -- of blame. president obama and hillary clinton crated a vacuum in iraq. once they got in, the way they got out was a disaster. isis was then formed. ms. clinton: donald trump supported the invasion of iraq. that was proved over and over again. the larger point -- he says this madeantly, george w. bush the agreement about win american when american troops would leave iraq. not obama. mr. trump: after the election, later."d, "see you
8:05 am
they have been of using the african-american community for votes. ms. clinton: it is such an unfortunate heckscher that he unfortunate that he has painted such a dire picture for african community -- african-american communities in our country. mr. trump: i do not believe she has the stamina. ms. clinton: this is a man that has called women pigs and slobs. pregnancyat has said is an inconvenience to employers. deserve equalnot pay him as they do as good of a job as men. david: let's turn now to megan murphy. megan, as you saw they covered a lot of territory. what did we learn besides the fact that we all need you to in for the second one? an: yes, this was not a
8:06 am
knockout blow for hillary clinton, but it was a very strong performance for her. she really did solidify her candidacy. at sometimes she was quite personal she is such a public figure, that people think they already know her. on his side, he did show a lack of discipline and apparent miss -- preparedness. he had the tendency to rise to her bait and get riled up. alix: ira member of the mitt romney and -- i remember the mitt romney and barack obama today. what kind of expectations does this race for october? megan: something that will be in interesting phenomena this morning's donald trump saying, "i never said that." he said that quite consistently, when in actuality he said that a lot.
8:07 am
so, over the next 24 hours there will be a lot of back-checking. he has contradicted himself about several things he has said. i think several people that have been not exposed to his candidacy have been now exposed to that tendency. by failing to step over the bar last night, in terms of how he scored his point, he set himself up for potentially to better debates, but he will have to do a lot better. he will have to do a lot better on the easy points. it is incredible for me to think that when you have a candidate like hillary clinton, seven out of 10 voters say that she does not have good trustworthiness. she only mentioned her e-mails a couple of times. those are very weak topics were her. he failed to hit her on those. david: yes, he did miss some opportunities on the way. we have heard about the effect on the peso. when we hear about the polls? megan: cnn had a snap poll last
8:08 am
night. the polls are very difficult to read because it is just based on so much of what you've just seen. at the end of the debate, there was an emotional moment for hillary clinton than it affected the vote. if you look at -- this was not in isolated focus group or poll hillary clinton and well last or poll that -- showed hillary clinton did well last night, it was across the board. to see that level of coherence from so many people. david: would you expect from the candidates in terms of what they are spinning today? then: there is no question hillary clinton's campaign was very pleased with her performance last night. they still think she could have done better. she did not really have that smash, knockout blow. anyl, she did not make major mistakes that could have certainly damaged her candidacy.
8:09 am
with donald trump's campaign, late into the night, they have tried to say that the debates do not matter so much. what they say matters is his message on the trail. they realize this for him is not showcase him at his best. they believe the format that suits them best are these huge rallies with big crowds. they realize he is never going to be a perfect debater. the best they can do is have low expectations that he can exceed. alix: did anything happened last night from either candidate that may have swayed undecided voters? megan: we spoke about that with tom keene. that is really the issue. earlier, they were really just going smash mouth against each other. it is possible that played well in some swing states. it is possible that it played well for him. that is one thing that could be a bright spot for him. david: megan murphy, our washington bureau chief, inc. you so much for joining us.
8:10 am
we had tom -- thank you so much for joining us. we had tom barrack on in the last hour. get a look at the updates in the business world with an. -- emma. >> saudi arabia is looking for a way to sit -- two slack the debt with more bonuses. saudi arabiaf ministers have been cut. syria, areas in the city of aleppo have been hit by dozens of airstrikes. some residents are calling the attacks the worst yet in the five year civil war. russia in syria have been blamed. the--ountries are keeping the chances of a government shutdown after friday's deadline are close to none.
8:11 am
they say that despite some differences, they believed that a key point of contention is the democratic demand that money be included to help michigan with its contaminated water. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am and the. -- emma. this is a bloomberg. jonathan: coming up, morgan stanley chief u.s. economist will join us from new york. this is bloomberg. ♪
8:12 am
8:13 am
♪ city,an: from new york this is bloomberg. i am jonathan ferro. last night was one of -- was the first of three presidential debates.
8:14 am
nottopic donald trump was shy to touch on was janet yellen's that -- fed. mr. trump: the day that president obama leaves to go to the golf course for the rest of his life -- when they raise interest rates, you will see some area that things happen. the fed is not doing their job. they are being more political than secretary clinton. ourthan: joining us from office in new york -- her office in new york, ellen. i understand the argument. is the fed keeping the interest rates row -- low to support the economy? it is better for the incumbent party. but, it is absolutely not the case. the federal reserve is keeping interest rates low because that is what is needed to support
8:15 am
economic growth, create jobs, and keep us moving forward. politics simply do not play into it. jonathan: there is another argument here that the federal reserve has had more power in the last 16 years then over the past 100. those that actually leave the federal reserve on the board of governors are nominated by the president. with that in mind, do you accept muchrgument that it is less passive than it used to be? ellen: i think the reserve's role has changed over time. necessarily, role but the attention that it gets. been said to be one of the most powerful positions in the world. , in a postgine
8:16 am
financial crisis world where policymakers are feeling their way through the sand with their toes where there are a lot of uncertainties and a lot of unknowns, for global central banks and not just the fed, that that would increase the tension even more on the federal reserve. what we do here in the united states matters for the rest of the global economy. more so now than ever. in that sense, yes, it does raise the profile of the leader of the fed. it does increase investor focus on, will janet yellen continue to lead the fed depending on the next president? david: if janet yellen continues to lead the fed or not, the next u.s. president could certainly affect the u.s. economy and rates. is the market appropriately considering a trump presidency at this point? ellen: i think we're seeing the ad and flow of many market indicators. athave seen the mexican peso
8:17 am
and flow with his poll readings. this comes as invested -- as investors get concerned about protection policy under his presidency. yesterdayat we saw that that is probably the result of donald trump rising in the polls leading up to the first presidential debate. the markets are placing their necessarily not that he would be bad for the economy in hillary clinton would be good for the economy, because there are a lot of unknowns -- at the very least, they are facing that's that the election of volatility.t it is something that they have to take into account, because it can affect the outlook. alix: have we seen that kind of scenario reflected in consumer confidence? what about spending in the united states? ellen: i do believe we are
8:18 am
seeing it. first, in the soft data, you see it in the consumer surveys. into the harding data. we have already seen the beleaguered luxury spending in the u.s.. it has been in place and it continues to be in place. from the consumer surveys, the sentiment is that the damage is more for the upper income groups compared to the lower income groups. that my continue to present to a dampening effect on luxury spending. honestly, the upper income groups in the united states are looking at hillary clinton as the next president, if she is she will talk about creating tax credit for the wealthy -- tax cuts -- tax reform for the wealthy, and donald trump's presidency would affect their finances. so, it seems to be a double when y for the upper income
8:19 am
groups. no doubt, it is affecting their spending. jonathan: can you be more specific about the markets are presenting a trump presidency? i will leave that up to our strategists. they have done a great job of looking at how donald trump has built into the price and how he is not. as a macro economist, i cannot wholesale tell you if he will be good or bad for the economy. i need to see, out of all the policies he has proposed, which of them would float to the top as the top right already -- top priorities. perhaps some would fall to the wayside as he looks more toward corporate tax record -- reform and income tax reform. if that is the case, then that is a very different outcome than just assuming everything he has proposed will come true.
8:20 am
in that case, then yes i agree with other economist that put out there analysis that it would be bad for the economy. however, we do not know which policies he will focus on. jonathan: how difficult is it for you to set a analysis for growth next year? ellen: it simply as to an already difficult task. but we will be watching for most is when the get a clear indication of who the next resident will be. -- next president will peak. -- be. also, which policies of theirs will float to the top. it all of hillary clinton's policies for lowering taxes on the lower income groups are met with being -- are met with cutting funding and other program areas, that is something economist take into account. it can given the effect of those stimulus policies. there are a lot of moving parts that we have to take into affect.
8:21 am
jonathan: -- alix: if a plan was implemented, there could be a boost to u.s. growth. can you talk about that for us? ellen: i would not put the word huge on it. let us say that hillary clinton, in all if you add the additional -- allot would a lot to income spending, we are talking about 5 trillion over a year. it is about eight 10th of the gdp. enth of the gdp. just for perspective, donald trump's represents 2/10's of the gdp. it does matter a lot to economist. in terms of the macro picture, it will take a lot more stimulus
8:22 am
and structure changes in income taxes and corporate taxes -- the whole gambit, in order to get towards what we would call a "game changing outlook." jonathan: ellen, thank you for joining us. alix: coming up, oil falling to session lows. iran's claim from that they will not freeze. we will go to algiers for the latest of elements. -- latest developments. this is bloomberg. ♪
8:23 am
8:24 am
♪ alix: this is "bloomberg ." i am alix steel. features here are relatively flat. take a look at some of the individual movers. volkswagen off by 3.5%. the doj is wondering just how big of a penalty they can extract from volkswagen before it puts the company into a grassy. remember, they face -- into
8:25 am
bankruptcy. reverend, they face roughly $9 billion in german investor lawsuits. now, the doj wants to see how much more they can get from volkswagen. caesar casino entertainment has reached an agreement with shareholders. -- with creditors. you have their second lien creditor getting $.66 on the dollar. that stock is taking a hit in the free market. uphave a biotech company 11%. a new cancer therapy reaches goals. 47% of patients saw the tumors does appear. the hope is to file with the fda by the end of the year. that will be ahead of schedule. so, this biotech upstart here in the market as we have a risk off deal in europe.
8:26 am
it is relatively flat in the u.s.. jonathan: coming up, oil will extend its decline. it falls 2% after iran says that it wants to freeze production. we will be heading off to algiers. that is up next. this is bloomberg. ♪
8:27 am
8:28 am
8:29 am
jonathan: from new york city, this is "bloomberg ." unchanged andmost there is a risk off tone to the
8:30 am
market in europe. deutsche bank is down by 3% on the session so far. risk aversionto or a catalyst? the banks got hit hard yesterday. indexoomberg dollar captured some softness but not much action outside the mexican peso. brent is atand $46.13. there is a meeting in our jeers by opec offering a production cut. iran says we are here to talk but not make any agreement. in bonds, risk off, the 10 year notes in germany are rallying to -771.72.
8:31 am
let's get to the headlines outside the business world. the first time during the presidential campaign, donald trump and hillary clinton went head to head at hofstra university in a debate that different theyly are. they spied on familiar ground. refused to release his tax returns and hillary clinton addressed her e-mails. my tax returnsse against my letter's wishes but she releases for 33,000 e-mails that have been deleted as soon. as she releases them, i will release my tax returns. >> i made a mistake using a private e-mail. if i had to do it over again, i would obviously do a different. i am not going to make any excuses. it was a mistake and i take responsibility. mma: both candidates claimed
8:32 am
victory. citigroup has said and that a donald trump win can be a selloff in equities. is drug lord now new mexico reportedly being tortured in prison. he is not being allowed to sleep in the other prisoners receive visits. mexican authorities a special measures are needed after he escaped from a maximum security prison last year. a typhoon has been battering taiwan with heavy rain and 100 mile-per-hour winds and two-putt waves. thousands of people have been evacuated and 200-8000 homes have lost electricity and businesses and schools were closed. global news, 24 hours a day. this is bloomberg. a big move in oil, down by 2% with opec members in out shares ahead of the unofficial
8:33 am
meeting on wednesday. the saudi oil minister expressed optimism and iran says they are there not to freeze its oil production. it's a time to exchange views and may say something for the next opec formal muting. -- meeting. >> you don't want to freeze production? >> no, at the current level we are not writing to. >> you want to go to 4 million barrels per day? >> yes. >> i am quite optimistic about the fundamentals of the oil market. the oral fundamentals will require in the long-term higher prices to bring in investment that is needed to meet rising demand. have the more, really coast of bloomberg markets
8:34 am
middle east. this seems to be a replay of doja back in april but it will a no freeze, scenario? a no freeze, scenario? >> we are hearing different things from some of the different ministers. iran is staying the course to reclaim presenation production and that is not new. they are unlikely to come to a compromise. is the real surprise. we spoke to the nigerian oil minister and he said a phrase might not really be what the opec a group really needs. they might need a difference in this market. close to 33ping million barrels per day. look at the state of u.s. crude inventory in that tells you a different story. the angolan oil minister
8:35 am
comments frome his nigerian counterpart in terms of perhaps something else is needed to make a difference in this market. he says to wait and give this more time. they are doing consultations tomorrow and there was a formal meeting on the sidelines. according to him, it's all still in play. alix: thank you. nny is still with us. knowing the rhetoric we have seen over the last 72 hours, what will be the big take away from the meeting? we will be looking for clues about where we go from here. haveranians and saudis expectations of a deal but it appears that the negotiating a deal that could come into effect later which would see iran freeze production and saudi itsia roll back some of production and that's
8:36 am
significant. for the first time since 2014 when opec introduced the produce at will policy that crash the oil market, we are talking about something new. there is a lot to do but we want to see some agreement that could come together later in the year. jonathan: many market participants want to think of things are that organized. is much playing out now people puffing out their chests? is that's a story? right, there is lot to be skeptical about with lots of to be tennessee and negotiation and politics. you look at what we are hearing from the saudi camp, there seems a change sense doha. iran has produced more oil since talkey might be able to about a freeze and when we look at how much the saudi economy
8:37 am
has been affected, they had announcement that they will not tens of thousands of civil servants in bonuses for the first time in the kingdom. they are looking at a fiscal deficit of 13.5% next year. they need to find a way to get prices higher. we willing to believe that the saudi's have capitulated on a story they have begun to tell themselves? i don't think we are ready to call it capitulation but we have to be aware to a change of tone. it may be that they don't reach a deal and the gap between the different produces are insurmountable. what happens when libyan or nigerian oil comes back? there is a very bearish tone in the market. ieae chief says he looks at the numbers and he does not see the market balancing until the
8:38 am
end of 2017. goldman sachs is reducing its forecast as well. i think there is a sense that something has to give. david: how does the potential bill -- deal go against the aramco deal? to be a more successful ipo if the oil prices are higher than now. i don't know how much do link it's clearlys but something they want to do. ramco is still looking at listing shares in hong kong or new york. it will be a much easier job with higher oil prices. alix: thank you so much. concerningaking news inbev. most of sab miller voted by proxy to support the type of the a 104 billionas
8:39 am
dollar takeover in advance of the shareholder meeting tomorrow . it's an early indication that the deal might go through. the vast majority of the sab miller shareholders voted in favor of this deal. about a 75% of those shareholders to approve. old stocks are moving higher in european trading. donaldn: coming up next, trump things the debate went well last night. there was one thing he left out, find out next. this is bloomberg. ♪
8:40 am
8:41 am
alix: this is "bloomberg ."
8:42 am
coming up, george osborne, former uk chancellor, in his first interview since leaving government. it is a bloomberg exclusive. emma: u.s. prosecutors are trying to figure out how big a penalty they can impose on volkswagen without putting the company out of business. andvw are trying to reach a settlement on the emissions cheating scandal that it has already agreed to pay more than $16 billion in civil litigation finds in the u.s.. u.s. prosecutors are investigating standard charger in connection with an indonesian power company. an internal probe found evidence of possible bribery and other violations. standard chartered says that refers -- referred the matter to appropriate authorities.
8:43 am
there's talks to boost a presence in hollywood. the company is having exclusive discussions to buy dick clark productions. owns amcup already theaters and legendary entertainment. that is your bloomberg business flash. we are still waiting for the numbers, the presidential debate last night is expected to be one of the most-watched ever. mark halperin caught up with donald trump right after it was over to find out how he thought it went. >> mr. trump -- how are you? congratulations on getting through your first presidential debate. what did you think? >> i thought it was great and i enjoyed it and is about making america great again. she proved it was all talk and no action and for years she has been working in things and nothing ever gets done. i think it came out very good. >> what objectives did you achieve? achieved. i
8:44 am
i'm looking at the online polls and we are doing well. i think i achieved. hillary will talk about defeating isis. why didn't she do it? she talks about trade, why didn't she do it? she talks about illegal immigration -- 800 people were going to be deported. they pressed the wrong button or there was dishonesty involved and they became citizens. our country needs help. >> did she say anything tonight that was false? >> sure she did but i did not want to do my final attack which was to attack her husband on what place with respect to him and his life and all of the things that took place because chelsea who i think is a wonderful young lady was in the room and i did not think it would be appropriate despite the fact she has spent so much on commercials, $200 million?
8:45 am
as you saw, if i am not leaving, i am tied. we have spent a fraction of the money she has spent. >> the debate ends and people are talking about how you both did. what is the proper role for the media question mark >> i wish the media would treat is fair. i just want them to be fair and that includes you. david: mark is always fair. that was donald trump. that was just after the debate last night. we know how donald trump things he did. how does the hillary clinton camp think she did? >> they are very pleased with the performance last night. they feel she got up there and she prepared and executed. no one doubted her debating skills. ways, that was a potential liability for her, people expected her to do well which raises the stakes if she did not perform or deliver,
8:46 am
people would have made a bigger story of it. both candidates held their ground. the general consensus is that hillary clinton might have hadpa little better night and her camp is happy about that. david: does it matter? >> i don't think so. both candidates landed some blows on each other. donald trump focused on trade which is a two-pronged issue. bernie supporters were concerned and donald trump landed a couple of blows there. the frame was that hillary clinton is a typical politician and politicians are the reason for all of your problems. that was the message donald trump is trying to push.
8:47 am
candidates in a general election -- have the surrogates. hillary clinton went after donald trump on his temperament and attitude. his cavalier attitude about nuclear weapons is so deeply troubling. that is the number one threat we face in the world and it becomes threatening if terrorists get their hands on any nuclear materials. on man who can be revoked by a speech and not have his fingers anywhere near the nuclear codes. david: from the polling we have seen, does that might resonate in the swing states? suggests it is starting to. the question has been this divide between hillary clinton's trustworthiness and donald trump temperament. in thedone a lot of work
8:48 am
conventions to be a little tamer on the stump and not wait into as much controversial topics and not put his foot in his mouth like he did before the convention. he has done a lot of work to rating that in but the clinton campaign is trying to make sure they don't lose ground on that and that's what you saw last night. , theerformance last night clinton campaign and clinton herself or trying to get under his skin the entire night and at times it looked like it was working and he started to get riled up and he started to engage more. opinion, it works to his disadvantage. that clinton attacked him on an tempora -- when he pulled back during one of the hillary clinton attacks on his taxes and his business practices, he was silent. all of a sudden he was not
8:49 am
interrupting her and you are wondering why. he was not sign the jumping to a zone defense fence on the template question. >> i have better judgment than she does and i also have a better temperament than she has. attestsan a candidate to their own temperament? >> i am not a psychologist. donald trump knows that any questions hillary clinton's judgment, that is a dog whistle to bernie sanders supporters who have heard that over and over a given that hillary clinton does not have the judgment to be president. he told us he was going to use that line so it's not a prize. david: thank you so much. up, creditg derivative traders are expecting concern over deutsche bank and we will show you why in battle of the charts next. take a look at the markets -- we
8:50 am
continue around the lows of the sessions in europe. to have deutsche bank around record lows and s&p futures are relatively flat. dollar-peso, that had a huge move up as much as 2% on the debate. you have a slightly stronger yen as the risk off the continues in the fx market with yields back up. the story and crude oil, rolling over 2.5% and iran says they at't want to stop production this level. what does this mean for opec? we will discuss that later. this is bloomberg. ♪
8:51 am
8:52 am
jonathan: from new york city, this is "bloomberg ."
8:53 am
time for battle of the charts. caroline goes first. i am sticking with the german theme. in looking at the difference credit default swaps, the cost of insuring debt on deutsche and commerzbank, both front and center today. look at the disparity between commerzbank which we understand is reported in the local press that this is a bank that could lay off 9000 members, about 20% of their overall employee base. they will end that promise to bring back dividends since the first time since 2007. that could be thrown out by the new chief executive. we can get that news as soon as friday. check out where the cost of insuring deutsche bank that is compared to commerzbank, it's far higher.
8:54 am
the risk of around deutsche bank is being shown much more in the investor market based by the credit default swaps and the cost of insuring debt. commerzbank is partly owned by the german government. angela merkel is watching her hands of any potential of helping out at deutsche bank and it shows in the cost of insuring that debt. we are appealing it back and taking a deeper look at credit default swaps when it comes to deutsche bank. you typically look at five your credit default swaps and this is where we were seven years ago and is where we are now stop it's a 35 basis point move. it's seen in the short end of that curve down for the one year . the difference is about 69 basis points. you typically don't see a huge jump in the run your credit default swaps. it shows the markets need and desire for protection.
8:55 am
there is more risk in the market in the shorter term. almost 4 billion dollars of credit swaps are outstanding and that is the most ready bank when it comes to deutsche bank. this move in credit default swaps can also spur more hedging by firms. effects a trickle on a when you have this kind of jump. the good news is if it is contained. not gone into other banks like we saw in february. the individual stress for deutsche bank is so them in the shorter term. it's not spreading out in debt but equities are a different story with stocks down. you have seen stocks down across the board. some german companies are coming into the market to issue debt. that's an interesting development. maybe a whiff of contagion. it's hard to make the vote.
8:56 am
alix has david: the most david: confounding boat. as well. with alix sorry caroline. up, myn: coming exclusive interview with the former u.k. chancellor david osborne. from new york city, counting down to the market open, this is bloomberg. ♪
8:57 am
8:58 am
8:59 am
jonathan: we are 30 minutes away
9:00 am
from the opening bell in new york city. down.nt you here is the story of the markets. whiff of risk aversion across every single asset class. the ftse down. the dax down. deutsche bank rolling over in today's session again. in the fx market, a marginally softer bloomberg dollar index. the risk aversion seen in commodities as well. softer, at 46. algiers, iran says, we are here to talk, not to make a deal. the front end of the yield curve in germany -- two-year yields down by almost three basis points. a couple of points away from an all-time low on a german two-year. alix: breaking news. home prices in the u.s. are rising by 0.2%, slightly below estimates. you had a june revised slightly
9:01 am
lower. housing prices continued to be strong. been in sinceave 2014 has been 4.2%-five .6%. we are smack in the middle of the range. inventory cannot keep up with that demand. year on year highs in up by 5%. david: really helping the economy after taking us into the ditch in 2008. housing is coming back. we are going to be speaking with robert shiller a little later in this program. few minutes, we have an exclusive interview with george osborne. we are going to go to that right now. jonathan: let's do that. his first interview since leaving that post. he joined us after speaking at a outlookere he discusses with former u.s. treasury secretary hank paulson. let us begin with the elephant in the room -- brexit. we have been told brexit means brexit. i'm honored to have you on the show. you put the question together
9:02 am
with mr. cameron. tot do you and visit frexit mean, ultimately, if we did get this outcome, -- what did you envision brexit would mean? george: we are leaving the european union. the question we have not answered yet, and the british people did not provide an answer to, is what is the new relationship with our european allies and partners? i think we should have the closest possible economic and financial relationship. as those decisions come up over the next year or two, i will be economic tiesrong with britain's principal trading partners. that in mind, do you see another referendum taking place on the basis of that to decide what kind of relationship we have with the european union after leaving it? george: the short answer to that is, no, i don't. i do not think that is at all likely. it was a britain -- huge democratic exercise.
9:03 am
more people voted in the referendum then vote in the general election. they were clear they wanted to leave the eu. that was the only question on the ballot. the we did not put to british people and now need to determine is exactly what now is the trading relationship with europe. how do we make sure london is going to remain a major financial center in the world? how do we make sure that britons can live and study in europe, the same way european citizens can come to britain? we need answers to concerns the british people have about that. these are all crucial decisions. no one at the moment has gone through the answer to all those things, which is not surprising. it is just a few months since the vote. we are going to work hard as a british government and parliament to get the right answers over the next two years. my broadview is we should be -- endroad view is we should up with a softer brexit. the economic consequences of a
9:04 am
harder brexit would be more severe. jonathan: the idea is perhaps a little bit harder to understand than a soft brexit, which is a fuzzy concept. there is a suggestion the prime minister made to wait until the end of next year to trigger article 50. is that a good idea, or would that uncertainty damage the u.k. economy? these are some of the most important decisions that britain is going to make since the second world war. it is absolutely vital that we get them right. in ant i made -- i made it speech at the university of chicago just a couple of days ago -- is that frankly europe is not going to be in a position to have this conversation with the u.k. until the french and german elections are out of the way next spring and next summer. so whenever you trigger article 50, the actual hard bit of the negotiation is going to have to wait for a new german government. my experience as chancellor over six years -- until the german government has come to a position, it is
9:05 am
impossible to get a decision in europe. that is just a bit of realpolitik. jonathan: what does that mean for the city of london? financial passporting is critical. as the former chancellor, you cited a relationship with europe. is there reason to think london will keep the passport? george: i think it is vital not just for the u.k., but for the whole of europe, that london remains the big global financial center that it is. i do not see that business, if it would shift from london, shifting to frankfurt or paris, given the recent survey in the last few days of the world's biggest financial sectors. london came number one, but there was not a single other european center in the top 10, apart from zurich, which is not in the eu. it is in europe's interest that london remains a strong financial center. the financial passport is important for the banking industry. of course, there are other industries as part of the financial services sector --
9:06 am
insurance, hedge funds, asset managers, legal and accountancy services. issue.ot the only i would say whether you have a financial passport or something equivalent to that -- i do not think we have to be prescriptive about the exact solution at this stage. but if you have something that enables businesses to base themselves -- jonathan: we are having technical difficulties with mr. osborne, the former chancellor of the exchequer, his first broadcast interview since leaving that post. we will work on it reestablishing that. he believes you cannot trigger article 50 in practice until the germans have a government. of course, we have a critical juncture with the italian referendum later this year and elections next year in france and germany. mr. osborne, the former chancellor of exchequer in the u.k., is still with us. i am going to move things on a little bit. you are at the heart of what many people described as project
9:07 am
fear, the idea that we would vote to leave the european union, wake up in a scary world, it would be called a diy recession -- that has not happened. i will ask as politely as i can, how did you and others get that so wrong? george: first of all, it is too early to say what the economic consequences of brexit are going to be. but what do we already know? we know there has been a significant evaluation -- devaluation in the currency. indeed, whenever there are suggestions in the press and elsewhere that it might be a harder brexit, there is pressure on our currency. so there has been a devaluation. an oldfects, to use british phrase, the pound in the pocket. and growth forecasts for the british economy has been downgraded next year. we were expected to grow 2%, and the consensus forecast is we are going to grow 1%. i think the real economic
9:08 am
consequences depend a lot on these decisions thatus going forward. as i say, you can mitigate and minimize the economic you go for the strongest possible economic relationship in trade and in services with our principal export markets on the european continent. so in the end, it is going to be the decisions that we take now which are also going to have a big impact on our long-term economic prospects. jonathan: those decisions also, not just about a new trade agreement and a relationship with the eu, but around fiscal policy -- there is talk about a financial reset. there would be tax hikes. there would be more austerity. my question would be as follows. even the situation as it evolves, would you anticipate as a member of parliament to have even more austerity? would you be pushing to pass the kind of emergency budget that you called for before the vote? george: there is a hard rule of
9:09 am
finance, public finance, which is that if your economy is not growing as fast as it was, that shows up in your tax revenues, and you face difficult decisions about whether to borrow more, whether to spend less, or whether to increase taxes. of course, borrowing simply defers that decision. i take as a central principle that western democracies, particularly speaking of the experience of the u.k., do better when they have clear fiscal plans that show that there is a plan to bring order to the public finances and surplus to the public finances in good years. and indeed, prime minister theresa may repeated that exact point in the house of commons. the timing of getting there, frankly, is now a decision for my successor, philip hammond, who used to be my deputy in opposition, and who i wish extremely well in this job. i am not going to second-guess
9:10 am
the decisions he has to make as a chancellor. the truth is, if you have slow growth, you have less resource, and that leads to difficult decisions. jonathan: i would not ask you to prescribe anything to chancellor hammond. i would ask you as a member of parliament your views on fiscal policy. these thing now is the appropriate time to introduce the kind of fiscal stimulus in the united states -- to you think this is the appropriate time to introduce fiscal stimulus in the united kingdom? george: i am for investing in long-term infrastructure, but in my experience it was not a shortage of money that stopped you investing in and for structure. amateur western democracies, it is a lack of things like planning permission and political can that for going ahead with decisions on runways and railways and the like. invest in we need to the future of the country. requiresthink that fiscal resources, but political .ill to get the things built
9:11 am
whether it is relic of capacity in london or new digital infrastructure, we have to take those decisions. there are still many more decisions to come. jonathan: i have asked the same question in several different ways. we will move on. on leadership, the fallout has been a lack of credibility for individuals including yourself. prime minister cameron steps down. you are no longer the chancellor. governor carney is still seen as your guy on threadneedle street. do you have any insight on governor carney? is he set to extend his stay as the governor of the bank of england? george: you would have to ask governor carney. that i think he is a brilliant governor of the bank of england. i think he reacted not only very impressively in the immediate aftermath of the brexit, working closely with me to ensure financial stability and liquid markets, but he also put
9:12 am
together the right policy mix in august, when of course he loosened policy in the light of the brexit vote. he is not my guy. he is the country's guide. he is britain's independent central bank governor, and frankly i think we have got the best in the world. states,: in the united the government failed to understand, too much of this referendum, the mood of the electorate, failed to understand this opposition to the european union, and in many ways fail to understand what was happening with an anti-globalism movement. do you see parallels between what you went through and what is happening in the united states currently? george: i do see some parallels. i mean, you have got to be -- make sure you do not draw too many parallels. different political systems. a different question on the ballot paper. accept wey, i fully did not do this enough before the referendum. we have to work hard at making
9:13 am
sure that communities that feel economically insecure, or feel that the system in the broader sense is not working for them, have a better outcome. i do not believe you get that better outcome by closing off your economy, closing off your free markets, blocking enterprise. what we do need to make sure that the rewards are more widely shared. i was a conservative chancellor, but i increased the national minimum wage to pay a went -- a living wage, because it is important that people who work in a capitalist system see the rewards of that work. there are other examples we need to look at so that people see the return from their labor. we also need to offset the very necessary loose monetary policy and the distributional consequences that is having -- essentially, it makes the rich richer and makes life difficult for ordinary savers. again, there is a role for government not in stopping the monetary policy which keeps the economy strong, but in
9:14 am
mitigating its impact or compensating its impact. i think all of us who believe in free markets, in our democratic institutions, need to work harder to find an answer to the anger that people clearly feel out there, and to make sure that anger is not simply echoed back to them by the social media that they consume. and it is a huge challenge for all of our democracies. it is something i would speak about here in washington. youthan: i am going to put on the spot. i am sure you never thought he would come on bloomberg and get away with being in the united states without being asked this is jim. yourself and david cameron welcomes the input of foreign leaders into a democratic decision of the u.k. people. so i am asking you to express your decision -- your opinion on the democratic decisions of the electorate here. do you support a particular candidate and can you tell me who that is? george: look, i am not voting in this election, but i watched the debate last night.
9:15 am
and i do not think the answers that donald trump put forward on closing america off from the world, erecting trade barriers, are going to help create jobs in america, and i don't think they are good for the world more generally. so we will let the american people make their own decisions, but that is my economic to sit -- economic judgment on what i heard in the debate. jonathan: mr. george osborne, that was very diplomatic. thank you for coming on bloomberg. alix: thank you so much for bringing that to us. the big question is, what does the u.s. election mean for the economy? the fed sees near-term growth at around 2%, but longer-term growth was revised down to about 1.8%. can the election change that? i am joined by a chief economist at goldman sachs. it is a pleasure to talk to you. can you marry the potential of a trump presidency and a clinton presidency to a 2% growth rate in the u.s. short-term, longer-term 1.8%? we broadly agree with the gdp
9:16 am
forecast that the fed expressed. 2%o think in the near term or a little more than 2% is probably about the right number. trendould continue above growth. some labor market improvement. i do think the long-term trend is a little below that. what happens in the election, of course, is potentially important for markets. and if there is market volatility, changes in financial conditions can have an impact on growth. but nevertheless our expectation is most likely above trend growth for the foreseeable future. alix: it seems that the markets are struggling with, how do you look at a potential trump presidency when it comes to an infrastructure plan? if it is fully realized, you get a lot of debt, but potential stimulus and a potential big boost to gdp growth. how do you reconcile that kind
9:17 am
of uncertainty? you are likely to see somewhat similar to fiscal policy, probably, under both candidates. i do think there is probably a bigger stimulus potentially, at a trumpnder presidency, because you would have unified control of congress. i do think you would get a somewhat bigger boost. that i think that is a matter of degree. the biggest fiscal shift in terms of impact on the economy i think came several went from when we sharp fiscal contraction 2011-2013 to something closer to neutral. that was a bigger move then i think is likely in 2017. again, that is likely true for both candidates, although i do think the republican victory might give you a slightly bigger stimulus. david: moving beyond fiscal
9:18 am
policy to trade policy, i am interested in your thoughts about how sensitive u.s. growth, but also global growth, is to trade flows. we are seeing protections rise up not just here, with mr. trump, but around the world. how sensitive is the world economic growth to trade patterns? jan: i do think that open trade has been an important driver of growth over the last two or three decades. so i think if you were to reverse that, that would on growth over the long-term, especially if there is a tit-for-tat between rater protectionism in the u.s. and retaliatory measures by other countries. i do think there are clearly some risks there. , i guess my expectation would be that a big protectionism -- i
9:19 am
do not think it is that likely. to be, it is going probably, a stalling of the momentum for further trade liberalization. that has certainly been a hallmark of this period. a big shift certainly would be regrettable. but i think in the end we are not going to see a big shift in the direction of protectionism. david: dcf shift occurring already before this election in terms of the ratio between inwth in gdp and growth world trade? been a slowdown in world trade relative to gdp growth. however, that looks more like a return to something more normal than what we saw in the 2000s. saw a big expansion of trade relative to gdp for a lot of one-off reasons. china being one important factor there.
9:20 am
and i think the big commodity boom being an important factor. forces are nose longer as strong. i think we are seeing more of a return to normal than an unprecedented slump in that relationship. i do not think we are seeing an unprecedented slump. alix: last night in the debate, we heard strong words from donald trump about the chair janet yellen, and creating the potential for bubbles in the market. when you see the fed on hold for longer, what kind of asset bubbles, types of imbalances, might the fed be worried about? jan: it is obviously something that gets discussed. it has been discussed in fomc minutes for several years. the risk of building up imbalances if you keep interest rates very low for a long time -- boston fed president recently
9:21 am
talked about potential imbalances in the commercial real estate market. there are definitely things that the fed needs to keep a very close eye on. that said, i think at this point i don't see -- i don't see a bubble. i don't see large financial imbalances. i think if you look at, in particular, debt growth, which i think is probably the best measure of overall financial imbalances, it has been pretty subdued. there was a deleveraging period until 2013 or so. since then, we have seen increases, but to levels that are moderate by historical standards. i do not see that as a major issue in terms of creating new bubbles. alix: as we see inflation starting to creep higher, what is the potential we are in a high inflation but low growth scenario, stagflation? if the fed is presented with that scenario, what are they supposed to do? jan: i think they are supposed
9:22 am
to focus on their mandate, and that mandate has in nation as one half -- has inflation as one half and employment as the other half. so in an environment where gdp is slower than it was prior to the crisis, because we have slower population growth, slower labor force growth, somewhat slower productivity growth, and inflation is close to target, and that sort of environment you should be normalizing interest rate gradually, even if real gdp growth does not look strong by precrisis standards. that is a supply issue, not something the fed can control. they need to focus on their mandate. david: talking with alan greenspan recently, he focused on unit labor costs. that is a cause of concern when it comes to inflation. do those numbers concern you? jan: i do not know if i am as concerned as that comment suggests, but i am certainly close that we are moving
9:23 am
to full employment. we are seeing upward pressure on wage growth, two point 5% instead of 2%. it is not dramatic, but there has been a pickup. have been soft, that is feeding into higher unit labor cost inflation. and also into core consumer pricing inflation. i think all of the signals are suggesting that we are now pretty close to full employment, and we are starting to exert some upward pressure on inflation. i do think the fed is going to respond to that. gradually, but i think they will respond. alix: you are in the september rate hike chant -- camp. thatlonger-term rate -- medium line, that green, came down to about 2.78% in the last fed meeting. a 2.78% rate hike over the next four years, does that matchup with a growth rate of 1.8%?
9:24 am
not line up implying the fed is more hawkish than the market thinks. jan: i think it does matchup. you need to look at real yourest rates versus -- know, versus real growth in the economy. it is real gdp growth at 1.8% %nd real interest rates are 1 or less, which is essentially implied by this chart. that matches up. you could even say that the numbers in the fed dot plot are a little low relative to the real growth rate of the economy. that relationship is not particularly tight, so i do not want to overstate that point. but i certainly do not think that the terminal rate in the dot plot is strikingly high, relative to the growth phase of the economy. david: following up on that, where are you in december where it comes to the fed? to be tracking
9:25 am
last i heard, i think you were over 50%. how confident are you? jan: we are at 65%, which means we are about 65% confidence. there is roughly a one in three chance, in our view, that the 2017.lips into i think if the economy does what we expect between now and the end of the year, namely show fairly steady growth, further labor market improvement, and further pickup in inflation, i am fairly confident, more than 65%, that we will get a rate hike. but of course the future is always unpredictable. david: that is why we have you on the program. that is the chief economist at goldman sachs. great to have you with us today. jonathan: counting down to the cash open in new york city. here is the mood. american express of 1.5%, the company reporting a 10% dividend boost. check out the global story right now. futures dead flat in the united
9:26 am
states. europe has a bit of pain. the ftse down 0.6%. the dax off by a full percentage point. deutsche bank down by just over 2%, a record low at the close yesterday. here is the story in the fx market. dollar/yen -- margins from the japanese yen. in the bond market, yields lower by three basis points. nymex crude -- the iranians turning up in algeria to talk, not to make a deal. market openn to the from new york city, this is bloomberg. ♪
9:27 am
9:28 am
9:29 am
jonathan: this is "bloomberg go." we are about 25 seconds away from the open. down 18 on the dow. negative about two points on the s&p 500.
9:30 am
pain felt on the dax. deutsche bank down by over 2%. another record low over in germany. you hear the bell ring in new york city. bylds come in on treasuries three basis points on the 10 year. softer, with a , as thee, down 2.87% iranians turn up in algiers to talk and not to make an agreement. that is the story at the market open. here is alix steel. alix: you have s&p, dow, and nasdaq flat across the board. does not look dramatic areas but remember after the debate, the s&p was up, and it slowly turned into negative territory in terms of futures just before the market opened, now down by 0.1%. you have weakness in european banks, particularly deutsche bank, and weakness in oil.
9:31 am
the two of those dragging down equities. in terms of the individual sectors we are watching, i want to highlight what is going on with oil, now down by 3%. deal, wanting production to be 4 million barrels of oil a day. they are at 3.6. that means no freeze,. you have markets shaking out. that is hitting oil stocks including services hard across the board. goldman sachs out with a note downgrading their fourth-quarter price target to $43 a barrel instead of $50. they see a surplus of 400,000 barrels a day. 300,000 been expecting girls a day. raises the question for opec -- with a freeze even be enough? nomura thinks they would need to cut one million barrels of oil a day to stabilize the market. that is not going to happen out of opec. that unofficial meeting. in terms of debate and the
9:32 am
markets, i am looking at where the volatility might be. the purple line is the clinton/trunk spread. as it moves up, it means clinton is gaining in the polls. the white line is the volatility of the treasury market. the blue line is jp morgan fx volatility index. you saw trump -- gain in the polls. you saw a pickup in fx volatility. not so much when it came to the treasury markets. the volatility in fx, where we see it, when we do see trump gaining in the polls, that is something i will be watching, going forward. anathan: let's bring in bloomberg economist who covers equities and financial services. you are a student of the markets and a student of the history of financial markets. to go by, is anything is there a lesson here at all? pickupcally there is a in volatility heading into the elections. i read a million strategist
9:33 am
notes. not every single one, but most of them predicting a little bit of a pickup in volatility. they are surprised it had not already happened, to some degree. a note from credit suisse pointed out about 3.56 points on average in elections since 1992 is how much volatility has increased in the months leading up to the election. that is not a ton. there were some years like 2008 when the vicks basically doubled between september and october. that was lehman brothers. it was not the election. to 1990.nly goes back there is not a super long historical record to go by. basically, all six elections, there seems to have been some pickup in volatility. a narrative see built around the world complacency. is there a way to say, this is quite rational? the market is looking at this and saying, maybe in the short term, there is some volatility. but whoever is in power will get to do what they want. little bitere is a
9:34 am
of symmetry between what people expect the impact on the stock markets to be -- both candidates are talking about infrastructure spending. both are warning wall street and financial services country -- companies. there is concern about health care stocks regardless of candidate. donald trump wants to get rid of the affordable care act. hillary clinton has been talking about drug prices. there is a little symmetry. the market is going to look the on the first term, and with any of the really ambitious things that donald trump is talking about -- would they have any chance of happening? that is questionable. jonathan: great to have you with us on the program. david: thanks so much. earlier this hour, we broke the s&p case schiller home price index numbers, a read on the strength of the u.s. housing market. were amonth of july they little bit over, 5.2%. the cocreator of that index, nobel laureate in professor of economics, robert shiller, joins
9:35 am
us from the university of yale. thank you for being with us. thanwas a little less expected. you were thinking somewhere in the 5% year over year range. was there any surprise in these numbers for you? robert: not really. it has been in a holding pattern for about two years. remember, the financial crisis caused big drops in home prices. around 2012, they started going up fast, over 10% a year. now it is very boring. it is correct for inflation, about a 3% price increase per year, nothing to get excited about. david: you said they have come up dramatically, although they are still below their peak in 2006. does that indicate they still have a way to run? robert: denver is above its peak, but denver really had a boom in the years leading up to 2007. if you correct for inflation, we are still way below the peak, but we are getting up there.
9:36 am
we are getting into more normal levels, and that should boost construction activity. you have got to sell them for enough money to make a profit. so we are getting there. but it is still not -- the markets are still not high. david: i'm curious your reaction to something. we just heard from tom barrack. he is really big in single-family rental units. he is saying at this point people do not have great confidence in the value of their houses. as a result, they are more likely to rent. is that consistent with what you see? robert: the homeownership rate has gone down. i think people are less overenthusiastic about housing. we have data on the expectations for home price increases. there was a survey in july. people are expecting for one year, i think, three point 3% increase for the next 12 months. that is not exciting.
9:37 am
maybe you do want just to rent. renting is easier. if you are not expecting to make a profit on your home, maybe. heard lastssor, we night from donald trump in the debate, attacking the head for being very political. the sense is he things we should have higher rates because we have too much bubble in the economy. do you think that is viable? you get higher rates, a trump chair,ncy, a new fed higher rates -- what does that wind up doing to the economy? robert: your immediate question is what it will do to the stock market and the housing market. if you raise rates, traditionally that makes it harder to borrow, and creates competition in investment. but if you look historically, the correlation between interest rates and stock prices or housing prices has not been very reliable at all. so i think it is sort of anyone's guess. if they raise rates, that will
9:38 am
be because they see signs of strength. so they kind of offset each other. it is not clear what the effect will be. on the other hand, this has been a period of pathologically low rates. there might be something unique to this experience, when we suddenly break the pattern of low rates, get out of the new normal. that might produce a correction in the stock or housing market. but i am not sure about that. spoke earlier about what housing prices did back in 2008. how critical is this rise we have seen in housing prices to keeping with growth we have in this economy? if homewell, i think prices continue to rise, and if they don't surpass their high 2006, that will encourage construction activity, and that will be a source of strength. i think it will be a good thing. i am not saying it is the only thing. david: dr. robert schiller thank you for being here.
9:39 am
yell professor of economics and finance. over 2.5%falling by after the iranian oil minister saying his country will not freeze production at current levels, but plans to boost output. we are life in algiers at the meeting. energyg of oil -- famed deal of credit suisse will join us next. he is the menu want to talk to if you are an oil company and need cash. ♪
9:40 am
9:41 am
david: i am david weston. coming up on bloomberg television, the nasdaq ceo will be here for an exclusive interview.
9:42 am
jonathan: from new york city, i want to bring your attention to a move in frankfurt, germany. deutsche bank stock now trading higher by 0.4% the justice department number three commenting in chicago, saying that banks can lower penalties. deutsche bank is a prominent open case at the justice department. they can get credit for resolving misconduct cases. they need to get credit and reduce fines. of thetone coming out number three at the justice department. chicago, speech in deutsche bank stock is starting to turn on that session, now up by zero point 4%. in the wider market, here is the story, 12 minutes into the session. equities a little bit firmer in the united states, about 0.1%.
9:43 am
the nasdaq up by 0.25%. let us check up with the stock movements. biotech movers. signs ahares are up on lymphoma drug did meet standards. it showed a 47% complete remission rate. this has michael ye very excited. stephen seems to agree. they are saying these exceed what is needed for fda approval. other stocks are trading higher in sympathy. for a havedowngrade hep-c drug franchise. this is the big drag, juliet science, on pace -- gilead science, on pace for its worst year since 1996. alix: oil is off by 2%, although
9:44 am
off the lows of the session. an internal meeting tomorrow. the iranian oil minister has said they will have informal meetings, will not freeze. they want to grow production to 4 million barrels of oil a day. he spoke to a reporter in algiers. a time to exchange views and make something for the next opec formal meeting. reporter: are you ready to freeze production at current levels? >> no. reporter: you do not want to freeze production? >> we are not ready to. reporter: you want to go to 4 million barrels a day? >> yes. alix: that was pretty clear. that was pretty surprising. do you see any agreement on the table tomorrow? yousef: the expectation was that there would be some compromise, some sort of pre-proposal ahead
9:45 am
of the meeting, scheduled for 3:00 p.m. local time tomorrow, when the opec group sits down on the sidelines. but that has not really materialized. the expectation was that iran would squeeze its current production and saudi arabia would cut back its production. we spoke to several oil ministers and the consensus or the feeling is one of optimism. the backdrophave of ever-increasing amounts of oil going into the supply equation of the global oil market. that is worrying a lot of participants, including the head of the international energy agency. he says markets will not rebalance until late 2017 at the earliest. the nigerian oil minister says if you were to freeze oil production, even if you were to reach an agreement, that might not be enough. what you might need to do is look at a production cut. we heard from the general and hery from opec,
9:46 am
said, we are doing our consultations, but in his assessment, there was already progress when compared to the delhomme freeze talks. -- doha freeze talks. we expect the formal meaning to occur at 3:00 local time tomorrow. perhaps on the back of that you will be able to carve something out. at the moment, there is a lack of common ground, and the reality of the oversupply in the markets. alix: thank you so much for joining us from algiers. for more on oil is the man you want to see if you are an oil company and need some cash. you go to david foley of blackrock or robert santangelo of credit suisse. credit suisse has been the number one banker for energy equity offerings so far this year. robert, great to see you. thank you for coming. we have oil off by 2.5%.
9:47 am
how long has the rebalancing been pushed out? robert: i think the rebalancing is likely pushed out another six months. equity investors do not look at this on a day-to-day basis much as quarterly and midcycle. i think the question is one of timing. i think if you look at stocks in our group, they price a midcycle price. they are certainly volatile in the medium-term. i think people expect some time 2017 you see the market rebound. alix: where you deal price, if you look at equity issuance over the past year, about $20 billion, it has been going up as oil prices came down. he had a chart that showed this. that was not the expectation. the expectation was capital markets would rebalance. shale was going to turn off. added this end up happening? case studyis a great in markets recapitalizing companies that have solid business fundamentals. questioned ate
9:48 am
the 2014 opec meeting, was the u.s. shale industry competitive? should it be producing in the new midcycle? i think what has happened is the industry has dramatically lowered the cost structure by 40% to 60%. the haves are very cost competitive in the mid cycle an investor sentiment is strong. people view this as a great opportunity. david: every time that rebalancing gets extended, it must put pressure on people holding on by their fingernails. how much pressure is on the industry now? robert: it is a great question, because the industry has segmented between the haves and the have-nots. the haves have been recapitalized. have-nots are trying to hang on. the longer it goes on, time is their enemy. alix: talking about the haves, cai international resources. you help them raise equity
9:49 am
twice, and twice the stock has gone up for pioneer international resources. what are the distinctions between i am a permian guy and i can get good assets, and the balkan guys that are struggling right now? robert: let me step away from tie-in near, a client of ours -- step away from pioneer and talk about the permian more broadly. investors see companies that can maintain and grow production $45-50 fiveow in a dollar price environment. people view these as companies that will earn a strong return in the midcycle, and view capitalization as an ability to drill faster, bring more present value forward, and therefore the company is more valuable. that thet would imply money these companies are raising is not to pay down debt, but for growing production. is that a fair assessment? robert: i think we see the
9:50 am
transition, exactly. the year ago, primarily the use of proceeds was to pay down debt. the first half of this year, if you look through transactions, it was to pay down debt. if you look at the back half of this year, it has been a combination of acquisition ,inance and growth capital combined with some debt paydown. it has been a mix. david: are we starting to see increased capital investment? energy was going the other way, taking capital investment out as they tried to back down the hatches. robert: it is coming back moderately. i do not think that is a huge story in terms of the global supply/demand balance. but you had it bottom out in the low 300, the rig count, and that reflects some increase in investments. it is up to 400 and change. alix: the top story is the u.s. presidential election. we get a trump presidency next year, there is uncertainty about his policies. energy companies might not know
9:51 am
how to invest. what is that do to the capital markets? robert: i do not see candidates strongly impacting investor appetite for the domestic enpependent ian p -- companies is a likely scenario. david: that surprises me. trump is really pro-fossil fuels. toert: i think he is going be positive. the question is, i do not think people view the clinton presidency as shutting down the industry or shutting down the permian. robert: -- alix: having an adverse effect. we talked about equity offerings. is the ipo market yet open for usd mps -- u.s. enp's? robert: we would expect to see ipo's before the end of the year, for sure. alix: great perspective. honestly, two years ago this conversation would have shocked me. thanks for coming in. robert santangelo, head of
9:52 am
americas equity capital markets for credit suisse. up, bloomberg markets with mark barton and vonnie quinn. what are we looking for? mark: the former u.s. ambassador israel, former president of occidental petroleum -- cannot wait to hear his view on what is going to happen in algeria tomorrow. we talk to a ceo about the debate that took place last night, u.s. politics, global politics, europe, and more. and a call from deutsche asset management. they released their quarterly outlook. fascinating to hear what his assessment is asset classes going ahead, looking at the next 12 months. david: thanks very much, mark barton. ♪
9:53 am
9:54 am
9:55 am
city, i: from new york want to check in on a stock that has got a lot of attention, deutsche bank. record low in today's session as well, but we bounce back on the day. coincidentally, when we did bounceback, this headline dropped. the justice department number three commenting in chicago, talking about bank fines. deutsche bank one of the open cases at the justice department. there is a $14 billion opening offer from the justice department to deutsche bank. but the bidding continues. this guy is saying banks can get credit for helping resolve misconduct cases. banks need to name wrongdoers to gain credit and reduced fines. is that a signal from the justice department? david: he is saying, it is not
9:56 am
our fault it has taken this long. it would have been less if you had gone earlier. i do not know if it is too late for deutsche bank already. time to sell, -- time to settle, guys. jonathan: deutsche bank is higher on the session by about 0.5%. i am reminded by bnp paribas and the acquisition that .hey got a bigger fine what is the message -- do it quick, get it done? alix: it is a trade-off. david: who is the next president? jonathan: equity broadly higher through much of the united states. we are in the first 26 minutes of the session. "bloomberg markets" is next. ♪
9:57 am
9:58 am
9:59 am
is 10:00 a.m. in new york and 10:00 p.m. in hong kong. mark: live from london, i am mark barton. welcome to "bloomberg markets."
10:00 am
vonnie: we are going to take you from new york to algiers. a story out of paris, london, and saudi arabia in the next hour. some say donald trump took the bait in the presidential debate against hillary clinton. we get the view from both camps on who was the strongest in the minds of american voters. strong moves in the mexican peso also tell a story. declines astends iran says it is unwilling to lower current production levels. it tells us how many barrels a day it wants to raise reduction, dampening the prospects of a deal. vonnie: more investor concerns about deutsche bank. we look at why it's corporate woes are the last thing angela merkel needs as she considers running for a fourth term.


info Stream Only

Uploaded by TV Archive on