Winners of the year, and they are rallying a twoyearend. Yearend. G into here are some of the companies doing well in todays session. We have seen outperformance for semiconductors this year. You can see the activity we have had for some of the semiconductor makers. Here is the Philadelphia Semiconductor index in white and the rally over the past two years versus the s p 500 has been extraordinary. Even the s p has gained 31 over the twoyear period. The semiconductor gains have been pretty much trouble that. Groups doing well today include marijuana stocks, which are heading up today. The canadian have a traded stocks we watch are doing well. California is set to legalize Recreational Marijuana use on january 1. These playersid are seeking to create multinational franchises in legal marijuana. Many of these companies we use as proxies for various pot policies around the country and around the globe are pretty small, Many Canadian listed, so they tend to be quite volatile here. Are, in most cases, small or even micro caps. Joe lets check in on bloomberg first word news. Former president obama is getting his first interview since leaving the white house. Asked radio, prince harry mr. Obama how he felt at President Trumps inauguration. He said there was a sense of satisfaction for a job well done. Obama concerns about how the country moves , you know, overall, there was a serenity, more than i would have expected. Jessica not achieving President Trump by name, mr. Obama warned about the use of social media by world leaders. The interview was broadcast today but recorded in september. Large swaths of the United States are facing bitter cold and dangerous conditions in the days ahead. Pennsylvania, has seen more than five feet of snowfall since christmas day. Windchill advisories are in effect for parts of the midwest and northeast, including new york. Theorologists when frostbite is possible with as little as 30 minutes of exposure. Some new Jersey Transit riders are facing decades of tax hikes to help subsidize a new 12. 7 million tunnel into manhattan. New york would use state budget funds to cover its share, but the outgoing new jersey governor has proposed a surcharge in the state through at least 2038. L tunnel in a rai 2010 because he did not want to burn and taxpayers with cost overruns. A number of Islamic State fighters in iraq and syria have dwindled to fewer than 1000. The u. S. Led Coalition Says it is onethird of the figure since just three weeks ago. Syria and iraq recently declared victory over Islamic State. In tel aviv, they put the finishing touches on what is hoped to be the tallest lego tower ever built. It is in honor of an eightyearold boy who died of cancer. He loved playing with the lagos, and residents donated bricks to build a tower in his memory. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am jessica summers. Julie thanks. Lets get more insight in the market and what to expect in the year ahead. Joining us is Elizabeth Lily from crocus hill partners. It seems as though investors and strategists are sanguine going expecting perhaps not as big a gains as we saw this year but still optimistic. Do you share that optimism . You, julie. It is great to be here. We do show that optimism. We have seen strong gains in 2017. Forward, a lot of the tax reform is discounted in the market, but the economy, up until now, has truly been led by the consumer. Continue to be optimistic that we are going to start to see a businessled recovery. With the tax reform, particularly the small caps were tax rates in smaller committees will grow from 35 to 20 , you will see businesses start to reinvest into plant property equipment, and as that flows into the economy, you will see some strong gains. The consumer is still strong its a we are optimistic going forward. Joe does that mean we will see a different set of winners in 2018 if the nature of this economic expansion changes posttax reform . Yes, that is a good question and good point. I think you will see a different at of winners, particularly lot of wonders in the small cap part of the market where we focus. 1are very focused on billion in market cap and below companies. You will see more leverage to their bottom line because the tax rate, and you are going to see strong gains in Industrial Companies that serve the industrial part of the economy, as well as health care companies. We are wonderful Investment Opportunities in health care and in the industrial sector. Elizabeth, i want to get to some of your picks, but first, help resolve something i thought was mr. Ariels i thought was mysterious as we lead to the passage of tax cousin even after, we saw small caps rally after the election last year on this optimism that tax cuts would be good for them and economic policies would begin for them, but they did not see the same upside when the tax cuts were actually being passed. In theory, this is a move that should be good for them. Why have we not seen a rally already . Saw was when there was the anticipation of the tax well, whensed trump got elected, there was a huge rally in small caps, and then it flamed out. What we saw in november was a huge rally in the small caps when reality became that the tax bill was going to be passed. And i think what we are going to see is we are continue to see gains into 2018 as investors realize the tremendous impact that the tax reform is going to have on these Companies Bottom line. See stronger to topline growth, especially with u. S. Economies, as the economy continues to gain strength. There is tremendous optimism among ceos and companies about trump, as opposed to the previous administration. He is much more businessfriendly. We saw a rally after his election and in november when the reality of this tax reform really became took hold, and i think we will continue to see a reality into 2018 and the smaller part of the market. Joe tell us about some of the names you really like. Sure, so there are two companies we are very excited about. One is crocs. Chances are in every household that has children under the age of nine or 10 and i know i have three kids in my family. They are older now, but they had three or four pairs of crocs each. Business model is going through a new vision. In Management Team has come at are transforming the company, taking out a lot of costs. This company is to have 10 operating margins but today are around 2 . We think the Management Team will take out costs. Theyre shrinking the store base. They have expanded into retail stores. And bad a poor strategy leases, so they are taking a lot of costs and closing stores. Wer the next several years, think this company is capable of generating 10 operating margins. 12 stock today is around industrial dollars or 13, and it can probably go close to 20 a share. We see a lot of value. Julie i have a followup question on crocs. One of the reasons the stock ,ent down in the first place one of the reasons was because there was concern about it being a fad, that people really yes, kids where it come about adults initially did and then did not seem to. Do you have any concerns that that could hit the stock again as it goes through various cycles of fad and not fad . Julie, it is a great point. In colorado, and we talked about how they are trying to expand their product portfolio. They are making a real effort to move into sandals now. They have proprietary technology know,he crocs itself, you the children wear, but now they are trying to move up the market. So the consumer gets older, and they will start they will continue to wear crocs but in a sandal form instead of the actual croc form. Concerned. I think you have a much more innovative Management Team. The cfo helped turn around to maryland and helped to reiterate the product line the cfo came tom timberland and held reinvigorate their product line. Theink you will see this on innovation side and see a top line that has not grown, and it will start to see some growth in these new products. In julie interesting. Another pic . Patterson dental is the other pic. It is a little bit larger, eight 3 billion Market Cap Company a 3 billion Market Cap Company. They are based in minnesota and have a new Management Team. Mckesson, and he has come in and will look at the Business Model patterson has two interesting businesses that serve different markets but synergies. Of they serve the digital consumable market, so if you are a dentist with the practice and you need to order equipment or consumables, rubber gloves, things like that, they have a bute market share in that, theyre also any Animal Health market, so they serve a lot of veterinarians. Theinteresting thing is veterinarians site has grown, but the dental site has not grown. So they fired the ceo several the new ceo is going to take a fresh look at the Business Model. I think a lot of costs can come out at patterson. More important like, what i think you might see down the line is some kind of Financial Engineering and a separation of the businesses. At 36, andoday is if you look at the two parts, the dental part and the Animal Health part and assign multiples to those pleases of the business, you could easily get a 55 stock. I think over the next 12 to try for months, there might 12 to 24 months, they might separate the businesses and that would serve as a value. I think they have been so frustrated with pattersons management, wall street, and they have not been paying attention to the changes. Julie trading at about 36 right now. Thank you so much, elizabeth lilly, founder and president of crocus partners. Joe coming up, we look at the future of the fed in the year ahead. We will look at Monetary Policy, next. This is bloomberg. Julie this is Bloomberg Markets. Joe lets turn to Monetary Policy and the future of the Federal Reserve and 2018. There is a candidate being considered by the white house for fed weiss chair fed pfister. A Portfolio Manager talked about the possibility at bloomberg earlier today. He is an exceptional leader, expert. Ader, he is if chosen, he would be wellsuited for the job. That is as much as i can say. You can only see great things about rich. Joe a former fed governor is also being considered. Joining us for more inside on the future of the fed is senior u. S. Economist at bloomberg economics. Thank you for joining us. Are a lot of openings that the fed, including vice chair. Is itissing Academic Experience or fed experience . What are the areas you have heard needs to be strengthened . Well, i guess they are missing the economic experience, economists. All the names that were floated and nominated are economists. So they will be a great addition to the fed, especially when well is not an po economist by training. Julie what do we know about these guys, about lindsay and clarida, in terms of where they might lean . I think they will not be uniformly hawkish. That is the first thing i would like to say, that probably lindsey will be the most hawkish one. Predicting ther asset bubble in the 1990s when he he was at the Federal Reserve board. So he will definitely say we need to fight bubbles and such an will be more hawkish. On the other hand, richard dovish will be more because he believes in neutral rates being very low. If you look at neutral rates and the dot plot that the Federal Reserve publishes, you will see that the neutral fed funds rate has been very low recently, declined over the last several years. Now it is very low. Believesichard clarida it is even lower than the fed believes. Adverte does not want to the yield curve, and he does not because he believes it will lead to recession, he will not hike aggressively. How important is consensus in the terms of the ability of the fed to continue the cycle that it set upon . Is that important or is a good to have a nice mix of people who disagree . The discussion is that it is great to have a consensus, but chair yellen and the incoming chair, they appreciate the divergence hof fears and like when people have different views. It helps them define expectations and really come up with the right policy. Butensus is great, different experiences matter. Julie thank you so much. Senior u. S. Economist at bloomberg economics. Time for the Bloomberg Business flash, some of the biggest business stories in the news. A major stay colder in Kindred Healthcare is upholding a takeover deal for the company. Brigade Capital Management owns nearly 6 and says the nine dollars a share offer is too low. Investors make the offer last week. Dollar general is planning to build a new Distribution Center in texas. They will build the facility in the city of longview. Aboutexpected to create 400 new jobs. Construction should begin early next year. Shell has said it expects u. S. Tax reform to have a favorable effect on the company and its operations in america. Is that it will be primarily due to the future reduction in the Corporate Income tax rate from 35 down to 21 . They expect the change to be respected in fourthquarter results for this year. That is your business flash update. Joe, i suspect a lot of companies will be commenting like that. Joe it will be very interesting. Have ahead, apple shares been struggling to rebound following that selloff on concerns about iphone x demand. Munsterhear from gene of loup ventures, next. From new york, this is bloomberg. His is bloomberg. This is Bloomberg Markets. Joe this is Bloomberg Markets. I am joe weisenthal. Julie and i am julie hyman cleared analysts turning skeptical on the iphone x, but are they overestimating the problem . Gene munster, cofounder of loup ventures, joined daybreak americas, and asked if he is buying into skeptical reports. It sounds back, but you need to put it into context. ,very year going into a cycle if you rewind six months, apple will give these reports to their suppliers to build a boatload of phones. And then every year as the cycle starts, typically in december, we will hear about a contraction of orders. Think about a coach that is telling a runner to run a three have minute mile, basically. They are telling suppliers to hit the ground running. In reality, apple only wants them to run a fourminute mile. This is normal operating procedure. Another quick point if you take the numbers at face value for the production in the march quarter, that would imply about 50 of the phones in the next year will be the iphone x. That is the 1000 plus phone. Investors expect the number to be 25 to 30 . Number this is expected, one. Number two, i think it is actually a positive. David take us back to the Fourth Quarter. X outbrought the 8 and the of the same time. Andles were disappointing they said it would be made up with the of content. Did they make it up in the Fourth Quarter with the iphone x . You look at supply, and we talked to some suppliers, and they have been struggling to keep up. We check inventory every day and look at about 140 stores in the u. S. Every day, and they are just reaching full supply. They are at 97 as of yesterday. There wass this, if not a lot of demand for the iphone x, you would have more supply. So i think that the numbers are going to be reported in the next three weeks and will do better than expected in terms of the iphone x. Onie that was gene Munster Bloomberg daybreak americas. Joe the latest data shows more strengthen the u. S. Housing market. We speak to Jonathan Miller from miller samuel. This is bloomberg. Scarlet from bloomberg World Headquarters in midtown manhattan, this is Bloomberg Markets and im julie hyman. Markets are closing in new york. Lets look at some big movers and commodities. Back, and thel pipeline exploded in libya is expected to be repaired soon. Plus, a pipeline getting closer to coming back online. Metals for gold and silver are extending recent winning streak. U. S. Consumer confidence fell in december, getting something of a boost to gold. A nod to copper, even though it traded on the london metals exchange, copper hit its highest in nearly four years. China ordered its top producer to in nearly four years. China ordered its top producer to stop output to fight went to pollution, a rally already boosted by strong demand. Lets get to bloomberg first word news with jessica. Jessica explosion in russia people injured. Says a devicey containing several ounces of explosives went off in an area in st. Pete st. Petersburg. No one has claimed responsibility for the blast. The cia stopped a plot to bomb several locations in saint deiters berg. In the u. S. , the Democratic Senate majority emerges as a primary back of a mysterious helped democrat jet doug jones defeat roy moore in the Democrat Senate race. They spent more than 4 million on hardhitting advertising and disclosebut did not donors during the campaign. The Senate Majority says it is dedicated to building a democratic majority in the u. S. Senate where republicans hold a slim 5149 lead in 2018. Ending its packs it practice of archiving each and every tweet on twitter. Disclose only archived tweets related to major events and subjects of Natural National interest. Tweets makes it difficult for them to collect them all. In syria, the Assad Government is allowing at least 30 critically oh people to leave where hundreds requiring medical treatment have been prevented from reaching hospitals just minutes away. Syria recentlysyria recently tie region, home to nearly 4000 people. The blockade has led to severe shortages of food and medicine as winter set in. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers. This is bloomberg. Joe americas Housing Market closing the year on a strong note. Report today showed panahome cells unexpectedly rose after surging a month earlier. Will it slow down the Housing Market momentum . Miller. Now is jonathan thank you for joining us. There are a lot of moving parts with respect to how the tax bill will impact the Housing Market. About the impact of the mortgage interest reduction. Classic think it is it bigger deal than we realized because it is not indexed for inflation. Will dissipate over time. A lot of the reason why the is becausees are up processing of that math one contracts are signed. Scarlet this legislation reverses or pushes back on the idea that owning your home is a fundamental right or part of the american dream. My overstating that . How much does it put it back . There will be a pricing reset of some kind, not significant but there has to be because when you lose deductions when things are not write offs like they used to be, there is a smaller month that goes into principal and interest. It will take a few years for buyers and sellers to recalibrate what value really is. The dust has settled, the homeowner will end , lessting a similar house money but without the deductions , it will be a wash. Joe from a homeownership affordability standpoint, it does not really change the picture. If you do not get as many tax benefits, you come up about even. Yes. It will take a couple of years of pain and price discovery for that to happen. Joe lets talk about the new york city market in particular. New york city and a few other cities, a lot of anxiety about the eliminate and a few other cities, a lot of anxiety about the eliminate should elimination of state and local tax deduction. The and a few other cities, a lot of anxiety about the eliminate should elimination of state and local tax deduction. The 10,000 hit a lot of people at the highend. And a few otherhat hitting cities, a lot of anxiety about the eliminate should elimination of state and local tax deduction. The 10,000 hit a lot of people at the highend. How do you see that hitting the market . Disproportionately, especially when east and west coast, they have much higher attributed tog whole ideas of homeownership. It is not uncommon, the 10,000 cap on salt and property taxes does, it has little to do with highend Housing Markets. For example, a large home in connecticut might have taxes of 75,000 per year. That is pretty common. Westchester, same story. The highend market i think will be disproportionately impacted. A counter has been, well hey, you will get more tax cuts. I do not think anyone looks at everything and says hey, i will itrpay for my home because will be offset by a tax cut. Scarlet there are predictions of huge geographical shifts in the u. S. It will be offset by a tax cut. Scarlet there are where you see living in the northeast, they and texasto florida and places where the tax policies are more favorable. You have seen tax changes before. Change that dramatically . I think it is more on the margin. I do not think that is the norm. I think what this does at least initially is reduce mobility. You can still have a reduction for 1 million mortgage or do it is the new ones you go into, you might delay. You are not talking about moving from place to place, human upward mobility. Turnover, i think the longterm implications will we be a decrease in transaction volume as a general observation. Price drop nationwide. I think moodys, 10 of manhattan. I think all of those are overstated but there will be a sort of hit to value. Broad contours of what this has looks like have been known for a while. Have you seen people doing stuff in anticipation of the changes, in a lastsecond maneuvering to try to mitigate the pain . Only on broad contours of wht this has looks the existing more side or people are paying property taxes earlier, before january 1. New york state, the governor sent out a letter about this. I know most people have interacted with have taken actions. But that is a shortterm benefit. We did not see a flood of activity and what we really saw was a pause more of, how will this work out and what will happen, and what are the implications. Housing does not like uncertainty. On the other hand, it is not the world. The that is in a pricing and sales volume and i think there will be a pullback in the next year or two. Scarlet so much attention has been focused on higher and homeowners and the effects on them. What about firsttime home buyers who are not buying a but andollar apartment, lowerpriced home or apartment . Are we seeing benefits to them because of other tax cuts . How does it shakeout for them . Concerns ise ofuced mobility in terms upward mobility. People stay put longer. We probably have the most extreme aspect of inventory shortage in the entry. Of upward mobility. People stay puti think at leastt exacerbates the problem and will create, when you have isis go up of tax bills, that will be a challenge. But a lot of the change we will struggle with at least initially is over the next one or two years. Joe correct me if i wrong. Downs at the theme is we will see impacts all over the place but it will be as the margins. So there will be changes but expecting a fundamental change deals with homeownership or a fundamental change in the dierks city market or highend, probably not massive probably not massive. Concur that there will be an impact but not at the other end of the spectrum. Thank you. Great to see you. Coming up, production jams have model 34 months. Is the situation improving . Not necessarily. This is bloomberg. Joe this is Bloomberg Markets to julie model three deliveries are tracking below southside estimate according to fred erickson, who wrote the delivery us its cut from 15,000 down to just 5000. He joins us from portland, oregon. Great to see you. We talk about the checks that analysts do frequently. Do you just go to dealerships and monitor what is moving . No. We are typically picking up the phone and calling across the country, 18 sale no. We are typically picking across the United States. Centersjust trying to get a sef what they are doing delivery wise and what they are seeing color theyer bits of might be willing to share. Joe you write in your note that but you say it is below likely accessible to the buy side. I find that to be an amusing characterization, the degree to which investors are overlooking this. Will there come a but likely accessible to the buy side. Point in 2018 where these numbers will no longer the acceptable . Yes, i think so. These guys have to fulfill and they have promises made for the last several years and they have to ramp up production and show Growth Market margin improvement. That is a metric investors are watching. And you a good point point picked out interesting piece of the note. It is hard to say the buy side is at a certain level here it is really more focused on seeing that they are ramping up production and that people will continue to buy it. That is what they care about. Julie is it a function of production or demand . Issue. S a production issue. When you have a 450,000 plus i do notk in think anyone will question demand i do not think anyone will question demand on this product. It is more of a function of can they produce it and how fast. I find this to be very interesting in the sense that you cannot really put a number on the buy side. See improvement and a lot of people like this story and as long as the story continues, maybe some numerical numbers do not matter as much. Your job as an analyst, he spoke to clients about all of this, how do you do that . How do you calibrate what information will actually affect the stock . A good question. Obviously, and our models, we have to have expectation in a forecast but it is interesting when you talk to investors about this one of particular. Aboutot necessarily talk you for but in general, you talk to investors going in any print, you hear a lot about you for but in about, it would be great if they had this number but im ok if they still hit 3000 or 4000 or an arbitrary number lower. The bar seems to continue to go lower in these moments because i think investors, as you look longerterm, these guys are hopefully ramping to something close to 5000 a week. If they miss by 1500 units in q4, is it that big of a deal in the long run, no. That is how they tend to look at this. Do you think the hopes surrounding the company are more a function of the coast of , or islity of elon musk it the people who are analyzing the stock on the buy side, what do you think is the special sauce that makes tesla resistant to these additional metrics . Yes. It is an incredibly compelling work work trying to towards sustainable alternative transportation, it is something that as a human being, almost behind at some level. Want he is clearly a charismatic and dynamic leader leading the charge on several fronts. To get you hear good investors say any good investment starts with a narrative. You hear good investors say any good investment starts with a narrative. This is arguably the most compelling of all time. It has fundamental throw flaws throughout and the stock has remained insulated. It starts there and having a you can hang your hat on as well. You can hang your hat on as well. Joe the greatest story in the world is no sensitive for cash on hand. Will they have to revisit Capital Markets at some point in 2018 . Let me give that some thought. Yes. All right. Read, equity analyst. Substitute for cash on hand. Joe a look at substitute for c. Joe a look at some of the biggest business stories in the news now. Eric rosengren said Financial Risks caused by low Interest Rates are something to monitor globally in 2018. In a blog post, he said he worries about per yield kinds of behaviors that could potentially have broader implications at a time when fiscal policy cannot react if we get a big negative shock. He also said geopolitical risks were more severe than in recent years. The richest people on earth gained 1 trillion this year as stock markets shrugged off economic and plutko divisions to reach record highs, more than four times last years game. The 20 increase on the billionaires index compares with a 20 increase from the world index and the s p 500. That is your business flash update. Julie coming up, the mouse caught its fox but now busy may have to battle to keep one of its top tv producers in the media game. We will have more details next. From new york, this is bloomberg. Joins us now from los angeles. This guy works for fox and out did disney buying these assets, he is thinking of jumping ship . The Production Company has a deal at fox. He has made American Horror story and glee come all of these hit shows. His contract comes up next year. They are in the throes of negotiating all sorts of Different Companies are trying to pursue him and curry his favor. We are at a moment that as as he has ever seen it. You not only have traditional disney, fox, comcast, but netflix, amazon, apple, and google, throwing money. The uncertainty produced by the fox disney deal has created created an opening to try to convince them. It is not just about money. When she jumped ship to go to netflix, wanting chic set one thing is having control over more of her shows. Has he said anything are indicated anything that would give us any clues as to what he wants . One of the reasons why prior to the disney deal, most people assumed he would stay at foxs because unlike disney at the time, fox has a prestige out let where ryan murphy has made shows and one wars, disney did not have that to offer and it is a more stifling place creatively than fox is. It is not clear how the different fox assets will get or how the executives with whom he has big good relationship, if they will be there at all here joe in the ofld of premium tv and all these people throwing tons of money and original content, is , that thereese guys is a shortage of . Is this the key bottleneck . It is helpful and really a signal to hollywood of your intent. If he will singlehandedly change the business of netflix, not at all. But that was one of the most surprising moves in the past signal to hollywood of your intent. Year, they signal that netflix will show up and pass a lot of money and let us do whatever we want, the biggest runner in television is going to, maybe we should. Some things like Stranger Things are really going nowhere. You do not always know where the big hits will come from. Quite how big of a problem is it for disney fox if ryan murphy leaves . I think it would be problematic again more for perception than anything. Disney and fox and you are trying to prove that the integration will work and that you will find a way to make top talent happy, you need to keep someone like ryan murphy. He is one of the biggest show runners on tv. Reporting from los angeles, thank you. Up, from hollywood to washington now that the tax bill is a reality, we look at the rest of d. C. s to do list in the year ahead. Advisor to mitt romney will join us next. From new york, this is bloomberg. Joe it is 8 00 p. M. In joke in london. Im joe weisenthal. Julie welcome to Bloomberg Markets. In bloomberg World Headquarters in new york in the next hour. Here are the top stories. Ira pill in some of the whatcare tax settlement, is the next stage in the policy . Then, how to make money in low . Olatility one involving a popular real estate etf. An upanddown for a flight retailers. Will 2018 be a smooth run for nike and under armour . Will explore coming up. We have a few trading days to go. Take a look at the s p 500. Volume. The average it is down 45 from the 20 day average. You can look at smaller increments at the bottom. The white bars give you where we are at the moment. Strange there are places to focus her attention. You see here, aluminum up nearly 3 . Ups predicting aluminum could rally on supply adjustments in china. A little less than 200 below at this point in time. Also watching Health Insurers buffeted by all of the discussions of health care in the past year. They are rising today as it looks like there is an increasing perception that the mandate repeal that was part of the tax overhaul plan will not necessarily got obamacare. We will discuss that more in a few moments. Been watchingve bitcoin proxies in one of them Company Called blockchain. Cory johnson dug into this on bloomberg. Com. It looks like there is not much there. That is the case with Bitcoin Companies and those that rebranded and took its called b. Cory johnson dug into this imagf the rally. 19. 5 today. Board approved a three for one stock split or we will discuss crips set cryptocurrencies a little later in the hour. Joe thanks, julie. Lets get a jet a check of the headlines. First word news this afternoon with jessica summers. Joe thanks, julie. Lets get a jet a check of the headlines. First word news this afternoon with jessica summers. Jessica President Donald Trump lance to start of the new year by meeting with Top Republicans to draw up a k plan a game plan. They will host Senate Majority leader Mitch Mcconnell inhouse Speaker Paul Ryan at the camp david president ial treat at the first week of january. Representatives of both lawmakers confirmed they would attend most of the nearly 200yearold magnolia tree on the ground of the white house may have been saved. The white house said a large that had become a safety risk. Cut but not much of the tree has been cut away after all. In jerusalem, plans are underway for a new train station on the western wall and it could be named for President Trump. The move would be a thank you ta safety risk. Monteith money trump agreed to have it to President Trump for recognizing jerusalem at as israels capital. Neither reside in the white house, so former president obama thehillary clinton remain most admired americans. They beat donald trump 17 to 14 to it is the 10th year in a row mr. Obama top deliberate the list. Hillary clinton is on top of the womens list for the 16 straight year, edging for the former First Lady Michelle Obama 9 . Mauney and garner just 1 of the vote. Hillary clinton is on top of the womens list for the 16 straight global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am jessica summers. This is bloomberg. Joe . With lawmakers back in states and districts and President Trump at maralago, the pace of washington is slow this week but one business could resumes in january, they have a long to do list including health care. Joining us now is a Hoover Institution fellow who is a policy director for mitt in states and districts and President Trump at maralago, the pace of washington is slow this romney, thats mitt romneys 2012 is trying to say they have done the work on obamacare, that by repealing the individual mandate, they got rid of the most popular thing, maybe for the ineffable, that it would be difficult to pass another Health Care Reform with just a slim lead in the senate. How live is obamacare right now . What the appeal of the individual mandate did, were zeroing out thathow live is oba . Penalty, what it essentially did was to knock something that was already down. There was a lot of instability in the individual marketplace. We were seeing a lot of premium hikes already. This created a less stable situation. Is it the end of obamacare, probably not. A lot of parts of obamacare are in place which suggests thisrepublicans will take anothr run at it in 2018. Whether that is blakely experience is a different story. It seems they concluded one more run would be in order and i think we will see that early into the new year. Julie one third of americans are on federal plans of one kind following the aca. Do you think that will be directly tackled as part of reform or defense the focus would be more on acs specifically . At what theyou look aca did, it was a vehicle to get people coverage largely through the expansion of the Medicaid Program, the federal state Partnership Program originally targeted at low income single moms that has become the catchall Health Insurance program for millions upon millions of americans. Wanted to dos something about that, it would be a significant change. Remember that is what got them into political trevor trouble , with peopleplace like Susan Collins from maine and other more moderate republicans more willing to affect the Medicaid Program. If you want to affect the scope in the Church Rectory of the Affordable Care act, the biggest thing you would do is look at for the Medicaid Program but politically, that would be very difficult. Joe if they could not do it when i have 52 seats in the senate and they will have one less with 51joe if they could t when i have 52 seats in the senate and they will have one less with 51 seats. We will also probably see Medicaid Expansion and more states, with a stronger showing of the legislature there, virginia it s mean it is probably here to stay . This so entrenched that it will be more difficult in the future to rearrange that . I think the Medicaid Expansion piece certainly has part and parcel of the Health Care Program in many states are you suggest correctly more and more states will be 10 to two take the Medicaid Expansion. In number of states in the south have not taken it for political and healthy reasons and they for medicaidssure expansion. The question will be what will republicans try to do to alter the way the Medicaid Expansion will administer, to put private that, thatuences on is one path they could take. It is not likely they will completely scaledback Medicaid Expansion to the more likely outcome is they give states greater freedom and flexibility to administer those programs in the way they see fit. It is not likely they will completely scaledback Medicaid Expansionthat is something repus could get behind. Do you think deficit hawks will rear their heads going into 2018 . Iny had quieted down mostly the end during the tax overhaul process. Do you think they come back and if so, what gets cut . Is there a concession thrown to them in terms of a cut in spending in some area . If there will be significant change on the spending side, it will have to be a reform of medicare, social security, and medicaid and we know how popular that is with politicians. They call it the third rail for many reasons. If they will do anything, that is where they would have to go. They call it the third rail for many reasons. I do not know that Mitch Mcconnell agrees with him. They have disagreements and i think substantively stub darrencei do wise, agreement. The only place they should go is entitlement spending. That is where the money is. All of this is nibbling around the edges. You have to go to have spending. Joe going into whether they will have more entitlement spending, the gop attempt to repeal obamacare went over various iterations, and the senators paired up to give their proposals. One i give a did not last long was Kathy Collins idea, which would have told state you can keep your funding and keep obamacare but if you want to try something different, you can try that. Could that be the direction this ultimately goes and could Something Like that beat bipartisan supports, giving the flexibility without losing money . Scenario and an alternate political universe, i saying wedemocrats support the notion of using that funny if states want to use a direction that is different from other states, that is fine. Saying we support the notion of using that election years are always extremely difficult politically. We want to give states the what senatorst is cassidy and collins want to do. It is one of the bases of the Cassidy Graham proposal. Can that will be the chastity on which Health Reform is built this year. Joe the point you just made about the 2018 election year, will that dominate the whole thing, that now that were less than a year from the election, we will not see anything happen . I think that is right. I think republicans got a huge victory with the passage of the legislation earlier this month, and that will be their legislative accomplishment and republicans may try to do something on infrastructure, but the possibility of a deal done on immigration, to deal with folks brought here illegally, but beyond that, i do not see a lot else and it will be a tough stretch to get those things done. They will not be working much either. They will be in session for a few months at the start of the year. Great stuff. Thank you very much. Coming up will next year be a . Ebound for Athletic Apparel this is bloomberg. Joe this is Bloomberg Markets. Im joe weisenthal. Julie i am julie hyman. Dramatic year for Athletic Apparel retailers, Companies Like nike, under, lululemon, and dicks sporting goods. Thanks to a huge rebound it saw in the fall. Joining us with more is Bloomberg Intelligence apparel analyst. What is so interesting about the chart for nike is it was not in it was not a foregone conclusion. There was just generally the f what it apparel market, it seems kind of shaky. Are things going better next year . Question terms of nicely nike, i think so. It is a lot stronger than last year. Were still dealing with inventory but overall, it should be a better year. Of in terms of the issue competition, and it was adidas last year and an under armour. Is the way to interpret this, it will be some hot company for a while or is there a risk that may see nike loses permanently . I think the first part of what you said. 94 is nike. Wall buttimes have a innovation, he put it out there and they are the first mover and they have the advantage over other companies. What about leisure, such a buzzword last year. Hard to remember at this point. What happened to that . It seems as though that has fizzled to some extent. Handbags threeth or four years ago. A lot of new players coming into the market and at some point, you get to where you have demand and it brings out it hurts your margin and you have to discover more and that is what you are seeing now on the apparel side. You will see them starting to rise again. It is not that the trend it is more of a mandatory issue than the trend getting weaker. Joe all of these articles about how millennials prefer experiences and no one likes shopping or paying for clothes is that overstated . I think it is. Look at 2018, the macro point of view Consumer Confidence is at a multiyear high. You have inventory levels lower than in years, which is very essentially it reduces the needs to discount goods going forward. And lastly the weather. It drove a lot of traffic. That is why i think we have seen good holiday so far. Julie in the past couple of years, we were in will this holiday proved this holiday and discounting. 4215 i thought you had one more. All right. Thank you so much. Joe Japans Softbank Group completed the 3. 3 billion cash deal softbank will operate independently and remain headquartered in new york. South korean prosecutors washed to spend an additional seven years in jail. Allegedly bribing his way to greater control of the company. A panel of three judges is expected to decide the matter in january. It 1. 3 billion. The assets that have accumulated on their ballot it expects to , that is their business flash update. Ahead, to detroit from new york, this is bloomberg. It is time now for options insight. Jim, great to see you. We have talked about the low thisility characterized year. We have talked about ways to position yourself for an increase next year. Did you look at maybe nonvanilla ways of looking at it, nondirect volatility ways . It is worth looking back and we are at the end of the year. This will be the Second Lowest year of realized volatility since 1928. The lowest was 1964. The realized volatility, about 6. 8 percent this year. Back in 1960 four, the annual basis, an average that is the lowest since the vix in 1990. Yes, everyone is aware of the low volatility environment. Be what might be more interesting is single stock volatility and we think that might be a marker for be thet half of next year. We believe that given where we are in the expansion, denying the earmark in june of next year, a 50 basis point spread between twoyear and 10 year treasury in the night in the but over ammediately reasonable time forward, volatility would lift. We think macro volatility could be higher later in 2018, but it is verya measure, low. Dispersion is high, single stocks flying all over the place, and they went out to a market that is not doing a lot. Options allow us to take advantage of significant dispersion. We think that is a new theme starting the new year. We have seen a diversions between mac all volatility and sinker single stock volatility. Absolutely. Think of the crypto craze, underlying psychology and the fact it could come back in the equity markets. I was around in the late markets. When i spoke to people who werent, i forget how long ago that was. There are a lot of individual stocks. It is fitting that sort of underlying enthusiasm begins to take over. Is crypto sort of symbolic of what could come into the equity markets, its because to a dispersion playing the significant moves underlying single stocks. Which one of the areas can we see an uptick . In terms of sectors, something we did is looked at a valuation of sectors and applied volatility out six months. We are saying lets take advantage of this market. Obviously, a valuation could remain in debate for the next few years. We say lets own upside in etfs where valuation appears attractive to her looked back over 10 years to find that and applied volatility is low. Three etfs. Health care, and energy, we had a graph here. Out in six months, in june, a straightforward way to exploit volatility. About 1. 15. , historically low, this is the about trade we look at it if there is a single name you feel strongly about and applied volatility is low come up with the trade on it have that exposure now. Thanks, jim. Todays options insight. Still ahead, we continue the conversation on volatility. This is bloomberg. Cannot live without it. So if you cant live without it. Why arent you using this guy . It makes your wifi awesomely fast. No. Still nope. Now were talking it gets you wifi here, here, and here. It even lets you take a time out. No no yes yes, indeed. Amazing speed, coverage and control. 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