tv On the Move Bloomberg December 13, 2013 3:00am-4:01am EST
getting over themselves, getting off the all-time lows in terms of lyrical opinion. -- in terms of political opinion. story ratheritical than an economic story. not have businesses do to worry so much about politics like they did in the second half of 2013. peugeottors expecting shares to open down. gm has a partnership with them. after the close, shares down five percent. gm says it is selling its seven percent stake. the shares going into this were still up 93% this year. shares were down by more than seven percent yesterday. in fact, they have been down by separate 5% on eight occasions if you include today. it has been a very fruitful year for investors, but i am sure it
has been a bit of a nailbiter. >> shares off 5.4%. >> busy, that is what eads has been. airbus is the name we all recognize from january. a big focus will be on the commercial aviation. we get to speak to the big man today. >> that is at 10:00 london time. holdings. eye on arm we know that it designs chips. it could be dependent on more from google. google gets most of its chips from intel, known as the for ari of chipmakers. they could be less dependent on intel going forward if it starts to make its own processes. that any news breaking could be boding well for arm in the future. term, this is great news. thank you. a lot of corporate news. ,e have the u.s. budget deal
something less to worry about for the markets. what else are we watching? >> we are going to talk a little bit about housing in the u.k. things are getting better, as if we did not know. taper looks as if it might take a backseat today. probability that the taper will hit the markets in december. when you look at these equity markets, it is time to put it in context as we close out the week. european equities a little bit lower. another market is down over 1.6% this week. longest losing streak since 2008. who is moving the market today? newhe bottom, you have the
-- you have the miners. saying it has been a tough year for the miners and it could get tougher. be the year of transition. keep your eyes on the mining stocks. equities are beginning to decline. monte paschi di siena, the board is haggling with one of their biggest shareholders. basically saying they want to delay raising the capital. we want to get, out there first. we want to be ahead of the pack. there are some divisive splits going on on the board. i saw a beautiful quote. spent $5 million buying volatility in the states. he is making a bet that by april
of next year, volatility will rise in the american equity markets. i do not think that is a shocking thought to have, but it certainly sets the tone about what is going on in traders mines. there have been significant positions in dollar yen. is it overdone? the lowest since 2008. 5-year low. the dollar rising and the yen falling for seven straight weeks. standard chartered saying get ready for 110. the call. the bloomberg consensus is 108 by the end of next year. when you do not want to cut rates any further, you just talk. that is what glenn stevens is doing. dollar, the longest stretch of losses since 1995. the head of the rba says lower exchange rates, and he actually
calls the rate, 85. >> manus cranny with the latest on the markets. our next guest sees opportunities in emerging markets and equities. for more on where he sees value, let's welcome bob parker, senior director at credit suisse asset management. 2013 is going to be a good year. everyone is saying it will be a good year. described 2014 as a calm year, almost a boring year. what does one mean by that? i think it means three things. first of all, the risk of a major sovereign default is very low. some debtng to have restructuring of some stressed countries, but it is not going to have contagion or risk on the global financial system or economy.
secondly, the risk of a major bank restructuring or failure is also very low indeed. the third point, which comes back to my point, perhaps we are being a bit complacent, but i think not. the third point is that the growth data is actually going to be reasonably good. andook at the united states growth could approach 3%. the eurozone is out of recession and will stay out of recession. german growth will be a very respectable 2%+. japan will clearly have a setback in the second quarter. overall trend growth is close to 2.5%. >> if you look at the eurozone, you are right. it looks like mario draghi is getting it together. the banks are not perfectly capitalized, but they will be in the next six months. >> are we going to have another eurozone bailout?
the answer is probably not. >> will it become like japan's situation? the euro is very high and we are seeing risks of disinflation. >> there are still ongoing problems in the eurozone. problem number one is the high level of the euro. it was very interesting when manus was saying the dollar is -- through another bout of strength, but not against european currencies, and that also includes the swiss franc and the sterling. it is the european bloc as a whole. ecb would like to see the euro weaker. as we have tapering in the united states and improvement in the u.s. trade deficit, i think that this sort of level, close is a good level to start selling euro for the next move in january or february back down towards 1.30.
is down some 16% after the chief executive finally resigned. as an resigned investigation into accounting practices forced the company to increase reserves. we will find out a little bit more throughout the day. the chairman has been named executive chairman while the company searches for a new ceo. i want to get reaction to this story. parker staying with us for the next ready minutes. -- 30 minutes. we discovered the news together and you said it points to how the insurance sector is seen as healthier than the banking sector, what not always. >> the details will come out in due course. it appears there was an accounting problem. there are significant losses to be quantified in the subsidiary. that results in a management change in ireland. serious, it has
resulted in management change at the top. the shareholders do not like surprises and this is a nasty surprise. and they do not like people turnover. uncertainty.ere is who will be the new chief executive? during that uncertainty, the share price will not recover. >> g.m. sold it seven percent stake in peugeot. bought then company stake in the carmaker as part of analytes to cut costs. -- part of an alliance to cut costs. yesterday, we had bad news for peugeot. today, more bad news. >> if you look at the entire year, peugot investors have done pretty well. it has been a rocky ride. shares have closed down by more than six percent three times this year and they are on course to do it again. toand peugeot will continue
buy and develop products together. i am not sure the cooperation will be on the same grand scale as they were originally anticipating. not only are they saving less than they thought by partnering up, but they find that they are competing with each other in some european markets. as for agm stake sale, the 7% they announced they would sell yesterday, they said that was to underpin the partnership and out you show out -- peugeot with capital support. many people saying that this could be g.m. effectively clearing the deck for its french wither to do a larger deal p joe's chinese partner -- p eugeot's chinese partner. it has been an extraordinary couple of weeks for gm. announcing several exits, including his own and his successor, the new ceo coming in
january. the new ceo announced they are selling their stake in allied financial for just under a billion. healthy profit there. we learn that they are going to stopchevy in europe, selling the chevy brand in two years time. europe has been a bit of a bloodbath for gm, putting it mildly. it has not been a quick bloodbath. since 1999, they have lost $18 billion here. the restructuring has not gone according to plan like the partnership with peugeot. gm beginning to exit or at least taking one step in exiting that partnership. >> thank you so much. parker,th us is bob senior advisor at credit suisse asset management. is having ageot tough time. the carmakers are having a tough time unless you are on the high end. >> they are one of the high-end
producers and i am not going to say bmw, one has to recognize the huge success of jaguar and land rover. they are maintaining margins and increasing profit share. the earnings outlook is good. in the mass market, one has a very different story. one has to argue that if one just focuses on europe, with the eurozone coming out of recession, the outlook for the auto industry is less negative than it has been. you sawase of peugeot, the strong recovery. today, it is down because of the gm announcement to sell its position. it's be blunt. gm is taking a very good profit on that transaction. having said that, the mass market is going to remain tough. there is arguably too much overcapacity.
margins will remain under pressure. although the eurozone is out of recession, we are still looking -- >> you need the models. a lot of times, we talk about it as a macro story. >> it is market share. it is not obvious. there are two issues. one, are mass- market producers like peugeot increasing market share? in very tough competition, that is not obvious. are they maintaining margins? margins are inevitably under pressure. there is also a structural problem in the mass-market read if you actually look -- in the mass-market. keepu look at how long you a car these days, it is longer than it used to be. you bought a car two years ago before, there was obsolescence built into it.
you would have to replace it after three years. now we keep our cars for seven years. >> google is said to be considering designing its own server chips using technology from arm. for more on this story, let's get to caroline hyde. how would this help google? >> it is all about control and cost. chips, server processes using arm technology. it could better control the interactions between hardware and software. now that we are using products that do not need massive computer power, you do not need "the ferrari of chips." you do not need intel chips, which cost a lot of money. hardware, at the moment, google making smart phones and tablets and laptops.
they have also been designing their own data centers that use chips to power world search, video, online communications. a spokesperson for google has said they are actively engaged in designing the world's best infrastructure, both hardware and software design. thes all about making connections between hardware and softcore -- and software more efficient. it is all about reducing costs. it is all about disrupting the established order of things. intel,such good news for who dominates the market. >> at the moment, they make up about 95% of chips used in server processors. they are the fifth biggest customer of google. intel ind really hit terms of the money that it ekes out of google. to see, we are not going arm just displacing intel in its entirety. we will see intel needed. they are the most powerful and best chips out there.
we are needing the most powerful chips less and less. it is good news for arm. they can threaten that dominance, to a certain extent, googleused directly by rather than using intel chips. >> it is one of the first time that there has been such an affront on intel chips. let's get back to bob parker. how significant is this? it seems like a big deal. is a word that we use in the tech world. it will change the way that we see these big companies. >> absolutely. the first point to make is that, since 2009, we have been long the tech sector and we remain structurally long. clearly, one has to be careful in the tech sector because companies which today are dominant in their positions, are they going to be as dominant in five years?
you used the phrase is rutgers. in the tech sector, that is very much going to happen. at the role of blackberry today relative to blackberry only five years ago. intel has inevitably got a very large market share in its business today. i think it is inevitable, over time, that that market share is going to be slowly eroded. transaction,f this this is clearly very positive news for arm. is it negative for intel? it is not that negative. the impact is very much at the margin today. is it going to be at the margin in 3-5 years? frankly, we will see. in the tech sector, inevitably, when you have a very large , you will --
move. google is considering designing its own server processors. the move could threaten intel's market dominance of the chip market. google is among the largest buyers of server processors. honda says it will pay based on profit targets. been urgingas her companies to raise wages to end deflation. manufacturers have said they will comply with this request. microsoft is said to be considering the qualcomm chief executive among candidates to replace steve ballmer. the list also includes microsoft ,xecutives, ford ceo alan lally and there are concerns about his lack of technology experience. it has been a tough week for eads. they announced nearly 6000 job cuts. it is hoping a new plan to keep things simple will turn things around.
joining me now is jonathan ferro. they are basically trying to embrace the market. they are saying, this is what we want to achieve. let me be more focused. >> this is a company that wants to go where the success is right now. the european aeronautics and defense company, you and i will not have to keep saying that name in january. it will be known as airbus. that is a name we recognize. you refocus the brand and simple five the structure of this business. we are talking about going where the success is. it has not been on the defense side of the business. the primary reason for that is because governments are cutting back on the budget for the defense spend. they are stepping away from that business. they are shrinking it. you step away from that and go to where the success is and they have some hefty financial targets to go along with this. >> they are also trying to focus on spending cuts. this is to focus on development
efforts. >> you put the money into the products that already exist and you know what they are worth. you get more bang for your buck instead of spending vast amounts of money to develop these brand spanking new planes. was the chief of the airbus unit before he took the top job at eads. he knows how to run this business. that is a crucial part of it as well. you can see the challenges. air canada, a $600 billion order, underlying the fact that boeing is still there. it is tough competition. you not forget. we talk about restructuring these businesses. asse companies are about nimble as tanks. it will take a long time to roll this out effectively. >> we have an exclusive interview with the airbus chief executive coming up a little bit later on "the pulse." we will also ask richard about his outlook for m&a and ipo in 2013. -- in 2014.
>> welcome back to "on the move ." i am francine lacqua at bloomberg european headquarters in london. these are bloomberg's top headlines. then coming when governor mark carney may struggle to prevent britain's housing market from reaching warp speed. two thirds of economists surveyed say the u.k. market is at risk of overheating. carney has already added some incentives on mortgage lending. the european banking authority warns that traders are not protected against losing or
losses if the virtual currency collapses. the epa would have to get approval from the european commission to regulate virtual currency in the eu. the u.s. house has passed a bipartisan budget that will prevent a further government shutdown. eases $63 billion in automatic spending cuts. president barack obama says he will sign the final measure. for more on the budget deal, let's bring in manus cranny. we have been talking about this all day. this is more of a political thing rather than economic. it means that businesses and markets do not have to worry about it any longer. >> i think that that is a very fair jumping off point. this is about progress on capitol hill rather than economic progress. when you think back to what was targeted, $1 trillion-$4 trillion worth of cuts, it is nowhere near that.
i love what jamie dimon said this morning. he said he would send paul ryan and patty murray an e-mail saying thank you. the government is no longer shooting itself in the foot. that is the important point. they said it was a rather unambitious argent and that is why pass. when it comes to sentiment from the house, i think john boehner summed it up. it is about progress. >> this budget is a positive step in that direction. it is wrong rest. -- progress. it is doing what the american people expect us to do, coming together and finding common ground. >> the house has shifted 332-94. there are the dissenters in the grand old party. they did not get to pull all of the sequester. the automatic spending cuts are still $40 billion being rolled back in 2014.
as for deficit reduction, it does not even touch the sign in terms of that issue. >> this has been a very big issue in the u.s. expediency has played a key role. what does it mean for paul ryan? >> i think it is a double-edged sword. in termsthe ascendancy of the ability to broker deals in congress. , couldat point of view he be up for the next speaker job? what is probably much more interesting is this -- had he scuppered his opportunity of running for president? has he created a hurdle for himself in terms of doing this bipartisan deal? there is the club for growth, the heritage foundation, etc. what he has done is take the grand old party from all-time octoberlow of 28% in
and possibly save them from themselves. not one of the statements from within the republican party. is as much about the rehabilitation or the potential rehabilitation of the fractious rental party --grand old party. , it is all tax rises about revenue. jump on a plane and you will know all about it. the fees are going up. >> here with me to discuss m&a and the outlook for 2014, the crew chief executive officer of goldman sachs investment division. talk to me about m&a in 2014. 013, equities rose significantly. historically, as soon as equities rise significantly, we up. many more deals coming m&a deals, we had them, but they did not quite follow the track of equity markets. >> you are right. we expected more activity than
we saw. confidence is bound to come back. confidence is the key determinant of the m&a market. they can take a proposal to the board of directors and predict what will happen in the next 2-3 years. they prepared to pull the trigger. youou move through 2013, start to see that confidence comeback. activity levels, the second half was better than the first half. >> is 2014 going to continue on that trend? where is the confidence? a lot of times, we speak to bankers and ceos and they say, i have the cash, but i want to feel comfortable when i do a deal. >> budget deals in the u.s., that is very helpful. economic growth in the u.s. is picking up. you go back to europe and there was more significant downside in the european markets. that is somewhat off the table. we are not out of the woods, but
people feel more confident. china's new leadership is in place. we are seeing progress in japan. picture at the global and you are seeing less downside risk and more upside. you are seeing people starting to commit capital and build their businesses. you see the main trends in 2014? is it certain industry groups? or is it going to be a new group? >> i think the telecom is a great example. a single transaction can set up a whole wave of consolidation. you saw carlos slim come into kpn at the beginning of the year. you saw the vodafone-verizon deal. telefonica getting active. i think you will see that activity across a number of industries. that equityis markets have moved up. valuations are more demanding. economic growth is picking up. the fact is, the ceos are trying
to drive topline growth. buying growth will be an important consideration. >> yesterday, we had liberty global again trying to buy the whole -- it is very u.s.-driven or carlos slim. it is basically because valuations are cheap in europe. overall, is m&a going to be other countries -- other companies trying to by european companies on valuation? >> some of the valuation arbitrage has disappeared. some of that gap has been closed. the fact is, europe continues to have great companies that are well governed and have ray technologies. i think you will see interest in the european marketplace coming out of asia. i think you will see more chinese interest in these companies and from the u.s. >> is there anything significant in funding that you see in 2014?
>> the funding markets remain very strong. if you look at the equity market this year, which is up globally, sales are up 20% of us -- 20% plus. a lot of that has been new ipo activity or people selling positions. liquidity out of existing positions. i think you will start to see that shift. the deadlock has been very robust and strong and we expect it to continue to be the case. >> thank you so much. stick around, because we will talk about ipos next. , we will look at a lot of corporate stories. also, a million-dollar reading list. what the richest and most powerful read in 2013. ♪
>> i am francine lacqua in london. this is "on the move" on bloomberg television and streaming live on bloomberg.com, your tablet, your phone, and any -- ass phone as well read well. richard, thank you so much for sticking around. before the break, we were talking about m&a trends. what we have seen in the last couple of months is more m&a, which you consider to continue in 2014. is it the same for ipos? >> 2013 has been very active. europe, we had more than 2011 and 2012 put together. we see that continuing. our pipeline is very strong. ofough the next six months this year, a good number of transactions will come to the market globally and certainly here in europe. >> when we cover
ipos, it seems to be similar sectors. tech, things that are mobile-lead. sector thate same will lead ipos in 2014? i think that is right. it makes sense. ipos are really growth companies. you are typically going to get those sectors. there is also privatization. privatizations come into the market and you will see that somewhat around europe, but to a lesser degree. >> what are the main trends that you see in 2014 for goldman sachs? >> 2013 has been exceptionally strong on the financial side. we talked about the equity markets and the finance markets. the high-yield markets had record issuance this year. bettertor that has been
than expected was the m&a sector. growth was expected. 2014, i would not be surprised to see m&a pick up in a meaningful way. >> we talked a little bit about growth. things seem to be on a good trend in the u.s. and in europe, we do not talk about a breakup. we talked about countries breaking out of the euro just a year ago. overall, it feels a lot more comfortable. >> it is about rose and confidence. do they feel ready to pull the trigger and take their companies into the next stage of growth? my discussions with ceos in board rooms around the world, that sentiment is definitely shifting. >> what is your take on japan? >> japan has made some progress. japanese companies have spent a lot of money expanding abroad. we see that activity. abenomics is still in progress. we will see.
there is more to be done. there is a lot to be done on the monetary policy side. fiscal policy has been robust. structural reforms are still required to set japan on a long- term trend. the good news, we are talking about japan again. >> absolutely right. thank you so much for all of that. now let's talk a little bit about luxury. come rain or shine, a million euro yacht. guy johnson shows us how to cruise the high seas with style. >> glamorous, romantic, and refined. more --ts are made for for beautiful people, but more importantly, youthful weather. this is not what i had in mind. what that means is two things. the first is that the rain cover is on. the second is that we have like zio totwo up -- lake i
ourselves. it is sleek and sophisticated. if it was a car, it would be somewhere between a for ari --a ferrari and a rolls royce. >> if you want this thing to go, it can go. the top speed is 41 knots. on a day like this, it feels a little abrasive. looking for a storm below deck, it certainly fulfill that option. the fully fitted kitchen under here and the head over here is all that you could ask for. if it all becomes too much, the option of an afternoon snooze. >> this boat is all about joining a club, but you club, includedbership has sean connery. the price of entry is high. >> if you want to keep her, she
is going to cost you one million euros. at that point, it is fair to say that your vote really has come in. boat really has come in. >> we have much more on riva on "the pulse." we will also speak to an auction specialist. coming up, the exclusive interview with the airbus chief executive. in the meantime, here are some companies "on the move." they do not comply with chinese labor law because it allows factory workers -- .hat is according to a report the apple supplier met 99% of conditions set out by the watchdogs. restrictions on overtime were broken due to labor shortages. cisco cut its sales forecast for d weaker 3-5 years ami demand in emerging markets. and a shift toward software instead of networking gear.
the company is the world against bigger of networking equipment. u.s. sales of videogame hardware jumped 58% last month thanks to the new consoles from microsoft and sony. inis the first monthly gain two years. the industry is watching sony's xbystation 4 and microsoft's ox one. ever wondered what is on the reading list of warren buffett? wonder no more. us for whaty joins the heavy hitters read in 2013. i am quite excited about this. it is almost like a glimpse into the world of the powerful. what is the most read? >> this is the most read. it looks about how the exchange rate system is set up.
john maynard keynes and harry dexter white, who was apparently a spy for the russians. that has been alan greenspan's choice. >> what about the other guys that we look up to? chose thebuffett, he book but -- and the book by his son about farming and efforts to tackle world under. -- world hunger. as a farmer. right that was his father's pick. >> what a nice dad. what about carlos slim? by theooked at a book ceo of gm and at&t and how he turned those around. >> i am actually fascinated. a lot of these guys are reading financial books.
did anyone choose anything a little bit quirky? adams, was picked by tim the institute of international finance. someone wrote to me last night and said, where do i ban fiction books? i guess these people like to learn lessons. >> you do not get to the top i reading charles dickens. certainly not for these guys. >> a lot of history books as well. ended peace"hat was very popular a few years ago, world war i and what led to it. >> i love that. what a great story. thank you so much. simon kennedy there. you can follow him on twitter. with whatull story
the big and powerful people in the world read in 2013 and their recommendations. as we go to break, there is a good chance that people do not mean what you think about bitcoin. six percent of americans believe it is an xbox game. another six percent believe it is an iphone app. an additional 40% say they have no idea what it is. 42% correctly identified it as a virtual currency. just more of the mystery that surrounds bitcoin. final thoughts coming up next. ♪
>> welcome back to "on the move ." i am francine lacqua here in london. one of the last major family owned jewelers is going into the emerging markets in search of new wealth. how the proud italian companies looking east. -- company is looking east. is a family business now in its third generation, designing and crafting jewelry for the rich and famous. sees himself as an ambassador for italian style. despite his love for made in italy, he hasn
deep concerns about the market. >> they already made this kind of an investment. >> instead, the jeweler is turning to central and east asia. he says the idea of italian quality and heritage is an asset that people will pay extra for. italy andlove made in high-quality items. they love their heritage. >> he is investing heavily, planning to open 40-50 stores in the next 4 or 5ears. while other rivals have sold out a larger luxury companies, for this family, there was more at stake than money. >> we really love what we do. managers, going to do something else for us is not on the table at all.
>> beautiful jewels. for a recap, let's check in with manus cranny. we have focused on the u.s. budget deal. much of the last two months, people were worried about it. they were saying they were going to hijack what the business was going to do. at least we have one less hurdle to worry about. >> absolutely. i think that sums it up. it is about progress on capitol hill. a message.g to set we are going to come together. i think there are political ramifications. the budgetok at deal, it does not deal with the structural issues. a lot of spending cuts and the change in social welfare. for me, this is much more about the rehabilitation of the grand old party. rather than the pragmatic part of getting america growing. the deficit is $17 trillion. they have $23 billion.