Transcripts For BLOOMBERG Whatd You Miss 20171219

A route. In other news, Orlando Hernandez is calling on the countrys leaders to help ring piece to the divided nation following his election. Several demonstrators have reportedly been killed in clashes with police. South African Media reports that olympian is repealing his prison sentence for the february 2013 murder of his girlfriend. Last month, the court more than doubled calling the initial sixyear term shockingly lenient. Now the earliest it doubleamputee runner will be is 2023. For parole global news 24 hours a day powered by more than 27 hard twice of hundred journalists and analysts in more than 120 countries. This is bloomberg. Julia live, i am julia chat we are 30 minutes from the close of trading in the u. S. Stocks are lower. The european tax overhaul. Joe the question is what did you miss . Texture pope republicans a tax overhaul that would be temporary benefit for individuals and would be good for companies. Strategy,t in jeffries breaks in more revenue than ever before. Why fixed income trading declined. Julia House Republican successfully passed a sweeping tax overhaul today. Paul ryan the as are too twice seven m as or 203. The report is adopted it is adoptive. It is on the table. The gavel goes flying, we did not show you that there. Mitch mcconnell says lawmakers will pass this later this evening. President trump could sign it in as soon as wednesday. Political reporter on capitol hill. Successful here, we heard from paul ryan, kevin brady, all very much enthused about the prospects of the tax plan. It is a done deal as far as they are concerned . It is very much a done deal, i would say. Only one member is expected to be absent, senator john mccain receiving treatment as he battles brain cancer. All other republicans appear to be on board. They seem to comfortably have the votes we are expecting to happen. I am told once they burn out some debate time. Just 12al in the house, republicans voted no. York,the 12 were from new new jersey, or california. The three States Affected by gassing of the Tax Deduction and the centerpiece of the bill. Joe we know it will pass the senate and it will be a big rose garden ceremony. This. Will want to use he finally got Something Big and accomplish in passed and signed, a tool for momentum. Where does the white house go next . They want to pass of the pieces of their agenda. It remains to be seen if taxes are oneoff or if the formula can be rapid replicated on things such as infrastructure or entitlement cuts or welfare and various other things leaders and President Trump want to do. One one bite of the apple passing things without democratic support and a senate per year. It is plausible we return to a place where republicans get the agenda on other items while getting this will through. Thing. A very important not only are the tax cuts in the ofl, but it opens up parts the refuge to oil drilling and smashes the centerpiece of the Affordable Care act. So it is a trio of conservative accomplishments that folks in the Republican Party can be very happy about. Scarlet the president tweeting after news of the passage by the house, congratulations to paul ryan and all the great House Republicans who voted in favor of cutting your tax is. They of course want to get to the rest of the agenda but in the meantime, folks in washington need to make sure they can fund the government past friday. The lights go out at midnight unless they can agree to a piece of legislation to keep it funded. Leaders are eyeing a plan to extend funding basically to get to the holidays. They burn all this time working on taxes. There are still deals that need to be struck and democrats are pushing for parity and increases in defense defense spending. Domestic spending for programs and education and health care and things like that. A lot needs to be worked through and there are democrats who need to be energetic who are energized by the base and are adding that daca is codified as part of any measure. There are options there. I do not want to still the gops thunder here. Tomorrow if we see the bill hit the president s desk, there will be fanfare and they will be slapping themselves on the back. This is a huge feat for them. What about the messaging to people . We keep coming back to the fact that a significant chunk of the American Population police taxes will rise. How important is it to keep reiterating that you may not feel the benefits now but you will is the push toward the midterms . That is where the bill will likely come bite the republicans back. Deeply unpopular in the polls. The American Public has disapproved by a much wider large margin. By large margins, americans believe this is a giveaway to corporations more so than a benefit to the middle class. They believe their taxes are more likely to go up than to go down. It is only chu of a small minority of them. Speaker i was asked moments ago about expiring provisions. There is a 100 billion tax hike baked into the bill and they have every intention of continuing that. Be worse thanwill 1. 5 chilean dollars. Democrats are very very eager to use it as a weapon against republicans in the 2018 election. Individual tax rates will disappear. Is there a lesson politically that republicans ever publicans can takeaway from the effort . Did they do something differently or is it as simple as, it is not that hard to cut peoples taxes . It is mostly the latter. The party of tax cuts. If an all republican majority cannot cut taxes, then what are they good for . This is why people vote republican. This is what they campaign on. It is the heart of what they have been about. The fact that they achieve this is a huge relief to Party Leaders who are terrified of going into an Election Year without any ledges rate of accomplishments. Gearing up to be an interesting 2018. Thank you so much. Coming up, the fcc keeping a close eye. More than 17,000 since they started trading in september of last year. Some alarm bells should have been pretty deafening at that point. This is bloomberg. U. S. Regulators temporarily suspended trading. S comes after the company 17,000 , actually more than that. In under three months, making paper billionaires out of top executives in raising concerns the stock was perhaps being manipulated. Joining us now is andy. At some point, they trained their eye on the company. What is the company . It was created out of a reverse mortgage or merger and a little while ago, you had as ats slagging it potentially risky investment for investors. Stay over that first point. I feel it we should say that and let it sink in. Almost Everything Else seems like superfluous information. Like that is crazy, right . I am not sure about it. Much just checking. 17,000 plus percent. Sayhat point did the fcc that now we have an issue . Findingsgulatory inside the decisions over what they would do with the stock . As my colleague pointed out, the fcc had a couple of things they fly does this behavior. He basically had disclosures that were inadequate. It potentially shady practices going on. Had to halt the stock until early january. Obviously, we all of it this and this is completely insane interdict list. But people in the industry are trying to make things a little more serious and rep double and safe for investors. It pushes to have the etfs of , ifle do not have to go they want exposure, does it look like that will be more likely . That is right. It has been happening for a while. Over 15 potential bitcoin etf popular proposed. Ask for permission to launch an etf here is a big question whether to have a futures product will push the fcc to make the leap and approve the bitcoin related etf. Regulator say the absence of that market is one reason why they did not want to approve the etfs . That is right. They rejected one of the first etfs. They were worried they were also worried about the regulator looking at the underlying bitcoin market. Is one of many steps, especially with reverse mortgage or mergers. Set. T me ask about etf he mentioned the bitcoin etf that there is a mere etf to go along with it, and the short bitcoin etf, which might get just as much interest. Exactly. It is not a question, do people want to short bitcoin, which you can do now through interactive brokers. We do not have a short bitcoin etf just yet. We have not seen those come to market yet. What is next on looking at theto suss out what are keywords people are looking at . Going into the new year, we will closely watch what the future prices do. So we are in the nation stages. He watched Consumer Prices to see what could be next. Looking out for what the fcc might prove in the future, a bitcoin etf. Classes someone looking at a stock like this and saying, hang on a second, lets look at what business actually does is and just ordinary retailers which could be a problem here. One of the quirky aspects is the exchanges for bitcoin itself are not regulated by any central body. For an investor getting involved in owning underlying bitcoin, it is a tricky area. You have to proceed with caution and have a digital wallet and secure it yourself. Those could be some aspects that make a Retail Investor wary. Some people are just jumping in. Julia i just feeling this will end in tears. In other words, buyer beware. For joining us today. Our stock of the hour, there we go, a member of one of the worst performing groups in todaysession, utilities hit by a downgrade in general down graph downdraft overall. We can broaden this out and talk about utilities more broadly. Today. Rperforming there is only one today, it has to do with the companys u. K. Business. Like many utilities, it is attractive because of the dividend case. With 3. 4 for the sector and 1. 9 or so for the s p 500. There is risk for the dividend and there is debate that will affect the stock price. The analyst here is saying debate about the dividend will probably reignite because of high leverage in the u. K. Operations and also there is a midterm regulatory review coming in the u. K. As you know since we have talked about regulation of the point, there is regulation of energy prices. If those prices come down, that will be a problem. If you look at the bloomberg. Are, it gives you an idea this is revenue in the nine states and on the remainder in the u. K. , if you flip it over to net income, it is just a record all the way to the right, the bulk is international. Of its revenue from the u. S. But the profitability appears to be better judging outside of the u. S. In the u. K. Business. Concerning time i guess, if you talk about the economy internally or outside, rising that is really a trick here utilities. If you look at a Utility Group today, the utility etf is having its worst todays so far this year as we have seen rates push up over the past couple of days. Though the companies will likely benefit from the tax cut is what analysts are saying, will that offset for rising rates . They pay thef relatively high dividends. If yields go higher, they become less attractive. Be people consider them to de facto treasuries. Exactly. Treasuries will go up and then the benefit becomes less. They tend to have relatively high debt loads. With rates going up, they have to pay more to service that debt. Buffeted byas been higher rates. If we have another chance to look at the terminal, this is the xo you in white. That is utility etf versus the 10 year yield. You see here a clear inverse relationship. If you pull it out to five years, it is more notable that utilities tend to suffer and vice versa. A Senate Committee has opposed the nomination of the administrations choice to head the bank. Beenor Sherrod Brown has calling on Congress Since earlier today. Worke Export Import Bank means good paying industrial manufacturing jobs, often union jobs with good wages and benefits. For us to continue to turn our back on it is malpractice. Paid sabbatical for making a comeback at bank of america. It has informed employees they will soon be a lot of takeoff and additional six weeks of the year with pay but there is a catch. Employees must have been with the firm for at least 10 years to qualify and can only request time once every five years. Average compensation compensation is now the highest since the financial crisis. They set aside 1. 83 billion aroundorks around to 573,000 one split among the 3500 employees, the most since 2008 but still less than the precrisis average of around 370,000. And that is your business that is your Bloomberg Business flash. Up, time toing bring home the bacon. The chart you cannot miss next. This is bloomberg. Scarlet there have been hardly any equity markets all year long. And not in bitcoin and things with the word cryptocurrencies. So the chart looks at the fiveday price change of wholesale costs for pork bellies, used to make they can. Take a look at the far end. Record see that was a and then there the worst performance all it back to july of 2016. We are in the middle of the holiday season. His the season to eat well and consumers are splurging for pricier cuts to meet and then they will go back to eating bacon. Itthey need to stop calling bitcoin and call it bacon and then it would skyrocket. The senate is set to vote on the tax overhaul. This many times and the stocks were said to outperform versus the s p 500. Smaller stocks benefit from Corporate Tax cuts and deregulation. Ratio, considerably tracking the l. A. , president Donald Trumps approval rating. Ist the president does most talk about the dow and the record highs. Overlay tothat as an show you President Trump Approval Ratings versus the dow. Too reiterated about the dow little more. Joe maybe he needs to find a new message . Or just use the dow more. Of a poor a sign recession, the old curve . The white and blue lines are from banks and they talk about lending conditions. If this were going down, it would be tightening. They are not. More and more banks say that loosening lending standards to small and large firms. You talk a lot about the Financial Condition flattening in the two tens red. It does not show any signs of getting higher. Scarlet the market closes coming up. Take a look. Stocks are down right now. This is bloomberg. Julia whatd you miss . U. S. Stocks closing lower this afternoon after the house passed sweeping tax overhauls and we await the senate vote later this evening. I am julia chatterley. Scarlet i am scarlet fu. Joe and i am joe weisenthal. If you are tuning in live on twitter, we want to welcome you to our closing bell coverage. Scarlet we begin with our market minutes. Whether you love it or hate it, a historic day for republicans on capitol hill. The first step toward passing tax reform has gone through. The house passed their final version of the tax bill. This is what happened in the stock market. Joe it is tempting to say it is it would be funny if we got a selloff, im using. Julia it is christmas time. Scarlet things are slower than usual. Lets look at individual names moving. Restaurants up almost 7 . Forroni grill filed bankruptcy, ruby tuesday closed locations, forced into the arms of high that equity market. All of her garden all of garden doingve well. 2 ,ival cruz lined up despite the turbulent hurricane season. A bit of a relief for investors. We wanted to add apple. It is not too often you get a downgrade for apple. Downgrading the stock after that iphone x sale. Csx, this stock has been in the news because of the sudden death of hunter harrison. Perhaps not surprising considering his other health conditions. But investors were not prepared for it yesterday when it tumbled 7. 6 . You can see it is up a little today. Joe lets look at the Government Bond market. We saw a meaningful selloff in the rates world. 2. 45 , yield up to increasing the most in almost 12 weeks. This is the story of the day. It is not just adequate sees just equities closed. Not many places to hide in todays market. U. S. Rates moving higher across the board, some steepening,too. Same in europe. Bonds in ireland, france and germany, higher. Talking about looking for the end of qe and wage increases. The mood of the day was not that there were massive selloffs, but on everything, including longterm Government Bonds. Julia it had a holiday, seasonal feel to it. The euro advancing. But it was choppy, lacking in liquidity. Saying, realle are oney, the macro accounts, the sidelines here, a seasonal approach. Sterling relatively unchanged. We have the british Cabinet Meeting to pound out, the brexit meeting. Special treatment for u. K. Banks after the Company Leaves the european bloc. Perhaps the u. K. Government could find a loophole. Founded it by now, someone needs a smacking. [laughter] completing our 100 retracement of the rally off the lows in october. Cashing in the best today rally since 2015. Taking the top job at the African National congress, helping to calm the rand, like no one has since nelson mandela. 048. Ick dive into g btv 8 we looking at the currency trimming more than 1 3 of its implied volatility in the past few days. In 1999, a discovery before the antiapartheid leader retired from public life. There were high hopes in south africa, hope they are not disappointed. Joe finally on commodities, lets look at oil and gold and sugar. Oil up a little bit, gold down a little bit. With the exception of sugar, up 6 . Iner, gainer got its index waited up up. Hter weighted scarlet earnings crossing the wire, macron fiscal numbers crossing the bloomberg. Versuseat 6. 8 billion the consensus estimate. Missing the lowest estimate among the numbers we compiled. Gross margin was higher than 55. 2 . Ated, 55. 4 versus quarter is for next also higher than the consensus estimate. To seven billion. For more on todays market action, the gop passes sweeping tax overhaul. Burns mckinney. Great to see you. When we talk about the tax bill or what will soon be the tax bill, everyone says it is priced in. You point out what started out as a Corporate Tax cut has become about individuals. Has that part been priced into the market yet . We see from of all, todays equity markets that by and large, if you look at the taxets of stocks, high companies, domestically oriented companies, they had bottomed in the summer. In the past month they got back to the euphoriatype levels since the election. The equity markets might have had it priced in. But i am not sure the economy does yet. The big story of the day is the bond markets, clearly did not have it priced. I think that equity markets are historically known for being more positive and bullish and euphoric. It is one of the key factors. You hit the nail on the head. This ended up being more reflationary than originally forecast. Did become more of a cut for consumers. Joe it is surprising any market i knew it would pass today. I am surprised bond traders did not. And you look at the bill talk about reflationary impact to be honest, most of the people we talked to said maybe it would be a oneyear sugar high, at best. What do you see in the bill specifically, this could add juice, reflationary power . Burns simply put, when you take an economy operating at near full employment, even without this bill, we have been on track to see and unemployment number going from a 17 year low down to something with a three handle. If you enact fiscal stimulus, that will lead to wage pressures. Thats far, a lot of Secular Forces have kept the wage growth in check. Globalization, price discovery mechanisms, automation. At the same time, we do not believe the phillips curve is dead, it has just been reined in and flattened by these factors. If you look at leading indicators in addition to the unemployment rate, a survey tends to have a twoyear lead on wage growth. What that suggests is that wage growth before this legislation passed was somewhat baked in. The average Hourly Earnings is below what the fed worried about. But it has been trending upward. We have factors already trending upward. And we get the sugar high that you speak to. That would suggest despite the cpi was tame last week, yellen says she is not concerned about inflationary forces. But we feel if there is any risk for 2018, it is you could have slight concern of things overheating and having an inflation scare. Julia we said the equity market has priced tax reform and the bond market has not. The 10 year by and large has been anchored this year. Where does the tenure go in order to price tax reform what is the 10 year go in order to price tax reform . Year has trends outside of anchors. The key place to look is the bond yields in europe. The fed has been pushing on a string, the longer end of the day yield curve has had a lid from the european yields. By mid next year there is a chance those go up. Longtermto see the 10 year bond yields from 2. 5 to 3 , with high valuations that could lead to concerns. Julia complete change, bitcoin . Thoughts on what that represents for the Broader Market . I dont think there are implications for the Broader Market. I have not personally invested in it. We are of value shop, everything we buy must have intrinsic value. Scarlet it doesnt qualify . Burns it doesnt generate cash or income. If i look at it as a currency, i think it fails to be a store of value or medium of exchange, because of the high degrees of volatility. I understand there is a fixed number and libertarian suggest maybe it is a defense against inflation scare, which no one has been talking about. Aside from a minute ago. I could sayt today, it is a bubble. When i see in asset that has gone up the 1700 in a year and is not producing cash if i go to the zoo and see a big cat with stripes, it might not be a tiger. Joe incredible speculative mania in companies that at crypto to their name does that tell you something about where we are in the cycle, in terms of peoples willingness to gamble and take risks, the likes of which we have not seen much throughout this bull market . Julia and the Broader Market . Burns there has been some frost in these areas. In these areas. It has to remind you of the dot. Com. Beyou go by the dictum, fearful when others are greedy, it is a sign of that. May be assigned to be more cautious across the board. Julia there is a saying, greedy pigs make great bacon. Burns mckinney from allianz global investors, thank you. How much voters are invested in the stock market . We go to washington for the 401k story. This is bloomberg. I am Mark Crumpton with first word news. The house of representatives passed the gops 1. 5 trillion tax overhaul bill. It was 227203. The senate vote later denied on a measure of the biggest tax change in three decades. It would permanently slash the top rates of businesses from 35 to 21 . It doubles the standard deduction used by 2 3 of american households. The head of the Environmental Protection agency used public money to have his office swept for hidden listening devices and bought sophisticated biometric locks for additional security. The items are among a stream of increased counter surveillance actions taken by epa administrator scott pruitt, who requires aroundtheclock protection from an Armed Security team. The Inspector General is investigating Scott Pruitts 20 5,000 purchase of a custommade soundproof privacy booth for his office to deter eavesdropping on his phone calls. An official tells the Associated Press investigators are investigating whether an amtrak engineer was distracted when a speeding train derailed yesterday near seattle, washington, killing three people and sending several railcars flying off an overpass. Officials say in addition to the engineer, there was another employee training in the trains cab. Looking into whether the engineer lost situational awareness. The Trump Administration says they know who is responsible for last springs Ransomware Attack of it affected millions of computers. The u. S. Is publicly attributing the massive wannacry to north korea. We do not make this allegation like lightly. We do so with evidence and partners. The united kingdom, australia, canada, new zealand and japan have seen our analysis and join us in denouncing north korea for wannacry. The United States and south korea have accused north korea of launching a series of cyberattacks. The north has dismissed of those allegations. 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. Scarlet more breaking news, fedex reporting results have boosted its fullyear forecast in secondquarter adjusted eps, 3. 18. Analysts were looking for 2. 88. The revenue exceeded the average analyst estimate. Peak season. Fred smith the ceo says we are on track for another record Holiday Shipping season. Julia whatd you miss . Newest campaign slogan, how was your 401 k doing . He had a fundraiser, rally and white house meeting. They think his reelection chances are rising, with stocks rising and retirement plans. The only problem, most voters, especially those in his base, do not have one. Alex, i am hoping you can explain the strategy. I get pointing to something that represents positive sentiment about the United States. But when some people directly own stocks in the United States, is this a good message . The president uses a stock market as a proxy for his approval rating. It is a better measurement from gallupspective, than polls, which show he is only approved by 35 of the voters. He frequently outperforms the stock market and discovered that at a fundraiser a few weeks ago. He told donors at the fundraiser a Police Officer at the event had mentioned to him, well, mr. President , my 401 k is doing great. He thought it would be a good line to trot out. He did not trot out the Police Officer, by the way. Scarlet it is ironic, he was at that Italian Restaurant in new york, not the place his base with dina. Dine at. Perhaps he is under the impression more people have a for a one note a 401 k than they do. They think it will put americans in a position of getting a 401 k . If they eventually get better jobs, maybe those who do not have one now will get one. And his message will be true for them, as well. Only 45 of americans even have a 401 k . Only1 3 of americans put money 1 3 ofr 401 k only americans put money in their 401 k . Joe in the media there is a reputation of the trump voter as a beleaguered coal miner in west virginia. He did not do badly among traditional republicans, voters welltodo his voting profile was not that different from mitt romneys voters. Alex yes, there are certainly trump voters with 401 k s, and those who voted for Hillary Clinton with 401 k s. It is not that his message is notg to nobody, it is relevant to as many people as he thinks it is. Scarlet that is a good point,. Lex lane wayne withg up, a conversation the minneapolis fed resident, neel kashkari. His top concern for the economy in the coming year. This is bloomberg. Scarlet bloomberg caught up with neel kashkari, president of the minneapolis fed. We asked him about the signals he is taking away from the bond market right now. The bond market is saying a couple things to me. One, Inflation Expectations have drifted lower. Because welarge part have been sending hawkish signals by raising Interest Rates in the lowinflation environment. Second, the markets are pricing in a lower interest rate. Good balances savings and investment in the economy, said by broader forces, has been settling down over the past two decades. Markets are pricing in a lower it cap swear bond yields are, and can explain appreciation in the equity market as they are discounting cash flows at a lower rate. Those are the signals i take away from the bond market. I want to go to the long end of the yield curve. We understand why the short end is coming up, given what they are saying. If you went with what the fed is predicting, three increases to one or maybe no, what would happen, in your view . That would take off the downward, disinflationary pressure the committee is putting on the long end of the curve. By raising Interest Rates in the lowinflation environment, we are sending the signal our 2 target is not a target. We are sending a target that it is a ceiling, that we will not allow inflation to creep above 2 . That puts pressure on the long end of the curve. If you look at how we behaved over the past five or six years, we have been treating 2 as a ceiling. I think markets have figure that out and are pricing in. The fed is pushing up funding without rate increases, and sending this hawkish signal about the outlook for inflation. If it was not sending out a hawkish signal, give us directional guidance. On a tenyear treasury that is now at 2. 4 , where would it be . 3 or north of 3 . It is normal to expect flattening when the fed is in a tightening cycle. It tends to move up more than the long and does. End does. I would expect with the tax reform package coming together, some movement in the long end. The fact it is not moving in response to our hikes or the tax package tells me Inflation Expectations must be solidly anchored or drifting lower. That is concerning to me. If we continue this path of pushing down the front end, we will see us deeper flattening. Based on the Economic Situation we have now, how many rate hikes do you think we should have next year . I do not like the forecast. We have all the president s giving their individual forecast, i have said we should allow core inflation to move back toward our 2 target, and at that point, evaluate whether we should continue to raise rates. In march,st dissented i did not predict falling inflation. I simply said i do not see much evidence inflation is climbing. Since then, it has been falling and wage growth has accelerated. I would like more evidence we are moving toward our target before we have further tax increases rate increases. What are they saying they will do with the extra cash . Will they invested, or give it back to shareholders . Havethink very few ceos i talked to say the tax package is going to lead to dramatic change in their behavior. I think they are happy to have lower taxes. If you look at the behavior of firms over the last several years, it is more about buybacks and dividends than increasing investment. Scarlet that was neel kashkari, president of the minneapolis head. This is bloomberg. I am Mark Crumpton with first word news. Republicans today passed a sweeping tax overhaul that sweeping cuts for corporations and temporary cuts for individuals. A step away from his first major legislative victory. Only 12 republicans, mostly from high tax states, where some taxpayers stand to see higher bills, voted against the measure. The House Republicans began this journey with two goals in mind. Deserve a americans tax bill for growth of their jobs and paychecks and americas economy. We believe america can leapfrog back. The best place on the planet for the next new job the next new business. Today we achieved those goals. Bill now heads to the senate, which is expected to vote tonight. Byeful dealmaking republicans over the last month is expected to ensure its passage. The u. K. Wants a significantly better trade deal with the e. U. The bloc. Approvedparliament has a state budget which has further austerity measures, with their Third International bailout next summer. The country will smoothly leave a year crisis. Unemployment hit highs previously unseen during peacetime. The king of jordan met with pope francis at the vatican. They spoke with the help of an interpreter and talked in private for approximately 20 minutes. The king presented the pontiff with an image of the holy sepu lchre, and water from the jordan river. Oiy gave the king all of olive branch is to symbolize peace. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Scarlet lets get a recap of todays market action, on the day in which the house passed the tax cut bill. You can see the dow, s p and nasdaq drooped into the close. They closed down. These are modest losses and trading was below average. We are gearing up for the holidays. Julia whatd you miss . And what back to taxes impact the International Side will have on multinational companies. In a recent blog post, our guest said tax reform has additional benefits to these large, global multinationals. Thank you for joining us. Be feltr is expected to more by Smaller Companies because multinationals can shift taxes and go to lower jurisdictions. But you are saying very little additional benefit. And how that compares to what the gop were hoping in terms of benefits. I would put it a little differently. I believe there are substantial benefits to multinationals from a shift to a territorial system, which allows them to move cash which more easily, eliminates the large, deferred tax reliability liability they have accumulated, in exchange for the 15. 5 rate. Quite this as Generating Positive effects for large multinationals. Also for domestic companies. What i have criticized it for, it did not generate as much revenue as i would expect, by raising taxes on those multinationals that have been most effective at shifting profits abroad. Joe one of the theoretical goals of this administration generally is to encourage more domestic manufacturing of actual goods. In general, not just in the u. S. , but there is a lot of criticism of the ease with which companies can recognize revenue, particularly on tangible investments. Does this bill do anything to address either of those things . Less than i would have hoped and less than i would have expected. It is a complex reform. It is hard to say what the effects will be. It does seem to encourage more manufacturing in the u. S. It has the opposite effect, it encourages companies to shift tangible Assets Abroad and export intangibles from the United States. Scarlet let me break in with headlines from sarah set the be hundred Sarah Huckabee sanders. She said the house may have to revote on the house bill. Paulumphant moment ryan will have to do a do over. It could be a technicality. Lastcan you explain the point a little further, in terms of the incentives it creates and white does not have more domestic impact . Risks alwaysthe associated with something based on a territorial principle, is that you do not pay tax on what you do abroad. Which, on its surface, encourages certain highly profitable activities. Be at exploiting intellectual property or manufacturing high Value Components to move abroad. It has always been a risk. The reform changes or deviates from this in a couple ways. It introduces a global tax on intangible income in low tax jurisdictions. Ironically, because of the way the taxes calculated, you can potentially lower your tax burden by shifting tangible assets to an offshore location. Rather than having your intellectual property in ireland, you may want to have the manufacturing facilities in ireland. There are potentially perverse effects on having it on the export on intangibles. You may want to export something you had previously reduced in the u. S. You would shift the final stage of manufacturing abroad. Julia you are talking about shifting a job potentially to another jurisdiction that has a lower tax rate . Brad correct. Scarlet that has effects on gdp, trade deficits, trade surplus. The numbers the president relies on to see if we are winning or losing, might be influenced as well. Brad yes, you can have an argument it could create incentives to return offshore profits to the u. S. , to book those as intangible from the u. S. In terms of actual production in the United States, unfortunately, i think this was a missed opportunity. Julia to what extent do you think companies will follow through . Brad they have no choice. Julia but in terms of what you are saying, in terms of shifting the Manufacturing Base to a lower tax jurisdiction. Lets use ireland. To what extent many look to ireland as a low tax will they look at shifting . There are other complications, not just financials. Brad yes, there are other complications at the margin. However, by eliminating the restrictions that forced you as a company to hold your profits offshore, and not be able to repatriate them taxfree, it could make it easier to locate profits abroad. You do technically lower your tax rate by shifting more of your tangible production to ireland, relative to the 20 in the u. S. Scarlet just a follow through on what we told you earlier, the u. S. House may have to vote again on the house bill 2 comply with senate bills. They must revote on it tomorrow to fix the senate rule. It is expected to pass. See joe we could it speaks to the inherent difficulty of using the trade measure as any measuring stick. As you pointed out, even right now, there are reasons to think it is not capturing everything going on. Deficit isthe trade almost certainly overstated relative to its real size. The extra surplus, profit the u. S. Generates on its investment abroad, relative to the profit Foreign Companies see in the u. S. , is overstated in equal measure. The aggregate measure of the u. S. s current position is probably right. It highlights the difficulty in measuring bilateral balances. Julia with this new tax overhaul, that does not change the way these things are calculated, because companies are able to shift strategies, as well. We may continue to get overstating of the trade deficit, for instance . Brad yes, part of the reform is meant to create some incentive inbring some of the profits bermuda, ireland which are not paying 12 in ireland, by the way. They give a much lower rate. The 12. 5 is not the real rate. Zero. A is the real rate multinationals have looked at is 12. 5 . There are efforts to make it more attractive to book what is now seen as an offshore profit in the u. S. , which could raise exports without changing activity. Julia do you think this is a mistake . Do you think of a realize the perverse impact they were creating . Things have come out in the wash that perhaps they did not realize they were doing, at the time they were writing this. Do think they recognized and made a compromise . Brad no, i think this was a conscious choice. There were constraints. There was a desire not to have a major increase in the amount of tax some companies were using offshore strategies were currently paying. Therefore, you could not do what should have been done, which was to broaden the base and capture more income from multinationals. Scarlet brad setser, senior fellow for geoeconomics at the council on foreign. Relations. On anuse must revote issue that came from bernie sanders. Once again, saying the house must revote on the bill to fix the senate rule issue. Wall street banks in an arms race of jobs. How far will bank of america go to retain its employees . It involves time off. This is bloomberg. Scarlet whatd you miss . The next along vacation, only 10 years in the making. Bank of america offering paid sabbaticals to employees in its Global Banking markets division. This Pilot Program would allow people to take an additional six weeks paid vacation after working at the firm for a decade. Here with the story is laura keller. Is anyone going to take it . People are so worried when they come back they wont have a job. Exactly, there was that color to the story, talking to different traders and Investment Bankers looking at this with a skeptical eye. Forsure if that volunteers them being the first person to take a job cut. In the, the bank memo, they are really behind the program. He is saying, i am happy for you to tell me where you will take your sabbatical. He thinks it is something people will ask the bank to take on. Joe is the reason they said they had to do this is retention, burnout, competition, lifestyle . Why the announcement . It is something all these things are dealing with, having veteran people retained is a real issue. Reasons know specific for why they are doing this. But i think definitely when you look at the numbers in terms of when you are allowed to take it, 10 years plus, these are your veterans you want to keep happy, with six weeks they can take off once they get to that level. Scarlet so it is less about competing with Tech Companies for millennials . About right, it is not that. Morgan stanley instituted a program where vps five years in the job could take longer sabbaticals. People y successful laura because the bank has to approve it, you would think it is for people excelling in their careers that they want to retain. Julia is bank of america leading the field . Laura as far as we know, this is a new thing. Julia i wonder if the other banks follow suit, in terms of allowing employees to take this. You knock four weeks out of your bonus, you get less of a bonus . Paid the base salary is you wont get that piece. Julia so you have to qualify. Scarlet what happened at jefferies . We like to look at jefferies to get a sense of what the big banks what did we learn from Investment Banking and revenue at jefferies . Laura all eyes are on jefferies to understand, especially at year end, bonus time. We got the color, Investment Banking versus trading. Over time, jeffries has been reinventingtself itself. They said a record, 1. 8 billion for fiscal 2017. Trading, 1. 4 billion for the year. For people looking through the trading lines, fixed income not looking good. 37 on the quarter. That is much worse than the 15 in overall trading backed by bigger bank executives. Scarlet shameful for bonuses. Julia speaking of, got to take that sabbatical. Laura keller, thank you. Up next, many in the marijuana business facing a new crop of legal challenges. How lawsuits could be a real buzz kill for the industry. We will explain. This is bloomberg. Scarlet the house of representatives must revote on their tax bill tomorrow. There was a senate rule issue. Bernie sanders pointed it out and the house will have to vote once again. Julia we were talking about this earlier on bloomberg markets. Nitpicking, pouring over the details of this. Will it still hit the president s desk tomorrow . We shall see. Americas pot industry facing a high hurdle. They have seen an uptick in the use of and direct the tearing rules to restrict applications for marijuana businesses. Its cased case was featured in Bloomberg Businessweek. A Company Based in cambridge, massachusetts, we caught up with them for the details. We are a medical Marijuana Dispensary company in massachusetts. They currently have one dispensary open in georgetown, massachusetts. Theyre planning to open a second dispensary in Harvard Square in cambridge. And everybody is ok with it, right . The state of massachusetts voted to legalize Recreational Marijuana last november. By all accounts, people are all for it. This is specifically a medical one. Different municipalities can decide whether or not they want cannabis to be active in their town. Cambridge voted they were ok with it. The city Council Voted in favor of the location. It sounds like a lovely name for a company. Not all the neighbors are feeling so healthy about this. And now healthy farms has a lawsuit. Talk to us about that. One neighbor in particular, the controlling partner of four different buildings in Harvard Square. And 18uing healthy farms other plaintiffs, saying they are taking part in a racketeering operation, because they are all coming together to create a situation in which they can sell marijuana, a federally illegal drug. You can see who for three times the damages incurred. Rico, it ist usually used against organized mobs. That is when we see this law put into use. This is a very different way of implementing it. And expensive. Yes, this is the fourth time been used against canadas business. It was to go against organized crime bosses. Do notwho done necessarily get their hands dirty, but are part of the process of getting crime done. People are using this because they are not only going after they arensary owner, going after the ancillary businesses that make it possible. That means going after the banks, if again, this company can get a bank account, they are going after the banks that let them have an account, and whoever owns the land or mortgage. Theyre going after any consultants on the project. In addition, in order to make the argument that this is they areing, complaining against people as high as the attorney general of massachusetts, saying she is violating the constitution, and that the constitution says federal law trumps state law. They are saying it is illegal under the federal regulation. You can read more on that story in the latest version of Bloomberg Businessweek. Scarlet time for the Bloomberg Business flash. Shares of apple up more than 50 this year. Now they have gotten a rare downgrade, cut to a neutral rating, saying their gains are in the late innings. Iphone x sales and other positives for the company are already baked into the stock price. The new York Islanders hockey club may be out of brooklyn to move closer to its long island fan base. The nhl franchise will build a new arena in belmont park. Construction on the new arena is expected to last 20 months. That is your business flash update. Poor islanders fans have been suffering this whole time. Julia the house must revote on the tax bill tomorrow to fix the senate world issue. Must mccarthy says they vote tomorrow. We were expecting the senate to vote on this tonight. Scarlet that has been delayed. Julia some knit taking forcing a revote. Joe what you need to know for tomorrows trading day. This is bloomberg. Scarlet whatd you miss . U. S. Stocks trooping into the close as the house passed the bill. They have to redo it tomorrow. Tomorrow, General Mills reports earnings before the bell. Joe i will look at Economic Data for existing home sales. Julia e. U. Member states meet to discuss brexit in brussels. Scarlet that is all. Joe have a great evening. This is bloomberg. Alisa im Alisa Parenti in washington. Lets start with the check of your first word news. House of representatives will have to vote again tomorrow on its tax bill after it voted to pass the most sweeping rewrite of american tax law in more than three decades just this afternoon. Blamed Senate Procedural issues that must be resolved. The senate is still expected to vote tonight. House majority whip Steve Scalise says the chair of the House Appropriations committee should keep his job. That is despite voting no against the tax overhaul, the most important vote of the year for republicans. Scalise says rodney feeling kaiser has informed the gop leaders he opposes the bill. A u. S. Official tells the ap investigators are examining whether an amtrak engineer was distracted when the train derailed yesterday, killing three people and sending cars off an overpass. Investigators are looking into whether the engineer lost the situational awareness. The Trump Administration is blaming north korean hackers of last year