Meantime, we are halfway into the trading day. Stocks mostly unchanged in. He s p we were talking yesterday about tax reform. Close to record highs for the major averages. A lot of euphoria. How do we get this tax plan enacted . What kind of lobbying are we going to see . Morgan stanley says this is a 2018 story when it comes to tax reform. Coming to my terminal on this side on the s p, we can see where the games gains and losses are coming from. We had a decent turnarnd this. Orning health care was one of the major leaders. Are two individual stocks i focus on this morning. When it comes to abbott labs, up [no audio] higher on gdp. Also, some centralbank action. We heard from janet yellen earlier. Rates, expecting a rate increase in december. All of this leading to a stronger dollar. Check that out. Iabsolutely will. Taylor, thank you. In our top story, wall street seems to be the big winner from trumps tax plan. The tax will cut individual as well as corporate rates. [no audio] peggy, lets start with you. What part of this plan would help these top earners . Things. To start, it proposes to lower the top income tax rate, the rate on peoples salaries. It is right now at 39. 6. It proposes to drop that to 35 . It eliminates the amt, a gnarly part of the tax code for a lot of high earners, as well as the estate tax. Be taxed atould eight top rate of 25 . This is big for a lot of people who run their own businesses, not corporations. That includes hedge funds, law firm partnerships, things of that nature. Are we going to see stumbling blocks . We are not seeing that much push back yet from representatives and senators. Largely, the reviews from republicans have been very positive. They like the Corporate Tax reduction. The reduction from 39. 6 to 25 . Momandpopsct as well as organizations like the trump organization. Revenue offsets always tend to be controversial. The big one in this bill is tax reduction. In places like california, a lot of middleclass families can write things off. And personal exemptions. Economists are finding that there could be lower middleclass families with a couple of kids who end up paying higher taxes even with the doubling of the standard induction. Gary condit not make a cohn cal that gary gary cohn did not make a guarantee that taxes would not go up for middleclass families. Support ismuch there . So far, we dont know if much. There has not been much talk of it. It has, up as a way to cushion some political blowback, thatrily from democrats, this is cakes for the wealthy and crumbs for t mdle class. Isping the top rates higher one way to saying no, this is not about the rich. But i have not heard members come out and say this should be done. Vonnie we have a sound bite from representative maccarthy now. Of course we are using dynamic scoring. Dynamics cory has proven time and again that you are able to scoringre dynamic has proven time and again that you are able to bring more revenue into the coffers if more people go to work. Vonnie we have paul ryan saying neutraluld be deficit and bob corker saying he is not running for reelection. Not see this as deficit neutral. That is the problem with all of the votes in congress right now and that is what we are hearing from advisers to the wealthy who are saying, hold tight. The devil is in the details. They need revenue to pull this off. Where do they get that from . If you take away the estate tax,. Hat is a revenue drop maybe repatriating from offshore is a way to gain revenue, but how much could actually come back . Shery until they figure it out, are they doing . We are hearing from our colleagues in d. C. That Congress Needs to sit down and figure this out. Trump has put out his proposal, but he says congress now has the right to tinker with it. Tonie wasnt this supposed be the big reveal . Why are we missing all the details . This is a framework. There is no legislative language yet. This is just the beginning of the process. Senate need to doing thisprocess of with bipartisan support and bypassing a filibuster. The house needs to write and pass its bill, pass it on the house floor, same on the senate floor. There is a long way to go. I have spoken to people who are confident they can get this done by the angst giving, but they do not have a lot of time. To worke said they want weekends, anything to get this done. They are desperate. Shery what a word. Thank you. Theie lets check in on first word news. Here is mark crumpton. Mark House Majority whip Steve Scalise returned to congress today. It was his first public appearance since being shot more than three months ago. The Louisiana Republican was critically injured in june when at republicansot during baseball practice. You have no idea how great it feels to be back here at work in the peoples house. Mark for other people were injured during that shooting. The gunman was killed by police. The Supreme Court will try for a second time to decide whether 5 million government workers can refuse to pay union fees after justices deadlocked in a similar case last year. Argue mandatory fees violate the first amendment. The ruling could deal a blow to labor unions. It could take months before. Rexit talks move on to trade the fourth round of negotiations was more positive in town but failed to deliver the breakthrough needed to start on a trade deal the u. K. Desperately wants. North carolinas outer banks are reopen to tourists after hurricane past the Barrier Islands and caused coastal flooding. The Evacuation Order has been lifted. 10,000 people were ordered off the island as maria churned offshore. Global news 24 hours a day powered by more than 2700 journalists and analysts in 120 countries. Guest coming up, our next says cutting the Corporate Tax rate may add 5 to s p 500 earnings. This is bloomberg. Shery welcome back. This is Bloomberg Markets. I am shery ahn. Vonnie and i am vonnie quinn. As we dig into details of the republican tax plan, we look into how it could be a boon for the 1 . Been talkingou about this . Wrecks absolutely. Right now, it is nothing more and a framework, and a framework, which is code for it will be modified. This has a long legislative path to go down before it will actually become law. It needs to be deficit neutral. You have democrats that will oppose it. Many fiscal republicans will oppose it. Will be modified before we before it hits the president s desk. Shery is that why we are not seeing a big pop in markets right now . I believe that is the case. Yesterday was the news of the proposal. Today, the question is what. Bout the deficit and the debt right now, the movement is based more on earnings. I think if you get something done which, i believe iting will get done will be beneficial to corporate earnings. Right now when you speak to ceos, tax reform is not in their guidance. It will be icing on the cake. What does that mean for financials . I dont know if financials will be the sole beneficiary. I think the driver will be lower Interest Rates and less regulation. To the when it comes bond market, now that we have the prospect for higher rates and tax cuts, are we headed for a longerterm bear bond market . I think so. I have been in this business for 21 years. We have had a bull market in the bond market since day one. I think the fed will do a nice job of moderating higher Interest Rates. Clearly, the bull market is going to be reversed at some point in time. The top 1 of your clients must be very happy. This is a big those for wealthy clients. I think any type of tax reduction across the board is going to benefit individuals. Surely, the wealthier population will benefit from it, but they will also benefit from higher asset prices. Shery where do you see the biggest risks right now in the u. S. Economy . We are seeing potential wage pressures coming through. One of the risks would be. Ull markets economic expansions dont try of old age. There is a catalyst that brings them to a screeching halt. That has historically been higher Interest Rates. If the fed doesnt manage the process properly and moves Interest Rates too high, too quickly, and the bull market comes to a screeching halt. The other risk would be it has been too easy. Over the last eight years, the index went up. The most part, that is exactly what we have seen. But we know cycles. Its not going to play out over the long term. You have clients in states like colorado, illinois, the mid part of the country. Misery. Lori ms. About the lower end consumer . Do you anticipate a decrease there . Wakes dont believe so. Relief if there is tax for middle income and low income, they have a high marginal propensity to spend. They will go out and support the economy to some degree. Whatever relief they get, they are going to spend that money. You see earnings going this year . 2017, doubledigit earnings on the s p 500. The expected returns on the market total would be Something Like 12 . That has panned out well so far. In 2018, we expect another 10 12 earnings bump. That does not include any fiscal initiatives whatsoever. Are we done with Bank Consolidation . I think you will see huge consolidation and banks and asset managers. Thank you. Vonnie its time for the Bloomberg Business flash. Strategic investment in event bright has allowed its push into commerce. 18,000 flights into the ongoing crisis linked to Pilot Shortage caused by errors in scheduling. Ford pickup trucks are about hit u. S. Highways. The american automaker is unveiling a limited series with a starting price of 81,000. ,he biggest aversion version with all the bells and whistles, tops 100,000. Ford says it is catering to customer demand. That is your business flash update. Still ahead, after months of negotiations, toshiba has agreed to sell its memory chip business. We will tell you about the deal on the board next. This is bloomberg. Vonnie this is Bloomberg Markets. I am vonnie quinn. I am shery ahn. Toshiba has sold its memory chip built this two bain capital for 18 billion. Capital fortwo bain 18 billion. Is it finally done . Is there closure . I wish i could tell you you are going to get closure, but i just cannot do that. Is it done . No, but for the time being, we have a winner, the bain capital consortium. The bane consortium contains the very familiar companies to our watchers. Chip company in south korea. All of these companies have pitched in financing money to get this deal done, a total of about 3. 7 billion in financing. Also financing from japanese institutions to close the deal for pain. As you mentioned in the intro, this is the Largest Technology deal of the year. Toshiba never really wanted to sell this business, but had to as it got into some major financial trouble with its Nuclear Power unit earlier in the air, and that is what led toshiba to look for a sale. And finally today find a buyer. Vonnie who might be the winners and losers . Its not as if there is not great intellectual property here. The losers and winners depends on chapter two. Chapter two is what does Western Digital do . Of arn digital was part rival consortium with kkr. It feels like it has legal rights to part of the memory chip business and is going to go ahead and block of this deal from happening in the courts. Depending on what happens, we will find out who the winners and losers are. It is certainly possible that Western Digital may in fact, way with part of the business, if not blocking the entire sale. Determined in the course. It has to do with Western Digital bought a Company Called sandisk a couple of years ago. Partnered with toshibas Manufacturing Business to produce these memory chips. The memory chips are super important to technology as a whole. They say videos,ictures, and many other things on yousmart phone. That is why apple ponied up money to be part of the bane consortium. They wanted to be sure they would have a consistent pipeline of these memory chips in years to come. Shery quickly. We had some controversy over a press conference in japan, didnt we . That was interesting. This deal was set to be announced earlier this week. It ended up there was no deal whatsoever because apple had not signed off. Hey canceled it edition of how tumultuous the whole process has been. For many months it just shows you how tumultuous the whole process has been. For many months. Why investors up, should remain cautious. The cio a vanguard next. This is bloomberg. What did we do before phones . They save us from getting lost, getting hungry, and getting tired of places like this. Phones changed everything shouldnt the way pay for them change too . Introducing xfinity mobile. Where you can pay for data by the gig, and share it across all of your lines. No one else lets you do that. See how much you can save when you pay by the gig. Xfinity mobile. Its a new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Live from bloomberg World Headquarters in new york, i am vonnie quinn. Shery and i am shery ahn. 500 is being dragged down by financials in this session. Also had revised secondquarter gdp with annualized growth at 3. 1 . Investors have a lot to way when weigh when ito comes to how the economy is doing but also where we are going with taxes. Mark President Trump is waiving cargo restrictions to help speed aid to hurricane ravaged puerto rico. He has ordered the jones act to be waived for shipments to the island. It will cover all products being shipped to puerto rico for 10 days. The jones act is a maritime law requiring shipments of goods to made byts to be american vessels a manned by american cruise. Passports were delayed this morning because of a Software Glitch with checkin systems. The spainbased Company Amadeus that provides the software to airports, airlines, and the Tourism Industry confirmed that the issue cause disruption to a number of its services. Turkey is warning its citizens to leave the semiautonomous kurdish region in iraq before it begins canceling flights across the region. Beginning tomorrow, carriers with suspend flights in and out of the airports in the region. This follows a similar move in held anafter the kurds independence referendum this week. The pope is calling for greater dialogue in the Roman Catholic church after a small group of traditionalists criticized pope francis for spreading heresy. They are criticizing his openness to divorce and remarrying catholics. The cardinal said those who dont agree with the pope are free to express themselves but that on these things one must reason and find ways to understand one another. It is the First Response to formal accusations made public last weekend. Global news 24 hours a day powered by more than 2700 journalists and analysts in 120 countries. I am mark crumpton. This is bloomberg. Vonnie thank you. The s p 500 is near an alltime plan rollout. X it is expected to be a boon for most investors. As greg davis, chief Investment Officer for vanguard cautioned this morning, the devil is in the details. Here is what he said about the outlook for markets this morning. We are still seeing continued strong flow. Of mutualbination funds and etf products. The flows are running ahead of our pace where we had record cash flows this year. It has been a strong year for us. It feels like it is coming back with a vengeance. You see it inthe ell and small caps. Is that what we are going to see . The start of the year play out again . When you see this positive optimism in the marketplace, we have to wait and see, does this legislation passed, does the proposal passed through . We have seen fits and starts for the last 12 months or so. We have to see if this goes all the way through. You are reducing Corporate Tax rates. Simplifying and reducing individual tax rates. We view all of that as very positive as far as Economic Growth. Going to beare important. We need to do these things in a fiscally responsive way. Lets just account for the policies. Countries really going to repatriate cash in a significant way . Ultimately, we will see that in terms of a rise in the dollar, which we have seen recently. That is going to allow folks to continue to reinvest in the business in the united states, which will help with job creation. It will be shortterm positive if the proposal ultimately gets passed. There is still work manys to be done and a tremendous amount of uncertainty of what needs to go through there is still andendous work to be done uncertainty of what needs to go through. What does it wind up meaning for the corporate debt market that has seen so much investor inflow in the last few years . That we the environment are in with substantial quantitative easing around the globe, there is still a strong appetite for highuality corporate debt. My point is, if they can get the cash from overseas, they might not need to go to the debt market as much to raise the cash. Thats possible. At a, when you can borrow relatively attractive rate, youre not sure how long that is going to persist. As you say, we dont know willer tax reform growth go forward or in what form, but lets assume it does. I want to talk about what this does for the economy versus investors. More aftertaxve dollars, thats good for investors. But you say it will lead to job creation. Why . Companies have a lot of cash on the balance sheets, record earnings. If they wanted to hire people or raise wages, they could do it now. If you have Stronger Economic growth, youre going to see businesses continue to produce more goods and services in the economy and demand more labor to do that. Again, the big driver is not about the cash. We are seeing Stronger Economic growth as a key driver. As a practical matter, does that mean you need to get dollars to people who dont make as much money . If you ve it to investors, we know they tend to spend less of their income. The structure of the tax cuts needs to benefit the folks who are more likely to consume the tax cuts and spend them versus investing. To the extent that it impacts the middle class and lower going taxpayers, thats to be a huge benefit in terms of spurring Economic Growth. I sense for them you a word of caution that this is not done yet. Is your message today ultimately dont jump back on the trump tooned to soon train soon . Dont focus on headlines. Focus on what you can control. One is cost. The other making sure you can divest in a balanced way. And stay focused on your longterm investment goals. Atwhen you take a look corporate as well as individual tax rates, i know you are cautious, but if we do wind up getting a tax break for individuals, we have seen discretionary really rollover in the fourth quarter. With that slowly start to reverse . It depends on if we see this proposal passing through and ultimately how we or how much of the middle class and loan cxt theres are affected by this proposal. Again, the devil is in the details as far as how this will play out. What we say to investors is ultimately, dont focus on the short term. Chief investing officer at vanguard. Coming up, austan goolsbee, professor of economics and former chairman of the council of economic advisers for president obama will join us next. This is bloomberg. Welcome back. This is Bloomberg Markets. I am shery ahn. Vonnie i am vonnie quinn. Markets rising more than 2 fueled by an analyst upgrade on a newlyht be called lucrative mealtime. I am perplexed, but emma chandra is here to tell me whats going on. Upgradesalyst upgrade the company to a buy. He has set a price target. He says you can see lots of encouraging trends. Mcdonalds has had a big sales rebound in recent years with the and reduction of allday thekfast, all that with introduction of allday breakfast, all that sort of thing. The company is getting a boost from legalized pot. In of Legal Marijuana users the last four weeks have eaten at mcdonalds. Thatnot just mcdonalds got the boost. Itsalso wendys and taco bell. People are buying food from these stores when they are getting what might be known as the munchies. That is a little bit surprising. This is true in so many states and there are currently bills in congress that could turn this into a bigger trend for mcdonalds. Very quickly, wendys is actually ouerforming mcdolds. As i said, wendys was also getting a boost from the use of legal pot. Have healthier burgers. That might be the reason. Shery we are going to talk more about this later on. Thank you. Now, the moments markets have been waiting for. President trump pitching his once in a generation plan for tax reform in indianapolis. Mr. Trump tax reform will income lower and middle households, not the wealthy and wellconnected. They can call me all they want. I will do the right thing, and its not good for me, believe me. Here is austan goolsbee, former chairman of the council of economic advisers under president obama and now a professor of economics in chicago. Thank you for joining us. The argument is that tax cuts hiring and growth, and that has come from the reagan era. What have you seen so far question mark is it Standard Practice from the reagan era and the george w. Bush cuts . Of course not. The reagan era, there should nexts be a giant asterisk to the argument the tax cuts fueled the growth because paul volcker cut the Interest Rates in the intervening time. When George Bush George w. Bush did this, it lost a lot of revenue. We should be completely honest about it. All of the objective analysts recognize the cutting taxes for high income people and big coorations do not pay for themselves. If you want to cut them, outline how youso far, they havent. Shery the logic right now, the argument, at least when it comes to mr. Trumps land, is that they focus on business tax cuts, which is different from reagan or bush. Would you not expect more economic gains from this . Its not just focused on business tax cuts, first. Abolish the estate tax for a tiny number of very high income of states. The states. Cut the top individual tax rate while raising the lowest income tax rate. There are a lot of high income individual cuts and some large corporate cuts. If we were talking about cutting the corporate rate in a revenue neutral way like we did in 1986, we would be having a totally different discussion. I would be in favor of that and have been for a long time. I think with their finding is there is a lot of opposition to broadening the base and not a lot of opposition to just cutting. The exception of senator bob corker, so far, we are not getting much pushback from any republicans, including sam blackwell, who is chair of the budget committee. Wasseemed to believe it going to be completely neutral because ofwhat she called deficit scoring and 3 growth. So it seems positive when it comes to getting votes from people, but will it hurt growth, and if so, who . Get will hurt and number of people. Right now, the people who look i think it will hurt a number of people. Right now, it looks like people who are heads of households with kids are likely to be hurt. High income people medium high income people in states where they are going to abolish state taxed adduction state tax deduction, those people might be heard. When the official scores come out and you dont have magic puppies scoring where you say we will just have 6, 7, 8 growth rate. When you have actual scores that show that it will increase the deficit by trillions of dollars, will people still support it . Paul ryan is on board and so were other people who were always deficit neutral. They are always on board for every tax cut that has ever existed. He has believed they would pay for themselves in the past when they did not. What is your objection to a bigger deficit . Bjections. Wo one, we have established many, many times that cutting tax rates for billionaires in the ingest corporations america does not generate massive growth. It doesnt happen. In lowest Corporate Tax rate the worlds is becca stay and. The lowest region in the world. S is uzbekistan the lowest in the world is europe. That would not make you think thats what we should do. If you are in a. In a bill, why do stimulus . It doesnt make sense in a oom, why do stimulus question mark it doesnt make sense. Shery they are trying to prevent offshore profit shifting. Wouldnt you say at least if its repatriated it could help the economy and Economic Growth . I am saying two things. This does not eliminate the incentive to shift activity overseas. It actually rewards it. That companiesso can go overseas, find the lowest tax rate in the world that they can find and then bring that money back without any penalty, the argument is you might encourage more shifting overseas. I think when we come to examine that, that is not going to play very well. The fundamental saying theyhave to get past is, you might have out a poll just came yesterday that showed that 12 of the country is in favor of cutting taxes for the highest income people in the biggest corporations. The majority of people actually believe that taxes should go up for those groups. Thank you for joining us. Austan goolsbee, former chairman of the council of economic advisers under president advisor president obama. Vonnie this is bloomberg. Vonnie this is. Im vonnie quinn. Shery and im shery ahn. Ricos electric Power Authority was ravaged by hurricane maria. Officials are still struggling to restore electricity while virtually the entire island remains without power. Yesterday, a group of investment holds most of the bonds offered a deal for a loan in capital desperately needed. One of them spoke with bloomberg about the proposal. Lending into an entity signeds twice reneged on and agreed upon proposals to restructure and has not been paying its principal and interest on a timely basis. I think that qualifies as a high risk situation. Have come up we with a proposal for lending to occur on a sub 6 Interest Rate. It provides a substantial chunk of new capital. I think it is there to say this is not a market transaction. Puerto rican authorities thought about it and did not agree, rejecting the offer this morning. Right awayrto rico said no, they are not interested. They made it clear. They believe the exchange, the deal would not be good for the electric utility. They are requesting that anybody of wants to offer any kind loan or financing to please contact them and discuss it with them. Shery what exactly was it that they Puerto Ricans did not like here. They did not go into the detail specifically of if it was the Interest Rate or whatever, but basically, the deal being offered was a billiondollar loan that the creditors were femag would help free up money for the puerto rican power utility, but also, there would be a Debt Exchange that would have a 15 haircut, and vonnie and right now, they are trading at what . Trading in the 40s. Vonnie right. Board federal oversight managing puerto rico, earlier this year, theyejectea similar deal that included a 15 haircut on debt on power. Shery what is next for puerto rico . Are going to continue doing the immediate needs of trying to restore power. Apparently, more oil is getting to the island to help with generators. Vonnie did anyone else jump in . 30 forwe will lose the haircut . There was no alternative financing offered. Vonnie thanks. We will bring you updates on this and puerto rico stories in general. In today sure to tune for our exclusive interview with a legendary short seller on what d you miss starting at 4 00 p. M. Eastern time. Vonnie remember, you can get all the things you missed on tv. This is bloomberg. David im david gura. Shery and im shery ahn. Welcome to Bloomberg Markets balance of power. Trump president donald kicking off his campaign to cut rates for corporations and individuals. How to be a major boon for the top 1 . Hoyer ofwith steny maryland. And we will be live with an exclusive interview for the president of argentina, maurici macri. David members of congress are getting a full day to dissect the framework of trumps tax plan. Earlier Kevin Mccarthy brushed aside any doubts that the plans pathway forward. You will see the first phase of tax reform start next week. If you have a question of whether this is going to get done this year you will know next week