Davos Day Five: Tech-Led Rally, Middle East Tensions | The Pulse With Francine Lacqua 01/19/2024
FRANCINE: GOOD MORNING AND WELCOME TO OUR LAST DAY OF OUR SPECIAL COVERAGE FROM THE WORLD ECONOMIC FORUM. I'M FRANCINE LACQUA HERE LIVE IN DAVOS. HERE'S WHAT'S COMING UP. TECH BACK IN THE DRIVER'S SEAT AFTER TSMC'S OUTLOOK DROVE A 160 BILLION GLOBAL RALLY IN SCHIP STOXX. U.K. RECESSION SIX GROW AS RECESSION RISKS PLUMMETED IN DECEMBER, TRADERS ADD TO BETS ON BOE RATE CUTS. PLUS, IT IS THE FINAL DAY OF THE WORLD ECONOMIC FORUM.
WE WILL BE JOINED THIS HOUR BY THE SAUDI FINANCE MINISTER. DON'T MISS A DISCUSSION I WILL BE HOSTING ON THE GLOBAL ECONOMIC OUTLOOK. PANELISTS INCLUDE THE ECB PRESIDENT CHRISTINE LAGARDE AND THE GERMAN FINANCE MINISTER CHRISTIAN LINDNER. WE WILL BRING YOU THAT LIVE ON
BLOOMBERG AT 10 A CLAIM -- 10:00 A.M.. THE FRENZY OVER OBESITY DRUGS HAS SEEN DENMARK'S NOVO NORDISK BECOME THE MOST VALUABLE COMPANY IN EUROPE. NOVO HOLDING IS RESPONSIBLE FOR MANAGING THE HOLDINGS OF THE NOVO NORDISK FOUNDATION, ONE OF THE LARGEST ENTERPRISE FOUNDATIONS ON THE WORLD AND IS THE CONTROLLING SHAREHOLDER OF NOVO NORDISK. I'M PLEASED TO BE JOINED BY KASIM KUTAY, THE CHIEF EXECUTIVE OF NOVO HOLDINGS. IT IS SNOWY IN DAVOS. WITH YOUR MONEY TANK BIGGER
THAN EVER, WILL YOU BE ACTIVE IN 2024 BUYING COMPANIES INTO DOING M&A? KASIM: ABSOLUTELY. WE WILL CONTINUE TO SCALE OUR ACTIVITIES. AS YOU SAID, WE HAVE SIGNIFICANT DIVIDENDS COMING FROM OUR OPERATING COMPANIES. WE HAVE TWO OPERATING COMPANY'S, NOVO NORDISK IS ONE.
WE NEED TO SCALE UP AND PUT THAT MONEY TO GOOD WORK ON BEHALF OF THE FOUNDATION. AND THE GREAT WORK THAT THEY DO. WE EXPECT TO BE BUSIER THAN EVER. AND ARE LOOKING TO POTENTIALLY OPEN ONE NEW OFFICE THIS YEAR AS WELL, TAKING OUR TOTAL TO SEVEN OFFICES. FRANCINE: OFFICES AND M&A, IS THERE A COMPANY YOU WOULD ACQUIRE TO MAKE THE FIT BETTER? KASIM: YES, WE DO M&A PARTICULARLY OUT OF ONE OF OUR TEAMS THAT WE CALL PRINCIPAL INVESTMENTS, WHICH IS WITHIN OUR LIFE SCIENCE DIVISION. AND THERE WE DO A FAIR AMOUNT OF BUYOUT ACTIVITY IN THE LIFE SCIENCE AND HEALTH CARE SECTOR. I CAN'T GO TO TOO MUCH DETAIL BUT WE DID A COUPLE OF THEM LAST YEAR AND WE ANTICIPATE DOING A PARAMOUNT MORE IN 2024. AND GOING FORWARD BECAUSE THE
CASH FLOWS COMING OUR WAY WILL BE QUITE SIGNIFICANT IF YOU LOOK AT THE FORECASTS IN TERMS OF HOW THE CLASS WILL BE DOING IN THE COMING YEARS. FRANCINE: DO YOU HAVE AN IDEA OF HOW MUCH YOU WANT TO SPEND AND WHAT REGIONS YOU WANT TO TARGET? KASIM: SURE. WE PUT IN PLACE OUR NEW STRATEGY , WE CALL IT STRATEGY 2030. IT WILL TAKE US THROUGH TO 2030. ESSENTIALLY, IT RECONFIRMS OUR ASSET ALLOCATION, AND IF YOU LOOK AT OUR INVESTMENT PORTFOLIO, 50% WILL BE ALLOCATED TO LIFE-SCIENCES.
50% WILL BE CAPITAL INVESTMENTS, WHICH IS OUR NONLIFE SCIENCE ACTIVITIES. ROUGHLY SPEAKING, WE WILL MAINTAIN THAT ALLOCATION. ASIA IS FAIRLY NEW FOR US. WE OPEN SINGAPORE THREE YEARS AGO AND I EXPECT WE WILL OPEN ANOTHER ASIA OFFICE IN 2024. WE SEE SCALING THAT WILL TAKE PLACE THERE ACROSS OUR LIFE SCIENCE ACTIVITIES. FRANCINE: WHAT ARE YOU MOST EXCITED ABOUT? TO TARGET OTHER COMPANIES THAT DEAL WITH OBESITY, OR DO YOU FEEL LIKE YOU HAVE THAT COVERED? KASIM: WE ARE NOT A STRATEGIC INVESTOR.
WE DON'T INVEST ON BEHALF OF NOVO NORDISK. OUR MANDATE IS TO GENERATE ATTRACTIVE LONG-TERM RETURNS ON THE ASSETS OF THE NOVO NORDISK FOUNDATION FOR THE BENEFIT OF PEOPLE AND SOCIETY. WE'RE NOT A STRATEGIC INVESTOR, WE'RE A RETURN FOCUSED INVESTOR. INDEED WE TRY TO AVOID THE AREAS THAT NOVO NORDISK FOCUSES ON, SO WE'RE NOT INVESTING IN DIABETES AND OBESITY AS SUCH. WE THINK ABOUT IT IN TERMS OF OUR DIVISIONS AND GROUPS.
WE HAVE A VENTURE TEAM DOING BIOTECH VENTURES. WE ACTUALLY HAD A VERY ACTIVE YEAR BECAUSE WE FOUND VALUATIONS ATTRACTIVE. THE BIOTECH SECTOR TOOK A BIT OF A HAMMERING STARTING IN LATE 2021, SO WE FOUND A 2023 AN INTERESTING TIME TO TAKE ADVANTAGE OF THAT.
WE HAVE A GROWTH EQUITY TEAM AND THE PRINCIPAL INVESTMENT TEAM WHICH IS OUR BUYOUT TEAM. BUT GROWTH EQUITY IN ASIA IS A EXCITING PLACE. FRANCINE: EVEN IN TERMS OF VALUATIONS? KASIM: ACTUALLY, YES. WE HAVE SEEN SOME INTERESTING OPPORTUNITIES.
OBVIOUSLY, INDIA IS AN EXCEPTION TO THAT. VALUATIONS ARE -- YES, WE ALL KNOW WHERE THE MULTIPLES ARE. ACROSS THE REST OF ASIA, WE SEE INTERESTING OPPORTUNITIES BUT DESPITE THE VALUATIONS IN INDIA, WE HAVE BEEN ACTIVELY INVESTING. FRANCINE: INDIA HAS HIGH VALUATIONS FOR A REASON. IS THERE A PLACE TO INDIA TO ALMOST RIVAL CHINA NOW THAT GEOPOLITICS IS CHANGING THE TRADE WARS BETWEEN THE U.S. AND CHINA? KASIM:
DEPENDS WHAT YOU MEAN BY RIVALRY. BUT CERTAINLY, INDIA IS BECOMING A VERY IMPORTANT DESTINATION FOR THE RE-SHORING THAT IS TAKING PLACE. BUT WE DON'T THINK ABOUT IT IN TERMS OF RIVALRY, WE THINK ABOUT THE HEALTH CARE OPPORTUNITY. WHETHER IT BE CHINA OR INDIA, IF YOU LOOK AT THE HEALTH CARE NEEDS OF THOSE SOCIETIES, THEY ARE SIGNIFICANT. THAT'S EXACTLY WHAT WE'RE INVESTING AGAINST. FRANCINE: IF YOU LOOK AT INSURANCE IN
INDIA, HEALTH INSURANCE, IT'S NOT SOMETHING WE'RE SOMETHING OF THE CUSP OF. KASIM: UNIVERSAL HEALTH CARE COVERAGE ACROSS ASIA, INCLUDING INDIA, AS THESE SOCIETIES DEVELOP AND THE MIDDLE CLASS GROWS, IT'S AN INEVITABILITY. IT'S A QUESTION OF TIME. WE'RE SEEING THE BEGINNINGS OF BROADER HEALTH CARE COVERAGE. BUT SEVERAL OF THOSE NATIONS HAVE AMBITIONS DO HAVE UNIVERSAL HEALTH CARE IN PLACE. THAT PLUS THE COMMENDATION OF THE BURGEONING HEALTH CARE INSURANCE INDUSTRY IN THOSE MARKETS.
I'M GLAD YOU MENTIONED THAT BECAUSE THOSE ARE THE SORT OF THEMES THAT MAKE US EXCITED ABOUT THE REGION. FRANCINE: IS IT A 20 24 GAME CHANGER IN TERMS OF MAKING SURE THAT THE TREND IS THERE? DOES IT DEPEND ON GROWTH, BUT ALSO THE MENTALITY OF POLITICIANS AND WHAT CITIZENS WANT? KASIM: I DON'T KNOW IF 2024 IS NECESSARILY A GAME CHANGER. I THINK THESE TRENDS HAVE BEEN WORKING THEMSELVES FOR A WHILE. BUT CERTAINLY, WE SEE AN ACCELERATION. BUT 2022 AND 2023 WERE EXCITING YEARS FOR US IN THAT REGION. ASIDE FROM ASIA, WE WILL BE
SCALING SOME OTHER OF OUR ACTIVITIES. FRANCINE: WERE YOU SURPRISED AT HOW MUCH THE OBESITY TREATMENTS CAPTURED VALUATION, CAPTURED THE IMAGINATION OF EVERYONE? BECAUSE IT SEEMS THAT EVERY SINGLE LIFE SCIENCE BIOTECH COMPANY NOW WANTS TO BE IN THAT SPACE. KASIM: YES, OBVIOUSLY, NOVO NORDISK BLAZED A TRAIL IN TERMS OF OBESITY TREATMENT. I THINK THE SCIENTIFIC DATA, PARTICULARLY AROUND THE SELECTED TRIAL DATA, ALL TALKED TO THE COMORBIDITIES.
THAT'S THE IMPORTANT THING TO BE FOCUSED ON. THIS IS NOT JUST ABOUT OBESITY, ALL THE COMORBIDITIES AROUND IT, WHETHER IT BE CARDIOVASCULAR DISEASES, KIDNEY DISEASE, HYPERTENSION, ETC. I THINK THE SCIENTIFIC DATA TODAY CLEARLY SUPPORTS THE TREND AND THE NEED TO TREAT OBESITY TO TREAT A LOT OF OTHER CONDITIONS.
THAT IN TURN SPEAKS TO PREVENTATIVE HEALTH CARE WHICH I THINK IS SOMETHING CRITICAL FOR OUR SOCIETIES TO BE FOCUSED ON. FRANCINE: HOW MUCH DO YOU EXPECT THAT MARKET TO GROW IN THE COMING YEARS? KASIM: I CAN'T COMMENT ON SPECIFICS. THAT'S FOR THE COMPANY TO COMMENT ON BUT THE FORECASTS ARE OUT THERE IN TERMS OF ANALYST RESEARCH. EVERY TIME I OPEN A RESEARCH REPORT, THE NUMBER IS EVEN HIGHER. I THINK THERE IS A BROADER APPRECIATION.
AS THE PUBLICATIONS LIKE THE SELECT TRIAL DATA FROM NOVO NORDISK SUPPORT THE NEED TO TREAT OBESITY, IN ORDER TO TREAT THESE OTHER COMORBIDITIES, THAT'S GOING TO BE A POSITIVE TAILWIND. FRANCINE: WE HAVE HAD HEADLESS CONVERSATIONS ON INFLATION. THIS IS SLIGHTLY OBSESSIVE FOR INVESTORS. IF INFLATION COMES DOWN, DOES
IT MAKE YOUR LIFE EASIER AS AN INVESTOR? KASIM: I THINK WHAT MAKES OUR LIFE EASIER AS AN INVESTOR IS MORE IMPORTANTLY, A CERTAINTY, AT THE END OF THE DAY WHETHER INFLATION IS AT TWO OR 2.5, OR CLOSER TO 3, I THINK THE WORLD WILL ADAPT TO. BUT I THINK THIS WILL UP THE VOLATILITY IN 2024, DESPITE WHAT I BELIEVED TO BE A CONSTRUCTIVE ECONOMIC BACKDROP, IS THE UNCERTAINTY ABOUT WHEN WILL RATES START TO DECLINE? BY HOW MUCH. AND INDEED, WHAT IS THE TERMINUS WHERE THEY WILL FINALLY SETTLE? YOU PUT THAT ALONG WITH THE GEOPOLITICAL ISSUES BEFORE US, AND I THINK 2024 WILL BE A YEAR WHERE WE NEED TO FASTEN OUR SEATBELTS. FRANCINE: THANK YOU FOR YOUR TIME TODAY.
KASIM KUTAY, CHIEF EXECUTIVE OF NOVO HOLDINGS. WE WILL SPEAK TO SAUDI ARABIA'S FINANCE MINISTER, AS CONCERNS ABOUT STABILITY HEIGHTENED IN THE MIDDLE EAST. THIS IS BLOOMBERG.
FRANCINE: WELCOME BACK. SAUDI ARABIA EXPRESSED CONCERN ABOUT MIDDLE EAST SECURITY, AS THE FALLOUT FROM THE ISRAEL HAMAS WAR SPREADS ACROSS THE REGION. TO TALK ABOUT THAT AND FIND ITS ACROSS THE REGION, I'M DELIGHTED TO BE JOINED BY SAUDI ARABIA'S FINANCE MINISTER. WE ALSO WELCOME YOU ON BLOOMBERG RADIO. 2024 IS GOING TO BE AN INTERESTING YEAR.
WHAT ARE YOUR MAIN CONCERNS? MOHAMMED: I CAME TO DAVOS WITH CERTAIN CONCERNS. A LOT OF PEOPLE HERE ARE CONCERNED ABOUT THE GEOPOLITICS. I THINK FRAGMENTATION TO SOME EXTENT IS UNDER CONTROL. BUT IT IS AN ISSUE FOR THE WORLD ECONOMY. AS IMF SAID, IT MAY SHRINK THE WORLD ECONOMY BY 2.5 TO 7% GLOBAL GDP. FRANCINE: WHEN YOU LOOK AT POLICIES SAUDI
ARABIA WILL PUT IN PLACE THIS YEAR, WHAT WILL BE YOUR THREE TOP PRIORITIES? MOHAMMED: TO DOUBLE DOWN ON WHAT WE'RE DOING IN TERMS OF REFORM AND DIVERSIFYING OUR ECONOMY. WE DON'T WANT TO BE DERAILED BY WHAT'S HAPPENING. THAT SAID, WE'RE ALSO ENGAGING HEAVILY OUR DEVELOPMENT MACHINE TO MAKE SURE WE DE-ESCALATE THE REGION, AND TRY AND FIND SOLUTIONS TO SITUATIONS IN THE REGION. FRANCINE: WHAT DO YOU DO WITH THE PRICE OF OIL RIGHT NOW? ONE OF THE STRATEGIES WAS CUTTING PRODUCTION. THAT MAKES IT HARDER AGAINST THE BALANCE OF BOOKS. MOHAMMED:
I'M NOT WORRIED ABOUT THAT. AT ALL, ACTUALLY. IN 2023, WHEN WE ANNOUNCED THE PROJECTION FOR THE REVENUES, IT WAS ON THE BACKDROP OF 00 A BARREL AND A PROJECTION OF ABOUT 11 MILLION BARRELS. WE ENDED THE YEAR WITH 20% LESS THAN THE PRICE, 17% LESS THAN THE PRODUCTION BUT STILL REVENUES CAME ABOVE WHAT WE PROJECTED. WE ARE CONSERVATIVE IN OUR PROJECTIONS, SO WE ARE MANAGING IT. FRANCINE: IN DECEMBER, YOU SAID SOME PROJECTS ASSOCIATED WITH VISION 2030 WOULD BE DELAYED. I DON'T KNOW WHAT THAT MEANS JANUARY 2024, WHAT DO YOU SEE DELAY IN? MOHAMMED: I THINK THE GAME IS EFFICIENCY. AND ECONOMIC VALUE.
WE WANT TO MAKE SURE EVERY DOLLAR SPENT IN THE ECONOMY IS NOT LEAKING. I.E., YOU DON'T NEED TO IMPORT TOO MUCH FOR YOUR OWN DEVELOPMENT BUT RATHER DEVELOP YOUR OWN ECONOMY. THAT'S NUMBER ONE, A KEY PRIORITY. NUMBER TWO IS OVERHEATING. EVEN IF YOU HAVE THE CAPACITY TO SPEND, YOU DON'T WANT TO SPEND TOO MUCH OF THAT WILL ACTUALLY CAUSE MORE INFLATION. THESE TWO BALANCES ARE VERY IMPORTANT IN WHAT WE ARE DOING. PRIORITIZING WHAT NEEDS TO BE DONE NOW AND WHAT NEEDS TO BE DONE BY 2026, BY 2030. WHAT CAN BE EXTENDED TO 2035.
DANI: CAN YOU UPDATE US ON ANY CHANGES IN INCOME TAX FOR INDIVIDUALS IN THE KINGDOM? MOHAMMED: THERE IS NO INTENTION IN SAUDI ARABIA TO IMPOSE INCOME TAX ON INDIVIDUALS. THAT HAS BEEN OUR POSITION VERY CLEARLY. WE MOBILIZED LOCAL RESOURCES. WE HAVE VAT, WE HAVE INCOME TAX ON CORPORATES AND FOUR AND INVESTORS. -- FOREIGN INVESTORS. NO INTENTION OF CHANGING THAT. WE ARE TRYING TO RATIONALIZE SOME OF THE BURDEN IN THE ECONOMY TO MAKE IT EVEN MORE BUSINESS FRIENDLY. FRANCINE:
CAN YOU UPDATE US ON ANY FINANCING THAT SAUDI ARABIA WILL PUT IN PLACE? WHETHER IT IS EUROBONDS OR OTHER ISSUANCE? MOHAMMED: WE WERE IN THE MARKETS EARLY IN JANUARY. WHAT WE WANTED TO ISSUE IN THE FIRST QUARTER, WE ISSUED. WE ANNOUNCED OUR DEBT PLAN FOR THE YEAR TO MAKE IT MORE PREDICTABLE FOR THE MARKET. WE WILL TURN TO MARKETS AS OPPORTUNITIES ARISE. I THINK IT IS IMPORTANT. OBVIOUSLY, MARKET CONDITIONS WILL DICTATE WHEN TO GO TO THE MARKET AND FOR HOW MUCH. WE NEED TO MANAGE OUR
LIABILITIES THIS YEAR, BUT ALSO FOR YEARS TO COME. FRANCINE: YOU ANNOUNCED A THREE TRANSIENT 2 BILLION BOND, WHERE WILL THE FINANCING OF THIS GO? MOHAMMED: WE HAVE A DEFICIT OF ABOUT 2% OF GDP THIS YEAR. WE NEED TO FINANCE OUR DEFICIT. ALSO, WE NEED TO ACCELERATE SOME OF THE EXPENDITURE. WE HAVE LOGISTICAL PROJECTS, WHETHER IT IS RAILROADS, AIRPORTS THAT WE ARE BUILDING. WE HAVE SIGNIFICANT WATER TREATMENT PLANTS THAT WE WANT TO EXPAND BECAUSE WE WANT TO MAKE SURE SERVICE TO OUR PEOPLE IS PROVIDED WITHOUT INTERRUPTION. AND RENEWABLES.
WE HAVE A LOT OF RENEWABLE PROJECTS THAT WE NEED TO MAKE SURE WE HAVE THE FINANCING FOR. FRANCINE: WE ARE ABOUT TO DO THEIR GLOBAL ECONOMIC OUTLOOK PANEL TOGETHER. WHAT ARE YOU MOST CONFIDENT ABOUT IN THE WORLD ECONOMY? 2023 COULD HAVE BEEN A DIFFICULT YEAR IN TERMS OF FINANCING. WE GOT THROUGH IT. IS THERE NOW TOO MUCH OPTIMISM ABOUT THE WORLD ECONOMY? MOHAMMED: THERE IS ACTUALLY GOOD SIGNS THAT THINGS ARE MOVING IN THE RIGHT DIRECTION. BUT STILL I THINK WE NEED TO DO MORE. MULTILATERAL DEVELOPMENT INSTITUTIONS ARE REINVENTING THEMSELVES, WHICH IS VERY GOOD. LOW INCOME COUNTRIES NEED A LOT
OF SUPPORT. THEY NEED GROWTH. WE ARE LACKING GROWTH, AND WE NEED TO MAKE SURE WE FIND WAYS TO HELP LOW INCOME COUNTRIES FIND A PATH TO GROWTH. FRANCINE: AND THIS WOULD BE PRIVATE PARTNERSHIPS, PRIVATE-PUBLIC? IS THERE A DANGER THAT WE ARE SO DISTRACTED WITH ALL THE CRISES THAT WE FORGET THIS UNDERLYING NEED? MOHAMMED: WE ARE DISTRACTED AND POSSIBLY HAVE THE TENDENCY TO DEAL WITH IMMEDIATE ISSUES. WHICH NEED TO BE TENDED TO LIKE INFLATION AND OTHERS. BUT WE ALSO NEED TO LOOK AT THE MEDIUM TERM. WE NEED TO IMPLEMENT POLICIES THAT WILL HELP GROWTH MEDIUM AND LONG-TERM. OTHERWISE WE WILL END UP WITH
SLUGGISH GROWTH. FRANCINE: ON THE GEOPOLITICS, WHAT CONCERNS YOU ABOUT TRADE AND SUPPLY CHAINS? DO YOU SEE THAT IS SOMETHING THAT COULD LAST A LONG TIME, OR IS IT TOO SOON TO SAY? MOHAMMED: FRAGMENTATION DIRECTLY MEANS INFLATION. THOSE WHO THOUGHT THEY WILL HURT THEIR OPPONENTS REALIZE IT IS HURTING THEMSELVES AND THEIR PEOPLE, THEREFORE, THEIR VOTERS. THERE ARE EASING TENSIONS, POSSIBLY LIMITING WHAT IS RESTRICTED, WHICH IS ACTUALLY A GOOD SIGN. HOWEVER WE ARE SEEING SIGNIFICANT TRADE RESTRICTIONS IMPOSED IN 2022 EXAMPLE. 3000 RESTRICTIONS WERE IMPOSED COMPARED TO THREE TIMES MORE THAN WHAT WAS IN 2019. THAT IS ALARMING, BUT I'M
HOPEFUL WE ARE GOING TO SEE A MORE RELAXED APPROACH TO THE FRAGMENTATION. OBVIOUSLY, GEOPOLITICS IMPACTS TRADE. WE WANT TO MAKE SURE NAVIGATION ROUTES ARE KEPT SAFER. CREWS OF SHIPS GOING THROUGH THE NAVIGATION ROUTES ARE KEPT SAFE AND NOT BE HARMED. FRANCINE: MINISTER, THINK YOU FOR YOUR TIME.
THAT WAS MOHAMMED AL-JADAAN, SAUDI ARABIA'S FINANCE MINISTER. WE HAVE TO GO TOGETHER TO THIS GLOBAL ECONOMIC OUTLOOK PANEL. WE WILL BE BACK AT THE TOP OF THE HOUR AND DISCUSS THIS OUTLOOK TO WRAP UP THE WEEK HERE IN DAVOS. PANELISTS INCLUDE ECB PRESIDENT CHRISTINE LAGARDE, THE GERMAN FINANCE MINISTER CHRISTIAN LINDNER AND THE WTO SECRETARY-GENERAL. THE Y KRITI: GOOD MORNING, I'M KRITI GUPTA IN LONDON AND THIS IS "THE PULSE."
CONGRESS PASSED A TEMPORARY SPENDING BILL TO AVERT GOVERNMENT SHUTDOWN THIS WEEKEND. IT WILL BE SENT TO THE WHITE HOUSE WHERE PRESIDENT BIDEN PLANES TO SIGN IT. THE SHORT-TERM PACKAGE GIVES LAWMAKERS TIME TO COMPLETE NEGOTIATIONS ON ANNUAL FUNDING FOR THE FISCAL YEAR THAT BEGAN IN OCTOBER. THE U.S. IS PREPARING TO INTRODUCE A PLAN TO REQUIRE BANKS TAP THE FED'S DISCOUNT WINDOW AT LEAST ONCE A YEAR TO ENSURE LENDERS ARE READY FOR TROUBLED TIMES. LAST YEAR'S REGIONAL BANKING
CRISIS REVEALED THAT SOME WORK TO SET UP OPERATIONALLY TO QUICKLY BORROW FROM THE FACILITY. JP MORGAN HAS RAISED TO CEO JAMIE DIMON'S PAY TO $36 MILLION AFTER IT REPORTED THE HIGHEST PROFIT IN THE HISTORY OF AMERICAN BANKING. HIS PAY IS UP 4.3% FROM 2022 WITH A .5 MILLION SALARY AND THE REST COMING AS PERFORMANCE INCENTIVES.
JP MORGAN REVENUE LAST YEAR WAS JUST SHORT OF $50 BILLION. THE EU ANTITRUST REGULATOR IS EXPECTED TO BLOCK AMAZON'S PROPOSED .4 BILLION ACQUISITION OF RUMBA MAKER IROBOT. THE E-COMMERCE GIANT WAS TOLD YESTERDAY THAT THE DEAL WOULD LIKELY BE REJECTED. A FINAL DECISION BY EU LEADERS IS DUE BY FEBRUARY 14, WITH A DEAL ALSO LIKELY TO FACE OPPOSITION IN THE UNITED STATES. COMING UP, SHIPPING COSTS SOAR AS HOUTHI ATTACKS IN THE RED SEA THREATEN TO CRIPPLE GLOBAL TRADE.
WE TAKE A CLOSER LOOK AT EVENTS UNFOLDING IN THE MIDDLE EAST. THIS IS BLOOMBERG. ♪ KRITI: TECH BACK IN THE DRIVER'S SEAT AFTER TSMC'S OUTLOOK DROVE A 160 $5 BILLION GLOBAL RALLY IN CHIP STOCKS. IN THE U.K., RECESSION RISKS GROW AS RETAIL SALES PLUMMET IN DECEMBER, FALLING THE MOST IN THREE YEARS. TRADERS ADDING TO BETS ON A DOVISH BOE. IT'S THE FINAL DAY OF THE WORLD
ECONOMIC FORUM. STAY TUNED FOR A DISCUSSION ON THE ECONOMIC OUTLOOK FEATURING ECB PRESIDENT CHRISTINE LAGARDE AND THE GERMAN FINANCE MINISTER AT 10 A.M. LONDON TIME. I'M KRITI GUPTA IN LONDON. FRANCINE LACQUA IS ON LOCATION. YOU ARE SEEING A REALLY INTERESTING DYNAMIC WHEN YOU LOOK AT THE STOXX 600. YOU ARE SEEING GREEN ACROSS THE CONTINENT, HIGHER 0.4%, THE FTSE 100 OUTPERFORMING.
ACROSS THE ATLANTIC, FUTURES SEEING A MASSIVE BID. THIS IS THE RIPPLE EFFECT OF THE MASSIVE TECH RALLY IN THE U.S. SESSION YESTERDAY. YOU SAW IT IN THE ASIAN SESSION AND IT IS FEEDING RIGHT BACK INTO THE U.S. SESSION. DOES THAT CREATE SELLING LATER IN THE EUROPEAN TRADE? MONETARY POLICY ALSO TOP OF MIND, WHICH BRINGS US TO THE CROSS ASSETS STORY. YOU ARE SEEING A SUSTAINABLE MOVE ABOUT 4%. 4.13 ON THE 10-EURO THE MOMENT. A LOT OF RATE CUT BETS NOT SHOWING UP AT THE SURFACE.
A LOT OF IT HAS TO DO WITH GEOPOLITICAL AND INFLATIONARY CONCERNS. PLUS, THE CURRENCY PICTURE IS WHERE THE DISLOCATIONS ARE COMING BACK TO EARTH. EURO-DOLLAR 1.08, CABLE AT ABOUT 1.27. BRENT CRUDE HIGHER BY 0.4% AND TRADING AT A $70 HANDLE. I WANT TO DIVE MORE INTO GEOPOLITICAL TENSIONS IN THE MIDDLE EAST AND TALK ABOUT A WEEK THAT HAS BEEN GRIPPED BY VOLATILITY. I BROUGHT IN TWO EXPERTS. ROS MATHIESON, BLOOMBERG'S NEW DIRECTOR FOR THE MENA REGION PLUS MARC CHAMPION WHO COVERS INTERNATIONAL AFFAIRS FOR BLOOMBERG OPINION. I'M GOING TO START WITH WHAT'S
GOING ON THIS WEEK. PRESIDENT JOE BIDEN MADE SOME CONTROVERSIAL COMMENTS THE LAST 24 HOURS SAYING THAT THE EFFECTIVENESS OF THE U.S. AND U.K. AIRSTRIKES ON YEMEN MAY NOT BE AS EFFECTIVE. IS THAT GOING TO CHANGE THEIR COURSE OF ACTION, HE SAYS NO. WHAT DO YOU MAKE OF THAT STRATEGY? >> IT IS JUST ACKNOWLEDGING THE REALITY THAT FOR THE U.S., THEY
ARE KIND OF STUCK, BECAUSE THEY HAVE BEEN DOING AIRSTRIKES ON HOUTHI TARGETS IN YEMEN. EVEN SO, THE HOUTHIS ARE STILL STRIKING SHIPS IN THE RED SEA. NOT DAMAGING THEM SEVERELY BUT ENOUGH TO CAUSE CONTINUED DISRUPTION, FORCING SHIPS TO GO THE LONG WAY AROUND AND MAKING LIFE DIFFICULT FOR SHIPPING IN THE AREA. FOR ALL THESE AIRSTRIKES NOTHING REALLY IS CHANGING. AND REAL QUESTIONS ABOUT HOW MUCH, IF AT ALL, THE U.S. HAS DEGRADED THE HOUTHI ABILITY
ON THE GROUND. JOE BIDEN WAS REALLY ACKNOWLEDGING REALITY. THE QUESTION IS WHAT ELSE CAN THE U.S. DO, OR SHOULD THEY DO HERE? DO THEY WANT TO END UP WITH TROOPS INSIDE YEMEN? NOT IN AN ELECTION YEAR. SO WHAT CAN THE U.S. DO?
MORE STRIKES ON YEMEN? HOPEFULLY, THE HOUTHIS AT SOME POINT DECIDE TO STOP WHAT THEY ARE DOING. KRITI: IT ALSO COMES AT A TIME WHEN THE UNITED STATES UNDER PRESIDENT BIDEN'S DIRECTION HAS ADDED TO THE TERRORIST ORGANIZATION STATUS BACK TO THE HOUTHI REBELS, WHICH HE HAD INITIALLY TAKEN AWAY IN 2021 FOR HUMANITARIAN AID, GIVEN THAT YEMEN IS STILL DEALING WITH A CIVIL WAR CRISIS THERE. AS ROS PUT IT, THERE IS A QUESTION ABOUT WHAT THE UNITED STATES' ROLE IS. WHEN YOU LOOK AT HOUTHI STRIKES, THEY HAVE ACTIVELY TARGETED U.S.
COMMERCIAL VESSELS, DESPITE SAYING THEY ARE ONLY TARGETING VESSELS HEADED TO ISRAEL. IS THERE A QUESTION HERE ABOUT CREDIBILITY WHEN IT COMES TO THE AMERICAN MILITARY RIGHT NOW? >> THE U.S. WENT IN. WITHOUT QUESTION, THEY KNEW IT WOULD BE DIFFICULT IF NOT IMPOSSIBLE FOR THEM TO QUICKLY STOP THE HOUTHIS FROM ATTACKING INTERNATIONAL SHIPPING.
THEY WENT IN BECAUSE THEY FELT THEY HAD NO OTHER OPTION. THEY HAD TO SHOW THAT THERE IS A REDLINE. THAT THE U.S. STILL IS COMMITTED TO PRESERVING FREEDOM OF INTERNATIONAL NAVIGATION. THIS IS NOT THE ONLY STRAIT IN THE WORLD THAT IS OF CONCERN. THE STRAIT OF HORMUZ IS EVEN MORE IMPORTANT FOR ENERGY.
THERE IS ALWAYS AN ISSUE THERE AS TO WHETHER IRAN, WHICH OCCASIONALLY THREATENS TO DO SO, COULD SHUT THAT DOWN. THIS IS A SIGNALING EXERCISE. BUT IT DOES PUT THE U.S. IN A DIFFICULT POSITION. REALLY THE STRATEGY FOR THE U.S. TO GET THIS DONE IS TO DIAL DOWN THE WAR IN GAZA. BECAUSE THE HOUTHIS SAY THAT THEY BEGAN THIS IN ORDER TO END THE WAR IN GAZA. THE U.S. IS TRYING TO GET THE ISRAELIS
TO DIAL THAT WAR DOWN. BUT YOU HAD PRIME MINISTER NETANYAHU IN WASHINGTON YESTERDAY SAYING THAT HE IS NOT GOING TO STOP UNTIL IT IS FINISHED. AND REJECTING OUTRIGHT THE U.S. PLAN FOR TRYING TO DIAL DOWN TENSIONS IN THE MIDDLE EAST. BY SAYING HE IS NOT INTERESTED IN ANY KIND OF PALESTINIAN STATE. KRITI: WHAT DOES THAT MEAN IN TERMS OF WHO IS REALLY BEHIND ALL THIS? AT THE CORE, YOU ARE SEEING IRAN REALLY FIGHT MULTIPLE PROXY BATTLES.
WHETHER IT IS WITH THE HOUTHI REBELS, HEZBOLLAH, OR VARIOUS OTHER ORGANIZATIONS WITHIN EVEN IRAQ AND SYRIA, I AM CURIOUS WHETHER THAT MULTI PRONG APPROACH IS EFFECTIVE FROM THE IRANIAN POINT OF VIEW? >> WELL, IT APPEARS TO BE. THE HOUTHIS ARE PLAYING THEIR ROLE. THEY ARE CLEARLY PUTTING PRESSURE ON THE INTERNATIONAL ECONOMY, PUTTING PRESSURE ON THE U.S. IN ISRAEL, YOU HAVE HAMAS. WE DON'T KNOW THAT THE
IRANIAN'S BEGAN THIS AS A CAREFUL PLOT. BUT WHAT THEY ARE DOING IS BEING OPPORTUNISTS, PUTTING PRESSURE ON ISRAEL AND THE U.S.. THROUGH HAMAS, HEZBOLLAH, THEY ARE PROXIES IN SYRIA AND IRAQ. THIS IS A MULTI-PRONG ATTACK. THIS IS HOW THE ISRAELIS SEE IT. IT IS ONE REASON WHY THE ISRAELIS ARE BEING SO INTRANSIGENT. KRITI:
ROS, I WANT TO BRING YOU BACK IN, BECAUSE AS WE TALKED ABOUT HOW THE WEST DEALS WITH THESE CONSTANT THREATS FROM IRAN AND THEIR PROXIES, THERE HAS BEEN A LOT OF RHETORIC PRESSURING MORE OIL REVENUES. IS THAT REALISTIC RIGHT NOW? >> IN THIS ENVIRONMENT, IT'S INTERESTING TO SEE WHAT THAT WOULD ACHIEVE. YOU TALKED ABOUT JOE BIDEN REINSTITUTING THE TERRORIST DESIGNATION ON THE HOUTHIS. PERHAPS TO TRY AND CUT OFF SOME OF THEIR FINANCING. BUT IN THE END, TANGIBLY, WHAT WILL THAT ACHIEVE IN THE SHORT-TERM? SO THERE IS LOTS OF TALK ABOUT PENALTIES AND USING ECONOMIC PRESSURE TO FORCE NATIONS AND GROUPS TO CHANGE COURSE. BUT THAT'S OFTEN A TRICHET CALCULATION TO TAKE. AND TO DO THE RESULTS ACTUALLY
DELIVER WHAT YOU ARE SEEKING AT THE TIME? LOOK AT THE AMOUNT OF SANCTIONS ON RUSSIA OVER ITS INVASION OF UKRAINE, FOR EXAMPLE. THOSE WERE DESIGNED TO SQUEEZE THE RUSSIAN ECONOMY TO MAKE BOOT AND COURSE IN UKRAINE. THE WAR IS ABOUT TO ENTER ITS THIRD YEAR.
CERTAINLY, IT HAS NOT STOPPED HIM. HE HAS CRANKED UP A WAR ECONOMY IN RUSSIA INSTEAD. UKRAINE IS STRUGGLING ON THE GROUND WITH THIS CONFLICT. THESE QUESTIONS OF USING OIL AND SO ON AS A WEAPON AGAINST IRAN, IRAN ALWAYS WANTS TO BE ABLE TO SHIP MORE OIL.
BUT IS IT GOING TO DETER IRAN WITH THESE PROXIES? AT THIS POINT, IT'S HARD TO SEE HOW. KRITI: IT AS TO THE PRESSURE THAT THIS NEEDS TO BE A CRISIS THAT IS WRAPPED UP EVEN MORE QUICKLY, DESPITE THE ESCALATION YOU ARE ALREADY SEEING. MARC, I WANT TO BRING YOU BACK FOR THE FINAL WORD, BECAUSE JUST THIS WEEK ARAB STATES HAVE SAID THEY WILL BE LEADING THE BROKERING OF SOME SORT OF PEACE PLAN TO END THE CONFLICT BETWEEN ISRAEL AND HAMAS. WHAT IS THE REALITY OF THAT? DO YOU THINK THAT IS ACHIEVABLE? >> IS GOING TO BE VERY DIFFICULT. THE SINE QUA NON THEY SAY IS REQUIRED FOR THEM TO GET ENVELOPED SIGNIFICANTLY AND PLAY A BIG ROLE IS THAT THE ISRAELIS SHOULD RESTART THE PROCESS TO TALKS LEADING TOWARDS A PALESTINIAN STATE. A TWO-STATE SOLUTION. WITH THE ISRAELIS RULING THAT OUT AND SAYING THEY INTEND TO MAINTAIN CONTROL ALL THE WAY FROM THE BORDER WITH JORDAN TO THE SEA. THAT'S WHAT NETANYAHU SAID
YESTERDAY. IT'S HARD TO SEE HOW YOU GET THOSE TWO SIDES TO MEET. FRANCINE: IT IS A HARD LINE THEY HAVE BEEN STICKING TO I WANT TO SAY FOR DECADES TO COME. YET REALLY REINFORCING THAT NARRATIVE NOW. WE HAVE TO LEAVE IT THERE. THANK YOU FOR POINTING THIS
WEEK'S EVENT INTO CONTEXT. ROS MATHIESON IS BLOOMBERG'S EMEA DIRECTOR OF NEWS. COMING UP, WE GOT FROM THE MIDDLE EAST TO THE U.K. WE HEAR FROM THE U.K.
CHANCELLOR OF THE EXCHEQUER ON TAX CUTS, GOOGLE AND THIS YEAR'S GENERAL ELECTION. THIS IS BLOOMBERG. KRITI: U.K. CHANCELLOR JEREMY HUNT WANTS TO MAKE BRITAIN MORE COMPETITIVE. HE SPOKE TO FRANCINE LACQUA AT THE WORLD ECONOMIC FORUM IN DAVOS.
>> WHEN INVESTORS LOOK AROUND THE WORLD AT THE INSTABILITY IN OTHER COUNTRIES. THE RISE OF POPULIST, FAR RIGHT PARTIES IN MANY PARTS OF EUROPE. THEY SAY THAT EVEN WITH ELECTIONS, THE U.K. IS A VERY STABLE LONG-TERM BET.
THEY ARE ALSO SEEING SOMETHING THEY HAVEN'T BEFORE, WHICH IS THAT THE TECHNOLOGY SECTOR IS NOW SO VIBRANT IN THE U.K. THAT THEY CAN'T AFFORD NOT TO BE THERE. FRANCINE: WILL YOU TELL INVESTORS THAT WE WILL SEE A CORPORATION TAX CUT? >> THEY HAVE ALREADY SEEN A HUGE TAX CUT BECAUSE IN THE AUTUMN STATEMENT I INTRODUCED FULL EXPENSING OF CAPITAL ALLOWANCES. WHICH MEANS FOR INVESTORS
INVESTING CAPITAL, THEY GET A 25% DISCOUNT OFF THEIR CORPORATION TAX BILL WHICH IS MORE ATTRACTIVE THAN ANY OTHER MAJOR COUNTRY. WE WILL CONTINUE TO DO EVERYTHING WE CAN TO GET THE TAX BURDEN DOWN. THAT IS A CHOICE WE HAVE AS A COUNTRY BECAUSE OTHER PARTIES WILL INCREASE THE TAX BURDEN AND BORROWING.
WE THINK THE WAY WE GROW THE ECONOMY IS BY REDUCING TAXES. FRANCINE: WILL THAT HAPPEN IN THE NEXT BUDGET STATEMENT? IS THAT THE LAST FINANCIAL EVENT BEFORE THE ELECTION? >> IS EARLY DAYS FOR THE BUDGET, IT'S ON MARCH THE SIXTH, I HAVEN'T SEEN THE FINAL FIGURES FROM THE OFFICE OF BUDGET RESPONSIBILITY, SO I DON'T KNOW THE HEADROOM I WILL HAVE TO PLAY WITH. I CAN TELL YOU WHAT I WANT TO DO, BECAUSE I LOOK AROUND THE WORLD AND I SEE THAT NORTH AMERICA, ASIA, WHERE GENERALLY COUNTRIES HAVE LOWER TAXES THAN EUROPE, THEY ARE GOING FASTER. IN EUROPE WHERE OUR TAXES TEND
TO BE HIGHER, WE'RE GROWING MORE SLOWLY. IF I CAN, I WANT TO REDUCE THE TAX BURDEN AND MAKE THE U.K. MORE COMPETITIVE, DYNAMIC, VIBRANT. FRANCINE: WILL YOU DELIVER AN AUTUMN STATEMENT OR WILL HE HAVE AN ELECTION BEFORE THEN? >> THE TIMING OF THE ELECTION I WISH I COULD TELL YOU.
IT'S NOT THAT I'M HIDING IT, I JUST DON'T KNOW. THIS IS A DECISION FOR THE PRIME MINISTER. WHAT I HAVE TO DO AS CHANCELLOR'S MAKE SURE I SET THE ECONOMY ON THE RIGHT TRACK. THE MAIN REASON PEOPLE VOTE CONSERVATIVE IS BECAUSE THEY TRUST US WITH THE ECONOMY.
THEY CAN LOOK AT RISHI SUNAK'S RECORD AND SEE WE BROUGHT INFLATION DOWN FROM 11.1% TO 4%. SO FAR, WE HAVE AVOIDED A RECESSION EVEN THOUGH MANY PEOPLE PREDICTED WE WOULD GET ONE. AND THEY CAN SEE TERMINUS PROSPECTS FOR THE FUTURE. FRANCINE: U.K. CHANCELLOR JEREMY HUNT SPEAKING
TO FRANCINE LACQUA AT THE DAVOS FORUM IN SWITZERLAND. DAN HANSEN FROM OUR ECONOMICS TEAM JOINS ME ON SET. THEY WERE TALKING ABOUT THIS FISCAL BUDGET AND WHETHER OR NOT TAX CUTS ARE ON THE AGENDA. CERTAINLY DESIRABLE BY MEMBERS
OF GOVERNMENT, BUT ALSO FOR THE LIKES OF YOU AND ME. WE ALL LOVE EXTRA MONEY IN OUR POCKETS, BUT HOW REALISTIC IS THAT? >> I THINK THEY PROBABLY CAN TO BE HONEST. IF YOU GO BACK TO THE AUTUMN STATEMENT, WE CALL IT HEADROOM ON IN THE U.K., WHICH IS THE SPACE HE HAS AGAINST HIS FISCAL TARGET. HE HAD ABOUT 13 BILLION POUNDS OF HEADROOM.
SINCE THEN, WE HAVE HAD THIS BIG FALL IN INTEREST RATES AND GILT YIELDS AND A FEW OTHER MOVING PARTS. BUT I THINK HIS HEADROOM COULD POSSIBLY DOUBLE. HE COULD HAVE CLOSE TO 30 BILLION POUNDS TO SPEND. TO PUT IT IN CONTEXT, AN INCOME TAX CUT, ONE P ON THE BASIC RIGHT OF INCOME TAX IN THE U.K. WHICH IS 20%, WOULD COST HIM
ABOUT 7 BILLION POUNDS. HE WILL PROBABLY KEEP FUEL DUTY FROZEN AGAIN. TO ANSWER DIRECTLY, YES, I THINK THERE IS A FISCAL BOOST COMING AND HE WILL PROBABLY HAVE THE HEADROOM TO DO THAT MAINLY DRIVEN BY THIS FALL IN INTEREST RATES WHICH WILL BENEFIT THE PUBLIC FINANCES. KRITI: BUT ARE THERE OTHER EXPENSES THAT AREN'T BEING ACCOUNTED FOR, SPECIFICALLY IN THE CONTEXT OF GEOPOLITICS? WE HAVE HEARD RISHI SUNAK TALKING ABOUT AIRSTRIKES IN YEMEN. I IMAGINE THAT WILL COST THE U.K. A LITTLE EXTRA MONEY.
WE HAVE HEARD TALK ABOUT THE DEFENSE BUDGET IN THIS COUNTRY, IS THAT ACCOUNTED FOR? >> IT WILL BE ACCOUNTED FOR, BUT WHAT'S INTERESTING ABOUT THE FISCAL STRATEGY OF THIS GOVERNMENT IS WITH SO MUCH EMPHASIS ON TAX CUTS, IN ORDER TO BRING BORROWING DOWN WHICH IS WHAT YOU HEARD THE CHANCELLOR SAY, TO BRING DEBT BACK TO SUSTAINABLE LEVELS MEANS AN ENORMOUS SQUEEZE ON PUBLIC SPENDING. THE QUESTION WHEN WE POTENTIALLY SEE THESE NEW TAX CUTS TO ASK IS , IS IT REALISTIC TO EXPECT SPENDING TO BE SQUEEZED THAT HARD WHEN WE HAVE HAD SUCH A LONG PERIOD OF AUSTERITY IN THE U.K. BETWEEN 2017 AND 2019? THERE WILL ALWAYS BE THIS QUESTION OF LONG-TERM SUSTAINABILITY THE MORE YOU CUT TAXES. KRITI: LET'S TALK ABOUT THE MONETARY
POLICY. THE LAST ONE TO A LOT OF BETS ON THE BOE TO BE EVEN MORE DOVISH THAN THEY WERE EXPECTED TO BEFORE. HOW MANY RATE CUTS DO YOU THINK IS ACCURATE IN 2024? >> WE HAVE HAD A BIT OF A ROLLER COASTER. WE HAD CPI ON WEDNESDAY WHICH SAW BETS BEING PAIRED SIGNIFICANT LEE. 25 BASIS POINTS WAS TAKEN OUT
OF THE CURVE. WE WENT FROM 130 FOR THE YEAR DOWN TO 100. WE ARE NOW BACK AROUND 120, A LITTLE BIT LESS MAYBE. OUR VIEW IS THAT THERE WILL BE FIVE THIS YEAR. 25 BASIS POINTS, THAT'S 125, 525 BASIS POINTS CUTS. THAT'S ON THE AGGRESSIVE SIDE FOR THE ECONOMIST CONSENSUS.
THE THING TO REMEMBER IS THAT THERE IS STRONG EVIDENCE THAT INFLATION WILL BE AROUND 2% COME SPRING. THAT OPENS THE DOOR FOR THE BANK TO THINK ABOUT CUTTING RATES. WHEN IT CUTS RATES, OUR VIEW IS THEY WILL GO ONE A MEETING, INSTEAD OF ONE A QUARTER. SO I THINK FOR US, WE ARE PENCILING IN 125 AT THE MOMENT. KRITI: THE CALL FROM BLOOMBERG ECONOMICS.
DAN HANSEN JOINING ME TO TALK ABOUT THE MONEY ISSUES OF THE U.K. WE GO FROM THE FINANCES OF THE UNITED KINGDOM TO GERMANY. GERMAN BUDGET LAWMAKERS APPROVED THE FEDERAL GOVERNMENT BECAUSE DELAYED FINANCE PLAN FOR 2020 FOUR, WHICH RESTORES A CONSTITUTIONAL LIMIT ON NET NEW BORROWING FOR THE FIRST TIME SINCE 2019. OLIVER CROOK IS ALL OVER THIS STORY. IS IT OVER YET?
>> ALMOST, BUT NOT QUITE. WHAT THE IT IS IS ALSO THE QUESTION HERE. THEY GOT THIS THROUGH THE BUDGET COMMITTEE, IT NOW NEEDS TO GO TO PARLIAMENT TO GET FULLY RATIFIED IN THE BEGINNING OF FEBRUARY. WE GOT OVERNIGHT THE NET NEW BORROWING FIGURE THAT IS CLOSE TO 40 BILLION EUROS. THIS IS THE BIG DEBATE WITHIN GERMANY. THERE IS NOT ENOUGH MONEY TO GO
AROUND ANYMORE. ON OF THE THINGS THEY ARE SETTING UP IS THE RAW MATERIAL FUND FOR A BILLION EUROS. THAT MONEY HAS TO COME FROM SOMEWHERE, AND THE PLACES IT CAPERS FROM HAS CAUSES THESE FARMER PROTESTS THAT CRESCENDOED MONDAY WITH MORE THAN 5000 TRACTORS IN THE STREET. WE HAD THE TRAIN WORKERS ALSO STRIKING. YOU ALSO HAVE THE TRUCKERS DOING A PROTEST IN GERMANY. ALL OF THIS STUFF IS WHERE THE RUBBER HITS THE ROAD. WHERE YOU NEED TO MAKE THE
EXCHANGE OF REALLY RETOOLING THIS ECONOMY FOR THE FUTURE. KRITI: TALK TO US ABOUT ANY OPTIMISM HERE. WE'RE IN THE NEWS BUSINESS, WE NEED SOME GOOD NEWS EVERY NOW AND THEN. TALK TO US ABOUT IF THERE IS ANY REASON TO BE POSITIVE? >> I WAS LOOKING FOR GOOD NEWS IN THE ECONOMIC DATA.
SOME OF THE SURVEYS, BUT THERE ISN'T A HUGE AMOUNT OF IT. WE GOT THE DATA THIS WEEK OF THAT GERMAN ECONOMY CONTRACTING LAST YEAR. IT'S NOT LOOKING VERY MUCH BETTER THIS YEAR. THE QUESTION IS HOW DO YOU
SOLVE THAT PROBLEM IN GERMANY WHEN YOU ARE CASH-STRAPPED? WE ASKED THAT TO CHRISTIAN LINDNER, THE FINANCE MINISTER, IN DAVOS, WHAT HIS RECIPE FOR SUCCESS IS QUESTION MARK HE FAVORS SUPPLY-SIDE REFORM. HE IS A LIBERTARIAN. THAT MEANS A COLLECTIBLE LABOR MARKET WHICH IS MISSING PEOPLE. LOWER TAXES. WE NOW HAVE HIGHER TAXES DUE TO THIS BUDGET SITUATION. THE OTHER THING HE WOULD REALLY LIKE IS THE WHITE WHALE OF GERMAN ECONOMIC REFORM, WHICH IS CUTTING RED TAPE AND BUREAUCRACY .
BUT IN THE ABSENCE OF THOSE THINGS, THERE IS ANOTHER ISSUE TO DEAL WITH, THE RISE POLITICALLY ON THE FAR RIGHT. WE ASKED CHRISTIAN LINDNER ABOUT THAT. >> THEY HAVE VERY EASY ANSWERS FOR VERY COMPLICATED CHALLENGES.
THINK ABOUT THE BREXIT. THE SITUATION IS SIMILAR IN GERMANY. OUR RIGHT-WING POPULISTS, THEY SUGGESTED GERMANY WOULD BENEFIT FROM EXITING THE EUROPEAN UNION.
BUT THE SINGLE MARKET IS OF PARAMOUNT IMPORTANCE FOR OUR ECONOMY. >> THE TASK FOR THE GOVERNMENT IS CONVINCING THE PEOPLE TO STAY ALONG WITH THEM AS THEY MAKE THESE DIFFICULT REFORMS. AMONG A DEMING ECONOMIC OUTLOOK, YOU MAY GET CONTRACTION. GERMANY WILL BE THE SLOWEST GROWING NATION OF THE G20 EXCEPT ARGENTINA THIS YEAR.
THE OUTLOOK WILL BE TOUGH ECONOMICALLY AND WILL BE TOUGH POLITICALLY. KRITI: SOMETHING WE WILL BE KEEPING A CLOSE EYE ON. OLIVER CROOK REPORTING FOR US FROM BERLIN. COMING UP, THE CEO OF MORGAN STANLEY GIVES US HIS OUTLOOK FOR FED RATE CUTS AT THIS YEAR'S ECONOMIC FORUM IN DAVOS WRAPS UP. THAT CONVERSATION NEXT. THIS IS BLOOMBERG. KRITI: MORGAN STANLEY'S CEO SAYS THE DROUGHT IN MERGERS AND ACQUISITIONS SHOULD EASE ONCE THE FEDERAL RESERVE LOWERS BORROWING COSTS WITH SOME PREDICTABILITY. TED PICK SPEAKING TO BLOOMBERG
IN DAVOS. >> I THINK THE PATH IS PROBABLY THAT INFLATION HAS PASSED. THEY WILL START LOWERING AT SOME POINT. WHEN THEY ARE READY. THEY WILL BE PRUDENT. THAT KIND OF PREDICTABILITY IS
VERY GOOD FOR THE CORE INVESTMENT BANKING BUSINESS. KRITI: THE MORGAN STANLEY CEO SPEAKING TO BLOOMBERG IN DAVOS. HE IS NOT THE ONLY ONE WHO JOINED US. BLACKSTONE CEO STEVE SCHWARZMAN SAYING HE IS OPTIMISTIC THAT ANIMAL SPIRITS ARE RETURNING TO MARKETS ON HOPES THAT THE FED WILL BE SLASHING INTEREST RATES.
HE TOLD US THE PACE OF PRIVATE EQUITY INVESTMENTS IS PICKING UP AT THE WORLD'S BIGGEST ALTERNATIVE ASSET MANAGER. >> THE ECONOMY IS SLOWING A BIT. THAT'S NORMAL WITH HIGH INTEREST RATES. ON THE OTHERS' LINE OF THE LEDGER, -- SIDE OF THE LEDGER, THE EXPECTATION THAT INTEREST RATES ARE GOING DOWN IS CREATING ANIMAL SPIRITS AGAIN.
KRITI: BLACKSTONE CEO STEVE SCHWARZMAN THERE. YOU HEARD FROM SOME OF THE MAJOR MARKET PLAYERS. YOU ARE ABOUT TO HEAR FROM SOME OF THE MAJOR MONETARY AND FISCAL POLICY PLAYERS. NEXT, A DISCUSSION ON THE GLOBAL ECONOMIC OUTLOOK. PANELISTS INCLUDING ECB PRESIDENT CHRISTINE LAGARDE AND GERMAN FINANCE MINISTER CHRISTIAN LINDNER. THAT PANEL HOSTED BY OUR VERY OWN FRANCINE LACQUA.
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