Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20171103

Premarket, apple. Up 3 or 4 . 900 billion market cap, potential. Tim cook is giddy. Time now for your morning brief. It is jobs day. 8 30 a. M. , u. S. Payrolls out for october. Later, President Trump will depart the white house and begin his 11 day trip to asia. At 12 15 p. M. , minneapolis fed president speaks on housing and finance. Is he getting promoted . With neeljp morgan kashkari running. Looking at the payrolls report for october for a preview of what to expect. Bloombergs International Economics officer is standing by. Mike we are looking for two things. A big number as we rebound from the hurricanes. And anything else to talk about today because after this number comes out, no one will pay any attention to it take during it is just a rebound from the hurricanes that was distorted. No reason it would affect any policy makers. The one number inside the number that people might follow is average hourly earnings. They did go up a glass month given that lowwage workers were the ones was likely out of work in texas and in florida. If we were to get a bigger than and 0. 2 is the thanted number, bigger expected rise, people might begin to think that something is going on. You can see a 0. 2 forecast to 2. 9that puts us up percent yearoveryear. 3 is what people are looking for. If it does not go down, that is good news. Here is my charge. You can see that maybe the phillips curve is not dead after all. Unemployment in wages began to rise. Let us see what happens with that. Other than that, not much else to see in the payrolls report that economists will take seriously. Alix what do we have to strip out when it comes to hurricanes regarding wages . Who ishave to look at getting paid. In texas and florida, it was the low wage workers. That influenced the payroll numbers. Looking ahead, we want to see if they have come back in and if that brings down the numbers or if we are seeing wages rise. In combination with the Unemployment Rate. The Labor Department said the unemployment, the Household Survey was not affected. If unemployment goes down again, that would be another interesting number to look at. Alix Morgan Stanley said they see some risk. Could fallyment rate as much as 4 in october. How will the market look at this if we do and of getting a lower Unemployment Rate . You might see yields rise or the yield curve steepen a little bit today. Investors have are ready in a december fed move. Not a lot of changes there. He be more weight on the idea of three rate moves next year. The fed has suggested that is what they might want to do and wall street only has been down for two. That is still a ways away. I dont think you will have a huge market impact. Maybe a Little Movement today in the yields on the long end of the dollar. Jonathon we will catch up with mike again later in the morning. Going to anre you early breakfast meeting . I think it is all in the wage data. That is what we are laser focused on. If you see yearoveryear wage gains hold the upper 2 range, you have to realize that there is some wage pressure building in the system. I know what has been the missing link in this recovery has been inflation. Where is it, richter particularly in wages . There are other surveys out there and other indices. The atlanta wage tracker is pointing to wage pressures. We should continue to see that in the monthly reports. Jonathon it feels like confirmation. You look at last month numbers, and everyone was excited about the higher wage figures. They were distorted. Why is what we are seeing now, real . Bob we are hearing it from the companies himself. Our creditk to analysts, particularly the highyield analysts that cover the small and midsized companies, they are telling us their order books are full and they are operating allout. Ayers looking to hire and they are having difficulty finding skilled workers. Ultimately, we believe it comes through in the wage data. Alix what is the Market Reaction after the jobs report . What can we trust . Let us say that we hold the wage gains. Or 200 in at 300,000 thousand for jobs, what happens to the market . Bob it trades sideways. Time to go outbe for a long lunch. All of the focus has been hijacked by washington today. I know we will talk about some of the tax reform but i think the wage data itself and the employment report today is secondary to a lot of other things. Not just taxes but the fed chair. The search is over. The president announced Jerome Powell to be his nomination. This is what some of our guests had to say about that. His background is a terrific background, again, a lot of government service. Service in the fed. In the private sector. I think it i think he is a credible candidate. There were other credible candidates but i am not disappointed. When you have structural changes in the economy as we shift from manufacturing to service, i would feel more comfortable if we had an economist in the seat or if he is surrounded by other economist to home he listens. I like him personally. I think he is a terrific guy. I thought he was a terrific pick when president obama picked him. I think it would be a mistake try to push powell a lot around. He is pretty solid. Tohas been working hard study. Remember, he has been around Financial Markets and policy since the early 1990s. He was in part hired for the job because he represents continuity. That suggests to me that he will be his own person. Jonathon from chicago, i want to ring in the director of policy research. Isaac, the first question as far as politics are concerned, has the nomination is there any reason to suggest that this will not happen . Isaac i think jay powell will cruise through. He should have his hearing in december. He should be confirmed in january and take over the chairmanship right thereafter. It was a smart pick. It lets the president make his own stamp on the fed while ensuring continuity. This should sail through. Becomes, whatow does the president now do with the other open seats on the board . That he have heard talk wants different ideas from different people on the fed and he tends to have a feeling about if you fight you get the best product. Isaac he has a number of picks. Get some newll thoughts on the board. I think we will have extremes represented on the Federal Reserve board in a way that we have not seen recently. Which could also create some complications in the Actual Senate confirmation process. Way we are framing it is i dont think we will have a full board until somewhere quarter, maybend even into the summer of next year. But we will have more expansive monetary ideology policy represented on the board. We will have a few hawkish governors rotating on from the regional level. Jonathon so far, on every economic issue, on the things that people were worried about 12 months ago, they have not materialized whether it is protectionism in international trade. On the reserve, people were scared about who might become the chair. This is probably the most mainstream pick outside of janet yellen you couldve chosen. What is the lesson so far . Is beingt now, it played down the middle by both the administration and coming out of the fed. I want to change the dialogue from why is jay powell such a great choice to how will we know if a how will lead the fed is successful. I think he has some enormous challenges ahead of him. The world is awash in unconventional policy tools. The distortions are real. Seemingly, after seven or eight years of these tools, people except them as normal. Cutsve had over 700 rate since the financial crisis. We have close to 9 trillion in bonds globally that have negative yield. It is crazy. That is not normal. Hasfed, under yellen, already begun the leadership role in normalization. She is handing it over to him. That is a lot. Jonathon a nice time to retire. Alix has she gone on vacation, yet . Bob she will be the first chair to go out without a recession in 40 years. Thethon coming up on program, we finally have a look at the house tax bill yesterday. We discuss the issues in the challenges to the bill. Later in the program, we take a look at apple. In the premarket, up by 4 . An indication that at the open will we will have a 900 billion cap company. From new york, this is bloomberg. Alix there are lots of aspects to the tax bill yesterday but we want to focus on housing. There was an intense reaction from home builders. Kbh was down by 3 . Tradingom Compass Point continues to join us. What will this do to the Housing Market . Isaac i want to step back a little bit and focus where the proposals were yesterday and tell you where what we are telling clients is winning. There is the good, the bad, and the ugly. We saw progress yesterday. And lawmakers avoided what wouldve been a nasty fight over 401 k s. Of bad is the alphabet soup groups who have come out in opposition to this. Everyone from Small Businesses ar, whorealtor group, n will be putting up a ferocious fight in the coming days. And the ugly, the fact that we get to do it all over again next play n the senate is plays into this bill. The senate has more of an uphill fight than the house. Concerns around the Child Tax Credit and some of the other peripheral items that make the gop far less cohesive in the senate. Alix i want to focus on housing. When you add in the mortgage interested option change in the elimination of the reduction for vacation homes, what will be the impact on the Housing Market . Going after the Housing Market in a tax bill when you are trying to boost growth is counter intuitive. Bob i am in chicago today for the National Realtors conference. Few thousand a unhappy realtors because they realized that their industry is being forced to pay for Corporate Tax cuts. The affected is going to be a squeeze on the high end of the market. As you said, i also think it is important for clients or investors to realize that interest on second homes will no longer be deductibles. There are acute areas of impact on the market. Jonathon can we talk about the repatriation tax . It was meant to be an incentive for companies to bring money home and put it to work domestically here in the u. S. That tax bill has made it look like a tax to pay for everything else. Why is the nature of that incentive why has that changed so much in the last few months . For one reason. If you look at the overarching goal, the primary goal is that they want a Corporate Tax cut. They have to find a way to pay for the Corporate Tax cut. And they are looking under the couch cushions for payfors. Repatriationthe discussion moved to being a pay for. So are the insurance and housing changes that we saw yesterday. Jonathon what is the real world impact of that . Will the money come home regardless and be put to work . Isaac that money is going to be taxed. That will be a bill that the multinationals will have to foot. More importantly, there will be a foreign minimum tax implemented. That will be another area where we have seen the gop highgrade from their initial hope of creating a territorial tax system to now, creating a minimum foreign tax. We have rdc in the coat rather we have already seen the koch brother backed path. I think what we will have is less hurdles in the way of returning capital. But we still need to get there. I dont think there are the votes in the house or the senate right now for this gop plan. Alix if you were to sum it up in one word, is this tax plan is this friendly or not . Isaac yes. Alix it is business friendly with some addendums. Isaac there are always addendums. Addendums. I would not have a job if there were not caveats. Alix isaac, from Compass Point, thank you so much. Big demand for the new iphone x. To genebe talking munster about all things apple. He says tim cook is apple and market cap is reaching 900 billion in premarket. We will break it down. This is bloomberg. Apple is still printing cash. It is knocking on the door of a 900 billion valuation. The outlook for the next quarter is also topping wall street expectations for apple fans are lining up at Stores Across the iphone. R the release of gene munster, cofounder of loup ventures. Archives,rough the four years ago, and a view outside at the apple line. Counting how many people were in it. How much has changed . But it is less relevant still a directional indicator. Less relevant because people are getting tired of waiting in lines. They purchase things online and reserve them. Particularlyis important about what we are seeing today. Even though that is the trend, to buy more online, we are still seeing the line. We looked at the number of people who bought iphone eight at the fifth avenue store that was about 175 people in mind. Between 600700. We are seeing an increase. Most people are expecting it to be on par. I think the lines are still a good indicator of how these go. Say we areple worried about the iphone x demand versus supply issues, you say it is supply. Gene supply appears to be the issue. We dont have a perfect view of this but i do think it is supply and the lines we see today in the leadtimes online suggest they will have a great demand. Jonathon the company is remarkable. To an f on to go, we were having serious discussions about two and a half months ago, we were having serious discussions about the future of tim cook. What is the lesson . Gene dont judge your opinions on these ceos on a quarter to quarter basis. I want to put some perspective on how good things are at apple right now. Last night, they grew in every product line in every geography for the First Time Since december 2014. And separately, the positive guidance was driven by the iphone eight. That is just testimony to how strong of a foundation tim cook has built. Alix when it comes to their growth rate. I guess i get what you are saying. They areliday quarter, looking at 7 11 . Is that a healthy enough growth rate for apple . Quarter, the december if they can have a consistent 5 7 growth, investors would be happy. Stressing the word consistent. Typically, Hardware Companies are not consistent but not with apple. The growth rate for next year is probably going to be closer to 20 . That really kicks in. That is iphone the iphone x. The stocky i think will continue to move higher today. Alix people are holding on to their smartphones longer. How do you justify a 20 growth rate . But, you reach a pool three years old and older there are about 300 million iphones out there. Holding them longer but people have to upgrade. Find that consumers are not that sensitive to price as far as apple is concerned. We see that in the lines today and the wait times. I would ask people to think about how much you would have to be paid to give up your phone for a year. Add in a couple of hundred dollars and better features, it is a nobrainer. Jonathon is this enough for apple . Gene it is still 100 billion plus but i think it will inch higher towards that goal. Alix they will have to deal with how much average revenue apple gets for each of their iphones. 617100 out 617. The yellow line is the average. Gene i think it will jump next year to 740. The street says 722. That implies 700 22 of the the number could be closer to 30 . Are the kids getting an iphone x . Bob not on my budget. Gene munster, great to catch up with you as always. Great video from the archives. Alix and you look the same. Jonathon coming up on the program, Kevin Cirilli will interview the chairman of the House Financial Services committee. That is next. This is bloomberg. Jonathon apple looking good in the premarket. Giving futures a lift ahead of the open. Considering it makes up about 4 of the s p 500. 0. 1 on the s p 500. The story in the bond market. An hour away from the payrolls report. We are looking for something over 300 k. 313 is the median estimate in our bloomberg survey. The fx market, a mixed session for the dollar. Eurodollar, lower. That is your cross fx pitch as we grind towards a week of losses after seven straight weeks of gains. On the s p 500. Invenezuela is a knowledge that its debt load has become unsustainable. To president plans restructure the global debt after the state oil Company Makes one more payment. He blames u. S. Sanctions for making it impossible to find new financing. The president has nominated jay powell to be the next chairman of the fed. Bloomberg spoke with dennis lockhart. Inflation and inflation data are very much in the minds of the policymakers. At the same time, i think jay powell and the fmoc, for the most part, with like to continue with the removal of stimulus and removal of monetary accommodation. Expected toll is have no trouble Winning Senate confirmation. In the u k, the Services Sector unexpectedly grew in october in the last six months. Sector index at which includes manufacturing and construction also rose more than expected. Global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. I am taylor riggs, this is bloomberg. Jonathon time for another 25 basis point hike. Pmi is coming in hot. We are headed towards higher rates. It is painfully slow. Of thesehave all antiquated tools in the market but you are right, we are going higher. Alix a dovish hike. Jonathon from governor carney. The president officially chose jay powell as fed chair and the tax bill details have been released. While we have more clarity, there is still much work to be done until the proposed challenges become a reality. We now turn to Kevin Cirilli who is joined on capitol hill why jeb hensarling. Kevin, over to you. Kevin listen, busy day yesterday. What is the timetable . It isssman hensarling off to a great start. People want a more competitive tax code. My hats off to chairman brady and the speaker. I think we are off to a great start. It will be a shot in the arm for Small Businesses and our corporations. Working families. They will see their paychecks go up. This is a great rollout and im convinced we can get it done before thanksgiving. Kevin the Realtors Association had some concerns. They are particularly concerned about the mortgage productions. What is your response . Congressman hensarling what they ought to look long and hard at is the difference between a 3 and a 3. 5 percent growth economy and a 1. 5 economy that we saw in the obama years. What will ultimately help home sales is a growing economy. The interest the reduction is still preserved. The standard deduction goes up and that will help a lot of working families and ultimately, i think all people will benefit from a growing economy. I hope they will take a second look at what they are doing. I also dont think they will be successful. I think there is a lot of momentum behind this point. Kevin switching gears, jay powell getting widespread praise him including from yourself and democrats. Would john taylor make a good vicechairman . Congressman hensarling i think he would have made a great chairman but also a great vicechairman. I dont know mr. Powell very well. I am not the president. He is the nominee of the present. Having been on the fed for five years, he knows a lot. I look forward to getting to know him better and working with him. I do have some concerns. I think we have taken way too long to get back to any type of normalcy in terms of fed policy. I am still concerned that federalreserve the reserve is engaged and policy. Im looking forward to getting back to more transparency and a treasury only Balance Sheet. I think the fed footprint is too large in the economy. Bottom line, it is the pick of the present. I think the Federal Reserve can definitely benefit from having john taylors leadership and wisdom, if not at the top. I hope the president will offer him the number two job. Kevin busy week in washington. Some other news, that you are next term. I interviewed the banking chairman yesterday and he said they are finally moving on some of their legislation. I know you had passed a bunch of legislation on Community Banks in particular. Have you spoken to him . What is the timetable . Kevin i hope so. As you know, we passed our bill months and months ago and it has been gathering dust at the senate. Not senator crapos fault. Is that one of the impediments to Economic Growth has been the onslaught come at the sheer volume and complexity of banking regulation, post doddfrank. Financial choice act sitting there for quite some time. I have been looking forward to going to conference with the senate. Hopefully senator crapo has broken the log jam. We are losing a Community Bank a day in america. In america, we have seen entrepreneurship at eight generational at a generational low. We are still see we are seeing good signs. Tax reform will be a huge shot in the arm but the economy will not take off until we get Regulatory Reform and unleash capital. From now, thehs financial choice act, will it be signed into law . Congressman hensarling portions of it will be enacted. The fullike to think bill would be signed into law. Claus willre santa be that nice to me next christmas. Kevin it is christmas season. We do appreciate that. Retiring chairman, jeb hensarling. Thank you for coming on to bloomberg. Alix thank you Kevin Cirilli. Part of one of the issues of tax reform that came out is the interest the deductibility up to 30 versus 100 . A huge blow to jump on traded companies as well as private equity companies. Take a look at the bloomberg. The white line is the junk u. S. Etf. You can see the reaction after tax reform yesterday. They both dropped by about 1 . Bob bob michel is still with us from jp work it j. P. Morgan asset management. Bob it lives off of replacing private equity money with that funding. The deductibility of the interest is the leverage that allows the equity piece to grow. Alix in theory, we get less supply. Does that mean permanently lower yields for these jump on companies . For these junk Bond Companies . Bob i want to be compensated for the credit risk. It is going to make it more painful for companies to come to the debt markets. Jonathon you want to lend to someone. I wonder about that repatriation story. It will also develop a supply issue. They are being forced to bring the money home. They are going to be taxed on it anyway, regardless of what they decide to do. Bob it is a twoedged sword. Has been overseas, company has issued a lot of debt to buy back shares and raise dividends. But the money overseas has been buying each others corporate debt. If the money comes back to the out. It will be dividended shares will be bought back. And there will not be a pool of money to buy the issuance. Jonathon let us say this fund is domiciled in bermuda or dublin. It is already invested in corporate debt. What happens to those investments . Do they have to liquidate . Bob i think they will. I think they will use that money for, where it is approach it to buy back shares i think they will use that money for capex. They will not leave that massive amount of cash on their books with that. When of the things we looked at in the Corporate Market is that been rising to leverage has been sneaking higher in Corporate America. Has reflectedally some deterioration in credit quality. Having the money overseas and having to use debt to finance what that money could have done has deteriorated Balance Sheets. Jonathon here is a difficult question. Do you get a sense that credit is more or less vulnerable on the back of this tax plan . Bob i think it is less vulnerable. Jonathon because of these policies. Why . The cash back from overseas will decrease the amount of corporate issuance. Leverage will go down in the corporate sector. When we were talking about some of the changes to housing taxation, the first thing that popped into my mind is that it will decrease the leverage in the Housing Market. Consumers are not going to be incentive to read i ncented to reach for the larger home thinking about the tax benefits. I think we are going to see Higher Quality borrowing. Alix what is the impact of this massive deleveraging as you see it . Bob a more stable Housing Market. A less leveraged Housing Market. And a market where it is more effective to be a lender to these borrowers. Jonathon one more reason to hate treasuries . Bob i am not so sure about that. It is definitely going to create a headwind to growth. You said it earlier. You are trying to get growth from 2 plus jonathon you think this tax plan is a headwind to growth . Bob yes. Jonathon you were bearish treasuries for a long time and you think this is more constructive . Bob on the margin but i think the overwhelming story and all of this is that the Central Banks, the price insensitive buyers, are getting out of the Government Bond market. A year from now, that will be the dominant story. Yieldl see the zero real. N the markets moving closer some of the things that will happen in the Housing Market. Some of the things that will happen with the inability to discuss to detect state and local taxes that will form some nearterm headwinds. If there is enough happening on the corporate side to it increase stimulus, we will wait and see. That was a very fine line between bull and bear. Bob i am still a bond bear. Layton, we will get his thoughts. This is bloomberg. Bloomberg daybreak americas this is bloomberg daybreak. Coming up in the next hours, the october jobs report. Gross. Get reaction from bill gross. Alix the National Association of realtors say the tax cuts announced yesterday confirmed their biggest concerns. It will cut the deduction from to five purchased homes hundred thousand dollars. Eliminating or nullifying the tax incentives for Home Ownership puts homeownership at risk. Us now is donald layton, ceo of government owned freddie mac. I wanted to get perspective. If you eliminate the mortgage interest and, what does that do to the Housing Market . One of the parts of the gig of running a government controlled company is you dont say anything about government discussions. The reality is, i am not supposed to answer that question. But, historically, i know for me personally, the mortgage interest reduction is a big deal and helpful in my home. Can you give us perspective on what the deductions did for the Housing Market . Economistslassic would say it will slightly cut the demand for housing. It has been so long since we did not have it or it was not a factor, no one has any good data to predict. It is structured guessing. Alix on the flipside, the story is it will be ok because we will have lower taxes. Do lower taxes wind helping when you want to purchase a house . Donald absolutely, but no one knows how much. Alix looking at business in general, how would you categorize the Housing Market now . Donald very healthy in one sense and not so healthy and another. House prices have been going up nicely for several years, higher than the rate of growth of household incomes. Makes ittely, that harder for firsttime homebuyers. On the rental side, rents are going up more than incomes. Peopleerlying issue, and are recognizing this more and more, is not enough production of new houses in america. Without getting fancy about growth rates, the average production of new Housing Units in america averaged for many years at about a million units. Dropped off in the financial crisis. Not only has it not made up the drop off, it has never returned to a million and a half. We are not producing enough houses which is providing a great price support. Making it difficult for people to afford rents and purchase homes. Jonathon this is happening everywhere. Why do you think this phenomena has taken place . Donald this is not about homeownership rates but about any housing, rental or singlefamily. Not enough. The issue of the mix of ownership versus rental i have been worried about nonus for a while. This job is very domestic but there is a lot of anecdotal evidence. From hes going more urban and urban means for rental. Later family formation. All of these things have rolled into a lower Home Ownership rate as well as all of the economic things you know about. Alix two freddie mac specifically, you raised a limit for how much credit risk securities can be bought. Basically, more private investors. Transfer isit risk the biggest thing since sliced bread in the long run. The biggest effect of the system is these two companies sitting on 5 trillion of credit risk in one asset class. Veryis not generally healthy. An accident waiting to happen and it has happened twice. The whole long game plan is more credit Risk Transfer diversified through the markets. What we did recently was introduced a new type of credit Risk Transfer vehicle that can produce more Risk Transfer for longer periods and more investors are eligible to buy it. There is more demand and we can put stuff out at a larger size. We deal in size. Jonathon let us talk about the new fed chair. The old fed chair, before janet yellen, he went for a mortgage and could not get one. Credit worthy borrowers, can they get the mortgage they should be able to get . Donald generally, yes. The two ghesnd banks lending off their own Balance Sheet mortgages are getting made. They are broadly consistent. His problem was that he had just changed a job. He didnt have much job history. You very much, don leighton, freddie mac ceo. If you have a bloomberg terminal, interact with us directly. Just go to tv on your terminal and scroll through. This is bloomberg. Big earningsthe pop yesterday but the highlight today is the release of the iphone x. We are outside and apple store in manhattan. I warned you 10 years ago standing outside of an enormous line. What are you seeing . This door behind me has just opened. They have just let some of the first people into the store to purchase their iphone x. We spoke to some people at the front of the line. Some have been there since monday. There were about 250 plus, almost 300 people in the line this morning. Most of them saying they plan to purchase to iphone xs. Many of them planning to pass them along to friends, family, or even sell them on. Alix one of the issues we are versus is about a supply demand issue. How much of the buying is due to that, that youre seeing . That is one of the main factors. Of apple address that last night. He said he cannot say when supply will meet demand. When they launched preorders last week, they sold out quickly and they had a long wait time, about six weeks. Apple said then if you did not get onto the preorder line, you can go to the store early. There were a number of people who had not been able to order them online last week, turning up at the store today. Some of the wait times in other countries in europe and in parts have reduced down to about four weeks. But there is still an average of six weeks for the wait time here in the u. S. We spoke with some employees. They said they cannot tell us how many devices they have. But they do not expect any customer to be disappointed. Jonathon why are we still doing this . Why are we still lining up outside the apple store . Bob apple has learned that undersupplied creates its own media frenzy. A queue up from monday. I will buy five phones and sell them to you for 20 markup. In this day and age, you should be able to launch a product with enough supply and you should be able to purchase it online, particularly if you are the smartphone producer. Alix we did our part. Jonathon it is always great to catch up with you, top michelle. He is still a treasury bar. Curving just a little bit. 235. Jonathon payroll is just 35 minutes away. This is, bloomberg tv. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. 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. Jonathan payrolls friday. After a string of solid data releases, jobs are expected to bounce back. Ver overans trying to pa divisions. Apple, the cash machine. The iphone X Hits Stores as profits come in betterthanexpected. The company edging 20 900 billion valuation. Good morning, good morning. This is bloomberg daybreak. David westin is off today. Im Jonathan Ferro alongside alix steel. The markets look like this. It is a really mixed session in the fx market. Eurodollar pulling back just a touch. After seven straight weeks of gains on the s p 500, we are pretty much dead flat on the week so far with futures flat ahead of the open. Alix i know where david is. Hes online buying an iphone x. Jonathan he would buy five and spin off the other four. Alix youve got a lot of kids, you need those christmas presents. Apples markete cap rises above 900 billion. We are now about that. How long do we stay up there . We will dissect that later on in the show. Time for your morning brief. In just about a half hour, we will get the u. S. Payroll data for october. President trump begins his 11daytrip to asia. Then Neel Kashkari speaks this afternoon he is a dove. Up for anwho queues iphone for monday . Not i. Alix i cover the line. Jonathan someone who is a real techophile. Alix are you getting the iphone x . I think i have the iphone 4. Im the last one to get it. When you tell me the phillips curve is broken, im the last one to buy it. [laughter] jonathan payrolls friday. Consensus is right around 310,000, that is a spring back from the hurricane depressed numbers last month. My team has come up with a more bullish forecast. As much as we were offtrend in september, think we will be in october. I think you get something closer to 355,000, which is my own forecast, or my teams forecast. It would not be unprecedented to see 400,000. If we look at weather related absences last month, it was the highest since the blizzard of 1996. In february 1996, the month after the blizzard, we saw ,000. Lls come in at 499 you can see some reaction. Jonathan 400 k . Carl and you ignore it and move on to november. Policymakers at the fomc number will only have one clean jobs report to go on. What seems to be steady momentum in the jobs market, they go ahead with rate increases. Jonathan wage number . Carl wages will be distorted just like payroll headlines will be. A spike in we saw average hourly earnings. You will get a payback from that. Kind of the opposite move of in september, strong in october. Wages, strong in september, they will pull back in october. Alix get some coffee, come back to us in november. Carl if you want the clarity, look at the ratios. The Unemployment Rate or the employment population ratio, which has been a useful guide for wage pressures in the economy. Alix we are also joined by john silvia. Do you agree with what carl has been saying . Definitely a rebound. I think when you are looking at the overall flow of the numbers, the wage trend is clearly up. We only have 280,000 as a job gains. We think there is less of a bounceback in some of the areas, data is going to get looked at by the fed and confirm they are going to move ahead in terms of a federal funds increased. Alix two more jobs reports until janet yellen goes on her vacation. Jerome powell has won the apprentice. Joining us from the white house is one of the reporters who broke this story. Talk to us about the process about how President Trump wound up with Jerome Powell as his fed chair nominee. Good morning. As the president prepares to leave for asia, he has this major weight office chest. This as they progress that began during the transition when his team got together and talked about the decisions he would need to make and how in the deal he immediately they would need to make them. They decided this could wait until this point in the year and it was really over the summer that these decisions began. Janet yellen, right up until the end, was always in the president s mind. It really was the influence of the treasury secretary, steve mnuchin, that seems to help put Jerome Powell over the top. For the president , it is that balance of the continuity of janet yellen, much of the same decisionmaking that has helped stabilize the situation, but also a chance for the president to make a fresh imprint and put a republican in that position. Alix what do we know about who might be pushing for whom to full the rest of the boards on the fed . Margaret it is john taylor who was Vice President mike pences favorite and who we will see emerge among many republicans now as someone they would like to see in that vice chair spot. The president may have three or four appointments in the coming months. What comes first may not be the only stuff we will see. We are seeing that quite public campaigning among republicans to fill some of that spots. Look for john taylors name to surface again and again. I will say this about powell. In terms of his background, there are really interesting elements to look at. He is not an economist by academic training. He is a lawyer by academic training. His experience in Investment Banking and on the fed makes a difference. The second is that he has quite a bipartisan background despite being a republican. During the touch and go debt ceiling talks early in president obamas presidency, it was powell who was quite influential tomaking the case republicans that the debt ceiling must be raised. That issue seems to keep coming back and it will again and he is now in this position. Alix thank you so much. Really great reporting on that article. Carl, what do we make of the fact that this administration is lobbying for mr. Powell . Carl i think this was the push for someone with significant well polished chops in the financial sector. Jerome powell certainly has that in spades. That was one of Steve Mnuchins priorities. As with the about the vice chair, if you are putting john taylor there, there is a potential conflicts between a low rate sky and a high rates guy. I dont think that is what is wanted and i think that may be john taylor as a spot at the fed, but might just be at the governor, but not as the vice chair. Alix what about the deficit the treasury has to fund and what does it do for powell on whether he keeps rates low or not . Carl absolutely. Powell made some comments in january where he basically talked about boosting potential growth in the economy and that was the way to really get the high Interest Rates and that was his way of signaling that if trumpenomics is going to give us a growth boost him if it does not appear to just be a sugar high, but a sustainable growth, that the fed would not that withy smother aggressive policy. With these tax cuts, that could lead mr. Market to be a hot and not be a low hawk and not be a low rate sky. The Market Reaction to the bigger budget deficit could squelch the taxcut boost. Jonathan do you get a sense that a lot of people are underestimating the task in front of powell at this point . Carl it is easy to underestimate the task because we are in a peacetime economy. We are in a fairly wellbalanced Economic Cycle growing at a fairly moderate pace. It will become much more difficult if he has to revisit quantitative easing. Jonathan the last thing he wants in that environment is have someone on the other side of the spectrum, so to speak, as your vice chair. Carl absolutely. Jonathan this administrations approach has been rather sensible so far for the fed. The nomination has been very consensus, mainstream for the top of the Federal Reserve. How much of a mistake would it be to nominate someone like john taylor just to satisfy party politics, when within the fomc, it could create problems . Governor, i think its fine. As a vice chair, i think it sets up potential problems and it is not unlike the waning days of paul volcker where there was discord on the committee and that created significant problems. I think you want to carefully consult Jerome Powell and say, who do you think will make for a good vice chair . The vice chair really should be an academic economist to strike that balance between the private sector experience alix i feel at the recent rhetoric has been about the shortterm impact. We dont know how he is going to react to higher inflation. Is there an inherent economic risk to this . Carl i think that more than a flareup in inflation central bankers understand how to deal with inflation that is too high and they have been doing that successfully for about 3050 years. The problem is that when it is low and getting lower and avoiding the potential slipping into a japan type of scenario, that is going to be the bigger challenge for powell. Jonathan carl, with us at 400 k. Carl 350 five, would not be surprised at 400. Im 355. Reedhan still ahead, rick will be joining us. His reaction to the tax bill, the new fed chair, and todays numbers when they drop in about 20 minutes. This is bloomberg tv. Multinational companies are looking at a three headed hit from the tax plan. Taxe is a 10 potential companies that get high returns on foreign subsidiaries. On foreigna 20 tax subsidiary returns. Silvia is still with us. Those tax plans for multinational businesses friendly . They are certainly getting a lot of attention. That is not the only thing in the bill. It is also paired with a reduction in the headline rate, the shifting of the u. S. To a territorial system. There is good news and bad news. Some of the international stuff was a little surprising and it is very complicated. We are still trying to figure it out and how it all works. It is certainly getting attention because it is one of the less expected things. A lot of this in the bill was well telegraphed. Is clearly not what people are expecting and that is part of what you are seeing in the market. It is a reaction to this is not exactly what we thought we were getting. Alix john, helping bring it down to the economic level. If you are going to get taxed on your earnings either way, what do you do with the cash once you bring it back . John s. the challenge for most companies is to say what is my expected rate of return on this anotheri invest in place, say indonesia or brazil, relative to the expected rate of return in the United States . We know that in many countries overall, there are more rapid Economic Growth in the United States. A huge manchester being in other parts of the world for Many Technology companies, whether technology is really ramping up. They really need the phone conversations that you cannot do elsewhere. I think for many u. S. Companies, it is really a matter of expected rate of return. The tax issue is a secondary issue. The use of capital is a primary cause of business activity. Jonathan is there reason to believe that the money comes home and will be put toward things like Capital Expenditure and not just buybacks and dividends . John s. unfortunately, the history of what we try to do about 1015 years ago was not good. A lot of the money brought back was for stock buybacks and dividend payments, not necessarily adding new capital, r d, or adding new employees. This gets into that tricky problem about do you say, yes, you can bring the money back, but you have to invest it in a certain item or certain employee or certain benefit . In that case, when you are directing where the money is going, there is even less incentive to bring it back. Jonathan do you see any additional addons to that kind of thing . They are sort of coerced to put the money to work to and not to buybacks and dividends . Rohit i think this is different than 2004. That was a voluntary homeland holiday. This is not a holiday. This is mandatory. This money will be taxed as if it is brought home regardless of what you do with it. With a mandatory or deemed repatriation setting look, for most republicans, the perspective is if you want to make a investment, that is great capex investment, that is great. If you want to deploy it on another investment, let the market dictate where the money will go. Whata company to do to do with the money is not exactly how republicans have viewed free market economy economics. Alix you know who does not like it . The Koch Brothers. Do you want to go up against the Koch Brothers with that . We will see. Apple is looking at a 900 billion market cap at the open after a killer quarter and the headline is that release of the iphone x. We spoke about it earlier. The growth rate for next year is probably going to be closer to 20 because we are going to have this big cycle. That is that iphone x. We are going to see the stock continue to move higher through the day because people are going to feel better about what next year looks like. Alix joining us is the ibc devices and displays research manager. Do you agree on these big expectations for the iphone x . Wholeheartedly. We just cant pick up today is being iphone x day. If we look at the echo effect of what is going to happen going into december, lets not forget black friday and what is going to have been 2018, this is going to be one of those levers that apple can pull and it is going to sustain itself for the entire year. Alix when i look at these jonathan when i look at these big pictures of lines outside the stores, how much of that is one big publicity stunt and how much of that is real supply issues that people really want to get a hold of this because it is very hard to get a hold of anytime soon before the holidays . Ramon it would be a publicity stunt if this only happened once ever. This is something you can pay your calendar to every single year, year in and here out. This is something that apple monitors very closely, especially since this is a different kind of buy, there is a different kind of chipset, a whole different kind of Technology Going into this kind of technology iphone. I would be leaning really hard on my supply chain to make sure we have everything lined up. We have a lot of customers waiting 56 weeks out from now to receive their iphone x. Is this good news . Absolutely. Alix on the flipside, lets talk about the issue of the iphone x. If you have to wait, do you go to samsung . Ramon no. No, not necessarily. Assuming that all the numbers are true about apple iphone you heard tim cook mentioning, we have a 95 royalty rate if you think theyre going to be waiting if they cant wait another six weeks to get their iphone, do they go over to samsung or android, a different ecosystem . You have to repurchase a whole bunch of applications and your media. This is really a sticky situation that a lot of apple fan boys and fan girls are happy to be a part of because they have an iphone and chances are they got a mac, they got an ipad , maybe even an apple watch. In the long run of things, waiting another 56 weeks is bearable. Jonathan i have not turned my ipad on for about two years. Alix really . I definitely dont have an apple watch. Do we get to the 1 trillion level . Ramon we wont get there today, but when you look at the iphone x price, you are about 30 40 higher than historical apple iphone prices, i think the question is when, not if. Upathan alix the stock is over 53 of the year. I do feel a little bit about apple cheerleader pompoms like we have apple cheerleader pompoms. Jonathan buy the stock, dont buy the phone. Alix coming up, bill gross with his jobs numbers take right after the break. Shares of pandora have hit an alltime low. Loss inforecasting a the current quarter. Pandora has struggled to compete with ondemand streaming services such as spotify and apple music. Cbc capital is looking for ways to buy clarient. They are interested in buying the plastics and coating units by themselves or partner for a full takeover. The alphabet unit has hit a speed bump, a federal judge in San Francisco has removed the damage expert from the case. Waymo has not commented so far. That is your Bloomberg Business flash. Jonathan five minutes away from the payrolls report, the october jobs number minutes away from what markets are watching. You on the to have program. 4. 2 for unemployment. What are you guys looking for . Brad we are quite a bit lower. We are looking for 160. We are looking for a pretty big revision for september. Month is goingo to be 268,000. Our u. S. Economists warned that this is going to be a very volatile number. Still a lot of hurricane noise in the number. November is going to be a lot cleaner. Is pretty much set up for something in the 300,000 area and we are coming in a little bit lower than that. Jonathan the low end, 120, the highend, 400. Does that point to the idea that this is still very much a guessing game . Brad absolutely. It is going to be a little bit of a guessing game and i think the market is not going to react too much to the data because of that. It is going to be looking forward to next month. At the same time, the dollar has had quite a nice little rally. Definitely not as short as we were on the dollar. A disappointing number will still spark a little bit of a kneejerk reaction. Some Market Movement after the fact. Alix we had that breakout last week of the dollar index above 93 and now we are trading just under 95. What will propel us pass that 95 level . Brad it is going to take a combination of we got a lot of information the last 48 hours, so we now know it is powell, we got some skeleton around the tax plan. It is really going to take improvements in the data. The u. S. Data has been outperforming quite handily. The dollar is going to follow it. We have really driven off of rates lately and the yield curve has been flattening quite a bit. To the extent that we steepen and get some good data prints, some more meat around the bone on the tax side, we should continue to see the dollar grind higher. Alix that still seems to be a push and pull to read you have a dovish fed chair nominee, you have potential tax reform, does that put a limit a range of what we could see for the dollar . Brad it could, but the one thing that is sort about their is the fact that the market has been so pessimistic in terms of the way they have priced the fed and longerrange forecasting. The dot plot relative to where the market is pricing, the market has always been underestimating them. If we get any signs of inflation or wage growth that is consistently better than expected, that could surprise dollarand spark a bigger rally. Not true that is going to happen this month. Maybe it is a q1 thing. That would really put the motor in the engine. Otherwise, it is probably just going to be a grind, i think. Jonathan what is the path of least resistance . What would be the other side of the trade . Isd if i was to pair it, it dollaryen. Oneink dollaryen is easy because the bank of japan is not going anywhere. They are going to keep doing what they are doing in terms of Monetary Policy and fiscal policy. They just got a mandate now, so that election risk is out of the way. It feels like that is a very clean trade. It is really set up very positively for dollaryen. There is a big level on the top spied topside. Jonathan great to have you with us on the program, brad. Thank you very much for joining us. From here in new york city, the seconds away. T is futures are positive, up about 0. 1 on the dow and the s p 500. After seven straight weeks of gains, we are in negative territory on the week just slightly. The story on the bond market, we look like this. Bonds, yields go nowhere. For the jobs number. 313,000 is the estimate. We can now crossover to d. C. Away, butnature taken she does not give back all that much. October,obs created in much less than consensus. Most of those were private sector jobs. Even less impressive when the big job losses revised away instead of losing jobs, the economy created 18,000. The good news is that unemployment falls to 4. 1 . That is the lowest since december of 2000. The big reason for it, 764,000 people out of the labor force in the month of october. More jobs created than lost, but a lot of people leaving the labor force. Of course, none of that any help to average hourly earnings. They were unchanged on the month. 0. 0. That brings the annual average down to 2. 4 . The u6 Unemployment Rate does fall. 7. 9 . The lowest since december 2006. We do see a hurricane snapback, but it is not as impressive as economists were thinking. Alix does that mean we are going to see a bigger snapback in november or is there something more fundamental going on in the labor market . Mike what appears to be that the economy is downshifting a little bit. The data we get here does not tell us why necessarily we did not see significant hiring. It may be that employers cant find the workers and you are getting a lower Monthly Average month after month. Jonathan the wage growth figure seems to be what we are trading on. Treasuries, yields are grinding lower. If you got excited about last month, that the lower employment rate was starting to cause weight gain, do you have to park that for the time being . Mike you sort of do. You had a lot of wage workers lowwage workers off the payroll in florida and texas and they have come back on, so that brings back down the average hourly earnings. So it does not give you a real clean read on what is going on. We would like to see that start to go up at a faster rate, but we were stuck in the 2 range for so long, so at least we are starting to see some progress. It is impossible to remember measure now because of the storm related issues. Jonathan a slightly damp number. Unemployment grinds lower to 4. 1 . Wage growth comes in weaker. We come in at 0 month on month. We can now cross over to Bloomberg Radio and tom keene with a special guest. Tom we now work on Bloomberg Television worldwide. William gross was very kind to be with us on fed day. Bill, i really want to talk about the broader fabric. A point where the financial crisis and the labor crisis of that disaster is behind us . Bill well, i think so. To the extent that quantitative easing might come back, i think we have some ammunition. We have a decently robust economy with growth despite these unemployment numbers. I think we are passed a crisis past a crisis. We have a potential crisis in asia and china going forward. Tom you were more than generous to be with us here on fed day. I did ask you about Jerome Powell. I will be nice, bill. Maybe it is because the San Francisco 49ers are doing so poorly this year, but you were not polite about it. You did not mince words about the next chairman of the fed. You heard him speak yesterday. How can economists assist Jerome Powell to a better fed . Well, i think a certain kind of economist can assist Jerome Powell and that depends on the appointments going forward. Trump has three and certainly four, as janet yellen will probably resign as fed chairman chairwoman do in tradition, so he has for appointments going forward. Fed withck the appointments. Be doves. Hey will the potential you can learn in my view is that there are subjective factors, longerterm structural factors, such as demographics in place such as Technology Advancement and displacement of labor at play and ongoing globalization. We can learn from those things come as opposed to the oldfashioned model, such as the taylor rule and the phillips curve, that have been failing us 20 years. St 10, 15, i hope he appoints someone with a more subjective, as opposed to modeldriven view. Tom heres the key question, bill gross, and we thank you for joining us. J and wee low rate ,ave yield curves flattening what does that signal to bill gross if you see flatter yield curves and the zeitgeist of a low rate centered bank . Bill a flatter curve is not positive. Lets look at it this way. Since 2011 come of the curve was 450 basis points and now it is 100 or less. It has flattened considerably since then. Has it made a difference . Not really. In my view, at some point it will. Typically, strategists say its got to go flat before a recession appears. In a highly levered economy with a lot of debt and that typifies the u. S. That we dont have to go flat. Perhaps another 2030 basis points of tightening would be enough in order to assert a slowdown in the economy. I think the central bank and the fed itself has to be careful in using historical standards to judge Monetary Policy. I dont think they can raise Interest Rates too much further before there is the potential to slow Economic Growth. Tom this is absolutely critical, what mr. Gross is saying. We are doing this on the fly. Jason kumal wheelaround here. I want to show what jason, well around here. I want to show you what bill gross is talking about. Where do we get on the yield curve where it becomes a recession indicator . How many basis points are away before we flip from optimism to a real concern about economic slowdown . Bill i think around 40 or 50. I dont see your chart, but i know what you are talking about. I think that indicates another 50 basis points in terms of fed funds. The critical element in all of this is really the cost of credit and what cost of credit . We are talking about mortgages, corporate loans, we are talking about Government Bonds to a certain extent, the cost of credit relative to the nominal growth in gdp. We had better nominal growth. Credit has been supportive of that. Certainly quantitative easing has been supportive of that. To the extent that we dont have qe, to the extent that Interest Rates go up by 40 or 50 basis points, then all of a sudden, the cost of the credit and the absence of credit growth, as typified by qe, become factors. I think the fed has to be careful. I know they think they have to be careful. Tom we are going to do this. Im going to make a chart for Bloomberg Radio and for Jonathan Ferro to show the tip point. Bill gross on tax reform youve got to live with it can you live with a 1. 5 trillion deficit addon . , as adam posenve believes, that we could go up to a 2 trillion addon . Bill well, heres the funny one. Im starting to rethink this because we have seen not necessarily deficits expanding, but Central Banks buying trillions and trillions of dollars of debt and recycling the Interest Rates back to the central government. Do deficits matter . Ultimately, they do. We talked a few days ago about the president present value of all of our liabilities including social security, medicare, medicaid. Oris perhaps 70 trillion 80 trillion. Of course debt matters. In the shortterm, i dont think it matters that much. We are using to a fiscally stimulative type of environment, as opposed to a monetary stimulative tech of environment and perhaps that is what we need. It is incredible to me, you know this, that the republican orthodoxy has simply changed from fiscal doves to fiscal hawks. To deficit deniers to deficit supporters. The entire party has flipflopped. Jonathan that was tom keene with bill gross. Now do you get a raise with that chart . Jonathan i think i need a bill grosstype bonus from the pimco days. Thats what i need. Eider coming up with us. From new york, this is bloomberg. This is bloomberg daybreak. In the next hour, gary cohn with his reaction to the jobs. Jonathan lets get to the market action. We are 13 minutes after the payrolls report. No big change to where futures are trading. Catch bond market, we do a bit after wages are soft, soft, soft. Some dollar weakness off the back of the wage growth. 1. 31. Up to about for Market Reaction, we are joined by Michael Mckee in d. C. Regan. York, michael and Lisa Abramowicz. Mike, just summarize the wage growth figures. How much can we read into the wage growth figures from last month and from the month that weve just regan. Got this november . Mike weve got to take all the numbers with a bit of a grain of salt. Not only job growth, but wages. ,he composition of wages lowwage workers who were off the payrolls last month, they came back in in october. That helped depress the average hourly earnings. If you take the average of the two months, 04 october, 0. 5 from september, that is what we have been averaging for the year. We were down a 2. 4 officially for the yearoveryear number and that is a bit of an acceleration. I believe we have a chart that shows this. Still, they are going up at a little faster rate than they were for many years into this recovery. Alix we are seeing that now. The white line is average hourly wages and the blue line is the u3 Unemployment Rate. I want to drill down in the september jobs report. Information services started to perform well. How did they do in october . Mike we did see an increase in information services, but most of it was in the people who work with their hands, manufacturing jobs. During the month, they were up by 24,000. Construction jobs up by 11,000. Those are generally highpaying jobs in the first place. Construction workers up 2. 3 . Manufacturing workers up on a yearoveryear basis only 1. 6 in terms of wages. Jonathan what are you meant to trade on right now . [laughter] jonathan once you spend a little time thinking about it, you realize that you cannot read much into any of this. Michael r. it is interesting what mike is saying. You see these kneejerk outlook athat are algo driven. God bless you if you try. Mike makes a great point. There are some pretty legitimate reasons why the wage growth would come down since they are adding so many lower paid jobs to recover from the hurricane. From the equity markets , theective, for the moment macro is taking a bit of a backseat to the bottoms up analysis of the tax bill. People trying to suss out the winners and losers of the tax bill, trying to figure out what elements of it will not survive to the president s desk. The sort of macro beneficial aspect of this big tax cut was largely priced in to begin with. It is really this bottomup effect on the stock market right now. Jonathan lisa . Lisa i think that you nailed something, mike. Dont look so surprised. [laughter] the tax proposal that game and yesterday was a big surprise in a lot of ways to the market. It was a downside surprise for a lot of big companies. Mortgages, at least once over 1 million, that are going to face a bigger pressure from who is going to take them out, considering they are not going to be deductible from peoples taxes. There are a lot of issues. This caused bonds to catch a bid yesterday. This sort of confirms the downside trend we did see and fear yesterday after the tax proposal came out. Alix flat, flat, flat is how we trade with that. Did this just make powells job harder . Mike no, it doesnt, in a way. When you average out what jobsned, you get 140,000 on average over the last two months when you take september and then this bigger gain for october. That is about what you need to add jobs for those coming into the labor force. At this point, hes looking at an economy that has not changed all that month over the last couple months. That is what the fed is looking for. In december, are conditions about what they were before we had the storms . Then we are on track to raise rates. Jonathan can we bring that back on the treasury curve. What is it going to take to elevate that curve . And to reshape a phenomenon that has taken place over the last 23 years of a spread that is grinding lower, lower, lower . Lisa this is the big question, what will happen when the central bank starts to unwind its Balance Sheet . They do have some longer dated securities in there. At what point will that allow 10year yields to rise at a year yields . Han 2 there was also a question of whether powell will hold on and peoplee rates as much as are expecting. That could cut the 10year yield to rise with respect to the 2year. Ultimately, it comes down to inflation. Jonathan if we had a real dove in the hot seat at the Federal Reserve, we would have seen something off the back of the nomination of powell . Lisa probably. Lets talk about Neel Kashkari. We are going to run things as hot as possible and we are going to let the ecb start the tapering program and let the other Central Banks start withdrawing and then we will go and keep on trying to tighten. Alix mike, bringing it back to jobs, is there a story that this is actually better than the initial reaction is estimating . When you take into account revisions, we are looking at net ads of about 351,000 jobs. He is trying to justify that 355,000 jobs number he had coming. [laughter] alix is there something to that where you strip it back and we are still solid . Mike that is what i would say. We are relatively solid. Not that there is particular good news in this report, but the average over the last three months is 162,000 jobs. That is a definite downshift from what the economy was producing earlier. The drop in the unemployment jobs people out of the market, if puerto rico comes back in, we might see unemployment rise again a little bit. Maybe if you drill down a little farther. I did look at the number of people who are working parttime and would like to have a fulltime job and that falls by 369,000. Basically, it is just slow and steady progress, not any kind of acceleration. Alix i love the indicator. Parttime workers who want fulltime jobs. Lisa are sticking with us. Watch us online. Interact with us directly. Scroll back and rewatch bill gross on your terminal, his reaction to the jobs number. This is bloomberg. I cant see that this is the moment when you would want the most fiscal stimulus in the market when you are at mostly when gdpoyment, registers and 3 . I dont know if this is the moment when you provide the biggest stimulus. Alix Lloyd Blankfein talking about whether this is the right time for tax reform. Michael regan and Lisa Abramowicz still with us. He pointed to the regulation and confidence as two cheaper ways to achieve the same kind of growth. Michael r. i think we have already seen that effect so far. The shift in sentiment, the investor surveys are all through the roof. All of the Small Business surveys, everything like that. That has somewhat of a beneficial effect. You also see the valuations on the stock market really continuing to go higher when it was not clear that investors had highermach to push pes before the election. There is an element of that in the market now. What is amazing to me is that it has not fallen out of the market. It continues to build, that momentum continues to build. People go, wait a minute. When you really do your tax return, when the average joe sixpack or middleclass guy like my class myself does is taxes , i want more of a threepack. Jonathan i think its really rude. [laughter] michael r. i think when Middle America does their taxes, that is when you know, wait a minute. The gop has taken a lot of time here. Jonathan lisa, we are out of time. Thank you very much. [laughter] jonathan coming up on the eder will bek ri joining us. Todays jobs data. We are 34 minutes away from the opening bell. Will we erase the losses at the open . Futures positive on the dow. We are up a marginal singledigit on the s p 500 futures. This is bloomberg tv. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Whentertaining us,es getting us back on track,hing . And finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. 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. Jonathan it is payrolls friday. The jobless rate at the lowest level in 17 years. Wage growth disappoints. Republicans trying to paper over divisions. 1. 5ax plan could add trillion to the deficit over the next decade. Apple edges toward a 900 billion valuation. Good morning, good morning. This is bloomberg daybreak. David westin is away today. Im Jonathan Ferro with alix steel. Futures are positive. Only just. Wage growth disappoints. We are unchanged now. The euro is dead flat on the day at 1. 1653. A lot of data to digest, but the market kind of shrugging it off. Onx the market is trading apple. In market valuation of over 900 billion. We are at that level now, so we could be poised for an historic opening for apple. Its quarter last year was killer. Its guidance for the Holiday Season is getting people jazzed. Goes onhe iphone x sale. The First Quarter of 2018 is expected to be the strongest quarter in its history. Mercado libre common the amazon of brazil, is up libre, the amazon of brazil, is up. Pandora isside, getting truly whacked in premarket. It basically shrank its user base by more than 4 million users year on year. Under 74 it has just million users. A big downdraft. It also missed on earnings revenue and it lowered top and guidance for revenue end guidance for revenue. Jonathan i dont know anyone that uses pandora. Rick rieder of blackrock . I do use it. I swear i do. Jonathan no, you dont. Rick i do. I have it on my iphone. Jonathan Michael Mckee joins us. The top line for the headline number. Unemployment keeps grinding lower. What we are seeing is a bit of a grind lower in terms of hiring. It is also getting harder to find workers. 261,000 for the month should not be as big of a surprise as we have seen every it may be because of the hurricane snapback that people were expecting a lot more out of the economy. The last three months, 162,000 average, that is kind of what you would be expecting. The wages disappointed. We are still waiting for a faster acceleration. Wages up 2. 4 . Better than what we were experiencing in 2010, 2011, 2014. At 4. 1 unemployment, we should be seeing a lot higher wage growth. Alix what about on manufacturing . Manufacturing jobs increased by 11,000. That has been a slow and steady recovery from a slump in the summer. It does not tell you a whole lot about where the economy is going in the summer. We are seeing businesses invest more. Maybe we are seeing a solid uptick. Ism numbers were down a little bit this past month. When you take a look at underemployment, it is the , how canvel since 2006 we categorize the slack in the labor market . Mike you look at maybe those who are unemployed for parttime reasons or who have parttime jobs, rather, for economic reasons to read those are about 369,000. That is a fairly big drop. We are down to where we were for parttime jobs before the great financial crisis. We are starting to see the labor market get tighter and tighter. We are waiting for the jobs to pick up and that is what powell is going to be looking for. Hes to believe that the phillips curve is going to bring wages higher and we are going to in wages. Rease jonathan Jerome Powell is the nominee for the fed chair. His background is terrific. A lot of government service, service in the fed, service in the private sector. I think he is a very credible candidate. Im not one bit disappointed. When you have big structural changes in the economy as we shift increasingly from manufacturing to service, i would feel a little bit more comfortable if we had an economist either in that seat or if he is surrounded by other economists to whom he listens. I like him personally. I think he is a terrific guy. When president obama picked him, i was part of the process and i think he deserved consideration going forward. I think it would be a mistake to try to push powell around. He is pretty solid. He has been working hard to study. He has been around Financial Markets and policy since the early 1990 path. 1990s. He was in part hired for the job because he represents continuity. That suggests to me that he will be his own person. Jonathan rick riederhe was in b because he represents with us. You have the jobs number, the new fed chair. What have we got when we put those things together . Rick we have a tax bill, we have the bank of england, we have a bunch of things. The 10year doesnt move. Jonathan what do you make of that . Rick it is pretty amazing. There are sonk many events that are taking place today that make it hard to come up with should we move a lot . We think rates can move moderately higher here, but we are at this point in time where we tend to see some buying come into the market. What mario draghi said when he said we are going to keep rates well beyond quantitative easing, it is a big deal, it puts a cap on where rates can go. Number being a bit softer, although there is a lot of noise in this number, we think it can be in very good shape. Alix is this justified by the Economic Data . Rick we have changed our thoughts around the curve quite a bit in the last few months. We have talked on this show about flattener, flattener. We think the front end gets real value in terms of the treasury market, in terms of security up of assets, municipals, and other things, but because the curve has flattened so much, the fed is not going to go faster than theyve outlined. If you have inflation accelerating, we think the backend is where you see pressure. Jonathan i brought up the twoyear spread for treasuries. We are at this interesting situation where once you go into a19, the ecb is going to have rate of 40 basis points. The Federal Reserve, quite feasibly, approaching a policy rate what is that going to do to the bond market . Showedor halloween, we what is the scariest chart . [laughter] rick if you take european Corporate Bonds. The average yield is a 0. 3 , two year treasuries are 1. 60. From a safety point of view, where you take from the frontend of the curve is in terms of germany, i get it that credit is not that expenses you finance companies at 0. 3 , that gets right to the equity and that gets it is a bizarre weve never seen anything like this before. What do you do . We like owning front and treasuries. Two years, three years, that is pretty good carry. You get pretty good carry relative to look at where europe is. It means we are going to be in a moderate Interest Rate environment for a long time. When mario draghi said well beyond equities are going to keep going up and we are going to continue this dynamic around the discount rate staying low. It means the equity benefits from that, which is a huge deal. Alix is higher wages the worstcase scenario in some perverse way because it changes the whole framework . Rick that is a great point. This number today is a bit confusing. By the way, it is a very volatile number. We talked about this last and we were on the show. The Construction Data in this report did not bounce a lot. Youve got to discount some of it. Reale seeing the wheel wage acceleration. When you take the atlanta fed wage tracker, every earnings ,eport, all they talk about hard to, wages are accelerating. That is part of why it is going to be tricky about how does powell respond to a dynamic where europe is where it is and we are seeing real wage acceleration . It is going to be an interesting few months around that. Alix does that wind up meaning that for him the worst case is going to be accelerating inflation because weve never lived in that environment or is it going to be consistent growth and wages plateauing . Rick wages are accelerating. We dont think wages are going to move beyond levels that are going to be tremendously high because of automation and technology. It is real wage acceleration. Inthink they are going to go december, they are going to go tothree times next year and they are going to continue down that path. I dont think theyre going to go any faster. Jonathan if you think the front end is adequately priced, where is it on the curve right now . Rick where is . Jonathan where isnt the curve adequately priced . Running at what is reasonable inflation, wages accelerating, the 10year, the curve is way too flat. We should steepen out. It is the ecb and the bank of japan that determines where the backend of the yield curve is. Jonathan how difficult is it to take the other side of this rate . Rick 100 . Jonathan we can say it does not make sense, but it is still kind of flying . It is not coming down. Rick part about managing money is how short do you want to be on Interest Rates. It is not priced right, but we could sit not priced right for 12 months. We are in a position that you dont take a lot of risk relative to your benchmarks in the long end of the curve. The front end is priced ok. Alix what is the reverberations to other sovereign debt markets . Rick we think emerging markets are mispriced at the cheapside today for a variety of reasons. Inflation is coming down. If you look at indonesia cutting rates or brazil or argentina, inflation is cutting coming down. Real rates are crazy priced wrong to the expensive side in established markets. Inflation is decelerating. You can pick up tremendous yield as long as you are willing to take some currency risk, which we are. We think emerging markets are jonathan do you prefer the political backed up there . Rick one thing about emerging markets is you are never devoid of the headline that keeps you up at night or stress in the morning. But if you look at where the leverage is today and you look at where liquidity is today, it is so different to. 20 years ago. The debt since in italy, japan, the u. S. Lets take a listen to what the president has to say. President trump we will see what happens, but i think we are going to have a very successful trip. There is a lot of good will. I dont remember much about that meeting. It was a very unimportant meeting. Dont remember much about it. [indiscernible] all i can tell you was this. There was no collusion, there was no nothing. It is a disgrace, frankly, that they continue. Alix that was President Trump speaking at the white house before he departs to hawaii and then asia. We will keep you updated on headlines. Coming up next, we are still breaking down the impact of the gop tax reform bill every we will take a look at what it means for the junk bond market. The Corporate Bond market is dead. We will take talk to rick rieder about that. Alix one of the big hallmarks of the House Republican tax bill is what it was going to do to the multinationals. Three potential new taxes for the multinationals. Any overseas earnings could see an increased tax rate for 12 . 20 on any royalty Payments Companies make to foreign subsidiaries, as well. Lets break it down with Brian Gardner joining us from washington. Criticism that those in particular are not businessfriendly. What do you say . I think that you cant look at it in a vacuum. It has to be taken in totality. You look at it with not just the changes in policy, but the lower rate. We live in a populous environment. If youre going to lower the rate, you are going to have to smooth out some of the edges and base for u. S. X political purposes. Yes, i guess you can point a finger at those and criticize them, but i think you have to look at the plan in its totality. Alix as jon was laying up in the editorial meeting, they are using multinationals as a way to fund their tax plan versus making the tax so base for u. S. Political purposes. Great Companies Stay in the u. S. That is a big distinction. Brian it goes back to the Campaign Themes of the trump campaign. This kind of fits into the making america great. It fits into the economic nationalist theories that the Administration Pushes and its supporters push and its base push. Think it is very consistent politically with that. Favorre going to look to u. S. Domestic and those activities that are conducted. Across borders, it is less politically popular. They are going to receive less favorable treatment in the tax code going forward. Alix the other thing that struck me was the limit on the Interest Deductibility. Is that going to happen . That is a huge push back from Corporate America and private equity. Brian when you look at what is in the bill and the different provisions, you look at them through two prisms. One is the political prism of what is popular and unpopular. The other is the budget. What keeps money in the government coffers . What takes money out . A limit on business Interest Deductibility is a huge revenue gainer. I think it is staying in. There could be a debate on how it is structured. Maybe the senate goes in a different direction. I suspect the senate is probably close in line to what the house proposed. There is going to be some kind of limit. You cant lower corporate rates to 20 . In leave corporate policy place and not blow up the deficit. There is going to have to be given take. This is one of the primary revenue generators on the corporate side. Alix brian, good stuff, thank you very much. This is a reaction to the market. Use of a highyield etf is that white line really rolling over and private equity also rolling over. I consume and so you can see what happens. Rick rieder is still with us of blackrock. What is the effect on the Corporate Bond market . Is by the way, my sense it is hard for me to believe that this bill goes through as stated today. Quite frankly, 20 it is too low. My sense is it should go to 25 . The things that you are doing around disruption in housing are too dramatic in terms of growing the debt too much. My sense is you phase into the 30 number, that it is not instantaneous. Will have ask it much of an impact on the investorgrade market. For highly leveraged companies, work,clearly, to make it if you need that sort of leverage, that is going to be tricky going forward. As brian said, when you go down to 20 , it is hard to find the money otherwise. Marrying allabout these things together, direct expensing is a big deal in terms of what that means. If you still had a couple years when you could deduct interest expense, you are getting a pretty attractive Corporate Tax rate coming your getting a pretty attractive deductibility for investment, and you will get that Interest Deduction for a couple of years. It is a pretty powerful cocktail for the first couple of years and then lets see where we are after that. Jonathan if these companies are forced with the stick and not the carrot, what does that mean for highgrade corporate issuance in the United States . Doesnt move the dial . Rick it could. A lot of this is taking place because of what is overseas, you could reduce the amount. When you think about your weighted average cost of capital, if you are taking the interest now, you can talk about the deduction down significantly less issuance going forward. But of what people have been scrambling to buy some debt is the supply could be significantly lower going forward. Our 20s of a that, if the economy is going to grow, but it could be less in a world that needs income. Jonathan rick rieder of blackrock sticking with us. Homebuilders getting knocked down by the gop tax plan. One analyst says the reaction is overdone. Futures treading water through much of the morning. This is bloomberg. Alix one part of the market that did not like the house gop tax plan was homebuilders. They got hit hard on the mortgage Interest Deduction being lowered to 500,000 from 1 million. Jack, you think the downside is overdone . The average look at sales prices come only two of them are about 500,000. If you break that down further, it is based on geography more than anything else. The other component of the Housing Market that is starting to gain steam is the entrylevel buyer. 2017 is the year that the entrylevel buyer finally returned to the market. If the market is shifting that the moves we saw yesterday we think are overdone. Jonathan it looks like a proxy for a sentiment play, but quite clearly there is going to be impact around places like new york city, manhattan, and places elsewhere, as well. Talk to me about the damage to the urban areas. Jack when you talk about demand state tax think the deduction is a far bigger deal. Names that have exposure to california that are definitely worth keeping an eye on, if you lose that deduction that impacts buying power. Jonathan how difficult is it to quantify at this point . Jack it is really hard. When you look at the public builders overall, most of them the asps are below 500. You look at the geographic mix. It is really tough to quantify for the builders. State and local is even tougher because you are talking about maybe you cap it, maybe you keep the property Tax Deduction, but you lose the state income Tax Deduction and we have not even seen the other half of the proposal, the senate side. Alix what about second homes or investment homes . Be 1 millionto of first mortgage, first and second homes and another 100 thousand dollars on home equity, now it is 500,000 and excludes that second home. Second homes are not a big part of the public home builder market. I would say Toll Brothers is probably the biggest. Not a big deal. Think aboutvel, you who is a second homebuyer . Probably not buying it for a couple hundred thousand dollars of Interest Deduction. Jonathan we had a guest on earlier who traditionally, when i speak to him, hes very bullish on the u. S. Economy and bearish on treasuries. He pointed out this policy and said this was a headwind to growth. Is this going to be a headwind to growth . Rick this particularly . I dont think so. I think jack described it exactly right. You look at the higher propensity to consume, it tends to be in lower middle. This is pressure on the highend of property deduction. Is a big and local deal. When you look at marginal propensity to consume, it tends to be lower middle, where it is doing ok. If you look at where the equities for the companies that were in that lower middle, they did ok yesterday. It was the highend that had a tough go. That being said, i said it before, going to 20 requires pretty aggressive stuff, much of which we have not seen. If you want to 25 and i think the housing lobby is one of the most powerful lobbies, i cannot believe we are going to be left year as the final conclusion. Alix what is the broader implication with hiking rates from the fed . Jack we actually think demand wont be impacted meaningfully of mattel about up until about a 5. 5 rate. Rent has gone up a lot. As you are going through that are to own decision, you thinking about the inflation you have seen in rent. The First Time Buyer concerns is fixing housing costs. Arm money outt of available to people that there has been no demand for it because if you can lock in 30your money, why would you take a shorter term . There is a basis point give up and regional banks would love to do more arms . Jonathan the since i get from you rick is that the 20 cant happen upfront . Rick i think part of the issue and why you are going to see this tremendous pushback and rewrites is that you are pressing the envelope to try to get to a level that is very aggressive and either you are going to burden them, the concept of the amount of debt we are going to have to incur or the amount of other pay fors, it makes it very difficult and i think it is stretching it to get there immediately. There were proposals originally to go from 35 down to 20 over a period of years. The concept of getting there immediately and how you solve for it gets really challenging and that is dubious and a policy that really needs to pass, certainly if you are a republican. I think you are making it tougher. I think you will ultimately get some version of this through, but getting to 20 immediately is very tough. Jonathan thank you, jack. The opening bell about 10 seconds away. After seven straight weeks of gains, marginal losses coming into friday. Can we erase that at the open . Futures are up by one point 0. 1 on the gdp. The story of the bond market looks like this. Treasuries catch a bid. Yields lower by about one basis point. The dollar was a whole lot weaker than that. We erased those losses and traded flat on the day. Alix we are waiting for equities to open up. The dow did pose a record close yesterday. To update you on the numbers as they come out. One stock that will be leaving will be apple. At 173. 92, around the 900 billion market cap after a killer quarter. Iphone sales grew 14 last quarter, but the First Quarter is projected that but the First Quarter of 2018 is projected to be apples strongest quarter in history. Betweene pretty strong 7 and 11 . We are seeing a trickle down across their supply chain. If you are waiting in line for an iphone because you are worried that will not be a 2 and, serious logic up by as secondquarter sales were about estimates. The high end is higher than estimates. Continuing with the apple conversation, this is a line you want to look at, a 900 billion dollar market cap level for apple. In afterhours trading, it was at the ninth 2 billion level. This is the chart to watch as we had throughout the day. Can we get above that level and hold it . Are we on our way to a 1 trillion market cap . Us is ourjoining guests. Mark, lets begin with you. It is going to be a tough quarter. It is going to be really difficult to get this firm launched. Can they meet it with a supply. Can they Beat Estimates again and again. Walk me through the numbers. It is really unbelievable. Every quarter, people say apple will not beat expectations, but here we are again. It is already the end of 2017 in the are doing it yet again for five straight years. The numbers are up your every revenue of 4. 6 billion units. Strong ipad sales, 5. 2 million max. Strong other product sales, influx purchases of the apple watch in the air pod. The most important number is their guidance, the q1 holiday quarter, the first full launch order for the iphone x, and the iphone 8 and 8 plus. This year, it is important. Theyre forecasting revenues for the quarter. We will find out if it was true between 80 billion and 87 billion would be in all time record. Is howwhat difficult is it to bet against a company like apple at this point . It is really tough, jonathan. It is really tough at this point. This comes after great numbers coming earlier in the week from facebook. We had good numbers on amazon and google. The whole sector has done so well. Youlook at overall growth, know, coming into closing out tos quarter, i mean, next energy, technology is by far the best performing in terms of yearoveryear growth and beating expectations. I think this apple is a continuation of that followthrough we have seen so far. All the big tech names have done really well. Microsoft pedigree quarter, too. Alix dan, what would be your favorite big tech play . We heard we held the names we just mentioned. I like amazon, which other leaders in the cloud space, which is one of the most dynamic areas. You know, facebook and google are somewhat similar because they are based on advertising in social media. Apple is interesting because of of because the multiples are so low. If you are talking about hitting 1 trillion in market cap, but only trading seven times earnings. Google is something to look at. Slow is apple a relatively growing company that is great profits, and great pricing power, or will we return of the 2014 2015 when the lines outside the apple store meant something and it was a blockbuster company . I am optimistic about apple. I dont think we are going to see a point that it starts dipping at a consistent rate or a high rate. It is pretty remarkable. The Fourth Quarter is not traditionally apples best quarter. But we saw very significant yearoveryear growth across all their product segments, and across all of their geographic areas, except japan in terms of units sold. We saw some of the strongest growth that we have seen in a while. I think that is because of anticipation of the iphone x and the breath of new products they released this year. Going to they are continue that string of major new product releases across all of its categories in 2018. But i am optimistic for the next five years or so for apple. Jonathan thank you so much for joining us. Speaking of the line outside of the apple store, emma chandra outside of the apple store in manhattan. What is going on . Emma you were talking a lot about your guests were talking about the return of the hype around apple products. It seems to be the case here down in manhattan in another stores and the rest of new york and around the world. We have seen lines around the block and in countries around the world. Plus peoplebout 300 here this morning before the sort opened at 8 00. The line has kept joining it people have kept joining the line. We spoke to a few people as they came out of the store, and said they were really happy with the product and they were really pleased with the new innovations that are part of the product, that included that edge to edge screen some of the removal of the home button and the new technology. Those of the two things that have caused concerns about production and caused delays. But certainly here, we were to let the store manager that the people in the line this morning and are still and elisha not be disappointed when they get to the counter to purchase their iphone x. Alix did you get the sense that the frantic buying, the line waiting was, i got to get apples new product, or worried about will not have an iphone x in stock to buy on tuesday . Emma a lot of people said they were very excited about the product and wanted to get it on the first day. We spoke to a few people who said they had not been able to reserve online, and that is why they decided to be here early. That is something apple had encouraged consumers to do. They said if you are not able to reserve the product last week when preorders first began, get the stores early. So it is a case of how much apple has been trying to manipulate hes lines as well . We saw a mixture of people who wanted to get their hands on the product and those who are just concerned they would not get it for a number of weeks. You think they might be manipulating them . Emma chandra, thank you. I ordered it online. There is some excitement about having it in your hands early, which i totally respect. I tend to be an early mover. You can order it online. [laughter] alix we did get details on the gops tax plan yesterday and there were clear winners and losers. While and Gas Companies were winners keeping in line with the president s fossil feel fossil fuel theory. It is a bad day for tesla. It was a bad day for tesla. Earnings really hurt the company and in the tax credit is gone. Then you had subsidies rollback. This is a bad day for them. There have been a lot of good days, so i think it is fair. Whenever you are creating new technologies, it is to move to a new place that we have never seen before. Youebb and flow you ebb and flow. I think he said it that youre trying to create something nobody has ever seen before at a price point that is almost inconceivable. And an energy and you are transforming that is also inconceivable. Listen, clearly, whether it is the tax bill, or the production dynamic, clearly it is a tougher road from here. But think about what he has created. It is pretty unbelievable. Alix the bond offering early in the year, a lot of people said, i dont want to buy it, but i have to or else someone will buy it. Did you buy it . We bought a small piece. I cannot talk about it. Listen, if you think about what the equity upside is, there is a whole lot of value. It is a whole lot better than the debt. The downside could be significant. From an individual point of view, you like upside and technology. Jonathan i want to bring up the chart that was issued back in august. It has not been pristine since this was issued. Rick, i will not ask you about a specific issue, but i will ask you the following question and you touched on it. On the equity side, there is this my secular, growth story. It is supportive of the equity. On the debt side, you have this tremendous cash burn. ,s investors have pointed out the attractiveness of the equity has been reflected in the bond market. People are scratching their heads as to why. This should not be an attraction issue, but it was. Why . Rick a couple of things. You get a lot of buying when you you havew issuer that to have some exposure to because of indices and benchmarks. There was a fair amount that goes into that. I think there is some idea towards you have some initial to get involved in terms of the company. But listen, i think most people when they priced it at a level, the demand, when you think about how attractive this company could become a the prices are level. They could have done a whole lot more debt if they priced it cheaper and get more convexity. Jonathan is that window still open for some of the companies out there to take advantage some of the rates we have here . Virtually anybody can come to the marketplace. This is part of why, Central Banks have to be really careful about financial conditions being too easy. The ability for anybody to finance in todays market is maybe a bit too easy at prices that make a lot of sense. Jonathan we will continue that conversation next. 20 minutes into the session. Down. 1 . We are heading towards a week of losses, just a marginal one. From new york, this is bloomberg. Alix this is bloomberg daybreak. Im taylor riggs. Coming up, gary cohn, u. S. National economic counsel director. This is bloomberg. A decade of flooding economies with money is beginning to end. Central banks have kept Interest Rates there zero since the financial crisis and the are picking it back up as policy makers gain confidence that their economies are able to thrive with less support. But that does not mean the stimulus is coming to a screeching halt. Telling bloomberg this morning, it is still too early to discuss and in date to qe. Date to qe. One should be flexible. That does not mean we have to go on forever. Sometime, there will be, of course, a reducing and then some kind of a firm date. It is too early to have this discussion. Jonathan still with us is rick rieder a blackrock. Something that surprised me and perhaps you can explain it is how tight italy is trading to italy right now. Lets put up a chart on the bloomberg. We have come in at a time when a time when ecb signaled they are pulling back. When we are approaching Political Risk in italy at the turn of the year. Just a demand for yields an incremental yields is number one. Number two, there were some risk, significant risk around the election. That has been weighing on things. The growth data has been great in italy. And then the ecb is still buying bonds. They talked about going forward, could you be buying more in italy relative to germany . You have a bunch of factors. It is not cheap. We would argue that it is dubious as to the levels here. Period, and be in a as an investor, it is about timing. Jonathan do you still hold a lot of the periphery . A lot back. E peared we have portfolio setter europeancentric we have portfolios that are europeancentric. There is not a whole lot of value in them. We have some positions. Theyre not attractive relative to some assets. Jonathan i spoke to a couple of people how do you express a positive review . You try to push it to fx and you get crushed with negative basis points. The euro has only so much upside. Multiples just wont expand. You try to push it through bonds, good luck. And someone sydney a chart and it was and then someone sent me a chart. Have you guys been on the trade . Where are we going to what is driving it . Rick a lot of credit to our teams and europe. Couple of things going on regards garter regulation, with regard to potentially moving. I would it surprised me how well it is done relative to the equities with these companies. We have sold a fair amount recently. The levels now, you know, i would argue that are a bit questionable. You look at valuations of the market today, it is questionable. Anre they are good carry environment where things are stable for a while. Liquidity is not tremendous, so you have to be careful of when you own them when valuations moved with a half. Jonathan if the work of some of these banks have done justify the move they have seen in some of the securities . Rick there is something important there. When you talk about dead versus equity, youre talking about some debt. Whether it is regulation or the nature of the Balance Sheet, including reducing nonperforming loans, you become a much more stable debt instrument, but do you create enough upside earnings power that the equity can search higher . But it is tricky. We talk about the ecb and the low corporate spread. 03 is what you would do in the investmentgrade market. The ecb when they start to roll back, and they start to taper, what is the reverberation if they buy more corporate and not as much sovereign . Rick recreating a paradigm that will go on for a while. They are tapering. They have reduce a fair amount in terms of what the liquidity the are putting into the system, but they will keep rates low and the us to buy credit assets. You are making the uninvestable and a lot of ways for someone when you think about where yield availability is in the world. But what it does and what i think the fre thoughtful about, it doesnt people into other assets. In most people and into other markets. That is part of what they are trying to create is to make it somewhat uninvestable. Can you create some risk taking and people going to other places. I think it is a worthwhile strategy, but i also think you have to wonder when you pull that back . I would argue that you can be a bit more aggressive about pulling it back because the economy in europe is moving well beyond what is normal potential growth. And that is not always the case. I think Central Banks have to be thoughtful. You get windows to move. Things can change. Alix taking up risks. I love sitting between the two ponders, by the way bonders by the way could rick rieder thank you for joining us. Check out tv and watch is online and click on our charts and graphics, and interact with us. This is bloomberg. Jonathan it has been an actionpacked week. President trump is heading to asia. Michael mckee and Kevin Cirilli take us through the d. C. Agenda for the week and the week ahead. Kevin, lets start with you. Kevin President Trump embarking on that tenday trip to asia that will take him to Southeast Asia and south korea. President trump telling wasrters that he disappointed in the Justice Department for not looking into democrats such as john podesta for the Ongoing Investigation comically yesterdays bombshell. While thesaid, president is overseas, it will be a Senate Banking committee on north korea sanctions on wednesday. That is the same day lawmakers and the other chamber are excited to release their version of the hotly debated tax reform. And has represented his our study to have a markup on the tax bill that we reported on yesterday. Athan we have the chair we have the fed chair nomination, and now Everyone Wants to know who the vice chair is going to be. Mike, what a we going to find out as when a be to find out what the rest of the board will look like . Michael we dont know. Administrations they had been very tilde nominee people to the fed board they had been very slow to nominate people to the fed board. The fourth when it may come open in janet yellen does as expected and resigns when her term is up. It is a waiting game. The vice chairman be more important this time around because, of course, Jerome Powell is not an economist. They might want to fill it with someone with a strong economic background. John taylor is hard to pit into that slot because this is a guy that was to raise rates and use policy rules. Mr. Powell suggested he is in no hurry to raise rates and doesnt like to use policy rules. Alix kevin, what is going to be the procedure for the tax bill and how it goes forward . And how will it be scored . What can we expect the next 14 days . Kevin second will be adding to the deficit, but we have to wait from an official standpoint from the senate until the senate gets there. If you are look to monday. That is when they will have a very Public Meeting and air a lot of these grievances, especially with realtors and what. Not. And look for wednesday my that is when the senate will have their bill. The big story will be the differences between the house and the senate. If they dont have many differences, you are on pace to get this to my the end of the year. Jonathan what is your sense of things . Kevin they are saying it is 20 and that they do not want to go any higher than that. That is a five percentage point increase. I would be really blunt here. I think the need for them is to get a win. That will outweigh all of the Percentage Points by the end of the year. Jonathan great work in d. C. Throughout the week. Kevin cirilli and Michael Mckee. Thank you very much. 26 minutes into the session. Lets wrap things up. Equities with a marginal move backwards. 10 . By a gary cohn will be coming up very shortly on bloomberg tv. Bloomberg markets is up next. 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. It is 10 00 a. M. In new york, 2 00 p. M. In london, and 10 00 p. M. In hong kong. From the World Headquarters in new york, im shery ahn. Mark and live from london, i mark barton. Welcome to the input bloomberg markets. Bloombergto markets. Shery here are the top stories we are covering. U. S. Employers added the most workers in a year, rebounding from septembers slowdown as economic ceo diane slunk will downto us to break octobers jobs report. Plus, House Republicans managed to find enough Common Ground to unveil their tax bill. But it is facing some backlash from within the party. The tax reform president joins us. An apple optimism. Customers are lining up for the iphone x as the tech giant forecast strong holiday sales. We will take a second