Hours time, lets get a check on where stocks are trading with taylor riggs. We were having some technical difficulties. Taylor we will blame it on record highs. Lets take a look at the dow of almost 200 points, 20 , a record on the dow on friday was at 23. By 2575, nonetheless of broadbased again. The nasdaq up about. 3 . Lets talk about that. If you things i want to mention. Mazon is not is aup. Apple is rushing that off. Are getting an update from jpmorgan, 1180 is a number were looking at for here. Come into my terminal. Btv 10. You are seeing an uptick here, about. 8 on some of these things. Days ofr five straight the biggest losses weve seen so far this year. A lot of the things are making full recoveries as we head into earnings on thursday. Julia lets move on. Ofs week, no shortage catalysts for investors. Tax reform, President Donald Trump spoke about the impending legislation. President trump tax cuts will restore americas Competitive Edge and lower the crushing tax burden on the American People. Its also going to bring back when we get this past, which are really believe we will. I wouldng to bring back say 4 trillion back into this country, which right now cannot come back. We are also expecting the president to make remarks after the policy when she attended with that republicans. If and when he does, well bring that to you. For now, joining us is Barbara Reinhard head of Asset Allocation at Voya Investment management. Its great to have you with us. Talk to me about tax reform and how it fits into your Investment Outlook for the rest of the year as far as the dollar is concerned and equities. Tax reform is a direct impact on the equities because it changes the earnings profile we can look at for 2018. Currently on the foia voya earnings, we would expect 10 . We would now if tax reform is passed in its current state, you could easily put out another five dollars to s p 500 earnings for next year, which is not incorporated in the price. You take a look at the dynamics and the equity market, very High Tax Companies that would benefit caps have beenl lagging the market pretty much for the better part of the year. They had a nice come back in september, took a little bit of a pause in october. You are really seeing it come through in small caps today. Shery we havent seen that being priced into the market yet. We take a look at the s p 500 earnings, they have been tracking below expectations so far. Ge, but itsgely been more of a cell event when it comes to earnings. Is this a trend will continue to see in the coming quarters . Ms. Reinhard you saw in the Second Quarter as well. Companies that were beating on expectations were not being rewarded in the Second Quarter. That is in and watch. Also happened in december of 2007. However, i would note that the reason we think this is happening this time is theres been a lot of enthusiasm priced into the market this year. Equities around the world have been responding, not necessarily to tax reform of the possibility of it, but because Global Growth has been so good. We think there is more to go to the upside is legislation gets past, but it also will bring the fed him. If you grow the economy much faster at full employment, the fed will have to respond to that as part of their mandate. Julia i will ask you the question that we seem to be asking the whole time. As a change of leadership include whether its one of the three yellen, powell, or tatum. Does that make a difference to you in terms of the outlook . Ms. Reinhard one thing ben bernanke started with an janet yellen has continued with his make the committee an important voting organization. Under previous fed chairmanships, that was more of a chairman led discussion. I think thats very much to both of their credits that theyve done that for the organization. The market is not like uncertainty. Beppointing yellen would seen as something that is most easy to digest and they will have to understand who the other candidates are. But its been a parlor game was played all year. Shery we will continue to play for the next few days or weeks. So far, it seems that wall street is betting on flatter u. S. Yield curves. The chart is 1506, were seeing right now the spread between short and longterm treasuries continuing to narrow. Matter who becomes fed chair at this point . Are people just expecting a little more hawkish yellen, no matter what . Ms. Reinhard we pay close attention to the yield curve. It does tend to be very important indicator and as the yield curve gets flatter, the probability of recession starts to rise. The reason we care about that so much is because during recessions is when you get a big peak to declines in equities. A very close attention to it. And as we continue to see the fed in shut Interest Rates, even if they are going very gradually as they have this year, we expect to see the curve continue to flatten. Julia this ties into the dollar store in what we see. Weve seen this rally in recent weeks. Do you think that can continue to the back end of next year in light of all the factors we got going on, whether its tax reform or the yield curve as well . Hasreinhard the dollar been a funny thing, it had an interesting year of have and have not. First part of the year, the dollar was much weaker. Dollar strength is important because Dollar Strength will hurt your earnings expectations. The dollar also affects our portfolios of you think about investing outside of the u. S. The dollar for us is about positioning and relevant registry. With the fed continuing to move and raising Interest Rates even if the ecb is starting to reduce some of the quantitative easing, does that the fed at a first mover advantage, which we think is probably and modestly dollar positive. Howa i want to talk about you have been rotating your equity positions. In the weeks following the japanese election as well, want to talk about japan. You are bullish on japan. Ms. Reinhard we have been bullish on japan for quite some time. Mr. To rotate folios in september and again in october towards japan. We felt as though the d rating the japanese equity market had suffered through this year was really unwarranted. Especially in the case of very strong earnings. The Political Uncertainty around japan has been removed, which is why you seen a bunch of big rally in Japanese Equities over the last couple of days. Important to know we edge the currency back into u. S. Dollars abeuse we do think winning or someone whos even more dovish will be a big deal for the yen. Shery im also thinking about the consumption tax hike and we are hearing that abe could be delaying that. Ms. Reinhard and actually relatively helps. Japans economy has been fraught with consumption tax hikes over the past 20 years. Putting it off for a while longer is not about thing. We would say theres a day of reckoning that has to come with a sort of outstanding debt they have. However, it is owned locally. Same policyve the you have in the rest of the world. Shery Barbara Reinhard, thank you for joining us. Head of Asset Allocation at Voya Investment management. A check of the first word news, Mark Crumpton has more. Mark S Supreme Court dismissed the remaining from travel ban case. The court took the action because the lawsuits challenging the original band arnel sense that band has changed. Meantime, the president s for month worldwide ban on refugees ended today. The u. S. Temporarily halted missions refugees from all countries with some exceptions. They administration plans to unveil new tougher screening procedures. President trump has a broader travel ban on people from several countries, the courts of blocks at policy repeatedly. A male protester feet away from President Trump as he walked the record or outside the u. S. Senate chamber shouted trump is whaton, and dropped appeared to be several small russian flags in the present instruction. Mr. Trump was walking alongside Senate Majority leader Mitch Mcconnell at the time. Its unclear how the man was able to ask is that secure location inside the u. S. Capitol building. British Prime Minister theresa mays cabinet is under pressure to agree on the kind of trade deal britain wants after leaving the european union. Ministers meet today and british businesses want an urgent agreements that would let them trade as usual for two years after brexit, but may have signaled they want to be a swift transition deal. Senior u. S. Senators are demanding a reassessment of american policy towards myanmar in response to what they call a systematic military campaign to force Rohingya Muslims out of the country. Senate Foreign Relations chairman bob corker says last year he expressed his concerns to myanmars later. Leader. Shared my shock and dismay at her dismissiveness of these concerns and attitude that she has maintained even in the face of unfolding humanitarian crisis, and mounting international criticism. Mark maryland democrat ben cardin told committee that he believes that what is happening to rohingyas quote genocide. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Mark Crumpton. This is bloomberg. Julia coming up, more tax talk from the white house. Wilbur rossretary commerce secretary wilbur ross says hes hopeful tax reform will be voted on by the end of the year. Interviews coming right up. This is bloomberg. Julia this is bloomberg markets, im julia chatterley. Im shery ahn. Investors are deciphering mixed messages from the white house about President Trump tax and. How will the plan work at it will benefit . Secretary blumer grow wilbur ross tried to clear it up. Is a lot of special gimmicks that have resulted in very low taxes for very high income bracket people. For example, theres the discussion about not giving a deduction for state and local income taxes. 80 of the benefits of that go to 20 of the population. So thats one thats very, very oriented towards the upper brackets. As an example of what the president is doing to reduce the discrepancies. Senator bob corker is doing the rounds in the u. S. That were today and he said the following leaving President Trump tax overhaul of congress would be the best way for us to have success area what do you say back to that . But congress is being asked to draft the details of the programs. What the president put forward is the framework, the conceptual framework, thats his objectives. But there are lots and lots of details to be ironed out, and that very appropriately is the work of congress. Because those committees have to semicolonsittle whatommas, because thats exhibits the tax code. David centre court are must be right. Have you ever seen major legislation passed the Congress Without firm and strong and persuasive leadership from the white house . Are we getting that in terms of this is whats important at this is what we will give up on . Socalledross the Affordable Care act had little detailed guidance from the white house. It was basically done in the congress. And thats the biggest piece of legislation from that administration. Debt . At is the next the next step . Secretary ross we are hopeful to have this voted in by the end of the calendar year. The budget resolutions that have been going through our precursor to that. Because in order to get the tax program through, you will need to avail ourselves of reconciliation. Reconciliation means that you basically only need 51 votes. And given the very partisan nature of congress right now, anything that needs 60 votes is going to be very, very suspect. So the budget resolution and its provision that there can be a deficit of two 1. 5 trillion over the 10 year cbo measuring period is a very important start. Jon the race for the head the fed chair is heating up. Im wondering if you have spoken to the president about who will make the best fed chair . Secretary ross there have been discussions, and im not going to comment publicly on it until the president makes his determination. But he has asked for a wide variety of people to give him their opinions and their rationales. Jon the front runners at the moment seem to be john taylor and jay powell. Would you be satisfied with either a do you have a preference . Secretary ross i dove in and am going to be discussing publicly the choices the president might make. Its a very important decision, hes taking it very seriously. Hes doing very considerable vetting, and im sure you will come up with a wellfounded decision. Commerce shery secretary wilbur ross speaking earlier on bloomberg. Production problems are putting s iphone xpple rollout. This is bloomberg. Shery this is bloomberg markets, im shery ahn. Julia i believe im julia chatterley. Apple iphone X Hits Stores next initial judgments of the iphone x will only be around half of what was expected this year. Apple has been battling technical issues that involves the models new facial recognition feature. Alex webb, tech reporter for Bloomberg News joins us from san francisco. This was always going to be a gamble as far as the technology it concerns. What is going on here, and if there are problems with supply, wire 55 why are 55 Different Countries of consumers able to put orders in by friday . Alex its a gamble from apple. If you are making an order from the iphone, it probably means you are less likely to go out and buy a competitors product. Charged forcking be the product until he gets delivered, but if you made a commitment to buying an iphone, they are hoping to lock you in. It could be a doesnt get delivered for a couple of months, but they hopefully that security was a customer. Shery we were talking about this earlier, you only really expect a huge dent on the revenue. Alex its hard to tell with the revenue was going to be. Next thursday, november 2, when they announce earnings, they will also give the forecast for the car quarter. If you extrapolate earnings over the course of the year, i think possibly analysts and investors are expecting revenue to carry over into the march quarter. Any demand that is meant isnt meant in the christmas quarter they are hoping will be meant in the next six months. Julia they hedged themselves between the iphone x and the iphone 8. The iphone x has this technology on the iphone 8 doesnt. Is it a step too far here as well, because you have demand lower for the iphone 8, and now the iphone x seems to be having supply issues. They divided and damaged again. Alex its a big question of whether it is hedging or cannibalizing. There has been the expectation in some reports that some people who are more inclined to have to buy the iphone x are waiting for waitinghe iphone 8 are for the iphone x. To see if its worth spending 200 more on this phone which will give you face id, and emoji, and a bigger screen is that worth the extra money . Some people will decide it is not and they will buy the iphone 8. A lot of this stuff is up in the air until it can consumers hands are apple often surprises us. Scale ofstimate the the apple fan boy demand. Julia what are they doing to mitigate the impact here, if they have problems with supplies . Are they talking to other people, are they negotiating contracts . Alex apple has a very effective supply chain mechanism. They try always to have a number of different suppliers for any different components. Some of these components going world,he three sector they have Single Source suppliers. , that technology is very hard to develop and a couple of other suppliers may come online through the course of next year. For the oled, thats not going to happen until christmas. They are pulling a lot of these threads, but it may take a while before sending emerges from it. Shery its important, the Holiday Season sales are starting. Alex webb reporting from san francisco. For a look atme the biggest business stories in the news right now. Amazon is trying to boost its product videos by middecember to keep Holiday Shoppers from wondering to you tube or facebook. They are increasing viewing product videos just before buying it. Amazon is testing a program to produce videos with merger partners. Products include electronics, housewares, and pet products. Fidelity investments chief executive officer Abigail Johnson addressed money managers. Johnson highlighted the type of Work Environment needed to reach her goal of recruiting more female employees. For us to build a better future, its important we create a culture where bad behavior is not tolerated. Going to break in, Mitch Mcconnell, Senate Majority leader speaking after the lunch with gop senators and the president. That willconnell be friends that are going down the end of the session. Tax reform, we are hopeful the house tomorrow will pass. Obviously, tax reform, we are hopeful for the ways and means and finance committee. We appear to be having some issues with the connection. He was just talking about tax reform and the discussion they have had. Were showing you live pictures, he is still talking, but they do appear to be having problems with their camera. The president also attended these meetings, having spoken about tax reform earlier in the day. Its been a lively day as far as the president on twitter heading into that meeting. We spoke with senator bob corker as well. Shery heading into the luncheon, we saw protesters coming out and saying that protesting President Trump, saying trump is treason. Its been a very lively day. We are expecting some more confirmation on whats going to happen with tax reform. We are expecting that a thursday budget resolution vote coming up. And senator Mitch Mcconnell is very crucial, very key in these tax reform talks. You mentioned senator bob corker. We had that feud with President Trump in the morning, and how that is going to impact the discussions. Lets listen in. Were focused on tax reform. We are on tax reform because we think its unacceptable that half of the families in this country say they are living paycheck to paycheck and one third of the families in this country are one great job away from financial ruin. So the tax plan we are putting forward lowers rates on middle income families and doubles the standard deduction. Removes a number of americans from even having Tax Liability at all by doubling the standard deduction. It also expands the top the Child Tax Credit to make it easier for families to afford the cost of raising children in this country. We think that is a path for that will help pave a better and Brighter Future for middle income families in this country. We hope there are democrats who will be available to work with us to pass that kind of tax reform, because it is good for American Families and it is good for middle class. Its good for jobs and wages. Those are the types of things the democrats say they support. Joiney do, they should hands with us and help us get this tax bill across the finish line. Im very happy the president accepted our invitation to join us today for lunch. I thought it was a very active discussion, to focus on the things we have been elected to do, which is to help lower the taxes of the American People. The president was very strong and very focused on that, on giving people raise by cutting their taxes. This will be the first time in a generation that has occurred. We have taken the first step in the senate by passing a budget. That has been done. We need a tax code that is fairer, simpler, and lets people keep more of their hardearned money. Is what we are committed to doing those what the president was focusing on today. In terms of businesses in the tax situation there, we lower taxes there to make it easier for businesses to hire people, put more people to work, and to raise wages. Initially, the president talked about the issue of confirmation of so many of his nominees. We are in a position where it seems that the democrats have been so obstructive to President Trump and getting people in place to do the jobs for the American People, that at this point, president obama had twice as many people confirmed as President Trump has to this time. We are going to continue to work to break the obstruction we are seeing for the democratic party. Part of the remarks focused on the regulatory reforms that have been made already, and they have been significant, things like the power structure that would have raised utility bills, the socalled clean power rule, the waters of the u. S. That would require the epa to be involved, and so much of the economy. These were huge overreaches and a step back from that. On the economy, the president said his two principle observations, what members are tax cuts it is about for working individuals and hardworking families, and at the other end of the spectrum, it is about creating opportunities to be more competitive so the jobs people have are better than the Jobs Available now. Not very complicated if we stay with those two principles. We will see this economy grow and individuals who work far hard for living benefit from it. Over one point 7 million jobs have been created in this country since last november. Over 1. 7 million jobs have been created. We are looking forward to tax relief to help make sure people are keeping their own dollars in the own pocket spirit 25 of people in this country do not have emergency access to 100. Talked about the fact that tax reform, the work we are doing, would give 4000 income to the average middleclass family in this country. This weekend, for the first time in 25 years, we witnessed a shutout of the denver broncos. It has been longer than that since this country witness tax reform. 31 years ago. Top gun was the number one movie in the box office. 1996, Mitch Mcconnell was rocking out to walk like an egyptian. Were still dealing with the next thing the 1986 tax code today. We can do better and grow this economy. [inaudible] look, i do not have any observation about that. We are here to try to a call this things for the American People. We are on the same page for the issues i mentioned. Front and center is comprehensive tax reform, as my colleagues described, to try to get the country growing again, and that is what we are going to work on. [inaudible] you guys were hollering so loud, frankly i do not even notice it. We did not comment on it. We just walked on into my office. [inaudible] if it is anything all republicans think is important to the country and to our party, it is comprehensive tax reform. The issue itself brings about great unity among our members. So were concentrated on the agenda that we have for the American People. The president shares that agenda. He is going to do a good job promoting that agenda. And we intend to achieve what we have set out to achieve before the end of the year. [inaudible] at what point do you an obligation as a litter of this party to weigh in on serious criticisms of the president . Party toeader of this weigh in on serious criticisms of the president . For have to try to achieve the American People the agenda that we set out to achieve, and tax reform is what we are about. If there is anything that unifies republicans, it is tax reform. We have been looking for the opportunity to do this, literally, for years. We now have a president who will sign it and believes what we are trying to do. We are going to concentrate on our agenda and not any of these distractions you all may be interested in. [inaudible] senator corker [inaudible] look, i do not know how many times i have to say the same thing. There is a lot of noise out there. We have a First Amendment and everybody gets to express themselves. But we are concentrating on the agenda of the American People need. I think there is great cohesion among republicans of all persuasions to achieve this goal before the end of the year. Thank you. Julia Senate Republicans speaking on capitol hill. A number of comments you had the likes of senator Mitch Mcconnell discussing and saying that these are all the reasons why we need to tax reform. A host of them outlining the reasons for the tax reform. Other comments that were more interesting, perhaps. Donald trump as the senate gop to give a show of hands on the fed. This was according to senator john cornyn. He declined to say who got the most votes in that fed straw poll. Lets go to kevin cirilli, our chief washington correspondent. Nothing said on the bob corkerdonald trump feud this morning. Very much trying to stick to the message, of course. And excitement from the journalists is all there. Kevin yes, a lot of angst surrounding president from meeting with republican senators. Senate Majority Leader Mitch Mcconnell sticking to the script, not answering directly this destruction would negatively impact the republican majority. But he said he believes tax reform is going to unite them, that they would still be able to get that done by the end of the year. I thought it was fascinating asking the president was for a show of hands poll in regards to the republicans wanted or would like to see take the top spot at the federal reserve. We know President Trump is anticipated to make a decision before he goes on his asian trip. We theres no question, should have been an opportunity for republicans to focus on their timetable of lowering taxes has been drowned out by all of this back and forth the between senator bob corker, as well as the president. We should know, President Trump leaving this meeting not answering questions, not engaging with reporters, instead heading right towards the exit, leaving that to Mitch Mcconnell. Shery interesting to hear that President Trump told the senate gop lawmakers that they are not going to touch 401 k plans. We have seen the president shooting that the republican idea. They do not seem to be quite on the same page here. Kevin correct. I think there is a lot of discrepancy how they are going to pay for that 6 trillion plan. We have heard a lot about eliminating the state local deduction tax, a 1. 3 trillion source of revenue. The president saying about 4 trillion is how much the tax plan would help generate. But it is still 6 trillion. On the 401 k issue, it is good news for black rock and Asset Managers at aig. They like what the president has said. I am being told we have got some more comments. Julia more comments are being made. Lets listen in. Cardin, i shaheen and thank them for joining me here today. As everyone knows, President Trump put down his phone for an hour to come to the Senate Republican luncheon to talk tax reform. Unfortunately, what the president says about tax reform has been correctly characterized untruths,orker as and corker was being kind. Lets review what the president said. With theed president says and what the republican plan does are polar opposites. The president said this is not a plan for the rich. Blatantly untrue. Untruth number one, that this is not a plan for the rich. It appeals the estate tax, which benefits the 11,000 wealthiest estates in the country, each one worth more than 5 million. Andowers the top rate, truth number two, allowing hedge fund owners and big law firms to take advantage untruth number two. It provides a passthrough so very wealthy people can pay a lower rate than average americans. Untruth. Weis totally untrue, shall say, that this is not a plan for the rich, which the president has stated. Then he said at the heart of our plan is a tax cut for every day working americans. Untruth number two era just wrong. Tax policy center, onethird of middleclass families would pay more, and very few get much of a break. When they talk about getting rid of state and local deductibility, when they talk about limiting 401ks, when they talk about limiting the mortgage deduction, those are all and it making the middleclass pay more so the rich can get a bigger tax break. That is not what america needs. That is not what america wants. And that is not what is in the plans put together by our Republican Leadership in the house and senate. That is an untruth. And then the president claims this will not increase, this will lower the deficit. Untruth number three. Absurd. No one believes that this will lower the deficit. And the Washington Post fact checker called this claim of fantasy. No one believes it. Untruth untruth after truth, as bob corker put it, when the president talks about the republican tax plan. One, and that helping the middle class. Two, not a plan for the rich. Three, it lowers the deficit. This plan is a disaster for america. It is no wonder our republican colleagues want to rush it through in the dark of night, because the more it is exposed to sunlight, the more rotten it smells, and the American People will know that. Senator cardin thank you, senator schumer. The more we are learning about the tax proposal that the republicans will be unveiling next week, the more we have concerned that this is certainly not in the interest of the American People. Senator schumer talked about the fact, one thing is clear it will blow a hole in the deficit. They allow one point trillion dollar hole to be created on the tax proposal. In addition, we know there are a lot of gaps and even reaching a 1. 5 trillion deficit. Secondly, we know that it will benefit higher income families. The wealthiest of the ones that will get the big tax cuts. Senator schumer mentioned the state tax repeal, issues minimum text that will benefit wealthy families. That is all clear. One thing that is also clear is middle income families will be asked to pay more. They will not beginning a tax cut. They will actually be asked to pay more. You start looking at the way they will be paying for this julia we are going to leave the democrats speaking there. We listened to Chuck Schumer making pretty potent comments as far as the tax plan is concerned, saying it is totally untrue that this gop tax plan is not a plan for the rich and no one believes the tax plan will lower the deficit. Layer upon layer of criticism as far as this tax plan is concerned. Interesting. Also saying the tax cuts for the middle class is completely untrue. And limiting this 401 k s contributions, those are not tax cuts for the middle class. Lets turn to our bloomberg exclusive, how are Family Offices handling the risk of a potential pullback . Jason kelly is standing by with a special guest. Jason so much to talk about here with lincoln ellis. He is with northern trust, a Senior Investment strategist. And focusing on Family Offices. Who are we talking about here . Lincoln i think there are three distinctive characteristics of Family Offices if you think about them in a broad sense. First is their approach to risk taking, right, they sit in the middle space the between our wealth colleagues come of the institutional and investors, both who were those who have to take particular kinds of risks, individuals who obtain particular kinds of goals, and institutions towards more reliability liabilitydriven. Family offices could potentially buy bronze and go home, but they are risk takers by nature, families who have built substantial piles of wealth and they are looking to invest for a long time horizon. That is the second part, they are longterm, perpetual capital kinds of investors. The third thing is the decision makex in which they decisions, make them much more nimble actors in the Capital Markets, and you have seen them become much more important parts of the Capital Markets over the course of the last two decades. Those three things make up what Family Offices are about. Then were talking about investment offices, people who have made money to entrepreneurial ventures, some have inherited that money. When you think about what we have just been listening to from washington clearly, potential tax cuts are on the table. Take us inside the conversations that you are having with your clients. How are they thinking about tax reform . Lincoln from a broad big issues. Two the structure and holding periods. You heard senator schumer talk about the structure, which has been a topic of much debate. Theres a the issues families continue to think about. In terms of size, they are nearer large corporations, so they, too, will have put a pause on investment programs or allocating capital in the same with that companies have, waiting for the outcome of this debate. Jason right, so as they continue to think about that you have been in this business for 35 years. The firm has served this sector for 35 years. What has changed of late . They seem to be, to your earlier point, taking more risks, seem to have much more diverse portfolios. What is driving that . The need to attain a particular kind of return. Both the nature and the way you go about obtaining that return has changed dramatically over the last 20 years. There is a chart we produced earlier this year that really shows the dynamics. Have owned acould portfolio of an Investment Grade bonds that would youll you about 6. 7 and have a volatility of 4. 5. 10 years later, you needed to own two additional asset classes, u. S. And nonus developed equities. Bonds would have dropped down to 35 . To get that same 6. 7 return, but you would have doubled your volatility. In this time of zero Interest Rates now and the central bank policies, you have had to add emerging markets and dispose with your fixed Income Portfolio to still attend a 6. 7 return. And that volatility component is now closer to 17 . So the ways in which families are taking risk are dictating the ways in which they have to manage risk. Therefore you have a multitude of different kinds of investments that these families are making. Jason take us to the other side of the equation to private equity firms, hedge funds that want this money, how are they having to alter their behavior . This group . Sell to lincoln it is an interesting dynamic over the last 10 to 15 years. In terms of broad themes, families have been the driver of this expansion into private markets for the last two decades. So where private Equity Investors use to own that space, they have had to welcome with someone open arms now Family Offices jason reluctant open arms and some cases. Lincoln that is right as partners in call investors into this space. So there is a new seat at the their Family Offices, and interest in being direct owners in business and partners with these will players in the private equity space is something new in the environment. A secular change . Has this shifted the way capital is allocated to a lot of these alternatives and traditional Asset Managers, do you think . Lincoln again, i would say it is something that has been evolving since the 1990s. You have seen a decline in listed securities by 50 since 1996 and a concurrent rise in assets into the private space. Anded financial crisis doddfrank and basel three regulations, you have had the development of more opportunity because of the capital vacuums created in the banking space. One should not be too surprised to see these people at the table. But it does reorganize the way that families think about risk and take that risk on an ongoing basis. Jason and take that risk on an ongoing basis. Insideyou really took us the minds of these investors and came up with a clever metaphor, comparing where they are and how waze, whatthem to we use trying to navigate around town. Tell us about that. Lincoln it is like the waze that helps to guide is a through any particular investing sequence he, and that is how do you find the most efficient and most effective way with inputs from others that would get you to the kind of outcomes that you are looking to obtain . Jason i am finally getting to understand what you do, lincoln. Very good to be with you and great have perspective, especially at this time when there is so much talk about how wealthier investors are thinking about the markets. Sheryd, back to you ahn, back to you. Shery thank you. Julia time for our sectors by the report with abigail. Abigail we are looking at health care or the health care is on pace etf that for its worst day since the middle of august, all on earnings weakness. Eli lilly is one of the big drugs today, on pace for its worst day since august 17. The Company Actually beat estimates, but this was mainly an older drug. A unit that is slowing, seen as a bearish signal. Those shares selling off. Santee, the medicaid company, beat thirdquarter sales and earnings estimates. But the midpoint of the earnings forecast only matches the estimate. Investors disappointed by that. Couldthere is a risk we have Insurance Companies going away, and that could cause their earnings to fall as much as 2. 4 . Estimatesiogen beat handily, 10 on the bottom line. That is far for the course, but the composition of the beat is in question. With main drug was in line the u. S. , but a big growth drug beat the consensus number, coming in at 275 million, but the whisper number is 300 million, and investors are not liking that. That is a big growth driver. But we are told that is just a trajectory. Julia thank you for that. Flake innews jeff the senate has announced he will not be seeking reelection. That is according to the arizona republic. Senator jeff flake saying he will not seek reelection, one fierce critic of donald trump, criticizing the policies and politics of President Trump. He has a new book called conscience of a conservative. From new york, this is bloomberg. You have had to follow bill gates and steve ballmer, two legendary figures. If you do this well, will you be happy . Of mcdonalds rising after they posted another increase in u. S. Diners less quarter. We have a guest joining us a covers the restaurant industry. Strong center sales, but there have also been franchising efforts of bearing fruit. Michael it was another quarter good court appeared samestore sales trends have accelerated in the u. S. , where they outperform the rest of the segment by 440 basis points, but also across the globe. They refranchised stores ahead of schedule and they will do some more, including in the u. S. They have done a tremendous job over the last two plus years. Time i checked, mcdonalds japan was not doing great because consumers were gearing more towards healthier alternatives. Michael they also had a food safety issue there. But over the last couple of years, they have been able to get on track with the rest of the chain. It has been a lot of things the technology park. They have put kiosks in the stores and have mobile ordering, branching out into delivery. It provides a strong value offering, like two for two dollars. They have improved some of the quality of the food with the new signature crafted burgers and chicken sandwiches and stuff like that. They have done a lot of things, and it is culminating in very strong results now. 34 a they were already up year to date, rid they . Michael yeah, up 50 in the past year. Shery michael, thank you so much. You cover restaurants for bloomberg intelligence. Coming up, we will be talking with atul lele, cio of Deltec Bank Trust international group. What he sees ahead for china under the leadership of xi jingping . We will get more details. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Julia 3 00 p. M. In new york, 12 00 a. M. In san francisco, and 8 00 p. M. In london. Bloombergome to markets. Julia we are live from bloomberg World Headquarters in new york. Here are the top stories on the bloomberg and around the world. The feud between President Trump over taxor bob corker reform, raising concerns about the gops path to a tax overhaul. A gathering in china laying the groundwork for xi jingping to seal policy for decades. We will discuss it with atul lele from deltec international. Ahead davidd solomon says he sees good Economic Growth globally. More from that interview ahead. One hour from the close of trading. Lets check markets with abigail doolittle. Abigail the bulls are back. Record highs for that out. The dow is on pace to close it out alltime high. Real strength after yesterdays pullback. Stocks had their worst pullback of the month yesterday, but today the buyers are charging right back in. The dow is carving a record high. We will look at why the dow is outperforming the s p 500 and nasdaq. 77,t, this chart is g btv a longterm chart of the dows rsi, relative strength index, a momentum indicator. It is above 85 right now, almost at 86. Redhing above 70 in the line is considered to be overbought territory. This is the highest rating going all the way back to 9055. We have a lot of all the way back to 1955. A lot of analysts discussing whether or not the market is due a pullback. An analyst at oppenheimer is not concerned by a high rsi. Hes as high readings happen and healthy advances and are typically followed by aboveaverage returns. He thinks stocks are set to go higher over the next three to six months. We have this very high reading for the dows rsi. Lets look at some of the stocks driving that. Caterpillar, 3m, boeing, mcdonalds. Record highs for the first three stocks. Caterpillar and 3m were very strong. Boeing reports tomorrow. Mcdonalds up the least of these four stocks. Mcdonalds did match the profit view. However, helping this stock is the fact that the samestore versus the1 estimate of 3. 4 . So the turnaround from mcdonalds continues as strong traffic flows into the stores. In case you do not think today was riskon, lets confirm that with a look at the haven assets. Haven bonds selling off. 10year yields higher. The yen falling against the dollar. Gold is down. The vix is down, the fear gauge. It is a riskon day. Julia thank you. Chinese president xi jingping has just become the most powerful chinese leader. The ruling party voted to enshrine his name into ideology into its constitution, this laying the groundwork for him to seal policy for decades. China will finally get an answer to the big question looming over the 19th Party Congress will president xi jingping designate is excessive . A successor . Gevo Investment Officer for deltec international, is joining us cio, isnternational joining us. Antics involving someone who is around his retirement, that he was well known as being an economic reformer. Could we see reform slowing because of this . Atul i do not think we will see reform necessarily slowing. It is more that china continues to manage the difficult position away from that and into consumption growth, driving overall gdp growth. That shift will still be there, and that is really the longerterm outlook in terms of the changes and china. Shortterm, our Research Shows things are fine in china. The trade environment is picking up strongly because of the pick up in Global Growth, and we are seeing Financial Stability being maintained. Longer term, we would not be reading too much into those changes. It is more that continued shifts, trying to move to consumption. Julia so youre saying we have seen a huge consolidation of power in china under xi jingping so far, but it is not necessarily to read too much ino it. Atul that is right. From an overall political landscape, this is an incredibly important meeting. But were speaking on some of the themes we have been writing about in our research, which is staying away from fixed asset and that isectors, squarely on commodities. Shery Commodity Currencies come to mind. Atul right. Commodities could be experiencing a downdraft on the back of two actors. One, chinas fixed asset growth is slowing. Last yearmulus from and the year before is fading. The second reason we are bearish on commodities for the next three to six months is that u. S. Dollar liquidity conditions are changing. We are seeing u. S. Dollar liquidity growth slow, and that slows down carry trade, including and especially commodity prices. Julia especially when president xi jingping has been trying to curb leverage. The chart 347 on the bloomberg showing you chinas loans and money supply, as well. This has been affecting the market. Now xi jingping has even more power over the economy. What does that mean in terms of investors getting leverage and it is just boosting lending in the markets getting a boost from that . Atul look, what we are going to see is a more clearly defined level of leverage across the markets. You may see, leverage stave in, but what is important is we will see certain parts of the economy experiencing deleveraging. We are seeing it in the Financial Sector at the moment. In the household sector, leverage rates may he maintained or increased. It is not so much to look at the aggregate level of leverage, but complementary what is happening within the economy. And when we see deleveraging taking place, it is actually healthy. Julia atul lele, thank you so much for joining us today. I want to take you to republican senator jeff flake who is speaking in light of his decision not to had two reelection. Lets listen to his comments. Senator flake the undermining of our democratic norms and ideas, we must never accept the daily sundering of our country. The personal attacks, the threats against principles, freedoms, and institutions, the flagrant disregard for truth and decency, the reckless provocations, most often for the patty is denvers personal reasons, reasons having nothing whatsoever to do with the fortunes of the people and most often for the most petty reasons. None of these appalling features in our current politics should ever be regarded as normal. We must never allow ourselves to lapse into thinking that that is just the way things are now. To thismply become used condition, thinking it is just politics as usual, then heaven help us. Without fear of the consequences and without consideration of the rules of what is politically safe or palatable, we must stop pretending that the degradation of our politics and the conduct of some in our executive branch are normal. They are not normal. Unkless, outrageous, and dignified behavior have become excused and called telling it justit is when it is reckless, outrageous, and undignified. Such behavior emanates from the top of our government, it is something else. It is dangerous to of democracy dangerous to a democracy. Such behavior does not show strength, because our strength comes from our values. Projects the corruption of the spirit and weakness. It is often said that children are watching. Well, they are. And what are we going to do about that . When the next generation asks us, why didnt you do something, why didnt you speak up, what are we going to say . Mr. President , i rise today to say enough. We must dedicate ourselves to making sure that the anomalous never become the normal. With respect and humility, i must say that we have fooled ourselves long enough that a pair of it to governing as writer on the corner julia lets leave that speech on the senate floor. He mentioned the reckless, outrageous, and undignified language, even from the top of the party. If you want to watch his speech, you can on bloomberg. Com, tv. Shery we are getting headlines. Senator scott saying now that the fed contender john taylor appeared to win the senate gop straw poll. Of course, we heard earlier in the day after President Trump met with Senate Republicans that he asked the senate gop for a show of hands poll on who should be the next fed chair. It appears that john taylor, the stanford professor, appears to have won the gop straw poll. Lets get a check of the headlines. Mark crumpton has more. Mark Senate Minority leader Chuck Schumer says President Trump should stop engaging in twitter fights and roll up his sleeves and get to work. Senator schumer said it is long past time for the president to do away with what schumer called his daily compulsion. We have a lot of serious issues to deal with in this country. Our challenges are too entrenched and complex to be solved if the president spends his time in a meaningless war of words on twitter. Mark schumer says the president must start engaging in the substance of tax overhaul and that the president s rhetoric on his tax plan does not match reality. French president Emmanuel Macron welcomed the irish president to paris today to talk about ongoing braise i brexit talks, looking towards a solution beneficial for ireland and europe. Protecting the common travel area between britain and france and doing all we can to ensure there is no return to a physical border on the island of ireland. Mark he called for more transparency from britain on the plan to exit the european union, but macron says it is up to the u. K. U. S. Secretary of state Rex Tillerson is in pakistan where he spoke about the importance of finding extremists and driving them from hideouts on pakistani territory. Bot, he told the pakistani Prime Minister that the country is so important regionally to our joint goals of providing peace and security to the region. The secretary of state heads to india and switzerland next. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Mark Crumpton. This is bloomberg. Julia coming up, David Solomon from Goldman Sachs tells us what opportunities he sees in europe. More from that interview coming right up. This is bloomberg. Shery as we learned last game, Goldman Sachs to a five percent from the Second Quarter. In september, Goldman Sachs gave a presentation discussing the Companies Fix trading business and emphasized europe. Earlier today, alix steel set up for an interview with David Solomon, the copresident and cochief operating officer of Goldman Sachs. She asked what opportunities he sees in the euro area. David europe is interesting. No question, the Economic Growth in Economic Activity there has surprised to the upside. That is leading to more market activity and more investing activity, also more corporate activity. Those businesses in europe are feeling stronger and more confident, and it is a little bit more of a tailwind. There are a lot of places in our business will we see opportunities to invest a little bit more, better positioned to serve clients. Alix specifically where . You made the case that you were going to get more prime brokerage accounts, certain competitors are struggling in that area. Assuming you gain market share there, do you feel like that is a sustainable . Can you add more . David i think there are places we can add market share. When you talk to harvey about growth initiatives, you know that a portion of those are focused on places where we see market share opportunity, both in fixed and inequities. And wee client gaps think we can take market share. Yes, we have strong market share across europe and all of our business. We have good market share in our banking business and our sales and trading equity is nice also our investment managing business. There are places we can invest and improve our position. As an organization and a leadership group, we are focused on making this investments in making sure were creating growth opportunities. Alix also in equities . David in equities and banking, too. We have broad market share and abroad footprint, that there are places we can grow that footprint. As market cap extends, there are more companies that might have been under the radar that are suddenly 1 billion type companies. In our Investment Management business, we continue to invest in the business in the private wealth business. Alix any specific regions and europe . Europe. Roadly across alix for lending, you unveiled a good plan. Seems like youre focused on that. Analysts are looking forward to how they judge it. If i am a Market Participant and want to see if goldman is delivering on the promises in terms of the lending business, really growing it, what do i look at . David there are Different Things you can look at. Lending is a broad term that touches a lot of activities that we engage in with our clients. On one hand, we have made it everything that can push to broaden our debt Capital Market capability here at have significantly improved our market share in debt Capital Markets. If you look at our ninemonth debt Capital Markets underwriting activities, it is less than for the firm. That is a form of lending. We have corporate clients making acquisitions that are looking at purchasing, and were lending and to them. Alix that means revenue. David revenue is a metric in the business. One of the things i know you are aware of is we have started, over the course of the last year, we launched a consumer platform, which is a new area of expansion for us. Markets by Goldman Sachs, a business where customers who have Credit Card Debt can manage that Credit Card Debt more effectively with a fixed rate, no fee loan. We are about the product and have been rolling that out. Were in the early stage, ontrack two of about on track to have about 2 billion in loans. We think that will be a nice contributor. There will be more information on the trajectory of that as the business progresses. Shery David Solomon, Goldman Sachs copresident and cocoo. Julia still had, options insight looking at how to trade microsoft into earnings. The stock is on pace to close at a record high today, up with a toy 5 year to date. This is bloomberg. Julia lets recap breaking headlines Stanford University economist john taylor is said to the straw poll of republican senators President Trump conducted. He is the author of the taylor rule and is well known as being progrowth and proregulation, one of the most hawkish candidates. Our fed reporter joins us from washington. We know that taylor is a combo catered relationship with the federal reserve. Inyes, he has been a critic recent years, and he has also been a bit of a republican enabler. He has been called up multiple times for hearings about whether the fed should comply with the , and they have kind of fed off each other, republicans and taylor, tsonga should saying there should be more accountability to julia do struggling to are make up their mind . I think the straw poll suggests no. Looks like he is facing a difficult decision. He is not sure what to do. I think he understands that without credibility with investors and the public, this whole thing could go awry very quickly. It is a tough choice. Does not look like he has made up his mind. Shery thank you so much for jumping on the news, which was breaking just a couple minutes ago. Time now for options insight. Is kevinjoining me kelly, managing partner at kelly and company thank you for taking the time. Today, more record highs for the dow, after the worst day yesterday that the yesterday. Is friday, we saw significant put activity, 6. 5 times. Today, it did very well. You have caterpillar and 3m leading the dow. The problem is people are putting on insurance, seems like. 5. 6 times the amount of put activity. Abigail microsoft will be reporting on thursday. How do you play that Earnings Report in the Options Market . Weekly options on some of those names, and that is microsoft. You can go to the end of this week and purchase the 79. 50 call for about one dollar 26. Cheap volatility, only 20 applied. If you look at the chart, this is a way to only booze 1. 20 only lose 1. 20. The macros or, everybody is wondering if we will see a pullback. Index showing that. I think people are doing with a should be doing, putting on portfolio insurance. That is what skew is. It averages 154. Just below 118. It has been up to when vix is down you should see skew up. This is making an efficient market. That is why you are not seeing big moves in the market, because people are going to the cheap Options Market. Abigail interesting insights, as always, kevin kelly. We will hear up, from our interview today with a billionaire investor who through the Weinstein Company a financial lifeline. Studio can the film be revived. From new york, this is bloomberg. Welcomedsident trump awardwinning minority Business Owners to the white house today. The president said tax or form would help all businesses, especially minority owned ones. He commented on the ongoing talks over nafta, saying renegotiating free trade reels deals is critical for american business. President trump we started with nafta. We will see how that turns out or does not turn out. We will get a new deal. We will see how it turns out. Mark the president also said his Economic Policy of cutting regulations and taxes are roosting markets to record highs. There is word of another plan to fix obamacare in the shortterm. The proposal comes from senator orrin hatch and congressman kevin brady, the Top Republican tax writers. The deal will restore Insurance Company subsidies for two years and include what are being called concrete reforms. One of those is an and to the individual insurance mandate for 2021. Nato has vetoed a u. N