Transcripts For BLOOMBERG Whatd You Miss 20180124

That is prosperous, open to the world, but capable of recognizing and standing alongside those who have been forgotten and left behind by global initiatives. Mark he also conceded that the main challenge is to help prove that globalization is more fair to middle and working class families. Puerto rico, bracing for a wave of home foreclosures. Hundreds of thousands were granted a threemonth stay following hurricane maria. The majority of those expire this month. Officials say that many residents cannot hate what they oh. More than 30 of the island still does not have power. Global news, 24 hours a day, powered by 2700 journalists and analysts in over 120 countries. Im mark crumpton, this is bloomberg. Julie live from new york, im julie hyman. Scarlet im scarlet fu. Joe and im joe weisenthal. Julie assets are posting is the biggest decline in the major averages. Joe but the question is, whatd you miss . Scarlet Steve Mnuchins endorsement of a weaker dollar to boost exports set the currency to a threeyear low. Bitcoin, its roller coaster ride, not scaring off one of wall streets biggest bowls bulls. And gloom a pass loss is a win lumas loss is a win for brasilia resilient exports. Julie five major themes will be emanating portfolio strategy in 2018, including millennials, inflation, and automation. Joining us now to walk us through those themes and risks, tom lee. Good to see you. Year, you look over this before we get to the specific themes driving at, the conventional wisdom think seems to be that we will continue to see gains that will continue to moderate. Its a this unsexy year on a macro basis. In a way, the stock market has gotten boring that way. Its not like we have had volatility or big drawdowns. Big macro risks havent emerged. In the absence of that, you isw, whats happen has the animal spirits have started to rise. Investors are becoming a lot more confident. Thats the dynamic taking place this year. Joe you would have a bullish call and people would say, there is tom, being bullish again, and you would be right your after year. Do you sort of sense that there was this deep residual skepticism that everyone had . But now that has flipped and now there is a degree of what one might call euphoria and it is pretty rare to be skeptical about this market . Think we get criticized from our clients because we are not elision of or not a listen up on everything or there are neutral views on a sector that are now considered a sell rating. It has changed a bit. But i think it is probably all good news. It is reflecting the frustration of actual active managers in explaining what the market is doing. It means that forces are at work driving stocks up that are not necessarily because the companys big numbers or the stock is cheap anymore. It could be one of two things. Could be euphoria. Could be a huge rotation out of negative Interest Rate bonds. China negative rate bonds. We have massive savings flow. 700 billion per year and none of it ist to equities, now starting to go into equities. It may be a big rotation thats bullish. Do you agree with howard marks, who says that the easy money has been made . Can we take what we did last year and replicate it this year . Tom the easiest money was when it was an easy. One of the things that happened this year as the market accelerated, right, the return from january of last year to september was a lower slope from december and it is now steepening again. That steepening or the acceleration has happened in the past and it is actually not bearish. When you say it happened in the past, when are you talking about, specifically . Tom since 1928 it has happened nine times. One of them was 1929. And 46. Those are the bad outcomes. 2004, 12,017ed in is another example. 2017 is another example. Its neither good nor bad. More than often is not a sign of the top. You have got some colorful acronyms to describe your strategy, but once again you are just looking at a different barbell than last year. Tom last year we recommended know,the cyclical, you computers, resources, american banks, phone carriers. But that outperformed by 550 basis points. It delivered 25 total return. This year we think industrials need to be in peoples portfolios. Its a really good inflation play. I think that inflation is a bigger theme. Its very prevalent and apparent. We can even see it in the costs that are being reported. Sensitive, inflation but industrials are a great play. Because of commodities . The dollar . Wage increases . Tom all of the above. They should be seeing growth. And then it is clearly a dollar play. When it comes to wage pressures, industrials arent labor intensive. There is protection from wage pressure there. Another one of your themes for 2018 is millennials. Im curious, what is the way to to the exposed millennials and their buying power, etc. [laughter] they are generation almost 20 million bigger than the baby boomers at the peak. Its an absolute gargantuan number of people and we know it has already affected when they turn 21, the spirits market, we flip, bourbon beer. Now we are seeing this with rvs and motorcycles. Boomers were the motorcycle generation, let millennials. Ike rvs the last time they were this good was when lucille ball was on tv. And it is millennials buying them . Sales go tothe millennials. Takingey ride around, pictures of themselves. Tom its become a meaningful contributor to gasoline demand. Scarlet its more than just buying houses or starter homes. Tom household ownership, the that household formation has been delayed by millennials for three to five years. Now they are just starting to enter the housing market. It is in our report. By generation, the peak of the isort housing start peak 2029. Joe there has been this debate about whether housing has a long way to run and it sounds like the tail will be there for a long time. I was a that housing is a good tenure story. How they invest money will be a big deal, too. Scarlet automation was one of the other things we mentioned. How does that play . Automation is a necessity. The primary labor force worker between now and 2022 is going to shrink. We will be roughly 8 million workers short, in that time, so the way to replace that shortage what happened to the millennials . In there, but whats happening is the boomers are falling off faster than the millennials are entering. And gen x was small. We dont count at all. Thes echo back to industrials and machinery makers . Does thatat for go back to industrials and machinery makers . Tom its great for tech. What was the best performing sector in 1999 . Tech by a monster. Ustom lee is a sticking with. We will discuss cryptocurrencies, next. This is bloomberg. Whatd you miss . Wildoin wild rise ride continues, just one day after it briefly dipped below 10,000. Still with us, tom lee, whose firm forecast cryptocurrencies this year. Joe you are one of the biggest s onstream bull cryptocurrencies, and im curious, whats your framework for thinking about how you peg a value on any of these . You have come out with valuations. How do you begin . Whats your methodological approach . Tom is a great question. The least case. What is a Digital Currency best used for. Financialases are core doors. Money transfer, wires, and serving as a store value stored value, in peoples minds. With this security, there is digital scarcity. You cant create fake bitcoin. It acts as a stored value. When you question is to whether or not you can own it, remember, if you were to acquire all bitcoin, you could own the blockchain. Storedoin is viewed as a value, you have to compare the concept of what is a store value and how much bitcoin captures. Of the goldes 5 market, its roughly 25,000. Going toay its easily capture, over time, as millennials start to invest, more than 5 . It isher way to look at network value. Similar to facebook, as you guys were talking about, the value is a function on the number of wallets. Do you then apply that equally to all cryptocurrencies . They have significant differences between them, in some cases. Or do you have to come up with different models . Tom i think that over 2000 have been created and lost that have reached a couple of Million Dollars in value. There is a huge universe of them. Many have their own blockchain. Some dont use a blockchain. They all have different use cases. It varies by token. I dont know what the future looks like. I would guess that its like every other industry. ,t would have a concentration with a few players as the most important. It going being one of them . That there are others. They will be the dominant market of unknown size. What is the correlation between cryptocurrencies and traditional asset class s classes . Tom we had to issue tokens to each other and issue them to asset classes, but they are essentially nonexistent. Joe would you expect that correlation overtime as bitcoin talks about stabling out . Maybe. Interestingly, it is the most negatively correlated to gold. It looks like it is cannibalizing gold. It hasnt risen, so institutions are still refusing to own crypto. The points it get to where it becomes more systemically important . Evil were down on cryptocurrencies, and people are saying that it doesnt matter, because its not real. Tom if crypto was a nation and where does it fit in the Global Market caps . Its the 19th a guest in terms of assets. Target, ites our will be like the 11th largest market. You have the whole financial industry focused on thailand, vietnam, but they are smaller than the Crypto Market today. Of the bigsly one stories of the second half of 2017 was this idea that this institutional wall of money would come in. The story fizzled out a little , when the future launched and it turned out to be the peak, for now. Talk to clients, have you noticed at a management in interest . I think there is still a wait and see attitude. You have to get the whole its like trying to build an auto plant in alabama. Gm, bmw, built alabama. St plant in you have to build the whole supply chain around it. For wall street to plant a flag there, its all happening very slowly. From the change in client interest we are having, its pretty much a fate a company. But if someone is saying to prove it now, i think they are looking for the wrong assets. As with all markets, its all about timing. Tom lee, thank you so much. Now its time for our stock of the hour. Navy and, on pace for the best days since november of 2016. Navient, on pace for the best day its had since november of 2016. Abigail mainly they provide educational loans, public and private. Theings growth are down on 9 . I say only because it could have been down much more. The mainline is getting into new areas of loan growth, like health care. That really helps to offset the weakness. Look at this stock since the ipo, shares are down more than 30 . Julie some of the risks are that it is facing some lawsuits . Abigail you are right about that. The Consumer Protection bureau basically said that the loans are not for the benefit of students. We also have some lawsuits from various states, including illinois, pennsylvania, along with washington. Relative to the Consumer Financial Protection Bureau lawsuit, theres a change in leadership there, so perhaps it wont go through, but that is a risk to the story. He did say that he would put on hold and reexamine everything the agency is dealing with. You mentioned student loans, that is the biggest thing for them. For years people have been talking about the bubble, its so bad. Is part of the concern that these have been priced in . Abigail i havent heard that talk around here. That portfolio is actually running off, due to actions around obama. The concern is that portfolio is becoming smaller. One thing for this company, the relationship with Interest Rates. If we take a look at this chart, we see, not surprisingly, stock trades and a shop sharp correlation to the 10 year yield. Here, late last year, this had to do with the stock dropping off. Now rising with the 10 year yield. Thats an interesting idea, i hadnt heard about that student bubble. Diversifying. Abigail, thank you so much. Coming up, highlights from our conversation with james gorman. He talks about challenges in m a. This is bloomberg. Whatd you miss . Arebiggest investment banks american. What would it take to make a competitor . These transactions are difficult, but they have happened. Deutsche bank, many years ago. , obviously. E that was a long time ago. It was. 22 ofcently, purchasing morgan stanley. But you are right, culturally, organizationally, from the sheer , they willet side not be likely for those global systemic and important institutions in the next years. There is no particularly compelling case for it. I dont think that the market needs bigger balance sheets. I think its highly unlikely. Will there be some regional mergers, or in country . I think there will be. Government will still own, from the financial crisis, pieces of institutions, and when will they start selling them . We can say that the financial crisis is over when the governments unload those stakes. Is there the possibility of bank . Rging investment it feels particularly led by the americans. Is there the possibility of coordination in europe . ,ames i think its unlikely honestly. We compete with a number of the and i dont think the regulators will be anxious to see those institutions merging to make larger balance sheets. I dont think thats probable. Theme,nt another big automation. All of these big things that people are asking about. Do you think that you are relatively safe from that . Ones to the core question automation and other related topics, i was asked recently by a journalist on how much i focus youompetitors and i said are obviously in the same industry, with some focus, but i get out of bed worrying about ai. I worry about automation. I worry about cyber risk. I worry about digital. All of these things coming to the markets at the same time, transforming the way business is getting done. We tried to transform our complexes with highly global transactions. Automate that. To its hard to build an expert system on how to advise aboard. Trading electronically has long been going on. With mel with with wealth management, the evolution of the Digital Space is not new. The market close is next. A bit of a meandering in the final 30 minutes of trade. This is bloomberg. [applause] whatd you miss . Stocks ending mixed after swinging the between gains and losses. I am joe weisenthal. Whatd you miss . In live ontuning twitter, we want to welcome you to our live closing bell coverage. We begin with market minutes. ,ets look at how stocks closed the dow at a record high. Did slide into the close. Joe this is a crash. On theany kind of red board for the s p is surprising. All three averages touched declining bybefore the end of the day. It is the nasdaqs biggest decline of the year. As you look at the stocks on the move, general electric, which we talked about, falling after rising following its earnings report. It said the sec was looking into its accounting practices, not just the six billion dollar writedown, but its underlying business. General dynamics rose after sale of its gulfstream increase. Corp. , capacity will grow by the same amount in the following two years, raising concerns about pricing pressure. Gave a salesents forecast that fell short of estimates, seeing weaker demand. Joe lets look at the Government Bond market, starting with the action in the u. S. , yields higher across the board, twoyear it yield and 10 year yield twoyear yield and 10 year yield. This is what people are telling me. Moving into risky assets. Fiveyear, the rally in brazilian assets, i am not sure. Anyway, huge rally for brazilian assets today. Scarlet the story is dollar weakness. Steve mnuchin endorsing a weaker currency, saying it is not a concern. The bloomberg dollar index at a threeyear low, down versus all g10 currencies, except the argentinian peso. The british pound in particular is rallying the most since april on a stronger than expected jobs report, which could reprice Market Expectations or the boe come a but also expectations for a softer brexit. Turned moreing has bullish for the pound as well. The euro firmer. A weaker dollar and stronger signsian currency after of former president when not be able to run for president. Joe commodities ripping today, texasoil up over 2 , west closing in on 66 a barrel, gold up 1. 5 , on a nice move. Silver up nearly 4 . Copper up 4 . The story is the weak dollar. Dollar andnot the not u. S. Equities if it was priced in dollars, it was up today. Has have thisar slide, it has not always been good for commodities. It is coming back into effect here. Joe absolutely. Those are todays market minutes. Trump leaves for davos at 8 00, and advisers are setting the stage for his America First manifesto on the signaling a tougher stance on trade after Steve Mnuchins common saying a weaker dollar is good for us as it relates to trade and opportunities, but longerterm, the strength is a reflection of the u. S. Economy and will continue to be the primary reserve currency. About this istalk our global macro strategist. It sounded like he was walking back that comment a little bit. He is tryingr if to job on the dollar lower more this was an accidental slip . I dont think it is an accidental slip. In this market, the shortterm is immediate for traders. The problem is you have fiscal policy working against each other. If you have protectionist measures, a weaker dollar, that in pairs the tax changes that come into play. Explain that. Haveo things, when you protectionist measures, you have investors who dont want to invest in the United States. They now have money to bring home to repatriate, but they do not know how the economy will react to protectionist measures, so do you want to measure in the United States under those scenarios. Gasped and fainted when they saw those comments this morning. How unusual were they from and Historical Context . Whether it is in the interest of the u. S. Economy are not, treasury secretarys like stronger dollar, stronger dollar. Years when he 25 made a comment about the strength of the dollar as good for the United States. Saw the markets react positively and decided to keep saying it, so i dont know if it was a policy. It was something to say. They tended to step back from that even though the dollar is in the purview of the treasury, not the fed. The dollarch is selloff a function of traditional drivers of currency Interest Ratefirst rat differentials, and things like that . There is euphoria in risk assets right now. The dollar has been going down for a while. This excited the trend. Verbal intervention cannot break the trend. It can slow it or increase it, as it did in this case, so ,eople are into the risk assets and this is fueling the flames. I want to bring up a chart i think you are looking at. This is the trade weighted dollar versus inflation, consumer inflation . Yes . Dollar, theighted drop we saw and the dollar looks less significant on this basis, especially when we have lackluster inflation. How does the inflation scenario play into the dollar Going Forward . Inflationaryion is expectations. If expectations pick up, that will raise Interest Rates in devalue u. S. Assets, so it will cause the dollar to fall. Looking forward will be the next real situation, if protectionism starts to create inflation expectations, those expectations will cause the dollar to weaken. Inflation is absolutely negative for dollar assets. With wilbur ross or the Commerce Department or robert announcing tariffs, what will that do to the currency outlook . For that the lookout and for retaliatory measures from other countries after the president decided to impose tariffs on solar imports. Made some pretty damming comments looking forward, talking about steel, how the u. S. Is willing to compete an affair environment, will go pound for pound with anyone, and if we lose in a straight capital environment, we lose. Regulationsain wto one thing about steel is that he mentioned there are countries that export steel to the United States that are not producing steel. They are moving still exports to a nation where they do not have assets. These are the kinds of things he wants to go up against. It suggests he will go after it by country and company one at a time, and nafta may be the litmus test on how he approaches the situation. Tariffs,picture, the not that big of a deal. This week. Joe not that big of a deal in the grand scheme of things. The level of tariffs were less than people were expecting, but did it feel like this may be the opening shot in what might be a different trade posture . It is possible this was directed towards canada and mexico. We just started conversations on nafta. This will not shake the trees of china and south korea, lg it will, but not the country. Was thessible this administration trying to grapple the sabr a little bit against the canadians and mexicans, saying if we will play tough with south korea and china, imagine how we will be playing with you. It doesnt sound like there is anything that indicates a change for the u. S. Dollar soon . It is hard to say. It is overstretched in the short term. It is just below its fiveyear , soly average Closing Price really over stretched. We could see a rebound in the shortterm. Mario may give that tomorrow if he is dovish, but i think it would just be a temporary pullback. How theto see administration will progress on trade, and that is key to the direction of the dollar and the economy in 2018. Thank you so much. Earnings. More reaction from the cfo of fort and hear his Financial Outlook for the company this year. This is bloomberg. Motor co. And hear his Financial Outlook for the company this year. This is bloomberg. With firstk crumpton word news. The Justice Department warned sanctuary cities they could be legally forced to prove they cooperating with federal immigration authorities. The move prompted some mayors to boycott a planned meeting with president trump. They are in washington for the u. S. Conference of mayors. American cities are the backbone of this great country. This is a fact, not a political theory. Population, 90he 1 of the gdp, 88 of jobs, and we are where future generations want to live and raise families, and we do this with our brothers and sisters who live in rural areas and know we depend on each other. That on landrieu added issues from jobs to immigration, American Cities will have to take the lead. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. We have breaking news. Ford reporting results. The automaker reported adjusted eps of . 39, matching the estimate. Revenue for the quarter was point 5llion 38 billion dollars versus an estimate of 36. 7 billion. On the top line, a beat, on the bottom line, a match. This is bob shanks come the cfo for ford. This just across the bloomberg. You had a beat on the revenue and met expectations on eps. Of revenue is the fseries pickup . Was important because it grew 9 last year. From strength to strength, both f150 and super duty. We had higher volume around the world. It was a good story on the top line, but the pretax results were down. The workcates for us we have underway and how important is we bring that home. You are an honest man. Didnt more of the topline flow to the bottom line why didnt more of the top line flow to the bottom line . It didnt happen for ford, why . For the quarter and the full year, we had headwinds on commodities and exchange. That is not an excuse. Levelsgins would be at where we would be much happier, but that was the issue we had in the full year and quarter, but had risingly, we warranty costs in north america and europe related to recalls. There has been a lot of talk about the cost of commodities, also fx. It appears for its effect than other affected more than other auto manufacturers . I dont think we are affected isany particular way that different than others, other than exchange exposures might be thirds of our two commodities art steel and aluminum. Everyone is affected in the same way. Real opportunity is looking at the affect and seeing what margin you are generating your , and we are addressing the health of the business through our redesign efforts. Your relatively new ceo has been talking about fitness quite a bit. Take us into that. Your Profit Margins in north america far exceed outside. Do you plan to get the others up, or does north america have to go higher . We have to get the operations outside north america earning at least the cost of capital, if not more. They lost money collectively in the Fourth Quarter and year and were down on a year to year basis. A lot of that was driven by europe. We had an impact of 600 million projected related to brexit. That did happen. We had the fx of higher warranty costs and some higher commodity costs, but there is no question those parts of the business have workingtter, and we are on that around strategy and execution, but even north america with an 8 margin should be doing better. Look at this fitness campaign, how far along are you in it . , investors, start to see real returns . We are well into the effort covering six initiatives. We have six areas and a number of initiatives underway. Are getting progress reports at the senior level frequently, and the progress is really exciting to me as a cfo because i am seeing big material numbers that the team are uncovering in terms of their efforts as they monetize that. We will start to see the impact hit the bottom line in 2019 and increased dramatically by the to five years out. They still have more work to do. I am excited to see what more they can come up with, but it is a material effect we will be able to bring to the bottom line. Thank you. It is good to talk to you. Thank you for that conversation. Coming out, are some of the biggest tech stocks show signs of slowing . The three charts you cannot miss. This is bloomberg. It is time for charts with Abigail Doolittle where we bring in the top technicians to look at bloomberg charts and functions. Chief technical btig. Egists at th can you show us your first chart. At the s p 500, it feels like it will never go down. It will at some point. We have these moving averagebased tools like the macd indicator. This buy signal is intact. It is a trend gauge designed to eliminate noise. Is whenrolls over, that it is put in position for that pullback. When you look how far stretch the s p 500 is, it does it take risk management. Today we actually saw weakness. The nasdaq 100 at the lows down 1 , finishing off those lows, but if we were to have a pullback, you have a chart. We look at overbought and oversold measures. This indicator is quite good and overbought condition at present when you have a reading above 80 . That is an overbought reading. When you fall below is when you have the cell signal. That would reflect a loss of momentum. The 50 Day Moving Average is uncomfortably far below the nasdaq 100. When we see that down taken momentum, that is when we want position for the pullback. Relative to of fullback, something along the lines of 5 , so are a longterm investor, not a big deal, but what would you advise is shortterm investor . It could happen in a matter of two weeks. You can see there are buy signals that occur when you get crossovers closer to the green line, which is oversold territory. Those buy signals can develop quickly, so positioning is over weeks, not months. What about the long term. I know you have a great chart of the vix. Longerterm, the market has momentum as well. We notice something recently in , the gauge of volatility. This is a monthly chart going back 20 years. You can see in the bottom window macd indicator just registering its first buy signal for volatility since february 2016. That marks a shift that could suggest more volatility. It is not necessarily bearish for the s p 500. With the that buy signal, i would say you have a falling wedge and this could produce massive volatility. Would you agree with that . If we can expect a massive spike. Fromality, you can see cycles that develop and a higher volatility regime would be something to expect. Great stuff. Thank you so much. Back to you. Thank you. Wagesing up, higher should be a good thing, but what happens when the issue of fairness gets in the way . We will dive into unintended consequences of employers hiking their minimum wage. From new york, this is bloomberg. We use our phones and computers the same way these days. So why do we pay to have a phone connected when were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And ask how to get a 150 prepaid card when you buy a new lg x charge. Its a new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com i am more current and with first word news. Impact week of statements, a judge in lansing, michigan sentenced larry nassar. He worked at Michigan State usa gymnastics. Sa just nasdaqs years, im giving you 175 , which is 2100 months. I have just signed your death warrant. Also spoke today, saying to those he abused that there are no words to describe how sorry he is for his crimes. The White House Press secretary says more details on president trumps wall will be provided on monday. A court in brazil voted unanimously to uphold the corruption conviction of a former president. It could prevent him from participating in president ial election scheduled for october. He says the accusations are politically motivated, and his lawyers are promising to appeal. He leads the polls by a wide margin. The first trial related to the 2015 attack on paris began today. Accused of helping to attackers, including the suspected ringleader hide from police when they were the most wanted men in france. The attacks on november 13, 2015 left 130 people dead. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Lets get a recap of todays Market Action. The dow climbed to a record high , and indexes did set new highs, but the s p and nasdaq did not swooned intons and the close. Financials are strongest, and tech stocks are weakest, which are reflected in how the major averages are trading. Whatd you miss . Raisings are wa minimum wages, but it could have unintended consequences. Have the issue of fairness is affecting how some employees view their paycheck. Assistantned by an professor of economics at the university of massachusetts whose work focuses on this. Thank you for joining us. It has been almost universally lauded that this is a good Thing Companies are raising wages. What are some of the knock on effects . Thank you for having me. Is interesting that the number of retailers are voluntarily raising the minimum wage, most recently walmart raised its wage from 10 to 11. This is happening because the labor market is tight and the Unemployment Rate is 4. 1 , but in the starting wage as prices are rising 3 is compressing the wage distribution, meaning wages are rising more at the bottom in these companies done over all, so the question is what happens within the companies . Go on. We looked at some interesting cases where a major retailer quirkyed wages, and a scenario where some workers got a 2 raise, and other similar workers got a 4 raise, so we tracked their quit rates. Here is what we found. Arrays,a higher wage, quits, and reduces in general that seems to have a bigger of fact for workers earning low wages. That is also good news for retailers looking to raise wages at the bottom. It has a bigger bank for the buck than raising wages across the board. Research looks at the idea of whether people feel they are being paid fairly within their company, and some people might feel lets say youre making 11. 50 and someone starts off at 11, someone might say that is unfair. That is not as pernicious as an issue as people making more than them got a wage raise the did not seem fair . To be sure both of those matter, right . We know when the minimum wage rises because of government firms also raise wages for those who are earning a little it above the minimum to begin with, and that is the kind of spillover that happens, because you dont want to change rate structure to much. If a shift supervisor is making two dollars above a Frontline Worker and the minimum wage rises to dollars, you dont want the shift supervisor to make the same wage as a Frontline Worker. That is one component. The other component is people get upset when they think they are getting paid less than their coworkers who are doing similar jobs. For that reason, raising the wage from the very bottom can be an effective way for reducing quits and turnover, especially lowwage sector like retail. Media and in academia as well, the gap in wages between the lowest and highest paid workers. Did you find in your research that there was more resentment to the people that the lowest work with directly as opposed to the folks who are csuite, andite how does raising the minimum wage address that perception and dissatisfaction . In the work where we were following quit behavior of retail workers, it was looking at similarly paid workers. Other research does suggest that sometimes employers have paid a lot of attention to keeping inequality low within the company. For example, the dramatic growth and earnings inequality in the United States has mostly happen between firms, much more than within firms. What does that mean and why is that happening . Because some of the lowest wage functions have been outsourced, thinking janitorial services. Janitorial services used to be done inhouse 3040 years ago and is done by contractors today. It allows firms to pay a lower wage potentially to lower paid Service Workers without affecting morale as much. Is thatall evidence there is quite a bit of attention workers paid to who they see as their comparison or peers, and firms Pay Attention to changing the demarcation of who exactly counts as coworkers, especially at a time when inequality has been on the rise. Joe this idea of inequality as a function between firms as opposed to the lowest paid versus the ceo of the company. Talkinglot of wonks about this, how much is that a function of more industries seem to be winner take all . You were lucky and working for amazon early on, you have done fantastically well. If you were working for another bookstore, not so much. An extraordinary difference in wages and outcomes. Absolutely. New work and Research Points to the importance of Product Market concentration, the winner take all type scenario, is affecting ane inequality, so you have increasing amount of profits concentrated at the top, and as a result workers and those firms get paid more, but there are just less of them. As a result, that feeds into inequality. There is also a lot of concentration in the labor market. Both concentration in the Product Market, market power, price setting in wage and wage setting, both matter and how it affects wage inequality. The research his face and aiding is fascinating. Thank you so much. Breaking earnings news crossing whirlpoolerg, reporting results. The Trump Administration this week and post a tariff on 50 for washing machines, a move many say will be beneficial to whirlpool. Fourthquarter net sales were 5. 7 billion, missing consensus of 5. 84 billion. Eps higher than expected at 3. 99. Whirlpool sees fullyear eps from 14. 50. 15. 56. Ensus was 15 id just did a word search and the release, the word tariffs not mentioned. Next, he was once called the most popular politician on earth, but is it time for change for brazils former president . He lost his appeal this afternoon against the corruption conviction and what likely be prevented from seeking election this year. We will have the latest. This is bloomberg. Whatd you miss . Court panel this afternoon upheld a corruption conviction against former brazilian president lula. It is a ruling that up ins the president ial race and complicates the political comeback of one of latin americas bestknown figures. We are joined now by our son paolo bureau chief. Shutdown the idea that lula will be part of the president ial race definitively. . No, he is still in the race. No, he is still in the race. The judges were unanimous on the conviction and the prison term, said this limits the Legal Options he has to appeal this second verdict. The impressionr that people never really thought he had much of a chance in the first place to have his conviction overturned. The Market Action would suggest otherwise, a huge surge today in brazilian assets, suggesting investors did think there was a nonzero chance he could be back in the race. We had been hearing divert and views. We heard from some people that the prison term got extended. It could be they signaled he could go to jail sooner than anyone expected, so there are a few things at play because this is a complicated case and of ins andve a lot outs, so it is hard to price in what is happening. Lula has over 30 at this point. Base ofabout his support. He has been convicted of corruption and was sentenced to 9. 5 years in prison before these judges decided to extend that sentence. Who supports him and why do they support him . Lula life was better, the economy was booming and everything was working out. Golden eight years. Commodities were helping and brazil took off. There is that. He is also extremely charismatic and extremely popular. He speaks very well. He speaks to his base very well. He has troubles in the northeast and parts of sound paulo cell follow i was struck in the quote in of story by a Professor International relations who said this is truly a loselose situation for all parties. If lula is rolled and eligible, it could like a political vendetta. If he has allowed to run, it could look like into unity. What does this say about the bigger state of politics and government in brazil . There is this perception in the car wash probe that every politician has some sort of corruption in their history. A lot of people and supporters say they are just after him to get him because he is the hero of the people and speaking for those who do not have a voice. Offers the wayt for a centrist candidate. Three candidates we have it depends on whether lula can run and in the end has to back a candidate because the court says he cant run in the october election. Still quite unclear what the election would look like at this point. Joe how could lula still be in the race . What is the next step where he could get this overturned . What his lawyers will do is appeal to this appellate court. They have a motion they can still file him at which should be ruled in a few weeks, and after they rule on that, he can appeal to the Electoral Court and supreme court, which will likely take longer. Thank you to our Sao Paulo Bureau chief. For now, it looks like he cant run for president. Management ontree etfs and wind they are not as liquid as they promised to be. This is bloomberg. Whatd you miss . How would marks has been a skeptic of etfs in recent years, warning the products have not been tested in a downturn. Earlier today, the Oaktree Capital cofounder updated me on the pros and cons of etfs. They are good for investing, fees,st of them have low which is a good thing. If you want to invest in the kinds of things that the etf invests in, then it is a good vehicle for you. The issue in my opinion, the main issue, is liquidity. I think people turned to etfs and away from mutual funds, because with the mutual fund you can only trade at the end of the day. Set at the end of the day. An etf you can trade any time. It is easy to say it is more liquid and more flexible. But on the be true, other hand, that is a show it. High yield about bonds, they are not liquid by nature. Can a fund that invests in highyield bonds be depended on to be more liquid than the bonds that they invest in themselves . My easy answer is no, but certainly not all the time. For the most part etfs have not been tested. When they are, we will find out. When we get a correction and a bear market at some point, do you think flows will change . It will depend on how they do. Investors, certainly most of the people who use etfs, certainly most retail investors, are what we call trend followers. They decide what to do today date based on what happened yesterday. Of course yesterday is over as far as i am concerned. What they should do is decide what to do today based on what will happen tomorrow, and that is harder to know then what happened yesterday, but i think that if you want to be an investor i dont encourage trading in etfs shortterm but if you want to be a longterm investor, no problem. You dont appear to use etfs at all in your investing. You buy individual securities. Is there a reason or moment you would consider using etfs . I can imagine a use for them. Givexample, lets say you 50 million to us and say, i want to be invested in highyield bonds. We start putting your 50 million to work, but you also say that in the meantime when you are not fully invested in bonds, i want you to buy etfs so i have market exposure while im waiting to get invested in bonds, or during the course of our management of your account we may have a bond that we want to sell and another we want to buy, so some cash could arise in the account and you could say put it in etfs in the meantime. Hard to imagine. Marks, was how would cochairman and founder of Oaktree Capital. Tch the show at 5 30 p. M. World bank chief economist paul romer is stepping down according to a staff letter obtained by bloomberg news. He struggled to reform the Research Operations at the bank. He will return as professor to new york university. I ceos are on the rise despite the downturn in Crypto Markets and regulatory concerns. Bitcoins has slumped as much as the sec has warned investors about fraudulent operators. Startups have raised 450 million this month. In ayear, ipos brought billion dollars. The New York Stock Exchange seeing the biggest ipo since nap. Raised 2. 27ompany billion. Shares sold a 21. 50 each, above the 20 . 50, the top of the expected range. The company is a payment processor. That is your Bloomberg Business flash update. That was a sneaky ipo. I was not aware of the size or that it was listing here. Coming up, what you need to know for tomorrows trading day. This is bloomberg. Whatd you miss . The dow making another record high. Coming up, mario draghi holds a News Conference following the latest policy decision. Economic data, jobless claims out at 8 30 a. M. Caterpillar and intel reporting earnings. Joe have a great evening. This is bloomberg. Alisa im Alisa Parenti in washington, and you are watching bloomberg technology. Lets start with a check of your first word news. President trump is headed to doubles, switzerland, to attend to davos, switzerland, to attend the forum. The president is expected to meet with israeli Prime Minister benjamin netanyahu, writtens theresa may britains theresa may, and other world leaders. After the Group Officially boycotted the meeting, they cited additional pressure by the Justice Department on socalled sanctuary cities for their cancellation. Some still showed up, despite the boycott. Sarah Huckabee Sanders says more details on president trumps proposed border wall will be provided monday. The president warned earlier thereif there is no wall, wont be a deal on protecting undocumented immigrants brought into the u. S. As minors from deportation. After nearly a week of victim impact statements, a michigan judge imposed a 175year sentence on the sports doctor who sexually assaulted young gymnasts