Slightly higher. At the low, down more than 100 points. All on pace for the worst day of the year. That is only true for the tech heavy nasdaq. Really weighing on the nasdaq, the Philadelphia Semiconductor index down 2. 4 . Still on pace for his worst day since december 4 of last year. Lets dig into one stock weighing them all down. Apple down 1. 6 . Its worst day of the year. This appears to have to do it to death and analysts. Jpmorgan is cutting the estimate, Sales Estimates for 2018. That is based on deteriorating iphone demand. We also have bernstein saying the iphone estimates for the march quarter, the street is looking at it right now, and it may be too high. It is interesting to see when the Company Reports what does come up. Broadcom trading lower in 70. Lets look at some of the homebuilders. We have some weakness here. D. R. Horton, all lower after existing home sales for the month of december missed the survey a little bit. Daca have to do it tax reform. Investors not liking that, thinking it can bleed through the new home sales. We have a chart that suggests existing home sales should have been higher. What we are looking at is a longterm chart of the supply of previously owned homes. During the housing bubble, at peak levels and dropping, dropping. We have a record tight supply of existing home sales. That should help the numbers, but that did not happen. Some investors may be worried there is weak demand for new homes. Lets remember december, very chilly, plus the holidays. Julie a little time for the tax changes to sink in. Lets check of the bloomberg first word news with mark crumpton. Mark u. S. Conference of mayors president Mitch Landrieu says the conference is canceling its scheduled white house meeting with President Trump. In a statement he said, unfortunately the Trump Administrations decision to threaten mayors and demonize immigrants yet again and use cities as political props of the process has made this meeting untenable. Microsoft cofounder bill gates says the Trump Administrations America First approach could undermine u. S. Influence in africa over the longterm. Gates spoke with Bloomberg News editorinchief John Micklethwait today at the World Economic forum in davos. I think he should. That is the area where i have chosen to take the wealth created through microsoft and Warren Buffett has been so generous in providing. I understand that money can be very well spent. Im in there saying lets keep up the good work. Mark President Trump has questioned the value of funding developing nations. Gates says the u. S. Should not pull back on africa when china and other countries are pushing deeper into the continent. In a case that will shape the outcome of brazils president ial election, the first of three judges voted to uphold the criminal conviction of former va. Sident luis de sil he could be barred from the election set for october. Lula, who says the accusations are politically motivated leads in the polls by allied margin. The Hurricane Relief effort led by five former u. S. President s race more than 41 million. A statement from one America Appeal says the money benefited hurricane recovery in texas, florida, puerto rico and the u. S. Virgin islands. Carter,resident jimmy george h. W. Bush, bill clinton, george w. Bush and barack obama attended the october 21 Fundraising Concert at texas a m university. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im mark crumpton. This is bloomberg. Julie davos is bracing for President Trumps arrival and his team is setting the stage. Treasury secretary Steve Mnuchin is breaking tradition and endorsing the dollars decline. He says, a weaker dollar is good for us as it relates to trade an opportunity. Wilbur ross said the u. S. Will fight harder to protect its exporters. Joining us is michael mckee, bloombergs policy correspondent. Mnuchin was echoing what his boss, what President Trump has indicated in the past. The dollar is down about 10 over the past year. That is not just because michael i have been asking what is going on . The fed is raising Interest Rates. We should see the dollar get stronger. There are a lot of different stories about what is happening. The rule is for treasury secretarys, it is similar if somebody ask you does the dress make me look fat. If it does, you dont say it. Currency traders tend to take what you say and build on it and overreact. When the dollar is moving in a direction, lower lately, he gives an additional momentum. Which is why treasury secretaries have always declined to talk about the dollar except the old formulation except a strong dollar is in the u. S. National interest without saying what that is. David a weaker dollar is better for trade an opportunity. What are the risks for the dollar to be weaker . Theael you go back to 1990s, the japanese yen was very weak and they were the trading partner we all feared at that time. The u. S. Trade deficit was getting deeper and deeper because the yen was so we can they could sell their products cheaply. Was so wekaak. Lloyd bentsen said we need a stronger yen. A strong dollar is in the interest of the United States. They dont want to repeat that. They dont want to cause wide swings. They would like to keep currencies on a stable level. Julie we have a chart of what you are talking about, i think. Michael you can see what happens as the yen gets weaker, the u. S. Trade deficit gets bigger. That is the kind of thing they are trying to avoid. To have a treasury secretary talk about it just exacerbates the problem. You had wilbur ross come out and say it was not a policy change. He was just talking about where the dollar is. From an economics point of view, he is right, but not helpful to have the secretary talking about it. Is a part of white house policy to intentionally jawbone the dollar lower . Michael when you read his comments it sounds like he was answering it honestly without thinking about the effects and recent treasury secretaries dont say things like that. When you try to manipulate your currency to affect a trade deficit, you can cause the kind of problems we saw in 1993. Probably not trying to use the currency they would use tariffs, other things to try to change the trade relationship with other countries. I dont think they will manipulate the currency. If they did, that would make the rest of the world mad. Julie take a look at the bloomberg again. Looking at various currencies against the u. S. Dollar since the trump inauguration. The peso has done the best, ironically. Euro and the number two place. These partners with the u. S. Have risen. Again, yes, we have heard these comments from the administration. As the economy has been strengthening, what has been going on here . Those trends appear to be in place. Other assets continue to go in the same trend line. Michael one is relative value. The mexican peso was hammered with donald trump was first elected because he said negative things about mexico. Its rise is understandable. The people ive been talking to about where the dollar is now say is partly the fact europe is strong, so the eruo has been euro has been rising. Ecb is talking about getting out of the qe business. There is a question with u. S. Yields rising, if youre a foreign investor and are going to lose on currency translation. A heads against that is selling dollars. There are a lot of Different Reasons people say this may be happening. Cameron christ who writes for bloomberg said one of the major reasons is when you get a momentum trade going into the forex market, intends to continue and people look for it to continue. It has been happening assetwide. Michael you look at where it is and it isnt that much lower than it has been for the last five or 10 years. The level has not been a volatile. Michael mckee, thank you so much. Coming up, is President Trumps rhetoric making the u. S. Ls appealing destination. Marriotts ceo explains why next. This is bloomberg. You can contact us on twitter. You can also watch ticktock by bloomberg, and it is streaming live on twitter. Here is a highlight on tesla. News, tesla just made the moon shot of all compensation deals. The company gave elon musk an award of Stock Options fourth 2. 6billion worth billion to stay on for another decade. They also brought get ambition to become one of the worlds biggest companies. Can get his options only if isy top 260 billion, which currently 10 times their size. The award appears to be a javid critics he speculated he maybe leaving tesla to focus on other projects. Ceo or be bothn executive chairman and chief product officer. He has good reason to stick around. It could generate a 55 billion windfall if all the goals are reached. Belly putter in the race to be the richest person on the planet. You can follow me on twitter. Get the latest updates at ticktock. Artse watching electronic falling suddenly after a report on again and website that one of their subsidiaries, biow are, is delaying release of the game anthem to 2019. Down, shares taking a leg now off by more than 2 . Elsewhere, we are talking travel. International travelers had a decrease of about 4 since 2016. Marriott international ceo thanks Donald Trumps rhetoric is probably too blame. The main reasons i am in davos is to talk about Global Travel. We are just getting statistics from 2017. We think there are 1. 3 ilion International Trips billion International Trips. That is a global figure. Every trip crossing the national borders. That number is growing significantly. It will approach to billion trips 2 billion trips in the next year or so. United states down 4 or 5 . You can see the u. S. Has lost of Global Travel in 2017. Why . I think part of it is a since the u. S. Is less welcoming today. The immigration policy . Arne were talking about travel. That is vacation people are taking. Or someound immigration of these other issues can be interpreted as words of welcome or relatively less welcome. I think we will continue to express this to the u. S. Administration. Yes, it is ok to have a conversation about immigration. It is essential that conversations about security. Lets make sure we are communicating a welcome to the rest of the worlds we would like for them to have vacations in the United States. There is a real global competition underway for that travel. We are in 126 countries. We can benefit as a business, whether they visit europe or singapore or the United States. We would like to make sure that jobs can be created by the kind of travel and growth we see in the years ahead. Can you give us a sense of the impact on marriott itself . How does that impact marriott . Arne it is give you bring you back to that. The Business Conditions and markets are generally get. The United States is performing well. Im talking about it could be even better, not that it is that today. The economy of the United States is performing reasonably well. You look around the world and we see the best of synchronized Global Growth we have seen in many years. That means our company is performing really well. The hotels we happen the system are performing well. The hotels we are opening our opening in record numbers. That trump has pushed through his tax reform, what are you cheering from your clients . Will that translate to more business travels for companies . Arne lets hope so. It is obviously brandnew. Clearly it will reduce corporate taxes. No doubt about that. That means those dollars can either be paid out in compensation for jobs or higher composition for existing jobs. They can be invested in new projects, whether that is building plans or hotels are investing in marketing platforms. Or they can be distributed back to shareholders and dividends. Most american companies, their shoulders will tend to be american shareholders. It is obviously a global market, but any one of those three gets dollars back into the u. S. Economy. If he goes back and dividends, it goes back and higher liquidity in the market. Therefore more dollars to invest in other projects. I think it cant help it be good for the economy. Has led of with haslinda what is the biggest risk for the Hospitality Industry . Arne it is likely to be a good year. The odds are very much in our favor. Global synchronized growth, tax reform cant help it hurt in the United States in the nearterm. Almost without a doubt. All of that is good. Certainly the conversation up around here is there are risks in the world and their are probably some external risks which are very hard to handicap. Lets hope none of those risks come home to roost. That was Marriott International ceo arnie sorenson. It is now time for Bloomberg Business flash. Some of the biggest stories in the news right now. Nine west plains a bankruptcy filing. The prearranged filing is from march 15. It is part of a plan to restructure almost 1. 5 billion in debt. They could sell of parts of a shoe and clothing business as well. New tv has named meg whitman as their new ceo. They will provide customized short form entertainment. Whitman, whose role of take effect march 1 was most recent ceo of hewlettpackard enterprises. That is your business flash update. Thel ahead, we look at ishares in metals and mining producers, a rebound in industrial metals. Up 24 in the past year. This is bloomberg. Is bloomberg markets. Julie it is now time for the smart pdf report. We spoke with Oaktree Capital management co. Chairman howard marks. Where Smart Beta Funds fit in the debate between passive and active investing. Charlie monger what said to me, none of this is meant to be easy. Anybody who thinks this is easy, is stupid. Can you do better by going from a passive vehicle to inactive the it to an active vehicle . It is a semi active vehicle. The answer is, if the decisions that are made are good ones, it will be better. If the decisions are bad ones, it will be worse. The great thing about the investment is there is nothing you can do. Just by doing get, it will make you richer. You have to do it right. Have asay, i want to Smart Beta Fund and emphasize technology,nd thats an active bet on those factors. If you made a good decision, he will make more money than a passive find. If you make a bad decision, you will make less. That was howard marks speaking with us earlier. It is a good question to ask for someone who is basically saying he does not use etfs in ball in his investing. His answer is right. He knows that he is talking about. Did you talk to academics, they consider anything that is not the whole market market cap weighted active. Anything that isnt just market cap weighted of the whole market, that is passive to academics. Everything else is active. You are tinkering with things. The difference here, and what a smart beta person will respond to is it is active, or semiactive. It is delivered in a cheaper format. It is no Capital Gains distributions. The mechanism, and you can argue the emotionless is a positive. When it rebalances it doesnt like a robot. People can have emotions. Those are three reasons the mechanism is better. The the vehicle is what people like. Stay with us because we want to talk about one of the etfs more on the passive side. It has returned about 25 over the past year. It is our pick for this week. Metalsishares mci global select goes by pick. It isore than 180 names, a commoditiesdriven fund dominated by the big miners and producers of iron and steel. It is heaviest weighted in the australia, u. K. And u. S. Compared with similar etfs, is not tied any single commodity. It is a play on industrial miners, which makes it more diversified. As a result it is more overlap with world equities than it does with gold prices and gdfs a cost 39 basis points. To our Animation Team at bloomberg intelligence. Join us every wednesday for bloomberg etf iq. Available at 12 30 p. M. New york time every thursday right here. This is bloomberg. Worldt from bloomberg headquarters in midtown manhattan, thisbloomberg markets. Is this isbloomberg markets. Stockpiles by the end of march thed be 23 percent below fiveyear average. Natural gas is up by 1. 58 percent on the day. If you look at precious metals, the green arrows, you can see gold is up by 3 . Secretaryws treasury Steve Mnuchins comments in favor of a weaker dollar. That translated into gains for gold and silver. A weaker dollar is certainly one factor but better than expected u. S. Manufacturing him i a rebound from yesterdays losses. Copper and nickel making the biggest strides. In the soft commodities space, week rising and one possible reason is algerias new grains with a valueadded tax coming to that. You can see a gain of 5. 6 . Julie lets keep the focus on the Energy Sector, scarlet, as well continues its rise today. Wti, advancing to its highest level in more than three years. Will prices continue to rise in the year ahead . Leawood kansas ofrob Robert Thummel 60oise which manages million in investments. Rob, thanks for joining us. Tos ceo says oil is going trade in the 55 to 60 range this year. You think oil has made its gains now and has and is going to be stuck . 55 to 65 is a great place to be forever where across the Energy Sector, whether it is Oil Producers or Energy Infrastructure companies as well. Scarlet how much of that is going to be driven by the weak dollar . Today from white house officials, advocating for a weaker dollar because it is better for trade carried it is better for opportunities. Does that factor in or is this a demanddriven gain . Robert there are a lot of factors going on, you are right. Reason oil has done so well going back to june of 2017 is because one thing has happened great Oil Inventories have started to fall. For the last four months global Oil Inventories have followed every single month. The last four weeks, u. S. Oil inventories have followed every single week. At tortoise we think that the biggest gain in oil and oil prices is that prices are getting back to more normal levels. Julie at the same time we have seen oil take off, oil stocks have not cap have not kept pace. We have a chart in the bloomberg showing this am a viewers can see this in pink or red here at etftop and then we have an attracts energy and the s p energy index, and they have just not gained anywhere near as much as oil prices. Why is the lag, and do you think we are going to see some more catchup here . Opportunityies the for investors. Thats exactly right. Oil prices have risen but Energy Stocks have lagged, the Energy Infrastructure and broader Energy Stocks. A Stable Energy price, 55 to 60, if we can stay with a Stable Oil Price that is significant because it brings investors back to the asset class investing in energyrelated stocks. There was a dark loud at looming over the Energy Sector last year, and that was, what was opec going to do when the productioncut agreement expired . We have an answer now. The cloud is dissipated. Opec is going to extend production cost of the end of the year, oil prices are on their way up, their stabilizing and its a great opportunity for investors to come into the Energy Sector because there is a lot of positive things going on fundamentally across the Energy Sector. Playet you say the way to ee oil sector, why not the mps . We look at natural gas and we see that as being a significant driver of the Energy SectorGoing Forward. So a company like et corporation is one of our favorite whaling gas producers. Its a natural gas producer. Its the largest natural gas producer in the u. S. Globallyas consumption is expanding and expanding dramatically in the u. S. Is one of the lowestcost suppliers of natural grass. So company like et q is going to grow its production values year after year and that meets cash flow is going to grow as well. Its Companies Like that but we like. Eq t though, the stocks went down 7 over the past year. So what do you think is going to turn that performance around . If they have a growing cash flow, how is the street going to get the message . Couple thingss a going on in eq t, specifically to that story. They own infrastructurerelated assets. They are trying to simplify the Corporate Structure and split apart potentially, the oil and Gas Production company from its midstream company. So that has been the lag, or the reason why the stock has lagged. But we just look at the company itself. Eqlook at what it costs for teacher produced natural gas. We look at the longterm demand for natural gas in all of those are lined very positively. And we like to buy stocks that are obviously down and the market has yet to realize their full potential, of these particular stocks. Scarlet you need to look harder for those these days. Rob, talk why you like talk about why you like mlps . Mlps have proven themselves to be the cheapest way to improve Energy Infrastructure here in the u. S. If you are an income oriented investor this is important. If you are an income oriented investors and are buying and equitiesnd are buying for investments, one of the few places that you can find that delivers very strong returns in risinginterestrate environment are mlps. Where Interest Rates have biz and have risen 50 basis points or more, msps have beaten the s p 500 in terms of return. A solid place to be right now, they offered solid deals and you can find summit 6 to 7 yield, they are growing dividends and that is compelling for investors. Isie i know there continuing talk for standardizing oil and Gas Production kits in the industry emps cost. How is that affecting oil services companys . Does that mean you have to be more discriminating among the spectrum of Oil Services Companies . There are a lot of different components in the oil Services Process and where you are located is important. On sore versus offshore. We like our short oral services. One area we like is called Completion Services, hydraulic fracturing process that is happening. Are the companies, these companies that are providing Completion Services are raising revenues 10 to 20 this year. That is where you are going to get cash flow growth rate drillers are another opportunity as well but we like completions from the northfield service as protector. Robert thummel, thank you so much. After nearly week of grueling victimimpact statements, i judge today in lansing, michigan imposed nassar, thelarry michigan sports doctor who sexuallyassaulted young gymnasts for years. Michigan statet university and usa gymnastics which trains olympians. 100 75sentencing you to years which is 2100 months. Years, which is 2100 months. Larry nassar also spoke today, saying to those he abused, no words can describe how sorry he is for the crimes. The Justice Department is ramping up pressure on sanctuary cities, seeking Public Safety grant money. It is warning state and local officials they could be legally forced to prove they are cooperating with federal immigration authorities. Officials sent letters to roughly two dozen jurisdictions including the states of california, oregon and illinois and threatened to issue subpoenas if they dont willingly hand over documents showing they arent withholding information about the immigration status of people in custody. Thefirst trial related to 2015 deadly Islamic State attacks on paris began today. The suspect is accused of helping to have the attackers, including the suspected ringleader, hide from police when they were the most wanted men in france. A tax on november 13, 2015 left 130 people dead. Turkeys president is promising to expand his countrys operation against u. S. Allied Kurdish Forces in northern area. , theing and ankara president said we will clean our region from the struggle completely. He was has urged turkey to exercise restraint, saying the offensive distracts from efforts to prevent the resurgence of the Islamic State. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Scarlet. Scarlet coming up, we continue our coverage in dom us in davos with highlights from the interview with the microsoft cofounder. Next. This is bloomberg markets. Im julie hyman. Scarlet im scarlet fu. We continue coverage from the World Economic forum in in davos area bill gates in davos. Bill gates spoke to us about what he calls the stubbornness of malaria and his goal of lowering Drug Resistance to the disease. Bail resistance,t drug and we have Drug Resistance now so we are working with the private sector to get innovation there. The drugs themselves, we use these combinations in southeast asia. We have resistance there. Peoplet the energy that put into these programs. One of the great ironies is that as you get malaria cases down, than a government will tend to move on a go on to Something Else and you will see a rebound. So for the last three years, lost of the bed nets have been wearing out, the last three years we actually have had the number of cases a lack. And in a few countries including nigeria the cases have gone up. You always have a little bit of variation in terms of the weather. The wet season is when mosquitoes proliferate in the next financial way, but the Community Needs to get its act and having showpiece things where we really learn, like this Central America thing is a key part of that. The chinese are looking at doing work that is kind of pro bono as opposed to building things. Is there a much more straightforward commercial advantage to them . Bill as they are becoming a conference has with African Leaders on a regular basis that i will attend later this year. Compared to the u. S. In history and today, chinese egg is very, very small. And the african countries appreciate, particularly under hiv and malaria, president bush made these big increases. They totally appreciate that we have done that, and i think we really can afford to keep doing that. Its a small part of the budget and i dont think it going to them saying, we need to increase aids in the leary getz we are so short of something really is the best idea. But there is also this question of soft power, whether america is now prepared to commit itself to those things. Is that something you worry about with the Current Administration . Hard poweralance of versus soft power, the you the u. S. Has the unique ability to focus on the hard power. Do you grow the state department at the same time you are growing the defense budget. Even the secretary of defense youbeen eloquent and that dont want to give up your softpower tools. And its all being debated. Isnt this arguably the first case of a global hegemon willingly giving away the hegemonic power by not investing in soft power . Theally what happens is hegemon gets pushed out and in this case america is pulling back from helping the rest of the world. Ll i wouldnt say its unique. U. S. Has often had this debate in a this debate and our relation with the United Nations has added something downs with different administrations. You know, keeping some pressure on the u. N. To be efficient and reasonable is not a crazy thing. How far do you go, its all to do with specifics. In this case the lives are being saved for a very small amount of money and you can aim to lift the country up so it is a selfsufficient and get rid of the disease. It was not a commitment that you are stuck with forever. So i think that these ones, even in this episode, make the cut. Do you think george w. Bush in a strange way never got the credit he deserved in trying to save our lives in africa and trying to save lives in africa the way he did . No he didnt, because africa is not as visible, not as many people go there. His initiative that was hiv focused and is Malaria Initiative were fantastic things. In some circles he does get credit for those things are probably not as much as he deserves. President trump famously, all these countries he has described in a not terribly nice phrase. He shouldnk concentrate more on the forward world . Concentrate more on the third world . Ill i think he should. Thats what i have done with the wealth created by microsoft and what warren f it has been so generous in providing. So i understand that money can be very, very well spent. I am in there saying come on, lets keep up the good work. Bill gates was speaking with bloombergs john nickel plate in dallas. Scarlet the third of three judges has voted to uphold the conviction of former president ruda. We see a rally in the brazilian currency now and a rally in brazilian stocks which is ew z, which tracks brazilian stocks, also at session highs. Julie lets get context. Bloombergs ray pollock joins us brazil. Hone from lul now happens to president ial bidas is an uphill battle for him to run for the presidency now. There are some legal battles that he can pursue but a 30 conviction makes it much, much harder for him to appeal and go to the supreme court. Madeit vote would have that easier. So, as you said, this is the decision investors at the Financial Market have been waiting for. It came after a marathon session, almost nine hours debating in court and a southern city. And there it is, it now looks when not be running for the presidency of latin americas largest economy. Brazilian stocks are higher and the three judges not only upheld the conviction but unanimously agreed to increase the sentence from nine years to 12 years and one month. What does this say about hammer, who is the president but doesnt enjoy a higher approval rating. In the days before the trial he came out and said it would be run and should let lula it would be good for democracy. Thats probably too but deep down never but he knows that he lula to run. And i think it could boost his standing and this current government, and it is optimism in the Financial Market that may sort of boost reform efforts. We will have to see how that plays out in the next couple of days but is definitely more on the Positive Side than on the negative side for the president. Davos right now and he says the rise above 83,000 reflects the markets absolute confidence in the country. Ray collet, joining us from brazil. This is bloomberg. Scarlet this isbloomberg markets. Im scarlet fu. Julie im julie hyman. This week we partnered with 2u inc. Undergraduate courses. Enrolled students will be able to study from offices and join in person study groups. 2u inc. Us is the ceo of. Chip paucek what rest of the arrangement and how it works. There is a fee and there is also a payment for you. Its multidimensional. Its a worldwide partnership. They have large physical spaces that have this from adam that have this Incredible Community inside them. And we partner with schools for what we think is the best digital education. It is not your grandfathers version of online education. It is super intimate live nobackrow. D our so all of them have a hybrid you are doing something physically someplace. You wouldnt want to go to a midwife to deliver virtual baby so we put someone in a clinical setting. Our students are used to meeting one another and doing it in a and doing it in a purposedriven way. Talking about access to physical locations in more than 60 City Worldwide and our students are fully distributed. Thats one part of it or its there are other pieces of it that are equally interesting to us. They acquired a School Called the flat iron school that had this incredible piece of technology that we were blown away by. From are licensing that weworked to build that into our experience. Scarlet it definitely helps her current student body. I wonder what the partnership with wework brings to you, who will you be exposed to that you can bring into your universe . 2u inc. That the net chip thats another part of it. Number ofering a scholarship to the wework community. I think Warren Buffett just said this week, if you are not learning for five hours a week and he reevaluate. So we have got great courses blockchain, and m. I. T. On artificial intelligence. And being able to offer those to Community Globally gives us a great platform to work with. Julie i was looking at the financials. The revenue to you almost doubled from 2014 to 2016 and the stock has more than doubled of the past year, as we can see there. You are still posting net losses and you are in good company. Thats true of a lot of tech firms. When you expect to flip over to profitability . D we got the ipo question quite a bit and our builtin business model, there is a huge lag on when we spend for marketing for our university partners, when that generates students and when they pay for the courses. They pay for the courses over a very long time. So as an example, builtin Value Investors have become used to is, at the end of this quarter from ourition bookings students in our program that will pay overtime. So if i wasnt recruiting new students and building new programs, more importantly, we would actually be there already. But we are doing is reinvesting into all these new verticals, like physical therapy and data sites and all these different types of verticals. It is really rare to find this kind of organic with potential if you just put capital into a core business. Chip, thanks for joining us. Join us tonight for the premiere f bloombergs the decisions as the ceo of cocacola discusses the impact of the tax overhaul. It is 3 p. M. In new york, 12 00 p. M. In san francisco. Scarlet welcome to bloomberg markets. We are live and bloomberg World Headquarters in new york over the next hour. Here are the top stories we are covering on the bloomberg and around the world. The headaches keep mounting for , now under investigation by the sec after taking that 6. 2 billion charge in its finance division. We will bring you the latest. Blow, fordhe earnings are out and that the ceo is already calling it a bad year. Bob shank will be here shanks will be here live. The bond market could be basing its biggest crisis in 40 years. Part of his conversation, from davos, at this hour. Lets get a check on the markets. Ith Abigail Doolittle up off the low . Abigail you are right, a bit of a roller coaster. The dow and the s p 500, the nasdaq, lower. Earlier in the day, all three had been higher. At session lows, the three major averages on pace for their worst day of the year. Investors wondering when these overbought markets could pull back. We saw a taste of this volatility today. ,he dow, at session highs dropping at the lows, down more than 100 points. Volatility often breeds volatility, so we could see more of this. Especially as many traders are wondering when this overbought condition may give way to some sort of pullback. We 20 on whatd you miss . Will talk about that possibility. Not recovering on the day, the dow transport, its worst day of the year. Being dragged by the airline companies. United continental in particular, 11 , its worst day of the year since october of last year. They are talking about the idea that they will not be able to raise fares anytime soon. There is too much capacity out there. Investors thought they might be giving away from that, but united now talking about that dragging on the other airlines as well. Finally, two big macro stories out of davos. Speaking to the idea that perhaps there could be a big bond bear market, the worst in 40 years. Its first update in three days, that is how the haven bonds are selling off. And then the dollar, truly a big story on the day, down more than 1 after treasury secretary Steve Mnuchin said that a weak dollar is good for us, good for trade in the u. S. Seems as though the bloomberg dollar index is going the way of those comments. Julie abigail, thank you so much. You checked out on the headlines with mark crumpton. Mark President Trump is heading to davos tonight. He is set to deliver the keynote address at the forum on friday. There has been concern by the trumpts on how economic and trade policies could affect the global economy. Suspension of cooperation between the organizations overhauling the state department. The decision was confirmed in an email received by Bloomberg News, reflecting a rising frustration at the state department and usaid over the secretarys plan. They are aiming to eliminate inefficiency and overlap, but they are facing inhouse resistance, as well as in congress. European Union Citizens will remain free to settle in the u. K. For two years after they leave the block in 2019. Davis says that the government has a moral responsibility to ensure that eu nationals can continue their lives as they are now after brexit. There will never be a circumstance where we are deporting people, unless they commit a serious crime or become a threat. We will find it other way around it, if we have to. One way or another, we will resolve this issue. Mark once britain pulls out, the right will be ended of those in the block to live and work there. The Trump Administration has imposed a new round of sanctions on north korea, targeting the kim jongun Oil Companies and shipping companies. China forioning supporting north korea. Global news, 24 hours a day, powered by 2700 journalists and analysts in over 120 countries. Crumpton, this is bloomberg. Scarlet the sec is now investigating General Electric. They had indicated this earlier and had formally reported it as part of the results. Ge says they are cooperating with the probe. Brooke sutherland covers ge. This is an important reminder that their string of bad news is far from over. Notceo said that she is overly concerned. Is she being too dismissive . no, but thats not comforting to investors. In november they got up there an said that after exhaustive dive into all parts of ge, the strategy for Going Forward was supposed to be the big earnings reset. To get this chart months later, and its not small, its significant. It does sort of shake your confidence. Do they have a handle on the problems . Do they know where the skeletons are hiding . At the sec, obviously, there is a lot more to come out. But as you wrote in your piece, it seems sort of baffling that they did not announce this late last year. They have this business for quite a while and should have been aware of it. What went wrong . Brooke we are definitely waiting for more to come out about that. It happened for quite a while. They wound it down between 2004 and 2006. They performed tests every year. Under the previous models in which they ran those tests, they saw positive models on the reserves. They stepped back, rethought this with new models, and that is how they wound up with this charge. But these problems are not new. Geot of these businesses sold to genworth. Markett that these conditions would have deteriorated should not be surprising to people in 2018. You have to scratch your head notsay why was this addressed earlier . Why are we seeing this now . Scarlet its not just health insurance. They are looking at accounting and the rest of the business to, right . Brooke they are. The sec is also reviewing revenue recognition practices and controls around Longterm Service agreements. Contract assets have booked earnings, but not cash, and it has swelled. That is part of the reason behind the cash flow problem, lately. The underlying profitability assumption behind those agreements are, by nature, wrong. They were made many, many years before the agreements came to fruition. Was ge conservative enough as far as what the Market Conditions were going to be . Dropoff we have seen in power, we have to be worried about that. Julie thank you so much, brooke sutherland, talking about General Electric. We are also watching ford, trying to manage Investor Expectations as well. They are set to report fourthquarter earnings after the bow and the ceo, jim hackett, already softening the blow for investors by calling 2017 a bad year. Part of the reasons, more costly materials needed to build cars. So, this is the companys narrative, craig. But there has been some skepticism on the part of analysts. How do we suss out how much of fords challenges are due to cost, and how much is due to execution or its product line not being appealing . Craig its easy to see, when , theook at the charts prices have gone up, theres no disputing. What is interesting is that you havent heard gm or Fiat Chrysler talking about these factors being big impediments to their earnings. You definitely see a difference around detroit and how they are talking about Raw Materials costs. No doubt, the costs are rising. Ford also throwing in the Currency Exchange as another back thend of holding earnings. They make more cars in the u. S. Than anyone else. There is some legitimacy to these claims. The fact that gm and Fiat Chrysler have been able to keep earnings going, and ford, on the other hand, having a lag this year and going into 2018, you do see some skepticism from the analysts that this may not be the whole story. Julie you can also point out that ford relies more on aluminum than its rivals because of the f150. To what extent can they pass this on to consumers . Or do they not have that Pricing Power right now . Craig they do with the f series pickup, their bread and butter model. But they dont have much pass that right now. The compact suv segment, which has been growing like crazy, you see gm and toyota taking advantage of that, fords model is one of the oldest in that segment. The suvs in that lineman lineup are some older than any of their foes. Pricing at other companies, able to take over this take advantage of this pricing surgeon suvs that we have had. Stay tuned for our interview with the chief Financial Officer at ford, bob shanks, coming up at 4 p. M. Eastern on whatd you miss . This is bloomberg. Bloombergis is markets, i am scarlet fu. The brinks chairman is already looking to the next downturn. Erik schatzker asked him why in davos. Is a perfect situation, but we have to keep in mind what part of the cycle we are in. Capacity utilization, the unemployment rate. Where are we in that . We are in the late stage of the cycle. Thats a. E thate period of tim might go for a few years. When the operating rate gets high enough that the Central Banks think they should put on the brinks the brakes. Erik take the punch bowl away. Ray thats right. Economic capacity is built at a growing rate, but then there is the growing demand. Think about that as driving behind a truck. If you are driving at 70 miles per hour, thats fine before you get to that capacity rate, but then you cant have the car, or the economy, drive at that same 70 miles per hour. To slow down. So, the central bank starts to put on the break. Thats part of the cycle. So, until the Central Banks started to put on the break, and 2008, we had one kind of environment. So, now we are closer to this thesety cash to weacity constraints, and will have a lot of stimulation. It will look great. Shorttermy the stimulation. It the things we know. Erik tax or form, for example. Ray and theres erik tax reform, for example. Ray and theres a lot on the sidelines. Banks can feel left out. It feels stupid to own cash in this environment. That will be great for earnings, it will be great for that stimulation of growth. We have to look beyond that to say what is Monetary Policy going to be in that . How difficult is Monetary Policy . Now, lets take a look at that. We could look at step one, kind of the blow off stage. Before wee erik get to Monetary Policy, how long, do you think, will we enjoy this perfect environment . When i say we, i dont mean just the thought financial community. Risk assets, presumably thats great for stock prices, right . But companies are raising wages, doing some hiring and investing. Down to,t is trickling lets call it the real economy, so how long will that go on . A 12 to 18 month kind of spur. When that is happening, the central bank wont have to tighten Monetary Policy. Erik it will feel like it has to . Will feel like it has to tighten Monetary Policy. With that, its very delicate. If you look at the history, markets, if there is a tightening of Monetary Policy so that Interest Rates rise faster than whats reflected in the yield curve erik its a surprise. Ay its a surprise you can look at the interest that is discounted for every month Going Forward. Knows how far. Pricedw how a bond is off of that. You know how equities are priced off of that. For all assets, private equity, its all priced off of that. When it rises faster than it is discounted in the curve, it is a negative. In addition, there is the slope of the yield curve that matters. At where tenyear rates are, lets say 2. 6 , as you start to get closer to that and of yield curve flattens, then that causes a constraint in the economy and in lending. , now,e a situation because of that longduration there is a sense of pivoting to that. There is also a lot more Interest Rate sensitivity in the economy. Assets themselves, like a 1 rise in bond yields will produce the largest air market in bonds that we have seen largest bear market in bonds that we have seen since the 1980s. Erik are we in it . Ray i think so. We are in an environment that is good for stocks and bad for bonds. That airn did we enter market . When the 10 year crossed 2. 5 . Bear market . When the 10 year crossed 2. 5 . Ray Monetary Policy will be delicate. I think the fed will not only tighten at a rate that is faster than discounted in the curve, but they will tighten at a rate that is probably faster than they are even signaling. That was ray dally out, speaking with Erik Schatzker in , speaking with Erik Schatzker and davos. Julie despite the downturn in crypto markets, bitcoin on the rise. The securities and Exchange Commission has warned investors about operator fraud. Have already raised 450 million this month. Last year the ipo outpaced the Venture Capital funding. Retailers are so worried about fraudulent online purchases, many say that they are rejecting legitimate transactions out of fear they might be fake. 67 of researchers a retailers have online measures that are quick to cancel suspicious transactions. Groups that also include banks and Telecommunications Companies , when included, raise the figure to 71 . That is your business flash update. Lots of concerns over fraud out there, online. Scarlet not just online, but in businesses, with investigations going on. A quick reminder that you can catch all of our interviews on the bloomberg with the function tv. You can catch the latest charts and other functionality on there. This is bloomberg. This is bloomberg. Julie this is bloomberg time for and its options insights. Joining me now is scott bauer, and scott, we have had things bouncing around in the markets and over the past several hours, even though the trend is still seems to be intact. What are you seeing in the options marketplace that is telling you how traders are feeling right now . Volume isst off, pretty big across the board, which is a good thing, big interest in the marketplace, but on very we are focused news driven things coming out of washington. The market is really making these moves on Robert Mueller news, Stephan Miller news, rather than the whole macro picture of how the economy is doing. It seems to me like this is a heightened sense of i have to have my finger on the pulse of to trigger here to be able make a move in the market, in case something negative comes out. Julie and that is a little bit of a change from the rise no matter what that we have been seeing in recent weeks. I want to get to earnings and trade. We have been talking a lot about General Electric today, the worst performer in the dow last year. You are looking at caterpillar, the best performer. Do you think that is going to help to propel momentum further . Scott i really do. Expectations, julie, our lofty. The stock has been a juggernaut. As i said, expectations are lofty. As one dollar 88 cents per share. What is really, in my opinion, here,to drive caterpillar not only the effects of the new tax reform, but also the new infrastructure plan that is in place. Caterpillar is in a good place to take full advantage. Julie if, indeed, it does happen. Do you think we could see that bouncing around as it unfolds . What is your trade looking like to capitalize on it . Looking for great metrics and, most importantly, future earnings growth. Based on the options market, predicting 7. 50 move. Im buying february regular a 172. 5 to 177. 5 call spread. Playing for that upside move. By using regular february expiration options, im getting my so some time as opposed to thats this week. Thats what im looking for here. Will seel right, we what those numbers look like tomorrow. Scott bauer, good to see you. Scarlet stocks, seeing a blow. Fordeak with bob shanks at at around 4 15 p. M. , eastern time. From new york, this is bloomberg. Mark White House Press secretary Sarah Huckabee sanders says more details on President Trump possum proposed President Trumps proposed border wall will be out monday. President trump has said that if there is no wall, there will be no deal on daca. Some members of the u. S. Conference of mayors are boycotting a white house meeting with President Trump after the Justice Department put new pressure on cities that dont cooperate with federal immigration authorities. Mitch landrieu said that an attack on mayors that lead welcoming see these cities is an attack on everyone in our conference. In davos today, president Emmanuel Macron argued that it is up to the global elite to createdhe inequalities by excess global capitalism. Said thatmacron winning the presidency of one of europes biggest economies gives him put him in a unique position. Quite a gives me the responsibility t