Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20171117

Dollaryen down the 4 10 of 1 . Bitcoin, we were talking 8000, now at 7800. What are we going to make a bitcoin, guys . Its on my board. We will answer the question in these three hours. [laughter] butn i think markets think markets like narratives. They cant build one around bitcoin. Usually theres a story to go with it. With bitcoin, theres no story. Likeu happen to have cabdrivers. Its like gold, bitcoin or gold. David moving away from religion, we will go on with dutch whats inside the business world. Good morning, taylor. The swedish Prime Minister is asking the United Kingdom to clarify how much it will pay the European Union as part of its financial settlement on leaving the block. Heaking at an eu summit, and also raised doubts about whether talks will be able to move on to future relations and trade in december as hoped. Zimbabwe president has made his first public appearance since the military takeover earlier this week. The president appeared at a University Graduation on the outskirts of the nations capital. Said ball boys military said today it is making significant progress. Allies ofe and arrest the leader and his wife. They have been there for 37 years. Saysternational aid group one Million People in the human have an outbreak, and other waterborne diseases. There was closing of airports and seaports by the Saudi Led Coalition fighting shiite rebels. Had a lack of fuel. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im a taylor riggs, this is bloomberg. David . David david thanks so much. The tax overhaul plan may have sailed through the house, but on the Senate Finance committee faced the need to come up with their own version. Ed, as democrats charged that it would be all about tax cuts for the risk. It would be nice to would knowledge that this is not for the this tax cut is for the rich, not the middle class. We know companies dont just give away higher wages. This gets old after a while. They do it right at the end of this. Its not right. Just, it takes a lot to get me worked up like this. David that is a worked up orrin hatch and i would say. To see where the senate is headed, Compass Point down and washington our economics policy correspondent, mike mckee. That was an exchange of republicans. They have a problem within their own rink. All of this will make the Senate Finance committee look like a garden party after they get to the floor the week after thanksgiving. Republicans have the senate thath full of problems their own party doesnt like. One of the biggest is the idea for businesses that ron johnson doesnt like. Thats going to be hard to solve financially for them. The Obamacare Mandate dropping that is putting that here. The deficit itself, you got jeff flake and bob corker, who could only lose three votes. Theytime to time would have to cost Small Businesses money that they dont have to spend. I think you can massage the numbers and talk about raising the corporate rate target by a few Percentage Points to pay for any per from changes, things that would get senator johnson back on board. I think we are going to get there. Have senateill passage after thanksgiving, but then we will get to the conference. It seems like both chambers are focused on a Conference Committee. The only way i can describe as the Conference Committee is like the last scene and animal house, where we are going to have leadership saying, remain calm, all is well. Thats what benjamin sues around. We have members negotiating in public, if we have back room deals and uncertainty. I think you are reasonably atimistic in coming up with bill. Talk about the Conference Committee. What are the issues that will divide the houses . It seems like both have said we might be able to work for on state and local text objections. It was important yesterday, after the house cleared its bill, that you saw the chairman of the house ways and means committee, kevin brady, say we are going to work on salt. 12lost 13 total votes, and came from high tax states. This to me is the number one issue we will have to focus on. I think the senate will move towards the house. On waystheres a focus. O work around issues i hear more about the Interest Deductibility fight. Should it be faced on based on what the house wants, or what the senate wants . What does that do for actual Business Activity . David were down to a difference. Its easy to say there are a lot of steps between here and there, but who wouldve thought they have gotten this far . They have surprised people by going this far this fast. One thing ive mentioned as well, weve got the continuing resolution, the government running out of money on december 8. Theyve got to do something about that. That will probably include a lot of these issues as far as negotiations. They might get something out of this. This all getting wrapped together. December will be an interesting month. I have an election they have to worry about. Thank you for joining us. Jonathan does any of a matter for markets, bitcoin, equities the tumultuous mate week four stocks. Joining us is neil dwight, a global strategist. Always great to catch up with you. These are getting shorter, shallower. We keep talking about what the market looks like. What are your thoughts . In general, the u. S. In particular has had a strong reporting season. I think what we need to see is what is a relatively high multiple. In the u. S. , this has the rally has been ok. The question that has started here forion is prices tax reform. The market is up 25 percent since the president was elected to earnings are up 10 . I would argue theres a lot in markets. Some colleagues disagree, and so we wait to see where it comes. Point, make a different which is that they will do something. They have to get reelected next november. They are, in the end, politicians. Want to speculate about, they have to get something done. Jonathan lets talk about the composition of the actual plan. Does it make a difference to get 20 for Corporate Tax rate now . With think the average s p company is paying 24. Its not the 35 to 20 that is so exciting. Its affect the Companies Like tmj pay 13. His got to do the work on a line by line basis. On thesay we are trading hope of tax overhaul, but at the same time, you think theres going to be losers as well, and the market is insured what could be introduced is not that big. I think the market is trading on the fact that we are getting out of monetary stimulus. I think the fact that the bottom 90 of not going to get that means we have economic benefits. Getident trump will not 34 of gdp growth next year. I think, to expect as we are pleading in he is public to get a pay rise. In the u. S. , you are not going to see any path through earnings gains. Alix so more of a pessimistic view i should say. How do you protect against upsides . Do you encase . S and s p just a think the upside is Global Markets, the u. S. What i would say about protection is that we are seeing this to some extent in other areas. The brothers and sisters around them, like chip stocks, or were market gains have come. Thatmakes me more nervous underneath, we are seeing commercial property stocks under enormous pressure. World doesnt look that great to me. Im looking at it going, the market is heading alltime highs, but the real economy doesnt look to be in that great of shape. Alix trying to find protection has been a good trade, right . How do you prepare for that, while not missing out on the current offer . When youve to decide feel youve got enough risk in the portfolio. A lot of fun managers have been selling on the way up, but in the end, you have to stay invested. The fed is going to be glacial. If you take no risk, you earn no return. Jonathan pay into bitcoin. [laughter] alix glacial. Up, ecb coming president mario draghi is confident inflation will drive for wage gains. More on his speech at the european banking conference and frank for next. City,s in new york this friday, the biggest in two months, featuring futures are stable and unchanged in the snp. This is bloomberg. S p. Draghicb president mario optimistic that euro area workers will wean off stimulus, giving back. Lackys the key issue is a of wage growth, but he sees that changing. Inflationile anchored expectations, the effects of inflation should not be persistent. The labor market tightens and uncertainty falls, the relationship between of wage growth should reassert itself. We have to remain patient. Alix with us, neil duane of allianz. Expectations have been anchored in europe, not in the u. S. Take a look at this chart. I compare them for basis points. A fiveyearing at fiveyear forward, 18 negative basis point change for the u. S. That is confusing to me. Europe is in a different economic cycle. Weve still got maybe 10 unemployment. This hot for quite some time and hope to get what i would call the virtuous circle of low unemployment, more consumer spending. I think the u. S. , we are writing that edge and have been for some time. You are hearing the phillips. We will eventually start to see wage growth. Alix how hot can mario draghi really risk it . We still think the euro is the most undervalued major currency. We think it should be worth 130135. Clearly, he needs better Economic Growth to allow them to spread this further. If the currency has to see quite quickly, then clearly the weaker its forces not general ones. They dont want the currency to appreciate too quickly. Eventually, the dollar is heading up. Jonathan structurally, that would make sense. 242 basisry spread, points. How much left of their at 2. 2 . I would say not a lot. Happenevels, what may next year, rather than relative moves. Refinance have trillion dollars in debt. Another trillion dollars in financing. Faruestions for everyone so in new york in the u. S. , is what price are you bidding me for 2. 5 trillion next year . I bet its higher than the 240. If it is higher here, it will be higher globally. Every curve will get shifted higher if the u. S. Goes higher. J the euro dollar to approach 130, something dramatic has to happen with policy rates. I think we simply need to get through italy without president isaacson. The Political Risk is keeping currency down. Why is it that mario draghi is sitting on a curve in the United States, and keeping the euro down because of his Monetary Policy . Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I think for may, the biggest story is one of the others going the other way. Inrica, for the first time the decade, will set the price of its bond market. Goes you say, if this forward, they will be issuing more trade. Last week, maybe you saw u. S. Treasuries, they said they would start shortening this. We will issue more shortterm and fewer longterm. The clear thing for all of us is to work out what we are going to bid markets for these bonds. This is free markets. I am in america. If you take a look at the a look at all of this, 10 year yields should roughly approximate were the final level is. That implies a flat yield curve, assuming the fed will do two or three hikes in 2018. Its clear the market believes we are one and one. Weve definitely got the fed one and three. Markets, if it has to be fed we price futures up to one and three, theres a read my lips type of comment. The market is now way behind the curve. David he didnt actually do what he said when we read his lips. [laughter] coming up, bitcoin lost 38 30 billion in market week. Now it is near a record. We will dig into its volatility next. Live from new york, this is bloomberg. David bitcoin is testing another record, climbing just short of a thousand dollars this week. After plunges of 29 , losing 30 billion in market cap. We promised we would surface out. You will do it for us. What is bitcoin . . What kind of Asset Classes is it i think its a scam for criminals. I think it has no credibility. If you have no wifi, you have no value. I dont spend along with watching technologies. I think its of the relevancy. David its important to separate those things out. Young back to bitcoin, if are right, that its a way of does surreptitious things, that mean the government will have to stop it . If more and more money leaks out of the system because of their Monetary Policy and other things able toould not be tolerate alternative forms of finance outside of their control. Jonathan theyre introducing futures contracts around this. Theyre getting on the institution said quickly. For some people. They dont spend much time looking at it. I cant imagine many of our clients are that interested in it. For me, its a complete sideshow. Jonathan to think traditionally, it is because were used to looking at certain security assets . Winterson why they are moving. We can tell the story that explains that we understand why they are moving. This will replace currencies for fiat. That seems to be the religious point of view, looking at bitcoin. You are pricing at dollars. If you just say bitcoin is strong, people say what is bitcoin . We might never see one. I wont try to understand this from my computer. I know two products for bitcoin. They have lost the two bitcoin they owned. [laughter] alix if you wanted to put your money into an asset, we saw bitcoin respond to that. Theve got bitcoin, gold, yen. Whats a going to be now Going Forward its going to be now Going Forward . You have to refer to gold. Around. Easy to carry my wife likes it, but not necessarily going to keep us if wek to some extent, get to, depending on your review of the u. S. Economy, the u. S. 10 year could look similarly safe. David you said you dont spend much time talking about bitcoin. Hardly a day goes by when a bitcoin story isnt right up toward the top on the bloomberg. A lot of people who have bloomberg terminal seem to be interested in it. Why is it so much the topic of conversation . I dont know. If you think about the function of the currency, the block chain is now so big ive gotten some of these transactions, maybe 10 or 12 the day. Each of these transactions costing more than 20,000 of computing power. Its not exactly like your credit card, where for six cents, you can buy and sell something. I dont know the functional purposes of the currency. Jonathan coming up, brexit stalemate eu leaders announcing its up to the u. K. To make the latest concessions. The latest of elements the uks plan to leave the European Union. Here in new york city, markets about two hours and change away from opening. A futures are stable, unchanged. S and p 500 futures go nowhere. ,ext up, to the city of london brexit negotiations. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Jonathan esther the first weeks of week of losses after the first week of losses, we could have another week of gains. Futures going absolutely nowhere today. Price is really subdued. The story of the bond market is Something Like this. Curves flattening once again on 10 year treasuries, coming in by a basis point, 10 points flatter through much of the session. Euro showing stress against the dollar, japanese yen, dollaryen coming down. Headlines now outside the business world. Emma chandra. Emma Robert Mueller served President Trumps Election Campaign a subpoena in october. They would seek documents related to any comments contacts with russians. Two other members are pressing George Kushner Jared Kushner to provide additional documents into the rush investigation. Iraqi Officials Say that banks held by the u. S. Coalition have liberated and iraqi town held by the islamic state. Ministry officials said they would take control of the town and a western province. This was against a campaign of airstrikes and met from militants. In the u. K. , there will be clarity on the brexit divorce will in a few weeks. He was urged not to be a passive observer of the brexit process. There also calls for the timeean union saying its to compromise. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im emma chandra, this is bloomberg. Neil, just yesterday, the u. K. Risks becoming a single issue country, and the rest of the world will move on. Is that were we are going . It feels at the moment that that could be it. Government, a British Civil Service that doesnt want to lose, and therefore the proportions of the process thereby whereby we have negotiations on one side and preparing for potentially a nodeal on the other side. The politics on the european side is also difficult. Although we have not had a following through of significant brexit ties for any of the big elections, but we have had is a rise of the nationalist or populist parties. Even our friends, what they want to call the germans or polls or whatever around europe or poles or whatever around europe, the dutch, they have a local constituency, so they can gain at some freedoms the british are trying to negotiate. Its a difficult political trap moment. I was jonathan speaking to someone in berlin earlier this week asking if this even comes up about brexit. We are still focused on angela merkel. People in europe have become a lot more constructive on economics. About a talked narrative around this, it was reaffirmed. I look at the story perhaps we can bring up this chart. There is an expansion on a stoxx 600, though it still stock 600, though it remains somewhat elusive. The reality is different from perhaps, one is overweight houses and health care, and the other is overweight pick . This makes a big difference to the u. S. To make a european point, its very sad that europe has no backs. Theres something about the lack of entrepreneurial flair, innovation, technological investment. Last result, europe has underperformed the u. S. ,e should be five years behind in this easy money of growth rates driving performance. Jonathan why isnt it happening . Data points are better, but this is going through. Why are the banks still struggling . Most banks are not fixed. Wouldnt havewe these basis points Interest Rates in europe. There is aggressive investment now from american investors in the german banks. Most of the german banks arent motivated its not safe. There are key reasons why the markets are continuing to perform. The flipside is, the more consolidation, that provides catalyst. The ceo of Deutsche Bank was on a panel with other peers in frankfurt. That institution greater heft, the ability to withstand greater investment, consolidate that investment. There would be a positive. A think its finally bounced. One has to look at the institutions. I would never relate out. I think it would be good for europe, because there are too many institutions, especially in this country controversial but true. Alix this is a contrast of the commerzbank ceo, saying bigger is not better always. What do you think . Banks are now i. T. Spots. Asia is going cash. Everything is done on the phone. I dont see where the sho everything i dont see where they shop. Though arese banks now facing what i would call the ultimate disruption. Millennials around the world are not interested in forming a relationship with that. There will go to they will go to something on their phone, a brand that probably wouldnt recognize the bank. Thats a change in the financial world. Alix if you see that the 10year bund yield should be 2. 5 given how strong the German Economy is, and you see potential for tie up in banks, why isnt that going for european stocks . I would say that i think the position in europe is that people have been overweight for fixed income . People are getting involved in the European Equity markets, despite the fact that they are highyielding. Europe income has been aggressively from. Therefore four months. For months. Therefore, maybe there better invested, but that doesnt necessarily show in terms of daytoday relative performance for markets. Thing about the central about the potential, you are seeing attempted consolidation. Thought that the United States of europe was a credible hypothesis now that president macron is trying to push europe to get going, we should have the benefits of economies of scale that the u. S. Has. We havent got there yet. Thats a political problem as well as a market problem. David i wonder for might be another explanation. A moment ago, banks are i. T. Companies. Are they perceived as such . Or tesla, is google they tend to put high valuations on that. In United States, theres a lot of tech. Financialsit is more and manufacturing, which has done wonderfully in germany. Its not a bright new shining object. Might that explain some of the differential . Probably. Think about the power of the european automotive industry. Valuations are low because people are concerned. There feels to be, in many cases , some of the Old World Industries that europe has specialized in will be losers and 510 years. Thats one of the largest challenges for traditional companies. General motors has substantial i. T. Investment, automated driving, things like that. They will persuade the street that they are as technically proficient a tough thing. Whats with tesla, theyre getting someone to prove that they can make 50,000 units. Its hard. You have business in the silicon valley. Everything could go to taiwan and china with apple. Apple just comes up with the concept, then says, go make a few million of these. Now theyve got to do it. Trying to do it in the u. S. Like the disruptors. Not necessarily the fangs come but the whole story around disruption. Its coming across every industry. You can find interesting ideas like new technologies. A think thats an interesting theme. Enemy,k inflation is the even though everyone cant see it. Loseslation for decades 35 of voting power. They are out pricing inflation of what will come in the u. S. Long oil all year. In the last six weeks or so, we have seen companies perform. We think geopolitics in the middle east look like they are deteriorating. 6065 is still not enough of the security premier. David Milton Dwayne will stay with us. Coming up, oil surges after saudi arabias head of opec says they should extend output curves when they meet later this month. Is it possible to have oil trading close to 75 . Neil duane says thats where it should be neil duane says thats where it should be. If you cant watch television because you are commuting, tune in to cut tom keene on the radio. Bloomberg surveillance can be heard in boston, new york, the bay, all across United States on sirius xm. This is bloomberg. Emma this is bloomberg . Ybreak coming up in the next hour, j. P. Morgan Asset Management Global Market strategist with his thoughts on tax reform. This is bloomberg. Now to your Bloomberg Business flash. Of a to settle a lawsuit drug maker sued by texas in two thousand 13. The company was claimed to have targeted the same Medicaid Program by urging doctors who prescribed antipsychotic drugs for treatment, for children over six years. This a 5. 7 increase in thirdquarter earnings. Acquisitioninance of a france advertising company. The unit had its first growth 2013. Earlierl having losses this week. Saudi arabias oil minister said opec should expend extend out to curves treat he spoke to bloomberg. We need to recognize that by the end of march, we are not going to be at the level we want to be, which is at the five foot average. That means an extension of some sort. Alix for more on oil, we are joined by a union Group Founder and ceo. They own oil blocks in argentina, peru, and libya. 7075 is where it should settle. Thats a bold call. We are going to be in great shape. Normaleard from yesterday, potentially proposing that they will close oil stocks. Shift ins a structural the market. Thats like saudi arabia saying, we will not bet on oil. Does that were you in a longerterm, for your oil assets . Our view is absolutely there. In the longterm, relatively quickly, renewals will supplant a big buyer of consumption. Ically, oil is not good this technology is not good. New technology is making it irrelevant. In the shortterm, the next 23 years, theres been probably a lot of reduction exploration, production and operations and production. These marginal costs, around 5060 with production. As soon as that goes, it goes up very high. 10 can add a little production back into the market. So i agree. If we go to 775, it is likely to happen. Alix so Political Risks, square that with that view. The geoPolitical Risk is understated. There are loads of production areas in the worlds are not stable. World that are not stable. We think the optimism in the United States around u. S. Shale is not as. S. Infinitely productive as many of the people think. Evens per warning this reporting season, caches in the negative. Alix what kind of production do you see for shale in the u. S. . I think what we need is a reflection of the fact that the u. S. Has 18 Million Barrels of oil a day, makes 12. The u. S. Has to consume 5 Million Barrels of oil from the global oil market. You still have to rely on the global oil market, in a way that the assets dont appreciate. 5 is thatn we see 7. 7 as a reasonable bounds for Oil Investors to get out, have some risks. At 50, you do not. Alix 75 in argentina, you are totally good, man. [laughter] its different in theory. Arabia. At saudi they need a different idea they have an idea that is not doing great. They have political problems with their neighbors suddenly. Russia has elections next year. We need to boost the economy. They need a lot of money, oil going higher. Producers are coming in the next month, much higher oil prices. Thats probably playing inside opec. Anyone buying in on the saudi ipo . Depends on what they will pay for it. [laughter] david they will pay labor fee, thats all you need to know. Alix ha. Both of you are sticking with us. A venezuelan company, we will dig and what it means to investors and how it relates back to oil. This is bloomberg. Isda, theterday, International Swaps and derivatives association, made it official. An oil company is fault, triggering default swap on its debt. To explain what happened and what what may happen next, we welcome congee pour scotexit. Theres delayed payments of both venezuela and the oil company have been having on its coupons. Dates counts as a default. Both government officials and business officials have said they have been paying them, and they are making the payments really delayed. , and you will get paid a double. Its a unique situation. Is saying is that that these delays, which have been over a week in some cases, and longer and others, count as a default and trigger a contract. We have heard about some restructuring that has been done or is underway. Is there a prospect for venezuela to restructure their debt . The restructuring efforts are more like a pipe dream at this point. It is something the government has wanted to do. They have nothing clear at all in what it means by restructuring. It has been used the word refinancing, renegotiation, all these different things. Have aer what, they will tough time. Current u. S. Sanctions prohibit u. S. Investors from engaging with top officials. The head of the restructuring process is actually a sanctioned traffical for his dealing. Investors have their hands tied in terms of signing documents that these people are engaging in, and also, investors are hibited from buying pond bonds per current sanctions. Unless there is a regime change, or they sign off on some of these things, its going to be tough for restructuring to happen. Million . A scum in terms of the prospects of an investment, what that means. You know the argentina story well. Youve spoken to people on their experience dealing with argentina. Are there any parallels here about what we are about to have with venezuela . Katia we katia interview the former manager from elliott fromement, who ran this start to finish. Now he is retired. I interviewed him about his thoughts on venezuela. And he had an interesting take. About half of the and standing debt from venezuela could potentially be a zero, even though a lot of folks think this is great, because compared to argentina, which had no foreign assets that they could try to seize they had tankers and oil shipments, oil receivables. All of these things they could try to go after. His opinion was, thats not the case. Worth muchare not because so much has been borrowed against them. Venezuela can do whatever it wants under domestic law, and it it can take and dictate a banker broke bankruptcy proceeding, which could leave this as a shell company, stripping of of its assets, or leaving it somewhere else. You could have a bag full of nothing but that. Its fascinating what his opinion was. The idea, the common sentiment among investors is that this is different from argentina, because theres all this external trade, and its entangled in the web, wheres argentina was isolated. Thats not the case, and you should be ready for a worstcase scenario. David good to have you. Our guests are still with us. Its all about risk and reward. You look at venezuela and other opportunities. Im staying away. You know, when the default happened actually, that created a lot of interest strangely. The trade in latin america has been so profitable for argentina, ecuador. ,his is 140 billion default with the national debt. Trade tonteresting analyze, a very complex trade with aspects of things piling and. This was up . 30, now down to 20. A big, big change in estimations of the markets. That is also longer was cuba. This is on their bonds this is still trying to work out. You in london america, and where . Argentina, we like the dollar and peso bonds. Venezuela is fascinating this china, india, and russia do they have enough money government to government question mark when you think of tapping into cash flows of these companies, im sure the government to government relationships will take priority over any other relationship. Usid great to have you with for the program. Coming up in the next hour, david leibovitz, j. P. Morgan asset manager global strategist, tax reform markets and more. One hour 34 minutes away from the open up markets. Futures doing absolutely nothing. As we caps off another potential week of gains. 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. Republicans set up a fight with republicans. Senators push their bill through the finance Committee Hours after the house passes their version. Global equities recover. Junk bonds bounce back. Bitcoin flirts with an alltime high. It caps off a resurgent week by inching closer to 8,000. From new york city, worldwide, this is the second hour of bloomberg daybreak europe go bloomberg daybreak. Im Jonathan Ferro alongside david westin and alix steel. We get back on track in the fx market. The dollar weakness does resume. The curve flattening resumes, as well. Alix talking about where the euro is trading, take a look at european stocks. The second weekly loss. Down 0. 1 . Bitcoin, we are talking about it. The thousand dollars. Are we going to hit it . 8,000. Are we going to hit it . David now for some headlines, we turn to emma chandra. Emma thank you, david. President trump says democrats could help with tax legislation if they were so focused on defeating it. Yesterday, House Republicans passed a massive tax overhaul bill. U. K. Prime minister theresa may pressing ahead to get brexit enshrined into law. Her Spokesman Says she thinks two years is long enough for the brexit transition. The Irish Government wants it to take up to five years. The highest level chinese envoy to north korea arrived in the countrys capital to try to improve relationships relations. Tensions have risen over tightening of sanctions and the calls from President Trump to give up their nuclear program. Global news powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David the house passed its version of the tax overhaul yesterday, but tempers flared in the senate when democrats claimed it was all about cutting taxes for the rich and the chairman of the finance committee expressed his frustration. Oldhis bullcrap really gets after a while and to do it right at the end of this is just not right. It takes a lot to get me worked up like this. David we welcome in kevin cirilli. You saw a very frustrated orrin hatch. It was a long frustrated session yesterday. The democrats really have a point that there may be political consequences because it looks like it really favors corporations and the higher e nds of the tax bracket . Kevin it was a long session and tempers were flaring. Responding to senator sherrod , awn, a democrat from ohio very progressive democrat, who also fired back and you saw in that moment and it is great that we are playing it you saw just how entrenched various sides are on this tax debate. Senator brown really making the case that this is only going to benefit the wealthy, it is only going to benefit the elite. Senator hatch saying the complete opposite. Ultimately, it is going to come down to centrist republicans, Susan Collins, Lisa Murkowski, these same folks who have been the key in the Health Care Debate about tax reform. If their constituents agree with senator hatch or agree with senator brown, that is what is going to move the needle forward. Activist groups are flooding the zone, so to speak, on both sides in battleground states like maine trying to get those lawmakers to vote for their various side. David as we know, the president has said repeatedly this needs to be about the middle class, not about the wealthy. At this point in the process, is there any realistic prospect of changing the substance of the package were overhaul or is it really a matter of spin and marketing . Kevin right now, it is a matter of a line here or there, but the crux of the legislation passed in the house and moved in alignment with what is in the senate, but there will be no significant changes, im told, to the tax package that likely the senate would take up at the earliest the week after thanksgiving. Two points, that said. We have been reporting on this, about how middleclass america and states like california and new jersey, because of the state and local tax deduction, ultimately might see a tax increase and the notion of that is that it would be a net gain for them in the sense that they lower. Ave a rate democrats and republicans disagree on the merits of trickledown economics, but that is where this battle is going to be headed. David thank you so much. Jonathan Everyone Wants to weigh in on that. Michael mckee. [laughter] jonathan want to weigh in . One, the joint committee on taxation, which is the ,corekeeper for these bills they show that these bills are going to raise taxes on most americans, particularly those in the middle class, after about five years and the people at the bottom of the Income Distribution table fare worse than the rich. This is a good political talking points than the democrats. Republicans assume congress will never raise taxes, so they will just renew these, but it is going to be a tough sell politically. The second point and this is a , the i brought along argument the white house and the is making is that they are going to cut taxes for corporations and they will raise everybodys paychecks. We have not seen that. What is giving them more money going to do . David ive got to tell you that ive been in a letter budget meetings and ive never said, we are making more money, why dont we raise the wages . Ive never heard that. Jonathan we have not seen that on wall street either. Seemingly, we should have a collision course between republicans and democrats. We have a collision course set up between republicans and republicans. The house and the senate. Who ultimately wins this . Mike it has to be the senate because it is the senate which has the tougher rules to court to get a majority vote to try to get a majority vote. They cant appear to give ground to give on the state and local reductions. 12 republicans did vote against this yesterday, so they will have to get give something to them to get them to vote for the final package. Jonathan from bitcoin to equities, everything charging forward. The s p 500 seemingly on course for a week of gains. That was the biggest oneday pop on the s p 500 in two months. David leibovitz joins us. David i think there is good it has not gone out of fashion, even if we dont see tax reform get done, we are expecting profits to grow at a modest pace and some of our Economic Forecast are poisoning does pointing to this being carried into the Fourth Quarter and possibly next year. I think there are fundamental reasons to stay long risk. Changes in policy are the icing on the cake am a but they are not necessary. See extrado you profits going to wages . David i dont think they will necessarily end up in wages. Allour point, we have seen of this debt get issued at very low rates. Then people say part of the tax plan is cash repatriation. U. S. Companies have plenty of cash. If they want to do raise wages today, they could do so. Jonathan if you are long risk, the you want them to spend it on wages . David l. that is a really good question. I think it depends on how the wage growth evolves. If wage growth is rising faster than inflation, you could see a list to purchasing power lift to purchasing power. If it becomes overly inflationary, you will see downward pressure on margins from very high levels and profitability will come under pressure. Alix what is different this time around is that investors are asking companies to do something different. If you take a look at this chart, at the top are stocks capex, those are starting to outperform those than the ones that put money into buybacks. Does that change the conversation for companies . Mike it is a harder chart to explain to the average person, but it does make the argument the republicans are making if you could connect higher profits to increased. That is the stretch we dont know right now. We are in a part of the Business Cycle were companies are spending more maybe because they need to and they have the cash. It is all about meeting the demand you have. We have been waiting for this to happen. It has been happening without the tax plan. Does the tax plan excel a rate that . That is the republican argument. Alix what would you rather buy then . Next l. i think over the 12 months, we would prefer Companies Engaged in capex. We think that is part of a broader productivity story. We think it is fairly atypical to see a rampup in investment spending for the end of a cycle. A lot of times, you see that closer to the beginning, but we think this capex renaissance is something that investors have been waiting for this entire cycle. Longerterm, it could help address supplyside constraints. David w. do you think that investors are paying proper attention to the timing of this . You dont just turn it on, it takes a while to do this. Even if you get tax reform, the First Quarter of next year, it is not going to be immediate. Capex totime for the work its way through to Economic Growth. David l. exactly. There was also a lag between profits and capex. We finally seeing Profit Growth rebound and become supportive of more investment spending. This is a down the road story. When better to start than now . Coming back to the fundamental drivers of the u. S. Economy, it is growth in your labor force and growth in productivity. There is a direct relationship between investment spending and productivity growth. Jonathan ive got a suggestion for us all. Ive got the greatest invite ever and i think youve got it too. Vodka infused turkey. And the kicker. This is the best invite of ever had. A free taxi ride home included. David w. i wonder why you need that. Jonathan why didnt you get an invite . Alix there is literally nothing worse i can think about. [laughter] jonathan senators with me. David w. this is not going to increase productivity. [laughter] jonathan michael, think you very much. David lebovitz is sticking with us. Coming up, the yield curve near its flattest level in a decade. It could zero out next year. From new york city, counting us down to the market open, futures are stable after yesterdays bounceback, this is bloomberg. Alix prepare for the yield oute 20 out in to zero in 2018 according to t. Rowe price. If we assume the fed will do two 2018. Ee hikes in jerseyjersey ira joins us. What do you think about that call . Ira the fed really cant control that call. Some are worried that the fed is reducing its balance sheet. At the same time, the Treasury Department, which issues these bonds said that they are going to be issuing front and bonds. Zero next year is a little bit aggressive, but sometime within the next 18 months to two years, certainly can be realized. Alix this contract with goldmans call. They see four rate hikes. What kind of scenario would we have to see to make that not be a trade again . Ira i think if the Federal Reserve were to get more hawkish. If you had a hike this year and three hikes next year, which is not priced into the market at all right now, you would end up with a lot more curve flattening. When the fed hikes too much and too fast, that is seen by the market is a policy ever. You end up with over as a policy error. You end up with slower growth. Seeing twoyear yields go up to the same level and that is where you get the massive curve flattening because of a policy error, not because the fed cant control the long end. Jonathan lets talk about that. What you can see next year from the Federal Reserve is that they see rates north of 2. 12 and in that spot right there. If we are at 2. 30 right now on the 10 year, the Federal Reserve sees the policy rate about 20 basis points short of where the 10year currently trades and they see that happening next year. So come either someone is really wrong or that curve is going to be really flat. David l. exactly. We are big believers that a flattening yield curve is in normal development during fed tightening cycles. The pace is a fair question. Historically, since the 1980s, the curve has flattened out when the fed has started to raise rates. Onthe fed is going to carry long beach ejector he they have laid out, you are going to carry on a long the trajectory they have laid out, you are going to see some repricing. It could underline the low environment we have been in. I do think things could become a bit turbulent in the market. Jonathan ira was firm in calling it a policy error. Do you think that agree with that . David l. i think a policy error is a possibility this cycle. But we believe that inflation is going to pick up, so if there is a policy error, we dont see it coming until 2019. David w. how close attention will the fed be playing the long of the curve versus the short . The Treasury Department said they will change to shorter tenor. Can they call their friends at treasury and say, it would be just as well if you start doing more long end then short end . So, this is one of the things that the Treasury Department has to handle. Their job is to get the lowering borrowing cost lowest borrowing cost for the taxpayers. Save 1 , you might try to do that. I think the Federal Reserve, in order to control longerterm Interest Rates, has to set those expectations. What is our policy going to be if this occurs . The problem with doing that is that they hand tie themselves and give themselves less flexibility. They have basically been seen as you guys would hike under these circumstances, we have met that, you are not hiking. The market is starting to believe what the fed is going to do. David l. i think the financial trade becomes increasingly challenging. Perhaps the fundamentals are coming back into play in a way which was not the case before and you are saying some of that seeing some of that macro decoupling. It sounds like particularly in an environment where the yield curve continues to flatten in the absence of material acceleration, the financials trade becomes more challenging. I think there is room for rates to run, but that is based on our expectations. Alix thanks. Ira jersey, great to see you. David lebovitz sticking with us. Comcast and verizon said to be looking at buying a chunk of 21st century foxs assets after talks with walt disney gold. Cooled. This is bloomberg. David w. first it was disney, suddenly it seems like everybody is interested in picking up some of 21st century foxs assets. We are still not sure if Rupert Murdoch really wants to sell. Why now . Why are all the Media Companies so interested in at least a part of 21st century fox . Disneyfoxwhen the talks were reported last week, then it became very clear that fox had kind of put this forsale sign on at least some of its assets. You have to remember that the traditional Media Companies are grappling with this harsh reality in terms of subscriber declines. They are seeing Cable Networks in secular decline. Huge amounts of subscriber erosion. The only viable strategy seems to be a direct to consumer streaming strategy. It is important for them to have hit movies and hit tv shows to sell them directly to consumers. David w. that is the story, direct to subscriber. When you look at the pieces that might get sold, those are the ones why would fox want to be left with the Fox News Channel, with their television stations, with their network . Geetha yes, i think what foxs realizing is that a lot of investment, with netflix on at the ning upending the whole media landscape, foxs realizing they are going to have to make a lot of heavy investment in the content side of their business. They do have a sprawling film and tv studio. On the film side of things, they have not been as successful as a disney or a universal with comcast. They have had some problems with aging franchises. They may not have the capacity to make those kind of investments, so it might be better in the hands of a bigger rival disney or comcast. David w. but do they have a Growth Strategy for what would be left . Geetha i think they do. I think they have kind of realized Fox News Channel is their biggest profit driver. It brings about 2 billion in annual cash flows. They have realized that they have news and sports as their core content and they want to home in there. Jonathan why some of the Worlds Biggest Oil producers might not be long crude in the way that they should be. An hour away from the opening bell. Futures going absolutely nowhere. This is bloomberg. Jonathan from new york city, this is bloomberg daybreak. Lets whip through some of the Market Action for you. Futures pretty stable after yesterdays big one day pop. , curves were steepening a bit at curves are flatter again today. On the fx market, dollar weakness is soggy. Dollaryen coming down again. The data comes out in the United States. A solid pop. 3. 2 ious number was ,ooking at Building Permits 5. 9 is the print. The previous month revised slightly higher. We would call these noisy given the hurricane effects of the last several months, but that has come in very hot compared to the estimate. Alix we had seen housing and little soggy compared to a month ago. Of jpmorgan, im interested to see what tax reform does to this if you get rid of the mortgage deductibility. David l. some tax plans proposals are going to be contentious. Like to go to the Interest Deductibility issue is a bit aggressive and im guessing it will not look like the original proposal. Jonathan stick with us. I want to get our viewers uptodate on headlines with emma chandra. Emma special counsel Robert Mueller sent a subpoena to President Trumps Election Campaign in midoctober. He was seeking documents related to any contacts with russian operatives. Two members of the Senate Judiciary committee are pressing Jared Kushner to provide additional documents for its russia investigation. Zimbabwean president robert yougov a mugab jonathan could be mugabe impeached if he does not bow to pressure from military officials. He is the worlds oldest head of state and has rolled zimbabwe 37 years ruled zimbabwe for 37 years. Officials say they have liberated the last iraqi town held by islamic state. Year, the United States began a campaign of airstrikes against the militants, allowing the military to retake mosul this past july. Global news powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Alix thanks so much. Crude on the front trimming weekly declines after saudi arabias oil minister says opec should extend output cuts this month. Effectstalked about the the arrests in saudi could have. It has no impact on foreign investment. It has no impact whatsoever on the kingdoms openness, capital flows, and our wide open investment environment. Does this mean the ipo is on track for Second Quarter of next year . Well, of course. The ipo is completely on impacted unimpacted by any of this crackdown. Isx joining us for more will kennedy in london. Feeling very optimistic by want to take us back to the music that we learned that norway is considering paring back its oil and risk its oil and gas stock risk. Will there are two aspects to this, alex. If you are trying to view the world do the Worlds Largest ipo, you want access to the Worlds Largest equity investor. That is not going to be open to them anymore. That is money they will not be able to draw on. There are potential other investors, potentially in the far east, who might be able to replace the cornerstone investors. With the Energy Transition and stranded assets, people are saudiramcoll the idea, they must be a little worried about that. Is like sure, but not at that price, lets talk about a lower price. That impacts the overall valuation. Will thats exactly right. We all know that the valuation of the crown prince put on the company was immense, he talked about 2 trillion. That is probably not realistic, but even if it were half that, it is by far the Biggest Company in the world come as a you really need to draw investors from every single corner, if you can. If they do deal with china as a cornerstone investor, that could be linked to longerterm deals on oil supplies. You are right. They will want to put quid pro quo for their participation. Little bit like a softbank jim . Jam . Jonathan put billionaires in a posh hotel and do a cash for freedom deal with them. Alix i brought that up because of want to tie it back into the oil price overall. , whatconnect the dots does saudi arabia need to do to support the oil price . Do they need 80 oil to make all this work . Will it is a fine balance for saudi arabia. The problem with 80 oil is it will make the ipo easier, but it will put a rocket under shale production in texas. The line opec is having to walk already is trying to ensure that the market is confident, that the will keep training supplies. Without giving the shale industry the opportunity to sell too much production forward and hedge into 2018 and given the ability to keep producing, so from an oil market perspective, 60 is probably about right for opec. For saudi arabia, they also have this added complication that they need to get this in normal enormous equity deal on the way. Alix great stuff. David lebovitz around the table with us. If im long at on and im long shall, what are you exxon and im long shell what do you do with those stocks selling . David l. when we think about big Oil Producers diversifying assets they hold, we do not think that is the worst thing. Norway has a lot of exposure to oil and gas in their economy. I understand the thought process. Thatcularly given the view oil prices are not had a drastically higher anytime soon. To me, it is a tale of two oil markets. We have shale producers breaking even between 30 and 40 a opec, and then you have where breakeven is north of 70. These are different markets with different sets of fundamentals. We are seeing Different Oil and water problems. We are not seeing the mixing. Said that oil prices are not headed anywhere higher anytime soon. What about anytime later . Even as we hear about issues involving the desire to have Renewable Investment around the world, we have tesla announcing more electric vehicles, General Motors and other countries desk Companies Going electric, what is the longterm prospect for oil . David l. when we think about shortterm versus longterm demand, yes we have demand for electric vehicles coming down the pipeline, but that is really a developed world phenomenon. More than 50 of the worlds marketsare emerging where fossil fuels are key. China as do you count a developed market or an emerging market . David l. i would count the more in the context of this conversation as a developed market area you have this emerging middle class, you have an increasing reliance on services than investment in industry as a driver of growth. While you do see areas like that where electric vehicles are becoming much more involved, i think there are still a lot of corners of the world which remained relatively undeveloped and will be a source of energy. The source of equilibrium is probably lower than what we have seen historically. Alix so you want to go long oil, lets pretend, where do you do that and how do you do that . David l. i would probably play it through the equity market rather than taking direct Commodity Exposure on. Or smallit big oil players . Is it going to be in europe versus the u. S. . David l. i would go with big global producers in the u. S. They have taken time to get Balance Sheets in order. As we take a look at earnings reports, you are seeing some of those down and midstream companys return to profitability. When we eventually do get the final oil price under control, that will filter through into healthier profits. David w. David Lebovitz of j. P. Morgan Asset Management, thanks for joining us. Great to have you. Still ahead, teslas big reveal of its new electric longhaul truck. We will look at how this could disrupt the Auto Industry and the oil sector. If you cant watch it on television, you can tune into where calling tom keene on the radio. Surveillance can be heard in new york, boston, all across the country. This is bloomberg. Emma this is bloomberg daybreak. Coming up on bloomberg markets, the Harvard Kennedy school dean and former cbo director. This is bloomberg. Now to your Bloomberg Business flash. Shares plunged after the struggling British Production Company warned it is in danger of reaching its debt agreement. It is negotiating lenders to restructure its finances. Movies boosted indias Sovereign Rating for the First Time Since 2004. They say reforms being pushed thrown by Narendra Modis government will help stabilize debt. It came as a surprise to some investors. Questions still remain about whether a Leonardo Da Vinci painting sold for a record 450 million is authentic. Says its in new york is one of fewer than 20 paintings by da vinci known to exist. Art experts are questioning how much is original and how much has been restored. Can you imagine you are in that auction room and it goes up and blasts through 400 million of the following day you have bought it and loads of articles come out about whether it is authentic or not . David w. the thing that strikes me is it is all about prominence. It is all about whether Leonardo Da Vinci painted it. Jonathan isnt that what it is all about . Alix would you want that on your wall . Isnt this all the issue with restored art . That is the point with restored art. Isnt it . David w. with how much of it is painted by da vinci, how much painted by his school . Jonathan some of it was painted by da vinci, apparently it is north of 400 million. [laughter] jonathan would you want to buy bitcoin or would you want to buy a Leonardo Da Vinci painting . Alix that da vinci painting . David w. i dont have that much money. Alix really . I dont know. Jonathan are you going to make the kind of money you could make on bitcoin . David w. i have a pretty good idea that that will be worth something 15 years from now, bitcoin may or may not. Jonathan another record. Bitcoin. Close to 8,000. This is it over the last two weeks. Typically, i go to the fx market. I can say that it is moving because of this. I can say that this is the story around the two currencies. Can you explain what is driving it right now . The discussion is really technical right now. The main thing underlying all of these wild moves is an upgrade to its technology. At the heart of this is that the developers, the people in the Bitcoin Community are disagreeing over how this thing should work. Because of the growing , peoplety in bitcoin are struggling to say which is the right way to upgrade it. It jumped to a record after an upgrade that has been really divisive was called off. People have said that bitcoin is not being strengthened by this, so it jumped. People started saying that it may be was not a bad thing that this upgrade was happening and they started switching to other coins that provided the technical aspects. Now, the same thing is happening. After it plunged almost 30 , and started climbing again. Minorss a small group of that are thinking, we do want to have this upgrade. That is fascinating, but it does not make me feel better about it. Every time you come up with a new software advance, to say it could go down 30 , there is not just one person who gets to decide. Down 30 , there will be a revision to the thing . Is a doubleedged sword of the decentralized nature of bitcoin. Some people see it as positive. Hat it allows for it it is confusing to have so many different types of bitcoin. There is no bitcoin silver in the works, bitcoin uranium, bitcoin platinum. Alix bitcoin uranium . [laughter] jonathan it is like sterling cash. David w. you just hope it is not like new coke. That fell flat. Alix how would bitcoin uranium work . Some are serious attempts at improving bitcoin and others are just kind of scam he or people trying to make a fake but essentially out of this thing. There is an argument to be made that there are different uses for different currencies. Jonathan im still confused. [laughter] jonathan thank you very much for joining us. Alix take a look at some of the movers 45 minutes from the opening bell in new york. Fox up by about 7 . Rupert murdoch says basically that his assets are in demand. The news broke that potentially disney had been a suitor. A sports car, which up to say looks beautiful communal me, i dont do cars. Beautiful if he can make some money with it. [laughter] alix but the equity market does nothing to care that much. Jonathan if you think bitcoin is a religion, tesla is definitely. Everyone that i know that owns one is so long tesla is unbelievable. They dont want to buy the equity, they want to buy the car. David w. theres your sports car. Alix that is a pretty roadster. It is a 250,000 car that can go 060 and 1. 9 seconds. David w. it would be the fastest production automobile ever. Alix that is incredible. Preferably with a stick shift. Alix Morgan Stanley buying into the truck, saying it tops the best of their expectations. We will discuss that later in the show. Rounding out with williamssonoma. A sharp contrast, shares are down 10 . It was downgraded by a few shots over there. Comp sales were slightly better, but the outlook is the issue. Jonathan my mum loves it, she loves williamssonoma. Alix whats the thing . Jonathan maybe she doesnt have the equipment in the u. K. David w. she loves to cook. Jonathan she loves to cook. David w. you love to cook, you love williamssonoma. Alix fair point. [laughter] alix if you want to spend a 900 on a pan, you know what to go. Check out tv , watch us online. Interact with us directly. Go to tv on your terminal. This is bloomberg. Jonathan the opening bell about 38 minutes away. Lets look through some of the action with you. Price action really muted. Unchanged in london, unchanged in frankfurt. Yesterday was the story for risk appetite. The biggest pop since september. Wages to get price action. Switch up the board, the story of the bond market. Yields coming in by about a basis point on the 10year. Curve flattening starts to resume again. On the fx market, you also see dollar weakness. Approaching and we see the strengthening. David w. we are going to talk a little more tesla now. Elon musk shows us he still has that flair for the big announcement when he unveiled their version of an all electric truck and then he threw in a new sports car for good measure, which was a surprise. An underperform rating on the stock. It is well under the 240 at the close yesterday. Welcome. Did you see anything yesterday that changes your mind . We saw be stock trading up now . Ways,hink we saw, in many what elon musk announced in terms of performance was ambitious and aggressive, but it was technically competent or consistent with what we heard from other Trucking Companies looking at also electric trucks. I think there is some credibility. It is not going to be done overnight. There was nothing unbelievable in what he presented. We saw his skills, as we mentioned, in pr still very strong. David give us a little peek into your analysis and why you think that the stock is overvalued . Philippe well, there are two issues. We have seen that they have difficulty ramping up production of the model 3 and they need more capital. Today, it seems like the stock found some support around 300 and we are waiting to see how much money they need and how confident they are in the fact that they can ramp up. Have iserterm issue we the vertical integration at tesla. They vertically integrate structurally lowmargin businesses. Our conclusion is that they are not going to get enough growth given howsiness model much growth they are putting into the business. It is a very capitalintensive Business Model Going Forward and that is the issue. David thank you very much for joining us from london today. Jonathan coming up, tempers flare, the house passes its text overhaul tax overhaul, but things got heated when it came to the senate. From the opening bell. After yesterdays big price action, futures on the dow start to roll over a little bit and on the s p 500. We are down about 0. 2 on the dow. From new york, this is bloomberg. Jonathan republicans set up a fight with republicans. Senators push through their bill through the finance committee. Financial markets very the fear. Global markets recover. Junk bonds bounce back. Medias blurry picture. Rupert murdoch has his pick of suitors. Good morning, good morning. This is bloomberg daybreak, im Jonathan Ferro alongside david westin and alix steel. Futures just a little bit softer as we approach the open. We are down not even 0. 1 . Some dollar weakness and euro strength. The theme of the last week, the curve flattening, begins again. That gives you a crossasset field. Here is alix steel. Fox. Lets take a look at potentially, we have comcast and viacom interested in fox media parts of its business. When you had the news that disney had ended talks, that ignited speculation in the industry, but the question remains, is fox for sale . It seems like investors wish it to be so with the stock on the rise in the premarket. Tesla also up in premarket after unveiling the electric truck and also had a surprise sports car waiting for you. It would be the fastest production sports car made in he u. S. Roadster you might not get until 2020. They need to start delivering or the credibility problem becomes more of an issue for them. Foot locker up a whopping 27 25 . Be and they do say they are going to get some guidance in the Fourth Quarter. Sales matching the top end of its range. Good news in the foot space. Jonathan thank you very much. On wall street, all is calm the day after the biggest oneday gain in two months, but there is plenty of volatility in d. C. I just think it would be nice just tonight, before we go home, to just acknowledge that this tax cut is for the rich and that whole thing about higher wages, it is a good selling point, but we know companies dont just give away higher wages. Really gets old after a while and to do it right at the end of this was just not right. It takes a lot to get me worked up like this. Jonathan republicans seem to be on a collision course not with democrats, but with fellow republicans. Joining us now is kevin cirilli. Talk about the plan and the house, the plan and the senate, and the collision course we are and what comes out the other side. Kevin the Senate Finance committee advanced their tax bill out of committee and senate floor the the week after thanksgiving most likely. The tensions between orrin hatch and sherrod brown, really that clear in indication of the battle lines we will see Going Forward. But the focus becomes on republicans. Particularly those republicans who might have concerns about repealing the individual mandate of the Affordable Care act or obamacare. Toigrants say that is going kick people off the coverage, the same people republicans said this tax package will help and republicans make the case that this is going to get rid of an unfair tax on low income and middle income americans. All of that said, it puts people like senator Susan Collins and Lisa Murkowski right in the middle as key votes and republicans can only afford to lose two without sinking their hopes for tax reform. David can a republican senator a four to be the one that keeps this from happening . It is fine to negotiate and say i want some changes, but really what kind of courage would it take to say the entire congress is ready to redo the tax code and im going to stop it . Kevin this vote is definitely going to have severe implications on the 2018 midterm elections. As he played the civet forwarded to the First Quarter of next year when lawmakers in the Republican Party are likely going to take up deregulatory financial policy on banking, this really could be a detrimental to that agenda should they not be able to get something done. Jonathan thank you very much. Joining us now around the table, michael block and michael mckee. Michael, i want to begin with you. We seem to be inching toward , theng these tax cuts market seems to be completely divorced from anything that is happening down in d. C. That is the consensus move. What is yours . Michael look, i think we are in a range here. Everyone wants lower taxes, but the bill the house has put forth does not do the job here. There is a concern about raising deficits. It raises the deficit, but by too much. That exchange we saw between senators brown and hatch is really interesting. Shame on you, senator hatch. You forced through a bill in the dark and did not allow things to happen. If you want to make the bill work, do things along the lines of time Corporate Tax cuts to higher wages. We dont believe or trust trickle down. The market seems to beginning as a pass for now. Earnings are good, data is good. Im trading a range until we get out of this jam and that is the game we are playing institutionally, is to say technically, lets trade this against the psychology, keep going with it, see how this evolves. Mike interesting point on the markets. I want to take the bond market side. This chart is the inflationadjusted curve. The green line is where we are now. The yellow line is where we were five months ago, the fiveyear has moved more than the 10year. At thiset is looking package and saying the effects are going to be over the next 23 years and after that, people are just spending patterns and you dont get anything in the out years. The economy just continues along. The market is saying, weve got to move in the short run, but we dont have to look at longer run. Michael, you said you were trading a range. How do you do that when you want to participate in the upside we see even though you dont think it is going to do anything . Michael b. you have to shoot when you see the whites of their eyes on both sides. You could start buying names you think are going to do well. For me, that is growth names, tech, health care. When we get to the top of the range, the three sectors have been playing from the short side, financials, energy, michael was talking about the flat yield curve. That is not good for banks. You can make the argument about the correlation about how the spread works. The kneejerk is going to save financials on the platter yield curve. That is my view about their earnings Going Forward. Call has alsor been to sell volume. Volatility. Selling volatility works. Alix still works . Michael b. if you look at a lot of alternative investment strategies, i used to trade risk arbitrage. There were investment papers that said it was akin to selling a string of additive money s p 500 puts and here is the math. That is true for a lot of these strategies to try to generate data plus in disguise. It works really well until suddenly a dozen and the question is are you ready when it doesnt . Timing that is the holy grail of investing. My game is to try to be as nimble as anyone else, more than anyone else. Dips seemsuying the to be just as resilient. He saw the fragility in credit, the softness that emerged, did it concern you a bit . Im concerned a couple reasons about that. We are told that all is well, we are never seen 40 again. Famous last words. Lets see what happens with opec at the end of the month. Jonathan energy has been terrifically resilient. Michael b. exactly. Everyone thinks the coast is clear. Meanwhile, telecom, these other stories, cracks are appearing. Dont tell me these folks also dont own the energy names. Correlation is all about how much pain are the yen and what are they going to do about it . We cant class and ourselves into thinking everything is fine with highyield. Shortterm, maybe. But i think we are heading toward a disaster, but the clock is ticking. We have to think about that. Energy is going to drive that. , we focus oninally tax overhaul, we tend to talk about what stimulus might be, we dont focus on the money they might have to borrow. The president of the dallas fed is worried about the debt to gdp ratio. How big of a jacada potentially be on Economic Growth drag could it potentially be on Economic Growth . It mike could be a drag on Economic Growth. The old crowding out theory. People are going to have to buy government bonds. We are going to see a massive increase because they are going to pay for Social Security entitlements. There is talk of entitlement reform next. [laughter] mike if they thought taxes were hard, it will look like a cakewalk. Alix why dont they do it ahead of the midterms . Mike that is going to be an issue down the road. The idea of can you stand up and say, note to these people . Who are the people against this right now . Jeff flake not running for reelection. Bob corker not running for reelection. John mccain not running for reelection. That is where the market is saying there is a 60 40 chance instead of already pricing in a 100 chance of this happening. Jonathan great to catch up with you. Michael block is sticking with us. Coming up, the yield curve is the flattest in a decade. It could zero out according to t. Rowe price. We will discuss that call. 19 minutes away from the opening bell. Futures a little bit softer. A report 1 on the s p 500. This is bloomberg. Alix the yield curve the flattest in a decade. It could zero out next year. Said the peak yield should roughly approximate where the final level of fed funds settles out. Joining us now is cameron there is michael block. Cameron, yield curve . Your take. Cameron i think it is pretty much where it should be. To and greenspan took over at the fed, every time they took over and tighten rate, the yield curve flattens and that is what we are seeing now. It is a very mechanistic reaction. Fixed income traders flatten the curve. Alix we are having to conversations when it comes to the curve. One is why . The bank lending situation, as well. , the twofor banking and five curves are more important. There might be a bit of an issue, but i dont think it is necessarily going to arrest the cycle. They are going to do what they think is necessary. Yes, if the market does not move the 10year treasury at all, saying we stay at 2. 35 through the end of next year, that probably does limit the scope for future rate rises, but i would argue very strongly that the level of the 10year yield and the 30year yield beyond that are functions of the feds guidance. If the fed were to guide more aggressively, then rates would be going higher, then i think you would see an adjustment at the back end of the curve and you would not get as much flattening as if the backend state where it was now. David michael bloch, does the yield curve tell us as much as it once did . Particularly with this much Central Bank Intervention . The ecb is still buying and people think it is sitting on the long end as people come into the United States. Should we read at the same way as we did 1015 years ago . Michael b. anyone trying to fromthe economic textbook that is sorely mistaken. It has to do with positioning, it has to do with centralbank manipulation. The yield curve, where it is right now, what i can tell you is the macro traders i talked to, when we were 20 or 30 deeper on that, they were screaming you are nuts for thinking that. They have gone quiet. We were talking about this in the break. Sentiments are probably a little bit more balanced. I would agree with what he said re. It has become a function of psychology and sentiment. , we can make jokes about how to position in fixed income now. Can i say that out loud . [laughter] michael b. youve seen nothing, cameron. We are making these assumptions that the fed is going to raise 23 times. This a read i dont think the fed kids about bank profitability. They care about stability of the market, they care about the economic data. They are market and data dependent. Im not in the camp that says 24 hikes are automatic next year. A lot has to do with public policy. Done,gress cant get this you are going to see Consumer Confidence go down. We may be one and done in december. David will the fed be looking at the steepness in the yield curve and making those decisions . If the backend does not come up, will that deter them from giving the three rate hikes . Michael b. from a psychology standpoint, i think the fed is copacetic with a flat yield curve. We get a pickup in wages and inflation, we are going to get the longer end of the yield curve edging up. My alarm bells go off and say, we should buy more 10years. If it edges up with inflation and wage Getting Better and the short and edges up, i think we are fine. If it shows signs of inverting are going to zero like t. Rowe price said, i do think the alarm bells will go off and the fed will consider slowing down. They are not supposed to think that way, but from a stability standpoint and to preempt market angst, we could see that affect things. Jonathan michael block, thank you. Cameron, good to have you with us. Tesla unveils an electric semitruck with a range of 500 miles and elon musk as one more thing. Teslas ambitions coming up next. This is bloomberg. David tesla back in the news with elon musk making a dramatic announcement and then surprising the audience with plans for a sports car, as well. To take us through the ambitious plans and what they mean for the larger automotive sector, we welcome craig from our detroit bureau. Michael block is still with us. Does can do this these plans fit together . He has a truck, a sports car, he still cant make the model 3, can he . Craig this is kind of a playbook you have seen him follow quite a bit, where he puts out a shiny new object that gets everybody excited. Oftentimes, he has a bit of trouble getting the product out the door, but as he is struggling to do that, he is keeping people fixated on the next thing. You really saw that was the case last night with him showing the semitruck. It is not clear that this is going to be a product that is going to be a significant revenue driver for the company, but sort of a we will see situation. I think everybody obviously was expecting that the semi was going to be shown, but the roadster was a big surprise and is another car they can take reservations for and help sort of pad finances as they have trouble making the model 3 sedan. David i dont want to take anything away from elon musk and his rivals really respect his product and his technology, but at the same time, he is hemorrhaging cash. How much of an announcement like this is more directed at raising the next round of debt or equity he needs to raise to keep his Company Going . Michael b. we do know craig we do know that there are already orders being taken from Companies Like jb hunt, so you have seen already a process begin with they have started to take deposits for that semi. That is helpful to the company youhis period where, as point out, hemorrhaging cash, they burned more than 1 billion each of the last two quarters. That is big a question about how many times can you keep going back to wall street and raising cash when you are having making a car in a mass production situation and that is really why the model three problems are so significant. Jonathan is the creator of this company the right man to lead it still . Craig is the ringleaders . Jonathan is the creator of this company the right man to lead it still . Craig you actually saw that question being raised after the latest set of earnings. And analysts suggested that the board needed to rein in its ceo. There were certainly some heads being scratched after the Rolling Stone report looking at elon musk and sort of portrayed him in a state of being distraught as he was because of model 3 all that he has on his plate personally. He has a lot of side projects in addition to tesla. It certainly seems like there is a rising chorus of people saying maybe tesla could benefit from a tesla could benefit from more automotive expertise on the board. You hear some of those criticisms being lobbed at the company more recently. Alix and all of this has to do with one we wind up seeing peak demand for cars if you get semi automatic vehicles, if you continue to get the evs rolling out. Tony ciba deals with disruptions in different markets and here is what he had disabled the confluence of semi automatics and evs. The model is that at the , essentially people are going to stop buying cars thatse history indicates it is going to start a disruption. People are not going to buy new cars. This is a disruption of individual ownership of cars. As well as gasoline vehicles and diesel vehicles. , not semiautonomous automatic cars, because that would be weird. Michael, what do you think of that take . He thinks we could hit that peak in 2020 and 2021 . What are your thoughts . Wholel b. i look at this what is your car phenomenon . Look at the run gms stock had when they started talking about that. , joked with analysts who said electric and Autonomous Vehicles , and they started upgrading the stock and it ran higher, which is usually when i had for the exits. Anyway. My big question on the whole electric car phenomenon is this, what about the infrastructure to support this . I dont feel it we talk about this enough. We are watching the house and senate wrangle with this deficit bill. It was going to spend the money to support this infrastructure . Where is it coming from . That is still my big question and if someone can answer for me, i would be much more excited. Jonathan i will do my best in the next couple minutes. [laughter] jonathan coming up, the opening bell four minutes away. A little bit of softness on the dow. Futures off by 0. 25 . This is bloomberg. 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. After one week of losses, we are grinding towards a week of gains by point percent. 1 . Today, a pullback. Futures up by 65 points. S p futures down by four points. No real drama here. Nasdaq is close to closing record highs for 2017 after yesterdays close. Lets switch up the board. Flatter by three basis points. All of that equals a little dollar weakness. 93. 73. Back to we have a hard crude price of 50. 58. Market. T you to the alix the dow jones is up. 8 . Now we are flipping into negative territory. 2 the dallas softer down and s p down. 1 . Yesterday, we saw a strong rally and you saw the tech sector you saw the tech sector making a big rally. Muted as wee more take as we going to the weekend. European shares getting hit. They had been down for about two weeks, but not a lot of moment. It has been a rough few days. The good news, we got retail that was not terrible. Abercrombie fitch, shoe gap, and a good beat at old navy. Is discount shopping, you are willing to spend if you will buy at a discount. And the theme seems to be that younger consumers are driving sales for the holidays. We will see if that hands out. Williamssonoma a little bit weaker in their earnings. A divergence between the equity market and the junk bond market. The highyield market last week, we saw a lot of outflows over 3 billion. That highlights would we have seen. The blue line is junk and highyield outstanding. You can see how much we are seeing that drop in the past few days. The flipside is yellow. Purple line the shares outstanding for s p. You have Investment Grade and shares outstanding holding up relatively well. Junk continues to get hammered. Is at know if this telecom, utility, fundamental ningspacific earningsspecific story, or if there is something we need to look at the equity market. Jonathan is that a move to quality that you see . We are seeing a little bit of that, yes. These are there are specific names dragging things down. I think we are seeing the equity market what do we mean by quality . The same place to be is real organic growth. We have seen the nasdaq guru higher we have seen the nasdaq go higher. Everyone is waiting for value to outperform growth. It is not happening because the issue here, where do you go to get something quality . It is about organic growth. Get it fromgoing to certain sectors like financials and energy. Good,rgy, earnings were but that has a lot to do with numbers coming from a low base. I amting to bring waiting to ring the bell and say the trade is over. Given the backups we have seen. We have seen this twice already, spreads wider. Then they tighten then they widen, then the titan and then widen again. Will that be the story . Of third time this year . A lot has to do with the Bigger Picture and what we get out of washington. Jonathan why does what we get out of washington drive what happens here on the screen . Because there is a lot of psychology about these dips. If people are saying theres going to be stability and what the economic picture will look rate,if they pass the tax it will help the Smaller Companies with their tax bills. There will be new confidence that we can only is companies and they can extend credit and investors can extend credit to capital markets. If this does not go through, we are going to have confidence undermined and that next dip could be the deadly one and everything can drag down together. Keep bringing up washington. It is all about confidence. That is what the markets are about. David so what you are saying, sentiment and confidence is coming out of washington and is really important. And then you are saying organic growth. To those connect . They should and they could hear. Lets say a tax version gets past that is less onerous and they make the math work. Congress has a knack of doing that of making numbers up at work. If that happens, think about this businesses will have more confidence in spending money on, buying new equipment, educating workers and workers will fill more confident about the future of their jobs. Im skeptical, but lets see what happens. Because of this underlying confidence, which helps growth and consumers spend more. Everything is tied together. Cards likehouse of the show on netflix. Jonathan let me give you a question from a viewer about the composition of the plan. For the nondeductible it he of interest in tax bills for highyield companies the weighing on highyield . The weighing on junk right now . It is very possible. There are very smart investors we have seen that have run the bell and said enough is enough. They are betting against these markets. It is hard to bet against these markets because as the chart shows, it keeps going on and on. One thing that is not getting enough press on the individual site is the Bank Earnings from q3. We saw consumer loans default and tick higher. I dont think that is getting enough credit here. At the individual level, there are cracks here. We can talk about gdp growth and where Interest Rates are, but there are a lot of things falling through the cracks. That is small companies, individuals, and i dont think the markets are giving them enough credit here. Alix ok, so in a word, what are you short . Financials, industrials come and energy. There is financials, industrials, and energy. I size those bets based on where we are in the market and on sentiment. But on financials, i dont think the curve will steepen a lot. I think that is bad for interest margins. And these big banks are getting a pass. It is not easy for the smart guys downtown to do that. Alix that was i 75,000 words, by the way. [laughter] that was low for me. Alix i want to get to retail because when you say short, people will say retail, but they did have great earnings trickling out. What have we learned over the last week and retail . We learned the rita apocalypse is not quite shaken up i think we learned that the retail apocalypse is not quite shaken up. Walmart was the best example yesterday. They had their best cop since the reception. We saw gas turn a corner yesterday with its first positive comp. Heading intontum the Holiday Season for retail. Alix what is going to be the theme now . Libby about discounting, online, or retail malls . I think online is a really important theme, especially this Holiday Season. One thing is interesting is there has been this talk of black friday is dead for several years. And to a certain extent, it is true. It is not the center of gravity of the season as it once was. But when you look at the expectations for growth, the growth will be black friday and cyber monday. They are ready draw the most dollars. And really suggest that retailers are going to have to be on their game, having a really good User Experience on a mobile apps and websites, neville be the key to driving those incremental sales this season. Alix and talking about foot locker . [laughter] alix they had a monster run after earnings. Take a look. David my christmas list is getting filled out here. [laughter] my mom has not been here and quite a few quarters. Alix the stock is up there. [laughter] jonathan help us out. You like retail . I like retail. One of the reasons is like sarah said, the apocalypse is not upon us and there are brands that have great name recognition. I have retailers who joke that say, is Abercrombie Fitch still listed . It was left for dead. Expectations were low. I can point to foot locker. With that skechers you are joking about a nike and under armour are getting a little bit here. Everything has its time and price. A lot of these assets have their own brand recognition, meaning people go straight to them. And b, they are cashflow generating an attached to private equity. Jonathan michael bloch, thank you for joining us. Sarah houser, great to catch up with you, too. Here in new york city, we are grinding towards a potentially wee of losses. S p 500 softer by 10, and the dow down by one third of 1 . From new york, this is bloomberg. Daybreak inloomberg the hewlettpackard enterprise bring them. Up, talking tax reform. There was big news out of the media world with two new potential buyers comcast and verizon, both with some interest and 21st centurys assets after earlier talks that disney had had some discussion with fox about a partial purchase as well. Joining us on the phone is alan gold, a media analyst who has a buy rating and a 36 price target for fox. Also with this is ed hammond. Dealss a sense from a pointing view, when we hear about these things, we have no reason to believe that Rupert Murdoch wants to sell, but he hasnt said no. The crucial thing that you said is assets. These are particular assets within the fox empire. A sense that murdoch would exit at this point. There are a lot of interested parties. You mentioned comcast and verizon, and also disney. This is very real. What is unclear is Rupert Murdoch going to allow these potential buyers to cherry pick what they want, or will you see a package of assets put together and then sold . David is this a different move for murdoch . He has sold assets in the past, but he has had real financial problems, but not now. Empire builder, but all builders get dismantled, and this could be the moment for fox. We are in a time for huge, structural changes. You are seeing this change. Murdoch is a smart guy. He may be thinking this is the time to change direction at fox and narrow it down to something that is not reflective of what it is today. Is it rupert or james . Who is driving this at the moment . That is a really good question. Obviously Rupert Murdoch will be the guy and will determine the direction for the company, but james is really influential. This is something that james is less excited by rupert. Allen, talk about the media environment. Seems like every 10 to 15 years, all the Media Companies trade hands. Are there structural things causing the real interest of the moment . David, i think it is structural things causing this. Rupert did try to buy time warner three years ago. Look how much the business has changed over the last three years. X is netflix is global with 100 million subs. Media companies are tightening. At t, time warner, pending rate with tori approval pending regulatory approval. Rupert murdoch is realizing he is too small. You cannot own two broadcast networks. Rupert still has his passion for news, so splitting it up gives him the ability to run fox news. You have just huge changes in the media industry. Rupert sees the deal like others see it. Allen, but talk about the regulatory issue. Who will have an easier time by parts of fox . Verizon, comcast, or disney . I would think disney. The Justice Department is saying they are not happy with the fact that they allowed comcast, nbc to merge with just behavioral remedies. Adding fox to me seems challenging. Verizon fox looks a lot like at ttime warner with the same vertical merger issues. Where i recognize disney and fox are both traditional media twoanies putting together studios, youre separating the sports part. It is the smallest of the two combinations. Disneyfox could get it done. If you are one of these acquirers for the fox process, why would you come on top of what looks like a deal between at t and time warner . Time warner would see an obvious way. Do you think one of the acquirers would bust up that deal . Isone of the key assets approval. I think all of the Companies Want have a direct to consumer service. Fox owns 30 . Whoever gets that 30 that fox has controls hulu assets. Afteral would close november of next year. Direct toey want a consumer service, and fox offers that. We will see if they are successful taking over the rest of it with sky now over in europe and india. David this is not the Rupert Murdoch whom i have known and have competed against. The Rupert Murdoch of old faced with issues and wanted to take over the world. Go back to jonathans question, is this Rupert Murdoch or james . Is this a different Rupert Murdoch at the end of his career . David, i am not sure. Rupert murdoch is 86 years old now, and maybe he looks at the world differently. Maybe he recognizes he cannot get bigger. He just doesnt have that edge these big against internet companies, and if you cannot get bigger by buying, maybe you get bigger by participating as a comcast or a disney. Jonathan what happens with sky at the end of this . The acquirer has a better chance to get them a deal. David rupert has had a lot of trouble, twice with sky, and sky is a very variable valuable asset. Alix good stuff, guys. If you have a bloomberg terminal, check out tv. You can watch online, interact with us to record. Click on tv on your terminal. This is bloomberg. David after the house of representatives passed its version of the tax bill, the attention is on the senate. We are joined by steve dennis, reporter of what to watch him capitol hill. Stephen, i want to talk about thanksgiving week. The senate is talking about a vote after thanksgiving, and that it mean senators could be going home and hearing from their constituents. How might that change the dynamic . You will have a lot of senators under pressure over the piece that is only in the senate bill right now that individual mandate repeal bringing the Affordable Care act, obamacare fight into this tax bill, is something ramping up opposition and a lot of activism from democratic groups in the health care industry. That is something you will see a lot of focus on, and in particularly, the three senators who voted against the skinny repeal bill earlier john mccain, Susan Collins, and Lisa Murkowski. If they all vote no again, they will have to rewrite this bill on the senate floor. David as you suggest, they have a real problem. If theyll dont dont repeal it, they will have a big a in the budget. Is there a plan b to fill the holy . They have to make the bill look more like a house bill in some respects. The house bill does not have the individual mandate repeal and they may have to make a lot of the tax cuts expire, particularly the Corporate Tax cuts. Individual mandate repeal is the engine that allows those business tax cuts, including the rate cut, to be made permanent. Would have to expire potentially in 2025 or 2026. That potentially hurts the growth score for these bills because if you only have a few years to have a tax cut, maybe that doesnt really change how businesses operate an organizer businesses, and doesnt help growth as much. That is a big concern. Those threeure on republican senators is enormous. I have spoken to all three of them and they are all undecided on that question. I talked to Lisa Murkowski at length, and she is very conflicted. She does not like the individual mandate, but they dont have a replacement plan. The way she put it to me is if she is giving people a medial tax cut, it is a fight. David i understand on the senate side, they will entertain a minutes from the floor unlike on the house side. Of this can negotiated in full sight of everyone, but behind closed doors or behind closed doors . There will be unlimited amendments on the senate floor. Any democrat or republican can offer unlimited amendments and could potentially vote on hundreds on the senate floor. But the real negotiations will still be behind the scenes. At the very end, Mitch Mcconnell would come in with his package and if he has 50 votes and the Vice President s vote, they send this packet over to the house. David and then the fun begins. Yeah. [laughter] david thank you so much. Jonathan something that mike mckee said that stuck with me the other day. Findey get home and they out it is not as important to their constituents. Alix and what do they do . David i dont care about the tax cuts as much as my health care. Thethan 26 minutes into session and the United States. It is 10 00 a. M. In new york and 11 00 p. M. In hong kong. Mark im mark barton. Welcome to bloomberg markets. Julie here are the top stories we are covering. Congressional republicans getting ready to sell the tactical overhaul after passes the house and a key senate committee. We will look at the dax roadblocks we will look at the next roadblocks. Oil is gaining as the saudi minister says opec should extend cuts. We will are some of that interview. In the battle for the future of media. Is Rupert Murdoch going to sell fox assets and who will be the most suitable suitor . It is 30 minutes into the trading day in the u. S. And we have a positive a after the seesaw that was the past several sessions with a big decline in a big gain. And then today, a little bit of a decline, but more muted