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tv   Bloomberg Best  Bloomberg  October 15, 2016 8:00am-9:01am EDT

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♪ >> coming up on "bloomberg best ," the stories that shaped the week in business around the world. >> they are scrapping note 7 them. >> samsung pulls the plug on its flagship phone. saudi arabia sales ahead with its bond abp and september minutes reveal some fraction at the fed. >> it is about labor market sack. caroline: kuroda keeps cool. then exclusive interview, boj governor says he will stay on the stimulus train. >> we have to continue our monetary policy. willine: leon cooperman
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fight sec charges. >> in the inside business, information is not a crime. for oil: and a pledge of cord brings optimism and's criticism. >> the pressure in saudi arabia has really grown to do something about the oil market. >> it is a two-way street. startis a little bit to celebrating. caroline: it is all ahead on bloomberg best. ♪ caroline: hello and welcome. i am caroline hyde. this is "bloomberg best," your weekly review of the most important business news, analysis, and interviews from bloomberg television. the week began with oil reports.
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an agreement that could help the market recover its balance. >> brent near a one-year high. russian president vladimir putin says he is willing to consider freezing or even cutting oil out with cooperation with opec. underscoring they are willing to join and output limit with opec, saying they were hoping opec would come together in november and materialized in an agreement. this was always going to be about non-opec as much as it would be about opec. the resilience of non-opec supply has been a headache for opec. so they had to try to carve something out. is a little early to start celebrating an agreement, but we have to wait and see if and how this kind of agreement really
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materializes in the market. >> when you get countries such as russia and iran, with very different interests, is it going to be almost impossible to keep this together? tord: we have to acknowledge the differences has been larger than it has been. still, they have made great progress. this could end up in an agreement that will materialize around christmas and the first quarter of next year. getting more breaking news, this time out of samsung, saying it is ending the production of the galaxy note 7. andaid it was recalling it now is ending production of the galaxy note 7. samsung dropping significantly, down 8%, after telling earlier partners to halt sales. of ones a combination debacle after another. when they say ending production,
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they are scrapping note 7, which means they will restart, maybe, with another version, hopefully in time for the holidays. but i doubt that. i do not think most analysts believe that could happen. this is a huge blow for samsung. and we saw that in the market today, when it plunged 8%. >> analysts are trying to understand what this cost samsung financially. sayst from credit suisse halting the note 7 could translate into as much as 17 billion dollars in lost sales. can samsung absorb this hit? >> what is hard on samsung is the fact that this is their flagship phone. though i point out that the note itself is probably around 5% of sales in any given quarter, 10% of their mobile phone sales. so i think they can kind of contain the damage, particularly as we roll into next year. my suspicion is they will move up the introduction of the next
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note. we are expecting minutes from the federal reserve meeting from september in a few moments. >> let's go to bloomberg erik schatzker in washington. it was a close call. that was the main headline from the minutes of the fed's policy meeting. the minutes reveal a more wouldd fed then a 7-3 suggest. so what is all the fuss about? market's lackbor to the three dissenters, who wanted to raise rates, believed conditions of the labor market are already tight, and keeping rates easy pushes unemployment to an artificially low level, sparking an inflationary iron that could force the fed to hike so fast the economy tips into recession. >> a lot of market participants
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find it hard to believe we could see the economy overheats, even if low rates are kept lower for longer. >> right now, we see inflation below the fed's 2% target. it has been there for a while. the best type of central-bank policy is one looking through the front window of the car, rather than the rearview window of what happened. they want to be ready. but i think it is not only some of these inflation pressures, but rather the financial stability considerations. thinking about what is some of the consequences of having interest rates low for so long. >> china's exports fell the most in february -- since february last month. that added pressure to the yuan. >> we are also talking imports way below expectations. fairly disappointing. tom: very disappointing compared
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to the estimates. exports came in down 10% on the u.s. dollar for september. there have been predictions with estimates down 3.4%. if you look at the imports, they were down as well at 1.9 percent in september. the forecast there had been for an increase of 0.6%. >> we are seeing a big falloff in orders in some of the biggest markets and oil in the u.s. we would have thought that the weaker currency would help, but this shows this is as much as about global demand as exchange rates between we have also seen this in japan. the weaker yen did not necessarily turn things around overnight. china seeing the same thing. it is about the weakness in demand in the u.s. those are external factors china has no control over. chinesean tempt
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authorities. >> john stumpf, who built wells fargo into the world's most viable bank, stepped down as the ceo, bowing to public outcry. >> we have seen banks go through scandals before and see the ceo stay. why did it not happen here? >> what i talked to them on the phone, he was adamant this was a decision mr. stumpf brought himself. he was not fired or pushed out. that is something he has seen. >> this is some of the worst crisis management i have seen in my three decades covering the banking industry. they were reactionary. they did clawbacks and changed product sales. in response to questions. and they did not intervene early enough. the had known about problems since 2013. you're seeing the fallout from
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that. having said that, i think the change in ceo helps turn the page to a new chapter. >> banks in focus. j.p. morgan chase posting profit. >> here is what you need to know. return on equity double-digit, and big -- 13%. that is a number to make mr. dimon happy. a 1.58 is nice as well. beat, beat, beat. on jpmorgan.de stock up by 1.64%. similar story from citigroup. a beat. the stock up 2.2 3% in the premarket. wells fargo unchanged or your down 2.6%. income down. on an eps basis, it is still a beat on the margin, but the stock isunchanged. >> all of the free banks
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reported today reported a decline. the markets are delighted. it is not necessarily a better earnings and environment, but there are signs of optimism and consumer credit building and trading being up. look at theu situation as it evolves with u.s. banks at the moment. earnings are down, but it is an upside surprise. it is about expectations management versus overall earnings? >> you could say that. we have had weak earnings from the s&p 500 for a number of quarters in a row. we think we are starting to get outside of that. maybe the banks are giving us a signal that this earnings season will be ok. >> we will dive back into the issue of oil later in the program with insight from industry officials and analysts on what may happen now that a production cut is on the horizon. plus, we dig the per into monetary policy in an exclusive interview with bank of japan governor kuroda.
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and more of the top business headlines. this is bloomberg. ♪
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♪ this is "bloomberg best." terrorontinue our global -- let's continue our global tour in malaysia. authorityre manager haveg headlines, saieh is a bank will cease operations after arresting its local manager linking its trouble to the malaysia molest -- malaysia investment fund 1mdb. we know about what has been happening with 1mdb with
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connections in the middle east. it is being forced to cease operations backed by a sovereign wealth fund. what is going on? >> all of that has been confirmed this morning. inincludes three banks, not -- with not just falcon. also onposing fines ubs. getting fined for 13 breaches. dbs fined by 1300 thousand dollars. falcon received the heaviest penalty. more than 3 million u.s. dollars in fines. it was also ordered to shut operations. its branch operator -- manager was arrested. investigations are not over yet. big news out of south africa. the finance minister will be charged with fraud from his time
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running the nation's tax authority pay what has happened? >> some details have emerged into what the summons was about. the national prosecuting authority said that the charges are related to the finance minister allegedly authorizing the retirement of a colleague that resulted in about 1.1 million rand of fruitless expenditure of government money. the finance minister saying his lawyers will respond shortly. we are also waiting on a statement from the national treasury. >> i want to get your sense of the political pressure exerted on the south african rand. to the newsaking the south african finance minister will be charged with fraud. we have a chart showing the political pressure exerted on that currency the last two months. what is your outlook for the rand going forward? >> the south african rand is still going up, mostly because
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it was so weak at the end of last year. now these political issues are coming to the forefront again. yesterday, it was one of the strongest performing currencies. whenever that happens, i kind of scratch my head and say is this a typical market environment? but sure enough, it goes the other direction. but structurally, south africa needs to get stronger. the market does not appear to see that happening. as long as that is the case, the currency is vulnerable. >> saudi arabia will hold investor meetings in london, los angeles, boston, and new york as it prepares its first foray into the international bond market. what do we know so far about this bond sale with a series of roadshows kicking off today? >> saudi arabia is the largest economy in the middle east, planning to come to market with $10 billion to $15 billion, the largest bond
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issue in the middle east ever. >> how ritual they have to make this offering in terms of the pricing? is there any presidents for this weekend -- is there any precedence that we can look at? >> saudi arabia would like q atar. is saudi arabia's neighbor, a regularly established issuer that is rated two levels higher than saudi arabia is out moody's . the closest proxy we have for saudi arabia and the market is the saudi electricity company. i think we can expect saudi arabia to price somewhere between qatar and seco, probably more towards seco. the u.k. prime minister theresa may has accepted that parliament should be aligned to vote on her plan to take britain
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out of the eu. she asked lawmakers to do in a way that gives her space to negotiate. >> that seemed to calm investors on concerns that the pound was ng-ho approach. >> she did not categorically say where the bad -- whether proletarians will have a vote. >> i think will avoid a vote, but there is little she can do to do that. there is good evidence that she will allow a vote and not feel particularly bound by it. >> what will parliament decide to do if parliament gets a vote? >> it is less what it would do with the vote, it is more about how binding that vote would be. what is clear is theresa may is not going to give parliament any say in whether article 50 of the lisbon treaty should or should , and theiggered
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mechanism by which we start the talks. are the moment, theresa may is holding fast to her feeling that she has the right to start those talks. tomorrow, we start to see a legal challenge to that. the parent company of snapchat is said to be one step closer to a public offering. the company chose morgan stanley and goldman sachs to lead its ipo. the recently rebranded snap has a private market value of $18 billion, making it the largest social media ipo since twitter. what do we know so far and what are the details you have been able to uncover? is thenow morgan stanley lead. there are five other banks in the mix. it is not surprising. you notice a lot of the banks helped extend its edit line in
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recent months. so perhaps a little bit of a pay to play. has we know is snapchat filled its fleet of underwriters. they are prepping ipo documents, looking to go public as soon as next march, according to our sources. some really momentum in terms of an actual offering from one of these big unicorns that we thought may have been further off. bank in fomenting a companywide hiring freeze, according to people with knowledge of the matter. give me a sense of the importance of this hiring freeze in a process ongoing within deutsche bank as it tries to deal with this external position with the doj and its internal position. >> i think it is a move that will help on the margins. they are already cutting thousands of jobs. this will help wring the headcount down faster, but there will not move the
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needle dramatically. it is one more step they can do to get that cost down. guy: what is the next step? el: some analysts want them to cut the bonus pool in a more ciccone and -- in a more draconian way. continuing to redo their technology side, reducing the number of systems they have, trying to get the cost down on the technology front. that will take time. ♪
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♪ tooline: welcome back "bloomberg best." i'm caroline hyde. at the imf bank meeting, bank of japan governor corrode oh hinted -- governor kuroda hinted more
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stimulus could be on the way. he spoke to francine lacqua in an exquisite interview. think thea: i japanese economy is recovering. but modestly. and the monetary policies we have been implementing have had an impact on the economy. and the economy has the fed recovering. still, we have not yet achieved to the inflation package in the target. we have to continue our monetary to get to the target. francine: with this new package you have unveiled, do you think this is the right one? gov. kuroda: i think so. you may know that three and a half years ago, we introduced a new framework.
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was arly this year, there negative in your state. now we came up with a strengthened framework for qqe.itative easing, called this new framework has two components. one is inflation. that is to say we will continue our extremely economy monetary policy to allow inflation rates to go beyond the 2% target. then gradually soft land at 2%. that is, i think, a strong commitment. not justart is
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controlling the shortest inter- at -0.1 percent, but also, we continue to control or tried it to around 0%. increasing it, we can get it to income control. francine: what do you will reach the 2% target? the kuroda: at this stage, isicy board members' focus that 2% inflation rate would be achieved some time in the next fiscal year. meaning from april next year march the year after
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next. but that is the latest focus. we will revise the focus every quarter. so we may change our focus, but the point is the very strong commitment, inflation overshooting commitment, coupled with cup control. these two are fairly unique. francine: very unique. [laughter] banksuroda: four central -- for central banks. caroline: coming up on ,bloomberg best," pressure greece, and brazil are looking for economic policies. conversations with the people who make policies. plus, will opec's promising oil deal stick? and we speak with hedge fund manager leon berman -- leon co
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operman. of myto convince the jury peers that we have done no wrong. i would be shocked if we do not win. caroline: this is bloomberg. ♪
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caroline: this is "bloomberg best." time to revisit the week's most interesting interviews. current and former financial leaders have come with bloomberg television this week to discuss challenges facing their national economies. >> the high real rate in russia is one of the reasons that russia is one of the hottest trades at the moment in emerging markets. does this inflow of capital become a risk for the economy? we are assessing the trend in
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capital inflows, but it must be said that at this moment, we don't see large significant risks because the russian economy is working with limited access to international financial markets. therefore, there is a capital inflow, but it's not so large in scale that it concerns us. first, we are adhering to our floating rate and in no way do we want to influence the exchange rate. second, we understand that during our disinflation policy of reducing inflation when we have to keep interest rates high , there could be such an effect. but it is temporary. since after we reached our inflation target, we can both cut the interest rate and ease on monetary policy. jra" yo: you recently criticized the policies of central banks. what is the one thing that the
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fed, the bank of japan cometh the ecb should do to avoid unintended consequences on russia and other emerging markets? >> i think the central banks of these countries face a difficult considering the deflation in these countries and the limited impact of loose monetary policy. art tove to resort to achieve their goals. if the private sector steps up in a big way, what could growth look like next year and in 2018? >> 1.6% growth. pessimistic, very, very reasonable but in theory possible scenario, 1.3%. , i would say to
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present. -- 2%. erik: private economists are putting the risk of recession at 50% in brazil. you said the pessimistic scenario for growth is 1.3%. what is the difference there? >> brazil is in a recession right now. a very serious one. probably the deepest in history in brazil. by the end of the year, we will be there. which means there is no doubt about that. for next year, the most conservative forecasts like the imf is showing .5% growth. i'm not saying some dust projected
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recession next year. ,rom a very conservative side like the imf, they are talking about .5%. the most optimistic, 2%. , greece is like a broken country. on the other hand, a lot of what was wrong has been fixed. we are running a primary surplus, which means we are spending less than we are earning and taxes. -- in taxes. a lot of the structural reforms or underway.essary not enough. start aa good basis to .ore viable growth what is necessary now is some political stability that will bring investors back.
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what greece needs is over 100 billion euro in fresh investment. that can only come from abroad. my worries is the current government is sending extremely mixed signals to investors. we need to be in. -- we need the international investor community to come in. >> can you survive if debts are not reduced? >> we need relief. it will not happen in terms of a hurt that haircut -- that debt haircut. has beengh debt relief put out there as a holy grail, it is not enough. it is necessary but not sufficient.
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what will bring confidence back stability in the tax system and the environment for businesses that foreign investment looks at. that will take time. in another bloomberg exclusive, one of the world's best-known hedge fund managers took us inside a fierce legal battle. charged leon cooperman with insider trading. you as a matter of practice in an effort to produce returns for your investors sale close to the wind? not not even close -- leon: even close. information is not a crime. iran goldman sachs research for
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14 years and led the firm for 25 years. if a company gives use -- gives you significant nonpublic information, urge them to make a press release. make any attempt to outlaw speaking with companies. we do not seek insider information. i would love to go into the facts around this case, but my lawyer has been muzzled. it is so sad, what's going on, i can't even tell you. erik: that term you used a couple of moments ago, astronomical. "the damage to the firm has dramatically impacted the opportunity for professional growth for my 43 partners and associates. what is astronomical, exactly? leon: we have dropped from 7 4 billion.
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goldman sachs pulled out. there are others. from a wonderful call gentleman who's been with me for 25 years and he said you've made me a rich man, please do not retire. do not send back the money. we are working very hard to deliver the investors the returns they deserve. job one right now is to deliver returns to investors. credit funds are up 14% this year. our equity fund is up 7% this year. our do everything fund is up 5%. there's competitive returns. job number two is to convince a jury of my peers that we've done nothing wrong. i would be shocked if we don't win. ♪
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caroline: you are watching "bloomberg best."
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on monday, russia and opec announced a commitment to work on joint measures to curb oil output. that is a far cry from the global deal that has specific provisions to reduce the global supply let. that's supply glut. what do you think of the opec deal? will it make a material difference? >> will definitely affect the markets. the prices went up a couple of dollars. such an agreement would further push the prices up. needs toid that, one take two factors into consideration. one, the higher prices. what would be the impact of fragile global demand growth? expect without the -- we seeincrease
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higher prices. the cut to be slower. >> we understand the russians would prefer a freeze rather than a cut. do you think we need a cut to move the price higher to a new level? do you think it can get back to ?60 and in what time period >> i would not speculate when and how much. the second point i wanted to highlight, not american producers are watching this debate very closely. they will make their investment decisions. when the prices reach those levels, i'm sure in six months or so, we will see the
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non-american production increase again and this will put a lot of oil in the markets. freezecision, cutting or , having a price increase afterwards, could lead to weaker oil demand growth and higher production growth from north america. john: what are the chances they adhere to whatever they agree? the probability of an agreement when up, but at the same time, what else have we seen? the data that showed that opec production was 33.6 4 million is 500,000, that barrels per day higher than the number they were batting around just two weeks ago.
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the bar continues to go higher and higher in terms of what they need to do. the way we would describe the outcome yesterday, yes, the probability of an agreement has increased, but the probability of having a successful outcome given the fundamental picture has actually decreased. alix: if we wind up having higher oil prices because the saudi's and opec are jawboning a cut here, that winds up incentivizing more guys to come back into the market and produce more. does that negate the efficacy of any cut they do? >> there is a window of opportunity and it is relatively short. the reason is the fast cycle nature of shale. we are in a lifecycle of these wells where the decline rates have flattened out. the high-frequency data suggests u.s. production is now beginning to take up. if you have higher prices, more drilling activity, your ability to increase reduction into next year is much higher.
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cut 500,000 ord one million barrels per day and pushed prices into that 55 range, you would have a 500,000 barrel per day response next year from shale producers. you would have production in whereamerica, the caspian you could increase rather quickly and you would have demand weakness. by the end of next year, any significant production reduction would be negated toward the end of next year. he would not change our price forecast for next year. we would just rotate the upside. right now, we have get cycling from $45 to $55 next year. instead, we flip it and go from $55 to $45. >> talked us through the next meeting you will be having with non-opec suppliers like russia. they are key in this equation.
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they are pumping at post-soviet record highs. seeking specific commitments from them? drafted agiers, we roadmap towards the implementation of the landmark decision in algiers. the algiers accord. this, weegral part of have increased the level memberations with opec countries and non-opec colleagues. russian integration has been active, very constructive. before algiers, during algiers and here. later today, we will have another round of further consultations. >> looking at russia's track record, it hasn't been stellar.
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why would it work this time around? glutenheard from latimer doesn't vladimir putin -- you vladimir putinme a commitment at the highest level of government. we are working side by side, shoulder to shoulder. we are confident. the question is not if, it's win. if opec does cut production, forget about the freeze, they need to cut production. if they cut production meaningfully, to pr to present,e 2%, we see oil prices going higher. opec cannot produce any more
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oil. global demand continues to increase. global supply is declining. when.estion is >> in the past about when opec has been effective, it's been because of saudi arabia. do they still have the wherewithal, the power, the influence to drive a deal here? >> if only because of the overall number. they produce more oil than anybody else. having said that, higher oil prices would bring a response from shale producers. shell production will be very -- e production will be very possible at the $55 level. s stay there, we will see a lot of drilling activity coming in. a lot of these incomplete wells .ill come in
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that will negate any production drop that opec might do. it is a two-way street. there's no question in my mind, saudi arabia cannot survive on $50 oil. they can all produce oil at $10 or $20, but you need five or six times the multiple to survive economically. >> crude holding around $50 a barrel. u.s. data showed an increase in stockpiles. i will be the cynic and say they all want to jawbone the crude price higher. ultimately, they won't really implement whatever they agree to in the coming months, will they? >> i think they will. the pressure in saudi arabia in recent months has really grown.
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anyone looking at opec thinking it's about opec or saudi arabia, they have pressure coming from the financial sector and corporate sector and at the government level. they have to do something. they have curtailed public-sector salaries. they have tried to put opec back together. rest of opec joins aggressively or not, it depends on whether the rest of opec goes along with it. we will get to a higher price. >> what is a breeze materially going to do? >> the saudi petroleum minister said a gentle hand on the wheel alreadyhe market has been rebalancing. you have two of the really big players on the same side of the
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table now. saudi arabia and russia. even vladimir putin has put his prestige on the table. >> yes, he has said we would be oilith a freeze, but the minister says we are not going to cut. there is one guy in charge in russia. i think he will have the final word. iraq from iran and saudi arabia have added 3 million barrels a day since 2014. those countries have leveled off. itre will be doubts about and people will say it's not working, but on balance at the end of the day, they will come out with something that will kind of restore confidence. there will always be the argument where iraq will say are production is this, not this. what is the real production? ♪
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>> look at the supply chain of samsung. and you have a product that goes away, it affects suppliers. materials, lamd .esearch, qualcomm caroline: there are 30,000 functions on the bloomberg and we always enjoy showing you a favorite from bloomberg television. maybe it will become your favorite. here is another function you will find useful. did you important context and fast insight into timely topics. here's a quick take from this week. >> these islands are at the
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center of a simmering dispute about who owns them. seven countries have overlapping claims. player one common -- china. tensions boiling over, dragging in the u.s. and even prompting talks about possible war. than 80% of more the south china sea with an importer it calls the nine dash line. why are these islands so sought after? many of them said above potential oil and gas reserves. the south china sea alone accounts for 10% of global fishing production. are strategic.
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country started making formal .laims on the new u.n. rules that led into a rush of moves from several nations to show ownership. china got the most attention. it started to build islands, installing runways. that led to the philippines to challenge china's claims. the philippines won the case in july 2016. , it is null and void. washington endorsed the ruling. beijing says it has no intention of preventing commercial traffic but is simply protecting its territory. in the east china sea, china is also locked in a dispute with its age-old rival, japan. that -- america
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does not take a formal position on their sovereignty. president obama said a security treaty applies to the islands. that means the u.s. military japanese waters are violated. this one incentive to stay friendly -- trade. $5 trillion of trade every year. quickly china's been building its military positions in the south and east china sees and how nervous that's making everyone, some analysts say there is a significant risk of armed conflict. perhaps even as a result of miscalculation. that was just one of the many quick takes you could find on the bloomberg. you can also find them at bloomberg.com, along with the latest business news and analysis 24 hours a day. that will be all for "bloomberg best" this week.
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thanks for watching. i'm caroline hyde. this is bloomberg. ♪
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