Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170913

Apples stock down. Suppliers like this. The apple watchmaker getting a nice jump. A whole new review. Time now for the morning brief. Apple had an announcement yesterday. Unveiling a 999 iphone. The iphone 10 is the most expensive phone ever from apple was one of three new models tim cook showed off at an event at the new headquarters. The event came on the 10th anniversary of the launch by steve jobs. Phone, and an internet communicator. Are youphone getting it . These are not three separate devices. This is one device. [applause] iphone. E calling it today apple is going to reinvent the phone. Tim cook said the new phone signals the next era of smartphone evolution. Iphone wet advanced have never made come a new design, face idea, true depth camera system, and more powerful technology than we ever put in an iphone before. It really is the future of the smartphone. The big question, will these new products impress customers and investors. Great to have you with us. Adam, lets begin with you. We did not know we would have to win and tell november to get our hands on it. It kicks the can further down the line in terms of trying to know what the uptick of this will be. A little bit to see how the technology will be adopted, the augmented reality, facial id, reaction to those new technologies in the phone. Jonathan if i am a consumer looking at getting a new iphone, why would i buy the iphone 8 when i can get the x in november . Fo he iphone 8 is a very harmful phone itself, but you dont need some of these other features with facetime, the ,creen, and things like that there will be a lot of people who probably wont need the highend experience, so having a staggered schedule of devices coming up, i think that works to apples advantage in getting that to market eventually. David they also raise the price. Raise the iphone a price by 50. This is average selling price per iphone. It has been increasing. What do they have to do to get to 700 a phone . That will be the easy part for apple to do, but if you look all pricing, this is not outside the grasp of a lot of customers. If you look at the u. S. Market, it is still affordable because youll not pay the full price totally upfront. A lot of this will be mitigated by carriers with aggressive pricing plans. The price increase will not hurt a lot of people. Where you cants on they these phones market, there will be some pinch. The big highlight was augmented reality. What was the read on some of the apps. It is still a show me story in that context. I agree with that. If you look at the demonstrations, it was a little thin. Tohink apple just wanted but the phone could do it, i found it unusual because if you look at apples track record, any time they have released new applications or experiences, there is usually an entire library of applications waiting for consumers and users as soon as they sign on. That the to me Development Kit for applications for augmented reality, how robust . How many will be ready, and what is the price . It is still an open question that apple wants to help answer as quickly as possible. David was this an offense if or defensive move . 10 years ago, steve jobs did change our lives. Other thingsfrom and spent it on our mobile phone. Going to takehone us away from other devices or just defend against samsung . I think apple since that first device was introduced has seen incremental improvement, building and building, and some upgrades more significant than others. Away was the take changes to the watch, which you dont need to keep tethered to your phone. Andhat continues to happen the watch gets more powerful, some could be ways that features on the phone can migrate to your wrist. Chance applee a could be cannibalizing themselves . Ofapple has a track record eating its young. They were willing to sacrifice the ipod to promote the phone. If you look at apples , iphonels and earnings makes up two thirds of all revenue. Apple moving away from the phone anytime soon. If you look at the apple watch and other products like the ipad , home pod, air pod, all these devices form an ecosystem around the apple iphone, so i dont see this going away. The watch is a convenience factor. I had a conversation yesterday and we talk about demand increases and price increases because the product becomes more exclusive. We will see hear from apple, the average selling thee grinding higher with iphone 10 and people will gravitate towards it because of the exclusivity . Ofthat has been a key part apples Business Model for some time. It just seems to be increasing. They have spread out the price range for some of these products. They lowered the price range for the lower end phone, so they have this catalog of phones, something cheaper, something bigger. Their hope is customers will find something that fits their in terms of marketing and everything like that, they are pushing to be this exclusive, high income a premium product. Alix thank you so much. Bummed it was not called iphone x. Jonathan david westin is still buying it. David i am buying it. I will share it. Jonathan he is a premium kind of guy. Alix we know. Coming up, Piper Jaffrays. Coming up, and exclusive conversation with jack ma. Alibaba, the global disruptor p. M. In new york do not miss that. This is bloomberg. David last night, President Trump hosted it dinner for six senators. It is part of his push to get tax reform through congress this year. Kevinor a report is cirilli. Top democrats and republicans gathered with President Trump to discuss tax reform. What is interesting is that all of the democrats who joined the president did not join on to a democratic letter which listed priorities of the democratic to seehey wanted included in any kind of tax overhaul, so that was taken as a signal by white house officials that they wanted to negotiate with this president. Specificsnt many with what was discussed, but reading with aides and statements put out, it suggests it was a positive working step. They are still optimistic about some type of tax reform by the end of the year. Thank you. Keep reporting on what they ate. U. S. Stocks continue to push higher. All three major averages closing at record highs. Futures are in the red. Leon cooperman is the latest. He weighed in on the valuation debate. I think the market is adequately valued, not overvalued. At correction could happen any time, including tomorrow. I would say we are getting closer to one in my opinion. Bob, great to see you. Do you agree . I do. The path of least resistance is up. We do need earnings to make that happen. We need a reason to move higher. So far, so good. About unitou worried labor costs, Profit Margins . We have had good revenue growth, which has delivered good Earnings Growth. We have not had a lot of cost pressures. If they move up, that will challenge Profit Margins and challenge the market. We know how contained wage rates have been. There is a big concern about a reach for yield. 100 year austrian debt, would you think when you see those kinds of numbers . That weows our mind have a 100 year deal at 2 come absolutely amazing. In my view, Interest Rates and Everything Else dont hang together. Something will have to give, and i think it will be Interest Rates beginning to move higher. We need some inflation to do that. Due to see some of that the storms here in the u. S. But a sound country could do a 100 year deal at 2 is amazing. Jonathan im not sure the cost of currency comparison works. It is quite remarkable. For me, where is the risk . Equity markets are at all time highs, but the bond market is quite interesting. The risk is in the bond market, so you have to believe a reflation story is continuing slowly but surely, but central bankers worked overtime to make that happen. They have had limited success. If they have more success, it will not look very attractive. David where are we with leverage . With rates this low, people borrow money whether they need it or not. Donerporate america has that, but with rates this low, im surprised there has not been more. Like you said, whether they need some money or not. I would have guessed we would have had more. Are there any indications we might be long in the tooth on the credit cycle . The credit spreads are pretty contained, so i dont think we have a problem there. That is an area to watch carefully. We have that scare earlier around energies breads, but they are reasonably well behaved. The spreads opened up a bit, but i think that is a timing issue. How do you view tax reform now . I am in the camp we will get something from but more likely First Quarter, second quarter. Kobach to january 1. Health care was going to be done by memorial day and tax reform by labor day. They just forgot to tell us which year. I think they will get it. Alix i think the story is twofold. You want to hedge your risks in case you get inflation and yields moving higher, but we have not gotten anything, so you cant move out of growth assets. How do you handle those two stories . I think you lean to the growth side and keep your eye open at night on the risk side, but i would not own a lot of paper that is sensitive to Interest Rates and would want to be on the growth spectrum because we are getting that. Nine u. S. Growth has picked up, and that helps corporate earnings bigtime. Jonathan we keep hearing republicans would be committing suicide if they dont get tax reform done. Why is that . Where is the leadership on the democratic side . Theres not much there either. The American Public elected donald trump and republicans to get something done, and tax reform has been front and center. If they dont get that done and not much else, i think the election next year, the democrats will say i am running against do nothing guys and you want something done. Jonathan the president is going to states were Democratic Senators are up for reelection. He things the pressure is on them. David hes going to states where he did well on that state, so maybe he is looking for bipartisan support. That is likely the case, bipartisan support. The world has turned upside down and politics. It is a mix of versus a mix, and that is hard for political analysts to figure out. It is a weird world. David its how the president likes it come all mixed up. Later in the program, we will talk with Mick Mulvaney about reforming taxes and when we can expect to get details of that republican plan. Live from new york and washington, this is bloomberg. The we traders have traded, if they had traded bitcoin, i would have fired them in a second for two reasons. It is against our rules, and it is stupid. Dimon that was jamie being outspoken about bitcoin. Us, im not sure i understand it, so why dont you explain it to me. I wish i had a clue. Forceful ase as jamie was, because i dont know. I remember when my son called me a few years ago and asked me, do you own any bitcoin . I dont know much more now than i did then. It is a wild ride, the absence of a country, trade, i think it makes it questionable. David you find people like jamie dimon comparing it to tulips. You have financial people who say there is something serious here. Investingsays he is in things around bitcoin. How do you sort that out . This is a new concept. New concepts often have bowls and backers and skeptics. Is it the fraud the jamie dimon thinks it is or the real thing . I think it is a whole new language. Every currency to date has had trade, taxes, and budgets. Bank of america fund surveys that are long bitcoin is the most crowded trade right now. I find that fascinating. Out, it is always, what do you think of bitcoin . Time will tell. Askedan my cap driver about bitcoin. That is where things have gone. Alix he actually did . Jonathan they think the value is in what cryptocurrencies are, decentralized ways of using money without a government behind it controlling supply. That is a double edge sword. That is the reason why the government will clamp down on it . That makes sense. I aminding people saying buying it because it is going up. That scares me when a lot of people do that. David we know china does not think much of it. They are shutting it down. Jonathan you will be sticking with us. Bankg up, the deutsche chief global strategist will join us from new york city. We are to hours away from the cash open with futures softer. Youre watching bloomberg tv. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. From new york city this is bloomberg with a look at the Market Action. The futures are just a little bit softer as we come into wednesday with stuck in a alltime high on the s p 500 traded the story today is that there was a treasury auction on the tenure. Today unchanged at 217. The euro dollar is just a little lower grade that is how we trade the euro against the dollar. As we cross that picture i am very happy to cross over to scarlet fu who is standing by as a special guest. Scarlet thank you, very much. I am stated by with michael bloomberg. Who of course of Bloomberg Television. It is a big day for both of these gentlemen. They are dedicating a new building to new york today. It is less than 10 years for this to come to fruition. This idea for a Applied Science came about because you are mayor. Proposalwe put out a to universities to come and compete and to build a campus on Roosevelt Island which is in the middle east river midtown. The rest is history. Here openedr dean it. He has if students working on their degrees. The campus itself just open. Scarlet the campuss opening and you are dedicating the did you wanted to diversify the economy. On and whatourced would make a difference in the facility to run business and this is what they said. Michael i think we know where the world is going. There is going to be much more on data and automation great we have a issue on how to create jobs outside that industry. We have to compete as a city and as a country with the rest of the world for the best and the brightest. With graduate education being where people are going to be real professionals. The best of the best look at the skills they need to create the things that make our lives better. Take our lives more enjoyable and make them longer. As a university is really going to train a lot of people on what is good for new york city. Tend to create companies were they went to school. There were a lot of schools and skills can Silicon Valley because a lot of people wanted that. Now we are seeing the same thing here. To 38 companies already. We have only had one class which is not on campus. Scarlet give it four academic years . Correct. That will help companies defend it. Scarlet cornells acted that for a campus to get started as we mentioned four academic years outside of the campus. They were borrowing space from google in manhattan. Talk a little bit about how google influenced this culture and perhaps the mission. Michael it was amazingly generous of their space and the ultimate commodity for any organization to move their own engineers out. It was incredible to let us get off the ground before we have the physical campus. It also gave us the opportunity to be right in the front of chelsea where there is not only google but other tech companies. When we were relatively small it was very important to be at the center of everything. Now that we have some Critical Mass we are able to get people out to Roosevelt Island. If we had to start there with literally seven students at the beginning nobody would have come to see a street it was just unbelievable to be in this location working with google and their companies. Scarlet working at their office allowed you to work sidebyside with engineers from Google Reader breaking down those walls and those formed a way to develop Roosevelt Island. Absolutely. At long starting with google and other companies we have had our students work sidebyside netjets with engineers from other companies but also project managers and marketing officials. Eloping this today talks states that only technological expertise but also expertise in understanding what you are building a product for creative we bring most together without our students and also by people from other industries to work with our students. Scarlet talk a little bit about these 38 companies. I think 94 are in the city. I think that is almost all of them. They range from everything from companies that are making hardware there is a program called jacobs runway which is at ae Cornell Institute which is company that came out of that program. It makes a aibased baby monitor. To gos in particular tend preventing too often the are helping when they are not. It is great to have this tool to tell you when to go in and get into the room. On one sort of a example and create a consumer Electronic Device all the way from things that are medical grade devices that help patients with lupus. We have everything from medical devices and consumer electronics. To everything from other applications. Scarlet there is room there at. He Cornell Center is located are jobs at risk down the road. Talk a little bit about how when you are founding a is the occasion how do you encourage the advance of ai and robotics with a eye towards creating new jobs . A lot of that innovation will steal the new jobs. Michael if you want to have better products that are more of portable to be put you need to do things more efficiently. The great challenges that we have around the world from every country is that technology and it does not have to be fancy a it can do simple stuff like using the web to transmit information. A cab moreto call efficiently. Posters of things, they are destroying jobs we need to create jobs to replace those great the challenges that some of those jobs require great technological skills and intellect to the students get at cornell tech. There are a lot of people who are not going to have that opportunity and do not want the opportunity. We had to create jobs for them whether they are in the trades we will always the plumbers and electricians. Those people have racing power because you cannot do that. You will also need people who aovide health care, there is student caregiver right and front of the patient. There is a infrastructure that we need to construct. Handle thatsociety is one of the defining moments of this generation. Scarlet ultimately it is about creating jobs. You havengs me to daca been very vocal about calling out the president for failing a test of leadership when he canceled this program. Why is resolving the fate of the house and people so critical . A young kidy are who was brought here. Some of them could not walk, they were carried in their mothers arms to this country. Technically i suppose they did come out here without a visa or without a passport. This is that they are criminals is ridiculous. The second thing is these people have not been here for a long time. They have not been assimilated. Many of them have jobs and they to us ining value creating other jobs for people who have been here for a lot longer. To throw out a hundred thousand people who are really people we need to compete in the world and to create those jobs that i talked about where we need to replace technology is just not the smart thing to do. I think we need more immigrants, every study shows that immigrants do not take jobs they create more jobs. They Start Companies and they do things that American Workers do not want to do or do not have the skills four. We live in a global world other you like it or not. If we want to have more jobs for america we need to have more global trade or more people coming here. We are a competition. Everything that we are walking away from. It is a very big market. It is not the only market. They are not our only competitor. America is still land of the free and home of the brave. Most people know that comes with america, you need to maintain that. We have to compete on the world stage, we need to make this a more attractive deep goal more attractive place to come. For the people who have been here for generations we need the next generation to come from overseas. Scarlet how do you see this will be resolved . I hope the president listens to people and he understands. Will read soobably many people think this would not be a smart thing to do to throw out these people. You see that the president met with free democrats which got a letter news. I dont know why that is. It did. For this administration and certainly did. Is going to start to listen a little morbid the things that we have been doing for a long time, we can always make them better. They are things that got america to where it is today. It is still the greatest country. To walk away from those things and try to return to a mythical past that was never there. That is that what we want to do. We have reduced poverty by 50 that last two get decades. America has made enormous progress in helping people go up the economic ladder. There is still inequality and people who have not been included. Just because you have not included everybody does not mean you are doing the right thing. It just means you have to do or of the right thing. Scarlet talk about how this a. Fects academice how does this affect cornells ability to retract and retain faculty and staff . Dan there is a great microcosm of what makes america great. As he said they not only came here as of their own free will and because they can have with almost nothing. Through education the ones who are students are really getting themselves where they can become leaders of industry and of social good and the country and the world. Big challenge for universities today is that when ever you have students who have some ambiguity and their status it is extremely complicated. Universities in the states attract the very best people from around the world. And are here on these those our citizens. There is already this melting pot of the world. We attract the very best and brightest here because we have such strong universities. To keep thoseneed people here. If you look at the Tech Industry and how Many Companies in the Tech Industry and the last two years have been founded or founded by immigrants or people who came to the United States to study data here and created companies that have literally driven the nasdaq and other indices. Complicateds very weather is some ambiguity. Jobsel look at where new come from, it comes out of universities. Strengths iseatest that we have the greatest universities in the world. The best here. Cornell among them. Cornell actually came from barbara him abraham lincoln. Acrosst the railroads the country and seven landgrant schools and those were the first universities to get a education. If we were to lose the advantage we have with the best at universities, they are all going to go elsewhere. We are never going to get it back. We cannot do this. We have to have these universities open to people around the world. Some go home. A lot of them will stay. Thank you both. And thebloomberg founding dean of cornell tech. Bloomberg is hosting a tech conference at the new campus. We will bring you interviews from that event. Both of you will be speaking at that event. David, i will send it back to you. Do want to talk a little bit about that event rated stay with Bloomberg Television because we have our editor of business week who will chairmaniewing the ibm. That will be at 2 00 p. M. Here in new york. If you tune in today you can tune into our colleagues who will be over on the radio. It will be broadcast on crusty sirius xm read this is bloomberg. This is bloomberg daybreak. Room, the Deutsche Bank chief strategist read this is bloomberg. Executiveseet sounding a warning for those this week. We heard big banks in a conference. Currently we are expecting our total fixed income and equity markets revenue to be lower year over year. Perhaps by about 15 . This is not related to the business you are running reddit you are trying to have a good trade and on the right side of the market. We have a Exceptional Business and it will be down around 20 this quarter. Last quarter when youre ago it was a perfectly good quarter. A lot of the conditions have continued and to the Third Quarter. First isate the performing well. It is a challenge for us. We will have that sales and trading desk we will be down about 15 . Versus Third Quarter last year. We will see. Now as allison williams, a senior bank analyst. As well as a chief equity strategist. Fixed income chart that we love from the second quarter. It shows Goldman Sachs down, if we can for that upgrade what does this chart look like now when they report the Third Quarter results . I think there is a decline. It is a comparison. Last year was a strong quarter. If you look at the trend last year the Third Quarter was actually higher. That is part of that visual. There is a seasonality to it. The fact that they are down 20 yearoveryear a lot of that is because it was not a good quarter one year ago. My take away from the interview yesterday is that he desperately wanted me to get off that angle. He wanted to talk about lending opportunities. Is that a realistic goal should we be focusing on Something Else horrible this he a really bad spot for them . I think it is tough. When you are looking at a cyclical business and things are going against you. They have been getting a lot of questions about that. They have underperformed with the growth in the first half. They have acknowledged that some of that was due to not navigating arc its well. That is not a good thing. I think what we got yesterday was that we do have a longterm plan and here are some opportunities that you have not thought about it now we have this one billion target in their head. They want to think that there is a path to grow and a path to improve. Within that a bit and seeing a little bit more transparency and what is going on. Whatw know that there is a more business with hedge funds and managers. It is something that they have been talking about him moving over the years. They gave a little bit more detail about that yesterday. With one of the more interesting charts, there was a salesforce that was showing they were making progress. Lets you mentioned them try to get you off topic. Hisyone is talking about pet bitcoin views. Maybe that isif what they were trying to do yesterday. They were discussing it with else in williams. We are talking about this Third Quarter of which will close down stupid it is going to be tough, right we have the election. The comparisons are going to be talk of art they . Comparisons are tough. This quarter it is seasonally weak data november usually it makes a quarter. I think a lot of what determines the quarter and what determines the outlook going into next quarter is what happens this month. As you know we really only care about the quarter for what it tells us about next quarter and in terms of the implications for the earnings and how people get upset about the performance because it is such a part of their revenue. People are focusing on it for the industry because it is a part of their revenue. When you look at what is happening with volatility and the comparisons. Season elite we do tend to pick up in the fall and the volatility of equities so well see if that holds true. This ae over covert, is surprise . The country said you do not want to be doing this and you are too much of a risk. We want you to make money somewhere else. Is there a longerterm structure that we determined that we wanted to pursue . Absolutely that politicians forward of that agenda. The good news is that the comparison is going to be better next year. We already know that. I would also say that the mixed chain is healthier over the longterm which can argue for slightly higher valuations. The trading stuff is very volatile. You cannot depend on it. When lending approves improves that has complete sustainability. Thank you so much. Terminal,bloomberg what this on library interact with us directly. Scroll through and check out some charts we have public for you. This is bloomberg. The as and he continues to flirt with record levels. Your biggest conviction in trade right now . I will make it specific the yields about the same less time i checked the bondra. Probably some earnings in the fence will go higher bid to me that is a bit of a nobrainer over the next several years. What is the biggest outlier . I think Consumer Discretionary stocks would be one. Bitcoin. [laughter] we think amazon will not put every First Quarter retailer out of business. We think the auto markets are a big trade with the hurricanes. I think that is why we are lacking consumer discretion. Some ofke retail bid at these purchasers got hammered with that hurricane doing through. Where in the sector do you like . Michael it is the gaps that we are looking at. With lightning striking the tock is so cheap relative valuation. The fundamentals are not good. Do not get a run but that is why stocks are down. Howou mentioned nordstrom, much of that will have to restructure, they will have to do something. All that speculation either. Trick to heavy with us and for your insight. Coming up next on the program, the multiexit strategist will be join us as we count down the points including retail sales. The big question is too big hurricanes stop of the residents have a window we get a clean rate of the economy. We will be debating that. That is 34 minutes away from the open. Two Straight Days of gains and alltime highs they did the s p 500 just a little bit softer. We are off by 10 points on the doubt. The story of this trading higher bloomberg world wide you are watching bloomberg tv. Jonathan wall street and gauges and expectation management. Investors from some of the biggest trading banks wait for it to drop. Jamie dimon comparing bitcoin to mania and says he would fire any employee trading at. It. Apple betting big on augmented reality. Unveiling a 1000 iphone, but youll have to wait a while for. This is bloomberg daybreak. Im Jonathan Ferro alongside david westin and alix steel. Futures are negative, just a little bit softer after the s p 500 closed yesterday at a record high. Up a temp of 1 and the yield ti has granted higher over the last few days at 2. 17 for your yield. Alix sterling and bitcoin. You have the pound moving a little bit lower off the 12 month high all ahead of a boe meeting. Bitcoin down 8. 5 . Thats a jamie dimon special for you. David it might have something to do with that bitcoin think. Alix that was a jamie special. David time now for your morning brief. Coming up at 8 30 a. M. , we will get Producer Prices for the month of august. At 10 30 a. M. , weekly food inventories. And then i want 00 this afternoon, the u. S. Treasury will be selling bonds. Jonathan apple unveiling a 999 iphone with augmented reality and facial Recognition Technology as well as an oed screen. It is the most expensive iphone ever and was one of three models shown during an event at the companys 5 billion headquarters. It came on the 10th anniversary of the launch of the iphone by steve jobs. Phone, and an internet communicator. Iphone, are you getting it . [laughter] [applause] these are not three separate devices. This is one device. [applause] it iphone. Calling [applause] , apple is going to reinvent the phone. Jonathan yesterday the Current Apple ceo tim cook says the new phone signals the next era of smartphone evolution. Iphone 10, the most advanced iphone we ever made, the incredible new design, face id , true camera death system, and more powerful technology and we have ever put in an iphone before. It really is the future of the smartphone. Jonathan apple also rolled out an updated watch with a Cellular Connection and tv settop box to support highdefinition video. Will this be enough to impress customers and investors . , who hass as michelson an overweight rating on apple. In new york, are Bloomberg Technology executive editor. Lets begin with you might. We have a good idea of what the price would be. We would not know that we would have to wait until november to get it. What is that mean for the guy who comes from Piper Jaffray now . Mike expectations were pretty lofty going into the 10th anniversary found here. I think they met the expectations from a features and functionality perspective with the screen and the facial recognition, etc. There will be some people disappointed that its coming not in the September Quarter as it historically has. At the same time, most analysts at this point assumed we were going to have a delay of shipment until the december quarter or just a lack of inventory availability. Most estimates have already shifted to assuming that the majority of iphone 10 shipment were going to be in the december quarter. For that reason, i think the impact on numbers is going to be relatively limited. Jonathan this tiered release schedule, tim cook was concerned around the leaks of the iphone 10 that some people are holding back. They are doing that eight first and following with the 10 later. Does that benefit them in some ways . Mike i think what benefits them is that you are going to have more time to talk about the phone and get pentup demand around the. Some people are not going to stretch for 1000 phone and some people will. They will figure out who those people are over the next few months by the iphone eight or iphone a plus or they will wait for the iphone 10. The good thing about apple Going Forward as far as iphone is that we will have a multiyour upgrade cycle. Next year 3d sensing will be added into the lower versions. It elon gets the cycle and creates a multiyour upgrade situation. David with all this discussion with apple, we rarely talk about competition. As opposed to what . Are they competing with themselves right now or competing with samsung . Normally we talk about market share. In different parts of the world, youre definitely seeing competition. China is a very important market, dont forget here. ,here you have Competitors Companies that have been out with some of these features already at a much lower price point. The are really appearing to curb in china. David with how they are being so aggressive in their pricing, are they largely leaving alone the Chinese Markets and the Indian Markets and places like that . Their competitors over there are much lower priced. Mike its an interesting point. In general, the technology and iphone 10, a lot of it has already been in devices made by other localized manufacturers. They are playing catchup from a Technology Perspective on some things. I do just think having a new phone, a new form factor, and bells and whistles with iphone 10 will help to drive more adoption in china. If you look at the last two or three versions of the phone, we have seen no real significant upgrades other than camera upgrades and other evolutionary versus revolutionary things. Alix i want to get your take on average selling price and what that could do for earnings. The average revenues for iphone sold his six and 52 and it will increase marginally over the last few quarters. We know the iphone 7 price was cut, but the iphone eight price was raised more than estimates. If they can sustain and get to 700 asp, what does that do to earnings . Mike the answer is that it is significant. Most investors and analysts have not put that into their numbers at this point. Around one third of iphone sold this coming year are going to be iphone 10, and as you mentioned a slightly hire asp, it bodes well for fiscal 2018 growth. Alix how many iphone tens will they have to sell to do that . Where is the juice going to come from . Mike the majority of people based on what we have seen for oled supply believe that iphone 10 could be a third of total units. That could be 90 million or 90ewhere in that range million or somewhere in that range for the iphone mix. That is what we will see for a significant upside for current assumptions. Jonathan we are talking about that point today and not the earnings warning essentially from the bank about trading revenue. If were talking up the phone and not the watch, on the watch, it was interesting. What did they say was the best selling watch on the planet . Tom they did. Esau fossil take a dive and you see these other stocks starting to have an impact. This is one of those products that has slowly crept up on us. At the beginning, it did not bowl people over. You see it everywhere now. You see people are wearing it. It is really gaining traction. The tv is another example of the product that you havent heard as much from them about it, but they have packed it with a lot of interesting features. We are talking about the iphone, but what will really be interesting is how the tv sells around the holidays when people are looking to upgrade. What set top box do i want . Do any that many . 4k . I go for the david for years, apple came out with new products weather was the ipod, ipad, or iphone. People say they need a second arrow in their quiver. Is the watch or apple tv that product or should we be looking for something new in the next year or two . Mike i dont think they are with that next product. I think they are just too small. Of thelook up in context overall mix, its not material enough to the revenue and cannot become material enough. If you look at apple today, its really a product Cycle Company built around one product. Whether than 60 of revenue is coming from iphone. If you look at services, it is creeping towards 20 of revenue. Essentially all services is from iphone. Technically speaking, 80 or so of apple revenue is tied to iphone. Its kind of a one product product cycle comes me at this point. Question, i dont think they needed innovative product in the near term to give the stock going. Its development around augmented reality and new applications for the existing iphone. As i mentioned earlier, the ongoing shift of some of these features from iphone 10 to the lower end iphones over the next couple of years. David when you look at a company that is this huge in huge of market cap, this depending on one product essentially, does that give you any pause . Mike and this case, the product is so dominant and they have done such a good job of innovating on the product, not necessarily every year but at least every couple years, which is really all you need even most iphone users will upgrade only once every two to three years. What is having the Services Revenue and the ability to improve on their App Development and new features and functionality within that that they can take advantage of, it does not concern us. We like to see certainly another category of innovation for apple over the longterm, but i dont think there is anything major in the near term that we should expect. Alix what did you think about the apps for ar . Tom theres a big market developing for ar and they really put a lot of them in there. It is something not talked about as much. Once we try those out and once people understand a little bit better how they work and once your friend adopts it, i think that is something that will encourage people to start buying it. Alix when i get pictures of a kid with the stupid glasses and a butterfly on their head, addressed me nuts it drives me nuts. David i dont get exactly other. Tom giles, thank you. Olson. Ou michelsoke we will have more on apple from gene munster. He will be joining us. Later this week, an exclusive conversation with jack ma. A special halfhour program of alibaba the global disruptor. Live from new york, this is bloomberg. I think where the market is adequately valued, not overvalued. A reporter asked if there will be a 5 correction and that could be any time. You dont see one imminently . I would say we are getting closer to one in my opinion. David that was leon cooperman warning a Market Correction could come at any time. Stocks closed at record highs and futures indicate the rally this week may be easing. Turning us now is marcus shoulder and Terry Simpson. Welcome to both of you. We should not be too concerned about a given day about their down, but what about one generally in the marketplace . Things have been so bullish for so long that at what point do you become nervous . Terry the nervousness has been because of the geopolitical risk of the last couple months or so and that gives caution. The idea is that we step back and we think about the macroeconomy that from the metals are strong. Not only an fundamental markets but in emerging markets. Investors have to understand that if you take away the geopolitical risk, markets can still push higher and that is what we are seeing. David how much of that confidence is actually based on International Global growth rather than purely domestic u. S. Growth . Terry a lot of it is. We have been seeing the synchronized Global Growth story. 2016 was all about u. S. Centric story. This year is about europe and japan to a certain extent. Japan has had six straight quarters of growth in a row a positive gdp. Markets are seeing higher export values as well as an uptick in investment. This is a really strong broad global recovery. Jonathan why can austria issue a century bond with the yield of 2. 1 . We can go into the details that its offering. And 11 billion auto book for 3. 5 billion of century bonds. None of us will be around when this thing matures unless Central Banks get crazy with health care as well. Im wondering whats going on here. Terry i think its interesting, but its companies being able to take advantage of the huge demand for yield as well as the duration and risk and portfolios. We can say rightfully or wrongfully that its justified, but the reality is that theres supplyt a huge amount of and Bond Investors are stretching. That may be wrong and 100 years, but they are looking at what are the prospects and trajectory of Interest Rates and saying we will take the. That. Jonathan we will ask where the risk is right now equities are bonds . The ecbe talking about pulling back and not getting back in, whats going on . Terry the biggest risk right now that we are talking with clients about is that if youre playing this this inflationary trend. Week months and we will see whether it will be six. Is clients risk getting in and buying duration right now. Too much duration. We want to ration and portfolio, but buying too much is a big risk. We do not believe this is structural. We think investor should be rewarded for going on the other side of that. Alix they probably did not buy that bond. Jonathan black rock is so big. They buy pretty much everything. Alix marcus, lets weigh in on this for you. The risk was that if you played the inflation trend anywhere along the dollar and short treasuries, where do you see it . Marcus i think we have a more nuanced view on this. Its not so simple to play bonds against equities. The biggest risk is not being one against the other. We are giving to the point in the markets right now where we are getting that much of the returns are squeezed out everywhere and everything looks overvalued. The only way to react to that right now other than taking the complete opposite view and positioning yourself for the next downturn or correction as we saw in your piece is to be highly diversified and find the niches and markets. The biggest risk is if you dont do that. Alix are we still in a dis inflationary environment . You do not get the option to stay in the normal inflation environment. Alix what is normal . Markus back at 2 everywhere coul. Output gaps around the world have eventually closed. We have moved from a world of excess supply, which was deflationary. This was investment over the last couple of years to one where demand and supply are more in balance. You see a pickup in business investment, which is behind the global story that terry talked about. This also this gradual pushup in inflation back to normal. We do not see anything that will push inflation to levels where it becomes a market issue or where it falls to Central Banks to accelerate any rate hike plans they may have. David isnt there a simple expiration of whats going on whether it century bonds at the low yields or equity markets . Developing Central Banks have pumped trillions of dollars and euros and yen into this market place. By the way, all the assets have gone up. Its almost as hard to get diversified because those dollars and euro and yen have creeped into every part of the economy. Is a problem and of itself . If youits a problem think about this from an asset class perspective. All valuations have been pushed higher. Press premium across the board, its not just equities. Say we should get out of equities, theyre much better valuation opportunities relative to bonds. As normallys and takes hold from the fed and potentially the ecb next year, we should see reversals from that, but the idea is that they will be so gradual that policy do not want to disturb those forces. It will be an adjustment, but we do not see that being very large at least at the outset. Alix Terry Simpson and markus schomer, both of you are sticking with us. The Deutsche Bank chief global strategist will be joining us. 2700 on the s p thats his target for the end of the year. This is bloomberg. Alix you have oil rallying for a third day with the bti trading above 48 a barrel. You have the iea coming out and saying Global Demand will climb this year by the most is 2015. They had to consistently revise their demand growth estimates. Joining us now is james heron. Walk us through what they did. It was not just the demand forecast. It was the compliance from opec and its partners. James opec and especially the nonopec partners improved the rate of compliance with the cuts they made last year. That combined with a bit of reduction in supply from libya, which is not cutting but has its own internal troubles. Unexpected demand, its slightly a bullish report from the iea. Alix we are hearing rumors of an opec extension past that march 2018 point . How. How realistic are those rumors . James it doesnt look necessary even with a strong numbers from iea today. It looks that they need to maintain at least the cap on production through next year. Otherwise we will be back in a position where its too much production and there will be pressure on prices against. Alix thank you so much, james. Andl with us is terry markus. Does that tell us anything about the Global Economy or of those separate instances . Markus it tells us something because copper is the one that tracks as much as oil. I think copper is much more reflective of the demand situation. Oil is a supply issued. It is nice that opecs come flying more. The u. S. Cannot steer against this right now because we are flooding in texas right now. The associate is that there is production shortfalls there. There is still situation where every barrel that opec cuts, the show guys in the u. S. Will increase. I think oil is stuck at 50 for a long while. Alix terry . Terry there is a story that gets lost when we talk about the metal complex. Oils big story has been about supply. Industrial metals has been about a reduction in supply. This is a multiyour story we have seen for the last two or three years and this is starting to play through. Demand has supported better growth, but the supply is very nice to have been the story. For 20 is for a rebound a little bit, but we do not see that driving prices lower. The industrialin complex, but we moderate expectations that we have here today. Alix past equities . Terry one of the reasons emerging markets are still good holding for multiasset portfolios and some of the uptick in commodities will translate over to emerging markets, which is much more commodity intensive. Alix interesting stuff, especially when you have higher prices means potentially more supply coming back. Sort of a doubleedged sword on that. Terry some of the conversations that we have had with companies is that they are not basically going to go back to that rebound. Remember the first decade of the 2000 was a Huge Investment boom. A lot of these Companies Got wise to that story and realized they basically had these declines in 2010 and 2015. There is potential we see supply but it will be more moderated. That discipline will be rewarded by shareholders. Jonathan Terry Simpson staying with us. With gene on apple munster on the back of that lunch yesterday. 999 for the iphone 10. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Jonathan from new york city to our beers worldwide, im Jonathan Ferro. 60 mins from the opening bell, the story across assets as follows. Futures softer after closing yesterday at alltime highs on the s p 500. We are down attempt of 1 . 17 on the dow. Data in thenomic United States, this is what the fx picture looks like this morning. Eurodollar on the front foot. Atasury yields unchanged 2. 17 after driving higher over the last couple of days. Economic data drops now. We come in at 0. 2 on ppi for food and energy. Excluding food and energy, we come at 0. 1 . That is month on month. Look at ppi excluding food and energy year on year, we come in softer than estimated at 2 . The estimate was 2. 1 . We climbed from the previous month, excluding food and energy. 0. 1 to 0. 1 . Just below expectations, but firmer from the previous month. David still with us is Terry Simpson and markus schomer. I will start with the. What does this indicate about the state of the economy . Markus not a lot of pricing pressure and not a lot of Pricing Power. Ppi is one of those numbers that we look at for a reflection of the excess supply versus excess demand. Running 6 ands you see a much bigger shift from excess capacities were companies are beginning process power because excess capacity has been absorbed by underinvestment. In the u. S. , we do not have the issue. We have no pricing pressure, but companies are not regaining Pricing Power. David white at this point do we have the supply overhang . Terry some of this is structural and will be taking a little bit of a while before we unwind some of this. Other effects on ppi. As we talked in the previous segment, how long will that take to pass through . That will take some time, but i think we will start to see higher Pricing Power Going Forward. There are Structural Forces that are going to keep it a little bit lower than it has been historically. Alix Healthcare Services were up 1. 5 . Those that mean anything for core pce . Terry thats interesting that you mention it. Thats minus reaction was i was expecting more for energy in this particular report. It did not seem to have that. I would think the risk for cpi number was down, but interesting parts on the serverside going on right now that may raise the risk for core cpi, but i dont think thats relevant. We will not see 2 on the cpi this year. We will not see it on the pce deflator. Around is looking at it six or 12 months below target and that is what is driving the doubts in the market about what the fed is planning to do. I also assume the doubts within the committee have indicated what they were going to do. Alix if you look at final demand and backup trade services, you look at 2 10 of 1 and increased month on month. The story was how awesome consumer demand was. Has that story completely reversed or is that stagnating . Markus stagnating in the sense that its growing at the same rate. I would have to say the fact that we have not seen stronger Consumer Spending is somewhat surprising because of the low Unemployment Rate and the high level of consumer confidence. You see the weakness seeping into the inflation numbers. The retail Sales Numbers have been somewhat volatile as of late. We have seen the pickup and retail sales spending out of autos. We know that auto spending a last couple of months has been really good. Ad. Are people shifting from one sector to another sector or is there general malaise . The problem is we wont even know for a while because we have harvey and irma hitting the economic numbers. Everything will be polluted by the hurricanes and we wont know till the end of the year. Jonathan is there a problem here . Tomorrow we get cpi. Cpis is expected to come in at 1. 8 year on year and 1. 6 when you strip out food and energy. Are we looking at 20 or 40 basis points . It seems a bit ridiculous when he stepped back and think about it that the Federal Reserve is coming down to 20 or 40 basis points. Terry i understand the grand context. It looks like its very small, but there is the idea basically that the market that they can actually had that 2 inflation target because its all about inflation exit patience and credibility. If they do not hit that 2 target over a long time, then the that basically weakens their credibility as a policy maker. While it is good for the consumer having lower prices come on the flipside of that basically, usually higher inflation leads to higher wage inflation. That is another thing we worry about having structurally lower inflation. That is the way they measure Central Bank Credit ability, we dont have much left do that . Ey . Theyve got hit that 2 target since they introduced it. Markus they lost credibility when they sold qb as the one thing to solve problems. That is the biggest problem that markets are not leaving the fed or the ecb or the boj for that matter. Terry if you look at this 2 inflation target, this was not a early of adopted in the 1990s. Since 2010, they have been over 1. 5 in core cpi for a High Percentage of the time. Are we and a new inflation equilibria . Maybe 2 is not the right target. The fact that we are missing that 2 target is big and important, but we are also relying on the old number back in the 1990s. David at some point you have to revise your models. The 2 presumably was to avoid dis inflation problem. Why dont we say 1. 5 is good enough . Markus im not sure that would serve any purpose. 2 is not some godgiven number that we need to get to. Its basically signaling its more than zero. We dont want zero. We have not experienced what its like to be at zero. Zero is a fairly dangerous environment. Its not a good idea to lower the inflation target right now. Many people talked about raising it to demonstrate to consumers and businesses and markets that we want to push it even higher. Telling us that policy will stay for even longer, if we got a 1. 5 , we could say we are done and thank you very much in Interest Rates can go back up and we are fine. I dont think thats a case. Jonathan the inflation targeting in the 1990s came out of the 1980s. They cannot push inflation from the bottom. Nevertheless what we seeing of the data is ultimate stability. You see that in volatility across assets. I want to inhibit to Something Else. That alix steel brought up on the show yesterday, how difficult that chart is for banks and trading revenue. Like last quarter, within the space of 24 hours, the big guys started coming out from citi bank of america and jpmorgan warning about trading revenue. That picture is not helping them, isnt it . Terry market traders will make money when you look at volatility. It does make a challenging business segment for some of those larger banks. That is what we see in some of the numbers. You are talking about this earlier this morning. If we see an uptick in volatility, this will help the segments of the banks that we are seeing. We will notses that see a structurally higher environment across asset classes. Alix the story for banks a few months ago was that we were going to see better dividends and deregulation. No one was talking that much about steeper yield curve for banks. Low vodoes them that l matter so much more than the other two . Terry when we think about Interest Rates, at a big driver of how banks trade in the markets. Rightfully or wrongfully, its how banks trade. If you throw that in there, it will when a lot of the movement for banks. The lending and seek our results and the return on equity, but also as fixed income and trading as well. All these other Business Revenues are important. Its not just about the Interest Rate level or the steepness of the yield curve. That stockink about selection coming looking at how well those companies are run. That is why we focus on volatility. Jonathan really appreciate your time. We will be sticking with us. Lets get an update on headlines outside the business. Emma the extent of hurricane damage in the florida keys is just being realized. Federal disaster authorities estimate that 25 homes on the island chain may have been destroyed. Emergency workers rushed to the key to search for victims and to deliver food and water. Meanwhile the number of people without electricity import has dropped to 9. 5 million. Utility companies warned that it could take 10 days for everyones power to be restored. North korea has made its First Official response to the United Nations sanctions. The regime rejects the penalties and promises to accelerate plans to acquire a Nuclear Weapon that could hit the u. S. North korea called the limits on textile imports and oil imports illegal and evil. And u. K. , the lowest employment rate is not doing much for the standard of living. Wages rose 2. 1 in the three months through july. It fell when adjusted for inflation. Global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries, im emma chandra. This is winter. Bloomberg. David as you commute, you continue to our colleagues tom keene and david gura on the radio. They can be heard all across the United States on sirius xm. Live from new york, this is bloomberg. Emma business bloomberg daybreak. This is bloomberg daybreak. Coming up in the next hour, chadha. Binky stay with us. David President Trump is pressing forward on his quest to reform the tax code, including taken to the road to visit 13 states, sending sick termination and gary cohn to capitol hill. Invited a Bipartisan Group of senators to the white house to talk taxes. We are joined by senator joe manchin who comes from the russell building. Give us a little insight into that dinner last night. And what didspirit you talk about in so far as you can tell us . Sen. Manchin the spirit was good. We had seven senators, four republicans and three democrats, including myself. On the senate side, we had orrin hatch, pat toomey, ron johnson, and john thune. The president and Vice President , you had gary cohn and steve mnuchin. It was allinclusive. It was something where the meat is. We were able to talk. We started talking about infrastructure. The need for infrastructure in this country and also the innovative and Creative Things going on around the world and how not only we can catch up, but how we can be innovators and creators ourselves in rebuilding america. That was an exciting conversation. We dovetailed right into tax cuts and tax reform, whatever you want to call them. The bottom line is the president started off the conversation with this is not a tax cut for the rich, not myself or at of the one percentage will get tax cut. This is about creating an opportunity by stimulative us economy, being globally competitive, and we talked about all the right things really. We just have to wait and see when the plan does come out. But they are willing to work and make sure that we understand that this is not what everybody things will be for the super wealthy who dont need a tax cut. This is for rebuilding america from the grassroots up. David the white house came out with the white house came out with a statement this morning that confirms exactly what you said, emphasizing the effect on middleclass families of any tax reform against done. There are two questions on our viewers minds. What are you going to do . How are you going to pay for it . Understand that theres not a specific plan out yet. From your point of view, what are the main things that you really want to make sure you see . Sen. Manchin the thing i said adamantly and i told the president and the people last night for dinner is that my main concern right now is that we cannot continue to add more debt , thinking things will change it be better. We are 20 trillion on the grandchildren. I cannot look them in the eye or any children in the eye and say look, here you go. This is what we give you and do the best you can. We can do so much better than that. I think the president and everyone knows how committed i am to not adding more debt. With that being said, he is not going to give breaks to the wealthy. Were going to get a lot of the junk gone. We will revitalize the tax credits in the code as we know it. It will be fair with more people anticipating. Participating. It will help the middle class probably more than any other, the working people getting up every day and trying to do the right thing. David whether its helping middleclass families or giving relief to corporations, youre going to have to pay for it and reasons you just articulated as a practical matter. Arent you going to have to do with mortgage deductions, deductions for interest by corporations, deductions for state and local taxes . Are you willing to put those things on the table . Sen. Manchin prime mortgage is not something we put on the table and talked about nor charitable giving. Those are two very important things. There are a lot of things that can be looked at. The people taking avenger manager basically people getting benefits from some of these offsets in credit from deduction. Those are all going to be looked at. It will be ouch for a lot of people. But if its good for our country and we are globally competitive and we are still a superpower and world leader, we have to look at some of these changes. We have not made significant changes since before we had cell phones. The world has changed and im willing to look at everything. The state of West Virginia sends me to represent them. Were looking at a holistic approach. Its basically boots on the ground on main street that have really been left behind to a certain extent. Those people who have done the heavy lifting, we want to make sure we have done whatever we can to stimulate this part of the economy. This is what we talked about last night. It sounds very good and very promising. We just havent seen the details yet, but we will. David you have the perspective of having run government and the state of West Virginia and going to capitol hill. You have been there long enough to know how things work. Sen. Manchin i know how they dont work up here. David that is my question really. This all sounds really good and were not gotten specifics as you say. How is it going to get through congress and when is that going to happen . Sen. Manchin the approach we should be taking care of congress and in the senate is can we get 30 republicans and 30 democrats to vote for it . Not can we get 48 republicans and three democrats . Or 46 democrats and 14 republicans. Thats just the wrong approach. I said this all along that we are not going to get the far right and the far left. Its not going to happen, dave. They are so wedded and i respect where theyre coming from, but you can do not get anything accomplished from the fringes. You have got to come to the middle. Im fiscally conservative. Im fiscally responsible and socially compassionate. Im not going to make you pay for something to make me look good or popular. Im not going to do that. David from your other conversations with the president , deeply thats the president s preference to really have a truly bipartisan approach , perfectly on the heels of what happened with the debt ceiling and the continued resolution last week . Sen. Manchin him reaching out to Chuck Schumer nancy pelosi saying we will do this in three months and we will have a time constraint to get these things done. It puts a lot of pressure on a budget and the debt ceiling. Its going to be on the things that need to be done timely rather than putting them off 18 months. I thought it was very strategic how the president handled it. Now the ball is in our court. Do we as democrats and republicans want to rise up and be americans and do the right thing for our country or are we going to play politics and kick the can down and get to the end of 90 days and say here is where we are again . He has put it in our court. He talked about that and promise over last night. We will have to see, but right now its very promising. David thank you so much. That is senator joe manchin. Alix now congress has to play tennis basically. Check out tv and watch us online to look at our charts and graphics. Interact with us directly. Just go to tv on your terminal. This is bloomberg. Jonathan in the fx market, the question is to hedge or not to hedge . Black rocks report says investors hedge most as currency risk offer little reward. Still with us to discuss is Terry Simpson. Walk us through as to why. This is one of those questions we get an almost every call. Its an unrewarded source of risk and we recognize over the short term that there are opportunities, but for the most part, we advocate to hedge most of that risk out. We do delve deep into this. What does the theory tell us versus what happens in practice . The reality is that when you think about this from the perspective of theory and applying to the market is that we dont even have to hedge all the fx risk out because there is some benefit to that correlation through other asset classes. Jonathan lets take a real world trade. A lot of people say buying european equities and the reward is in the fx risk. If you strip out, theres not much reward at all. Terry that couple gets the issue couple hits the issue. Complicates the issue. We also understand that there are years where its also a sickly been a big detriment. We talk about in the papers of the latter team said its much more upper Risk Management exercise and then a return seeking exercise. Thats important because we always try to maximize, but fx is a big risk driver. Alix talk about performance. Markus from my perspective, fx is not a variable. The reason the equity markets are underperforming is not because of the stella right now or that politics are stellar right now. Jonathan if you want to go there, stellar at 2 . Come on. Markus for europe, thats fantastic. Its a very strong growth rate and its right now almost on par with the u. S. Euroroblem is the strong is depressing exports and that is why the markets are underperforming. In particular, the next court is like germany. A variable from an economists perspective that i have to factor in when i present the macro forecast and outlook to our portfolio manager. Jonathan the other thing is to think about the asymmetric risk. If you are a dollarbased investor, you had a massive bout of dollar weakness. When you look at the risk reward , is that where we have come from and ultimately where we are now . Terry we have a neutral rating right now on the euro basically we have run so much so far. We ultimately think we would change that if we get to more normalization and more guidance from ecb. Weve were also recognize other technical factors that drive the market and what matters to our managers at black rock are the currencies. We are not bullish, but we are not seeing anything that makes us bearish. Jonathan Terry Simpson, great to get your insights. Schomer, thank you to you. Binky chadha is a little bit bullish. The cofounder will be joining us to weigh in on that night hundred 99 iphone and the future of apple. The markets open in 34 minutes and futures softer on the s p 500. Two days of gains and two days of alltime highs. We are down a 10th of 1 on the s p 500. Features 13 points on the dow. From new york to our viewers worldwide, youre watching bloomberg tv. Jonathan wall street engages in expectations management, from some of the biggest investment banks seeing trading revenue drop. Comparing bitcoin to tulipmania as the jpmorgan boss says he would and fire would fire any in it, andading apples most expensive iphone ever, the 10 starting at 999 but can be yours in november. This is bloomberg daybreak, im Jonathan Ferro alongside david westin and alix steel. On the s p 500 coming into wednesdays session, futures a little bit softer. Negative three points on the s p, down by 1 10 of 1 . Muted price action for the eurodollar, a stronger footing on the market for the euro. The treasury market gets a soft tenure auction pushed yields higher, settling down on the u. S. 10year. Second morning to alix steel. Alix apple down 6 10 of 1 in premarket. The reviews have been all over the map. On one hand, saying it does live up to those lofty expectations, the iphone 10, the iphone 8. 999hat price of nin is just not worth it. And other innovations like the watch and ar were all anticipated. There is also a buy the rumor sell the news be with apple, so be careful of that as we head into trading. Lets look at apple suppliers as well. These are u. S. Apple suppliers and how they are trading in premarket. A boost from faster communication needs on the apple watch. It was a earlier in the session. Turning slightly lower, they have a radiofrequency supplier that could do well with the new phone, and micron up over 1 , providing a dram of , so a bigr new phones boost for them as well. In asia, we saw some movement with some of their suppliers as well, han High Precision down. Ver 1 they basically assemble the iphone. It is interesting the stock was down. Pegatron, which sounds like a transformer, was down by 3 . They get about 14 of their revenue from apple, and quantum computer up by 3 . Watch,lp make the apple the apple watchmaker. They get 10 of the revenue from apple, and we have talked about the iphone all morning but the watch was really interesting. David we are still mentioning things i have never heard of. Jonathan two days running, alix. Thank you. Pegatron, like pokemon. Apples most expensive iphone edgar, featuring advanced facial Recognition Technology. The iphone 10 was one of three new models. The events came on the 10th anniversary of the launch of the by then ceophone steve jobs. A phone, and in internet communicator. And an internet communicator. An ipod, a phone, are you getting at . [applause] these are not three separate devices. This is one device. [applause] and we are calling it iphone. Today, today apple is going to reinvent the phone. Jonathan it does not feel that long ago, and you see the picture and it looks very dated. David it changed our lives, all of us. Alix when it first came out, i was going to save who was going to buy this . The currentday, apple ceo tim cook said the phone is taking on the next era of smartphone revolution. Iphone 10, the most advanced iphone we have ever made an incredible new design, face id, true depth camera system, and more Incredible Technology then we have ever put in an iphone before. It really is the future of the smartphone. Jonathan apple also rolled out an updated watch and date tv settop box that supports highdefinition video. Will these be enough to impress consumers and investors . Gene munster joins us from minneapolis. Posta look at this a smartphone era. Walk us through what that actually means . Gene the current smartphone is a touchscreen, and the postsmartphone world will be a smart powered by augmented reality, but eventually morphed into some form of a wearable. That is why tim cook was making such a big point about this being a big change. They have been talking a ton about ar, not only on earnings calls but johnny adds yesterday had some comments about it as well. Comments ives had some about it as well. It is all about the shift to augmented reality in some form of a wearable. Jonathan i want to say in 10 years today, because over the last 10 years, the iphone has not changed radically as far as what it looks like. What will i be wearing in the next couple of years . Gene it will be your phone for the next five plus years. The phone will be around in 10 years. Outave a model that goes over 10 years. The iphone will be about percent of apples business in one decade, but we think some form of wearable we are calling it apple glass will be about 40 of the revenue. What is it look like . It will look like glasses that 50 plus percent 50 plus percent of people in the u. S. Where every r every day. Importantint to an acquisition apple made in i tracking, and that would be because of this wearable. David we had google glass and it did not work out. Was it just ahead of its time . Gene essentially. When we think about google glass, and ahead of its time, i think about the utility of it. It was not there. It was clumsy, people thought it was awkward, but at the end of the day people would have powered through that social awkwardness of it had a compelling experience behind it. So what apple is doing is inching us along this path to have a wearable that gets you utility. One of the ways they do that is coming out with an ar kit, which allows developers to build ar applications, and Start Building in some of the things like the 3d sensing camera on the iphone 10 and start to shift to a form of a wearable. They are moving on a more gradual pass, where google glass with a bit of a shock to people. So you are describing a world where, instead of watching people with their noses in their smart phones, they actually have call all caps can without even talking or making any gesture. Is that is what call up an app without even talking or making any gesture. Is that where we are headed . It would be future, seamless. We could interact with that by a glance, a gesture, be able to read the things around us. That was the significance of the doing aing, it is better job with your face in this case, but reading things around you. But the ability to read things around you, it can anticipate what you want. I will boil it down to one simple sentence the interface of how we work with computers and machines is going to become much more natural. Alix wow, that is all i say is wow. Wereeviews on the ar apps sort of mix. Some analysts did not think they were exciting or a little bit clunky. Is this is what is this what we need to materially Pay Attention to in the shortterm, or is this a smoke and mirrors thing like a look at our ar apps because our sales are faltering . Gene ar israel. Most companies are making bets on this. The apps have not been out very long. Ar kit came out in june. Imagine back when the app store started eight years ago. If we are hyper scrutinizing each app coming out and saying it does not do it, we would be missing the point that in the future that three or 4 million apps would come out in the future that would change your phone into a computer in your pocket. It is the same around ar. I am more measured in my criticism, i share some of those but i am more measured because i see where it is going. Howow do you think many do you think iphones do you think apple will sell . Will be between 20 and 25 . We look at what happened with the iphone 6 when that came out, and there was a lot of handwringing for our investors that it would not result in higher uptake. More than half of the units were the bigger phones. He bigger iphone 6 there is a president for asp is going higher. Your trivia of the day here, the first fiscal year of the iphone, the average asp was 560. This year will be about 650. That is about a 20 increase. Where tech prices usually go down, this is defying the laws of visit physics. Do not estimate how much people will pay for their iphones. Jonathan were talking at the launch date. We will not be able to get our hands on this until november, but what is that mean for your guidance, and sales over the next couple of quarters . Gene there will be some movement in the street numbers, and that might be a reason why the stock is down more because based on the reason of by on the buy onell on the news the rumor, sell on the news. They need to get 10 of their iphone units from the december quarter. But they will recapture those in the march quarter. Jonathan i will ask you this question how are we meant to value this company when the company told us to look at services, and that would have a higher multiple, but you say they are about to do something amazing with the hardware and moving to a smart phone era. Estimated pe is 17, 18 times earning. We are still positive on the story. Think investors are getting away from wanting ratings and price targets from analysts, so we are moving away from that. But at the end of the day, this company is in a great position. The reason is not only the services piece, but being a forerunner in this whole im we are talking about. I do not have a specific price target, but what i can say is if you think about broader tech , apple still maintained its pole position. I think that is positive for the stock. Alix they can for joining us, a great insight thank you for joining us, a great insight. Gene munster of loop ventures loup ventures. Later this hour, Mick Mulvaney, omb director, will be joining us from the white house. This is bloomberg. Alix the stoxx have rallied to record highs in back this week, but any the surface, which is calm, investors are a little cautious. I am bottoms up because im a former equity analyst. The recovery has been in financials and energy, both are margin reverting strategies, and get those two stocks have been terrible. It is almost like the stock market is getting credit for an earnings recovery which has been driven by energy and financials, and they have been terrible sectors. The increasing divergences that ado not really think support broad equity directive. Overvalue, a not reporter asked if i will ever have a 5 correction . Time,an happen at any including tomorrow. We do not see one imminently . I think we are getting closer to one, in my opinion. Alix a recent bank of America Survey showed the number of investors taking protection from a stock market plunge actually rose by the most in 14 months in september. ,oining us now is binky chada Deutsche Bank chief global analyst. You are the second most bullish strategist on the street. I want to get your response . There is no doubt about the fact that if you look at s p 500 earnings, they are noisy. But there are a variety of ways to tune the noise out. The simple way to take the noise out of the s p 500 earnings is to look at Earnings Growth for the median company. Just to be very clear, the 200 250 accompany any order and change over which quarter we are looking at. If you look at the median s p 500 Earnings Growth, we are running at a percent10 in the summer of 2014, get a massive , go dollar and oil shock down to 1 , and now we are and 10 . T 8 , 9 , i would argue that the bottomup earnings story is a lot better is betterand it described by looking at the median then the factors. We all know what happened to oil prices and we can discuss financials go ahead. We like financials and industrials, but what kind of dollar do you need to see to get to your bullish outlook . Mick mulvaney the most binky the most important thing to keep in mind about the u. S. Dollar is that the u. S. Dollar continues to do these very long, x, seven year multiyear cycles 6, 7 year, multiyear cycles. Augustseptember 2011, and it went too far too fast, and has been range bound for 2. 5 years. If you look at where we are today, we are at the bottom of that range. The critical question is is the dollar up cycle going to resume, or has the next down cycle already begun . I think time will tell, but it is too early for the downside in my opinion. Jonathan that forecasters forecast often, that is a line on wall street. You have not revised it since december of last year on the s p 500. As yougs played out thought, or did it offset somewhere else . Howy if you think about Financial Markets have performed across asset classes, what i ,ould argue is that u. S. Growth Earnings Growth, Global Growth, they have all rebounded. That, i would argue, has been very much in line with our all and expectations for the euro. So does no surprise that assets like equities, a emerging havets, Industrial Metals all done very well. The biggest the price is the slowdown of inflation, when every macro factor is telling you inflation should have gone up. The main surprise of the year is a surprising decline in inflation, it has been a surprise for everybody, including the fed. Been firstates have range bound and have declined. It is why the dollar has declined. It explains a lot of the Regional Equity performance. I would argue that the bottom line is yes, it has been a surprise, but if you think about can think of three macro factors that drive inflation that are all pointing up. I also think about the microfactors that drive inflation, and i would argue they are neutral Going Forward from here. Jonathan give us a sensitivity analysis. What factor would most affect your rating . Binky would most affect what . David your prediction. Binky right now, they have no real reason to change any protection. I would argue that inflation is the missing link across asset classes. I would argue that the risk reward strongly argues were inflation to move up. We are making a lot out of the blip in inflation. I think we forget about the noise and all economic timeseries. Is the standard deviation and the core inflation . It is about 35 basis points. Moved 40, maybe 45 basis points. Can very well reverse and the other direction, as it did last year with the drug pricing. David begin china of deutsche chada of Deutsche Bank will be staying with us. We will be talking with Mick Mulvaney here in a moment. Live from new york and from washington, this is bloomberg. David this is bloomberg. Im david westin. Three big banks are now warning about how the Third Quarter is looking for their fixed income position to weaken. We are expecting revenues to be lower yearoveryear, perhaps around 15 . Iswhat happens this quarter not the latest in the business you are running. You try to have a good trade and look at the right side of the market, but we have an Exceptional Business, and it 20 thisown about quarter. Last quarter for us, one year ago, was a particularly good quarter. Form isgregate, the performing well, but it remains a challenge for us. We would expect that sales and trading, 60 be down in the year. Nge versus last still with us is binky chadha of Deutsche Bank. Is this give you any pause . Mr. Chadha not really. If you think about the potential for relative sector performance, it has to come from relative multiples, what happens to them, and relative Earnings Growth. If you look at the financials, i would argue that they are by far and away the cheapest sector in the s p 500. Iundervaluation at 20 would put the current undervaluation a 20 plus. To bevenue is not going great compared to what was actually a pretty good quarter one year ago because of brexit and the like, and the trading that resulted from the volatility that we had around that. Valuation,e 20 think about Earnings Growth for the financials, which despite it being marked down is actually better than average. Is in the double digits. It is a reason to be strategically overweight on the financials in this cycle, especially given where rates are. To be if it is not going trading, you will make it up on rates. It is not look like rates are moving up faster than we thought, or do you have a different view . Mr. Chadha my view is that rates go higher. As i argued earlier, the decline in rates has happened since march, and what happened in march was the march of onc, and miss onprising inflation. They are not exactly macro driven. That is a shock that we do not expect that inflation and slowdown to get wider. We do not expect the macro drivers to take over. Inflation goes up, rates will go higher. Alix when i was speaking to harvey schwartz, i said it seems like goldman in particular thinks that lending is their secret sauce. They want to grow lending by 14. Illion by 2020, 2021 do you want to distinguish between the banks if they are more lenders, traitor oriented, investment banks . Is that something you need trader oriented, investment banks . Is that something you need to do . Most recently, we have had the issues in texas and florida, which is also having an impact on insurers, and also in financials. The i am talking about is financials as a whole should you distinguish between them . I would argue that right now, there is a broad brush across the specters sectors. There are spaces and the subsectors, so yes i would, but with a broad brush, i would argue that the entire sector is very cheap. Jonathan where is this coming from . Mr. Chadha the pickup in growth . Jonathan in terms of the data, where you see it right now . We have had a slowdown in the data, and it is one of the mysteries that we have as to why its load down it slowed down, but i remind all data has noise in it, and economists always look at growth rates. If you plot the level of loans, it looks like a line that is trending way up, but occasionally goes too far, too fast and slows down a little bit. In terms of the drivers of loan growth, it has to be the pickup in u. S. Growth, the pickup in inbal growth, the rebound earnings that we are seeing as reasons why capex is coming back. It is not just loans. The bond market is also in place reallye corporates have good access to bond markets. David if you look at the sentiment of companies and pull them, which bloomberg does, they do not list difficulty with loans as a problem for business. Can growgly, it is we our business as much as we want to without borrowing money. Is that a potential challenge for the banks . Mr. Chadha in principle, the large banks are providing not just loans, but underwriting the bond. It is one or the other. One can debate what the fees are and the rate sensitivity, as you were saying. We i would argue that what have seen through this entire remainings corporates very, very conservative, and that basically continues. X in terms of loan growth Goldman Sachs is looking for 12 billion worth of new loans in four years. Is Something Like that number realistic . Mr. Chadha i am not sure how to compare 12 billion relative to their Balance Sheet or anything. Alix in terms of growth or consumer demand, corporate demand. Is that number something that says no problem . Billionha it is a 92 a cap 90 trillion economy. Most of that is consumers. It is extremely feasible in the back row, but for the company, it is another story. Jonathan 1 is something we have on the loans . Binky chadha from Deutsche Bank. Ahead of the opening bell, 22 seconds away, futures a bit softer the on the s p 500 for two straight asian two straight sessions. Coming into wednesday slightly negative, dow futures down 21, negative asers well. Unit price action, to 17 on 2. 17 on the 10 year, as we kissed the 2017 intraday low just last week. Softy through tuesday, a 10 year treasury auction yesterday. The dollar firming up a little bit as well, back near that 90 92 handle. Lets get that market open. Here is alix steel. Alix we are opening up modestly lower here, the dow is flat, the dow up to 10 sub 1 , and 32 record closing highs this year for the s p. We are taking a little bit of a break. Areareas of the market we watching one is retail. Nordstrom up by 6 , reportedly the company is picking lettered toen is a partner to switch an lbo, leveraged buyout. The family owns 31 of shares. How much money will be needed for that kind of financing, and what vision is that put them in what position does that put them in for the future . Macys and calls getting a move higher on that news as well. Buy thewn 1 10 of 1 , rumor sell the news is really pushing through here. Macron benefiting, over 1 as well. Applied materials also getting an upgrade from goldman. It is a retail issue in the apple issue, two things we are watching. Jonathan joining us now from , and binky chadha is here as well. From what you saw yesterday, how did you feel that interview on market for the next couple of months . Investors are excited about the prospects for the phone and the watch. Getting deeper into their home. It is a continuation of trend with them. They are owning the ecosystem of the phone, getting deeper into health potentially with the the tv, they are getting inside your house. It will continue to look more software and Application Company rather than a Hardware Company. That is what investors needed to see and they saw it yesterday. The last 12er months, we have had a return of 50 on apple, the implied return potential from analysts over is 10 , 11 . Onths again, what is going to drive that is not so terrible, especially given the alternatives and bonds. Second, the stock is not trading at an expensive multiple, which i think people continue to give more credit to it. Software more like a and Application Company. I think i have segmented the market really, really well, and learn from their initial watch they had some that were 300, some that were 1000. Lot aboutey learned a segmented pricing and will do a lot to gain more market share. But it is hard to gain change your ecosystem. I do not know a lot of people who switch from apple to samsung. This does not strike me as a company that is terribly capitalintensive very they might need billions and billions of dollars to invest, but that is not apple. That hugethey do with amount, 250 billion more or less on their Balance Sheets . Slice ofas a small their Balance Sheet. It will continue to invest in some terrific and market end markets. Health, home, auto, this is a very mercantile company. Not one that goes willynilly into things. They will be scant in terms of announcements until they have something real, but you will see more and more deep dives into that goes once you on that phone and potentially that watch that goes into that. Once you own that phone and potentially that watch david are there going to be places they are devoting a lot of Capital Investment . Will we see Capital Investment of the tens of billions of dollars a year . Cash, as youlot of know, and i think there will be Big Investments in there. They will decide what returns they can get on that. It is unlikely that that kind of cash or they will get anything close to that. I think people look at the Balance Sheet and look for ways that shareholders can benefit from that properly and tax efficiently. I give tim cook lots of credit on what they have done, and i think it will use some, but not all of that, obviously. For what is your forecast the selling price of the apple iphone and 2018 . Year this will not be a where the x 10 will have broad availability. The new phones will be on order later this month. I do not have a bottoms of analysis on pricing, but i think they will skew the market a lot higher. The s ps asps are not going to go higher this year, but they will this year next year based on the segmenting of the markets. Alix when will you see that . Mark next year, because you have a catalyst as the asps go up. That will make the revenue and the model look better. As margins increased, this looks less and less like a few Hardware Company and more like a Software Company that will get a bigger multiple. When you have operating expansions as well as revenue growth, you have expansion potential. Jonathan you see tech at 23 , more than 23 . Along the s p 500 financials, you have to be a long on tech as well. David i would argue that you want to be neutral tech here. The style and sector point of view, i would argue were thinking the s p 500, if you break it up into value and growth. You can take a look at the s p your value and pure growth value ande pure pure growth indices. There is a 15 band, we are sitting at the bottom of the band. The previous times we have sat at the bottom of this band, relative valuations were in 2010, when the market was down 15 . We were all afraid of the doubledip recession. Augustseptember 2011, when the the was downgraded, european financial crisis, i could continue. But the market is up at 11 and we are at the bottom of the band. The market is not pricing any cyclical growth. You want to be a long value on value relative to growth. Get to 2600u can with tech essentially treading water . Mr. Chadha tech argues that the market is performing. The return you mentioned today also gives you some idea of how the market is positioned and the rotation. There has been a huge 15 output, theoint growth relative to value since late december. Jonathan a remarkable run for technology stocks. Binky chadha, great to have you with us, and Markley Lehman of jp securities. The s p 500 on monday, an alltime high on tuesday. Wednesday, a bit softer, negative one or two point, down almost 1 10 of 1 . From new york, you are watching bloomberg tv. Emma im emma chandra here is a hewlettpackard enterprise green room. Ing up, sammy plant flower sammy plant flower of dartmouth college. Stay with us. This is bloomberg. Alix nordstrom reporting its best day of the in early august. The company has said it was an informal talks and now reports indicate the Nordstrom Family is firmto picking te pe lindemann carters. They are boosting the price target i want you to help us set the stage of where nordstroms is in its bid to go private. It has been looking for a private buyer in some for some time now, and lemon green stands out with their experiential offering. You heard them a little while ago and out the new constant that concept, nordstrom local. We think this move to go private is to do more things like that. To be differentiated without having to answer questions to the investment community. Alix oliver, is this why you upgraded your stock price target today . Increasedu do have friction that this could happen. We raised our price target. We have production that we like this model. Nordstrom local is a great idea and is very consumer centric. What nordstrom is blue doing is addressing what Consumers Want and shopping, which is more service, more to ration, and a very innovative store in terms of no inventory in the store and beer and wine. In terms of the leveraged buyout profile and crunching the numbers, we think they can achieve in 18 return at the 52 lbo clearing price. And a relatively moderate 1. 2 timesleverage, debt to give a thought. The numbers do stack up, and if you do not to nordstrom at large. Out to nordstrom at large comedies are infecting your business, 25 of the businesses nordstrom rack, their offprice concept. Ofre is a nice confluence factors in this interesting controversy between public and private markets as well. David if this happens and they go private, and they go as radical as they like to go, how different will nordstroms look five years ago from now . Going to look tremendously different. There is a revolution going on in retail. There is a lot of technology, from augmented reality, Voice Recognition shopping, and also a store that is not a store a store that you drive into, or clothes are ready, you try it on and you are out in five minutes. Do whatever else you want, including drinking wine and having the experience. Retail has fundamentally changed. It is about experiences and immersing that into your lifestyle. So it needs to solve for the modern shopper, which is really on instagram, facebook, and thinking about travel not the andst fashion for most, nordstrom will change in that methodology because they are one of the Earth Companies to do Free Shipping and free returns First Companies to do Free Shipping and free returns, and there will be a lot of difference in how speed and inventory are managed as well. This revolution will be very customer driven. David two things. One of them is the number of and second, real estate. Oliver there are major factors, where there are two many too many malls in america. A lot of getting repurposed. To urbaner is moving centers, off mall, and looking for super convenient form factors. You drive in,l, very local, the stuff is ready online, or you can order and pick up instore, and that is a very, very profound transformation and a great way for nordstrom to test this concept, which is off mall. There are a couple of pieces happening. Physical mall traffic is 50 orng about more, online traffic is growing orabout 20 or more 15 more, online traffic is growing at about 20 or more. Shopping witho go a glass of wine. That is heaven for me. David i bet you will buy more. Alix and with us also is binky chadha. What you think . Mr. Chadha i like value, and i would value that is exactly right. There is a good reason why stocks have become cheap, but once they dumbed down and you are looking in the rearview mirror, there is a tendency to forget that they are stocks and can turn around, as we have been seeing. This is not a very easy or good way for filtering quantity or a value trap. Do you think they have franchise value . Do, and therehey is a whole set of corporate actions that companies, when they get down to that sort of value, can take. We are just talking about one. For the00 price target s p 500 for the end of the year. David . David we are going to turn to washington and tax reform. Whatever the Trump Administration wants to do to taxes is going to have to fit into a budget, and that makes the director of the office of management and budget a key person. We are joined now by Mick Mulvaney from washington. Mr. Director, thanks for being with us. Would you like to do when it comes to tax reform, and second, how will you pay for it . What are the outlines of what the president really wants to a cobblers with tax reform . Dir. Mulvaney first and foremost, the president called me on my way to this interview to remind me is that first and foremost in his mind is the 15 corporate rate. We need that to invite drive to get companies to move back to the United States from overseas. That is going to drive our productivity, gdp growth, and get us to that sustain 3 Economic Growth that we so desperately need and want for this country. We have been stuck at lower than average growth for a while now. Beyond that, we want to be simple or and fairer for people. People in the middle class should get a reduction, and they will under the proposal. It will also be easier for them to pay their taxes. I have seen numbers, 90 plus percent of people hire people to do their taxes because it is too complicated. Americans want to pay it, but they want it to be easy. That is what we will focus on. We will focus on a corporate component and an individual components. To get these reforms to jump start the American Economy get back to the dane sustained level of 3 Economic Growth. David there will have to be covered by this somewhere, but right now the president is not interested in succeed percent, 70 , or 20 . It is 15 . Dir. Mulvaney he pointed out to me this morning that in china, one of our biggest if not our Biggest International competitor, the tax rate is already 15 on certain corporate entities there. The average is Something Like 22 amongst the developed nation. We are at 35 and higher. The president desperately wants that 15 , and i think we look at it as folks who wants to help us that 15 are friends when it comes to fixing taxes. David how much more difficult as that make your job . We are all concerned about oreicits, but nobody m then you. What will you have to do to find the money to get down to 15 of the corporate rate . Dir. Mulvaney i have said this before and what will say it again. It cannot balance the budget in america at 1. 8 . That level of growth, which generates that level of revenue for the United States government. You have to get back to that 3 growth. If we have had that over the we would be close to balancing the budget this year. That is how powerful sustained every single year at 3 on average Economic Growth can be we are looking at a 19 trillion a 19n we are looking at trillion economy. The real cure our ills is longterm Economic Growth, which drives this debate. Alix so can you promised the American People and wall street that whatever tactical you come up with will not have any rosy scenarios are or attached to it . To getlvaney in order the size, the magnitude of the reductions that we want in the corporate and individual rates and in order to get the sweeping reforms that we so desperately need, you absolutely will see an increase in the deficit in the shortterm. But the payoff in the long term is the promise of a balanced budget. That is why the budget guy is so interested in what the tax project looked like. Without 3 Economic Growth, we will likely never balance the budget again. Jonathan we had a promise to get this wrapped up by august, it is september 13. When is this getting done . Dir. Mulvaney i think you have tapped into some of the frustration that you have heard out of the president in the past couple of weeks. He wanted desperately to Deal Congress wentre on its august recess, but the president does not get to, nor andld he, wave a magic wand get it done. The president has senators over for a private dinner last night, three republicans and three democrats, talking about nothing but tax reform. We are doing everything we can to Push Congress quickly, but at the end of the day it is congress that does it, not the president. Id when any tax cuts referencetax cuts 2017, or only 2018 . Dir. Mulvaney we were asked that specific question, and it would be nice to go to the folks in texas and florida the end of the year, the beginning of next year, and say here is what we can do for you for fema, but because the tax reductions are retroactive to the beginning of the year, here is more tax money back to help you out and this especially difficult time. What a great message that would be from the government to the citizens. What we are hoping will be retroactive at the beginning of 2017. Taxes, growing the economy more, there will have to be some pain somewhere. Are you looking at things like mortgage deductions . Interest deductions for corporations . State, local taxes . How will you pay for this . Dir. Mulvaney no, we propose about everyof loophole and production. Under some of the proposals that we have put forward out of the white house previously, you have seen a proposal to get rid of the deduction for state and away a lot ofive the local deductions were businesses, get rid of about everything except part of the mortgage deduction and the. Those are part of the discussions we are having. We are very interested in looking at the entire tax code. We would love to throw the tax code out and start with a blank piece of paper. When you are doing that, you look very closely at things like state and local deductions. David and our corporate interests on the table . Dir. Mulvaney everything is on the table. I do not know if we included those in our last round of discussions. I think it is fair to say that we are doing to look at the entire tax code in order to get that 50 reduction and get 15 15 tax rateate for corporations. David you are seeing some infrastructure behind you at the white house, that is encouraging. Dir. Mulvaney your tax dollars at work. David thank you for being with us. Michael mckee, it was a reality check on what you just heard us a reality check on what you just heard here. Michael the most interesting thing he said is that everything is still on the table, which means there is no plan. That is the hard part, when will and when willan people be able to see what is actually in it . There are a lot of talking points in there that the ministrations has been putting out about tax cuts and closing the budget deficit. No you have to wonder what his magic about 15 for a rate . Expensing would matter more than the actual rate. Meid that is what surprised the most, because the president said 15 and then when he heard another verse and say it could be 20 , 22 person say it could be 20 , 22 . Michael they have to move these other deductions and exemptions around to avoid completely blowing up the budget deficit. Alix we are at 3 Economic Growth. Michael from a compliance standpoint, bringing down the cost of compliance for businesses would be a help. The corporations are sitting on why doesnt of cash anyone think a tax cut will stimulate all kinds of investment when they are not investing now . It will go back to shareholders. Jonathan [indiscernible] bringing in some stronger growth than what we have had in the recent years. It is hard to make the argument that tax cuts will get you there and keep you there. Jonathan that wraps things for us here. Lets wrap up the Market Action very quickly. Futures a little softer, the open was too. Points on the s p 500, and we pause on the s p 500. You are watching bloomberg tv. Vonnie it is 10 00 a. M. In new york, 3 00 p. M. In london, and 10 00 p. M. In hong kong. From new york, i vonnie quinn. Mark from london, i am mark barton. Welcome to bloomberg markets. Vonnie here are the top stories were covering from the bloomberg and around the world. Stocks bouncing around, but is a selloff on the horizon . Find out why billionaire Leo Cooperman says we could have a correction anytime. Banking, the ceo says the adoption of the mifit ii rules will quiet profits. And in company news, did apple hit a home run with yesterdays product event, including the launch of the new iphone 10 . We find out if apple shares have taken a list in early trading. We are about 30 minutes into the trading day in the u. S. Apple is lower in early trading. Julie h