Reaction around the fact that the government had been shut down for a third day in a row. The senate cleared a pathway for shortterp spending through february 8th. Investors seem to be heartened from that. Hiles now off the record lows. The s p 500 energy index is the best second tar for the s p 500, helped out by a lot of the drillers. Real string there for the driller after they reported a strong Fourth Quarter. They beat earnings and revenues. Earnings by more than 13 . Margins quadrupling to about 15 . Lots of strength there. The company is also talking about the idea that there is a worldwide recovery under way for the oil market and that the u. S. Shale market has much to do with this. Helping out some of the other drillers as well. Lets take a look at the 10year yield along with some of the rate sensitive sectors. If we look at the 10year yield, we are going to see earlier it was down about two basis points. At this point i am hearing that we dont have that, but the rate sensitive sectors rallying on the day in sympathy with yields. On the year, down, interesting point to make. Then finally if we do look at the imap in the s p 500, we are going to see that here up top, telecom, real estate, utilities, those are some of those rate sensitive sectors going doing well. Energy up top being boosted by oil. Thanks, abigail. Appreciate it. Lets check on the bloomberg first word news with Mark Crumpton. As we have been reporting, congress is speeding toward reopening the ferguson. Senate democrats dropped their objections to a temporary funding bill in return for reassurances from Republican Leaders that they will soon took up immigration and other contention issues. Chuck schumer told his colleagues that he and Majority Leader Mitch Mcconnell had several conversations over the weekend. He said he and President Trump hadnt spoken since their Oval Office Meetings sunday. We expect voting on a funding bill very soon. Leader mcconnell and other republicans have been talking about a temporary spending beal now with a promise to deal with immigration leader. Democrats have opposed any measure that doesnt offer protection for young undocumented immigrants. Plane authority was welcomed for talks on the middle east. He called for quick recognition of the state of palestine. They reinforced its belief in a twostate solution and jerusalem as a shared capital. They continued aid for palestinian interests. I want to assure palestinians and president abbas about continued support, including financial. The european and Member States are by far the largeest zone oher and supporter for the palestinians, and our support will continue. She also says that what the e. U. Has been very open with differences with the Trump Administration on the israelipalestinian conflicts, both sides must be contribute to piece talks. Darren osborn is accused of driving a van into a crowd of worshipers attending ramadan prayers. One person killed, nine others injured. Osborns trial began today. The food and Drug Administration is working on a new antismoking plan to try to get americans to kick the habit. The proposal would drastically cut nicotine levels in cigarettes so that they are essentially nonaddictive. They would offer lower risk products for those who cant and wont quit. The adult smoking rate has fallen to an alltime low of 15 , but it remains the cause leading because of death and illness. I am Mark Crumpton. This is bloomberg. Scarlet . Thank you, mark. Lets go back to the Political Drama that continue toss play out on capital hill. Join us is lonnie cohen. He is a Hoover Institution ellow, a policy director for mitt romneys 2012 president ial campaign. Great to speak with you. Now that we know the shutdown is going to end, the senate is going to hold its vote shortly, what we are anticipating is the government will be open until february 8 because that is when the funding runs out. Somewhat the likelihood we are going to be right back here again february 8 because all we have done is push off the imimmigration issue until then . I think the likelihood is pretty high. This issue, the issue of immigration, is so interactsible, so difficult for people in the congress interactible, so difficult for congress to fix. There is no reason to believe that this issue is going to be resolved in the next couple of weeks. I tend to think we may be back here again. The question is going to be whether democrats will continue to insist that this issue be resolved in return for financing the government it seems that is an untenable position as they discovered with the current shutdown. Why do we have to keep going through this . Is it a structural problem or a political problem that we keep seeing the budget being held hostage, whether it is immigration this time or whatever political issue dujure . Is there a way this issue can be avoided . The answer is it is boston. It is a political problem and a systemic failure. Lawmakers see this as a tool for negotiation. They dont see it as something that has to get done for the good of the country and the economy. Things we are seeing that come up is people dont realize how serious of a thing this is. For your viewers who are involved in enterprises, none of them would even dream of trying to run their enterprises in this way. This is completely dysfunctional. Yet the people we send to washington here in the United States dont realize that what they are doing is really creating the selfinflicted wounds. That is the political issue. Subtract recallly, we would be much better off where we did a normal process where there was budget resolution and appropriations once every two years. But there is no end in sight for the paralysis we are seeing. Nomar alprocess, we dont even see that anymore. That is another point. We see the various Political Parties trying to blame the other for the shut down. Arent the American People blaming congress generally . Wont they tar both sides with the same brush when we keep seeing this same playbook . That is right. I think americans see this as a pox on both of their houses type of dynamic. Obviously i think for the democrats the problem here is that the perception is they shut this down just to have this discussion about immigration. The challenge for republicans is it is perceived they are in charge of all of government, so why cant thought get it done . On both sides it is a problem. If you turn on very cable networks, not bloomberg of course, but the perception you get is entirely colored bipartisan politics. Democrats are saying they see this as a victory, having this discussion about immigration. Republicans are blaming democrats for shutting it down and americans are stuck in the middle. This is a problem we have that is indicative of our broken politics. The shutdown invites arguments over who is to blame. Does it matter who wins the blame game . Whatever network you work or whatever media declares, there is something between now and midterm elections. There are going to be a lot of surprises between now and then anyway. Does it matter who is blamed for the shutdown . Scarlet, i dont think so. Think back to 2013. That is the last time we had a shutdown. The perception there was that republicans were holding up financing so that they could have a debate about obama care. Fast forward to the 2014 midterm elections, and republicans had a great year. So the length of time we still between now and the november elections is still an eternity. And the factors that will influence a what happens in the mid terps this november will have a lot more to do around the strength of the economy than it does who shut down the government in january. A lot of this is going to washington out. We have these 18second media singles now. A lot of this wont be around until november. It seems like a long time ago that the tax overhaul got passed, and we talked about the big republican momentum from that moment. That momentum seems to have melted away. What is the next priority of the Republican Congress and of the president for that matter . They have gotten mired in this current situation. I think that the sense is that they are going to turn to infrastructure next or something that is going to be able to garner significant support. I just dont see a lot getting done in 2018. I think we are in a political environment the shutdown is indicative of how partisan, bitter and caustic these discussions have become. Dont forget that the impact of the tax bill is going to continue to be felt. Republicans see it as the gift that keeps on giving. You had the ansah noments around these Companies Providing onetime bonuses. You are going to have a relatively positive flow of information around economy, jobs and the growth of the economy. That is going to be something republicans are going to return to. You can bank on donald trump going out there and campaigning on the tax bill as well the republicans as we move toward november because this is something that i think will continue to be a positive boone for the economy. In the mean time, there are lots of points of distrust between the players on khalil on capital hill. We are looking at a live shot there. When they begin voting on the bill, we will keep you posted there. Is a lot of distrust between Senate Republicans and the president following his tweets about the child Insurance Health care program. He has displayed his willingness to cut a deal, between the democrats and president as well was he keeps changing his mind. What is the level of trust if any between the democrats and republicans in the senate . When mcconnell says he will bring a bill on the dreamers to the senate, what is the level of trust there from Chuck Schumer and his group . I think that Chuck Schumer and Mitch Mcconnell do have a working relationship, notwithstanding the fact we have just been through a shut down. What mcconnell has said is they will proceed to this discussion about Immigration Reform if the government remains open. That is a big qualifier 134 room to say we are not going to have this discussion anymore. But i do think there is this level of trust between the two. I think the president remains a bit of a wildcard. I think the challenge for Senate Republicans is figuring out can they have a discussion that is not going to get them cross wise with the president , because ultimately they need the president to sign off on keel if there is to be a deal. The waters are very choppy. It reminds me of the old peanuts cartoon where lucy is holding the football for Charlie Brown and pulls it out right before Charlie Brown kicks it. That feels very apt. Lanhee u very much, cohen. We are awaiting the Daily Press Briefing at the white house. It usually starts at 2 00 p. M. It look like it has been a little bit delayed today. We will be checking on that as well as the senate vote when it begins. This is bloomberg. This is bloomberg markets. I am scarlett fu. And i am julie hyman. It is ay day for deals, especially in the pharmaceutical world. Celgen agreed to by. Bloomberg glass light columnist joins us now with the latest. S latest column is biotechs 20 million merge he may end up being a dud. Thanks for talking about this. In your column you lay out the reasons why these deals may not be home runs, or it is at least in question. Explain your thinking on this . Absolutely. For cancer deal drugs to track down cancer. It is junos individual drug, behind two entries between other entries in the market. That makes for a competitive dynamic and classwide difficulty. Ese drugs are really expensive, and there are reimbursement issues, and they also have severe side effects. For the other deal, it is a lehman feel ya focus off biogen. That is a really tough market, and there are drugs coming out that may actually be able to cure lehman feel ya in some of lehman feel ya. Why are they going into these areas of medicine . It is Pricing Power. You see that especially with santa phe, a diabetic drug maker. There are a Dozen Companies all competing for the small niches hike you have in diabetes. And cancer in particular has been mostly immune to pricing pressure, although we will see if that continues as marks get more crowded. So we have seen regulators kind of not pay as much attention for the cost of therapies for these diseases as opposed to generic drugs or more mainstream diseases . That is definitely the case. Any given payor is going to have a fraction of the number of people with the diseases. Maybe a couple of those in a given count, state or anything. See all of hat we this activity is big drug makers having things coming off patent. Are we going to see more deals that are a little more risk taking because they are under this extreme pressure . That is definitely the case. In an put celgens deal that category. Far more than that, it is about that this cell therapy is going to be a cornerstone of future Cancer Treatment and that buying juno will help them be a competitor in that space for years to come. , one more quick question, and when you look at this environment, it is research coming up for new drugs when you look at the legacy versus Smaller Company picture . I definitely think it is. With these kind of deals for cell therapy, these are drugs or methods of treatment that have only been tested in small Academic Circles a few year. They are incredible, but also incredibly risky. The fact you are seeing so much money poured into something people thought may never hit the market really does put wind in the sails of researchers of thanks, max. Thank you so much. We just want you to keep you posted. Sarah Huckabee Sanders has become speaking at the Daily Press Briefing. She has commented on the plan to reopen the government. She said the president is pleased congress has come to its senses. He said the democrats position was indefensible. They are going to advance a temporary spending beal to fund the government through february 8. Now we are getting some headlines as well from the House Majority leader mccarthy that no progress was made over a deal over daca, which is not surprising. Through may vote on the spending bill around 4 30 p. M. We had thought it was earlier, but it is looking later. She is answering questions about daca. Lets listen in on the white house briefing. Into the lottery system and funding for border security, that would certainly include the wall. On another issue, tomorrow is the beginning of a final round of negotiations concerning nafta, the north American Free trade agreement. How are those negotiations going right now . What we are hearing right now is that they are not going well. They havent been going well for the first five rounds. Is the president prepared to pull the u. S. Out of nafta . We dont have any specific announcements, but we feel like things are moving forward. We are going to continue in those negotiations, but as the president has said many times before, he is going to make sure he gets the best deal for america and american workers. That is still the focus and a topic of discussion as we move ahead in these negotiations. After this shutdown episode, does the president feel like he can deal with democrats anymore . One senator said over the is a d said there difference between authorization and appropriation. What is the level of trust Going Forward . I wouldnt say it is the highest level of trust, but we are certainly hopeful that we can reach an agreement on responsible Immigration Reform. We have laid out what we want, and we hope democrats we know they agree on moat of those component, and we hope they will come to taillon focused on making a deal and less on playing games. Is restructuring a deal possible . We hope so. We hope the democrats will not focus on politics and will focus on helping the country and not political gamesmanship. We will talk about that moving into immigration. Is there a pathway to citizenship for dreamers . We have said that we would support a permanent solution for those in the daca program. I think that would address that on that front. You must have some position on this. The president clearly has conviction on this issue. Does he support this divisive issue, a pathway to citizenship for these individuals . I think for the specific number of people already in that program, we do hope to find a permanent solution. To be clear, this is a pathway to citizenship, or does that not matter to the president . It is part of the negotiation program. We want a permanent solution for the program. We also want to a big priority for the administration is making sure we dont have the same battle thee, four and five years down the road. We want a responsible reform program. To follow up. You just said that you would be open to permanent Legal Solutions for the 690,000 people in the daca program. What about beyond that . There was a story last week that said internal white house memo estimated that what the democrats want would essentially legalize three million dreamers. Where did you get that number and how big is the limit that the president has on the limit of dreamers . Where do you tiara the line . Look, again, i am not going to negotiate with you anymore than i was going to with major. This is something we are going to work on with congress and look for the interest solution for our country. Dont forget, a big priority for this administration is making sure we address this program in its entirety, not just that one piece of it. Again, there are certain people who have daca pro text. Other dreamers decided not to apply for various reasons. Is the White House Open to addressing a larger deal . We are opening to having a debate on a level Playing Field on this issue and negotiating that with congress and making sure that we get the deal that meets the criteria that we have clearly laid out. One clarification for my question. Is the president still planning on going to dava . If all things go as expected this afternoon with the reopening of the government, which we expect that they will, the president s delegation will leave tomorrow and continue on his trip later in the week. The priorities of a daca fit, where exactly does that rank . When you talk about what needs to happen for a deal, conversity v. The lottery program, the wall, the program. The actual daca solution, how big of a priority is that, that one component, for the president . We look at all those as equal parts in this process. That is why we laid out what we call our four priorities and listed that as one of them. So the daca fix is on the same level Playing Field as the wall . We know that is part of the negotiation. That is something the president has committed to do, but we dont want to do that without the other three component. It is like having a stool with two legs. It doesnt work very well. We want to make sure we are addressing this fully so that we are not just kicking the can down the road but dealing with the issue more longterm. What has he been doing behind the scenes as this drama has unfolded . We have put out a number of things. He has had several different calls with members on the hill. He has had a meeting with the cabinet to manage the shutdown. They wanted to make sure it was well managed and it wasnt, as director mullin veiny, pep neitzeled as it was in weapon neitzeled as weaponized as it was in 2013. That has been a big proprietary for the president. It went much smoother than it has in the past. But also the president was putting pressure and Standing Firm on exactly what he was willing to do and wasnt. It clearly worked because we are back where we basically stharred on friday, and the democrats have now allowed this to move forward. Hopefully the house will move this through quickly, and it will be at the white house for the president to sign, and then we can start immediately on discussions on Immigration Reform. When will ceci him . We will keep you posted. We will make sure you guys are aware when that time comes. When he signs the thing . It is personal possible. We will let you know. The timing of that isnt finalized. We have to wait on the house peel. There is o. M. B. And legal reviews that have to take place before it hits the president s desk. A a little bit that have is a timing and formality issue. We going to see him today regardless of what the house does or doesnt do . We will keep you posted. Does the president still have faith in that . Absolutely. I speak with the president about it directly this morning. He has 100 confidence in secretary enroth. He loves wilbur, things hawaii has done a great job, has been a strong advocate for the administration. He has bang good in the discussions for steel, aluminum and trade across the board. The president was clear back in september when he said dreamers have nothing to worry about. Is that still the case . I think we have been clear we want to find a sluge on the daca program. We hope that democrats are willing to work with us to make sure we resolve this issue. There are a lot of dreamers in this Country Living on pins and needles, not knowing what their fate is . I think they should storm capital hill and protest there because that is the place that has held up this discussion. Democrats are ones that shut this discussion down, forthing a shut down, being unwilling to fund the government. We lost four days on this process on the conversation that should be focused on Immigration Reform. If they had been part of solution instead of part of the problem, think i think we would have already been further down the road on negotiations on that package. Hopefully we wont have problems like that in the future. Thank you, sarah. Two questions. First on the obviously. Congressman tom cole, a member of the represent leadership, said over the weekend that to a member, republicans in the house were committed to the three priorities the president laid out in the process of reopening the government. Is the president in cement on those three in the negotiations that are going to follow, ending j migration, ending of the lottery and appropriations for the wall . We have been clear those are our priorities when it comes to immigration they nonnegotiable . These are the priorities we want to see. We have been pretty up front. I think i have said it about 30 times already today. Those are the priorities and principles we have outlined we want to see in any legislative package the president signs. My second question is on a completely different subject. Montanto and behr, two giants in the seed industry are preparing to merge. Their c. E. O. s have met with the president. Many fear this is going to lead to a monopoly for them in the seed industry in raising the prices, which will hurt the quarterman community. Is the president in favor of e merger of monsanto and behr. I havent spoken with him about that. I have laid out your criteria for what you want in a deal, but are you saying that if it is not in those areas, that he will begin to deport the dreamers . We are hopeful we dont have to get there. We would democrats to get serious about actually solving problems. They say they want to have this conversation. They say they want to negotiate, so much so they were willing to shut down the government. If they are willing to go that far, surely they will be willing to come to the table for discussions to get something done. The president is the one that enforced the law. That is his job as commander in chief. He did that, absolutely. One other question. Thabeet is because of congress failure to actually address the issue. They are the ones that pass and make those laws. The president gave a sixmonth time frame in order for them to do. That i think all of america is counting on them to show up and make sure that happens. Some have said that the shutdown was a good thing, mean it was a good thing for the party. I havent spoken to him about that. You have been listening to Sarah Sanders hosting the whitehouse briefing, saying the democrats shut down position is indefensible. They reiterated that the white house supports a permanent solution on a daca program. She wouldnt specify whether that includes a path to citizenship. She said assuming the government reopening later today, he is scheduled to leave later today. It would be tough to keep him from going there. She got questions about his confidence in commerce cretary wilbur ross enroth. There were reportses that there were tensions between the president and enroth. He says trump has 100 confidence in the secretary, but we have heard that before and it hasnt turn out there has been 100 confidence. We will see what happens. Lets bring in our chief washington sportsnet, who has our chief washington correspondent, who has been listening to the press briefing. Talk us through what happens in this case . When are they likely to begin voting, how long will it take . The house still needs to vote on it as well, correct . Yes. Speaking with an aid about the procedure and what we are going to see, sometime within the next hour, lay makers in the senate will vote on this. It is going to pass. They already have the 60 votes for the procedural vote, and then they are set up for the majority vote. From there, about 4 30 today, the house of representatives will have a vote. It will pass. Then the bill, keeping the government funded through february 8, will head to the president s tembing. He will sign it he then heads to davos, returns and then eaded for respect first state of the Union Address next week. He will lay out his vision. I want to read a statement from President Trump about the developments of the government reopening. He said he is pleased the democrats in condition gress have come to their senses to reopen the senses. He said once the government is funded the administration will work towards solving the problem of very unfair illegal immigration. We will make a long term deal if and only if it is for the good of the cupt. I have spoken to several aids to prominent senators in congress. You look at the cast of characters who may be running for president in 2020. All of them voting note on the closure vote. They are frustrated with minority leader Chuck Schumer, and they dont understand why he made a deal with Majority Leader Mitch Mcconnell, and they are not cowensed that mcconnell will hold his word on negotiating on daca. That list of people sounds suspiciously like people who may be running. All of that said, we just heard Sarah Sanders giving a lot of lip service to the used of some sort of permanent solution on immigration. All of those folks want some sort of deal on immigration. Everybody wants a deal on immigration. Is a deal on immigration going to get done . It depends on who you ask. Earlier, Skip Schumaker was saying he believes the president should negotiate with the minority party, democrats and moderates. Earlier i spoke with mimi walters, a moderate republican on the issue of daca. She is hoping there will be some type of koren terrorist fix in line of what the Business Community in Silicon Valley has been pushing for on daca. I spoke with jim jordan from ohio, someone who has a view of immigration in line of stephen miller. He wants to keep in line with stephen miller. So there is so divide within the republican policy on policy. She blanks i asked her if was in line with and nest. She told me now. What about wilbur enroth . Have you heard anything regarding the relationship between he and the president . Very quickly, i spoke with a source in the administration earlier this morning who said they had not heard anything. This is the type of palace intrigue story we have to monitor. But right now there isnt any suspicion he is on the outs. He is still scheduled to attend davos with President Trump later this week. Thank you, kevin. We are awaiting the senate vote to keep the government funded through february 8, and then the house has to vote as well. Then it will make its way to the president s desk, and he will sign it, and the government are not reopened, all that to come in the coming hour. Third period this is bloomberg. This is bloomberg markets. I am scarlett fu. And i am julie hyman. Stokes are not the only part of the market of record levels. U. S. Home prices are also soaring to new highs, surpassing levels seen during the housing bubble of 2005. One money manager who correctly contrast the crash back then says his housing bubble barometer is flashing red again. Should investors be concerned . Real e someone who covers estate for bloomberg news. Who is this investor, and what oes into his housing prompter . He manages money for High Net Worth individuals. He manages a 1. 3 billion portfolio. He correctly predicted the crash back in 2005 using his stoke barometer, which is made up of home builder stocks and Mortgage Company stocks. So he sort of predicted it right when those stocks sort of peaked in 2005. They were kind of a leading indicator. The following year, home prices followed and crashed. And then when the market bottomed, the stocks bottomed first before home prices. Again, he is seeing that those stocks are surging. We could see it here there. Is a chart on Julie Bloomberg which shows the tear that Home Builders have been on, the home builder stocks in 2018. We are looking at housing prices there. Which always have recovered. Talk a little bit about how tax cuts play into this . You could make a comparison between now and then, but you have these tax cuts passed at the end of last year, which is good and bad for different hole builders. They get lower tax rates. Consumers will benefit from a doubling of the standard deduction. Property tax did he ducks are limited in certain states. Is it a wash in the end . I think stay tuned. We dont quite know. I spoke with the chief economist of the National Association of Home Builders, and he thinks that of course they opposed the tax lannan. But he thinks that one of the reason why he is expecting price toss flatten this year, maybe only rise 1 or 2 instead of 6 or 7 , and for sales to completely stop growing, is because of the tax plan. He thinks that that is going to really hurt. California is a giant state and makes up a very large portion of our housing market. Right there if you see an impact, it could actually make a big change to the market. One of the interesting things about what james stack is saying now, this is the money manager we are talking about, is he is a lone voice in the wilderness. The last time we had the housing crash, there were lone voices in the wilderness. There were a few, but more than one. Now it seems the tide of opinion is on the other side, right . Yes. I wouldnt say he is the only one even now. You do have people some of , people who abears have been calling for this for years. Stack is not this that category. He more recently started to get concerned. He called the bottom also in 2012. One of the things that does make him nervous though, it is familiar to him, this idea that there arent many other people who are as wary about what is going on. It is not that he thinks it is going to happen tomorrow, but he does see red flags, and he thinks other people are either blind to that or ignoring them. Raising alarms. Uncomfortable either way. Thank you so muff. He covers real estate for bloomberg news. Joining us from boston. It is time now for our stomach of the hour. We are focusing on netflicks. Shares are higher today by 2. 5 actually over the last two trading sessions. This comes after the release of Fourth Quarter results after the bell. Netflicks up to a very hot start in 2018, up 1 . What will investors be watching for . We are joined by our tech reporter. Lucas, great to see you. The stock price is near its record high, but they are looking at the fact that it raised prices to subscribers. Last time netflicks ins dued a price increase, there was a lot of coverage. Netflicks thought it influenced how many people turned off or canceled their subscriptions. Most of the forecasts this time indicate it is not going to have that much of an impact. Is it pause netflicks is so entrenched . This one blew me away. Subscribers are now more than digital cable tv subscribers in the United States. This is just part of our culture at this point, right . It is a couple of things. The last time they raised prices, it brought back prices of when they split their d. V. D. Business from the streaming business, which at the time was a huge price increase. It really was the last time the company was in deep trouble. They now fund so much programming, and there is so much to watch. It seems like there is a new notice every week. Most people are going to pay for netflicks no matter what. They have a lot of Pricing Power for people who have that at their primary form of entertainment. I was fluid to stranger things. And the crown. I would guess the numbers for this quarter will be very strong. The big question is what is the flast for the First Quarter of next year . Can they keep growing . Do they have something planned . I think they have a new season of grace and frankie. The new letterman show where he interviewed obama. That is probably a small addition. They have a new season called altered carbon. They usually have new year soaps of older shows. To take a step back, aside from the content, the stuff that regular networks are pray to as well, is the content food or no. What could stop netflicks or slow it down . They are spending on all of this stuff. What is the risk . One would be if the growth slowed overseas. That is the big one. Right now the growth in the u. S. Is slight. They are at four or five million a year. That is not all that huge. Their growth is coming from international markets, principally right now from latin america and europe, though they dont break that out. If that growth slows, that becomes a problem. The reason they are valued so highly is because investors big league investors believe they are going to keep growing. We will be watching for netflicks due out at 4 05 this afternoon. Coming up, we will be speaking with dine from Graham Thornton about the u. S. s first female central banker. This is bloomberg. This is bloomberg markets. I am sacred heart sacred heart here with julie hyman. He curtains are closing on fed chair janet yell en. In todays walk the talk, bloombergs ongoing conversation about diversity in the work force, i spoke with Graham Thornton economist diane swonk about the legacy of the u. S. s first female central banker. Certainly as fed chair we saw her pivot from crisis era policies to the unwinding of policies. Not only raising Interest Rates five times during her tenure from zero, but starting to see that Balance Sheet shrink, starting to see the assets on that roll off and mature. She started that process. That was important. For many years we were stuck at that zero balance looking for ways to push on a thread to get the economy to perform better. She was able to negotiate the economy from harbaugh times at the height of the crisis into better Economic Times. But the better Economic Times were not better Economic Times for everyone. She was willing to hear concerns about what the central bank can do to address racial and gender disparities. How unusual is that, or is that just a sign of the times, the fact that there was this recovery, but it wasnt evenly distributed . I dont think it is just a sign of the times. One of the things unique to chair yellen is how she put the humanity behind the mandate of full employment and stable prices. He dug into the composition of unemployment before any politician started playing with it. She said listen, not everyone is on the dance floor anymore. Look at composition, and that revealed that not as many prime age people were participating as in the past. We have a lower Participation Rate wrong women than other major countries, including japan. The male Participation Rate plummeted dramatically. She looked at those reasons and created the dash pardon when looking at the health of the economy. She said experience from the 1990 et cetera and remembered how much a long expansion although the lengths of the expansion doesnt determine mr. It dies or lives. But it is like a fine wine. The longer it goes on, the better it gets. Her goal was by extending the expansion as long as possible, she could bring people out of the woodwork with tighter Market Conditions and get them reengaged in the work force with new skills and in some cases where they had become addicted to open oden drugs. She was also a good politician and diplomat. How does she do on that front . I think she was handed a raw deal on that. It was something that ben bernanke had to struggle with. In the wake of the crisis there was going to be a lot of blame. The way the fed chose to deal with crisis, bail out the banks instead of individuals, which incidentally, most home buyers who ad an extra neighbor had a bail out. There was no winning in this. It was hard to have aed Good Relationship with congress in the wake of this, especially a congress that ept ared a different side of theside paufs she was appointed by because of his she was appointed by barack obama. She was going to be treated more harshly. I think she was diplomatic and responded to congress in the best way she can. Would it have been a better deal if there were more people staffed on the fed. The chair, do not cone spent matchup of the time smoothing over things with congress. We didnt have all that staffing. Who could be the next female fed chair . A whole litany of people could be. I would be in favorite of lil brain prosecute brainard. She has been january everly. She has experience. What we are worried right now is in terms of the sides of the aisle, women who are in position that could feed into that, experiencing government, advisors economic chair, or deputy secretary, which is vacant. There are a lot of things like that, and not a lot of women in it. That was my conversation with diane swonk. Diane will be back with us next wednesday on the Rate Decision the fed decides. One of many areas that neat diversity. Time for a look at the biggest business stories in the louis. Barrie st fund run by rosen stein made the decision ollowing a 3 billion cost cutting program. The third point is urging nestle to sell its stake in liorial. They are pushing for a share buy back. They disclosed a 3. 5 billion stake in nestle in june. That is your business flash update. Coming up, with the next round of nafta talks under way in montreal tomorrow, we will chairman. From the this is bloomberg. Fred mcleod. It is 3 00 p. M. In new york, 12 p. M. In San Francisco and 8 00 p. M. In london. I am julie hyman in, and i am scarlett fu. Welcome to bloomberg markets. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org we are live in bloomberg World Headquarters in new york. Over the next hour, here are the stop stories we are covering arnts bloomberg and around the world. Will he, wont he . President trumps threats to with draw from nafta. We speak a former chairman bout the import export bank about trade. Amazon is making a play for the Convenience Store industry. The company Just Launched its Cashierless Store calm amazongo. We will preview netflicks Fourth Quarter earnings. And we are one hour from the close of trading. Lets get a check on the markets with abigail. Another day, another record. You are right. Here is the dow, s p 500 and nasdaq higher. The dow for a while fluctuating between small games and losses. This as the u. S. Government has entered a third day of a shutdown, but news that the senate is going to take a vote to extend suspending. We have nice gains for the major arches, once again, putting it to record highs to julies point. David over at main stay capital thinks that marks have gotten ahead of themselves, and we are likely to see a 5 to 10 correction in the First Quarter. Gtb. Take a look at g it is a forward 12month earning estimate for the s p 500. We see over the last year or two years, climbing steadily. This is typically note how you would like at a trend line. But the point to be made here is on the Corporate Tax reform, we have seen the earningsest made jump from about 148 all the way up to 154 as analysts take up their estimates, tax cuts helping the corporate providence outlook. This could explain why we are seeing records day after day. Lets take a look at stocks doing a little less well though. We are taking a look atalfirst down. 8 . A paper in korea talking about the idea there were apple purchases managers visiting to reduce korean partners purchases of supplies, reflecting a slow demand for the iphone 10. We have seen others. Westchester heard varying reports. It will be interesting to see when apple does report their quarter in about two weeks, whether or not that comes true. And then finally, where we have some real weakness, lets take a look at a small cap contract manufacturer. Take a look at that. Down more than 23 , this after the company did prenouns the bearer side. They are on pace for the worst shares since 2018. Company reducing estimates on slower than expected on program ramps, unfavorable mix and others trading down in sim there. Thank you, abigail. Lets get a check of the headlines. Mark, we need to start with washington . Mark yes, we do. The white house says President Trump is pleased that congress has come to its senses and is moving to reopen the ferguson after a threeday shutdown. Senate diems led by democrats led by Chuck Schumer ropped their demands for the immigration bill. Senate Majority Leader Mitch Mcconnell told his colleagues i think if we have learned anything during this process, it is that a strategy to shut down the government over the issue of illegal immigration is something the American People didnt understand and would not have understood in the future. The Pennsylvania Supreme Court today struck down the bound rios of the states 1 con congressional districts, saying they violate the state constitution. The ruling is a major victory for a group of democratic voters who argued the district of unconstitutional gerrymandered to benefit republicans. The legislature has until february 9 to pass a replacement. In zhreal as Vice President pence began his speech, several arab lawmakers were tossed out of the proceedings for heckling him. The main arab party had said it speech over the President Trumps decision to recognize jerusalem as israels capital. A spanish judge has refused to ask danish authorities to rest a leader who arrived in copenhagen today. He fled belgium to avoid a spanish probe for his role in an illegal and unsuccessful is he session bid for catalonia in ok. Globalt news, 249 hours a day, powered by more than 2,700 journal e. U. S and annual e. U. S in many country. It is a pivotal motion for negotiations on the north america free trade agreement. The sixth round of talks began today in montreal. The u. S. Has been turning up the pressure on canada and mexico to radically alter the trade agreement in favor of u. S. Interests. Join us is fred hochberg, who sambed as president of the import export bank under president obama. I want to follow up with with regards to the government possibly reopening later today as Congress Puts off the issue of immigration to february. Nothing happens in a vacuum, with the shutdown over the impasse of immigration. How do you see the party fighting over iment gragg as the country approaches the talks . Here will be a dreng direct impact. Daca is about the border immigration issue. Many folks focused on up gration from latin america and mexico. How we come out of that will affect the politics in mexico. And that will influence what stance the Mexican Government can play with the United States. So without question, a direct impact. So fact that it is then unresolved, what does that say about how these talks are going to go . They started yesterday and go through january 29th. One can savely assume there is a high likelihood that this is not going to be resolved, the immigration fight before january 29. So are they going to be able to make progress . The fact that this is a nine day negotiation is actually seen as a positive sign. That is substantially longer than most of the meetings have been. That is actually a very good sign. It is also happening during daugavins, so they may actually be able to get some work done out of the news reports. O. J. Mayo be focused on daugavins and the proceedings there. To owes are still the autos are still the big deal. The art of the deal is finding a compromise that everybody is only mildly unhappy with. The tricky thing as i talked to people in canada earlier today, it is not clear we want a deal. So if it is not clear that one side wants a deal, it is hard to have a negotiation in good faith. I wanted to ask you about canada specifically. Bloomberg had been reporting that canadian trade officials have reason to believe that the likelihood of the president walking away there nafta is higher now. What is giving their side that reason to believe there has been little progress made since the last talks and little progress in the current talks . For one, reports came out of the white house over the weekend that the president was going to take a very tough stance on trade. We have the state of the union coming up in a week. That is going to also play a role in terms of whatever the president says. It has been hard for people to discern. There have been private rumblings that the president has softened on nafta. Then reports over weekend that the president wants to take a suffer stand and a harder line on nafta. Nafta benefits state farmers in red states that are part of the trump base. It is not that simple to discern the tea leaves in this particular negotiation. And what does that do to negotiations on the ground and the trust level when you have these representatives of the administration there at the same time that you get these conflicting news reports . It must be difficult to sort of know if they are speaking for him. I do not envy any of the negotiations one iota. You want to know what is the bottom line and what the direction is. I think from the start, and the reason that the canadians may feel this way, and may be justified, it hasnt been clear we really want a better deal or not. Whether the politics for President Trump are better for him if there is no deal versus an improved deal. Saw that firsthand in the xm fight. There were those who wanted toe shut the bank down. There were political points to get that went beyond fighting reforms and making bank work better. It is not clear what the optive is here. We are getting close to a march deadline. The deadline is march. They have the mexican elections. We have the agreement in congress that expires in july. There are a lot of tight time tables here. One objective the president has articulated is that he wants to reduce the trade deficits with mexico and canada. I have here on the bloomberg, the u. S. Trade deficit with both countries, and indeed there is a deficit. I wonder, fred, as the president tries to reduce that, which is a separate issue because it has to do with our savings rate as well, who has he empowered to lead discussions on the us side . I would think bill are your ross would be involved in these discussions, but it looks like it is robert leilhei stanford er the trade yeptive. That is another issue. There have been reports that enroth has been sidelined. There isnt clarity, then my there is e not clarity there as well. Most importantly, businesses need to make plans, and they dont make plans a week at a time. If you are investing or building up a supply chain, you do it over months and years, not week to week. And so the lack of clarity here has probably stalled many of those plans at this point until there is clarity as to what the outcome is going to be. We have talked a bit about the election here in the u. S. What about the president ial election in mexico this summer . What effect does that have on the negotiations . A huge effect. There is a trumplike mexican candidate that could also throw another Monkey Wrench into these negotiations. President trump understands his base well. He needs to also, and the white house needs to understand, the president of mexico has a base. The Prime Minister of canada has a base. And they each to have to come back with something and not look like they are rolled. That is why Everybody Needs to be i would say mildly unhappy with the outcome versus a clear winner and two losers. That is not going to make this work. We will see if it does end up working, if they can all appear that they havent gotten rolleded. Fred hochberg, thank you, former chairman of the u. S. Sexorltsimport bank. A reminder that we are still awaiting the official senate vote and then the house vote to follow. The House Majority leader has said the house side could come around 4 30. We are aweighing the senate vote. It is expected to pass to allow the government to remain open until february 8. Carl yastrzemski officially opens its first stores in seattle. Will cashierless Technology Work . This is bloomberg markets. I am julie hyman. And i am scarlett fu. Time now for the Bloomberg Business flash. The s. E. C. Has charged three former employees from an Oversight Board with leaking information to kpmg, the Public Company accounting Oversight Board regulates auto tors and was meant to restore Public Confidence to the industry. Three employees have been charged about telling kpmg bout upcoming inspections. Firstdegree murder said businesses should compensate publishers. That follows facebook push to on gnize trusted publishers its. It defense digital graduate courses for nuffers, inudokaing nyu and yale. They will be able to stud from 200 offices where they can join inperson study groups. That is your business flash update. It is digital stuff. You know they cant spell things properly. I know. Amazon is making a big play for the struggling 550 billion u. S. Conference story industry. The company is launching its cashierless story calls amazon go in salley today. Joining us now to discuss from outside the story in seattle. Spencer, we were knowing in the shot ahead of time, there are a lot of people waiting to go into that story. Obviously people curious about it. Break it down. Ow exactly does this go . There are people lined around the corner behind me. What you have to do is download an app on your smartphone, and then you use a code from the app to scan, which opens a turnstile, and that lets you into the story. From there, machines take over. You grab what you want. There are sandwiches, wraps, salads, drinks, milk, bread, eggs. Grab what you want and leave, you are billed automatically. If you feel there is mistake, you can hit refund for anything placed in your cart by mistake or thing you arent happy with. It sounds like food. Are there nonperishables . Can people pick up amazon books . No, i didnt see any books. I got a sneak peek last week. There are a couple of branded things like coffee mugs and water bottles, but it is mostly fresh prepared foods, thing you grab for a lunch. There are some packaged things like granola bars and baked goods. Largely for someone rushing to get a quick bite on the go. does amazon want to get into this business there was more of a clear prppings when you talked about the whole foods acquisition. When you think about the Convenience Store industry, very fragmented. What is alluring to amazon about it . Well, amazon likes to solve customers problems. If you think about lunch time, we have probably all encountered a big line. There is a big line today, but this is an anomaly on their first day. But you can control how much time you spend in the store, get what you need and leave and no cashier logjam. That is the impression they are trying to make on the Convenience Store industry. What is the plan to broaden this experiment beyond seattle and the base of its seattle headquarters . Well, they unveiled this more than a year ago and spent a year beta testing, working out kinks and that sort of thing. They had to get a sufficient volume of transactions to get their machines and algorithms to work. They are not broadcasting anything, but there have been signs that they are hiring people like realize and Construction Managers and such. They are certainly looking at expanding this thing if they like what they see in seattle. Spencer joining us from seattle. A quick reminder that you can catch all of our interviews on bloomberg with function tv go. You can find charts and related functionality on the program. This is what we were discussing earlier, netflicks. This is bloomberg. This is bloomberg markets. I am julie hyman. It is time now for options insight. Joinings is jim from m. K. M. Partners. Jim, typically, sort of seasonally you come on and talk about stock replacement strategies, using options for that. This is not one of the seasonal times that you usually would talk about that, and yet you say it makes sense right now. Why does it make sense right now potentially . Usually it is late in the year. Hird quarter for gains for the year, take down equity things and come close to replicating that explore via ongs. Take down your risk while maintaining that exposure. It is not something we usually talk about in january. We are referring to it as offensive Risk Management with our clients. Why . By my technical measures, the u. S. Equities market is as overbought as it has ever been. Lets take down some of those gains now and really think about together that through the year assuming this market stays as strong as it has. What we did to sort of illustrate that is go through u. S. Listed stocks, look at them by their r. S. I. , relative strength index, above 81, the. S. Index is about 81 or so, and show them in descending order to our clients. At the bottom is floricorp. Our price is about 15 below where it is now. You can throok across a portfolio and take down some of those gains or realize some of those gains. In this case what we are is looking out to july and simply buying an upside call with a relatively high delta. That means it acts a little bit more like stock than if we are just making a speculative trade in option land. It is worth thinking about now, but ulis as the year plays out given this strong back drop for u. S. Risk assets to perform well, a strategy we think makes a lot of since through probably 2018. And you are also looking at companies pegged to earnings. Is that also with stock replacement, or is that on a separate note looking at earnings . Separate note looking at earnings. A report next tuesday. We cover the name. Our analyst is eric handler. Stock came in last november when they came out with their new star wars game. Here were concerns about microtransactions, effectively that you need to pay to play competitively in this game. Stock traded down 17 . Of the ealized most gains back. We want to go out to march and put out a 105 125 risk reversal. Ou sell the 1905 and buy the 125 strike call. Nice long directionally exposure ahead of earnings out to march. Thank you. We will be watching those e. A. Mernings, and we will continue to monday that senate vote on the shutdown. This is bloomberg. Mark i am Mark Crumpton with first word news. A white house official says President Trump is growing frustrated with wilbur ross. The president reportedly feels that ross has not done enough to address the u. S. Trade deficit with china that continued to grow in 2017. The white house denies any friction. Sarah Huckabee Sanders told the president today that he loves him and has full confidence in him. Secretary ross is expected to be part of the world delegation at the economic forum. Rex tillerson met with his british counterpart boris johnson. Tillerson said he sees progress in garnering european support for new penalties against iran that could prevent a u. S. Withdrawal from the iran nuclear deal. He highlighted his concern that iransk does not cover Ballistic Missile program. The European Union has imposed sanctions on several senior venezuelan officials accused of human rights abuses. He