Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20180222

Seeing the treasury and buying yields down. After the fed minutes, they got hit in tensely. David it is time for the morning brief, here is what is coming up. The ecb will be publishing that account of its january policy meeting. At it 30, initial jobless claims and at 1 00 this afternoon, the u. S. Auctions sevenyear notes. Alix time for our bloomberg daybreak first take. First up is that hawkish versus dovish read on the fed minutes. The ecb account coming out in half an hour. There is rhetoric out that they are to blame, and barclays shareholderso looking for its first buyback in years. David we will come Peggy Collins and Joe Weisenthal we welcome Peggy Collins and Joe Weisenthal. Lets start with a quote from the fomc minutes. This is what they said. You have to get all the way through the end. That thegreed strengthening return increases the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate. They therefore agreed to update the characterization of their expectation for the evolution of the federal funds rate in the 2. 2meeting statement further gradual increases. Everyone was the word was looking to see if it was going to be there. It took the market a little while to digest what these minutes meant. We saw a rally initially after the minutes but we saw a selloff. The best interpretation i read dewey. Om 10 dewey tim he said there is not some big upgrade in the inflation outlook , but some of the lower end of the expectations may be coming out. They may have more confidence in the central position, rather than some new upside tail risk. The market interpreted that to be hawkish. Alix at the same time, they were positive on growth. You would think in theory, that would be good for equities. Better growth, higher yield. The Corporate Tax cut rate is really something that we saw a big bump in, at the beginning of the year in terms of companies. The market is still seeing some signs of Company Strengths but they are worried about this inflation. Last year, the fed said we missed the call and did not expect inflation to decline. Global happen this year, we are expecting that inflation may rise faster than people are thinking. David and worried about whether or not it is coming. This sort of said we are not sure about the models. We dont have a better one they sort of said we are not sure about the models. We dont have a better one. Joe they are not that confident and there was this separate briefing about inflation models. Maybe the inflation maybe the traditional models are correct, but you have to admit the fed has been off the market between the relationship of economic growth, the rate of unemployment and the inflation we have seen. It would make sense they keep looking back at their models and asking if something is new. Alix they still stuck to the phillips curve. Is, you look at the bond market and take a look at what is happening, and there is a report on bloomberg that maybe it is all about the ecb. You can see the rise we have seen in yields as you have seen significant Market Movement out of the ecb. The story that broke to cut qe. Some kind of change signaled and guidance. Are people talking about this relationship . Peggy i thought that story was interesting. I had not heard until i saw that story today in terms of whether or not the ecb moves since september have been driving up the u. S. Treasury. As yellen has stepped away, he is not really a known entity. I think we will sort of see the ecb with even more of a lean forward. But it will be interesting to see if that intensifies as we have a change of the guard at the u. S. Fed. David is draghi driving the bus at this point . Joe all markets happen at the margins. Maybe the ecb is not as big a player as the fed in terms of what drives Global Markets but if you have some expectation of what the head is going to do, and they have been telegraphing the whole thing, and you have some marginal change in another central bank and how they are going to be doing policy and buying back bonds, it seems plausible that they could be a factor. Alix what is interesting, and i dont think we have seen, is the buying that should be coming from europe into the u. S. Treasury markets. You have bund yields. That to me is counterintuitive. I dont quite know why. Joe and of course we have the weak dollar and concerns about the hedging their. Maybe to get more yield, but that has been a thesis that the u. S. Looks juicy to the rest of the world. Maybe in the margins there is some of that. Isid our third story barclays earnings and they were somewhat disappointing. Jes staley talk to us and said he is really bullish. Hopefully our shareholders will take comfort from the fact that were going to increase our dividends as planned. We are also going to be talking about as we generate excess capital, given that we are over our capital number, we are going to start looking at buybacks. That is something on the table. David dividends and buybacks, this is how the stock is reacting. You can see how barclays is trading. You will see it is up, nicely. Peggy, i know you cover u. S. Investing, but this is fascinating. A lot of volatility is helping, so far. Peggy as i read the story, i said this could be the year of what have you done for me lately, for the banks around the world. Alix oil companies, you name it. There was a lot of pressure on companies to show shareholders and investors that they are strong. The Corporate Tax rate is one of those things that gave a boost to u. S. Banks of the beginning of the year that barclays did not have at the beginning of the year that barclays did not have. We will see moves away from plain vanilla yellow lending and more high risk trading. That seems to make the hairs on the back of my neck stand up as we oversee investing. We will see how that goes. David should we get nervous that the banks will get overextended . Like the scars from 2008 have not faded. Of human nature, because of how things are cyclical, there will be a point when banks kerley extended and make all the same mistakes again. That will permanently be a part of the landscape. By and large, it feels like we are still in this when is the next crisis . There are variations on that. My guess is that it will be a while. Alix a great article says that is fine, but there are still problems with it comes to barclays, like target profits. David theyre still having litigation problems. They have not gotten that behind them, yet. Alix thank you so much, Peggy Collins and Joe Weisenthal. Coming up, Kristina Hooper, invesco chief Global Market strategist. This is bloomberg. Taylor this is bloomberg daybreak. Head of theted the region where it makes the most money for inappropriate behavior. The north american chief left the automaker after an investigation. Ford says he engaged in behavior that is inconsistent with the companys code of conduct. Warren buffett comes out with his annual letter to Berkshire Hathaway shareholders on saturday. It may contain clues about his succession plan. In january, he named a longtime executive as vicechairman. That led to speculation that they are the frontrunners to be berkshires next ceo berkshire decade next ceo berkshires next ceo. Rovio gave8vio guidance that analysts called a huge disappointment. Alix fed officials added the word further twice to their statement. We debate each word change in the statement. A lot of the big goes into that and i think further is intended to say that continuing the current path we are on and think that is the debate we have been having. Alix missive members agreed that the strengthening of the nearterm Economic Outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate. Update the to expectation for the evolution of in theeral funds rate statement in the post meeting statement to point to further gradual increases. Alix lets go to Kristina Hooper, invesco chief Global Market strategist. Kristina i think the appropriate reaction would be to say it is not that relevant. We need to look ahead. We now have a new fed chair. That was the fomc under janet yellen. We are focused on the Humphrey Hawkins testimony, next week. Givel give us into us insight into jay powell, and interpreting data. Keep in mind that janet yellen has been very focused on the data and interpreting it. What we saw from the 2012 transcripts that were just released in early january of the fomc deliberations, we saw a very different jay powell. I know he has been viewed as Janet Yellens ideological twin, but he is his own walking beige book. He is talking about anecdotal and anecdotal information where is she is going through the information and trying to understand that. Two different approaches that will put disco different takes on monetary approaches. Two different takes on monetary approaches. David she wouldve had a lot more deficit spending. We have both a new fed chair and a new fiscal regime. Kristina absolutely. All the data released that shows Inflationary Pressure was done after that fomc meeting. Alix the fed staff prepared a lot of slides on inflation. Looking through all the different models and taking a look at things that were and were not working, there were disco that found a longer run trend in inflation has been stable in recent years at a little below 2 . Has been persistently lower, that is a very Charlie Evans kind of read. That is a much more dovish take. Kristina what we need to see looking forward is what is jay powell going to focus on because janet yellen has been focused on Inflation Expectations, a variety of measures. I would love to see what he is more interested in, and i think that will help us understand what the shape of Monetary Policy will be, in 2018. David bring me uptodate on expectations because as alix just said, Inflation Expectations factor in, in a significant way. Kristina Inflation Expectations are nudging slightly higher, certainly if you were to expect, if you believe that leading indicators of Inflation Expectations are Consumer Sentiment or things like that, then we are certainly moving in the right direction. What i would say is there could be far better measures of understanding. From,he fomc walked away the most recent meeting saying that the phillips curve has not held up, but we believe it will hold up over the longerterm. But we have seen with the phillips curve thus far has been reflective of a very weak jobs recovery. Unemployment has changed. What compensation has been like, they make less than what they did before the crisis. Alix the bloomberg takes a look at the s p earnings yield versus the 10 year yield. Ande hit 3 on the 10 year what does that do to the equity market . Kristina we could very well hit 3 in the next few months. What does that do . I think it creates a shortterm rerating for equities and then we will see if the fundamental support equity is recovering. But we are going to see is a process throughout 2018 of yields moving higher, causing a rerating of equities that either pauses, moves lower or moves higher because fundamentals are improving. Alix the question is then how do you invest . We are not even in a bubble stage, yet. I think we are in a prebubble stage that could go into a bubble stage because of this thing. That could be followed by a bust phase. I would say that the probability in part to the next president ial election would be relatively high. 70 or Something Like that. A 70 chance of a recession by 2020 . Kristina that is fairly accurate. Certainly what we have seen is that lateterm fiscal stimulus extends out the cycle. It does not mean that it extends the cycle out that we get past the next president ial election and what we know about typical economic cycles is the longer the run, the longer the recession. Alix what is your prebubble cycle stock pick, sector pick . Kristina technology, where the fundamentals are strong. David it was one word. Kristina hooper of invesco will be staying with us. Coming up, we will hear more from jes staley. This is bloomberg. The first parts of january and february volatility came back at some of us thought it might and that is good for the market business, but it is way too early to really get any indication. David berkeley shares are up after reporting fourthquarter earnings. Jes staley spoke to bloomberg over in london following the release of the results. Jes the big news is we ended the restructuring of the banks. No more assets we are looking to sell, number businesses we are looking to close no more businesses we are looking to clues that close. Looking to close. A very Strong Capital position at 13. 3 , above our target in that is the first time we have done that in a long time. In 2018, we planned for a 6. 5 end of six. 5 of for our shareholders. To the markets, you are right. The first parts of january and february, volatility came back at some of us have thought it might, and that is good for the markets but it is way too early to give any indication. The early stock was quite positive. In terms of the market, what are your expectations . You talked about tangible equity targets for the business as a whole. Is that a challenge . Is that going to be a stretch . Jes i dont think so. Ingenerated a return of 5. 6 17. About 350 basis points to go. That 150 basis points of are advantages we will have in refinancing the liabilities of the bank. We have a lot of expensive liabilities that are rolling off. We have high Interest Rates in the u. S. And the u. K. , and that will play into that number. Improvements on the tax basis. Spend over 600 billion pounds in 2017 that will not be there in 2019. What feedback are you getting from shareholders . Are they with you for the long haul on this journey, or are they putting you under pressure . Jes we very much support appreciate the support we have gotten from our shareholder base. We are very much looking forward to barclays getting into a position where we can return excess capital. Hopefully our shareholders will take comfort from the fact that we are going to increase our dividends as planned a significant amount. As we generate excess capital, given that we are over our capital number, the bank is going to start to look at buybacks. But thatown the road, is something that is on the table because we recognize that we have an obligation to begin to return excess returns to our shareholders. X just daily in london taley inly jes s london. The blue line is european stock bank index and barclays is that white line. In your opinion, underperforming stocks, if they woo you with buybacks and dividends, is that going to be enough . Kristina not buybacks, but dividends. Dividends are going to be attractive even if rates go up. There are not going to go up so swiftly that bonds are going to replace dividends. Especially with baby boomers. They need both Capital Appreciation and some level of yield. This is an attractive place to be. We are seeing a lot of companies do it. David provided that dividends are tied to earnings. Hooper of invesco is going to be sticking with us. Released some ecb accounts from its latest meeting. We will break it down for you. This is bloomberg. Alix this is bloomberg daybreak. Im alix steel. Are 30 seconds away from the ecb account of meetings last month. European stocks getting hit. Dana disappointed. We are looking at what is happening in the dollar, mixed. Dollaryen lower as the yen continues to surge higher. Hit as a weaker fourthquarter gdp read. Yields are steady. A little bit of a safe haven risk. The ecb account is out. Here are some of the highlights. The ecb agreed a guidance shift was premature, they may revisit it early 2018. They acknowledged the need for steadiness in communication and will potentially revisit their guidance shift in early 2018. The conversation was timing and sequencing of a rate hike. How deeply did they discuss that and what were the options . It appears they did not at all and may revisit in 2018. Eurodollar goes nowhere, maybe stronger on the margins. Some officials wanted to drop the easing bias on qe. Sounds like there was a little bit of disagreement about whether they should stay the course or be backing off a bit. Concerneded very abruptvoiding adjustments. Clearly, taper tantrum world reversing the hike. Draghi had that incident that did not go so well. Reaction filtering through now, eurodollar moving higher on the news. In terms of the bond market, bunds, i dont see much change. Tiny margin on the buying but not much movement. David Kristina Hooper is still with us. You have not had a chance to read these. What is your overall approach as you look at possible investments to the ecb . Steady as she goes appears to be the basic message here. The ecb remains well behind the u. S. In terms of normalization. It does provide a more attractive environment for equities to flourish. Alix what do you mind a making of eurodollar . Is the strength that we saw , not a, not an ecb story strength story, a weakness dollar story . Weakness to me it is a dollar story. We have seen an unusual relationship over the past couple of years between the u. S. Dollar and expectations about fed funds rate. What i would expect is that we u. S. Dollarsee weakness until we get signs from this new fed that they may have a different approach. To me it is a u. S. Dollar story. David we want to bring in our collect from frankfurt. He has had a chance to briefly read through these. Give us your initial take on what we can get from these, this account. , ity initial take would be seems like mario draghi is trying to bring forth a message that the ecb will go slow as it moves toward removing the stimulus and ending the qb. E. Q january, remember from a little too much has been read. Nto what accounts have said basically, the impressions of the markets back then was ecb is going to discuss changing their language on the Forward Guidance already early this year. Mario draghi followed up at his january conference saying this is not the case yet. We are only having a discussion about where to start removing or changing our Forward Guidance. This account seems to suggest this is what is going on. It is a reinforcement of the message that it is study as it goes and we will move slowly. Alix how do we end up looking at the hops on the council that want a qe full stop in september versus a phaseout . Where is that conversation in light of this account . Out, there are some of the governing Council Members who suggested easing bias. The wording that says ecb can still increase asset purchases. They wanted is removed. Clearly, there is a group of hawks who would like to move faster. But we have to be aware of one and thehat mario draghi chief economist have been trying to say. The direction of travel is clear. We are going toward the exit. It is just a question of when we want to change the language. I think that is where the differences lie. Are saying wewks ,hould probably adjust faster to reflect the better the situation in the economy. Seemse time being, it that there is have it, and that is where we are. The discussion is still ahead of precise discussion about the changes in the Forward Guidance. David i understand there will be a change in the body of the maki decisionmaking officials. Is that likely to change directions . That is a good question. The finance minister of spain will be taking over, there will still be a vote on that, but he is more or less approved. He will start from the first of june, take over as Vice President of the ecb. Victor,take over from who has been considered one of the dogves. We cannot tell much at this point about his view. He has been trying to make the most of the fact that he has experience with supervision, banking crisis, but we dont know where it is all going, although we will probably learn more monday when he appears before the european parliament. I am sure he will be asked about that. Do you like europe, how do you like it . Kristina lets put it this way. Europe is attractively valued, but that include some banks, and their valuation reflects their true value. For others, valuations are lower than reflects fundamentals. Europe in aure to very diversified way, european equities, but also complement indictment emergingmarket equities. Those look attractive as well. The areas that look less attractive, given a normalization environment, u. S. Equities. Probably an underweight make sense at this point. David thank you very much. I want to thank our colleague from frankfurt. In the next hours, we are speaking with Ilmars Rimsevics, governor of the bank of levy. Emergingyou look at markets yesterday, they were some of the hardest hit after the minutes. They have had a killer run so far but today one of the worst performing currencies. What areas of emerging markets do you like the best . You said equities, can i apply not debt, and what region . Kristina i would say emergingmarket equities and emerging asia in particular. If you think about country like taiwan, south korea, they will be benefiting from global growth. That is an area of opportunity. Alix we also have one of the biggest bowls in emerging markets. Enoughwould own is emergingmarket equity as your career or Business Risk can tolerate. That was the gm of cofounder. He is telling his kids to invest more than half of their money in emergingmarket assets. Is that a good idea . Kristina im assuming his children are young and have a long time horizon. It makes sense to have 50 of ones equity exposure in international stocks. A good portion of that in international markets. Over 50 would be for the very young with longer time horizons. David one of the fascinating things i found in the bloomberg is, if you look at emerging markets, look at their gdp and population, growth, and compare it to the stock markets, they are under stocked in a sense. It does not reflect the size of the economy, the group. Does that indicate an arbitrage between em and dm . Kristina certainly there is an arbitrage when you look at it at that respect it. There are a lot of good reasons to be in emergingmarket stocks. I am a fan of dividends. Significantme dividend yields coming from emergingmarket companies. Certainly, the kinds of Growth Prospects in the long term, it makes sense. Alix we pulled out a chart of the spreads. In the u. S. , very tight. Our bonds overvalued . Kristina i would say bonds are fairly valued in this environment. David do you invest in stocks and not bonds . If they are fairly valued, is there an undervaluation right now in em . Kristina this is the time to be but absolutely, overweight in emergingmarket equities, and record weight in emergingmarket debt. David Kristina Hooper, thank you for being with us. Now lets get an update on headlines. Taylor has the first word news. Trump isresident promising to act quickly to prevent more School Shootings. One of his solutions, letting teachers carry guns to confront attackers. The president met an emotional group of victims and those affected at the white house. Randal quarles says the u. S. Economy is in its best shape as the financial crisis. He endorsed a gradual path to rising Interest Rates. And it is time for theresa may to shut out her most senior ministers to force them to agree on a trade deal with the european union. She needs an agreement before making a speech, setting out her plan. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. David coming up, unilever is weighing up a possible new headquarters location and the u. K. Government is talking about the possible companys departure from london. As you commute in today, tune into tom keene and Jonathan Ferro on the radio. York,n hear them in new boston, the bay area, all across the country. Live from new york, this is bloomberg. This is bloomberg daybreak. Up in the next hour, an exclusive interview with Ilmars Rimsevics, the Latvian Central Bank governor. David we are going to turn to wall street. Three things that wall street is buzzing about this morning. Bank of america looks to be staying in london, renewing its lease in the city. Says hishorn Greenlight Capital has turned in its worst performance ever, despite all about volatility. And hits keep on coming for general electric. Willys profits this year be toward the bottom of its reduced forecast. Alix that is the best headline ever. Joining us now is an executive editor from bloomberg. Bank of america saying they will still be in london. Is that a vote of confidence in brexit or on a diversified were they are located . These are the big debates that are happening at all of the big banks. Bank of america, is leaked out that they were considering something in london. Alix didnt they already lease areas in dublin and paris . David Brian Moynihan said that they would do a fair amount in dublin but they also have a big fancy place in london. We have heard from wells fargo, others, northern trust, looking for more space. A little bit in the right direction, from the financial services. David unilever. A big report out, unilever thinking about console consolidating. They are considering leaving london. And going to rotterdam. A city that we dont hear people fleeing to. It is really a symbolic loss. A wellknown property. We on wall street obsess over the banks and financial institutions, but the big employers, but they also play into the zeitgeist of how a city feels. Alix jpmorgan building a whole new headquarters here. Jason putting on my new york bureau chief hat, it is great for midtown manhattan. Park avenue is such a central thoroughfare. But those buildings we walk up and down them every day some of those buildings are a little bit in need of an upgrade. David i think they were built in 1961. I thought they were going to tear that one down and build a highrise in the same location. Alix one goldman went into their place right along the river, they did a whole clean energy thing. They did a revamp of how they were supplying electricity. As you look around new york, you look at whats happening with commercial real estate, hudson yards, you talk blackrock will be over there, wells fargo, they are building some cool buildings. You have to imagine jamie dimon likes to be on the forefront of these things. Seems like a real signature piece for him. Having aid einhorn really rough quarter last quarter. What i found interesting, his thesis is that he wants to play value because of rising yield. I have a chart that shows the correlation between the two. It pretty much holds up, so why did he do so badly . Jason i like how you go from nred to nred. Nerd to nerd. It is interesting, going under the covers, the reason einhorn,ear from he maybe gives more to the public than a normal Hedge Fund Manager would. Last time we saw this move was 2000. Last time we saw this poor performance for green light was 2000, and then it came back for them, which meant the economy. Alix it could be how he is positioned. Shorting growth stocks, amazon, netflix. That is different from playing a correlation between value and yield. I wonder how this will shake up for him. Jason we will see. We seem to have a lot of big Hedge Fund Managers lining up on different sides of how to play this next cycle. As we have talked about, this is truly where they earn their money. There will be winners and losers. Interesting to see when the First Quarter is through, given all the volatility we have seen, how this shakes out. David the next one im almost reluctant to raise, general electric. General electric has had so much bad news and then yesterday came we think we are going to come out toward the bottom of the forecast. Apparently we have not seen the worst of it yet. Jason one of our superstar columnists on gadfly. She talks about they have come out with on this bad news, and then they put themselves in a position where even sort of bad news feels really bad. What the cfo said yesterday was we will be at the low end of our annual profit forecast, which was in the range, but people take the midpoint when they look at the sorts of things it did not make people happy. David this goes to a point with publicly traded companies. You want to be really straight with the street. If you have bad news, get to it quickly. If you start slicing salami, you lose credibility. They think there is something worse coming down the road. Alix did he know about it before and just handled it poorly, or was this a genuine surprise for the new ceo and he is having to do damage control . Jason in the case that broke is making in the column, which i recommend everyone read, they must have known. For instance, ge capital, that is not news. The other thing is the dramatic difference between what flannery and his team are now saying versus what immelt and his team was saying. Right now they are saying about a dollar a share. Before it was two dollars a share. The street estimate right now is . 97, so they dont even think they will make the dollar. David the question is, who knew it . If you dont send the message, they will not bring it to you. All of a sudden, you see this stuff coming out and immelt is saying, see you later. Bye. David many thanks to jason kelly. Coming up, Ford Motor Companys head of north american operations is the latest executive to step down in the an investigation involving inappropriate behavior. Alix check out our charts and graphics on the bloomberg. This is bloomberg. David this is what im looking at and it is not pretty. It involves Ford Motor Company. There have been a number of men behaving badly in high positions. Now we have a Ford Motor Company executive, raj nair. A really upandcoming executive. He was with ford for his entire career, ran asiapacific and africa, global product and then tookg head, cto, over as president of north america and is now stepping down for inappropriate behavior. This is the end of a career that was sort of storied in the industry. He was talked about a potential down the road ceo to replace jim hackett. This is where jim hackett had to say. It is a sad story but also alix important. We have seen it impact the News Headlines but we have not seen it Impact Company earnings, maybe with the exception of the weinstein company. The question is will the start to be a trend . Avid ford motors went down little bit on this news, not dramatically. Alix coming up, you have bonds, yields. Andrew balls of pimco will be joining us. In the markets, a little bit of a risk off day developing on the margins. The dow jones trying to get a rally in the futures market. 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 now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Show me the olympic winter games like ive never seen before. Xfinity x1, yeah, i always know the scor. Triple corks in 4k. Lookin so sick. Stream live on every screen, every win, every trick. 2000 hours of coverage, get your mind blown. 50 olympic channels, yup, youre in the zone. And if theres something that you want to see, pick up that voice remote and just say show me. Experience nbcuniversals coverage of the olympic winter games like never before with xfinity. Proud partner of team usa. Further is intended to say continuing the current path we are on. Alix hawkish or dovish . Marketstes confuse the and they came up empty on my inflation is below the 2 target. Could the ecb be to blame for the selloff in the bond market . The ecb releasing their accounts, saying they are not ready to commit to a shift in guidance. Bigtime investor Jeremy Grantham tells his kids to put more than half of their retirement money into emerging markets. David welcome to bloomberg daybreak. Im david westin. Equity futures are trying to get into positive territory after having a very confusing day yesterday. S p futures up five points. 1 , got a down by little bit of a boost after that ecb account but now lower on the day. Save haven buying coming into the treasury market in europe as well. Crude continuing to get hurt as. Time now for the morning brief. At 8 30 this morning, we will get the weeks initial jobless claims. 1 00 p. M. , the u. S. Government will be auctioning 29 billion in 7year notes. And then david kaplan speaks in vancouver on the subject of trade. Alix lets get to first word news with taylor riggs. Taylor President Trump was to look at the possibility of giving guns to teachers. He tweeted today that a Gun Free School is a magnet format people. He met at the white house with School Shooting survivors and parents of the us. Russia may support a United Nations Security Council resolution calling for a ceasefire in syria. But moscow once a few exceptions. The foreign minister says it cannot cover Islamic State fighters or Al Qaeda Linked groups. Syrian forces today again involved in area near damascus. More than 200 people have died there this week. It is brexit decision time for theresa may. She is shutting her most senior ministers away in a room until later today to force them to agree on what kind of trade deal they want with the european union. She needs an agreement before making a speech setting out her plan. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Thank you. The Federal Reserve had their minutes from the january meeting coming up yesterday showing the inflation situation remains muddy but momentum could sustain additional increases of Interest Rates this year. Joining us now is andrew balls of pimco. Great to see you. That stoodthe quote out to us was the further gradual increase part. They saw strengthening in the nearterm economy. How did you interpret that statement . Andrew i think the minutes from the last janet yellen meeting, beforehe war that, that, i would not read greatly into it. They clearly have the confusion , looking at their inflation forecast and methodology. But overall, the market is closed to the Federal Reserve dots, expecting three hikes this year, and nothing in the minutes changes that. Alix the markets were looking for one hike in 2019. Is that the ron kind a message for the markets . Andrew they are a little bit below where the fed is for the second year. Our expectation is the fed could do more. Is where weto 2. 5 expect the fed to be. The market is pricing pretty close to where the fed is after a number of years were there was a bigger gap. David do you put a greater factor in for uncertainty . Chair, a new fed, a new new members. On the other hand, we have a somewhat different fiscal regime as we have tax cuts coming in. We also have the budget deal, increased deficits. Does that increase the uncertainty of what is coming next . Andrew yes, i think it does. , a powell being appointed bit of continuity with the yellen fed, but having this much stimulus this late in the cycle is pretty much unprecedented. It raises issues around the inflation outlook, of course. Then we have the big increase in supply. A lot of options this week, an increase in supply in the u. S. , big increase this year. The market has largely priced this in, we think. Some better Economic Data as well as the supply, fiscal boost. Year starts to look interesting, we think, but you have a new Federal Reserve chair. The first few months have been made much more difficult, interesting by the fiscal expansion. David following up on the auctions, into this week, a lot of tbills will be put out there. We have had two of the three so far, fairly solid auctions. Does that give you some comfort in that, do you still anticipate , as supply increases, we may have rocky days ahead . Andrew we have moved a lot in terms of the 10year since september. Partly data, partly supplied. The auctions this weekend gone fine, rates have not done too much. Compared to a week ago, lets say. The actual auctions themselves, would not expect too much excitement. But there is a big increase in are notso higher rates a surprise in that context. We have seen the big shift since september, year to date. Side, this the macro late stage in the cycle, fiscal expansion adds to the uncertainty. Theo economic volatility last few years has been at a low level. Now you have more macro uncertainties. No surprise to see higher volatility over all in terms of bond markets, Financial Markets generally. Alix the question becomes what yield on the 10year becomes sustainably disruptive . Bloomberg has broken to a lot of individual to get a perspective. We see yields going three, maybe as hot as 3. 5 . Asshould not be viewed unhealthy in this cycle because you have real growth. About 2 inflation. 3 would be meaningfully below normal gdp. Question for investors is, at what level do risk premium and multiples in equity markets or spreads in highyield bonds start to be impacted . This blowout that you will is completelyicit unprecedented post world war ii, except for a minor image during the korean and vietnam war. During peacetime, unprecedented to put this much stimulus into an economy at full employment. We have a genuine concern about wage and inflation breakout. That is where the bond yields could go higher. We have inflation picking up, wages big saying, are upcoming inflation picking up, does the central bank have to move faster . Thing thats the one will undermine your assets, including the currency it is nominated in. That is why we have a bearish story. The market sold off a little bit going into the auction. I think that is what you are going to see, dealers set up, because they will not be sure if endusers will show up to these auctions. If they dont, you end up with dealers owning more of these bonds. They will set up by going in a little short. Alix what are you doing with the 10year, andrew . We expect a range of 2 to 3 , using that for a couple of years now. We are at the top of that range, starting to look more we expect a range of 2 tointeresting. You have the increase in supply, we have talked about that already. The growth impact is really only from the fiscal boost this year pretty much. Looking forward, our expectations is the fed will get to 2 , 2. 5 . If you look at rates on that basis, markets the pretty fair. 3 , a big move since september, we think treasuries look reasonable. If we saw a sustained increase above 3 , we would see that more as a buying opportunity. Comments on the bloomberg. This is 30year tips. How are you playing inflation . Inrew you see the shift real yield, nominal yield, more on the real side than the nominal side before anyone gets too excited about inflation risk, if you look at tips, 10year breaks even at 2. 1 . If you translate that into the pce, it does not happen for over 10 years. There is reasons to see increased inflation risk at this stage in the cycle. When you look at the tips market, Inflation Expectations, i dont think there is too much to get excited unless we get more data surprises. Inflation, if we saw an upside surprise, that would add to the difficulty of the feds task. And arecast is for two bit, nothing to get excited about on the inflation side. Balls, thank you. He will be sticking with us. Eurodollar pretty much flat on news the ecb may change his policy language later on in 2018, but was not warranted in january. More on that and how to play with the italian election this is bloomberg. Taylor this is bloomberg daybreak. Ord has ousted the head of the region work makes the most money for inappropriate behavior. North american chief raj nair let the company after an investigation. Ford said that he engaged in behavior that was inconsistent with a cups code of conduct. Shares of angry birds maker rovio losing half of their value. The Company Reported earnings that missed estimates. Guide is gave 2018 that one analyst called a huge displacement. French insurer axa got a lift from its u. S. Business last year. Health to be income estimates. That is your Bloomberg Business flash. David we learn from the ecb account from the january meeting although,orning that overall, they were comfortable staying the course for now, some officials were ready to remove a pledge to expand the Bond Buying Program is needed. Some members expressed a preference for dropping the easing bias regarding the Asset Purchase Program as a tangible reflection of reinforced confidence in a sustained adjustment of the path of inflation. That sucht concluded an adjustment was premature and not yet justified by the stronger confidence. We welcome from frankfurt, paul gordon. We dont want to read too much into this. At the same time, a piece of evidence that is new to us. Paul it is important not to read too much into this. These governing Council Members is did not carry the day. Expand of continuing to your qe program, you say, we are going to carry on up to a certain date, we may be extended but we wont expand. Ultimately, you shift to saying total stimulus, free loans to banks coming negative stimulus, and the stock of assets held on the qe provide stimulus. That is what some of them want. David we dont have much to read on this at the moment. If, in fact, there is a growing sense, that we should take away the easing bias, does that say anything about when they start to taper down, start to raise rates . It does not give much sense of timing, unfortunately. The other factors out there, people can work out for themselves. Has pledged to continue buying debt into september. So you have to get some kind of signal by the summer, maybe june, on what will happen next. The Economic Data is mixed. The economy is strong, inflation is not. The general tussle in the governing council at the moment is not so much over what should happen, but when it should have been. Inflation will return but there is disagreement about how long it will take, and therefore, when the issue be should act. David paul gordon, thank you for being with us. Alix still with us is andrew balls of pimco global fixed income. The other elephant in the room is what will happen in the italian elections. Look at the spread in the italian 10year yields versus germanbunds. How are you playing this into march 4 . Paul the likelihood is the italian election is a nonevent in the sense that the interesting thing, the difficult thing for markets would be if was goingtar movement to be part of forming the government. That is a very low probability. There are other configurations of centerright or broader coalition. But from a bond market perspective, as long as it is not the fivestar surprise, it should not be a big event. Italy has performed quite well. All peripherals during the recent market volatility have performed well. Assuming we get the centerright or the broader coalition coming out of the election, maybe there is a little bit of risk premium built into the italian curve, but not that much at the levels we have now. David what if we get none of the above . There was a report recently that servant economist who said the most likely outcome is a Hung Parliament or new election, that nobody prevails. Have the bond market react to that . Andrew if you have a hung come along period of negotiations, maybe you build a bit of risk premium, but it is kind of italian politics as usual. Would be theght cleanest outcome. A long negotiation over former government could be an issue. We had that a few years ago in the midst of the European Crisis and it was not that big a deal then. From a pimco point of view, we fivestar, wed on see it as low risk, we will look for confirmation of that. In our global portfolios we have been a little bit long italy. That has worked fine. Not a lot of risk premium there, so not something you want to take a big edition. Alix so you would or would not be buying peripherals now . We have a small overweight in our european portfolios, thats fine. The cyclical outlook looks good for europe. The mediumterm, secular outlook is where the concerns are. Ecb tapering this year should be broadly priced in. The next time there is a recession in europe, next time there is a slowdown, we think the underlying fundamental weakness of eurozone will be exposed again. Staying with us is andrew balls. Coming up, a chorus of emerging market bulls. And later on, an exclusive ,nterview with Ilmars Rimsevics the Latvian Central Bank governor. Live from new york, this is bloomberg. David a stronger dollar is weighing on emerging market currencies. They are Still Holding on to their game this year as you can see from this chart. Still with us is andrew balls. Lets talk about emerging markets. When you see the opportunities when it comes to fixed income in emerging markets . Andrew the best opportunities we think is in fx. When you look at the relative value across em space, we like being long em currencies. The Growth Outlook looks good. You are not seeing a lot of imbalances in the major em countries, some good political news in south africa. One of our favorite trades will be earning income, earning carry by being long on a broad basket of em fx. Flix what did you make o your reaction to a stronger dollar. If we have a weaker dollar trend, do you need to rethink that theory . Andrew it is a minor stress test for em, but the volatility that we had before, em performed well. Since last a rise september in terms of real and nominal rates. Em fx has performed pretty well. Unless you get big surprises, for example, a surprise on u. S. Inflation would be difficult. With the baseline view, we think em fx looks good. For generally, the outlook e. M. Looks good given the fundamentals. David what about bonds . Spreads have really narrowed. Does that mean that they are fully priced, that there is not as much of an opportunity to buy into e. M. Bonds at this point . Andrew on the dollar side it looks reasonably tight, you can find opportunities but it looks reasonably tight. On the local rate side, where you have the embedded fx exposure, you can find select opportunities there. Overall, mexico, for example, looks pretty reasonable. We think the best place to be, the relative cheapness in the asset classes, is to be long the fx risk primarily. Alix are we going to see investors invest in their own countries or come to the u. S. . Andrew you will see both. If you look at the underlying balances, again, it looks pretty reasonable. You dont have the credit positions in e. M. Space, crossover investors going that way. E. M. Investors, you will always have the flows to the u. S. , official sector flows. Overall pretty balanced. Alix what i was trying to get at is chinese and japanese investors, particularly japanese Life Insurance investors. Will they be buying treasuries are there more attractive opportunities locally . Andrew four japanese investors, the hedge yield will be important. The fx is important. Someone higher levels, yes, you would see higher flow. I am sure you have seen european flow into the u. S. One of the factors keeping u. S. Rates at the long end of the curve slightly lower than they may otherwise be is flows from europe, more than from japan at the moment. Outlook,ng about the risks to the bond market, in the event of a significant rise in investors, japanese could be a factor. Dont forget, u. S. Pension funds and Life Insurance as well. David thank you very much. That is andrew balls. The first economic report of the trump presidency. We will speak with the author of that report, kevin hassett. This is bloomberg. Alix this is bloomberg daybreak. Im alix steel. It is a slight risk off field but u. S. Equity futures are trying to tread into positive territory. European stocks not getting much help after data disappointed. In other asset classes, it is buy the long end of the curve. U. S. Yields down by four basis points. Dollaryen getting hit hard as the yen surges. Potentially a safe haven bid. Initial jobless claims coming in, no surprise, solid. 222,000. Story, questions on inflation, solid job market at full employment. It was the conversation yesterday at the feds meeting for january. No real surprise for the markets. Buying on the long end of the curve, mixed dollar, u. S. Equities trying to eke out a gain in the premarket. David coming up, jobs numbers. The white house yesterday released the economic report, underscoring the administrations progrowth policy. According to the report, the u. S. Could grow at 3 for the next decade in Donald Trumps policies are connected. We welcome the principal author of the report, kevin hassett. Congratulations, you have got it out. A big accomplishment. I think i understand childbirth a little bit better now. David this is a pretty favorable report. Most americans, they would say, i would take that deal. As an economist, you have to look at sensitivity. There are prior president s who have put out reports that have not come to pass. If it does not, what will keep it from a coalition accomplishing . I know that the nerd you are, you have flipped through it, but we have eight chapters that are building up the story of how fast the economy can grow. The headline of the report is dont believe these guys who tell you that we are in a new normal of low growth. Possible if we return policies to normal. The tax bill is working. More than 4 Million People have gotten pay raises, the tax bill is polling better than 50 . Taxes are always unpopular, right . Things are starting to move forward, so 3 over the next 10 years would be a typical 10 years, normal in any other time. It this way. We look back at the forecast of every other economic report going back to truman and the median growth forecast 10 years out with 3. 2 a year. Even in the first four years of the Obama Administration, their forecast averaged north of 3 . What happened, because they gave us higher taxes and regulations and all the other things, we ended up where growth was low. The obama team would have us believe that that was the new normal, that it was just the martians that mean the economy slow. We think they had some policies that we can fix and return the world to this normal world where we get 3 growth. If you look at all the forecasts going back to 1947 and then you have this pessimistic view of the future of america right at the end of the Obama Administration that is the truth that they believe and they are besides themselves because we are saying that we are going back to where we used to be. Are some soundre reasons why we should expect go back to 3 growth. I am glad that you raised president truman. One of the things that happened under him was the baby boom. We are now working our way out of that. A lot of us are retiring. , itever tax reform can do does not typically lead to a lot of babies being born. How do you play against that headwind . Kevin great question, something where we have about 20 pages in the report about. You are right, baby boomers are retiring. It turns out the peak retirement year tends to be about 62. I thought it would be a little higher. The peak of the baby boom is turning 62 next year. So we should be right about at the peak of the retirement of the baby boomers. But if you look at all the other things that affect labor force participation, there are a lot of things that had a negative effect that are not just demographics. The Previous Administration had a very pessimistic outlook for the next 10 years in part because of the retirement of the baby boomers, but we think that is just more than half of the story. There are other reasons why are the people left the labor force. Wage growth was low. They did not see wages Strong Enough to attract them to the labor force, jobs were mismatched, Unemployed People were in part of the country, jobs were in the other part. Then we had the opioid crisis, increasing disability. A lot of policy things that could be fixed which affected labor force participation. We think the drag over the next 10 years of the retirement of baby boomers is legitimate, will subtract. 2 a year from gdp growth, but that is half of the effect that the Obama Administration believed. David you have been working hard on the fiscal side of this. There is the other side, monetary. I know you have not try to influence Monetary Policy but you must have certain assumptions that feed into this report. What do you need to accomplish your goals . Kevin this is something that i have said over and over on the air to make it clear to market participants. We have macro models are well known that help us understand how our policies affect the macroeconomy. One of the things that you do in that model is put down a path of Interest Rates. That evolves given Everything Else going on in the economy. The outputase that of our models is consistent with Forward Guidance. Think we could get positive growth of the type we are talking within our models. It seems like our guidance is fine. We would never advise about Monetary Policy. If they think it is getting overheated, we respect what they do. With unemployment so low, how can you get 3 Growth Without runaway inflation . The bottom line is we are hitting the economy with a supplyside shock, not demandside. If we took it out of the obama playbook and spent 500 million on clunkers, that could be inflationary. But what we are doing is inducing firms to buy more machines, put more plants, increase supply. If you remember your old econ 101, if you have more output, you have lower prices. Finally, and not to put words in your mouth, but sort of, what i hear you saying is, for this to work out, you need the fed to be steady as she goes, not fearing one way or the other. Not saying that you are trying to influence them, but that is what you need to get your mission accomplished. Kevin i would not put those words in my mouth. We need the fed to be independent, doing what it needs to do. I am not getting wishywashy on you there, i mean that. If there was runaway growth that was more than we expected, then the fed would respond accordingly and they would be responding accordingly for good reason. It is in everyones interest to maximize this longrun growth for people to have. I disagree that we want the fed to do exactly what they forecast. We want a fed that functions well. People over there, we have great confidence that they will do that. For what its worth, i think that was pretty clear. Great to talk to you. Kevin hassett, white House Counsel of economic advisers chairman. Latvia continues in the news as the governor of the central bank is accused of soliciting bribes, and accusation that he denies. This reaches all the way into the ecb as well. Fromohnson is with us live the capital latvia. Governor. Ined by the he denies the allegations that have been made against him. Lets get his point of view on what is happening here. Governor, thank you for your time. You were released on monday, you have decided that you are going to remain in post. You have taken the Latvian Central Bank on quite a journey. You have worked their your entire professional career. The highlights of that career im sure was taking latvia into the eurozone and taking up a seat at the ecb. Given the progress, that story, the background, what is happening now that could damage the credibility of the institution . Why dont you step aside, let what will happen happen, let the process work, and maintain the credibility you have set up . Why not simply step aside temporarily and let the process take place . Gov. Rimsevics i think it is a good question but this is nothing for me to speak on about judicial affairs. My lawyer could explain to you. At least he consulted me this morning, he said no particular accusations have been presented. At the moment, everything is away. When you step down, you step down. That is it. Guy could you not step down on a temporary basis . Gov. Rimsevics no, this is impossible. The judicial process in that be a, the shortest i know, about seven to 10 years. , have decided at the moment all the criminal charges will not be presented, i have the possibility to protect myself. I am not the friend of the Banking System in this country. This has been well known. Me,spoke very well about about the eurozone, ecb, and so on, and that is exactly what is happening at the moment. The015, when we joined European Monetary Union, latvia also promised to crack down on Money Laundering in this country. Amountised to reduce the nonresident deposits, reduce the amount of payments of nonresidents going through the latvian Banking System. A number ofised offshore companies handled in this geography would be reduced and the amount of nested accounts would also be reduced. We should be completely getting rid of that. 2015 comes, and unfortunately, several latvian commercial banks are again involved in Money Laundering and latvia is again where very place dubious and unclear transactions take place. At that moment, latvian commercial banks starting to lose their u. S. Dollar clearing accounts around the world. , result with u. S. Dollar clearing accounts. Whichu imagine a country is a European Monetary Union country cannot transact with u. S. Commercial banks in u. S. Dollars . At that moment, i decided to step in and produce a program do the health check of commercial banks of latvia, but not by local doctors but by u. S. Law firms. Very painful, very unpleasant exercise. It took me almost a year to persuade the banks, the commercial Banking Association that there is no other way, that we have to do that. We went to United States, we hired the three best new York Companies who did that exercise. Guy and this is related to what is happening now . Gov. Rimsevics absolutely related to what is happening now. At that moment, when the banks were done with the exercise, the size of nonresident deposits in 2016 went down by almost one third. The banking situation started to improve but of course this is very painful for the banks because they started to lose the money. Amid thewas closed exercise at the beginning of 2016. Guy and that is the bank that relates to the charges with you . Gov. Rimsevics at the moment i cannot talk about these things. Ist is the situation which unraveling. Ofortunately, by the end 2016, all of the commercial banks, unfortunately, losing all corresponding accounts. This is again blamed on me because i went to the United States guy do you deny the allegations against you . Gov. Rimsevics absolutely, vehemently. Guy have you spoken to mario draghi, anyone at the ecb . Gov. Rimsevics i have had a conversation with members of the board. Not mario draghi personally. At the moment there are possibilities, looking into the , perhaps going to frankfurt and working as a governing member. Guy i dont do have to put this more delicately. Have you ever been offered a bribe . Gov. Rimsevics no, i have been hinted. These are very thin ice things. That hint . U report gov. Rimsevics no. Guy why not . Gov. Rimsevics that is a good question. Usually you think maybe i misunderstood, lets see how things are developing. The bank of latvia, the most important thing is we have nothing to do with commercial banking supervision. To thatt to come that issue, you say is a good question. Credibility of a central bank is extremely important. We can put the regulatory issue on one side. But im curious to know why you didnt even the merest whiff of impropriety, why didnt you report that at that point in time . That would be a fair thing where you can say now, that happens then but i reported it. You can imagine, if i had known that this thing was going to develop like it has been developing, i regret that i did not do that. This may sound like housekeeping, but no big bank bank, run by a russian resident, alleges that in the press conference you gave, you said that the bank had misled regulators. Therefore could lose its license. They now claim that by undermining a latvian institution, you have broken latvian law because that is written into law. Is that the case. Case . Gov. Rimsevics i have not undermined anybody. This is very well known and established fact at the moment that the bank as misled the regulator at the entrance into this. You have evidence to share . Gov. Rimsevics definitely. This is not possible to do it by me but there is evidence. That heold me myself has the court case in london. Guy im curious about your belief in the legal system here. You taught previously that the bank was denied a loan and then a few hours later, your residence was searched. You have drawn a link between those events. Is there a link . The institution that is at the basis of which the authorities detained you for was wound up in 2016. Is there a link in that loan not being granted and what happened to you . Gov. Rimsevics i cannot allege that. I can ask whether that is coincidence or fact. I believe i am not a friend of the banks. There are things which have been done, which have been prepared probably for several years, that they have been going after me, looking for my mistakes, wherever i could be blamed for the smallest things, for misbehavior or misfortune. I think it is also important to mention there was a possibility , when it that very day made an appointment to meet the u. S. Ambassador. I thought it would be happening next week. Ande was a home search arrest. This is my speculation, of course. There are a lot of things coinciding with that day and with the u. S. Sanctions against the bank. Silent andobably be not tell anything more but there are a lot of coincidences. Guy as you say, speculation at this point. Governor and savage, thank you for speaking with us. Back to you. David terrific interview, fascinating. We want to turn to a different subject, banking regulations here in the u. S. The Treasury Department to the latest step in President Trumps plan to visit making regulations, recommending changes to the organized Liquidation Authority. We welcome now the foremost authority on banking regulation, rodgin cohen. The foremost. I dont think anybody would dispute that. Organized Liquidation Authority has been talked about since 2008 because there was no good way to unwind these large banks. Some people, particularly republicans who say we dont need a special authority. Just put into bankruptcy. This came up from a different place. Why . Rodgin there is balance in this issue, which is necessary. Bankruptcy is recommended in the proposal and should be enhanced, may not be the best solution. We have to have flexibility. Why would you eliminate the possibility of a different form for resolution, if it would be superior . I think it is a very strong it as a lasteping resort. David part of the impetus of this was a concern that essentially regulators would have a Carte Blanche to write checks to the treasury. Is that addressed by this proposal from the Treasury Department . Rodgin i think the concern was enormously your exaggerated exaggerated to begin with but the issue is very much addressed , a real focal point of the report is to limit the discretion of the government to place the taxpayer at risk. There are many good aspects of this report, including a full throated attack on a subject which worries a number of banks, which is ring fencing, becoming all too common place in the world. Dox if you are a bank, how you interpret what came down yesterday, how do you change your business . Dont think you change it at all. This is basically an endorsement of the system we have, but recognizes there is always opportunity for improvement. Think you can take on more risk, we will be there for you feeling . Rodgin not at all. I think it is quite clear, the basic tenants of orderly Liquidation Authority, which shareholders are wiped out, creditors bear the losses, and management is replaced, that remains fully there. David stay with us on Rating Systems and revisions of those. What do you expect, hope for . Rodgin what i am hoping for is that the Federal Reserve adopts the proposals which it made last august, the Comment Period expired about a week ago. What this fundamentally does is remove the hairtrigger aspect of how banks are rated. Banks would be given the opportunity to correct their deficiencies instead of an automatic descent into a lower rating. I would expect that would be adopted this year. Alix lets move the banks into the conversation of gun control, after this hearing shooting in florida. Some chatter about potentially this is where banks and Credit Card Companies can take ownership when the Public Sector will not take the mantle. What do you think about that . Visa saying we will not let you buy a gun on our credit card. Rodgin let me start with the proposition which i think is fundamental. That we do not have a proper balance today between the constitutional protections of the Second Amendment and the safety of our children in our communities. Every one of these massacres was perpetrated by a person who, i think, indisputably should have never had access to weapons he had. , i haveing to banks issues it is debatable whether we should have what i call private ordering. Which is requiring the private sector to assume the responsibilities of the government. That may be a policy issue but it is more a pragmatic issue. This cannot be an excuse for the government not to act, and the private sector just does not h and depth oft authority as a government. We cannot let the legislative and executive branches off the hook on this. David it may not be ideal but it is not without precedent. I remember in south african apartheid, private companies with disinvest. Alix big oil as well. David when the Public Sector fails to act, is there an alternative . Rodgin it is not an alternative in the space of a replacement that it is for banks to act. I think each bank will want to look at its reputational issues and its core values and determine what action it should take care. Alix when you look at paypal, for example, Payment Companies that have already made this step with gun sales to what you think about that . Perfect hink it is perfectly appropriate for any corporation to make that value judgment. Whether it will be successful or not, again, that is the issue. How much does it really accomplish . And dont we need the government to act . David what is the one biggest thing you are looking for in Bank Deregulation in the next 12 months . Alix 10 seconds or less, go. Rodgin i think we will see a variety of easing of restrictions, not by the largest banks but by the medium and smaller banks. Alix always a pleasure. Rodgin cohen, great to see you. That does it for bloomberg daybreak. Coming up, the open. The Oppenheimer Funds cio will be joining Jonathan Ferro. This is bloomberg. Jonathan from new york city, im Jonathan Ferro. This is the countdown to the open. Chairman pal takes over with full confidence and growing confident on the economy. Treasuries with an auction bid wrapping up today, the 10 year yield stabilizes with fouryear highs and barclays puts 2017 behind them. The ceo delivering a dividend boost. Arerallying in europe, we 30 minutes away from the opening bell in the u. S. Positive ahead of the cash of them by 4 10 of a percent on futures. Fx market, the euro is showing strength despite a german number that came in way off the close of record highs. Eurodollar at 12315. And yields up by four basis points. And after the selloff yesterday following the Federal Reserve minutes, that is where we start, the release of the fed minutes, investors getting more on the january statemt