Reuters Insider - Davos Today: Thursday 2014

Ken Financial Services

27/04/2014 11:22

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 Description:        Top interviews and news from the World Economic   
                     Forum including Russian Deputy PM Arkady          
                     Dvorkovich, Greg Jensen, co-CEO Bridgewater, and  
                     actress Goldie Hawn. Guest host John Studzinski.  
 
 
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Transcript (May be auto-generated)

 Good morning, everyone. It is Thursday, January 23. This is Davos Today brought 
to you by the World Economic Forum and Reuters. I'm Axel Threlfall outside of a 
heavily-guarded Congress Center that is right next to the library, the old 
library in Davos, the hub of the Reuters operation and home to the Davos Today 
studio, as you can see. That is where I'm headed now. Our guest host is waiting 
upstairs. Word of advice: Wrap up warm today, low of -7 expected in Davos. I'm 
delighted to welcome John Studzinski as our guest host. Good morning to you, 
John. Good morning, hello. We've got half-an-hour, lots to talk about with the 
guests and between us. Let me first though bring you the headlines. Iran's 
President says it may be possible to turn more than three decades of enmity with
the US into friendship if both sides make an effort. Rouhani due to address the 
World Economic Forum just off at 10AM this morning. Tensions between Tokyo and 
Beijing take center stage in Davos as Japan's Prime Minister called for military
restraint in Asia, and the senior Chinese academic brands him a troublemaker. 
The first day of Syrian peace talks in Switzerland end amid bitter divisions 
over the future of President Bashar al-Assad. But US Secretary of State John 
Kerry leaves the door open for Iran to participate in the discussions. And the 
EU threatens to take action against Ukraine over its handling of anti-government
protests after three people were killed during violent clashes in Kiev. Now 
Standard Chartered, the subject of renewed takeover talk this week, but CEO 
Peter Sands wasn't mincing his words when I asked him whether there was any 
truth in it. We're going to hear from Peter Sands a little bit later on. Let me 
get to John, delighted to have you. Good morning. We have you on the set every 
year. We've got you for half-an-hour this time. 

This is a little unsightly I know, but they're handing this jawbone things out. 
It records how long you sleep, how long you're in deep sleep. It records how 
many steps you take because health is such a big deal here. I slept about 4.5 
hours last night probably, so clearly I'm not partying hard enough. What is 
Davos about? Is it about the parties? Is it about shaking hands with the people 
you want to meet? Or is it about going to the sessions for you? Really it's two 
things: One, it's listening to people particularly in one-on-one. 

On a one-on-one context, you get the best insights, we all know that. But I 
think you also have a chance to listen to some very bright people. And most 
importantly, you get to watch the body language among very bright people 
particularly on panels and on other large forums just to watch how these very 
big world players all interact. And what have you seen, what have you noticed, 
what have you taken away from some of the body languages? Give us a little 
insight. Well, there's a lot more comfort now in the last two or three years 
about all the issues around China. 

China's not controversial. I think the new leadership is seen to be very much on
track. And I think you can see that in the sessions that I've attended and on 
the sessions that I've listened to. There's increasingly a focus as you know on 
wealth disparity and social inequality. And I think finally after Davos sort of 
dancing around this issue for three years, some of the sessions are starting to 
come to grips with this being a problem. I'm not yet hearing enough about what 
the solutions are. But the problems of it are really starting to be addressed. 

I know you're on the board of the IYF, the International Youth Foundation. Yes. 
I was speaking to Mr. Nassetta yesterday who I believe is also on this board. Do
you agree that they youth issue is still marginalized here, and how do you 
suggest we get this a little bit more mainstream because let's face it, John, if
we're not thinking about the next generation, there's not a lot of point in 
talking about what we're talking about? Well, the easiest way to deal with the 
youth issue would be if there was a UN resolution that ask all countries in the 
world to prioritize the engagement of youth into the work force, then that would
make it even more compelling. And I think once you prioritize something— look 
at how long it took the environment to be prioritized. Right. If we can 
prioritize youth employment, youth engagement, youth dignity, I think you're 
going to avoid a lot of the social activism that is going to continue. Okay, 
good. John, I'm going to stop it just there for now. 

We will talk about private equity as well, I promise. I want to talk a little 
bit about that. President Jose Manuel Barroso says the EU is shocked by the 
deaths of three people during violent clashes in Kiev. The Union has deplored 
the use of force to calm anti-government protests and called on all sides to 
halt the violence immediately. Joining me now, Russian Deputy Prime Minister 
Arkady Dvorkovich. Very good to see you again here in Davos. Let me start with 
the Ukraine. What happens next, do you think? Well, I think people will think 
twice about picking what they didn't. 

People should come to the table and discuss how to create a peaceful environment
and find solutions that will be comfortable for all the Ukrainians, not just 10%
or 20% but for the majority. And what role is Russia going to play in trying to 
bring things under control? Ukraine is our close neighbor and historically a 
close partner. And we're really concerned about what is going on. Economically 
we are very much integrated. In Soviet Union, goods are flowing back and forth 
and the Russian companies could not exist without the Ukrainian companies and 
vice versa. Now we are trying to reintegrate ourselves without contradicting 
Ukrainian move to, close to EU. So it's about finding the solutions both for 
Ukraine, Russia, and the EU. Are you going to talk to the EU? Are you going to 
talk to the protesters? We'll talk to Ukrainian government. We'll talk to EU. 
And I think that three parties should come together and discuss those things. 
Right. 

John, I don't know if you want to comment on this one? I mean clearly this is a 
concern. It's a stability issue in the region. What does it mean to you? Well, 
the Ukraine has been one of the most, given the importance of gas and the role 
that natural resources play with the Ukraine, but we have to remember that the 
Ukraine, from an agricultural point of view, it's one of the most richest part 
of the world and has a great potential to even be a richer agricultural thing. 
So there's no question that from an economic point of view, Russia, the EU, and 
the Ukraine have to develop a very good sort of close integrated relationship. 
Well, it has to happen. It's out of balance right now and it's a question of 
balance. 

And right now, I think that's what the protesters are commenting on. And it's 
probably time for people to sit around the table and listen rather than 
protesting. Right. And that's going to happen soon? Well, people should, on the 
sense of taking arms and going against policy is not the right way to do those 
things. Protests should be peaceful and people should discuss things and should 
try to find a peaceful solution. You cannot afford to have to war in a country 
like this. Let's talk about energy. The Iranian President's here, it's clearly 
important. Rouhani is meeting with oil ministers. What does Russia feel about 
Iran, the prospect of Iran starting to pump a lot of oil again? I think both 
Russia and peers made together very good steps towards the peaceful resolution 
of the Iranian nuclear issue. And Iran is making good steps towards 
implementation as its plans have been approved by the parties, by six parties 
involved in the talks. And all the parties involved are lifting some sanctions 
now. And at some point it will restart oil drillings. How soon? Well, it 
depends. 

It's still up to the people who negotiate those issues. But at some point, this 
will happen. John, you were saying something about the oil? I mean clearly this 
is an important issue here. Mr. Rouhani is speaking this morning of course. How 
are you watching this? I'd be interested, Deputy Minister, in your view. 
Clearly, the rapprochement with Iran right now which is very powerful and I 
think it's going to make very good progress is going to change the whole chess 
board in the Mid East and certainly with Iran. How do you see, given Russia's 
relationship historically with Iran and Russia's relationship with the rest of 
the Mid East, how do you think Iran becoming much more integrated again as a 
player, how do you think that will affect what's happened in the Mid East? The 
Middle East process is still difficult. Iran isn't, it's not a single issue. 
Syria is much more difficult. But Iran is a big country. It has population of 
millions of people and an important player in the region. But all parties, all 
countries all people should be taking into account including the interest of 
Israel and people of Israel, Iran, and other players. Otherwise, we will not 
have good solution for the issue. Deputy Prime Minister, I know you've got to go
because you've got a breakfast meeting, but very, very quickly when we look at 
the capital outflows, the current account surplus shrinking, if you look at the 
surprises to the downside on growth, what more are you going to do to prevent 
capital flow? What measures will we see from Russia? The most important thing we
are doing right now is implementation of the road maps to improve investment 
climate. We formulated road maps together with our companies – small, medium, 
and big companies – and this is an exercise that we do together. Last year, 
we're able to move a few places in the ratings of the World Bank, Bloomberg 
doing business. We are going to push each other. We are going to improve. And 
this is a major step to improve the investment plan. Yeah, John comment, is it 
enough when you hear things like that for investors in this country? Well first 
of all, let me congratulate you on the Sochi Olympics. I think that's wonderful,
but I'd be interested, my Chairman, Mr. Schwarzman is on Putin's international 
investment advisory group and one of the things that we're conscious of is that 
certain sectors like oil and gas are often very difficult for foreigners to 
participate in. Whereas other sectors in the consumer space, in the 
telecommunications space have historically been very attractive. So if you were 
giving advice to a foreign investor, where would you want them to focus in the 
future as areas of investment? Oh, beside the traditional things - energy and 
consumer products, agriculture and infrastructure. Two things that would be 
important in the medium term state. I think agriculture is very interesting. 
Alright, Deputy Prime Minister, many thanks for talking with Reuters this 
morning. We've got to let you go now, many thanks for coming in. Thank you. 

Now, Davos can be a treacherous place from the record number of panels and 
business meetings to the late night parties and icy weather. We asked some 
long-time Davos devotees what they do to survive the five-day forum. Now, banks 
are fed up being the bad guys after taking much of the blame for the global 
financial crisis. There's a sense they're fighting back. 

Joining us now, Jeremy Bennett, CEO of Nomura International. Already having a 
chat with our guest host I can see. Jeremy, thanks a lot for coming in. Just a 
general question on the investment banks, where are you going now? You had 
regulations coming out of Euroasia. Where does it go now? Johnny, did you just 
rolled your eyes? Well, I hate the word "regulation". I think it's one of those-
it's like a four-letter word. Well, I want to ask how regulation is affecting 
private equity as well but- No. I probably should earn up to- I spent five years
as- worked for the Treasury and being a regulator as well as being as an 
investment banker. Now, I mean, this regulation is not necessarily a bad thing. 
I think I said yesterday - I was speaking to the panelists today, if I was in 
requirement side, I- if you pass a law, you should really abolish a law. So it's
all about moving regulation on rather than just building, building layers of 
regulation. Yeah. And are we moving regulation on? Yeah, I think we are. I think
there's a lot of good stuff that's happened actually and I think often being a 
regulator much maligned thing in banking circles which is wrong. Fundamentally, 
a lot of good work has been done. And I think the banking sector is getting a 
safer place to be. Sure. Including the investment banks. Alright, you mentioned 
your previous role. 

But then we look at LIBOR, the probe- we look at the FX probes. And as the bad 
guys, I've got to say it looks like business is usually, doesn't it? There's a 
long way to go. There's a long way to go. The industry has got to improve its 
culture. I think ultimately, an awful lot of work is now going on around the 
industry on improving the culture of investment banking. And I think that's at 
the core. Ultimately, you can't write enough rules and regulations to cover all 
the things that can go wrong in an investment bank. And ultimately, it's about 
the culture of the industry. I think Jeremy is making a very good point. 
Remember, 2008 is about bad governance. And 2008 was basically a lot of the 
regulations that followed it are reaction to bad governance. But the issue with 
regulation is it's like a pendulum. It's a question of- you've been in the 
position of being a regulator, being in government, how do you manage the swing 
of the pendulum from being not enough regulation to too much? I think the 
pressure on regulators is not to be underestimated. Yeah. And again, credit to a
lot of the regulator around the world in coming up with what I think is a 
relatively balanced response to a public- let's face it, that feels that none 
else has been done very often. So now I think we have very good regulators- I 
mean, we really do. I mean, I say that from firsthand experience. We'll carry on
talking about regulation in a second even though you hate that word, John. But 
specifically, Jeremy, on Nomura- 

Yeah. -it used to be all-things-to-all-people. Now you're aiming for a more 
focused bespoke strategy. Is that paying off? I think it is. I don't think we're
an outlier on that. I think investment banks increasingly picking their spots. I
think this all-things-to-all-men strategy of a few years ago has been proven to 
be costly, to be sometimes inefficient. I think the strategy we've got at the 
moment is working very well. We're very happy. Okay, so it's the right strategy 
but no doubt will need tweaks along the way. What is most likely to not let 
strategy off path? If you're too concentrated- if you pick too many limited 
spots, then obviously you're exposed. We haven't- we've picked places around the
world where we're very keen to invest. We're investing in Asia as you know. As 
Asian investment bank, we're putting a lot of effort and time and resources into
building operation business. We're building up in the States. And so we think 
we're diversified enough to- which done most of the market cycles that we can 
predict coming. 

John? Yeah, I'd be interested given what you've been doing- given your Nomura is
Nomura- given now that Japan is a very big investor. Talk a little bit about how
you see the Japanese outbound investment- Japan- I mean, but people have- Why is
it changed since the last couple of years? 20 years- let's be honest, I started 
working Asia in the late '80s, early '90s, and pretty much since then Japan has 
been bumping along bottom until the last couple of years. There's been a huge 
resurgence. And remember, you've got $16 trillion of domestic savings and assets
sitting in the hands of retail in Japan. Yeah. Now it's an aging population. 
When that moves, there- even a small amount of risk going in Japan makes an 
enormous difference. $16 trillion. 

$16 trillion- and I want to throw another as well- and I know we've got let you 
go as well, Jeremy, but the- Mr. Abe yesterday saying he's reviewing the 
Government Pension Investment Fund. And the expectation is that's get equity a 
massive boost, it's going to hit the JGB market quite hard, right? I'm not sure 
it is. I mean, Japan- that $16 trillion is going to be invested in a diversified
pool of assets. And a lot of the money is just sitting and literally savings, 
current accounts- So I mean that could go to JGBs. But most of it is going to go
in the equity market, right? I think a lot will but remember, we're talking 
about a relatively conservative investor base that is moving at the margin. 

And I think that- first of all, for Nomura with our market share, that gives us 
an enormous tailwind behind us. But not just in Japan, I mean, around the world 
things are picking up. And I think you said earlier, John, that things are 
feeling a lot more optimistic here at Davos this year, and so we're optimistic 
about the future. Okay, Jeremy, great to have you on the set. First time you've 
been on the Reuters- at Davos today I should say. Look forward to seeing you 
again next year. Thank you very much. Jeremy Bennett from Nomura International. 
Now, Hassani Rouhani- Hassan Rouhani rather, of course, the first Iranian leader
to visit Davos in a decade, and expectations are high. Euroasia Group President 
and Founder Ian Bremmer thinks Western firms could soon be scrambling to get 
into Iran. Here, you're going to see CEOs from all over the world looking to 
invest in Iranian economy that's vastly more interesting than any other economy 
in the Middle East. 80 million people, educated middle class, women in the 
workplace, diversified economy, massive energy reserves. So, I mean, clearly he 
wants to say Iran is open for business. I've got a President in the 
Administration that are looking to cut a deal on the nuclear side because the 
economy is what matters. 

And yes, these sanctions will really hurt us. We're going to turn it around. I 
personally think there's a good chance that those sanctions actually get lifted.
We do get to a comprehensive deal. I think it's slightly better than even. 
That's huge for an economy that's effectively closed to foreign investors right 
now. You're talking Greenfield, right? So there's a lot of people, I mean, 
lining up to see these guys, there's no question about that. Exiled filmmaker 
Shirin Neshat is the latest Iranian to offer the President her support. When we 
spoke to her earlier, she was optimistic about the success of a nuclear deal but
only if the international community gives Rouhani a chance. And first of all, I 
think it's important for the international community to stop isolating Iran even
today in these discussions about Syria. I'm very, very optimistic that Iran will
be part of the conversation. And I think that we need to support this leadership
because for so long there's been this anti-Western sentiment among Iranians. And
now that this leader has made such a leap, I think the international community 
needs to trust him and give him the support that he needs even within his own 
community. Elections and the small matter for the football World Cup make 2014 a
big year for Brazil. 

My next guest is the Executive Vice President of Banco Itau, part of the largest
financial conglomerate in the Southern Hemisphere, Jean-Marc Etlin. Welcome to 
the show. Thank you. Great to have you on the set. I know- John, I know you've 
got a lot to say about Brazil. Let me just start though with a big picture, 
concern about a repeat of last year's social protest in Brazil, the World Cup on
the horizon- at that context, how difficult is it to operate? Honestly, we don't
see any change on our day-to-day. I mean, business has been flowing as usual. I 
think, as Brazilians, we somehow are still trying to figure out the context of 
those protests. I think it's part of the growing up pains if you will. John? 
Yeah, it's interesting, the big year ahead: you've got an election, you got the 
World Cup as Axel said. I always interpret those protests to me is an emerging 
working class, middle class, and people want to be heard. But if you're an 
international investor, how should we be- and given that the Real has obviously 
undergone a revaluation in the last year, how do you think about Brazil from an 
investor perspective and how should everyone listening to this and putting money
into Brazil be thinking about it right now? Yeah- Hi, John, good to see you. And
I'll probably make a non-obvious point here quite frankly which is- 

Good. I think it's a fantastic entry point. I mean, if you have a sort of 
medium-term to long-term horizon 3, 5, 10 years, I think it's a great entry 
point. And why? Fundamentally, I mean, the good things at Brazil are the natural
resources story, the size of the internal market- nothing of this has changed 
really over the sort of three years. I think what we're seeing is a little bit 
of what I just told you. Yeah, yeah. Which is some of these growing pains issue 
that come from time to time. And why now? And why this sort of pain? 

So I think, if you look back, the Year 1994 is a cliff year for Brazil. It was 
the plenary hour, massive change. And we had over the last sort of the first 15 
or 20 years of that process which has led us up to recently. What I call sort of
three non-major non-recurrent events. One, at 50 million people or so 40 
million, 50 million entering the consumer market. That doesn't happen every day.
Right. It's a one-time event. We had inflation going from 80% a month to 5% a 
year, massive gains from that. So one-time event. We had credit being extended 
to the vast majority of the population. This is also a one-time event. Yeah. 

And now we have to sort of manage because this is not going to happen forever. 
Sure. Now, we have to manage our economy. John, tell us if Brazil and the 
outlook for you and opportunity, and let's talk about financial services sector 
specifically in Brazil as well. How does it look to you now and the things that-
does it worry? Well, no. Actually, no. At Brazil, I totally agree with 
everything Jean-Marc said. Everything about Brazil. And look, it's a 211 
million, 215 million people and enormous potential, a very impressive President 
who's been challenged this year but you know, I question natural resources and 
agriculture. It could be the second or third largest agricultural exporter in 
the world, Axel, if it gets its infrastructure right. Transport and logistics, 
how do you see that? Because if it gets that right, you're very powerful. You 
touched the key, I think, the crux of the issue which is we need to transition 
and I think we have started to give signs of that from a sort of consumer-led 
model which is what really took us there from 1994 to recently to an investment 
productivity model and it has basically two things. One is infrastructure, 
investment infrastructure. Well, we just privatized eight to 10 roads, we just 
privatized two airports. Maybe too late, maybe too few but it's a sign, it's a 
start, I think it's going in the right direction but the second thing is 
education. Long term, that's sort of which you get to the productivity issue. 
But this is to happen. 

How patient are investors? How patient are international investors? Well, 
investors have become savvier and savvier. Remember, investing- you want to 
invest at a time when things are cheap. You don't want to invest in a time when 
things are expensive. So sometimes, the media gets this completely wrong because
they say strong stock markets mean that people are optimistic. That's the last 
time you want to invest because it probably means you're not going to do very 
well in terms of return. Okay. Well, actually on that point, let me ask you 
this, are we going to see the return of the short sellers this year in the 
equity markets? Where? In the developed world. In the US equity markets, in 
European equity markets. I pass. I think that's a- you can't generalize about 
the equity markets and I'm not, I won't go there. You won't go there? What do 
you think, Jean-Marc? Are you not going to go there either? Because he doesn't 
go there, you want me to go there? I'm an emerging markets guy. I know, I know. 
I needed to throw that in there, you know. 

Who are you meeting in Davos? Are you here to go to some of these sessions to 
see the big picture or are you going to do some deals or are you going to- No. 
For us, I think, for us the idea is to really position our firm as a sort of 
specialist in Latin America which is what we are. I mean, we're the largest sort
of you know, private, you know, co-owned financial conglomerate of the region so
it's very natural for us to be seen and to be positioned as a specialist in 
Latin America. So in some ways, unlike someone like you, someone like John, when
you think about Latin America, give us a call. I mean, I think we are the right 
guys to sort of guide you, help you, provide you with good advice and so on and 
so forth. So I think I'm spending my time here meeting companies, meeting CEOs, 
meeting owners of companies to talk about one thing which is Latin America. 
Which companies, which sectors are you most interested in? Most- I mean, I'm 
interested in anybody who might be interested in investing the region. 

And we see- And who have you met so far who was really interesting? We seek, you
know, consumer-led companies because there's a 350 million people consumer 
markets so a lot of consumer companies are interested in investing in the 
region. Mining companies because of the natural resources in mining. Oil and gas
companies because of oil and gas in Mexico and Brazil and other regions. It's a 
very, it's a very interesting time in Brazil though because we're now, when 
you're in Brazil, the first or second question you get from a lot of big senior 
Brazilian chief executives is, "So tell me, what are you hearing about capital 
going into Colombia or Mexico or Peru?" And so the Brazilians are becoming much 
more sensitive about competing for these other Latin American markets and I 
think Itau is in a very strong position to talk to investors and corporates 
about the pros and cons of these different markets. Okay. I'm going to have to 
stop you. Jean-Marc, many thanks for coming in. My pleasure. Jean-Marc Atlin 
from Banco Itau. Right. Time for- rather, excuse me, time for one of our pics of
the day. 

This is a great picture. This is where we are. Over 2,500 delegates including 
prime ministers, presidents, and royalty, both Hollywood, and the real kind, all
crammed into this small gap in the Swiss Alps. These amazing aerial shots of 
Davos posted on the WEF pics Twitter feed. All right. John, I'm going to bring 
it back to and you're going to hate me for this but, to regulation. I mean, I 
can't believe you do your job and you go to your meetings and this is a word 
that gets left out of meetings nowadays. I just cannot believe that. How is 
private equity benefitting from regulation of the banks? First of all, I think, 
as I said earlier, I'm a great believer in good governance. And I think if you 
have good governance, the regulators have a seat at the table but regulators 
love boards and companies that behave well. Since 2008, you've had a lot more 
regulation and that's good because it's made a lot of companies. Now, in terms 
of private equity, and let's remember, private equity is more regulated. Private
equity is really what's been regulated at the banks. Sure. Are you feeling a bit
more pressure though? The private equity side? From the regulator? Private 
equity is really no. It's private equity. It's focused on deal flow. And in the 
market right now, stalk prices have been too expensive. And the only type of 
flow that's in the market are really a lot of divestitures coming out of 
companies almost as a result of activism and as a result of restructuring that 
took place and is taking place since 2008. But- yeah. Yeah. What kind of 
business are you looking to pick up from the banks? And are you looking up from 
the best- Well, first of all, in Europe, there's still an enormous amount of 
restructuring so the banks there are selling in some cases, a lot of real estate
and which Blackstone has been a beneficiary of acquiring a lot of that real 
estate. Blackstone has also looked at a number of things that are being, coming 
out on the asset management space, what-have-you from banks. But it's not, it's 
a difficult time for private equity right now because with the stock market so 
high and the corporations, remember there's $3 trillion of cash in the S&P 500 
in North America alone. Those people are cash buyers and they probably will pay 
more as you saw in the case of Suntory and Jim Beam than a private equity 
investor would be allowed or would want to pay. Sure. I mean, let me stay with 
the cash that the companies are sitting on and whether you think we will start 
to see more of this being spent. 

And the assumption that their stockpiling was down to a- there was a Reuters 
piece about this, a hiatus in the economic cycle. Maybe it wasn't down to that. 
Maybe it was down to a concern over the regulatory environment and what's 
happening elsewhere. It's about three or four things. I mean, number one, in 
2008, a lot of banks cut back credit lines. Companies then decided they had to 
start squirreling cash because they need it to almost, become their own internal
banks. Number two, capital markets were more fickle so they had, they couldn't 
rely on capital markets. Number three, they wanted to hold back on investing 
because they wanted to wait and see what sort of cycle is emerging. They were 
laying off people. And their business models were tightening up. So this cash 
accumulation has become now, face-to-face with shareholder activists, who on one
hand are saying, "Okay, you've got too much cash, what are you going to do with 
it? What's your investment thesis?" And on the other hand, they're saying, 
"Okay, if you invest it, you better be investing it in something you're good at 
and in one of your core businesses." John, 30 minutes goes very, very fast. And 
it's over. 

It's been a real pleasure having you in the studio. It's great. Thank you. It's 
been a pleasure to sit and chat with you and have you come in on the guest. You 
can hear my voice going a little bit so it's been a great help as well. Have a 
great rest at Davos and hopefully we can do the same thing next year. No, thank 
you. John Studzinski from Blackstone. Right, you're watching Davos Today. It's 
just gone 0730. The headlines: Iran's President says it may be possible to turn 
more than three decades of enmity with the US into friendship if both sides make
an effort. Rouhani due to address the World Economic Forum just after 10AM this 
morning. Tensions between Tokyo and Beijing take center stage in Davos as 
Japan's Prime Minister call for military restraint in Asia. And a senior Chinese
academic brands him a troublemaker. The first day of Syrian peace talks in 
Switzerland and amid bitter divisions over the future of President Bashar 
al-Assad. But US Secretary of State John Kerry leaves the door open for Iran to 
participate in the discussion. And the EU threatens to take action against 
Ukraine over its handling of anti-government protest after three people are 
killed during violent clashes in Kiev. 

Standard Chartered, the subject of a renewed takeover talk this week but CEO 
Peter Sands wasn't mincing his words at all when I asked him whether there was 
any truth in it. It's speculative rubbish. I confess I haven't even read the 
story. Does the bank's wobbles though and their lower share price leave it more 
vulnerable right now? Is now the right time to be talking about this? No. The 
bank is in very good shape. We have great opportunities in our markets. We have 
a very clear strategy. We have a great team. What are shareholders asking you? 
Are they encouraging you to talk to other banks? We have a very good dialogue 
with our shareholders and they're very supportive of the strategy. Okay, so but 
are you talking about this issue with them? 

I'd say it's complete speculation rubbish. Okay, let's talk about the 
restructure announced earlier this month. Are we going to see a major change in 
strategy? Is that needed or just a tinkering? No, it's actually very clear in 
the announcement. We made clear our strategy and what we're doing now is 
aligning the organization to deliver the strategy so we can put a clearer focus 
on the distinct needs of particular customer segments and we can operate 
actually more effectively as one bank. What scale of job cuts will be needed as 
part of the restructuring? That isn't really what the reorganization is about. 
We're about aligning the organization to be more effective in delivering the 
strategy. There will be some cost synergies, but that'll just be part of the 
ongoing drive to continually improve the efficiency of the bank. Talk to me a 
little bit about China. Clearly, it's one of the themes here and concerns of a 
slowdown, the PBOC shadow banking issue, what are your concerns and is your fear
getting greater about the region? Actually I think a lot of the concerns around 
China are overblown. People have been predicting that China is going to go off 
track and have a problem for years, right? And China has defied predictions. I 
think China will deliver somewhere around 7% growth in 2014. There are of course
problems in areas like shadow banking. You would expect issues when you've had a
country grow that fast for such a prolonged period of time. But they're not 
problems that are going to derail China in my view. 

Any major regulatory headaches emerging this year or do you think most of the 
heavy lifting has been done on that front? I wish I could say the heavy lifting 
has been done. I think we're still in a situation where there is a huge amount 
of change going on and that of course brings a risk of unintended consequences. 
I think the biggest headache actually is the fragmentation of the regulatory 
agenda, the fact that different parts of the world are putting the emphasis on 
different things and that has a risk of actually fragmenting global financial 
markets which in turn brings dangers to global trade and investment. So that's 
number one risk for you, isn't it? The fragmentation issue is the big issue, 
yeah. 

Okay, let me finish up with you and your plans. I'm sure you don't want me to 
ask this, but has there been any discussion with shareholders about you moving 
up to this Chairman role? I've made very clear that I have no interest in 
becoming Chairman and I've never expressed any desire to do so. I'm very happy 
in the job I've got and I have a very good relationship with John, my Chairman. 
How long are you going to stay on the job you've got? I have no plans to do 
anything else. You have no plans to do anything else? No, I don't? So are we 
going to expect to see you in this role next year? Well, I am, as I say, I have 
no plans to do anything else. So I'd be very happy to talk to you next year. 
Okay. 

Can't make it clearer than that, right? Okay, very few investment funds beating 
the market over the past two years. So where does that leave the professional 
investors? Joining me to answer that question, one of the biggest names in the 
industry, Bridgewater Associates' Co-CEO Greg Jensen. Great to have you on the 
set, Greg. Great to be here, Axel. Thank you. And it's your first Davos, right? 
First Davos. Are you having a good time? It is, it's great, a great opportunity 
to learn a lot, to take in a lot. I've got a lot to talk to you about. I want to
start though with something quite specific and that's the US equity market, 30% 
run last year. How are you guys playing the US equity market this year? Well, 
I'll tell you, equities are a small part of what we do, but before I answer the 
question, let me tell you a little bit about how we think about things, which is
over the last 35 years, Bridgewater has been building up a compound 
understanding of how the world works and so which we apply to the US equity 
markets and over a hundred markets across the world. So that understanding, 
which we've sort of built out, are linkages between how markets work and 
economies work and how they interact, that's what we then use, to answer your 
question like that, is that built up understanding. Okay. And based on that, 
we've been- we study all the transactions that occur in the economy, the buyers 
and sellers and what they're likely to do going forward and as we look at those 
things, for the equity market, these are going to make a couple of points, we'd 
say we're sort of in what we'd say is the sixth-seventh inning of the equity 
rally. In the US, prices have gotten to the point where they're sort of at fair 
value relative to really low yields on bonds and cash. And so, on a long-term 
basis, we think they're very low expected returns in equity, something like 4%. 
Okay. But in the short-term, over the next six months or so, there's still a lot
of liquidity around. The inflation picture will continue to be quite moderate, 
that we'd be bullish on equities in the short term although the prices have 
reached levels that are quite expensive. Okay, but then six months out, it's an 
opportunity for the shorts again? Well, we'll see. I mean, it depends how the 
world sort of progresses over the next year and a half or so. US equities would 
certainly be one of our least favorite equity markets, to think European 
equities are priced significantly better than US equities. And so, there's a lot
of opportunities beyond that. And if you look at it across the different 
regions, in the US, what you have is, you're sort of in the middle of the cycle,
you're progressing along- 

Sure. -in Europe, you're in a totally different spot and in Asia, again, a very 
different spot. Okay. So you've got different pictures. With that, I mean, you 
guys came out with this beautiful deleveraging going on in the US, ugly 
deleveraging going on in Europe, is it getting less ugly in Europe, is that 
princess going to be able to go to the ball soon? Well, again, I think from a 
pricing perspective, the pricing is more attractive than the equity market in 
Europe. But in terms of their economic situation, it is ugly and it is going to 
continue to be ugly in the sense that you've got essentially a lost decade in 
the periphery, that what everybody is getting hopeful about is something like 1%
growth- Yeah. -from terrible levels and that is going to be sustained because 
today, that's most likely to be sustained, those terrible growth rates from very
bad levels because we're at an equilibrium point. Right. It's a terrible 
equilibrium. But right now, as long as there's economies this week in the 
periphery of Europe that you can sustain because they don't need that much debt 
to sustain this level. How are you investing in Europe right now? So we are long
across sort of a basket of European equity markets. We are short the currency. 
We think basically Europe is the one area in the world that really needs 
significant easing, continues to need significant easing and hasn't gotten 
enough, the rest of the world, the US and China in particular, are moving more 
towards, China is tightening in the US. Yeah. We'll be moving towards tightening
Europe, requires significant easy monetary policy a lot longer than the rest of 
the world is and that should be continued low interest rate, low risk-free 
interest rates- Sure. Probably higher credit spreads than they are today, but 
probably an improved equity market. Favorite strategy this year? I know it's a 
big question, but favorite strategy for the year? 

Well, the way we look at things- Okay. -is that there's no one thing is that 
reliable. And so we've got a portfolio of positions across a hundred different 
markets. In terms of sort of the- I'll just run through the most important ones,
we'd say European equities, short the Euro and the Yen we think are good 
positions. And the US bond market, we're actually on the bullish side of that. 
We think that there's priced in a lot of tightening which is actually going to 
come very slowly because the US economy, while it's improving, will not be able 
to improve at significantly higher rates, and so we think that the central banks
are only going to tap on the brakes in the US. The Fed's only going to tap on 
the brakes very gradually and that actually was priced in the interest rate 
curve and the US is unlikely to play out and you'll likely see lower yields 
rather than higher. When you come back next year, are you going to have the top 
job? Is Ray going to have moved on? Well, we're sort of five years into a 
10-year transition at Bridgewater, and so- Am I going to be speaking to the boss
next year? Well, I'll tell you, well, titles aren't that important at 
Bridgewater. So our hope is that the boss at Bridgewater is the truth and that 
we'll have the type of community that will fight for that no matter who's in 
whatever position. Yeah. And so we're going to play this transition out and 
learn about each other as we go and we're not so focused on titles. 

Alright, Greg. Alright, great. Great to see you, thanks so much for coming in. 
Greg Jensen from Bridgewater. Now, Davos isn't really a tech event, but the 
whole place has pretty much gone Twitter-crazy as you can expect. The WEF have 
been crunching the data to give a window into what's going on. By late 
afternoon, Wednesday, the most influential participant was Bill Gates, no great 
surprises there, Reuters Columnist Ian Bremmer who we heard from earlier was a 
close second with Neelie Kroes and Nouriel Roubini also in the top 10- top 
trends included China, tech, jobs and education – again, no great surprises on
that front – while most activity, both in Davos and around the world was 
coming from Americans, followed by Brits, Spanish and Mexicans. Check that out 
at www.WEFLive.com. And don't forget, we're in on the action as well, let us 
know your thoughts using the Davos hashtag #DavosToday and you can watch our 
videos, of course, on www.Reuters.com. 

Coming up- Results were inconclusive. This was supposed to tell me what to do, 
we're supposed to trust the test. The test didn't work on you. We'll talk to the
CEO of IMAX on the latest raft of movies looking to draw in lucrative teenage 
audiences. My next guest called the Euro a "giant historic mistake" on a Davos 
panel yesterday. Professor Ken Rogoff, Harvard joins me now. Ken, many thanks 
for joining us again this year. Sorry we've had to put you out on the balcony in
the cold. 

Yeah. Hopefully, it's not too bad. Yeah, exactly. Okay, a giant historic 
mistake. I know you were the only American on that panel yesterday. How did they
react? Well, actually the panel was so negative. It was hard for me to be 
negative. I think Europe has a lot of lightened strengths, its ability to have 
good legal systems that benefit from technology relatively egalitarian societies
compared to say, the United States, and I think in the future, things like 
simultaneous translation will make it easier to have labor mobility, so maybe 
there's over pessimism and I'm usually the most pessimistic- I know, yeah. -I'm 
not the most optimistic on that panel. 

I mean, I got to say, that scares me, I've got to say. That really does. 
Obviously, this debt-to-GDP issue is a big one for you. It's above 90%. It might
have been valid pre-2007, but there's- we saw some of the debt numbers coming 
out yesterday. Yes, things are falling but is 110, 120, the new norm? Well, I 
think in the case of Europe, the periphery of Europe really has a huge debt 
overhang problem from public and private debt. And it would have made sense a 
long time ago and it still makes sense to find some way to write it down, 
stretch it out. The asset would cost something and the Northern countries would 
have to pay something. 

But in the long run, it would restore growth much more quickly. But, I guess my 
question is, is it the new norm? Do we just need to deal with that? Is the west 
consigned to sub-par growth now? Well, I mean, there are many factors affecting 
growth but when you're in the middle of a deep recession, and Europe has not yet
emerged from its recession, there's really not much you can do. Debt inexorably 
rises after a financial crisis and you have to think in terms of decades trying 
to bring it down. It's not something you can do quickly. Yes, it's not pleasant 
but there's really not so much they could do about it. 

You're on another panel, I think tomorrow, on income equality where the money 
politics is undermining democracy. Is big money corrupting the economy? Well, I 
mean, I think there's no doubt that inequality has grown and especially if you 
look at the 0.01% has become much wealthier relative to the rest. But you know, 
there are technological factors all over the world that are influencing this 
heavily. Labor share of income which was just rock solid constant for many, many
decades started falling maybe 20 or 25 years ago everywhere. You know, 
independent of the political system, maybe a little more in the United States. 
So, globalization, technology, I think, are driving things but we probably need 
our political system to find ways to redistribute income, re-equilibrate things 
more than in a situation where labor share is not declining sharply. Does Davos 
make a difference, do you think for you? I always learn a lot here. 

I mean, I think, you know, you hear different perspectives, meet people you 
wouldn't meet otherwise. So it's always very interesting and unpredictable to 
me. So, yes, I'm happy to be here. Ken, thanks a lot for talking with us. Ken 
Rogoff of Harvard. Thank you. Now, Brazil's President Dilma Rousseff will try to
convince the world's business elite in Davos that her country is still a good 
investment ahead of elections and the football World Cup. We've been talking 
about that, of course, with Banco Itau this morning. She's not the only famous 
Brazilian here. Earlier we caught up with former international football player, 
Ronaldo, to find out whether he thinks the national squad can win for a record 
sixth time. I hope Brazil is going to win because play at home and it's 
important to win. But it's not easy to win a World Cup. Last World Cup we won 
was in 2002 but my dream is- And you were playing then? Yeah, I was there in 
Japan playing. It's not easy but as Brazil play in Confederation Cup, it was 
good. So I hope that Brazil can win. And while you're here in Davos, are you 
going to go snowboarding? Yeah. I've been trying to snowboard. 

I did a lesson. And now, I can come down the treks. It's nice. Difficult but- 
Alright. We'll take the camera out next time with a GoPro and we'll follow you. 
Yeah, I did some videos. I fell and got hurt but it's okay. I'm old to do that 
but I do it with my son and my fiancé. Does Rob Cox know anything about 
football? I don't know. I thought he was a nice hockey guy. Anyway, Ronaldo 
talking with Rob Cox from Breakingviews. Right, take a look at this video coming
up. Shot on an iPhone and Google Glass, basically an excuse for our production 
team to have a day out on the slopes whilst we're stuck in here. Shot on Google 
Glass. 

Japan's Prime Minister Shinzo Abe last night revealed his do-it-yourself 
approach to fixing the economy. Davos delegates were given an insight into the 
third arrow of Abenomics, as Abe likened himself, get this, to a drill bit and 
said, no vested interest would be safe from his drill. One year on from the 
inception of Abenomics, how is it all actually working? Toshiba Chairman 
Atsutoshi Nishida tells Reuters' John Gordon how the weaker Yen has impacted his
business. You might be surprised. I think, generally speaking, it's working very
well. I should say, I mean, Japanese Yen against US Dollar was too, you know, 
high. It has been appreciated too much. It's beyond our capability. Yeah. 

Now, it has been adjusted to the normal level. So this is normal now? Yes. So I 
think on the JPY100 to JPY105 against US Dollar, very reasonable rate on foreign
exchange. Alright. A lot of consumers know you for your consumer electronics 
business. With the Yen where it is now, are you finished restructuring? Is it 
now a lot easier for you to run that business? In the past, when Japanese Yen 
was very much appreciated, we started the two, you know. Transform our business 
structure, so that we can even compete with our foreign competitors, you know. 
With that very high or appreciated foreign exchange rate of Japanese Yen against
US Dollar. So we moved some of the business from Japan to overseas. So East 
Asia? And now, we're having or procuring the products from such foreign country 
where we started to manufacture. But right now, because of Japanese Yen's 
depreciation, we are suffering. Coming up. About Peter. 

Not everyone has a happy ending. We speak to the CEO of IMAX later in the show 
to find out whether the latest superhero installment will be box office smash 
this summer. Now, "it's been the wild, wild west." That was the message from 
John Chambers, the CEO of Cisco who was on a panel discussing the state of the 
digital world yesterday. A number of tech CEOs calling on authorities to rethink
security demands just days after Obama announced reforms of the mass 
surveillance programs revealed by Edward Snowden. Yahoo's CEO Marissa Mayer seen
here was asked what one request she'd put to the US President. Here's what she 
said: Transparency. Yeah. The ability to: one, understand, so we can help our 
users understand exactly how many requests we're getting and or are these the 
range of types request we're getting and how that data is going to be used 
because we need to be able to rebuild trust with our users. Marissa Mayer 
sounded pretty much as croaky as I sound this morning. Small tech start-ups, 
increasingly a big part of Davos. SoundCloud is a platform for creators to 
record and share music. Nigel Hilditch met founder Alex Ljung and asked him 
about competing with listening platforms like Spotify and Pandora. It's the 
world's leading audio platform and we reach over 250 million people every month.
And what's unique about it is that it's really the platform that connects 
creators with listeners all over the world. We have people from over 200 
countries using it in the last 60 minutes and it's really the only platform in 
the world that works at that scale and manages to connect both those creators 
and the consumers in real time. How do you walk the fine line between keeping 
your users happy and actually making some money from the platform by bringing in
advertising and record label involvement? Part of why people come to SoundCloud 
is because of all the other users who are there, creating new music and audio, 
finding it, reposting it, liking it, commenting on it. So if we would do 
something that doesn't please users, that ultimately is going to devalue the 
product. But you've got to make some money, though. That is true. 

We have our creator-based subscription account, something that we've had for a 
long time. They're performing well. We're experimenting with some new formats as
well. I think the important thing there is to have people included in it. We are
still primarily focused on usage and growth but we are starting to experiment 
more on the monetization side as well. And is there an exit strategy? So what's 
the future plan? No. I think that we're focused on having a large impact. We 
think that there is a large-scale platform like SoundCloud that should exist in 
the world because it does create creators and listeners all over the world and 
does play an important role in people's lives. I want to ask you what it's like 
being a start-up in Berlin, where you're based. A couple of big names have gone 
bust recently. 

What's the situation there right now? The start-up game is one where some things
will work and some things won't. I think if you look statistically at all 
companies that gets started, most of them don't work out. I think the stats are 
probably pretty high in Berlin still and the excitement is definitely super 
high. Among the other tech innovators here in Davos, the MIT professor who 
brought us the vacuuming rumba who's now moved on to more industrial challenges.
Rethink Robotics Founder Rodney Brooks rode the Schatzalp railway with Reuters' 
John Gordon to explain why his factory line robot, Baxter, has a built-in smile.
Rodney, you've made the industrial robot more friendly with Baxter. Tell me why 
a line manager should care, though? Well, this is a robot that you can use in 
situations where you only have a run for two hours or four hours. Traditional 
industrial robots, four months the minimum run time. So this is like you set 
something up, an ordinary line worker can program the robot, learns how to 
program the robot in just a few minutes. So it's a very different experience 
from the industrial robots. So this is going to go in the Toyotas and the 
Pfizers of the world. This is a small and medium- This is a different sort of 
robot. It's a new category. It's meant to go where it didn't make sense to put 
robots before. Right. 

Now, we've heard about this coming wave of automation- I've heard stats like, 
you know, 47% of potential unemployment in some areas of employment. What does 
that mean for what you guys are doing, because you have a different approach? 
Yeah. Well, in the US, the average age of the average factory worker is 56. 
Young people are not coming into it. This is a productivity tool which lets 
those older people be more productive because instead of doing everything 
physically themselves, then our supervising robots do these repetitive tasks 
that no one really wants to do. And tell me, what's the missing link in robotics
right now? The thing that these really have is dexterity. These things that we 
have at the end of our arms are amazing machines. And as a roboticist, I've just
not built dexterous hands that are anywhere this good. I have seen the stats, 
how much of your brain is used to control your hand. It's amazing. 

Let me talk about Google coming into the business here. They've snapped up I 
think eight different assets. How's that feel from where you're sitting to see 
this giant coming into the business? Yeah. They've bought a lot of very small 
companies. Pre-product, only company was actually producing robots and they're 
producing them for defense-funded research labs. So they're mostly I think 
getting the great people - some of where my former students – they're getting 
great people and great ideas and I really don't know what they're planning on 
doing this. Have they talked to you? 

Have you been approached? No, I know nothing about the actuality of it. Alright.
Now let's talk about your business. You had, unfortunately, made a few job cuts 
last year. Are you in Davos looking for funding right now? No, we're not looking
for funding. We've got plenty of funding through 2015. We go on wide to try and 
find the right markets. We've now focused down, we've got a good runway, we're 
growing sales around – we're expecting to get to the real hockey stick curve 
before we need funding again. We'll see if Baxter can pick up that hockey stick 
as well. Rodney, thank you very much for your time here and good luck in Davos. 
Thanks so much. Now Davos delegates come to talk about the big picture, 
something my next guest spends his entire life doing. Has anyone linked you like
that before? Yeah, once or twice actually. 

I'm proud of that one actually. And now with your flair. Okay, it's the crooked 
voice I think. Rich Gelfond is Chief Executive of IMAX. He's a regular on the 
show. Great to have you back. Nice to be here. Let me start with something you 
said just as we are in that package. You're at lunch yesterday, all the CEOs are
very, very bullish. Davos is a contrary indicator. Back in '07, everyone was 
feeling great as well. And what happened, how worried are you when you hear this
bullishness? In '09, everybody said the world was never going to get better 
again. In my own experience and we're in 55 countries is that the economies 
looking really good. I mean Asia is very strong, the US is good, Europe seems to
be turning and that's what everybody said at this lunch. So that does concern me
because my experience here is when everybody is on one side, it's kind of like a
pendulum, it goes out of whack. So how long do you give it? I don't know, but 
the real question is what's going to derail it. 

And the answer is you never know, right. Nobody guessed that it was subprime 
housing in 2008, so I think it's the unknown. Yeah. Emerging markets have been a
big growth driver for you. Are you worried about the slowdown there? I was 
worried about the emerging markets actually because you have this growing middle
class. I read some statistic that Asia, when you look at the middle class, about
50% of Asia is going to be in the middle class in the next five years, and I 
don't see that trend really disrupting it. So I think if there's a shock, it's 
more likely to be somewhere in the developed world and somewhere more akin to 
what happened in 2008. Okay. We're playing some of these great movies behind 
you, sort of coming out of the back of your head right now. 

But Gravity and Hunger Games Catching Fire, massive hits in 2013. Well are there
similar standout blockbusters for this year and beyond? I do think so. I think 
Transformers, you can never underestimate Michael Bay, and it's a global 
property, it always does very well. There's a new Spiderman this year. Chris 
Nolan did a film called the Interstellar and other than his Batman films, he 
worked in Inception, he has a terrific track record. And of course, this is the 
final year of The Hobbit, and if you look at it, number two did really well. So 
I think number three will do very well. 

Very quick question on this massive curve screens that Samsung's bringing out. I
think they released them in Vegas. Does that worry you? Is that a threat to you?
It isn't because I think people like to do social things, they like to go out of
the home with friends. And I think screens can keep getting bigger and bigger 
but unless you're a shah or a king, it's hard to put a 100-foot screen in your 
home. And Samsung's a 100-inches, I think we still have a bit of an edge there. 
Rich