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tv   Bloomberg Daybreak Americas  Bloomberg  January 14, 2019 7:00am-9:00am EST

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reignited trade war and global worth fears. globalin sight to the government shutdown. feeling the pain. and citibank reports painful earnings with loan growth margins key for investors. i'm alix steel in new york. david westin is an detroit, driving cars all around. i'm kidding, what's the mood at the auto show? david: these are exciting new cars, to be sure, but it's a slightly different auto show, a lot of them talking about things you are talking about, how the economy and china is going. a little bit of a subdued element to the show this year thus far. david: walk me through those -- alix: walk me through those big names of us far.
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ceo,: i was talking to the mary barra, and then i talked to jim, talking about the economy and how they saw it. positive, but this is what they had to say. >> the auto business will be solid. the economy itself has signaled uneasiness, but i don't think there are any markers that would say that we are going into any kind of recession just now. will be showing more of the jim hackett interview later in the hour. we will also be talking to scott keele. we talked about the joint venture that we thought would be announced today about how bw and ford would be getting together over cars in europe. alix: no cars of running? haven't gotten out yet? david: no, sorry. [laughter] awesome stuff.
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check in with you later, david. a risk off feel, the u.n. getting chinese trade data overnight. imports and exports are much canr than estimated, you see the s&p futures off by 8/10 of 1% with euro-dollar flat on the day, a stronger dollar story when it comes to the high yielding currencies, but not the safety currencies. the 10 year yield is down by three basis points across the bond world except when it comes to italy. part of that is definitely going to be the trade story, the imports from copper to soybeans and all of that reverberating in the market. time now for the bloomberg first take and we have michael mckee guys, if you take a look at what's happening in china, how much of that, mike, was just payback of exporting a lot
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before trade picked up? mike: it looks like there was a lot of frontloading going on in in fall ahead of the tariffs those going into payback. the problem going forward is that we are about to hit the chinese new year and everything pretty much stops than, so the data aren't going to be very definitive until we get to may be march with then some catch-up, that's what we usually see with the chinese putting things on hold. it's going to be hard to tell where they are on a trade basis, however the numbers were disappointing this morning and they do suggest continued weakness, suggesting that the chinese have an imperative to make a deal except for the fact that look at the reaction. taking down the united states and we know that donald trump doesn't like that. be hit harduld they when there is more impetus for a deal and stimulus coming out of china?
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it is a question as to whether the economic data hits hard. i think it when you look at chinese stocks, for example, you have seen them make a higher low over the last couple of months and there are some signs of potential stabilization in the equity market. it's early to make that call, but the central bank has reduced the reserve requirement ratio several times already. there is an impetus for some version of stimulus to support those economies. the question now is -- is that enough to offset the weakening economic condition and creates a more stable conditions into 2019? stocks should lead to better performance, but are we getting enough liquidity and stimulus to china andt when europe, that inter-relationship is somewhat undercovered. european indicators are much weaker than chinese from a pmi perspective.
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europe continues to deteriorate that's pretty bad for china to. mike: i spoke to an analyst that i respect in china who suggested that there has been more stimulus than people believe in china and that that could stabilize but that europe and the united states economies are problem. overhang to the european economy is a potential american shutdown. shutdown could shave $1.2 billion of gdp each week as part of the government close. with $3.6conomy billion friday, january 11, which seems like pennies, a lot for those workers trying to cover those costs without their paychecks. saying that it won't matter on a short-term basis, but on a medium-term it should. in another two weeks, that s&p analysis will have cost the
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u.s. another $1.2 billion. the shutdown will cost more than the whole wall would have cost within two weeks. it's a micro story because 800,000 people, 130 5 million people employed in the united states. unfortunately those people are really suffering and only half of the ones for load can apply for unemployment benefits, the ones forced to work without pay can't do that. it's tough on them but it won't hit the overall u.s. economy until there is confidence. there are some signs that it may be starting to do that and it may weigh on the growth, 2.8% for the fourth quarter, less than that maybe for the first quarter. good health with this continuing to go on. so for earnings? on the government shutdown? wrecks it will be few and far
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between. they have just as little visibility as anyone else. to the extent that there is a true impact, you will see it in the government contractors, and the airlines. don't forget that we shutdown a portion of the miami and houston airports. consumer stocks will give you a good sense of where sentiment is and if it's getting some degree of hit from the government shutdown. you cane pockets where find some of this but we are not going to get a whole lot of companies. alix: unless you are a farmer like -- what should i plant next year, i have no idea because i don't have the usda data. citigroup coming out at eight, this is just the last couple of weeks and the revision downward that we have seen for the big banks since september. it's pretty germanic. have they come down far enough? that's a big question. in a general sense expectations are very low. not necessarily because earnings estimates on lower but because
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of valuation. your indication of sentiment towards those earnings every say very low bar relative to where we have been for the last couple of years. signing us up for the reaction to earnings season not being quite so bafflingly negative, but there will be pockets of strength and weakness. financials is one of those areas where expectations are incredibly low. it's a long-term average with a forward pe. there's not a lot of hope for financials and they do contend with contribution out of the financial sector. quickly -- alix: quickly, credit card growth was flat, what kind of long growth will we be looking at? amount, whichuge will be a problem for the banks. the biggest issue is that we don't know -- we will get our data on the government shutdown from companies and from banks
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and we will try to piece it together and we won't know what consumer credit was because those numbers will be delayed. to get a complete read on where the economy is. second quarter earnings estimates, it will be hard to make those with a lot of confidence going forward. point.reat all right, guys, thanks her a much. a reminder, you can seal the charts that we used and more on our terminal, g tv , and coming up we have more on what it could mean for global growth with greg davis, the vanguard cio. this is bloomberg. ♪
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>> this is "bloomberg daybreak," we have your bloomberg business flash. pg&e plans to file for reorganization at the end of the month, with investigators trying to figure out if the equipment anited the november wild for cala -- wildfire in california. it could lead to billions and liabilities. more consolidation of the global goals mining industry, merging with goldcorp in the all-star deal valued at $10 billion, saying that they paid a 70% premium based on the weighted and merged,e price creating the world's biggest gold buyer. it again forc did the second time in less than two weeks, the hong kong-based put premium seats at a huge discount, offering a
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first-class seat from portugal to hong kong at 1/10 of the original price of $16,000, just as a did the last time, the airline says it will honor the tickets. that is your bloomberg business flash. alix: chinese trade getting hit by the trade war, imports and exports posting their worst numbers since december with a rush of orders for tariffs and accelerating global growth hitting domestic buyers. joining us now is our chief asia economics correspondent. did you buy your 100 and $60 or scholastic it to portugal? purchase cafelly flights this weekend but unfortunately i didn't get any bargain basements from them. good luck to whoever got those tickets. alix: apparently it happened once before. you never know, keep it on alert and you could definitely be getting that $160 plane ticket. going to the data in china, the
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biggest take away for you when you saw the slowdown in exports and imports? >> well, the thing clearly, what's happening is it's the latest confirmation that the chinese economy is under pressure on the external export side, getting hit by two things, a slowing global growth story that we all know about. and on the other hand it's getting hit by the trade war. keeping themselves in tech goods , new tariffs have been placed on a lot of those products. and of course the import story points to slowing domestic economy. there are always factors related to prices like the oil story. on theory today is negative side of things. second biggest in 2019 on the cloud. of stimulus moves
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can we expect from the government, then? happening inn recent months has been something of a creep effect by the government. everyone is expecting kind of a big bang stimulus approach. but they are doing is trying to take more targeted measures and encouraging banks to lend more currently to the private sector. talking about cutting income taxes with rate forward, this several measures. have taken what they so far, it hasn't really gained much traction which is why the policy makers have to unleash more up their sleeve. comes back to these trade talks and whether or not they can get some kind of a last-minute deal that keeps them out from march 1, that's really critical in terms of what they are looking towards. alix: great stuff. , go, get on cathay pacific and get the static -- tickets.
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david -- greg, great to see you, thanks for joining us. >> thanks for having me on. alix: you have a knee-jerk reaction to the downside this morning, feeling like the downside. look, we had one of the most violent down grabs i have seen , nothing much changing except people ignoring ,nd assessing over the bad news so this december was a better time to buy. what do you think? >> investors need to stay focused on the long term. we will always have these kinds of loose but investors have gotten anchored to what we 2000 17.ed in it's the lowest realized volatility in 50 years, a lot of investors had been anchored to that but remember, that's unusual and now we are going back to more normal levels of
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volatility and we need to look through that. david: you recently were -- alix: you recently revised your base case. walk us through the asset allocation in the u.s. economy. >> some of those main drivers, it's all of this uncertainty that we have going on in the marketplace right now with concerns around the happenings in washington, with the fact that the federal reserve has been on this fact -- this path to tighten monetary policy. we always tell investors to stay focused on the long-term, make sure that they stay balanced and diversified across the holdings. it's trying to understand the risk tolerance for investors, when you see a big move or correction in the equities markets that causes investors to lose sleep, they probably have too much exposure to equities. go ahead. oh, one of the of the things i would say is that given the shape of the liqueur of and
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things of that nature, investors are being compensated for being relatively conservative when it comes to the bond market. you're getting paid to be in the two-year part of the curve, you don't need to take on the interest-rate risk given the flatness at this point in time. what does that mean for u.s. versus international allocations? >> when we look at ballot -- allocations in the u.s. market we think that it's relatively fair and that international valuations are cheaper. looking at the expected returns , on ane next 10 years annualized basis we expect the u.s. equity market to return four to 6% and we think that in the international markets, the fact that they are frozen behind in terms of tightening monetary policy we have international returns at six to 8% in that range on an annualized basis over the next 10 years or so.
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where does that leave you with emerging markets, particularly china? of things. on the bond side we look at valuations having returns given all the volatility we have seen over the last couple of months and we expect that going forward as the u.s. economy starts to slow down to some degree we expect to see the money flowing back into emerging markets with investors trying to pick up the increment to yield in the space and we think that an emerging markets have really outperformed over the next 12 to 18 months or so. alix:alix: there is a story oute that these are idiosyncratic stories. slowing european growth is in italy story. the french issue in terms of gasoline hikes, short-term story. is there an asymmetric risk to the upside of things don't turn out terrible and a trade deal materializes? >> right now i think the risks
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are pretty balanced between trade tensions and slowdown in economic growth around the globe. there could be some upside, but we think at this point in time. looking at asset allocations with cash yielding more, when it could -- went to the signal be to take on more risk? >> you want to get to a point where you feel as though the federal reserve is getting closer to the end in terms of tightening monetary policy. at this point in time we are still not sure how close we are. in 2019 we are expecting some thing that's down but we won't see the final move by the fed until the middle part of this year. until we see greater certainty around that we will be a bit cautious. alix: greg, thanks so much. coming of u.s. banks kickoff earnings with citibank meeting at the charge on the health of
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financials and what to expect next. this is bloomberg. ♪
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kickoffs. banks earnings this morning with wells fargo and jpmorgan reporting tomorrow with morgan stanley finishing things off with a big bang on thursday. still with me, greg davis of vanguard. what do you expect to learn when big banks report this week? >> couple of things we will be watchful of is that whenever we see a significant rise in volatility like we have seen in the last couple of months, we get a sense for how banks have been positioned in terms of the trading acumen and things of that nature. there will be some winners and some losers as part of the earnings season because of the volatility we have seen. 9 alix: -- alix: what you do with financials when there's a lot of risk? there are so cheap and so undervalued after getting beaten up so much, what does the valuation trade do when it comes
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into play? extent -- the extent that we start to see normal interest rates you would expect the values to do better and further and further along this path that would have a better reception in the marketplace relative to growth related stocks, so it wouldn't surprise me if we see the financial space , provided we get through the earnings season unscathed that they continue to do quite well based on the earnings that we didn't expect to see over the last couple of days or so. alix: all sectors have come down materially. energy is really one that supposedly well versus the estimates. when oil prices falling off the cliff in december. where is the right pocket of growth? what do you like? >> again, we tend not to focus a
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much on the individual sectors, we look at the overall economy with investors being broadly diversified but for those he investors that do, we always said you have to be cautious with the economy at a place now where we are close to the end of a fed tightening cycle and we think that hey, when it comes to what we have seen over the last couple of your -- years, growth has outperformed value, and it's more of an area a focus on the marketplace with better valuation in the financial and other sectors. we expect them to pop at some point. alix: what is your outlook on the dollar? >> given what's going on in terms of the fed hike reducing what they are anticipating over the last several weeks, we would expect the dollar to be a bit under pressure. especially as we see that the
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endhikes through the tail of this year with the dollar weakening a touch at this point in time. it's been a real pleasure to talk to you today, and we will be bringing you city earnings soon. coming up we will be heading out to detroit with scott keele and the volkswagen of america president and ceo, a tough day offthe decidedly risk markets going into the yen and treasuries coming out of global equities on china trade growth worries. gridlock in manhattan. this is bloomberg. ♪
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alix: this is "bloomberg daybreak," i'm alix steel. ons morning as we wake up this monday, chinese import export declines in december rattled markets. a trade conversation, a
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global growth conversation reverberating to the markets. off the lows of the session, i did want to highlight italian banks getting hit particularly hard in europe, the ecb saying that they have a capital profit issue meaning they will be surprised when you say it, however when they want to get back into the bond market it's another overhang for a tie in banks with interactive classes here as a safe haven move into certain currencies like the yen, despite the fact that you saw fall 1.7l output percent, much worse than estimates in the eurozone. rate, modestly higher, making a different shift in the market with theresa may speaking, saying that she's ruling out a lame brexit and doesn't want a second referendum in parliament. 50 basis point is how we printed
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crude, president trump earlier, talking about oil, the u.s. oil production is bad news for russia after some officials over the weekend talk about how good opec was for the u.s., so go figure. andd westin is in destroyed david, you're kind of in your mecca right now? right, we are happy to be here for the detroit auto show in we have scott here, welcome, good to have you. one of the stories here is the continued diminishment of passenger vehicles and the advent of cars and trucks by, but you are going counter cyclical, you have a new passenger vehicle? >> let's get down to the facts, we are launching the for sought in a few hours, that segment is 1.9 million vehicles, the entire car market of many countries. i think it's still a segment worth pursuing. we are a german engineering company and there are people who love driving that.
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yes, the market is tight and declining, but we think there is good opportunity there. successou had a lot of with audi, now you have a america, you've got some challenges. how are you going to address that? >> the automotive business, some things don't change and that's exactly what we are going to continue to do here at volkswagen. yes, we have our challenges, but let's not forget the fact we grew a great deal with the new suvs that we have behind you and we had a lot of things to work on. on the margin question, did you have to shut down to add some new ones? >> behind us here, the mythical beetle. a vehicle we had to let go of. it got to niche, too small. we will always be making these kinds of smart decisions like we have done their, but launching jetta and rocket.
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obviously some great new products at the show to look at, ,ut there is also the economy china and trade. how does trade affect things? >> it used to be a simple business, you see have to just worry about the car business. now you have these macro issues. on the trade front, there are two big issues. i think we have good transparency. we have a plan for mexico and a big plan for chattanooga and we are looking at value context. we have five years to comply and we will put together a smart strategy. regarding the other tariffs from coming not a big impact here from the north american market produced here locally. so we think we have some smart solutions, but like anything you have to be prepared at these times.
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passenger vehicles, trucks and the united space -- united states, they are up, in a down market how do you grow? >> you compete. we have fresh suvs and we feel we are in a good position. but the second thing you have to be a smart. you need to have a lot of caution with that, smart with your inventory and are return rates. obviously with those going up you don't want to be sitting on a lot of stock. i think we can and will grow. we have to be smart about it. but the truth is you don't want to peak things without telling since 2016, so it's an environment have been waiting for. we have seen a before, but we haven't seen electric location. everyone saying that they've got to get money off their core
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business to invest in that. how do you go about doing that at vw? >> volkswagen has a phenomenal global footprint. massive success scale in china and europe with a 20 percent market share in these places, so we have the ability to fund the business. you have seen that upwards of $34 billion to fund that future. that's a huge thing where we will probably scale a successful company that can invest in the u.s. as well. i anticipate local production of an electric vehicle is something we will be announcing soon and it's an exciting opportunity. david: what about coproduction? vw making cars were ford, but maybe not limited to europe. is there a possibility afford making cars for bw in the united states?
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>> we are looking to be smart. the customer cares about a beautiful car at a great price with great technology. if we can manage the cost and the complexity and handle it with a partner, it's a smart thing to look at. we have a good history with ford, we have done some great partnerships in south america and europe. i'm not sure what will come from the announcement, but if we can do it, let's make sense, we have to drive costs down and the consumer wants great cost. david: you had some real success at audi. what are you bringing to vw? it's a very different market segment. the luxury end of the market, how can you translate that into a mass-market? >> two things i'm focused on, one, a strong best wrong brand with loyalty. obviously the volkswagen brand has had some challenges and we want to bring the brand back to life, we want to make it in ahing that matters profound way and i think we will
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do that. the second thing is the dealer network. want to be successful in the u.s. marketplace? the dealer network needs to be behind you. with those two pieces those are the things i'm taking to bring life. david: consumer sentiment, even with a great dealer market you need someone wanting to buy and there is concern that they are getting nervous. >> they are getting nervous and i think the core metrics are in place. if you look at corporate profitability and earnings, they are in a good place, it's just the headlines that are getting people rattled. we need less headlines and more of the pragmatic substance that's here in the u.s. market, it's just a lot of noise that gets people uneasy. great to have you with us, scott. alex? -- alix?
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alix: the way forward is some kind of work with ford and vw teaming up in order to fight? well, we will hear more from david throughout the next few hours as we await any cut of announcement. headlines outside the business world, we have the vienna. -- viviana. >> chinese foreign trade slumping at the end of the year, exports were down in december while imports fell almost 8% and those are the worst results in 2016. last week you may remember the u.s. and china expressing optimism after mid-level trade talks had wrapped up. president trump firing back at his report on a relationship with russia and says that he couldn't care less if details on his conversations with vladimir putin were released. the present reporting -- "the washington post" reporting that
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the president took his interpreters notes and advised him not to discuss it with officials. and theresa may ramping up warnings that brexit could be reversed if parliament -- blocks the deal. to convince conservatives to back a proposal or lose the dream of leaving the european union. news on tictoc and twitter, i'm viviana cotto. the prime minister in her recent remarks on brexit, sanction is a want a recent referendum but if the deal doesn't pass, there is a risk the u.k. might not need you at all. -- leave the eu at all. >> take a step back to remember what is at stake and what we stand to gain by coming together behind the agreement. settle the questions on the
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floor in front of new relationships. if we back the deal tomorrow, we can start that worked on wednesday. fail, we have a bigger risk of not leaving at all. joining us now from london, kristine aquino. is going to lose that vote tomorrow, so what's the key that we need to watch? we could go several ways from here. we could see a no-confidence vote from the u.k. parliament and theresa may, a proposal for a second brexit referendum. there are a number of ways that this could play out. at the moment it seems that the market is leaning towards the optimistic side of that scenario, really seeing all of these developments and the fact that we are getting closer to the march 29 deadline and the
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fact that there might be some sort of delay on brexit as far as the pound is concerned. what's interesting to me is that sterling volatility, we have seen the increase involved, look at where we were in 2016 when we had the brexit. about investor expectations. it's not as much as at -- >> it's not as much of a game changer as the initial vote but it speaks to how little ability there is in the market at the moment. trading investors at the moment say that if you don't have to make a decision in sterling, then don't, it's really becoming a lot more untreatable. it's really market trade, the daily changes, there are not a lot of trades with short-term moves and there isn't a lot of upside to this.
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there is this increasing notion that if they don't have to be in u.k. assets, there is no reason for them to be. david: thank you very much. -- alix: thank you ray much. this is bloomberg. ♪
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," this is "bloomberg daybreak coming up in the next hour, the ford ceo, jim hackett. alix: three things wall street is buzzing about this morning, deutsche bank intensify strategy talks as they have been in
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frequent discussions with competitive commerce break cash bank and government officials. and the kkr incredible source of yield says the sale of their business is one they plan to remain active in. hedge funds on brexit, christine o'dea is on the stronger pound and not alone, so join me now is peggy collins and our bloomberg investment coverage. what i love about deutsche bank is that now it's kind of official. seems like commerce bank and deutsche bank makes sense, serious people doing serious talks. >> seems like something's going to happen here, watching the drip drip drip of bad news out of deutsche bank. never seen the end of it. there was always the assumption that the german government was not going to let deutsche bank kind of fade away. they had a literal vested interest in commerzbank, they
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bailed them out just a few years back. it feels like something is moving here, right? >> it absolutely does, i agree. we are also going into fourth-quarter earnings season for the banks on the u.s. side with more numbers coming out of deutsche bank and if they are not good it puts additional pressure on them to do something to make things better. alix: do savings need to fail a lot to make this happen? seems like they are doing ok, seems like enough to keep them >> in our investing world, cerberus has been the word on both of these for a couple of years and there is probably dealmaking going on behind the scenes as well with big investors, so we will see what happens. it's interesting to see that
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the government already part owns those investors and that's a lot to take on with large lenders. the buzz isaying, definitely out there in the report today on bloomberg has basically been evidence that they are talking with both the government and the commerzbank. >> this could be a way for them to get healthy and leave others out of it. end of the day, deutsche bank, german bank, they will be fine. >> right, they are called deutsche bank. [laughter] alix: steel markets? we liketeel business, that business, it has been an incredible source of yield for clients on the balance sheet and it's one that we will continue to be active in. know henry pretty well. what did you think of that? >> i always find it interesting when any part of kkr things
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about the debt market, you tend to tune in. lisa abramowicz wrote a great blog about something he said about leverage loans, backing off a little bit in a way that makes them more skeptical and they said that if kkr is even just a little skeptical about the leverage loan markets, literally the king of lbo, maybe take a step back. , but was some enthusiasm you really have to read pretty closely what he is saying. >> this coming off the global outlook that was released last season where they were scrutinized. a lot of that money flew out of leverage loans at the end of last year. kkr essentially saying that they were still positive on leveraged loans, but they think they need to be able to be more tactical, kind of changing how they are able to invest. and he said some interesting thing about how he is thinking liquid credit is going to provide cases that are better
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than equity like returns and giving you equity like returns compared with the private credit , which has been soaring over the last few years. alix: not what you want to hear -- i like you, but, i want to go out with you, but. >> he said there wasn't going to be an implosion of high-yield, so. [laughter] great articles on brexit over the weekend. hedge funds that were bearish on sterling, now we see it playing a rally with u.k. stocks because he thinks we might not have a brexit now? essentially had a great year last year, up 50% but he has had some very big losses as well. this is quite a turnaround for him, backing the support of the brexit deal, essentially saying that without leadership, the chaos that seems to be happening still in britain around brexit,
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he says he doesn't think it's going to happen, they won't leave and it will be a big bounce for the pound. love the money starting to move a little bit. you were just talking about london a few minutes ago about this trade and how people are -- hedge funds singapore. singapore is now moving its headquarters to the u.k.. talk about a reversal. >> this is orchard globe, not a small hedge fund, moving and it's not a binary threat. london will go on. the question is, du take advantage of it now? and what happens to the sector? alix: ok, fun, fun, fun. you can tune into jason on bloomberg radio every day, 2 p.m. to 5 p.m. eastern time. david, you are still in detroit, you have much more coming up for us? is not just about auto,
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it's all about air. date number four of the government shut -- 24 of the government shutdown, that's coming up next. this is bloomberg. ♪
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david: out here in detroit at the auto show, we are covering the shutdown right now and are joined on the telephone by the vice president of the national controller association. thanks for joining us. good to have you. trish, give us a sense of what the effect is on the are traffic controllers. i understand they are not getting paid. >> correct. we have been working for 24 days. than twohem drove more hours to get to work during a snowstorm.
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they are working and they are proudly working. morale is suffering, they just received a zero on their paychecks on tuesday. that's when some of them get paid. some of them are getting paid tomorrow as well. the reality is there. that regarding the statements, a lot of overtime work, a lot of commitment to country to do the job that they proudly do and received nothing for it. david: is everybody showing up for work? >> yes, they took an oath to provide for the public. the morale boosts that they are getting, pilots of thanking them for being there. they are there to provide the safety net that the public flying needs and deserves. it isn't just passengers on airlines, it's general business aviation, air ambulance, cargo,
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military, they are all flying and providing the service to all of them. is it realistic for a -- to expect a judge to order the government to pay them? >> i hope so. we all expect to go to work and do our jobs and do it well and get paid for the work that we do, so i hope the judge sees it that way. there was no due process involved with withholding. the numbers that i represent, they are like -- rightfully there for their pay. ok, trish gilbert, national air traffic control association, thank you for joining us now. when i came to laguardia i talked to the tsa people, they were saying they were pretty sanguine about it. i have to wonder how long that will last. the longer you go without getting paid, at some point you just say i'm going to keep calling in sick or i'm done. the question as we go into this unquestioned -- unparalleled
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government shutdown now. no question, it goes on and on and on. i got to sit down with steve carlisle and talk to him about china. alix: really looking forward to ont interview, especially the electric vehicle side. coming up, we are minutes away from the fourth quarter citigroup results. revenue ofs are for $17.5 billion with equities trading at $671 million. we will break down those numbers as they cross with a look at portfolio growth. this is bloomberg. ♪
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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. click or visit a retail store today. comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. alix: citigroup out with its fourth-quarter earnings and it is not pretty when it comes to fic. it is also almost half what they
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saw in the third quarter of this year. other numbers we are looking for, earnings coming in very strong. lighte coming in a touch at $17.1 billion. investment banking revenue was up by 8% quarter on quarter, coming in at $1.28 billion. that is better than what was expected. this and the market revenue actually fell by 16% quarter on quarter, estimates coming in light. markets are confused as to what they are looking for. immediate move lower and then it moved higher and now it is up over 1%. in terms of the end of period loans, they were up 3% of the -- but credit fell 7% the cost of credit fell 7%.
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of visibility, volatility was supposed to be good for banks. that is what they complained about for years. the kind of volatility they saw was bad for them. joining me now on set, allison williams of bloomberg intelligence. initial blush? allison: the numbers are disappointed that disappointing. we are not seeing anything specific on cost guidance. the cost guidance is a big part of the story with capital returns. the biggest part is the return on equity and the cost cuts are the way to get there. they thought they were going to miss the fourth quarter targets of the question is will they make up for that year? so far, it looks like they are talking about committing on the return on the tangible commodity
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equity target. points, to your point, if they maintain that, what kind of new expense cuts and initiative will we see? what is next? they have said about 100 basis points this year versus the adjusted number. been 58.3.would have they wanted to come around 57.3. they said they were going to miss about 10 basis points. if they did miss, can they add that on to next year? vague on thattle front in terms of giving any kind of commitment. i don't have the specific numbers in front of me. alix: the numbers are really staggering. down 39% quarter on quarter. is any of that surprising to you? allison: it is difficult because
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the numbers imply it is going to be down as of early december. we saw a lot of volatility. it inl look to see was the rates and currency business? they tend to be much bigger than other companies because they are one of the leaders in their business. to have a 21% decline in fic does not bode well for the rest of their peers. jpmorgan a bigger -- another one of the biggest leaders and we don't have their numbers yet. alix: equities was down 16% quarter on quarter. allison: equities came in a little bit light but your equities business is much smaller than the others. it is probably going to be about a mix of derivatives.
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business has been great for the equities. that is going to continue to come in this quarter pretty good but some of the other businesses may see some pressure and the prime business as well. alix: if you are just joining us, citigroup earnings out. big beat on earnings. revenue coming in light. the big number we are talking about is that fic number, coming down 39% quarter on quarter. equities also missed estimates and are down quarter on quarter. the m&a advisory route is up by 47%. let's pivot on the investment banking and m&a. what is your take? allison: m&a much more successful than expected. solidly but that is
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definitely a positive surprise. the numbers that we have seen fourth quarter closing, very strong but the question is going to be on the outlook. this bodes well for some of the other companies in terms of withting m&a across, but the announced deals impacted by thevolatility, what are pipelines, what are you hearing from clients? getting getting -- fic a little more color. how much of that will be cleared once we get out of the december volatility and how much of that is a structure will growth issue? allison: for the equities business, we are seeing talk of some big ipos. we had really strong equity underwriting up until this quarter win a lot of the volatility kicked in. -- when a lot of the volatility
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kicked in. there is a lot of concern about where the market is going in the future, so if you want to go public, now is probably the time to make sure you get out there. alix: join me on the phone, charles peabody of portales research partners. last time i was on with you, you said we will see a buy the dip within banks. they rallied 10% to 15%. what do you expect? we're going to see a little bit more of a rally because what you have here is a situation that you had multiple compression over the past 12 months. you have not had dramatic earnings reductions yet. you will not get those until you find some kind of problems in credit.
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as long as credit is good. you pointed out they had a 7% decline in provisions this quarter. the stoxx continue to rally a little bit. alix: when you take a look at fic coming in light, how do you take that? you feel like that part of the business has not been priced in? charles: the bottom line is, revenue was week and i expect expect was weak and i citi to be the lowest. i think that was priced in. i think people were expecting that. alix: we heard from the press , theye saying that 2019 are committed to do -- to delivering 12% and continuing to improve operating efficiency during the year. what the you take that to mean? -- what do you take that to mean? charles: the target is something
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that is within their control or they have greater financial engineering capabilities to hit has a large share buyback. they'reciency target if going to maintain the 200 basis points of efficiency, they're going to fail in hitting that target. my guess is on the call today, they will walk back that 200 basis points and try to keep expenses flat. alix: do you feel like we are going to see a rally over all? what does this mean for the rest of the bank guys? who do you like the most? charles: i am in the buy the dip mode and i doubt that barbell strategy where i will go with quality and some names that have a little bit of hair on them. i ame quality side, willing to look at bank of america because they are pretty steady. those with a little bit of hair, look at goldman sachs. alix: nelson williams of
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bloomberg intelligence and charles peabody of portales partners, thank you both. already kind of a nasty pace in the morning and this might not help. s&p futures down by about 19 points, right around what we have seen the last hour. day, solar flat on the the bond market, the european industrial output also fell. yields down by about three basis points. crude off by about 1%. that is going to be a china global trade story is all the question marks about china percolate. shaw --us now is seem a cema shaw. >> financials have not been my favorite for a while.
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it is difficult to tell what is happening this week. think in a cyclical situation like this, you do not expect the banking sector to do particularly well. the one thing i was expecting is that given expectations have fallen so much further, maybe we could have a slight bounce back. alix: we have seen industrials get quite hard to hit quite hard. what sector do you think might be dislocated from the fundamentals in terms of sentiment? seema: it is becoming increasingly difficult to divide up by sectors. ahead,e is a slow down
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which may suggest cyclicals could do better this quarter. within each sector, i would think now, the -- have they priced into much recession risk, if they have, then maybe they are the ones to get behind because i don't expect a recession for this year. i don't think the expectation has gotten to negative -- gotten too negative. it goes sector by sector and company by company. alix: seema shah of principle global investors will be principalith us -- of global investors will be sticking with us. -- fell to 57.4%. important because it is the operating efficiency that is going to be key on the call. look for a 100 basis point reduction. what does that mean for 2019 and cost-cutting?
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coming up, china's exports and imports posting the biggest drop since 2016. plus global growth, that is coming up next. this is bloomberg. ♪
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alix: china's trade gets hit by the trade war. the country dickey exports and imports most the worst drop since 2016 in december. a rush of orders expected to be tariffs fade. here with us from london is seema shah of principal global investors. what does it mean for e.m. and europe? seema: that is one of the things that we have, the market is
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generally moving away from focused on the china-u.s. side. i'm confident we will reach a -- point for the chinese economy. mergers were similar to mergers that were introduced last year. the worrying sign for china is what their relationship is with europe. we know the germany economy has slowed a lot because of that weakness in the chinese economy but it works two ways. it is going to have a negative impact on china. -- outlookoutlet for for china is more cloudy than a few weeks ago because of that european dunnage. -- itit feels like the us feels like this export/import number is going to be more backwards looking. what kind of visibility do you have in the first half of this year? they are trying to beat
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that date on the tariffs. the numbers are little bit worse than people were expecting, taking that into account. we probably won't have any clarity until march or april because of the chinese new year. i do think march and april we theld reach a -- for chinese economy and those numbers shouldn't -- should improve. that forincreasingly the u.s. and china, there is pressure to back away from this tariff war and make the various concessions each side needs. one thing that continues to concern me and has not gone away is that this tariff war has almost become a tech war. is the underlying issue which seems unlikely to be resolved in the near future.
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alix: what does that mean for putting money to work in different sectors? seema: the one thing it is telling me is to be cautious of technology going forward. i don't think there is going to be a recession this year. i think there is a slowdown ahead. i am still fearful for the tech side because of that tech war. we might see a boost in china growth. they should get a resumption in those strong numbers later in the year. eventually having export controls on chinese tech companies from the u.s., that means that some of the u.s. tech companies are going to continue to suffer. as a leading sector in the u.s., that is fearful for u.s. equities and that is why i believe that for the rest of this year, we will continue to be testing those lows we saw in december. alix: seema shah, great to see you. coming up, pg&e's blooming bankruptcy.
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this is bloomberg. ♪
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alix: welcome back to bloomberg daybreak: the americas. from thetin is live north american international auto show in detroit. it is time for the bottom line, looking at three company stories worth watching. big surprise i am watching an auto company, particularly cadillac as it relates to china. the story of cadillac has been falling in the united states but growing dramatically in china. i spoke with steve carlisle and asked if they are worried about what is going on with chinese car businesses. steve: we would hope these trade issues would find their way to the rearview mirror as the year goes on but even with that uncertainty, it is still an enormous market. david: basically what steve said
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is maybe it is a soft patch but it is still a big market and they think it is a huge opportunity. alix: that also has to do with electric vehicles right? they're going to have a fancy cadillac with electric vehicle. i am: one of the things picking up year is the extent to which china is going to drive the electrification. that is what people are anticipating. alix: i am looking at a gold merger. i used to cover gold back in the day. this merger to me is crazy. newmont buying goldcorp. i never thought i would see the day where this kind of merger would happen. wi-fi in find interesting about this is a comes on the heels of -- these are now two of the largest gold companies in the entire world. this was the bogus -- the biggest gold deal ever.
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reserves are declining for gold and it is a quality of gold story. if you don't have good gold to mine, it costs more. that is why companies are feeling pressured to merge at this time. anyway, i am looking at that. a $10 billion deal. an unbelievable transition for the company. the third company story we are watching his pg&e. the story for this is the company -- watching is pg&e. the story for this is the company -- potential liabilities of $30 billion or more. the question is where does it go now? the ceo basically quit. we've got to said move on with a new ceo. for more, i am joined by andy. what does this mean for the bond market?
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andy: a negative for the bonds. should behe bonds fully covered but you don't want to get in the way of a technical selling. they went from investment grade to high-yield and now they are likely to be nonperforming bonds. alix: are there any secondary traits we need to look at? andy: more money going after the secondary trades. edison international, the other big california utility. some for energy as well. it isal money we made yield co. they have about 10% of their exposure. if we get some panic selling, we think that is a good place to be. the parent company will more than offset contract rejections from pacific gas & electric. what has more downside? natural gas providers who are giving power to pg&e?
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perhaps some of the alternative energy contracts that might be up for grabs? what do you see in that part of the industry? andy: it remains to be seen if they reject the purchase power. pacific gas & electric buys $3 billion of power across the board from everyone. , it is go out and reject going to raise their cost to capital and finding a new renewable deal essentially forever. $3 billion purchasing. nobody really knows but if they do start rejecting contracts, it is going to raise the cost of capital and the yield code has the biggest exposure. their parent company has the balance sheet to offset any contract rejections. alix: fairpoint. how much of this is a ploy to push california into helping them not go bankrupt and how much is for real? andy: it is a tough one to call.
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it is interesting to see the governor working behind the scenes. he was completely silent after the election and then within getting an office, we have three reports of bankruptcy and a notice to the employees today. it is tough to read what this governor is thinking. alix: going forward, say they go into bankruptcy. what is the next step for them? this issue is not going to go away. you will still have natural disasters. the wildfire issue is not going to go away anytime soon. toy: they say they will have perform the inverse condemnation. i tend to agree with them. whether or not the legislators want to do that, whether or not the governor wants to do as his first act in office, sort of bailout the utilities, it does not make sense in this state, especially california. alix: andy devries, great to get
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your perspective. coming up, we had back to the north american international auto show in detroit where david talked to jim hackett, ford president and ceo. it was a rough quarter for the bank. the only goodngs part. revenue missed. fic, absolutely terrible. also a brightking spot, up 8% as good m&a advisory revenue popped as well. this is bloomberg. ♪
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alix: this is bloomberg daybreak. a couple things going on in the market. weaker trade data out of china is going to be weighing on the market, whether it is in europe, asia or here in the u.s.
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citi disappoints and that is weighing on equities as well. s&p futures off by about 21 points. italian banks getting hit pretty hard. ecb says they are having some problems, shocker. in other asset classes, you have a mixed dollar story. flat for euro-dollar after industrial output fell. the ftse doing well. the dollar weaker against the u.s. dollar. theresa may ruled out a second referendum and that adds a little bit of optimism in the market i guess. how meaningful will it be for market participants? crude off by over 1%, dragged down by china, global growth fears as well. i mentioned citi.
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the good, earnings coming in very strong, $1.61 per share. investment banking revenue up 8%. a nice pickup in deposit and loan growth. the bad is things like equity trading coming in light at $668 million, lighter than estimated. a bond and stock underwriting pretty bad. the really ugly is going to come from fic. that came in at $1.94 billion, quarter on quarter, 21% year on year. financials have been beaten up so hard. it had been a terrible year. the price-to-earnings ratio getting totally creamed. have we seen all the bad news? ?ould it have been worse let's get an update on what is
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making headlines outside the business world. viviana hurtado is here with the "first word news." viviana: there is new pressure on chinese negotiators to reach a deal with the u.s.. 4%,rts were down more than imports falling 8%. both are the worst results since 2016. and chinathe u.s. expressing optimism after mid-level trade talks wrapped up. president trump is firing back after a report on his relationship with russia. he says he could not care less for details of his conversation with vladimir putin were released. the washington post reporting he took his interpreters notes after his 2017 meeting with the russian leader and told the interpreter not discuss the matter with other officials. 24 days into the partial u.s. government shutdown, one of trump's biggest allies once the government reopened at least temporarily. lindsey graham says if congress cannot strike a deal within three weeks, the president
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should declare a national emergency and build the wall. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. alix: thank you so much viviana. day 24 of the u.s. government shutdown, senator lindsey graham want and center. >> i tried to see we can open up the government for a limited time to negotiate a deal and the president said let's make a deal and then open up the government. nancy pelosi says even if he opened up the government, i would not fund a wall. that is why i am depressed. alix: joining us now from his office, jpmorgan g -- chief u.s. economist. michael, good to see you. how much is because of the shutdown? michael: it is entirely because of the shutdown. government is about 20% of the partialand when even a
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shutdown occurs, that reduces the number of hours worked in the government sector. that leads to a slower growth in gdp. one thing i would point out is that does not incorporate any possible knock on effect to private sector activity. so the government obviously is an intermediate input in other things that the private sector does, whether it is travel by air. those things start to get impacted in a big way, which i don't think have happened yet, but that could magnify the effect. so far we don't think this is spilling into the private sector. we still have a glimpse in the economy with things like weekly jobless claims which do not show that things have started to deteriorate but the longer this goes on, the bigger a risk that becomes. alix: s&p also saying that over the weekend as well, saying this shutdown could shave off real gdp in the quarter for each week that part of the government is closed. the u.s. economy will have lost
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$3.6 billion by last friday and may seem like pennies for the world's biggest economy but it means a lot to workers without their paycheck. you did not upgrade the second quarter. i would think that once they got their paychecks there would be some payback. michael: if we reopened the government, payback next quarter, but we are also incorporating the fact that this could drag on longer than anticipated which would have some knock on effect. secondly, i think the risks are sorting to skew toward the downside when you look at some of the survey and sentiment measures and the global backdrop. you are right that this should give us, when we reopened and hopefully soon, that we should get some payback in the second quarter but so far we are taking a cautious approach. alix: i love that you say when and then laugh. does go rate hikes now for the fed. you were at three earlier.
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how does this affect how the fed might be looking at the economy? from chair heard powell last week that he is seeing things similar to the way we described earlier. now, if we reopened the government within a few days, i don't think it would affect our outlook which does not have hikes until the second half of the year. if this drags on, they could do more serious -- it could do more serious damage to the economy. right now, i don't think it affects the outlook for second half rate hikes but the longer it goes on, the more we have to revisit. alix: michael feroli of jpmorgan, so great to catch up with you. i am here in new york and david gets to be in detroit talking cars. we miss you here. is very interesting. we got to sit down with jim
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hackett, the ceo of ford yesterday. he talked about restructuring beyond getting rid of some people in europe. all that is part of his $11 billion restructuring plan. talk to him we about the u.s. car market and he says it is pretty solid. jim: i am not happy about ford gt performance that year -- forward's dashboard's -- ford's performance that year. we are moving from the oldest product line in the industry to the most refreshed. are all newroducts in the next two years and that is going to be really important. you put that against what kind of market do we expect? i think the auto business is going to be solid. the economy itself has signals that create uneasiness but i don't think there are any markers that say we are going
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into any kind of recession. david: what affect your business the most? ratesis -- is it interest or concern over things like trade conflicts? jim: sentiment is a big deal. if people are borrowing for their vehicle, they want to believe their jobs are safe. interest rates can matter because it changes the cost of the vehicle. i think it is right now just about things are firing on all cylinders in our economy but for political strife over policy and some trade issues. we have had great employment. i think it is worth stepping back and saying it is in pretty good shape and it can run for a while like that. david: we are seeing that here at the detroit show. 70% of the vehicles are trucks and suvs. ford was early and saying we are
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going to get out of the passenger vehicle in -- passed -- passenger vehicle business. does it give you some satisfaction, people trying to catch up? jim: i am smiling but we fumbled one part of it. we never want to give up those customers. we want them to know that silhouette is coming. the suv performance taught us what people here in their vehicles. it has to do with the right the thirdgroom in row, the ease of getting in and out and fuel efficiency. all these new models can give them both. you can have it both ways. we think as customer start to see these new products, they will pop into the. some of those -- hop into them. some of these sedans are not going away until all of these new models. they can stay in the ford brand.
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david: you said you were going to be having a major restructuring. we have heard from ford europe that there are going to be some big changes with thousands of people let go. where are you in that process? how much of that $11 billion is represented by europe? jim: it is a fair question. we took time to be thoughtful about how to do this. in north america, when we changed the silhouette of these vehicles, we were able to protect jobs. you never heard of any plant closings coming from ford. if there were any differences because of that, we shifted people around. we still produce. we are the highest in the industry for producing vehicles in america for america. our blue-collar workers are in good shape with the plants we have. as it relates to europe, this is
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not just a new problem. i want to do the company just 19 months ago. this has been around for decades. it is not only ford that has had to deal with this. we think there is a design in the future that allows us to be there with ford branded products. we have to get the industrial system in the right construct for that. i am not going to pull any punches. brexit hurt the evolution of that business model. without got -- without that, there could have been other choices. a substantial part of what we are earmarking was for restructuring in europe. david: the volkswagen board said they are going to go ahead with discussions with ford. what you we expect out of that? how much of that arrangement will be cooperating on more traditional internal combustion engines? jim: i want to build the context of what is behind this. we have a bill for restructuring
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what we would call the existing business. we have $23.5 billion cash. we have enough to manage that and we have a bill for the new world economy. it is not going to be for the faint of heart. thate going to make sure balance sheet is really safe. we want to protect that dividend. the idea of being able to fund both the change in the old and the new is why i have thought about other partners. but we don't have to sell ford to do that. we don't have to sell the brand to do that. we can invest in like-minded technologies. that is more to come on that score as we finish details. but the motivation is pretty high and we don't own that by ourselves. there are outside investors that have come into the auto industry
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to help fund new technology you are reading about. david: more to come but the buzz around is that we may hear very soon, more details about the vw-gm venture. he was so honest. it is a hard environment and they need scale to make the transition. looking forward to more from the auto show. the restwe expect from of wall street and earnings season? we discuss. this is bloomberg. ♪
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viviana: this is bloomberg daybreak.
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coming up later on bloomberg markets, an exclusive interview with the ford executive chairman. alix: wall street did not get a good read from citi this morning. fic down 21% year on year. drogen,me now, leigh estimize founder and ceo. financials were down a lot at the end of the year, pricing in volatility in the bond market. a lot of people were looking at it and wondering why it was down. we got the read on it with jeffries. i think across the board, it is going to be tough. caughtf these banks got holding some stuff, especially in the junk market. they may have had to liquidate
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some stuff. that vol, there was a lot. i think it is going to be tough across the board. you will see fic numbers continue to come down until we get another week out. over theking at sales last month, they have been hammered across the board. the first question, what sector revisions are not down enough? quarterhe consumer last , we talked about this a lot. we are coming over the crest of the best for consumer discretionary and we still think it is not down enough. if we get an earnings recession and 2019, it is going to be because of that. we are floating pretty close at this point.
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industrials we are also worried about as well, seeing a decline ahead of where the street is. china numbers were not good last night. one of their worst revisions there. tech is down a lot already. the problem with 2019 earnings is if you look at the global eps since the great recession, it has been all tech. it is not enough to get this market going if that is what is driving it which is what has been driving it. alix: we mentioned industrials and goldman sachs talked about cyclicals and said their valuations may mean more earnings going forward, that the price action is eating earnings estimates. what sectors don't have that? -- beating earnings estimates. what sectors don't have that? leigh: financials, probably.
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we have another week of bad revisions probably and then i think it may clear up. the xls and just the sector in general was hit harder than i think a lot of people expected at the end of the year. it was bleeding to the downside. often that will also lead a recession but i think it is down a lot and i would expect that to be the loser going forward. alix: was interesting is if you come inside the bloomberg, this is earnings estimates, sales estimates and growth margin estimates for the s&p. growth margin estimates are holding up much better than sales and earnings. what do you make of that? leigh: we are down a lot for tech and that is the driver of those gross margins. since the great recession, the increase in gross margins has come from tech and since we are at 3.5%, that is very low relative to what we have seen. it may be hard to push it down much from their, especially
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given you won't see too much more financials. if it happens, it is going to come from consumers. those gross margins are not that high to begin with. we don't have much room left. we are historically high but that is a part of the general structure of the nature of our economy. alix: the worst may be over but we are still factoring in other sectors. good to see you, leigh drogen of estimize. in new york,ngs david westin is in detroit talking about all things auto. david: we have a new car for you. we are joined by the president of toyota north america. good to have you with me. we have a super you will not show me, but explain to me about the supra and how it is going to help you accomplish what you need because you have a lot of margin pressure. jim: if you look at why you sell cars, do you sell because any
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volume, profitability and strategic reasons. supra as a lot for the strategic's -- strategic reasons side. this will be a fifth-generation car. talking about top management, they said we need to get more profit management in part because we have to invest in electrification and autonomy. can you do that with the product line you have? jim: i think you have to call some product back. if you look at the history of found it was not reaching our strategic goals, we reduced product. you will see that. , it wasicle like supra cut back in 2002 and we're going to bring it back in. david: are we going to have a prius of the future? think the previous stays
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but you will see more hybrids in the lineup. sales were 9% of our hybrids. by 2020, that is going to be up to 15%. as we look forward to 2025, probably all of our lineup will have some kind of electric option. david: is that because consumers are demanding it or because the government is pushing in that direction? jim: a little bit of both. especially younger consumers are looking for more environmental vehicles. as we all struggle to meet the future campaign, we have no choice but to electrify vehicles. david: how much is china driving it? jim: china is driving it and europe is driving it as the move away from diesel. david: how about trade? you said you have concerns about what trade can do to your business. jim: it is all business. there is no american-made car.
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if you look at a vehicle like camry, the best-selling -- the best selling car in america, we build a ton of them in kentucky. that vehicle ticket cost goes up by 18%. vehicles like tundra go up almost $3000. there are huge ratifications. david: we have the chinese issues that are pending. what effect could that have? 17.3 million municipal in american this year. how many units could you lose? jim: it all depends. as cost goes up, if you look at the average consumer, the monthly payment they are paying segment by segment has not gone up very much. five dollars,be six dollars a year. $2000, $3000ing price increasing, it is going to
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reduce the overall volume of the industry and we are going to have to produce less vehicles and employ less people. david: how do you see the u.s. consumer right now? the economy is doing well, employment is in good shape. there was a lot of uncertainty about trade or the government shutdown. are you seeing it in the control room? jim: not yet. what drives our business is consumer confidence in the industry. interest rates are still at historically low levels. we will see an uptick maybe one or two times this year. that will have a moderate impact, but it is consumer confidence. the more disruption consumers see, the less willing they are to take on debt risk. -- -- what is the biggest biggest risk in 2019? jim: the overall consumer. david: thanks so much to jim lentz, president of toyota north
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america. alix: thanks so much, david. let's take a look at citi. earnings coming out. it has been an interesting world for citi. the stock is unchanged after falling as much as 2%. earnings coming in at $1.61 per share. that was the good part. you also had deposit growth of. -- up -- growth up. , coming in as fic very much below estimates. billion, down 39% quarter on quarter, 21% year on year. it is the story of the volatility in december was bad for the big banks. investment banking still coming in pretty strong. advisement revenue up by 47%. deposits and loans coming in
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quite strong as well. the tax reform helped them as well. this is the last quarter we're going to see that tax reform benefit. questions as to the efficiency ratio. the goal was to improve the operating efficiency ratio 200 basis points, 100 last year alone. there you have the stock off by 1%. in addition, you have a tough take because of china data weighing on the markets as well. coming up, bloomberg markets: the open with jonathan ferro. this is bloomberg. ♪
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jonathan: from new york city, i am jonathan ferro. the countdown to the open starts right now.
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coming up, u.s. earnings season kicking off. citigroup reporting disappointing results. the global growth story weakening. europe data looking softer. in the u.s. government shutdown entering a record day before with no end insight -- no end in sight. good morning. s&p 500 -3.5%. euro is weaker. treasury yields down a basis point. investors worldwide looking for quarterly reports for signal in the noise. >> earnings -- >> earnings would like you have to watch as earnings come out. >> right now, it is single stock risk. it is not macro, it is earnings. >> i think earnings will be even softer. >> it is forward-looking. >>


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