London. Its jobs day. Eurodollar, the one thing we need to watch out for 1. 2051. That were expectations these equities would go higher. We are seeing a little bit of retrenchment out of u. S. Equities because valuations, a lot of people think, are more attractive. Kettneree if max scherze thinks the same. The u. S. Jobs number, 2. 46. We will ask him about brexit. Ask him about this rotation into bonds. In later on, we speak with will em buiter. I know he has a thing or tow to say about germany. Sebastian in the u. S. A bombshell book detailing the backstabbing in Donald Trumps administation is being published four days ahead of schedule. The white house has been defending Donald Trumps Mental Fitness for office, an i ssue raised in the book. If he was unfit, he would not have defeated the most qualified group of candidates the Republican Party has ever seen. This is an incredibly strong and good leader. Thats why we have had such a successful 2017. Sebastian north korea has agreed to hold talks with south korea ahead of the Winter Olympics next month. The talks will include overall korean relations and north koreas participation in the games. U. K. Independence leader nigel farage will meet with michel barnier. Farage has asked his twitter followers to cement questions for him to ask. The meeting will take place 11 00 a. M. In brussels on monday. U. S. Car sales suffer their biggest slide since the global recession. Theres lingering skepticism over the emissions scandal. 6 from thefell 5. Year earlier. Demand for diesel slumped 17 with petrol models showing the biggest increase since records began in 1997. Angela merkels plan to extend her alliance is met with increasing public skepticism as she begins talks with her rival party. Only 45 backed a grand coalition between her christian spd. Rats and the she increased by two Percentage Points, compared with early december. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im Sebastian Salek and this is bloomberg. Francine stocks have rallied around the world on signs that the Global Economic expansion have pushed bacenchmarks to higher levels. The s p 500 and nasdaq breched new highs. Next on the agenda is the u. S. Payroll numbers. Joining us now is max kettner, a nd Simon Kennedy, our executive editor for Bloomberg Economics. Max, when you look at the market movement, what exactly is priced in . I dont know if people go for valuations, or if equities will go up. Max the law of the momentum trades which have worked in 2017 are still sort of carrying over, right . The financials doing well on the expectation that the tax code will perform. The cyclicals are outperforming the bond proxies. What you see is a continuation of the expectation of very good growth, but disinflationary. People expect a jump in 2018. Francine i want to get into the economy ina second. But overall, is this the year, depending on inflation, where you see a rotation away from bonds . Max i dont think so. That should have happened already, actually, in 2017. In 2017, everyone said, high yields dont make sense. Ieldingelds are yo 2. 5 . Meantright rotation would a switch to really good growth, with better than expected inflation, and then you could see a rotation from bonds to equities. Thinkne yoit seems markets this time it is for real. How can you be so sure . Max one year ago, we probably said the same things. The economists and central bankers have kind of stufck with the things will resume as normal, inflation will kick in. And markets have been holding off, as max said, but we are looking at strong economic data. The actual economic forces are gathering speed into the new year and that, in theory, should lead to inflation. The pmi is very interesting. Details,u dig into the and a lot of companies are talking about supply constraints, running into limits, which implies c inflation. Francine how reliable are these figures reflecting the workforce participation . They are pretty reliable. People will still question them. In the u. S. , weve not seen those trends kick in, which we normally would have done so. So, people are looking beneath the headline data, and the earnings data, the one thing missing from this global expansionist, the wages. But then that will reinforce the feds push to three Interest Rate hikes this year. Francine let me bring this over to the bloomberg terminal. Trend, the hiring looking more like midcycle. We have seen a lot of anecdotes from employers, discussing how the labor pool is shrinking. You can also see that it kidn of nd of it is not uncommon for this to excel a ratacceleran this part of the cycle. How much do you focus on this . Do you look at this to make sure theres not a wrong bet . I think the market focus has shifted to the average hourly earnings, as simon was saying earlier. Ultimately, thats the one puzzling piece we dont understand yet. A lot of strategists say, look, it feels like every start of the year, the last two or three y ears, everyone said, we expect higher bond yields and inflation should kick in because of the usual phillips curve relationship. Oken off. Sort of br there has come some realization that the phillips curve has bro ken up. Therefore, the headline number does not play. Francine this could be the year the phillips curve comes back. It could have been last year. Theres a lot of discussion about unemployment. What was old is new again. A very good article on Bloomberg Businessweek, he went back in crunched since 1961. He suggested that the fed will want to see some sign of which growth, as will the economy, which has felt not caught up in this economic growth. If and when they do, that could accelerate consumer spending. Francine max kettner and simon french, both stay with us. Includinging up, waiting on inflation. Euro area cpi. Its out in less than an hour. A little bit later, we talk brexit. Can the pound shak eoe off Political Uncertainty . We bring you the outlook for this year. This is bloomberg. Francine economics, finance and politics. This is bloomberg surveillance and im Francine Lacqua in london. Heres Sebastian Salek. Sebastian ubers former ceo plans to sell 29 of his stake in the ride hailing company, and stands to make 1. 4 billion. Apple has said all Mac Computers and ios devices are affected by chip security. The company added that recent Software Updates mitigate the meltdown. The tech giant says the apple watch, which runs a derivative of the Apple Software system, is not affected. Streaming premier League Matches in the upcoming auction in the u. K. The move is part of a broader strategy to bring more sports content to the global customers. They are trying to get more people to subscribe to the prime membership, and convert occasional customers into loyal customers. Francine thank you, sebastian. Here is our inflation data, released at 10 00 a. M. This morning. It is expected to have slowed year on year to 3. 3 . Activity has accelerated to the fastest pace in almost seven years. What does this mean for mario draghi . Still with us, max kettner and Simon Kennedy. Thank you both for joining us. Executive editor, actually covering economics. Max, when you look at the big winners of 2017, you could argue it was opec because of what they did with oil, and the european economy because investors could not get enough of european assets. What about 2018 . Onall depends on you how you look at it. You get the euro appreciation in there. Its also a question of not whether eurozone equities will rally further, but a question of they will not continue to rally further, but should that shoot higher . When we look at positioning, positioning is that multi year highs. Of see one and a half years surprising positive activity in the eurozone. Go back 12 months ago and everyone was below that. Now, everybody is on the completely opposite camp. Euroine when you look at strength, is that the main concern that the euro region economy could have . I dont know if it is the main concern, but it is a concern. A lot of banks are raising it as a flag for global Central Banks, if the dollar keeps falling and their currency gives falling, that could put on ice their hedging plants. On ice their tightening plans. Some messages over the christmas holidays, perhaps suggesting they will be done in september. There will not be a long tapering. It will be interesting to hear from the dovish members of the ecb. Francine when you look at the Central Banks around the world, does mario draghi have the easiest job because of the mende, but he is not really given a mandate into the bond buying cultures . More facility. Pretty much, though, the easiest job has got to be jerome powells. Theme powell will have yellen fed for quite a while. Shes put in place strategy and guidance that would suggest powell would need to change quite a few minds on that board to change tract. , though, yeah. Hes bought some time, eys. He has bought some time, yes. The next big question for the ecb in the wider Investment Community is what happens after september. Hes got a couple of months, but at some point pressure will grow. Francine how much reporting and editing are you doing on the changes in the central bank over the next two years . You have jay powell coming in. You still have the Vice President of the fed. There is a huge amount. We have seen powell. A lot of board members, a lot of rumors going around as to who that might be. The pboc, potential change there for the first time in 15 years. Chile, south korea a lot of Central Banks are changing at the top. The new york fed is a big one. The ecb, five of the seven top positions in frank for will be changing by the end of next year, commenting in mario draghi. That allows the chance to influence monetary policy, to promonitoring. An ecig is there class is there an acid find . Lass you can we are modeling after 10 year bund yields. You can find the residual that has bueen building up since the restoration of qe. So, it yes, yeah, probably one of the most distorted i dont know, because we have got some parts of nonfinancial credit last year we had tech spreads around six basis points. That does not sound attractive either. That has recovered a little bit. Bunds, but part of credit also in ecb policies. Francine thank you so much, Simon Kennedy and max kettner. Kalanick next, travis is planning to sell 29 of his the company. This is bloomberg. Francine this is bloomberg surveillance and im Francine Lacqua in london. Uber cofounder Travis Kalanick is planning to offload some of his shares, about 29 . He previously stated he would never sell his stake. Joining me from commerzbank, next get i gesturing me from commerzbank, max kettner. This feels like a big deal. That is a pretty huge amount. Valuation atthe 48 billion. hisafter kalanick has sold shares, he will have the shares technically valued at 70 billion. So, thats quite a bit. But a big player, symbolically it shows he is cutting his ties from uber. He needed a successful company, but trashed a lot of reputations on the way. Francine is that good for the company, as they are trying to get away from the allegations and the court cases we have seen . Bloomberg markets asia ive i think it is great. Travis might try to sell more than his 29 . He got to a point where he realized he needed to step back and work out what hes going to do next. Mo4 billion is a lot of ney. The new management in place is hoping this is the tipping point, moving uber away from the ipo, whichcing the is the next big thing for the company. Francine do we have timing on that . In 2019. This is the last big window that employees and investors have to sell out from uber. The ipo is the next one, in over a years time, in theory. You cannot just offload your stake, even if you are a high stakeholder like travis. So, hes taking the opportunity to raise money. Francine we will be back with max kettner. Coming up on bloomberg tv, its the brexit show. We focus on theresa may and the pound. Francine good morning. Its time for our weekly brexit show, live from Bloomberg European headquarters in london. Im Francine Lacqua. Sebastian . Sebastian teresa may says she thinks hes bluffing. Two senior officials familiar are privately saying the e. U. Chief brexit negotiator is faking a hard line stance to make a deal that would allow banks to operate freely. This comes as the u. K. Comes to negotiate the ties with the union. The trade secretary is looking at all options amid reports britain is exploring membership as the t. T. P. To boost trade in brexit. The comment was made in a threeday trip to china. As brexit weighs on london house prices, a english spa town and two coastal areas saw the biggest increases last year according to halifax, southwest england, saw a 13 jump in 2017, almost five times the national increase. London south coast saw the next highest gain with prices rising more than 11 each. U. K. Car sales suffered their biggest slide since the global recession. It is based on lingering skepticism of the performance of diesel cars. Preliminary figures indicate 2017 sales fell 5. 6 to 2. 5 million vehicles and the steepest drop since tween. The demand for diesel dropped 17 and back to petro vehicles which prompted Carbon Emissions since records began in 1977. Gel ferrier is to meet barnard next week. He is the lead vote to lead the e. U. And is to submit questions to ask. The meeting scheduled between farage and barn yea on monday. Bloomberg powered by more than 2,700 journalists in 120 countries. Francine . Francine the pound will shake off the bronxity woos, according to a Foreign Exchange strategist at i. N. G. Sterling gained 10 against the dollar in the last year after a sharp drop following the brexit vote. I. N. G. Believes it will climb to 1. 53 by 2018 and is not the only one positive on the pound and tops the buy list of bank of Merrill Lynch and the International List as well. Still with us is max kettner from commerce bank. Dan, were getting headline figures for the unit labor cost and is a year on year Third Quarter for the u. K. , 1. 3 . What does it tell you . Dan pretty weak, unit labor costs just to clarify wages adjusted for productivity growth. Its a measure of inflationary pressure, domestic pressure in an economy and in the u. K. Youd expect unit labor costs, if inflation was running at target, 2 target, and i know its above that because the pound, but running at 2 youd expect union labor costs at 2. 2 . Youre close to a percent point below the level of the bank of england might like to see to see inflation back at the target. Its a weak reading. It doesnt make for good reading for those looking for, you know, hikes relatively soon. Francine at the same time we had encouraging figures from the u. K. The last couple days, Like Services werent bad and how do you make sense of all this . Dan they werent bad. We still think the economy is in the slow lane at the moment between growth this quarter it be. 4 which is what was in 3q and next year that pace is maintained and looking at 1. 4 gain. Youre right, the surveys were little bit relatively upbeat but the broad story is that its not poking inflationary pressure. Same sorry around the world and figures underline that. Francine max, your take on pound snn 150 . Max it looks a bit punchy, 153 and particularly not because of sterling appreciation but assumes a weak dollar and pretty much were in the opposite camp. For sterling as a whole, on a trade rated basis, probably broadly rangebound since the brexit vote and broadly truck chew waiting in this volatile range versus euro, particularly given we look for some euro weakness, actually, you cant unsee euro sterling tailing a little lower and see some complacency particularly in the first half of the year. Id rather say cable is within towards 130 but the 135 range but with regard to innation particularly the beginning of this year. 153 a bit too punchy and more if you want to play sterling strength, its probably more towards the euro leg versus dollar. Francine dan, you have a forecast . Dan we do. We have pound dollar at 136 at the end of the year so thats flat from where it is now. The reason why we would be different from the 1. 50 call is we dont think the bank of england will move this year and second of all we dont think brexit negotiations will go particularly well and that story will come back in a lot of these forecasts predicated on the transition deal coming through quickly and the trade deal we get i imagine being the forecast relatively optimistic about the trade deal and we a candidate type deal is what well head for. Francine lets bring you to my favorite chart, this is europe town and kind of a trajectory if you look into august of 2017 where a lot of bets were it would go to parity, euro pound at parity and weve leveled off. What happens if you see pound stronger, what happens to this chart . Max you probably can see a bit of sterling strength and interesting to see on one of your favorite charts that you do see some genuine sterling strength compared with eurodollar which is pretty much close to the highest where euro sterling is a bit below the highest there so you see some genuine sterling strength particularly versus euro and reckon particularly what weve seen the last year and a half there was a streak of positive surprises week over week and activity surprise in the euro zone and thats sort of leveling off particularly if you think about growth expectations for the euros economy has nearly doubled the last 12 months. For the potential for further upward price is rather small and with the euro appreciation, the potential for a few negative surprises in inflation is quite high the next couple months, euro is leveling off and can particularly be versus sterling. Francine dan, when you look at what the b. O. E. Looks at, they look at debt and the figures we look at but is there one particular figure you think will be more important given were in the midst of negotiating with europe . Dan in terms of the outlook, you dont have to look further than the labor market tatistics. If the decline in the oiment rate is Unemployment Rate is sliding and productivity growth fails to reappear you end up in the world the bank of england really has to expedite and get going on rate hikes. S theres also the wage data but one thing, if the Unemployment Rate continues to tumble will get in a very awkward position and will have to start hiking rates sooner than markets are expecting. Francine this is a pound chart , the pound versus dollar. You can see we revert back to 1993. We look at trade weighted than cable . Max i think so. When you look at cable, its two variables you look at effectively, trade weighted, the genuine look at sterling and the pew look at sterling, per se. If you look at the deviation from Real Effective Exchange rate, obviously sterling appears cheap but as it comes with valuation, it can be a value trap and what dan said with the 1. 36 forecast, theyre not sure about brexit negotiations and i broadly zpwre with that. Its a bit of a gamble now whether you say look, negotiations will be fantastic and then all of a sudden you end up with 1. 50 or even higher call if you say theyll be absolutely dismal and could be below 1. 20. Francine what does it mean for your investments in the u. K. , as a process strategist, do you tell people to stay away from the u. K. Or pile in . Max you look at particularly equities, they are heavily driven by sterling so the correlation with sterling that temporarily has been breaking up in 2017, that is back. So you do see that very heavily driven by sterling strength. If you are of the opinion that actually negotiations will pan out relatively well, and with regard to 1. 50, as illusional as it sound, you have to stay away from the u. K. So you know, if you say look, we have a view that negotiations will be about ok but actually a bit worse than expected, so a little bit of a downslide for sterling, that was actually the best case for u. K. Equities from a cross asset equity perspective. Francine thank so you much. Dan hanson who covers the u. K. For Bloomberg Economics and also max kettner from commercebank for a spirited conversation. A lot coming up, including the trade secretary to discuss the future of the trade relationship with the e. U. And later the debate will move on to a braver party, whats its stance on the brexit deal and how will it handle it and well ask if there should be a second referendum or not. This is bloomberg. Francine welcome back to our weekly brexit show, live from bloombergs European Headquarters in london, im Francine Lacqua. The International Trade secretary refused to rule out britain joining the t. P. T. Bloomberg was told it would be foolish not to look at all the options. Were not ruling anything out. Its not something right at the top of our agenda at the present time but i say it would be quite wrong to rule anything out in terms of future relationships for the United Kingdom. Francine labors shadowed trade secretary Barry Gardner is here. Thanks so much for joining us. You also give us a great conversation over brexit. What would you do if you were in charge of trade right now . Barry i would be focusing on getting the best possible trade agreement with the European Union. The European Union is our key trading partner, to be thinking as liam fox has been saying, that we might do a deal with t. P. P. This is an agreement largely concluded, wed be going into a structure that has been put together precisely to benefit the economies of the pacific rim, and weve had no input into that. It represents 8 of our export market, that whole t. P. P. Structure. And yet liam fox is suggesting this might in some ways compensate for the losses we might have from our Current Trading agreement with the e. U. Where we have 44 of our exports. O this is an agreement, t. P. P. , we saw it was the one point on which both donald trump and Hillary Clinton were agreed they had to pull america out of those negotiations because of the jobs impact it might have in the u. S. , the loss of jobs there. Francine lets talk about jobs in the u. K. The unions are arguing there should be a jobs first brexit. Right . If thats the case, does it not mean that labor should actually fight for the u. K. In the Single Market . Barry look, lets be clear, there has been right from the beginning an understanding that the labor party, which was campaigning to remain in the European Union, and we said ok, after the referendum, we accept that democratic result but people have to be realistic that if we are leashing the European Union, there is going to be an economic hit to our country. Francine you wouldnt go in the market . Barry i didnt say that. We recognize the benefits of staying in a Single Market, a Customs Union arrangement, and with a we arent fixated upon is particular structures. So were not saying well it has to be e. E. A. Model or it has to be a norway style or turkish style Customs Union. Its not the structures that matter here. Its the benefit. And the government should be focused on the benefits. So when you rightly talk about a jobsfirst brexit, thats a brexit that puts the economy first. But lets not make the mistake of saying it cant be a brexit. That democracy first. We are leaving. The question is how do we ensure that when we leave we have the maximum benefit to our economy maintained, accepting he European Union will lead in the European Union means we take some hit. Francine if theres a change in Public Opinion, i dont know whether you want to call it a change in circumstanceses, would you be for a second referendum . Barry the worst thing a politician could do at the moment, which indeed they have, is to say we must have a second referendum. Because what that would indicate is to our negotiating partners in the European Union is give the u. K. The worst possible deal, then theyre most likely to stay in. You would be undermining your own countrys negotiations. Thats what people who are calling for a second referendum are doing. That is not a sensible position. We are in the labor party, her magestys loyal opposition, which means we dont simply oppose the government for the sake of opposition, we oppose the government in the best interest of the country. And of course to undermine our countrys negotiating position would be a very foolish thing to do. Francine how exactly would you negotiate . Again, what were trying to figure out is it you say jobs first but its democracy first with the jobs, youre dealing with brexit and committed with brexit even if youre labor and in charge, and therefore you cant really negotiate on Single Markets, so what do you negotiate on . Barry sorry, you say you cant negotiate on Single Markets, why not . Francine you told me if brexit is brexit, then were out. Barry no, no. Lets be clear. Leading the European Union, right, it is possible to stay in the Single Market and not be a member of the European Union. That is what the norway option that is what being a member of the e. E. A. Would entail. Francine of course. Barry its not impossible to be a member of the Single Market but not a member of the European Union. Francine you would focus on that . Barry the question politicians have to answer to the public is it all intents and purposes the things that people voted for, namely regaining sovereignty, control of our borders, not paying money into the e. U. , not being subject to the European Court of justice, if all of those things have remained the same at the end of this process, then politicians have got to be able to answer, well, what was it all about . Francine right. Barry thats the difficulty. Francine how would you negotiate . It goes back to my initial point. Barry wed negotiate for the benefits but not the structures. So thats why i think weve adopted entirely the right position in saying look, we recognize the benefits of the Single Market. We recognize the benefits that a Customs Union can bring. But were not fixated on the structures. What were fixated on is securing the benefits, making sure our economy suffers minimal damage as a result of leaving the European Union. Francine and you think the European Union again, there are red lines and they said them pretty clearly. Barry listen, be clear, there are red lines the government has set i think are crazy and there are red lines europe has set in these negotiations which i think will need to be modified before the end of this process as well. Were not a government in the labor party at the moment. And therefore, we are not conducting those negotiations. What we must do as a responsible opposition is make sure that the government does not hem itself in so badly by its own red lines it end up giving our country a bad deal. It ends up actually destroying jobs in the u. K. And destroying our economy. Francine all right. Barry gardiner, labors shadow trade secretary. Hell be back with us and ask him more about the negotiating tactics. Coming up, where the labor stand exactly on a brexit deal and how it would handle it poofment well discuss that next. This is bloomberg. This is bloomberg. Francine its our brexit show but were getting a new name out of the f. C. Chair, it is charles randall. Weve heard charles randall. I think a nonexecutive board member for example, the b. E. I. S. And was former at england but well have plenty throughout the day. Now back to brexit negotiations. We were with Barry Gardiner talking about the structure of the match with the e. U. But well bring in an outstanding writer of betting the house. Let me bring you back to what you were saying its not the structure of the matter but the benefit. Will labor accept Free Movement of people in the e. U. . We want fair rules and reasonable management of migration. And we recognize that the important thing is the economy and what you must do is you must set your immigration policy in line with your economic needs, not the other ay around. Ive constantly criticized this country saying its our immigration policy that determines your other policies and thats insane. Is there a level the immigration is too high . Barry the point is what does our country need . Immigration always goes up and down and it goes up and down in line with the needs of our economy as an employer state we have a skill shortage here and cant get labor working in this area or indeed seasonably because it isnt about high Skilled Labor but about labor. If you want to make sure you have things done, its migrant labor that comes in and leaves the country and goes elsewhere. This happen with a vibrant economy and you have the movement of people. You remember when teresa may went to india and said we want your business, the times of india as its headline said you want our business, you dont want our people. If youre having trade, trade means not simply an exchange of goods and services, it means an exchange of people and thats why you have to structure your economy to meet the rest of your economy and that means your immigration policy is set by your economic needs, not the other way around. Francine barry too short of time. You have to come back to get deeper into what this economy really means. Bloombergs government reporter tim ross and labors shadow trade secretary Barry Gardiner. Well be back with tom keene coming up shortly and talk not only about brexit but your Asset Classes and commodities. Bloomberg surveillance continues in the next hour and well bring you an exclusive interview. Its jobs day, im so excited. Well talk to the st. Louis fed president , james bullard, and get his views on Labor Participation and of course the jobs data out of the u. S. , 1 30 p. M. U. K. Time. Dont miss it. This is bloomberg. Snolet retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. The dow passes 25,000. Will investors love todays jobs number . Travis kalanick will sell 29 of his stake of uber. Isdeflated expectations, cpi likely to continue undershooting the ecbs target. Good morning, everyone. This is bloomberg surveillance , and tom, we are getting that inflation figure out of the u. S. Out of the eurozone. Its actually quite significant. I think we have it. Its interesting, tom, because were talking about the worry that theres not enough inflation in the world. It has slowed down a touch, tom. I think there is a little bit of a reaction on euro, which will impact how draghi thinks on the future, tom. Tom today in america, really we touch on the ism number, the first look for america. The might of december was extraordinary yesterday, francine. Ism. Optimism on francine we will talk about your inflation data, but heres taylor riggs. Taylor north korea has agreed to the first formal talks with south korea since 2015. Kim jong uns regime will meet with the south korean next week, discussing the Winter Olympics being hosted in south korea. Analysts doubt the u. S. s decision to suspend Security Systems to pakistan will change e interest in the region. Administration says it will withhold aid. The u. S. Has accused pakistan of being a safe haven for terrorists. Main financial backer, rebekah mercer, cut ties with the White House Former strategist after speaking on the phone with President Trump. This is according to people familiar with the matter. Natural gas prices are soaring. Record 175it a per million, 60 times when natural gas averaged this wint er. This rally is expected to cool off. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im taylor riggs. This is bloomberg. Francine, tom . Tom taylor, thanks so much. Equities, bonds, currencies, commodies. We will discuss the why of it with Willem Buiter. Futures continue, up six. Dow futures, up 61. Emotionally, that is a big deal. The 10 year yield difference,. 49 Percentage Points difference. The 10 year is half a percent higher than the two year. You move the decimal point over, points. 9 basis the vix, showing the great excuse me, lets go to francine. Thats not my chart. I apologize. Francine you explained the chart, and explain how you could make the chart. So, its quite all right. London, up. Tokyo, up. I think investors out there believe in synchronized growth story, and that seems to continue to win investors over. The dollar strengthening a touch and treasury studying in advance of the figures, tom. Now let us suggest right where we are, going back a long way. This is a really, really, really important chart on the bloomberg. Heres the average Unemployment Rate for 20 years, just about 5 . Heres the gloom of 2009. And here we are coming down. Weve seen the slope many different times. I would suggest the street is wherea 4 believe in the Unemployment Rate is. A lot of people are thinking 3. 1 . That gets you back to where we were in the time of whit dwight david eisenhower. This is extraordinary. Enough how them zeitgeist is unprepared for a 1950slike Unemployment Rate. This is not something to predict, but to look towards for 2018. Francine that is quite a chart, tom. Well done for the zeitgeist chart. Weve brought it back to 1970. Are we midcycle, or late cycle when it comes to hiring in the u. S. . It is not uncommon for the rate to accelerate at the midpoint of the cycle, which is the yellow portion. Thinking of that, you are expecting the jobs data, looking at the Stronger Household income gains. This is one of the things we are looking at together with the participation rate. Stocks rallying around the world on signs that the Global Economic expansion that pushed benchmarks in 2017 remains intact. Daq in s p 500 the nasdaq and s p 500 breached new hieights. You crossed the World Markets in politics. Is it surprising that markets are on a tear . When the politics are still there . That is the right question. Im not sure its taht surprising. Im not sure its that surprising. We had a strong start to the yea i,r, and there seems to be good reason for that. Tax cuts in the u. S. Are potentially further boosting this capex cycle we are in. There are three main risks, economic and political. The economic is this is the consensus. Everyone has bought into global growth. I would expect that to continue, but if there are risks, its in china, where policy remains very tight. I think the Political Risk is probably trade. Lester it was all about tax. Last year it was all about tax. This year it is all about trade. Donald trump has got to make some decisions regarding transfers and the National Security investigation. If theres anything that would dim optimism, it would be the u. S. China trade. Francine does the correlation come up between those two Asset Classes . I believe we are in an environment where we dont want too many u. S. Treasuries. Tom was talking about the curve flattening and i believe that will continue. It is a bullish midcycle. I agree, it is a nice chart. It probably feels more mid to late cycle. Yesterday we sell weekly claims out of the u. S. Its beginning to look like it is bottoming. You cant really push down unemployment any further, and that is when you start to get wage rises coming in. Francine i noticed that exactly, rupert. Leu wonder about that tea af in what it means. I guess my theme for january 5, 2018 is this equity market real and fundamentally tangible, or has it been manipulated into a melt up . Rupert i dont think it has been manipulated. Over the last several years it has been about Central Banks and qe. We are into a reduction in the Federal Reserve balance sheet. Weve got the end in sight of qe in europe. Yet, the equity valuations are based on structurally low Interest Rates. And earnings, weve got strong Earnings Growth and we are about to get a big new dose of juice from a healthy tax cut in the u. S. I dont think this is manipulated. Tom right. You go to a lot a fancy meetings at blackrock with a lot of fancy, smart people. What is the number one surprise for Rupert Harrison as you come back from your four weeks vacation . Surprise is this. M. O. The idea of missing out. Surely, we can only expect at best, single digit gains thsi is year. My sense is, markets dont behave like that. When you have decent macro and markets rising, you tend to get an uprising. People dont want to miss that on the upside. Francine people think that valuations are ok in certain parts of the world. Or, its frothy. Rupert you look at the conventional it looks high, particularly in the u. S. I think we have to take into account structurally lower discount rates. The curve, likely, will continue flattening. We have higher yields. But equally, i think we do prefer we have a healthy allocation to europe. In japan, there a good late cycle markets. Valuations look less stretched. Particularly, the domestic story in europe. That domestic demand story in europe i think has a long way to run because europe is still a couple years behind the u. S. In this cycle. Tom that is an interesting debate and we will come back to that with Rupert Harrison. Let me frame this first friday of 2018. We do it with good conversation with mr. Harrison. Also joining us from the same fed, jim bullard. Bill gross will join us and gary cohn, on the white house lawn. Stay with us. This is bloomberg. Taylor this is bloomberg surveillance and im taylor riggs. Greenyards attempt to purchase dole foods has failed. Less than three weeks ago, the company was in advanced talks to acquire dole. But an agreement could not be reached. In the u. K. Car sales fell last year by the most since the global recession, sales were down 5. 6 to a little more than 2. 5 million vehicles. The impact on Buyer Confidence is being blamed. The demand for diesel cars plunged 17 . Gasoline models led to the first increase in Carbon Emissions in two decades. Peter thiel is considering starting a conservative news outlet. Thats according to revelations in the new, behindthescenes book about the Trump White House and buzzfeed news. Your Bloomberg Business flash. Much. Aylor, thanks so to our international audience, there are no words to describe the fury and the fire, the uproar in washington. You see it in newspapers, right by me here. People are trying not to talk about fire and fury. We have discussed us on team surveillance, but were going to dive into it now with Stephanie Baker, and francine and Rupert Harrison as well. What i want to know is if mr. Mueller reads this book, will it change his investigation . Stephanie there are certainly tidbits in there that are very revealing. The thing i thought waas most significant was bannon was describing the molar investigation as far more serious than anyone in trumps circle has dictated so far. You know, talking about the june meeting with this russian lawyer, talking about Money Laundering allegations. So, there are definitely tidbits. Parts of this book have been challenged. People have said they have been misquoted. Other bits have been corroborated. Obviously, this cannot be introduced as evidence by Robert Mueller, but it provides him with a roadmap. And i believe been in himself and i believe steve bannon himself has not testified. As far as i know, he has not. Tom stephanie, i would report to my audience that you are a legit journalist. You enjoy being in a room with three editors saying, you cant say that, or you can say that, or you throw a shoe at them, or whatever. Was this fact checked, edited, or has he just plowed through, as michael has been known to do . Stephanie he has certainly taken literary license. Recordare off the conversations that he later negotiated back on the record, or he assumed were back on the record, given they had been discussed. Its not something i would have been comfortable doing, but he does construct a narrative that he feels comfortable doing and much of it rings true. That has been reflected with the other reports that have been matched very similar to other reports we have seen in the Washington Post and the New York Times. Francine this is like cage fighting with donald trump and the various people in the book. Will we see allegations of Money Laundering . How far does this go . Tom yeah. Stephanie we know Robert Mueller has subpoenaed records of those connected with the Trump Campaign. Hes looking at trumps tax records. I think that this isnt necessarily relevant to the mueller investigation, but i think it reflects the chao s within the white house. What is extraordinary is become of access he got andt i think that reflects the rudderless ship the white house was. He was wandering the halls of the west wing, getting this unprecedented access. Bannon has not denied any of the quotes in there so far. And there have been reports that he has got a lot of this on tape. Released,es are this could be a longrunning saga, and the tapes could possibly be introduced as evidence. Francine i know you want an advanced copy of the book, which is released today. Does this feel odd, when you are looking at the markets . Donald trump has had a pretty bill. 017 with the tax does this hurt the markets . It does not seem to be changing prices at the moment. Threatly, if there is a to donald trump as president , markets will start to take notice. The longterm repercussions are unclear, as far as the markets are concerned. In the nearerterm, the question is, how does this change his behavior . Will it be a distraction . One of the big deliverables from his Election Campaign he has not yet delivered on is protectionism, trade, china, nafta. Those are all things he can do to provide distractions. Tom right. Rupert, thank you. I do want to point out that the president we did nine times yesterday and the second that the president tweeted nine times yesterday and the second to last tweet said, lies, misrepresentations, and lies. I have to expect we see more comments from the president of the United States today from his favorite communication source. Its the fire and fury of jobs day. We do that with professor today. This is bloomberg. Francine good morning, everyone. This is bloomberg surveillance with tom and francine from london and new york. Lets talk about the uber founder, Travis Kalanick, who was ready to sell 29 of hsi is shares. Kalanick have previously boasted he would never sell his sake. Harrisons rupert from blackrock. Is this good news for the company, or not . Hes a controversial figure, but if he sells the shares, its an eparture. He had a 10 stake. He is going to sell about 1 3 of that, 29 , we are hearing. That will move him a little bit. He still has his board seat. Hes still there. Francine what are the implications . Was he forced to sell . We dont know what is motivating this. There was pressure on the stock to sell some of the shares, though not too much. Those who held the initial set of shares in uber were restricted. They could not sell more than i think the total was 50 of the shares that had initially been issued to the founders had been sold. Then there was some complex negotiation amongst the founders. Youcine jeremy kahn, thank so much. Rupert harrison will also stay with us. Tom, there is a little bit of concern surrounding apple, saying the iphones and macbooks are suffering chip loss. If you want more stories, pick up the latest edition of Bloomberg Businessweek. K, we focus on the conflict in iran. This is bloomberg. Good morning, everyone. Bloomberg surveillance. Francine lacqua is riveted to the American Labor economy. We got that later. Bill gross will join us as well and we will send that across radio and television after 8 30 eastern time. Shes out in the stove snowstorm at our first word news, here is taylor riggs. Taylor both koreas have agreed to meet to talk about reducing tensions before the olympics. Will discuss overall relations and north koreas offer to send a delegation to the olympics. It will be the first former formal talks since 2015. Environmental activists are planning to fight the Trump Administration over offshore drilling. They proposed to open more than 90 of the coast for oil exploration. President trump told a lawyer to get attorney general Jeff Sessions not to recuse himself last spring from the investigation into Russian Election meddling. The president told the white house lawyer to persuade sessions against the recusal, but the efforts failed and ultimately special counsel Robert Mueller was named to conduct the probe. There will be a new chairman at financial industry watchdog. Charles rendell will take over the Financial Conduct Authority april 1. Global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine thank you so much. Now on to brexit and all things u. K. More than three quarters of Labor Party Members want a second referendum according to a Yougov Survey of political members. Just 14 of conservatives want there to be another vote and it comes after the former prime leaderr and labour defended his call for a second referendum. Joining us for a brexit discussion, greg ross. You have to choose between these two. I know the one i would pick, no choice. Us, Rupert Harrison. What exactly is going on . Who is bluffing, who is not bluffing . The u. K. Thinks the you is bluffing when it comes to Financial Services access. Do we get clarity in the next few months or do we wait until october . I do not think you get clarity until you see the piece of paper at that young the up negotiations. Theres still a lot of work to do. Financial sayinging barnier is that might not be possible. Francine rupert, how would you deal with this . This seems to be we had a little theresa may, could continue that trend . Rupert i think so. Theres a lot of political will on both sides to make this happen and avoid a messy situation. I think Financial Services is tricky because there are quite ambitious models of joint supervision, new arbitration models outside the e. U. Structure. At the same time, i think the commission and the will remove a little bit because move a little bit because they have to face reality they dont want disruption and have to ensure continuity. Francine but she is in charge. It seems a lot of the folding came from the u. K. Side and then at least we are on the path of that agreement. Tim im a little more negative about the outlook for phase 2. More negativettle about the outlook for phase 2. I think germany is going to be more tough. They will consider their theement in terms of what u. K. Is being offered and they will look at what access they can achieve while controlling Free Movements of labor. I think merkel is minded to draw a line. She needs to prevent the u. K. Being an unhelpful case. The phase 1 deal on in my mind is contingent on how ambitious the phase 2 agreement how be and when the sees barebones the offer is going to be and the fact that it will not be legal text, it will be essentially a political commitment that will not be binding. To my mind, that creates a sense of risks. Set of risks. Tom its a parlor game of the elites of london and nobody really cares about this and maybe we are just beating it to death. Is the United Kingdom engaged in is this juston or about london elites going back and forth in a game of pingpong . Rupert i think people are engaged. Before the referendum, people didnt really care and it wasnt one of the issues people wouldve put top. Since then, i think people are engaged and i think maybe they are a little bit weary after walltowall coverage and people may be welcoming quiet and break from brexit right now. I would be more positive than the risk the domestic risk. I think the conservative party will continue to accept basically anything theresa may offers as long as it delivers on the red lines of leaving the Single Market. I think there is time for process progress this year. Tom i guess the question is in europe engaged, or even more importantly, what are the incentives to europe to even negotiation. Why doesnt europe say this is the way it is, move on . I think there is the greater risk of disunity in phase 2 in terms of process, theres already pushback from Member States that want to begin preliminary discussions on trade as the Council Guidelines dictate heard that will not start until march. Theres pushback a lot of countries feel the binary character of the templates in the offer to the u. K. Are exactly that, too binary and that there is should be some space in the middle. The union is going to deal with greater pressure points, greater disunity through the process, but i think the ultimate deadline that will guide the ultimate approach will be the u. K. Can be better off as a third country as it was as a member then it was as a member state and we have to work through what that means. Tom this is so highbrow. Tim ross, help me here with what happens. If i am at heathrow switching airlines out of europe, what are british people going to do. Is there going to be three lanes . E. U. Passport, british passport, everybody else . What is going to actually happen at heathrow . Maybe you better buy your own plane, that might be the best. Tom weve got the surveillance gulfstream. Other than that, what are we going to do at heathrow . Tim all of this stuff you are quite right its the issue that really matters. We have arguments about whether or not the u. K. Should import chlorinetreated chicken from the u. S. In a trade deal that might happen after brexit. These are the kind of realities that are going to matter more to people than any of these highbrow political debates. A lot of it we are nowhere near having the answers. Francine plus, everybody is getting blue passports like the u. S. , so that is something to possibly cheer up about. When you look at the next phase. First of all, i was perplexed this morning. Nigel farage is actually talking to michel barnier. I dont know if its the same blue as the u. S. , tom reed we will have to dig deeper. U. S. , tom. We will have to dig deeper. Tim he is representing himself and has a radio show these days. Hes interested creating drama. Tom wait a minute. You know what that will do to people. When you get your own radio show, thats a bad thing, mr. Ross. Tim i love radio. Particularly Bloomberg Radio. 25thits our 20th anniversary. Francine we might send tom to figure out if he can talk to michelle barnier. On a serious point, if you look at the serious players, who does theresa may have to fear within her own cabinet . Is Boris Johnson a viable alternative or is there no one who will challenge her at this point . Rupert i think theresa may will survive the year and i think there will be an agreement at the end of this year. I think the policy to reconcile the hammond vision and the boris incrementally is edging away from europe over time once the benefits of trade agreements are bankable. Within that, theres a lot of disagreement that will manifest over the course of the year, but i think that will be the overarching policy and political narrative. Francine if more politicians come out saying they are in favor of second referendum, is there danger this e. U. Gives the u. K. A much weaker deal, harder deal in the hope of turning Public Opinion . Rupert i think right now we are away from a second referendum. At the moment we are in the error bounds of the referendum result. I do think that longerterm, the e. U. Side probably do have in the back of their minds that maybe the e. U. Will change u. K. Will change their mind and once we are in a transition phase, we will have this political agreement on a trade deal. Once you are in transition, theres the job training changing that into a trade agreement. We are talking post 2019 into and there will be incentive on the e. U. Side to string things out and see where politics change. I think that is the limbo risk and skeptics are worried about that, thats why they want to hardwire the date of exit transition. Tom i want to congratulate you on your wonderful book, betting the house. Volume 2ecommend for you do something on mr. Bannon and you can give it some fire and fury as well. What is the fire and fury right now of downing street . How fired up his Prime Minister may for 2018 . Tim i think she is very keen to crack on. I see no prospect of her being deposed anytime soon. I think she is in a much stronger position than shoe is was straight off the election. She will see brexit through and might go beyond that. Tom thank you so much. Congratulations on a wonderful book, important book this year. We will continue with mr. Harrison. Let me tell you about Bloomberg Radio. We begin our 26th year. We are doing that after we celebrated our 25th anniversary yesterday. Its a good way to begin your briefing across a cold United States. Karen moskow and bob moon, bloomberg daybreak on radio. Look for that. This is bloomberg. Is bloomberg surveillance. Tom keene in new york and Francine Lacqua in london. Lets talk about the future of europe and the turkish president. He is in paris today for an efficient an official visit to discuss bilateral relations with emmanuel macron. The elections in italy in the lack of progress in forming German Government are potential risks for the euro zone. Rupert harrison, black rock multiasset strategies portfolio manager. When you look at europe politically, is this macrons big year or is there a danger he focuses too much on International Politics where he needs to reform ekholm . Back home . His secondch approach was about european reform on the latter he is not going to be disappointed by the germans not simply because there is no conceptual agreement how to reform, but because of the political impasse in berlin. I think it impacts the timetable in terms of agenda the results and how likely. Thats a problem for him and his narrative. We will see how he addresses that. Francine what are the unintended consequences of Angela Merkel being weakened . How weakened is she and does it also impact the italian elections, but also ecb policies with a lot of people moving out . Rupert if she is weakened, the german situation has rained on the macrons parade. It underlines the tensions between french and german that were going to be difficult to reconcile. Within her party, she is weakened because people are starting to look towards the post merkel area and theres concern they have been losing votes to the afd and the kind of edu for this have broaderesnt consequences beyond that, i think. The ecb debate is basically settled until halfway through the year. They kind of got over the big hump of last year and have gone to the each beach. The italian election is pretty generous. Youve got this potentially ,oxic combination of the league could they cause an upset in some way . It seems less likely now particularly the immigration numbers across the mediterranean have come down. Francine we like to debate tom we like to debate in bloomberg surveillance and we identify that this morning. Mr. Harrison suggests a more optimistic tone. At the telegraph going the other way, concerned about the sustainability of this recovery. Within the top risk of 2018, what is the blunt gdp call on europe by Eurasia Group . Economicont make forecasts. In terms of the political economy, the risk are brexit, albeit some more benign. Francine do you believe tom do you believe in recovery . I do believe in the recovery, but i think there are risks. Italy is one i would flag. I think we are concerned becoming a bit more concerned. Pd really are the being hurt in the polls. The a messy work out for various situations. There has been discussion in parliament on the front page and that is beginning to subtract party. From renzis al qaeda of other potential formations are looking plausible all kinds of potential formations are looking plausible. Not contagion for a member of the euro area or southern europe, but a problem giving the size of italy and outstanding debt to gdp. For these reasons, we are a little concerned about italy. Not an existential crisis, but worth watching. Tom it will be an existential road trip. A francine, is the italian election as big a deal as the French Election . Francine it is a big deal, yes. You can argue italy is one of the weaker countries, not as important as france and not as binary because italians are used to grand coalitions. We will probably a deck be on the road for that. I want to alert viewers and radio listeners that the new chancellor of austria is actually giving his first joint News Conference with his deputy. I know we are getting live pictures. He is the youngest world leader at 31 years old. There he is. We will be back with Rupert Harrison and talk more about the assets and we will be talking about where you put your money and any kind of fallout from italian politics and the impact that has on ecb policy. This is bloomberg. On politics and international relations, on economics, bloomberg surveillance. Francine lacqua in london, i am tom keene in new york. Lets talk markets again. Rupert, i looked at an iconic mutual fund not managed by black rock that has a 92 correlation to the s p 500. They didnt they did some they did not beat the s p last year. Why am i in an active fund . What is the passiveactive debate after a bang up double digit year . Rupert i think the debate is Asset Managers need to prove their value for money and its not just clients focused on this, its regulators very focused on index huggingactive funds and people need to demonstrate performance in the end because people know clients can go passive, they can use very cheap flexible. Within blackrock where we have passive and active funds, the debate is if your running an active fund and charging for that, you need to demonstrate the value you are adding. Tom active managers seems when things get lousy they outperform passive funds. You come in with your unique skill sets. When you are in those meetings do you buy that . That you need the doom and gloom market to justify active managers existence . Rupert i think a lot of funds group theyre worth during a lockdown term. I think one of the things that helps is the decline in correlations. One of the things in this early period of recovery made it tough for active managers was high cross asset it was really dominated by binary decisions risk on, riskqe, off and that has really changed over the last 18 months and we have seen surprisingly low levels of correlations. For example, one of the things that explains the low absolute level of all attila the in the s p is the incredible low level correlation across thats where value managers may be able to their decisions are not swamped by big up down moves. Francine what is bitcoin . Does it show there is something the markets arent1 providing or just keep it completely separate . Rupert i would keep it completely separate. Theres a whole story around anonymity and speculation. Typically a lot of money coming on coming in from Asian Countries where something is going up and Everyone Wants to own it. I would put it slowly to one side. Tom i love when you are on. I just looked at the vix chart, absolutely wonderful. He is at black rock and year multiasset portfolio work. We really dive into the american coverage. William bauer will join us from citigroup joining with Catherine Mann. Louder, Catherine Mann of citigroup, thats very good. Coming up next. This is bloomberg. Tom this morning with the dow 25,000, the melt up from march 9 of 2009 continues. March up from march ninth 2009 continues. Catherine mann of citigroup. Rate, aunemployment good signal of the labor market and all of washington consumed by fire and fury. The president is alone is he alone in the white house . Good morning, everyone, this is bloomberg surveillance. I am tom keene. With me, Francine Lacqua in london. I thought that was a great discussion in the last hour on brexit. I cannot imagine the discussion we will have with Kevin Cirilli in about 10 minutes. Francine i am really looking forward to it. I have been reading some of the excerpts. Tom look at you. Francine i got it in pdfs. I dont know what the consequences of this book are or will be, but it feels important. I think Rupert Harrison was making a good point. The question is whether the president wants to distract from some of the saga and do something on trade and protectionism. Thank Stephanie Baker for fire and fury and how we are treating it here. Here is taylor riggs. Taylor north korea has agreed to the first formal talks with south korea since 2015. Kim jonguns regime will meet with south koreas next week. They will discuss reducing tensions before the Winter Olympics. South korea has north korea has offered to send a delegation to the games. The trumpurity Administration Says it will withhold 255 million in aid while it reviews pakistans cooperation fighting terrorism. As you were mentioning, theres more fallout over Steve Bannons comments in the behindthescenes book about the Trump White House. Rebekah mercer cut ties with the former white house strategist after speaking on the phone with President Trump according to people familiar with the matter. The storm that battered the northeast has national gas Natural Gas Prices sure is. 175 per million btus in new york. That is 60 time what national gas natural gas has rallied this winter. Global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom thanks so much. We want to mention also thank you so much for bloomberg on the storm yesterday. It came in a little worse than expected. Some serious snow across the northeast, particularly up to boston. Right now, a serious melt up continues. Futures up 79. Onto the next screen if we would. Looking at the vix at 1. 93. There is the dow with all the buzz about 25,000. We will do that attach here. Andow euro stronger particularly stronger it gets everything out there, including yen and swiss franc. Francine i am looking at global equities, seems to be extending their start to 2018 higher. Tokyo up, the dollar strengthening and treasuries steady in advance of that figure. I need to bring up today with breaking news on hna. This is the conglomerate heavy relying on credit lines in china. Units of hna according to people familiar with the story have missed payments due to several chinese banks in several weeks. That means this is according to people we spoke that three lenders have been frozen some unused credit lines. We need to pay particular attention to it. Tom china is the top of the heap of Eurasia Groups risks for 2018. This is the chart we will show throughout the hour. We will do it with alan krueger and bill gross and jim glassman as well. This is the Unemployment Rate. It is log. Notice the slope showing great recovery off the agony of 2009. A lot of people over here in the 4 , 3. 9 , whatever. We are beginning to see People Economy here as well. Theres a job chart to begin jobs day coverage. I was going to start with the markets, but lets go right to Willem Buiter of citigroup on the American Labor economy. This is just an extraordinary chart. Did janet yellen give us this tight labor economy rupert tight labor economy . The fact the fed has been accommodating is one of them. You would get a recovery, but the combination of continued monetary softness, there is some tightening now, but not to where it would normally be, its still extremely relaxed. Tom this is an incredibly important idea whether it is the fancy taylor rule or people sitting around having a cup of coffee, dow 25,000. I just asked you did janet yellen give us this subfloor percent Unemployment Rate. Did she give us dow 25,000 . Willem i think she contributed more to the dow 25,000 than the Unemployment Rate although she made a contribution to both. Markets are slightly out of touch even if they are strongly improving. Francine what is the biggest distortion out there . When it comes to inflation, is it a 5050 chance if it picks up or not . Willem the labor market is now territory quite likely before long and possibly even today although that is not our projection. Distortion is probably less this combination of extraordinary low risk and failure to price any risk that is not completely inability tohe take care of the longerterm underlying developments on the supply side. Francine will the jobs number today be enough to give us a sense of what wage growth will do . Willem yes. I think we stay in the 2. 5 range year on year, which means there is no dramatic pickup. With unemployment entering into the three plus region, we are going to see upward pressure on wage growth and even somewhat less on u. S. Labor cost growth, particularly picking up as the late stage of the cycle and more has taken place. Show a chart. We are doing this to impress Willem Buiter how we do logs on surveillance. This is off of stan fischers important speech. It is the fed funds target rate distorted because we are showing percentage change. The point is we are finally away from altered accommodative. Arent we . Where a. Is the fed begin to impinge normally where up here does the fed begin to impinge normally . The shortld say run at least 50 basis points. In the slightly longer run if you were to stay on the current with underlying recovery going on the way it is, it would be at least 100. Tom thats a lot of math. Thats right here. So there are the two lines. On Bloomberg Radio i will put this chart out later. We have a long way to go to get back to where we are not producing the melt up goosing the melt up stock market. Francine the melt up is probably the word of 2018 as Rupert Harrison was saying. Are we going to see a rotation between bonds and equities . Will it start normalizing again . Willem i am not the worlds greatest forecaster. It looks like its the kind of with the kind of fiscal stimulus in the growth come along yields are extraordinarily low. Of stock market into the safer assets, that kind would not be impossible. For the rest of the world, the greater risk appetites could further switch to equities. Tom we will come back with professor buiter and continue our discussion. It is johns day out there. We like to speak to Rupert Harrison. Michael mckee is at the meetings of the American Economic association and he will speak with the always interesting jim bullard of st. Louis and bill glass and jim gross will join us and then from the white house lawn, jon ferro in conversation with mr. Cohn. This is bloomberg. Taylor this is bloomberg surveillance. I am taylor riggs. Belgian food distributors attempt to buy dole foods has failed. The company says an agreement cannot be reached. Dole may be valued at 2. 3 million. Billionaire tech investor peter thiel is considering starting a conservative news outlet according to revelations in the new behindthescenes book about the Trump White House and report from buzzfeed news. Buzzfeed says thiel is talking to Robert Mercer and his family about backing the news venture. Computers, the company insists users have not been impacted. Apple says recent Software Updates will mitigate one of the vulnerabilities and they will come out with updates for safari web browser to defend against another security flaw. That is your Bloomberg Business flash. Tom we want to begin with Kevin Cirilli in washington with a morning must read. I want to make clear this was a balanced and tempered essay by the shell goldberg in the New York Times even though the kindine is to be inflammatory. The way relatives, opportunists, try to manipulate and manage the president and how they often fail. She goes on to say some of the military men trying to study american foreignpolicy amid the president s wins and tantrums might be doing something quietly decent, sacrificing their reputations for the greater good. With that is our chief greater good correspondent in washington, Kevin Cirilli. Theres going to be a lot of greater good this morning. I want to go into the white house. How are the generals, general mattis, general kelly how are they going to do the greater good this morning given the tumu lt . Byin i think the tumult led Michael Wolffs book, he will have comments later this morning. A lot of people are making comparisons to of steve bannon to stick maurice. Dick morris. General kelly has tried to steady the ship in terms of the information that gets to the president in terms of foreign policy. Two substantial policy developments within the last week is that the United States starting their trade negotiation talks with south korea at the same time, north korea and south korea have opened a back channel. Hugei get the idea its a january for washington and the nation and we are all distracted by not the silliness, but the fire and fury of the moment. How does mr. Mueller fit into this . Money laundering seems to be the phrase of the morning. Do you as an insider in the halls of congress, the you expect mr. Mueller to drop a bomb today, five days from now, 20 days from now . Kevin i think the pace of the investigation has really intensified and i think the criticism and the apparatus of the apparatus and the machine going after bob mueller from the administration and a certain faction of the Republican Party has also intensified. Case in point, with paul manafort, the former Trump Campaign chairman, who charges has charges against him, including conspiring against the United States filing his own lawsuit this week against bob mueller and other government officials. Francine kevin, i think the book is sold out on amazon already. I have a pdf copy. What is the book mean for the Trump Administration . Is the president going to be distracted, does he want to focus the attention somewhere else, and what are the applications of that . Kevin i spoke to the source last night and said why would you said for a dinner on the record with Michael Wolff in the middle of all of this . It really is fascinating that these folks trusted someone who has a reputation of being a controversial journalist to say the least and apparently there is audio tape recordings of it. It really is interesting. In terms of the strategy, yesterday you saw this at the White House Press briefing with Sarah Huckabee sanders essentially saying the book is bad, and in is bad, the bannon is bad, the relationship bannon,etween trump and and thats how they are steamrolling through this. I think they believe they wont it wont have implications with their base and the base will support the president. Francine you are absolutely right. Lets remember Michael Wolff is controversial to say the least. If this doesnt go away and leads to more investigations and questions from the base, how does President Trump handle it . Does he focus on trade and give his base protective is a . Protectivism. Kevin based upon my reporting, protege,teve bannons stephan miller, has actually realigned himself inside the white house with President Trump kind of breaking away from steve bannon. Steve miller is clearly trying to place play realignment longer game. The question becomes what does steve bannon do now . Is he emboldened . Does he have the money . Where does he go from here to get to the midterms . Tom i get the idea this is not soapp, but a substantial opera that keeps cabletv employed. Lets go to the president s rebuttal last night. To therized zero access white house, actually turned him down many times. The is from mr. Wolff of phony book. I never spoke to the author of phony book. Look at this guys past and watch what happens to him and sloppy steve. How does this affect your day gig, to the congressional up war of january or or they or are they two discrete worlds . Kevin they are two very discreet worlds and separate worlds. I would point to the fact that so much in terms of the policy that goes on here in washington is so below the surface, it doesnt even breakthrough anymore. Big stories in washington are breaking through beyond bloomberg world and that is what is fascinating because most people its business as usual. They have adapted to the chaos of the situation that they just keep moving forward in congress and at the agencies. Tom i look forward to your lies ns tomorrow. Sentatio we continue with Willem Buiter on the labor academy. Alan krueger will join us from Princeton University as well. We will come back and continue our discussion. This is bloomberg. Francine bloomberg surveillance. Tom and francine from london and new york. Tom and i are preparing to theate to rome to cover italian elections on march 4. I think a lot of the politicians are readying themselves with possible key alliances as the center seems to be a little bit in a wobbly position. We are back with Willem Buiter. When you look into the concerns on the elections march 4, there seems to be much more of an antieuro sentiment we saw 6, 7 months ago. What does that mean for the election . Willem i would not confuse the growing popularity of the fivestar movement and euro sentiment. Its clear the fivestar movement is likely to come out on current projections of the elections in march as the largest party. It doesnt need to go get an antieuro coalition to organize the referendum. I think there are risks specifically, but more of the crashing out variety than the walking out variety and as long frankfurt,aghi is in the crashing out scenario is also not part of anything realistic, so it should not be dramatized. Its a threat in turley internally to the but not a disaster waiting to happen with italy walking out. Francine very quickly, the fact that the pd has done so badly in the last couple of weeks in polling, what does that tell us about what italians want . Willem it tells us the pd is divided and that mr. Renzi is in tough conflict with his harder left. It doesnt tell us what they want, although what the italians want although it is being led by a party being torn apart. Francine for more Bloomberg News stories, be sure to read the latest edition of Bloomberg Businessweek. We focus on the treatment of immigrant workers. Its an interesting cover, very important cover whether you look at it from an Italian Point of view and the election and it goes back to immigration. So does brexit. This is bloomberg. Tom good morning, everyone. Bloomberg surveillance. Its jobs day in america and much going on in europe with a rekindled Brexit Debate and the filing gets back january 5 from the new year. We love to keep up with the zeitgeist. I want to make it clear, mike allen has just published a and detailed note on this controversial foot of esther wolf book of mr. Wolffs fire and fury. There are definitely parts that are wrong, sloppy, or portray off the record confidence. There are two things he gets absolutely right. He then goes on to take line by line in the book the themes we just heard from Kevin Cirilli at the white house. An extraordinary essay by mike allen this morning certainly will be the talk of the morning in washington and across much of america. To our first word news on korea, heres taylor riggs. Koreas havetwo agreed to talk about reducing tension in the runoff runup to the winter olympic games. Kim jonguns regime accepted a proposal to have discussions on tuesday. They will discuss overall relations and north koreas offer to send a delegation to the olympics. It will be the first formal talks since 2015. Environmental activists are vowing to fight the Trump Administration over plans for offshore drilling. The Administration Proposed opening 90 of the u. S. Coast to oil exploration. President trump told the lawyer to tell Jeff Sessions not to recuse himself from the russian investigation. According to a person familiar with the matter, the president told white house lawyers to persuade him against the recusal. Andefforts failed ultimately special counsel Robert Mueller was named. It will be the new chairman at the u. K. s financial industry watchdog. Attorney Charles Rendell will take over april 1. Jones, whoceed jon is leaving at the end of his fiveyear term. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Tom thanks so much. The head of the st. Louis fed going to word 18 months ago called regime. Regime popped into Michael Mckees consciousness. It is ice cold across america, in philadelphia, are regime is a smart conversation of jim bullard and Michael Mckee. Mike we will talk to the st. Louis fed chairman of that regime changings, and whether they speed up the economy and the tax cuts that are coming are going to cause him to change his regime. Everybody laughs when it comes up. Bullard this not put in an Interest Rate forecast and thinks nothing should change until the regime changes. We will hopefully stay a little warmer. Tom within the American Economic Association Meetings, we know there is always one theme out of their vast bulk of schedules and meetings that sticks out. Can you clean with that is this year . What are academic economists riled up about in philadelphia . Mike i dont know if riled up is the word. It is easy to discern with the theme is. What is the theme for everybody and everything we talk about, donald trump. There are supposed to be 13,000 people at the meeting. I think we are down to 10,000, so many people cant get here. They are waiting for you here. You left a chair which more panels. The Trump Administration and what they have done in the first year is one of the major panels of today, featuring some of the biggest names in economics, including larry summers. There is an assessment of the u. S. Economy one year into the Trump Administration. There are panels on things like infrastructure and health care, evaluating the obamacare programs. A lot on going on in washington and how its driving the economy. Tom begin our discussion with professor bullard. The question everyone is asking is, whether the United States economy under donald trump, will we see faster growth and will be see bigger deficits that eventually leads the fed a higher inflation and leads the fed to move faster . You will see faster actual demanddriven growth as a result of the fiscal stimulus. Potential growth will barely pick up. We are moving to an economy where deficits will rise, where slowly but steadily inflationary pressures will augment and ultimately the fed will have to do more than they are probably ssing tossing out. Francine go ahead. Mike i was going to ask a quick is how quickly this happened. The recognition of the reality as early as the middle of next year. The fiscal stimulus bill is coming out of the pipeline, of ,he deficits which are rising you will have 5. 5 of gdp for employment deficits in the u. S. That is scary. You would expect that you get some response, shortterm, positive, longer or negative for the u. S. Economy. Francine if the fed has to hike more than they are plotting, what is it mean for the economy . Is there a danger they go too fast . Moving made a habit of very slowly in my view, my personal view. Probably too slowly. It is hard to see it moving too fast. It is true there are all the changes in the personnel on the board in the pipeline. It is hard to see a fed that is more dovish than the current one and later 2018 and 2019. That is plus the fact there is significant fiscal stimulus on the way. It probably means more likely to engage in more higherpriced than fewer. Francine mike, let me bring you over to President Trump tweeting earlier. He was talking about jobs and making America Great again. 6 trillion in value created. For the administration you can imagine President Trump thanks every time you have a record high in the indices, it is a win for him. Does fomc look at the indices . Mike not the same way. I dont believe the stock market is the economy, nor did any economists. It is really a measuring stick of investor optimism. Some of that money could be cashed in and could be spent, of people who own stocks have enough money. They are not rushing to add to consumption. We see that in the retail sales numbers. The fed is not as concerned about that as they are the valuations being too high. You can go to wait they can go that way quickly and lose a lot of that money that is been accumulated. Tom 6 trillion in value created. Professor, who was that value created for . Value created simply means financial asset prices are in a bit of a boom and bubble. That is created for the beneficiaries, the rich and the old. The propensity spent out of wealth increases. Zepplin. Read torstin what is value mean . It is so squishy. Whether they are writing about orns, or academic economics, 120 years ago. What is the value the president is talking about besides what people see in a gilded age and plutocracy . I would never look at Financial Markets as a reliable index of value. Tom thank you. I would look of the underlying behavior of the real economy. Gdp growth or more inclusive measures of economic wellbeing, unemployment, employment, those kind of things. There the economy has been doing pretty well. It is probably of the policies pursued by the fed and the administration. Partly it has nothing to do with them. We should not underestimate the importance of policies for performance of the economy. There is a lot that goes on regardless of what policymakers in washington do or say. Tom Michael Mckee, look forward to your conversation with jim bullard from the fed bank of st. Louis. Looking forward to that in the 7 00 hour. Francisco and washington, boston, new york, and on sir ius xmn. Stay warm in your car. Alan krueger will join us. Bill gross and jim glassman later on. It his job stay in america. This is bloomberg. Francine taylor lets get to the Bloomberg Business flash. Former uber ceo Travis Kalanick plans to sell about 29 of his stake in the right healing service. 1. 4 billionabout from his sale to softbank and the consortium of investors. The owns about 10 of uber. The leader of apples streaming Music Service is planning to leave in august. According to persons familiar willmatter, jimmy get his payout in the deal. Industrytime record executives whose vision is sometimes classed with others apple. Amazon plans to make a bid to Stream English Premier League soccer matches. According to a source familiar with the matter, that is part of a broader strategy to bring more sports content to customers. That premier league may decide on its Media Partners next month. That is your Bloomberg Business flash. Francine thank you so much. Lets get back to uber and Travis Kalanick. He is said to be ready to sell his shares to the ride hailing business. Here. Kahn is much forhank you so enlightening us on what this means for the company. Uber has been going through a tough time. They are huge lawsuits in various countries. Is the fact they are distancing themselves from the previous ceo make it better for the company . Think that may he is still there. Francine what comes next . Jeremy i dont think we totally know comes next year. We know the company has a new ceo. They are trying to clean up the culture. At some point he offered to sell even half of his stake and was prevented by the rules of this particular deal from selling that much, so he is selling 29 of what he owned. We dont really know what hes going to do with it. He may have a particular plan or he may not. Francine how is he doing . Jeremy he is doing well. Is trying to clean up the culture. He is trying to fix a host of problems they have, put it will not be easy. To have problems with regulation, the number of lawsuits. Tom do we know ubers financials . Spotify is going to go public. Im under the impression uber has never made an operating dime. Doing overs finance do we know ubers financials . No,my know, we dont. We dont. We have some idea of what the Company Valuation is based on this deal. Is always a company around 58 billion, but that is less than some earlier funding rounds they had done. There is not much we know about the fundamentals of this company. Francine apple cannot saying all maxon iphones are exposed to iphoneslaw macs and are exposed to a chip flaw. Jeremy is potentially a very big flaw. They could potentially affect all computer chips made by any of the big chipmakers. Fixed, it would allow an attacker potentially to get almost anything off your computers memory. It is a big deal. The company is issuing patches. Issuing willle is immediately take care of one of these exploits. They said it will issue a patch for safari web browser that would take care of another of the exploits that researchers have come up with. Hopefully these patches will stop this from being an issue. I think for most consumers you will not see significant performance slowdown from the patches. That is not necessarily true for those doing enterprise database servers and heavier computing loads. There the performance slowdown to be significant. Tom what is a patch . Jeremy a bit of code that update software and fixes the vulnerability these attacks would use to try to steal data. Tom thank you so much, jeremy. We will continue. I have a really important chart on trade. We will look at it with carl coming up. Tv. If youre needing to watch tv , you can watch it off your bloomberg terminal and steal charts see you can go into your meeting in two hours and dazzle them with bloomberg charts. Stay with us. It is jobs they, can a beautiful central park. This is bloomberg. Tom bloomberg surveillance. It is jobs day. Carl is joining us from Bloomberg Economics. We will rip up the script here. All International Economics stood up and cheered for citigroups announcement that Catherine Mann will darken the door in february. You will become a special advisor. She read a definitive book 20 plus years ago, is the trade deficit sustainable . Why did you hire cap a man kathy mann . She is the best person for the job. She is an outstanding macro economist. Vast range of experience, both in academia and think tanks and oecd. You cant really imagine a better person to be global chief economist. Tom we will do some breaking news and morgan stanley. Francine this is what happened. We had the tax plan passed in december and a lot of big companies, the banks trying to figure out what it means. Whether they take immediate hit. Morgan stanleys has seen the next tax provision of about 1. 25 billion from this new law. They are basically trying to figure out if this is longerterm. I think a little bit more than we were expecting. We heard similar things from credit suisse. Tom they will take it out of his salary. The chart on Catherine Mann and the trade deficit. It is the trade deficit. Carl knows this chart as well. Down from the 90s. Carl, a lot of critics would say this trade deficit is bad. It impinges on jobs formation. Does it . Carl there is obviously some flight of jobs out the u. S. , but there is a lot of Multinational Companies that benefit from a more globalized world. Even later this morning we have trade data coming up alongside the jobs report. I think there is a risk, at least in what ive been here in anecdotally, that a lot of foreign producers are rushing to get there products in the u. S. Before the Trump Administration turns to trade policy more forcefully in 2018. Was for a big pickup and imports that could be related to that rush. Tom are we fully employed in america . The agony of the trade deficit is part of america is fully employed, but there is a huge body that is not. Is that where we are . Are close but we cant say we are at full employment until we see wage pressures trend higher more presciently. That has not been the case. Full employment is lower than where it has been a prior cycles. Is as low as 4. 1 . Maybe not. Far from 4. 1 less than a lot of economist believes going into the last couple of years. Tom you are swarming over here irming over here. It simply means Capital Expenditure exceeds domestic savings. If anything that is good for jobs. I would like the u. S. To save more at full employment, but to worry about the trade deficit francine at what point in the cycle we have a chart that basically says if you look at the hiring trends regionally, this could mean we are midcycle. Which to a lot of economist or investors would seem preposterous. We are late cycle. 2009 a going on since depending on how you count. That doesnt mean there is not some natural termination date. There is still some slack in the economy. Certainly a man is demand is getting stimulus from the fiscal side. The Global Economy is doing well. Increasing demand for exports. Capital expenditures are up. This recovery still has legs. Francine carl . Carl i would have a slightly different view. I would say where the economy was back in 1996, the midpoint of the long cycle. We have tied for second place for the longest Economic Cycle in the postworld war ii period. I think the fact inflation is low, wage pressures of not materialized, Interest Rate policy is a very accommodative means we will probably make a run at or surpass the 40 quarter record of the 1990s. Down to thel go American Economic Association Meeting in philadelphia. Jim bullard will be there. With an do a panel interesting and twisted economist. He owns the phrase toolbox. Ave is chairman powells toolbox for the challenges he may face . He certainly is the instrument to tighten faster if that were to be required. If it were to be some demand implosion, of course with rates still suspiciously close to the affected lower bounds, Strong Political resistance to the notion of reversing the contract and of the balance sheet, if there is a stimulus that would be challenged. It is most likely a call of next activity by the fed. It will be for more tightening. They have all the tools they need. Tom thank you so much. Willem and carl. Coming up, Michael Mckee with jim bullard in philadelphia. Bill gross will join us. Cohn afteras gary the jobs report. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. In america. Jobs day the 87th consecutive month of job growth, but wages are the real warrior. Plus, a new year rally. Global equities, every named u. S. Equity index sits at a record. All apple owners, the companies of all macs, apples, iphones are affected by the big security problems. David it is jobs day. I am david westin alongside alix steel. I guess the jobs day is pretty good. Alix yes, i guess, unless you look at the dollar and say, i do not know, i do not really love it. One and a half hours until the jobs numbers. S p closing at a record yesterday. Weaker. Lar slightly the euro has been stronger. We have weaker inflation print in europe. The dollar a little bit stronger then
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