Lisa the small and midcap names outperforming over the major indexes. That is not what we have seen as of late. Romaine lets dive deeper with our reporters. Abigail i am thinking about the isn manufacturing report. The lowest level since june of 2009. The fifth month of contraction. The eight down report out of the last nine months. If you look under the hood, you can see some bright spots where talking about boeing and gm harriet its pretty bad. Manufacturing report go from growth to contraction. At that time, if you can recall there was a bear market for the s p 500 in white been 2016 through 2018, the Manufacturing Sector healthy going above 60. Here is the contraction going from 60 to 47. 2 remarkable. Take a look at the divergence between the s p 500 and the isn manufacturing index. Kind ofve that divergence, at some point you think its going to have to catch up in some way whether manufacturing recovers of the record highs, that divergence is something to keep in mind. You would imagine on a day like today with risk front and center, the riskiest of shares would underperform and you would be right. Look at these two different invesco etfs. The first is lower on the day down 1. 3 double the s p decline. The other is a low volatility etf which is gaining on the day. One owns more stocks more shares. It meanwhile, the low volatility is insurance. So the it does today is popularity that the high beta trade has garnered and shows the possible risk. It since early october, we have seen the high beta etf search most 18 meanwhile the low volatility fund, which was a juggernaut has hardly done much of anything. We spoke with one investor over at tiaa and he said what today shows is that the trade goes both words both ways. On the way up and the way down. Its possible we could see investors shift toward more of a minella like boring trading strategies. Puts close it out looking at gold which is rising on tensions in the middle east after President Trump ordered an airstrike that killed a key iranian general. It is approaching a sixyear high that it hit back in september. The move helped gold to build on the biggest annual gain in almost a decade or it the rally has been driven by mostly by a weaker dollar in recent weeks, real rates and geopolitical concerns not unlike this one. That rally was making investors and analysts predict further gains this year and into 2020 one, something that could go reaching 1600 per ounce. Still with us, is bloombergs macro strategist. Edit, i want to start with you. I want to start with you. Yesterday people were buying treasuries. Do you expect the bid to be persistent throughout the year . Is this going to be another year where people thought the going to go up . I would be very surprised if thats the case. On the margin, yields are likely to rise. That is based on the view that we are likely to get faster Global Growth this year than we got last year. Last year was the weakest we have had an expansion. I think youre going to see some improvement and growth outside the u. S. That is going to boost Global Growth on the margin. All things being equal, that is likely to exert upward pressure on yields but i dont think they are going to go very high because the secular disinflation forces that have been pulling them down, aging demographics, high debt levels, a lack of private sector appetite to borrow his win to keep yields cap. I can see them going above 2. 25 but i am surprised at the down move we see here. A lot of people are taking todays down move and the move and gold as a sign that the pressure is the opposite. It is too much lower yields and people are expecting another easing cycle in response to any geopolitical risk. My base case view is that the fed a steady throughout the me year. Inflation is not likely to get so alarmingly low that the fed is likely to cut. Geopolitical risks, if they do escalate to the point where it changes things, that certainly is a possibility but not one in our base case scenario. Romaine does that become a headwind for stocks . Or does it help . It depends on the magnitude. 2. 25a benign move to shouldnt be too much of a headwind. If you get 2. 5 plus and a steeper curve that could affect the Housing Market because more Mortgage Rates will presumably go up. We still have plenty of uncertainty visavis the trade situation. I think todays manufacturing number coming before any phase one deal is signed suggests there is headwind on the run. Run. Lisa we said there was a decline in inventory. The one Silver Lining is that perhaps, there would be an increase in orders. Thats the one thing you can take away. What that means is that the current rate of growth is going to be low because firms are the stocking. It in the future, once the inventories are at an appropriate level, they will match orders once again. Going back to your point the you expect higher rates to pick up in growth, obviously, one of the stories for 2019 was the persistent din of trait anxiety cause companies to under invest. Could geopolitical issues have the same affect . In 2020 . Yes. I dont think investment is going to be an are of strength for the economy. I do think that housing is coming back based on lower rates that the consumer is likely to be strong. The u. S. , we are talking about growth being steady around 2 . Its in places like europe and emerging markets where we are more likely to get better than last year. This is one of the consensus ideas. After today, use of the biggest decline in emergingmarket currencies at one point since september. I am wondering what you glean from that. Is it a oneday blip or a serious risk . Anytime you have building geopolitical risks related to the possibility of an oil spike that is going to hit emergingmarket assets, i am willing to bet thats a countertrend to what were likely to see this year. We think it will be a year of better growth for emerging. Arkets emergingmarket assets should outperform u. S. Assets this year. Quick, this thursday, friday was a weird week. Today i dont know what it feels like. Was it just generally, when you say who was on the desk . I would call it statistically insignificant in the grand scheme of things. I live in connecticut so i take a train into manhattan. I can judge by how clear the train is. That gives you an idea that we are not fully staffed. The year begins i was paying attention today because i am a real professional. Did you see that . Second car. [laughter] our thanks to our macro strategist. Gamble. Ourse, a that does it for the closing bell. Whatd you miss . Is coming up next. We of talk about the tensions in the middle east. This is bloomberg. Live from bloomberg world headquarters, im romaine bostick. Heres a snapshot of how u. S. Stocks closed today. Stocks slump and havens rallying. Middle east tensions. President trump plans to spend send 3000 troops to kuwait. Boosting the presence in the region. Tesla its the gas. A new record for delivery. Revving up investor confidence. Fresh details surface on just how the Renault Nissan ceo fled japan reedit. Tensions flaring on the middle east as u. S. Airstrikes order by President Trump killed one of irans most powerful generals. Our guest joins us from washington, d. C. Playset by pushing this forward through the weekend. Are we expecting a sign of how iran plans to retaliate . Yes. I think it is reasonable to expect iran to have a shortterm response given the high level of attention on this issue. Looking back on previous tensions between the u. S. And that it is worth thinking followon attacks have occurred months or years later for similar highlevel attacks. Leader 1992, the has lot theollah leader response came a month later in argentina targeting the Israeli Embassy there killing and wounding dozens if not hundreds. It is worth thinking about those sense of actions that iran and with them, their array of allies and proxies. Or the Global Network of cells that iran and hezbollah could use to execute an attack. I could see some type of shortterm Immediate Response may be coming in iraq or syria targeting the u. S. Military forces but then perhaps something coming later and more severe. In a theater that maybe we are not expecting. Hethere is one legacy that will leave is to have the element of surprise and asymmetry thinking about retaliation against the u. S. Silla money was characterized as an architect of diplomatic strategy across the region. He was a very different government entity. How much is that how much is that replaceable . Are their deputies who can continue to maintain the web without him there . Thats a great question and one that i think analysts are disagreeing on right now. I like to think that he was a unique and visionary leader. To the 2000s, trying to build the axis of resistance. A network of the iranian force with the regime in syria. Roups with Palestinian Hamas he was uniquely capable and had a charisma to motivate and inspire those fighters. At the same time, while building up his capabilities and networks, i think he and the iranian leadership understood that a day like this might come. They built the capabilities of these groups themselves to be functioning as well as as long as they got help from iran. There are surely successors that are in place to take up some of the duties. In the shortterm, maybe the immediate potency and capability of the iranian Regional Access axis could decline. I think there is enough resiliency and capability that they will be resilient and be able to continue to achieve iranian regional goals which is influence across the region. Romaine this is still primarily iranian supported. Do these regimes, does iran as a country as a nationstate, do they have support in any other nation states out there should this escalate into a significant allout war . State thatthe other you would think of in the middle east that would provide support would be syria under the sun regime. Militias were there in syria going back to 2013 helping prop up the sun regime. Aside regime. Thatll look for a role china or russia will play. I think that russia will seek as they try to do a power break or a dramatic role diplomatic role. We will try to make the United States the arbiter of the issues in the night middle east. They want to avoid an allout escalation. I think china, because of the economic interest will try to deescalate tensions. Thattrength of iran is its not just states they rely on, its building up the capabilities reedit we say it militia but if you look at has lot, its basically an army. Infantry fighters on the ground and weaponry including cruise missiles, air defense systems, and we see similar capabilities with yemen. It is worth thinking about not only states that can support iran of the capabilities of these groups they have developed just for this type of scenario. Thank you, brian. Coming up, topping wall street estimates with record deliveries in q4. Can elon musk keep up the momentum . Thats up next. Bloomberg. Com has a story on professional bull riders. That includes the us with new partners, u. S. Concealed carry association, it is the biggest yearoveryear sponsorship jump since 2015. The ceo says partnering with the that it makes sense given that most of their supporters are Second Amendment supporters. This move comes after President Trump temporary ban of flavored fates. The company said it would take flavored ecigarettes off the market. Shares of tesla hitting new highs again today. Today they delivered a record 112,000 cars in the Fourth Quarter topping street estimates and achieving elon musks year end sales goals. Lets bring in the Detroit Bureau chief for bloomberg news. An extraordinary surge for tesla shares. Back to the summer and you look now, what is it that has really happened that is suddenly gotten this people people looking at his company and optimistic way . Hype witht a ton of the cyber truck. Even though it has a crazy design in the eyes of a lot of observers, it was very radical and different. He delivered something that a lot of his hardcore fans really loved. He put out some robust sales goals and he is known for missing targets, delivering them late and he hit it. This is important selling more than 360,000 electric vehicles because it takes away a talking point. Every time he is late or misses a goal, they go crazy. The company is starting to execute. Another interesting piece of news from the release today was salabley have made 1000 model threes at the shanghai factory. Tariffs, theyd will have more capacity on the ground to sell vehicles and china. It will not be exporting from the u. S. If they have more demand here, they can meet it. There is a lot of momentum operationally. I wonder how much we can take away from this in terms of elon musk being successful as a manufacturer which has been a big question versus setting a low bar and jumping above it with a race and all of his factories around the world. Are some open questions here. The stock has been roaring. A lot of analysts have a bold case on the stock. Is it will profitability be there also . Right now, you have sales down in the u. S. Tesla has been saying they have been diverting production to europe where they dont have a plant to china were they are just getting up and running. That is true, but as demand for the vehicle lessened in the u. S. Or is not having rapid growth, thats one question. The other is can they make profits . The car has an extensive expensive battery. Whether or not they can generate the kind of margins and cash flow to justify this valuation in the longterm, that is another big question. Romaine obviously, a big part of the outlook for the company is going to be what happens in china. Do you think we can see that profitability materialize in the cards that they are producing and selling their . There . You get greater scale when you start to amortize the cost. They sell millions of vehicles every year. That is a big help. Labor is cheaper over there. Said and we have to take him at his word, they learned a lot bringing up the first factories of the second one is quicker. So far, it has been and it will be cheaper and more efficient and faster in terms of production. The next factory is much bigger than the first one, you do see a better route to profitability than they have had in california. Thank you so much, david. For all of our correspondents in detroit. Ahead, looking at the oil market as commodities soar after the killing of an iranian general. Is this part of a larger trend . We have analysts saying its probably the shorter term. This is bloomberg. Lets get the first were this afternoon. We begin in florida where donald trump addressed the killing in baghdad of an airstrike. The general was planning attacks on americans. Americans anywhere are threatened, we have all of those targets already fully identified , and i am ready to take whatever action is necessary. That in particular refers to iran. The Trump Administration is beefing up its military presence in the middle east. There are plans to send the 82nd airborne division. They will join the 700 troops already sent this week. The u. S. Has 60,000 personnel in the region. In jakarta, flooding killing at least 43 people. Hundreds of thousands have been exact evacuated. Monsoon rains are leaving neighborhoods submerged. It the worst flooding there in six years. In australia, the deadly bushfire is ending the political honeymoon for the prime minister. His clumsy heading of the disaster is striking criticism. Some of the criticism comes from fellow conservatives. People are missing. Global news 24 hours a day on air and on tick by bloomberg. Powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Crude oil prices surged today after we found out about the killing of the iranian general. That was the drone attack ordered by President Trump. The tension in the region drawing busy trading levels today. For more context, we are joined from houston by our guest. The number one question isnt what happened to what happens tomorrow . Significante a disruption in the supply of oil . Thats exactly what the oil market is trying to figure out. There is a wide range of outcomes from the iranians doing nothing. Other extreme, the iranians shutting down the strait of hormuz where 20 of the world Oil Transports every day. Thats why we only saw the market go up two dollars per barrel here rather than eight dollars per barrel in september when the facilities in saudi arabia were attacked. I have been hearing about the risks of the risk to the strait of hormuz for a long time. If there were a real disruption, look at the due to the price . If there was a real disruption and the streets were iosed for a significant time, could see where the press of oil would exceed 100 per battle and countries would open up their Strategic Petroleum reserves to bridge the gap until they could reopen the straight. How likely do you think they could be . It is low on my list of possibilities. Iran has to decide of course they are antiamerican but on the other hand, they are trying to beef up their alliances with china and russia. Closing the streets would not benefit china who is already importing over 10 Million Barrels per day. There is a question of how much of a potential slowdown in growth due to rising geopolitical tensions would offset any disruptions in oil. Can you talk about the balance and how much pressure it can put on oil prices if we do get a geopolitical escalation based on what that does to Global Growth . I think that we are already seeing the oil market has more or less been under pressure due to the slowdown in demand we have seen. The forecasts have been revised downward constantly by the Energy Administration as well as the energy agency. World hast, the significant supplies of oil. Most recently, a big Norwegian Oil fields started up with 300,000 Barrels Per Day. Another field has started up in south america. Mention theients, a price of oil had we not had sanctions on iran taking 2 Million Barrels per day of oil off the market or the production declines in venezuela with an additional 500,000 Barrels Per Day decline. The story over the last 12 months has been the climbing demand growth in light of increasing supply. Talk about declining demand growth. If we were to get escalating tension and that had an impact on the economic picture, that would reduce the demand a story. If you still got the gusher of supply coming out of the u. S. And other countries. At his that change her outlook for the industry . Change yourthat outlook for the industry . Here in 2019, we saw a significant amount of and currencies because oil was not enough to have a return on investment. Capital spending is down, the amount of drilling rigs that are in action continued to decline. I expect the rate of growth of u. S. Show production in 2020 is going to be slower. They were expecting Oil Production to average 13. 2 Million Barrels per day. Right now it is 12. 9 Million Barrels per day. You mentioned the struggles in the shale patch. If there was a bump up in the oil prices, how much of a lifeline could this be to the scrambling are straddling the edge of potential bankruptcies. A the higher prices are benefit to the producers but i dont see them rushing to drill more wells. Epic they want to see higher prices. Barrel of oil comes a bunch of natural gas and you can see the Natural Gas Prices are down 27 to 30 . They have a mixed bag of their product revenue. Quickly, i wonder what you make of the fact that exxon and chevron shares are lower on the day . Chevron, they are lower in light of for refining margins and petrochemical margins. We have seen that across the board today with a lot of the independent refiners down 3 . You can put phillips 66, marathon and others in that category. They are seeing their refining margins get squeezed with a Higher Oil Prices and higher stocks of refined products. Thank you very much for joining us. Sticking with commodities, lets ring in our Bloomberg Intelligence analysts. Gold seems to move on to things. Geopolitical tension, people get anxious and they want to hold rocks. Then easing Monetary Policy or low real rates or things that the Central Banks do. How do you decompose the move and gold between those two factors . I love the analogy of holding rocks. People who buy gold these days dont touch it. And you the correlation trust that there is a strong correlation with crude oil because one of the reasons gold is going up is because crude oil is a massive u. S. Production. If we have a major issue in the strait of hormuz, the u. S. Is in a unique situation. We are an explorer now. In this case, it is looking at the bigger picture. Geopolitical tensions. High. Llar at an alltime how much higher will it go . Deescalationt a in geopolitical tensions over do yout few weeks, expect goal levels to decline . It should but right now it is right at last years high. It is not going down on bad news. Today was an excuse. Potentially gold can go higher and it needs a good reason not to. I cant see that unless we sustain higher u. S. Dollar. Thats a good point. If you get to the point where you get more Dollar Strength where people have predicted before the issues, doesnt that change . It should. What is going to drive it . Is such a high correlation between the dollar and the u. S. Stock market. Thats the conundrum and commodities but if you look at gold, look at the bond market. Yield, u. S. Bond yields are declining despite the fact debt is increasing. Who is the vigilante . Gold. Are you still collecting bitcoin . Are you still hoarding rocks . In terms of volatility, how much of what we expect to see over the short frame of gold is going to be just a function of how long the jitters . Its a kneejerk reaction. Gold for january is typically the best month. The last five years, the average return has been 5 in the stock market has been euro. Zero. This is a winwin for gold right now. Do you have gold bars sitting on your desk . The only gold i have right now is on my finger. [laughter] thank you so much. Coming up, iran is vowing severe retaliation. U. S. Officials are bracing themselves for a potential cyberattack. Coming up, more on how the government is preparing for that. This is bloomberg. Vowsans Supreme Leader severe retaliation after the killing of one of their top commanders in an airstrike in a dead. As to what that response is going to look like, we were told earlier they are concerned about a cyberattack. They are quite capable to launch a severe cyber attack against our financial institutions, our infrastructure and educational system. A are highly capable. Look for horizontal escalation by iran. That was our Cyber Security reporter. Do we have a sense of what that retaliation could look like from iran . Its impossible to know how they could retaliate. We know what they have done before. They flooded the bank with traffic so people couldnt access their accounts. It went on for weeks. It was a wakeup call to the industry of potential Cyber Attacks and what can me to the industry. Its impossible to know exactly what the next attack could be. Whether theyre even will be a cyberattack. A lot of people think its likely because its one of the tools that iran has an there arsenal. Is iran considered to be particularly good in terms of the skills they have developed or people have developed the skills on a global scale . Iran is considered to be pretty good. They are an advanced threat. Or they as good as russia china . Its hard to say. They are not in the upper echelon. They have a lot of resources and skills to pull off something advanced if they wanted to. We know there have been connections between cyberattacks and that they could have had protection from russia and china. This is a difficult question to answer very and there is Research Months ago that showed that Russian Hackers would hijack the hacking infrastructure of iran to spoof their attack to make it harder to tell who was behind it. That is very difficult to know without more precise attribution. Given the fact we have had wakeup calls with respect to a tax on banks, do you believe or are you hearing from experts the protections in place are sufficient to withstand the potential attacks . The thing is with cybersecurity, you dont know what you dont know. If iran has been in your system, you might not know. Known in the past few months that iran has been looking at industrial control systems. They have been probing these systems. It is unknown whether they are trend to get a foothold or intelligence. Systems relating to power grids. Things like that. The inside the grids . Who knows. Thats the kind of thing we are looking at. Do experts within the United States feel good about the degree to which Industrial Systems have taken this seriously or is there a sense of alarm that people are too blase about the risks . I think people are concerned about the potential risks. Its a difficult problem. Youre never going to be perfect with security. If you have a lot of resources like iran does to do the research to find the holes, theres always going to be an opportunity. Doesnt the u. S. Have the capability to strike back in the same way . Why should we fear there cyber offense more than a military offense . Yes, we do have advanced hackers. We have retaliated using hacks against iran a few months ago following the drum that was taken down. They went after the Iranian Revolutionary guard. That is something they would have to consider before striking us. Thank you for giving us that update. Lets get the latest business flash headlines. For the week of slump u. S. Manufacturing. The i. S. And purchasing Managers Index fell for a fifth straight month. Economists had predicted an increase. Orders tracking and factories continue to doubt that production. Be of a headcount is up. Bank of americas headcount is up. The ceo says their increased headcount comes from low and moderate income areas. They have also added military veterans over the last five years. They had 9000 employees. The best news for the mid manhattan real estate market. Home sales fell but its the smallest yearoveryear decline since they started trading in 2017. That is according to a report by appraisers. Lvmh will close a store in hong kong made shopping district. That is according to a south china newspaper. It has plunged since the start of the antigovernment protest last year. A mall reform reportedly refused lvmhs request to lower rent. Coming up, a little help from lebanon. Reports continue to swirl about japan. Los ghosn fled this is bloomberg. Carlos ghosns escape. New details emerge on how the former head of nissan and renaud may have been able to flee japan while on house arrest awaiting trial. Latest in terms of what we have been able to piece together about how he escaped the Japanese Justice system . Out in bits and pieces, we dont know the story yet. It does appear that he escaped from japan on a private jet that went through turkey. Now saystor of the jet that at least one of their employees falsified documentation to allow him to get out. Andhe got onto the plane out of his residence in tokyo, these are still thinks we are piecing together. Storyhought there was a that was fascinating about how he approached a hollywood director to get his story out there in movie form before he executed the escape. Can you talk about how this has been very much of a Public Appeal on the part of carlos ghosn in order to escape the Japanese Justice system . Yes, that was a little surprising. If you know anything about carlos ghosn, he is kind of a master of the media. Maybe not media manipulation but whenever he would give a press conference in geneva or at a big auto show, he was very aware of how he was going to be presented and photographed. A smart planner and producer. To that extent, it does not surprise me to hear that he was already thinking about writing the next chapter for talking to people in hollywood. One thing that occurred to me was, maybe he was asking for tips on makeup and disguises because who knows how he was able to speak at japan. It is part of a longstanding character trait. We got a brief statement from carlos ghosn the other day. Do we have a sense of when he might resurface in the media to potentially tell his story . Think we know much more than what he said in a statement which is that he was going to make more Public Comments next week. It may be that he is waiting to see how much else comes out from other sources before he goes public himself. He probably just wants to hunker down and relax with his family for a few days. Nothing formal from him yet. Were getting bits and pieces, media reports about folks who have helped him escape from japan and we will probably hear more about that in the next day or two. Stock chartsing at of nissan and renaud. They are doing terrible. Does his being out of the japanese legal system in theory, will this able to speak freely, does this affect them in a concrete way Going Forward . Starts taking he potshots. I think he is clearly out of the picture now and maybe he will settle some scores. Some of the folks who were involved in the allegations against him are still involved employed at nissan so there may be some bad blood there. Apart from that, nissan in particular appears to be falling apart. We just got the Sales Numbers for december and the end of the year in the u. S. And they were terrible. The company talks about wanting to turn a page and introduce new product but we will have to see. Right now, it is pretty ugly on the ground. Thank you so much for the carlos ghosn update. The numbers for the u. S. Trade balance for november comes out. Dont miss this, the december jobs report comes out next friday. We should have switched those. [laughter] thats all for whatd you miss . Bloomberg technology is coming up next in the u. S. This is bloomberg. Riggs in San Francisco and for emily chang and this is bloomberg technology. Coming up, Tensions Mount after President Trump orders and airstrike that killed one of irans top generals. As they promise retaliation, we look at the technology realm. Plus, another high note with a record amount of deliberatelys deliver