Costs and passing them on to their customers. Quite a reluctance among firms to do that in the past. Now a little bit more willingness and ability apparently to do that to it janetnecessarily resolve yellens mystery over low inflation but it is a glimmer of hope for people hoping the inflation rate will rise closer to the feds 2 target. All of this is happening in the context of an ever tightening labor market. This is something we are hearing over and over from just about every fed district. Its getting more difficult for companies to fill open positions, find qualified people and thats restraining their ability to grow. One tidbit from this report that i have to share with you is from the dallas fed. Worker shortages were reported throughout the oil and Gas Supply Chain and in construction. Similar reports came from care,cturing, health airlines. Some banks reported labor was becoming a bigger issue than Regulatory Compliance. You guys have heard a lot of in recentg from banks years about Regulatory Compliance burdens and labor shortages are getting tougher on banks than that and you know its a tight labor market. Also interesting about their shortages in the oil and gas industry as well. Bloombergs chris condon at the fed did a little bit of difficulty getting that count from the fed official. I have been in those lockups. It can be a little tricky. Quite a divergence today. Pretty remarkable. Abigail it is a very interesting day for the equity markets here in the u. S. Take a look at the dow gaining just a little bit after that beige book report came out. The s p 500 about flat. Indexes putting in record highs today and the nasdaq down 1. 3 since the middle of august. Some of this has to do with the report out of Morgan Stanley earlier this week suggesting that ships could be a little bit rich. Toneive to the shift in take a look at what is happening to the bank stocks. At one point on pace for the worst day since 2014. Right now on pace for the worst day since june 9. It seems to have a similar flavor right now. There are some bright spots. Take a look at the retailers. Tok at gains we are going see for the likes of target. Most analyst investors out there are thinking that a Holiday Shopping season 2017 is off to a much better start than expected. One of the best starts in years and we are seeing a little bit of that foamo. Finally, bitcoin. A big story on the day. Of 15 . Oint rising above 10000 and taking out 11,000 at one point. Its really pretty extraordinary of course what we are seeing with bitcoin on the day and certainly on the year. Retracing. With that on whatsor more driving todays equity market we bring in gina martin adams. Divergence in the equity market. Is this just rotation out of big cap tack . Probably the overwhelming story. This is a big rotation out of winners into losers. In addition to that you do have a possibility that this is a regulatory and tax play as well. Yesterday we saw the financial stocks really roar relative to the market. Pretty big divergence yesterday as well and that seems to be related to powell talking in front of congress and the likelihood that he continues to roll back the regulatory pressures. At the same time if there is a sector that may face increasing regulatory pressures its tech next year. That you have tax and what you are seeing today is the lowest taxpayers are dramatically underperforming. The highest taxpayers in the index again. Of this is possibly that we are getting a little more optimistic that we might get something out of congress. The senate did pass some form of legislation. Will that continue, im not so sure. The biggest thing impacting the markets is broad rotation out of the winners. Times somelot of the of these rotations is profit taking. You have a chart looking at some of the top performers this year than becoming some of the underperformers today. I think we have a graphic of that. This just segments the s p 500 into quintiles. The number one is the top performers in the index and the average return so far this year, tremendous return for those stocks and big losses today. On the other end of the spectrum the worst performers in the index were quintile five and their returns were really poor. I think the big story is out ofrs are rotating winners and buying some of the losers in the hopes of getting extra alpha in their portfolio returns through the end of the year. Scarlet this shows the groups in the s p 500 year today with tech. Telecoms in the bottom spot. That today telecom top spot financials as well and tech in the bottom spot. We still have a little to go before the end of the year. Do you think we will see more of this kind of activity. The one problem is there is that element of regulatory. Its not just rotation. Some of this is about regulatory headwinds emerging. Theres always a possibility that we get shocked there and we revert back to some of the trends that have driven gains all year. We had a really lopsided year this year. Sector dispersion this year is greater than any point in the cycle since 2009. This is the time to take advantage and i think investors are recognizing that. My tendency is to say most likely we have this many rotation that occurs for a while with the possibility that you get stunned by policymakers. Scarlet if tax reform does pass and right now things are moving on schedule, what does that mean for profits. You have written about how perhaps not all of the tax cuts have been priced into equity if you look at eps forecasts. Change andseen no analyst expectations for 2018 earnings over the last year. Much exactly where was before President Trump was bat says to me that if we do have tax reform analysts will have to revise up their earnings estimates and we havent seen enough valuation expansion to account for what we think will be a revision higher and earnings estimates. We think well get Something Like a 7 boost just if the tax rate gets reduced to 20. Thats not accounting for permanent taxation of overseas revenues. Change in territorial tax system. There are a lot of potential moving parts that have to get priced into the equity market that are not priced in yet. It gets done. Thats a debate for another day. Thanks son adams, much. Lets check on the first word news with mark crumpton. Senate Majority Leader Mitch Mcconnell says a vote to begin debating the republican tax legislation will be held today. It comes as gop senators marco rubio and michael he plan to introduce an amendment to the proposed bill that will enhance the Child Tax Credit. The senators from florida and utah plant offset the costs with the Corporate Tax rate of 22 instead of the 20 rate favored by President Trump. The senate bill calls for boosting the Child Tax Credit to 2000 for each child under the age of 18. It currently provides 1000 for each child under 17. The president picked to be the Health Secretary says people pushed out or left out by the obama eras health law also need help. Government said the must help people who risked being priced out of the Insurance Market by rising premiums. Legislation to help stabilize premiums is pending in congress. Fired longtime today show host matt lauer over allegations of inappropriate sexual behavior. Nbc received a detailed complaint about lower on monday night. The memo said it may not have in an isolated incident. House Speaker Paul Ryan says Sexual Harassment shouldnt exist anywhere, let alone in the United States congress. His comments came hours before the house plan to approve a measure requiring lawmakers and staff to undergo mandatory annual antiharassment training. The fact that some people end up walking these halls are subjected to a threatening or hostile Work Environment when they came here to serve their to serve their ideals come thats wrong. Thats a disgrace. We cannot and we will not tolerate that kind of behavior. Washe measure the house considering a similar to the one the Senate Approved earlier this month. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Coming up, we had to the l. A. Auto show for conversation with head of mercedesbenz usa and a look at their new cls. This is bloomberg. Scarlet time for the Bloomberg Business flash. Nasdaq announcing plans to launch Bitcoin Futures as early as next year. Contracts would trade on the fx market. The new yorkbased exchange joins the cme in the cryptocurrency derivative. Moreprice has searched than 11 full this year alone. Barclays is warning half of its bankers about pay cuts. Top investment banker says he wants to boost pay for leading performers and cut compensation for the bottom half. He was recruited from jpmorgan to turn around the struggling Trading Group did profits halved wendel for years because of restructuring and poor performance. That is your business flash update. Wherehead over to l. A. The auto show is underway and weve got mercedes unveiling a new addition to its roster. The 2019 cls is the first overhaul of that lines design in years. Exler joiningmar us from the l. A. Auto show. Thank you for joining us. Great to speak with you. Talk about this new cls. Tell us about the bestselling futures you expect on the 2019 cls. Thanks for having me. Its my pleasure to talk about the cls. Its an absolutely gorgeous car. The first representative of our new design language. All new Exterior Design that looks absolutely fantastic. Theas an allnew powertrain sixcylinder with an integrated 48 fault starter generator and it has all the newest technology. We are really excited bring this new car to the u. S. Market in the summer of 2018. Scarlet tell us about your expectations for sales of the car because luxury has been relatively strong in the u. S. But there has been a strong Consumer Preference for suvs. How do you think cls will measure up . You are right. Overall consumers have shown a preference for suvs in a little bit more than half of the luxury market overall. At mercedes we are in the special situation that we are doing very well with our passenger cars as well. We have High Expectations for the cls which has always been an icon. The first one came out 2004 and the car was absolutely fantastic and it generated a whole new segment. A lot of excitement. This one is a true representative of what we call our dream car segment. When it comes out we are all optimistic we are going to do very well with it. Scarlet passengers and car a hightechy want interior. Talk about whats on the dashboard and how that has improved. We have all the latest technology bells and whistles in the car. Active steering assistance, active brake assistance. Almost call them autonomous driving features that altogether make autonomous driving one day. Individually they are already there and working together. The active drive control system for example if you have the drive pilot on it will automatically slow down the car or if other cars come in front. All of the technology is already there. Its absolutely cutting edge. Scarlet moving away from the actual card to your u. S. Operations, a new headquarters is coming from a states ends in the u. S. In atlanta. How does that fit into your overall strategy and im curious why atlanta over new jersey which is the old headquarters. In 2014 three years ago we had to make a choice. We were in a building in new jersey and we had to renovate the building substantially. A sickly to the point where we had to leave the building for the renovations. We couldnt be there while the work was done. We started asking ourselves where do we want to go . And we realized it makes probably most sense to look at the u. S. In total and we took a look at other locations and atlantic came out as the preferred location for us and we moved there in the summer of 15 and we have been very happy. It has been going very well. We are in a temporary facility now. We broke ground in the fall of 16 and around the end of march we will be moving in our own new headquarters and we are really excited about it. It is like moving from tenant to owner. Its really cool. Its a great new building. Specifically designed for our leaks. Needs. Lots of conference rooms. In our business is all about Cooperation Among our different departments and our people. Scarlet i wonder how much anticipation you have for tax reform in the United States. In the move from atlanta to new jersey. Could you repeat the question . Taxlet to what extent reform and expectations of a Corporate Tax cut plays into your plans over the next four or five years. Decisionsly this is a we are taking for the next 50 years and tax decisions by years,ents taking for eight years and change. When we decided for a new thequarters we did not take tax environment into account. We tried to have a longer perspective and not react to the political environment. Scarlet especially since its not a done deal yet. Thank you for joining us from the l. A. Auto show. Ahead, can a changing of the guard at chipotle boost the companys outlook . Shares are up today. From new york, this is bloomberg. Scarlet a leadership change at chipotle. The chef who founded the fast casual mexican chain in 1993 will step down once a new ceo is found. Beentle slog stock has sliding for two years. Lets bring in Nicole Miller regan for piper jaffray. She is joining us over the phone. Thank you for joining us. What qualities do you think the new ceo aaa needs to have . I think they will be looking for someone that is a cultural fit to allow for a cultural reset. Fit numbercultural one. They will be looking for somebody that has executed a turnaround. Theres got to be a track record of turnaround. Global experience. I think theres an opportunity for this brand to grow faster than it has historically across the globe. Scarlet when you talk about being a good cultural fit what characterizes chipotles culture that makes it unique and does that make it more likely that they would ring up an insider or are they going to look outside the company . It does seem like they will look outside of the company. They obviously have a great internal team and they have built a very unique culture. Im sure they are looking there as well. I do think most investors inspect it would be an external higher. Theres pieces of the culture that are unique and then he to keep it and they do things differently than most. Example is clearly the food with integrity and the passion they have around that. Theres other things they need to embrace and do like the rest of the industry. Menu and marketing and operations so when they go and have new items to explore and they go on tv with marketing that all of those things are working in tandem. Scarlet do you have any particular dream picks . But if you were making the decision you would choose to be the new ceo . Heres what we are willing to say. There are a lot of people on the beat. We have had an unprecedented level of m a in the group so far this year. It has been more transactions, bigger transactions and pretty highly valued transactions across the board so that leaves thereof executives out not necessarily retired by choice and not necessarily wanting to stay on the sidelines. Im making this news public today they are going to have a lot of awesome candidates to pick from. Scarlet in your note today you said maybe the person should have some Global Experience as well. Something that has been talked about by analysts as whether chipotle should start franchising internationally. Do you think that would be a good move or is it too fragile in the turnaround stages to make a move like that . I think talking about fragile is a very good point. Whether its companyowned or franchised internationally it should happen and it should happen quickly but it shouldnt happen right now. They have other things they need to prioritize. And have to prioritized operational excellence. Doing the things that every other Restaurant Operators do. I was talking about the across different pieces of the business. I think someone will come in and say theres a lot of opportunities and a lot of things we should and shouldnt do and how do we prioritize them. They should Grow International faster its definitely franchised is an option. Ok. Let Nicole Miller regan, managing director at piper jaffray. 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. Julie lets take a look at bitcoin right now. We were talking earlier today about it breaking through 10,000 very quickly, than 11,000 quickly, and rocketing higher, but now on the day bitcoin is lower, below 10,000. A very volatile day in what has been a spectacular year, in many ways, for bitcoin care we will talk more about it later with Steven Englander. Scarlet we will get more on traditional commodities and began with soft commodities. Its begin with coffee, gaining 1. 8 on the day. A supply concerns supporting prices as the weather turns unfavorable for coffee growing in brazil. Lets switch to metals. Gold is down by almost 1 as the dollar fluctuates. U. S. Third quarter gdp was revised up. Testimony from fed chair also suggested the u. S. Economic expansion is widening. The beige report added to that. Oil a volatile there pop before tumbling to session lows. Inventories fell lower than estimates, and traders are up upbeatefore the are before the opec meeting. Speaking of the cartel, ministers from opec nation spoke with reporters before the official start with their meetings. Here are their thoughts on the current challenges facing the cartel. To contain to continue the dialogue between opec and nonopec it is not a temporary fix. It is something that we game at least some of us, we aim to continue with this dialogue for years to come because i think it discuss, especially the big ones like the russians, the mexicans. We will discuss several scenarios. Among them, the extension for is whole of 2018, but that not the only option we will discuss. We will discuss as well other options. We are waiting for the meeting with the committee. I still have not arrived in vienna. It is too early to talk about disagreement, but studies very in terms of the period needed to reach a normal level of inventories. The question is a technical issue and needs to be studied and discussed with other parties. That station would be for the extension would be for nine months, not six months, ok . I think the majority of members will agree to that and be in conformity with that. To this minute, there is still no agreement. I hope that tomorrow, during the meeting, we will meet reach some sort of agreement that is beneficial for everybody for the market. There are a couple of alternatives there. Either to extended to the end of the year extend it to the end of the year or use six months time. Scarlet no agreement yet. Goldman sachs head of global, brees says no matter what opec decides, oil is wellposition for the long run. He spoke earlier today break americas. You look at the overall runup in price 2. 50 been associated with the opec which means the lines sure of the move is being driven by the underlying demand environment. Ie voiced concern that inventories could draw down faster than anticipated in any deal opec does strike could unravel. Julie lets check first word news with mark crumpton. Mark President Trump is country to tell the that this weeks potential vote on a u. S. Tax overhaul could be the beginning of the next great chapter for the American Worker according to experts from his upcoming speech today in missouri that were released by the white house. The president left a short while ago in route to the midwest. Mr. Trump did not speak to reporters before boarding air force one. Secretary of state Rex Tillerson says the United States may target additional Financial Institutions with sanctions following north koreas latest missile launch. Tillerson was speaking in washington with the visiting crown prince of bahrain. Secretary tillerson says he is not giving up on the diplomatic effort. He says that we keep working at it every day. A program tounched provide Shuttle Service for people residing in the gaza area looking to travel to the u. S. Consulate in jerusalem. The Associated Press reports that operation could help ease one of many restrictions on people trying to leave the blockaded territory. Tripsiv recently barred for these interviews after some applicants seeking work reportedly fled into hiding in israel and the west think. Facebook west bank. A spokesman for the United Nations has confirmed that a former general died in a hospital shortly after drinking a liquid in a courtroom where judges had confirmed his sentence. He died despite efforts to save him. He had argued that he was not a warm criminal and that he had taken pure reason poison. The tribunal did not elaborate on what he drank. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Julie thank you, mark. Ailmanup, christopher reveals where the fund is putting money in todays market. From new york, this is bloomberg. Scarlet this is bloomberg markets. I am scarlet fu. Julie and im julie hyman. Scarlet we have headlines on the tax report effort. It appears the senate gop has agreed to increase the path to 20 , increasing the odds of ron johnson signing on to tax reform. Steve daines of montana had said more passthrough deductions. The senate has agreed to more passthrough deductions. The next step is a full floor vote perhaps as early as next week. Julie we have comments from ron johnson from earlier today on the subject. We Crafton Johnson if a progrowth tax package, we should not have to worry about the trigger. Hopefully the trigger will be designed where it slightly increases everybodys taxes a little bit across the board, does not attack one sector of the economy, but as a fallback, i share your concern. A lasting you want to do is if you had higher harder times or a recession is raise peoples taxes. Julie johnson was talking about the idea of a trigger where if the tax cuts do not raise enough revenue, there would be tax increases triggered. He was talking about that issue, which is also a contentious one as this tax debate continues. Lets take a check on markets because we are seeing a notable session in that there is such a divergence between the s p 500 and the nasdaq, and in particular between tech and financials. The cap tech in particular is lagging today. Apple and facebook. The banks rally. For bank of america, a couple of examples. We talked about this with jim martin adams. Gina there is sector martin adams p she said there is some sector rotation going on. What do the big investors think about current Market Conditions . Erik schatzker sat down with chris ailman, cio of casters, the secondbiggest u. S. Pension fund, and he began by explaining how he is navigating this current environment. Chris ailman it is one of those things where you have to stay in the market because it is going to continue to grow, but the valuations are at levels that make you very worried. Maybe a better analogy would be i am sitting on a mountain peak, and i think there is more mountain, but i am concerned all i am going to do is fall off. At 55 , we are at our target. We are not overweight. We have been taking profits in this market for the last year, which has helped us, but obviously want to let profits run, and you dont know if this is going to stay on for another two years, or if it is going to end in another two weeks. Erik what is your got . Chris that it is going to last for another two years because people are so worried about current valuations. If you look at the gdp major countries around the world, france, germany i will forget the u. K. But even japan will have positive gdp. China is doing well. The u. S. Is ok. So, with low, slow growth, it can stay in this mode for a while. Erik you talk about taking profits. You have been lightening up on access tons equities and fixed income and you have been adding to real estate and fixed mitigation strategies. Ist i would like to know is that all just a part of shifting toward youro longterm objectives, the longterm targets, or does that also reflect some concerns about the current environment . Chris the answer is both. We shifted the portfolio. We are still roughly 8020 and the but we change the dynamics of the diversified 20 . We are also trying to be towardr longterm objectives, the smart, rebalancing. As the equity market continues to run and that side of the portfolio grows larger, were going to take some profits and reallocate to the other asset areas. We are try to take profits in real estate, shifting two things there is not much that is the shift into things, and there is not much that is cheap. When i am rebalancing, i am also raising cash to pay that out. Erik so, is the growing cash position that we seem in the allocation a reflection of that, or is it because you feel you need to have more cash . Again, both. Any to have at least 1 in cash at all times. Erik in october, youre a 3 . Chris that is correct. Were continuing to be cautious. Coming into the fall especially we were very concerned about the activity, the valuations in almost every market. We talked a little bit larger cash position would be a good place. 3 is still incredibly low. 50 ve peers that are at 5 , in cash, and they have been this kind of a market. 15 in cash, and they have been missing this kind of market. That would be too high for us. Erik you see your self moving in that direction . Chris the highest we would get his 5 . Erik more generally, does a market like this require you to be more dynamic with asset allocation, with your hands more formally on the controls . Chris i often say we are a big, giant cruise ship, and we have a long horizon we are shooting for, but, yeah, thats the kind of market where does make me want to go up to the crew, grabbed the wheel a little bit, and hold on. But im not going to spin the ship. Were going to take profits. Were going to batten down the hatches a little bit in case we ever sees seas, but we will ride this out for periods of time. Erik an important part of calstrs strategy is the approach to Risk Mitigation more of it. Where are you turning for solutions, and what are the strategies we are talking about . Chris what we found is your normal diversification away from stocks is fixed income, and with Interest Rates at alltime lows and finally going higher, which is what we need, we wanted to look the other way, a basket of strategies. An asset class that is not a specific thing. Erik hedge funds, right . Chris correct. It is a basket of different strategies. It is not. Normal people would say long bonds are a lousy investment. Drop around the world, what is the one thing that goes up . The 30year u. S. Bond. It is a hedge against the rest of the portfolio for us. We do have what some people call hedge fund strategies. We do not think hedge funds are an asset class. We are very specific about a couple of strategies that are structured similar to hedge funds, but even some of them we will employ passive strategies to replicate what they are trying to do. You are building a portfolio. As a longterm investor, you can invest in strategies that are not daily valued, that go around the world, and seek out returns that are the opposite, or not as correlated to the u. S. Stock market. Erik so, to the degree you are looking for things you are looking for more Risk Mitigation, looking for more real estate, where are you finding it . Who is offering Attractive Solutions . Lot is attractive. We are actually finding it outside of the United States. We have a team looking at real estate in asia, looking at real estate in europe. There is a ton of longterm money floating around the world. E are finding prices the gateway cities, san francisco, l. A. , d. C. , boston, new york, are priced to put our price to perfection. If we are in the u. S. , we are building it up to become core real estate. We think there are a few opportunities outside of the u. S. When it comes to managers, we are diversified. Erik anyone firm in particular . Not any in particular. Ofre talking to black rocks the world, and smaller managers that are just starting up because we think it will be more nimble. Erik you have invested. Will you commit capital to the Infrastructure Fund they are raising . Chris we are looking at it. Firms cannot be excellent at everything. They want to be. In if a structure, the Fund Structure is a higher costs. In infrastructure, the fun structure is a higher cost. We areooking to see if interested in teaming up with people. I should have my tim hortons card with you. A few been up in canada times to wear a longterm investor times. We are a longterm investor in blackstone. They are looking to bring out more what we call core private equity, longerterm funds, lower fee structures, with the idea of a longerterm holding period, because even a private equity fund with a seven to 14year cycle is shortterm. That means we have to redeploy the capital again. 20we can do it for 10 to years, that is more attractive. Erik you would rather find ways to do it on your own. Chris structure returns are low single digits, even with a little bit of leverage on them. , andould rather just buy they are boring assets. I love infrastructure that is there all the time, but nobody boring,it because it is ugly, and sits there, but you pay a fee. The access roads i often talk and joke about how we own the extension cord between new jersey and manhattan. It is buried six feet under the mud, under the river, and that is great, because as long as there is electricity flowing, you are happy, and we are getting a fee. Stable,a longterm, cash flow investment, which is what i want. Scarlet that was chris ailman, chief Investment Officer of calstrs speaking earlier with erik schatzker. Chris ailman also told erik bitcoin is the ultimate tangible investment. They are erasing earlier gains, now below 10,000. It was about 11,000 earlier. We will talk about volatile. More on bitcoins dive coming up. This is bloomberg. Scarlet this is bloomberg markets. I am scarlet fu. Julie i am julie hyman. Well, that did not last long hours after surging 11,000 past 11,000, not just 11,000, but past 10,000 and an 11,000 in one day, it tumbled almost 20 from the high and wiped away almost 2200 from his pricing 12 hours. Abigail doolittle joins us with more. Bitcoin, in the grand scheme of things, is not that important in terms of its importance to the mobile market in the but it is stuff like this that keeps drawing us back in. Market, but it is stuff like this that keeps drawing us back in. Anywhereyou cannot go without hearing about bitcoin. It is an interesting question to ask, especially when you look at this intraday chart, as we were 10,000, up above 15 , and down 16 . Huge volatility. Theair traffic or was at conference, and investors said bitcoin is less volatile than twitter and crude. That was before today. I do not know if that will hold true after today because that is certainly a big swing. The other question to your point about the big hype we have around bitcoin, is this a bubble . If you look at a longterm chart of bitcoin since its inception, i think it is up 12,000,000 . If we have this chart, it is extraordinary. It is up almost 12,000,000 . If you look at the spike, it is also known as a parabolic uptrend. According to physics, it cannot hold a 90 degree angle. These usually and in what some people call tears. The same word came to my mind. This was considered an alternative to fiat currency. This was seen as an alternative to the dollar, the euro, and that sort of thing. Scarlet especially with Central Banks pumping more money into the system, and perhaps charges of debasing the currency as well. Exactly. Perhaps anticorruption, if you will. Julie i love the comparisons to gold, because people are saying this is, kind of, like a safe haven, although a certain demographic be it more than others. You can tell there are certain believes it more than others. You can tell there are certain economists like joe stiglitz who have decried it should be outlawed. Abigail it is one of these things were you can see anything in it depending on what you are looking for. A way ofit is seen as not being subject to government influence or centralbank influence. For others abigail it is the black market. Gold, it ist around interesting. The currencies had a similar spike after the financial crisis. This is a great chart that i absolutely love. Back in 2010, 2011, this was silver rising in a huge way, when from 10 dollars to 50 in a short period of time, then the parabolic trend, this and 55 in five days and it has been trailing along. Bitcoin looks more dangerous from a technical standpoint. To your point, julie, people see what they want to see, and the one thing currencies have is the backing of the government. What is backing bitcoin is it the scarcity from the mining, or is it unclear question with unclear . Julie the cabdrivers in dorset. What has also been fascinating is the affect among Semi Conductor makers. Yesterday they said they would not get as much of a benefit from cryptocurrencies next year, but they are just two of the stocks that have benefited. Abigail it is interesting you are saying that. Nvidia on fire. Amd had been on fire over this cryptocurrency and other aspects as well, but we have seen it telling off a little bit. The stock is hit in a big way. It has not put in a record high. Not takenhas still out its 2000 bubble high. It is seen as an early tell on what could be next. Scarlet and of course nasdaq is the worst performer today in equity markets as well. There. Big lag is thank you, abigail. Teaming up coming up, Steven Englander. His view on bitcoin. He is still a skeptic. We will dig into why. From new york, this is bloomberg. Is this a phone . Or a little internet machine . [ phone rings ] 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. Choose by the gig or unlimited. And ask how to get a 200 prepaid card when you buy any new samsung device with Xfinity Mobile. A new kind of network designed to save you money. Click, call or visit today. Scarlet its 3 00 p. M. In new york, and 00 p. M. In london. I am scarlet fu. Julie and i am julie hyman, in for julie chaudhry. Welcome to julia chatterley. Welcome to bloomberg markets. Are live in bloomberg World Headquarters in new york over the next hour. Here at the top stories were covering from the bloomberg and around the world. Bank stocks taking a dive. We look at what equity markets priced in with the Capital Markets Steven Englander. Hours after surging past 10,000, than 11,000, bitcoin tumbles from its high. Plus the tax plan roadshow. President trump pitches the gop overhaul. We will bring you there live when it begins at we are one hour away from close the close of trading. Bitcoin captured our attention, but lets look at equities. The nasdaq got your attention. Check out this divergence we dont see this every day the dow trading higher, almost. 4 , almost an alltime high. Paceasdaq down 1. 4 , on for the worst day since the middle of august. The s p 500 down about. 10 , earlier putting in an alltime high. It is really technology and chips taking a hit, causing the divergence, while some of the older, older economy stocks doing relatively well. Lets break this down. We look at the imap on the s p 500. First of all, interestingly, we see more of the sectors are trading higher. Eight of the 11 sectors are trading higher. Real estate is flat. Utilities, and then write down there, tack down 2. 7 . Look at the financials. Financials up 1. 7 . Thathan krinsky told me the high today of a selloff, and the rally for the financials is simply a rotation out of growth into value. Lets look at some of the movers. On the one hand, we have to tech stocks selling off, including apple and facebook. Take a look at that. Jpmorgan in bank of america up in a big way, and bank of america, up in a big way, in sympathy with the fact that 10year trade yield is trading higher. Interesting divergence something similar to what we saw back in june where there was a tax selloff out of nowhere and investors move into financials. The question will be whether the were not that continues. Whether or not that continues. Intraday here is the chart the highs, not only at the1,000, but up 15 peak, down to 20 . There are reports there were Service Outages and delays in some of the Largest Online exchanges, but there is always so much mania around bitcoin, weathering wondering whether or not it is a bubble, that can cause investors to be nervous and perhaps kneejerk reactions. It is weighing on some of the chip stocks as we look at nvidia and amd along with western digital. Nvidia and amd, this is related to bitcoin. There could be meaningful decline in demand in 2018. That is giving a riskoff sense. Western digital on pace for its since january of 2016. That is also setting a riskoff tone for chips and technology. Volume is pretty heavy as well. The nasdaq about 29 above the 20day average. Gs the fall of the fan shares of the tech giants dropping the most. We are joined by Steven Englander, Rafiki Capital Management head of research and strategy. Thank you for coming into you note out where you say investors are not as complacent as they seem. Does the tech selloff today support the view . Steven englander actually, surprisingly, yes, and your colleague just pointed out nine out of the 11 sectors in the s p are up. We are looking at some specific events here. In particular, i do think it is beginning to dawn on people that tax reform is for real, and a lot of the firms that are down today have lower effective tax rates and i think they get hit doubling when you have rumors theyve push up the corporate 22 , because to they might be paying that, and the effective rate could go up as well. Some of it is a tax thing. Some of it is a rates thing. Rates have gone up. These are firms that have benefited from the abundance of liquidity, and the signs that liquidity is pulling back, you buy a bank if you overlay the bank index versus the s p against 10years, it is hand in glove. It does not take much to be a banker. Scarlet do you buy into that that the liquidity is coming out of the system . Steven i think it is going to come out a little bit, but i do not think it will be disastrous. I think if we get the tax reform, i think there will be some modest stimulus. Rates will back up a little bit. The other things might be partially an have nothing to do with tax reform or policy. If you look at productivity growth over the last year, it has picked up, roughly back to 1. 5 . If we have a 3 , 3. 5 quarter of gdp and employment growth is, that will keep , the things the system, keep things going, but will also keep what janet yellen refers to as the neutral rate, that rate might be showing early signs of going up as well. Julie i want to go back to the issue of taxes, and i have a chart that looks at the hightax Rate Companies you are talking about. The russell 2000 has been seen as a proxy. The s p, for reference, is in yellow, and this looks back over the last month. You see the leg up here. That said, these groups are already higher on the year. We have seen strong performance. So, how much more would be pricing in, say, a 20 Corporate Tax rate . Guess is that it more than 50 priced in in the equity market, probably not 75 priced in. We have somewhere between in terms of the. Equities response, we are somewhere past halfway, but we are not three quarters of the way. What is puzzling is that the bond market seems to have woken up this morning and said oh, my goodness. It is going to happen. Senators, and everybody in congress, they know that unlike obamacare, it is not like you can say lets trash this, and we will have a better bill that will be bipartisan someday. If you dont do it now, you have the midterms, and good night. This is the last chance and they know it. Politicalt is a imperative they need the tax cut or tax overhaul for midterm elections, but does the economy needs stimulus . Steven i think there are two aspects to it. One, i think the incentives in the tax system, or the tax bill to reallocate capital somewhat better are somewhat good. The incentives not to keep capital abroad, those are good. Do you need keynesian stimulus right now, the answer is no, but you probably will not get much of it from the bill. Most of the benefits will go into savings rather than more spending. Scarlet Steven Englander of Rafiki Capital Management will stick with us. Well talk bitcoin. In the meantime, we get a check of the headlines on first word news with mark crumpton. Mark the Un Security Council has scheduled an emergency meeting this afternoon on north koreas latest Ballistic Missile launch. Pyongyang abruptly ended a 10week pause in weapons testing yesterday by launching with the pentagon said was an intercontinental Ballistic Missile. The Security Council has imposed its toughest ever sanctions on kim jonguns therezie regime, and japan is likely to seek stronger measures. A spokesman for theresa may is criticizing President Trump, saying the president should not have retweeted videos from the far right Group Britain first, showing antimuslim and antieuropean union messages. Reach an agreement on a financial summit before a botht but he cautions sides are looking to find common ground. Dismissed reports the two parties had agreed on a british payment of 59 million. He added the british people had chosen to return to being on their own rather than standing in solidarity. A House Intelligence Committee investigation of russian meddling in last year aheads u. S. President ial last years u. S. President ial election is not likely to resolve anything. Will likely report there is no evidence of collusion. Democrats are likely to say there is plenty to plenty of evidence of collusion, but they were not given enough time to investigate. The chinese premier says the trade turnover between china and russia has grown by 20 recently. His comments came at a meeting in moscow with russian president vladimir putin, who praised what he called the stable and Constant Contact between the two countries. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Julie . Julie thanks, mark. Bitcoin blowout. The cryptocurrency losing 25 , but it is still up 300 this year, 12,000,000 since its inception . From new york, this is bloomberg. Bitcoin is successful only because of its potential for circumvention, lack of oversight. It seems to me, it ought to be lauded. You look at bitcoin, it is not much different than gold. I do not see why there is all this hostility toward it. The number, it is even mind. You look at what has happened in the past and can happen again, it will not create instability that would be meaningful. I dont think so. I dont fear so. It is a speculative asset people are buying when they see the asset going up, but things do not go up forever. I think at the moment you are seeing this incredible volatility, which in the end is the very reason why mainstream operators wont touch it, because that volatility is something they are not set up to cope with. There is no currency in the and boberhaps the sizes one dollar, that has had the level of volatility we see in that coin. We are still with Steven Englander. Bitcoin the asset market equivalent of reality tv stars, which is apropos this day and age. Explain what you mean. Steven what i mean by that it is clear that it gets a lot of attention. There is a market price for it. People seem to be able to say this is a what i will hire a reality person for, but when you ask yourself what is the substance, you find yourself being uncertain exactly what you are you buying when you are buying bitcoin . I am part of a demographic that has been a skeptic. As of this morning, i had been wrong for about the last 10,500, and now i have been wrong for about 8,500. I think when you have an asset replicable,nitely and the marginal cost is pretty much zero of doing it even though you have miners all over the place doing it, you have all kinds of cryptocurrencies. It seems to me that the supply is going to outpace the demand and that is when the bubble is going to burst. Julie i guess the trick is figuring out when or if that is going to happen, because even if it is a bubble, as you and many people have argued, it does not mean that it will pop imminently, or even, potentially, for a long time. Steven for sure. The next potential line you showed a couple of minutes ago, that can keep expanding for a well, but one of the classic symptoms in the economic picture of what is a bubble, what they call a rational bubble is that exponential price increase, where it is purely the expectation of further gains, no underlying substance or underlying value that is driving it. That is very characteristic of bubbles in the past. Scarlet i want to get your reaction to what jeffcurrie said, that he thinks of it like gold, but the difference is gold is physical. You can take a piece of gold or gold jewelry and use it as a currency. That possibility does not exist with bitcoin. I go back to what i said earlier. It somehow bitcoin could pet this, and patton this, and nobody else could have the cryptocurrency, i would say there is a story there. But if you could have lender want, andny coin you when you actually see bitcoin up because people think there will be a fork and a split, i think that tells you it is being driven by the price expectation. I think that is dangerous for a lot of investors. Maybe if you bought at 100, a 2000 drop, he does not bother you, but if you bought it over the last 24 hours or so, you are feeling the pain. Alie price appreciation is pretty powerful attracted, right . That is one of the things that has been fueling the game. You were talking to clients and you say i do not believe in this thing, dont invest in it. Where do they would you steer them to . It is difficult to get this appreciation but other other places outpacing the market . Steven at the risk of being boring, i find it very interesting that people are so pessimistic about the economy, and so overwhelmingly concerned that the asset markets and activities are overextended. If you take a look at some of the characteristics of this economy, for example, how stable growth has been, the fact that productivity has been picking up, labor costs are tracking zero, essentially, you know, we are, sort of, saying this economy should have the risk premium of a 90yearold, where in fact the characteristics are those of a fouryearold. It could be we are pessimistic 40yearold. It could be we are pessimistic this economy expansion will continue for much longer than we think. The a quiz are pricey, but story that says we will have a 20 equity drop tomorrow it is very hard to find what is going to trigger that. Julie Steven Englander, we will ask you to stick around for a little bit longer. It is time for the Bloomberg Business business flash. Compromised over 2 million u. K. Customers. Last week the company said it could it concealed the breach, paying hackers 100,000 to delete collected data. Global and tories are investigating whether ubers announcement violates any laws. More job cuts at espn. The disneyowned Sports Network is eliminating 150 positions, about 2 of its workforce. Yes. Has lost 12 of subscribers since 2010 and it is paying more ofespn has lost 12 subscribers since 2010 and is paying more. Still to come, ill be talking with alon rosin about dish network. Why investors are going along with that satellitetv stock. From new york, this is bloomberg. you aremr. Trump doing a lot of good things. I want to thank where is josh, our next senator where is he . He is going to be a great senator, and he wants to see a major tax cut. I think i can speak for him, right . And your current senator does not want to see a tax cut. That is not good. That is not good. He wants your taxes to go up. Secretary mnuchin, who is doing such a fantastic job, thank you. Mcmahon, Small Business became a big business under lynn to she is helping a lot of people. Thank you very much, linda. I want to thank missouris incredible congressional delegation. They all flew in with me. They would not miss the flight. Vicky hartzler thank you, vicki. Billy long, who i think was my first endorser in the entire country, practically, right . Thank you, billy. Blaine. He was great on television today. I watched him. I got up early and i watched them. A good interview. Very much in favor of tax cuts. Jason smith and dan wagner nn. Nk you jason, thank you a i have two others. I have a lot of faith in faith sally faith. Where is sally, your mayor . , Missouri State treasurer. Thank you, eric. Doing a great job. Just three months ago we came to this state to launch our plan to bring back main street by cutting taxes for American Families and Small Businesses. Today i have come back to this to spend antate afternoon with its amazing citizens you are amazing to help push our plan for historic tax cuts right across the finish line, and were going to do that. Usher in aelp we can thrilling new era of opportunity and growth for this nation that we love so much. Tax cuts have already passed the house of representatives. [applause] big ones. Big ones. The eyes of the world now turn to the United States senate. A successful vote in the senate this week will bring us one giant step closer to delivering an incredible victory for the American People massive tax cuts and reform. I do not even mention the world reform because people do not know exactly what we are talking about. You know, for years they have not been able to get tax cuts many, many years, since reagan, and the problem is they talk about tax reform, not tax cuts. I said do not call it tax reform. Call it tax cuts. Every once in a while we will add the name reform, but it is tax cuts. [applause] mr. Trump right . Idly by and watch ourselves losing in competition to other countries as they jobsnue to take our because their tax codes are more competitive and less burdensome than ours. That is why we must cut our taxes, reduce economic burdens, and restore americas competitive edge. We are going to do that. It is already happening with our markets. People get it. [applause] if we do this, then america will win again like never, ever before. [laughter] [applause] cut taxes a vote to is a vote to put America First again. We want to do that. We want to put America First again. It is time to take care of all workers, to protect our communities, and to rebuild our great country. You know, we have spent we trillion inlmost 7 the middle east over the last 16 years. 7 trillion. Now taking care of it. We are doing numbers like isis has never seen before. We are wiping them out. The terrorists. They are bad. And all of that but, we spent almost 7 trillion. He could have rebuild our country seven times over. Were going to start spending here. Were going to protect our country, whether it is north korea or any other country. Were going to build up our military, make our product here, make our planes and everything here. Were going to build up our military. [applause] but we have to start focusing on our country. That is why i am saying America First. Make America Great again. You have never heard that expression. All those hats. They have never heard that expression before. That was a good expression, and it was a true expression. It is happening. Long ahead of schedule. Today some numbers came out that people have not seen in many years. Its beautiful city of st. Charles is the Perfect Place to deliver the message i want to deliver the Perfect Place where americas past and future come to life on its historic bricklined main street, nice street. Do you agree . [applause] was along these very streets that in 1804 the Great American explores lois and clark gathered their final supplies before setting out on their very historic expedition of discovery. I have to say, i did not really know that until two days ago. Now the world is watching. Look at all the fake news back there. [applause] they are all watching. Today, more than two centuries later, a new generation of american pioneers begins its own adventure, gathering inside the startups and the storefronts of main street across the country, blazing new trails and to totally uncharted territory of business and technology, and once again, leading our nation limitlessure of potential. That is all we have in this country. We have the greatest people. We have the greatest country. I love this country so much. Our country was not treated properly for a long time. We are treating it properly. Love, treating it with and with this. You have got to treated with this. And today, just as it has always been, main street is the heart of our economy, the soul of our community, and the birthplace of american dreams, but over the years, crippling taxes, massive regulation, and totally disastrous trade deals oh, the trade deals. I get a headache thinking about who made these deals one after another. Wto. Nafta. The wonderful deal with south korea. Remember they said they would produce 200,000 jobs . It did, for south korea. We lost 200,000 jobs. It turned some of our businesses main street into empty ghost towns. You have seen what happened. We have a want to elect an opportunity to restore american prosperity and reclaim americas great destiny. We have made tremendous progress, far greater than i would have thought. I will tell you this in a nonbraggadocio sway. 10month never been a president that is accomplished what we have accomplished. That i can say. [applause] today, again, the stock market has reached another record, alltime high. ,he Unemployment Rate nationwide, is the lowest it has been in 17 years, in 13
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