Markets are not going anywhere, the european stocks are flat, the pound is flat against the u. S. Dollar, this despite some week inflation today and another member of the bank of england coming out and talking about a rate cut coming from the bank. The expectation that we will get another cut is growing. The ruble as well, we saw some movement. The Prime Minister will be stepping down with a lot of questions surrounding why, and what that means for president Vladimir Putins future. Everyone is waiting to see that trade deal get signed. Vonnie lets stay there, a president assad to sign President Trump is set to sign the phase one trade deal in the tower. The agreement would lead leave significant tariffs in place and would punish beijing for failing to deliver on key pledges like currency, and intellectual property. Steve mnuchin spoke about the issue of future tariff rollbacks earlier today. As part of phase two, there will be tariff reductions as part of that. Thats the incentive for them to do additional phases. Whether thats before or after the election, we are in different. We are joined now by kyle, from dallas. Its an 86 page deal which is actually quite a thin deal, will we see any concessions from china that we didnt know about . The original deal that the chinese said they were going to sign in the middle of 2019 was about 152 pages, we are missing roughly 70 pages of a more comprehensive deal. What the chinese were reluctant to sign is anything measurable or enforceable. I think what we can expect with which is is an annex confidential. I think in it there will be as to specific performance on the chinese side, what they will buy, how much, and the chinese are desperately short these things they are buying. They desperately need food, soybeans, pork, half their pig population died last year from asian slimes were chinese pigot asian swine flu or chinese pig ebola. We pinned to the chinese down, they had to swallow the fact that this is unilaterally enforceable and measurable. Ofse of the two components the deal that are noteworthy and worth paying attention to. Vonnie it does leave significant tariffs in place. There are the having of some how thing halving of some. Mnuchin slightly went against what President Trump said, saying the next phase could wait until after the election, do you imagine we will see anything between now and november . Kyle i dont. Weve been talking about a china trade deal, we have put our first chair ofs tariffs on chinese washing the scenes washing machines in 2018. For two years we have been talking, this gives both sides the ability to say theres a compromise. President trump forced the chinese to swallow these components that they did not want to swallow and refused to in the past. Thats the enforceability and measurability and the fact that we will leave tariffs in place trade one of the preconditions was that we drop all tariffs to top to talk. We really have the chinese over the barrel here. Going into this election, this buys trump time to say he has a time to see who the next president will be. The chinese know that our supply chains are moving out of china and going somewhere else. This gives china more time to be more selfsufficient in the areas they need to try to be selfsufficient in. This buys time for both sides. Guy you talk about a big win, is it a big win . This has had a bit a big impact on the global economy, was it worth it . Kyle we are at alltime highs in the stock market, an alltime low unemployment, the economy in the u. S. Is booming, the pendants said this will cost 1 or 2 of gdp. That these will be borne by the u. S. People, i have not seen this happen. Our economy has done nothing but get stronger. So what do you mean was it worth it . Manufacturing is in recession, the ifn numbers dont look good, there are sectors that may have been affected coming off this story. You think that this sector has suffered as a result . To 2001, we back allow sign a two cents to the wto before they really had the proper components and they made a lot of promises. Our industrial sector was hollowed out area when you look at the rest built we lost 4 million jobs in five years. Manufacturing sector got outsourced to china and central asia. Thats not the backbone of our economy anymore. Our Economic Growth is actually accelerating. Ifn is coming down but look at , especially europe in germany, theyve been horrible. You see manufacturing around the developed world is up 50 but the Service Sectors are booming. You have Central Banks that zero rates. At zero we were quantitatively tightening for 18 months, the qe that we moved to a few months ago has unwound half of the qt in a couple of months. We have a huge stimulus coming into the market. Whether or not we signed some china deal where they purchase is it abeans and pork, huge win . I think its a nonevent. Buys both sides sometimes some time and phase two will be difficult when we have to bring in National Security and human rights, which china does not want to talk about either of those. Vonnie i want to ask you as we wait for nancy pelosi to telus to the impeachment managers are going to be for the senate trial next week, will it have any kind of impact on markets . Even taking eyeballs away from market screens to watch the proceedings. We are not seeing much of an impact right now but will that change . Kyle i dont know where you stand on this, but we are going by february 12 who the democratic nominee is, and we will see the polls against how that nominee stacks up against President Trump. , withhe economy booming black unemployment the lowest it has ever been and u. S. Unemployment back to its lows in the stock market at highs, this is trumps race to lose. For me does not take my eyeballs off of anything. Vonnie stay with us, we want to get straight to capitol hill in speaker pelosi. To emphasize the importance of time, because everything is about time, how we market mark it. Today is an important day because todays the day we name the managers that will go to the resolution, tohe transmit the articles of impeachment to the senate, and later in the day when we have our and grossman our engrossed meant that we march those articles to the senate. Started, wheners in the course of human events it becomes necessary, or abraham lincolns fourscore and seven years ago, thomas payne said this is the time. Longfellowgain, even , listen my cheer, listen my children and you will hear, the Midnight Ride of paul revere. About marking history. Using time. On december 18, the house of representatives impeach the president of the United States. An impeachment that will last forever. Since december 18 there have been comments about one are we going to send the articles over, we had hoped that the courtesy would be extended that we would have seen what the process would be in the senate. Has revealed, time many things since then, time has been our friend and all of this. It has yielded incriminating evidence, and put truth into the public domain. Since we have passed the articles on december 20, two days later, new email show the 91 minutes after trumps phone call with president zelinski, a top office of management and budget aide at the department of asked to hold off on ukraine aid. There was an investigation into thedelay of efforts in lawyers to justify the delay, delaye alarm that the caused within the administration. On january 2, newly unredacted pentagon emails into how subpoenas that the president had blocked raised serious concern by Trump Administration officials. About theconcerned legality of the president s hold on a to ukraine. On january 6, john bolton said he would comply with the subpoena to testify and that had he knew and he had new and relevant information. On january 13, reports emerged that pressure was hacking ongoingas part of election efforts to support President Trump and yesterday the House Committee, two chairman here, chairman nadler of the judiciary and chairmanship and chairman others as well as two released new evidence pursuant , as anuse subpoena associate of Rudy Giuliani proved that President Trump was a central player in a scheme to pressure ukraine for his own benefit and the 2020 election. Since about the constitution of the United States, and it is important for the president and , thatir putin to know American Voters should decide who our president is. Ot Vladimir Putin in russia im very proud today to present the managers who will bring the case which we have great confidence in in terms of impeaching the president and his , as the further evidence insists and we would not in the situation if we had not waited insists that there would be witnesses and that we see documentation. And now you see some of that happening on the senate side. I hope it does for the good of our country, and honor our constitution. So today we passed a resolution naming the managers, appropriating the funds for the trial, and transmitting the articles of impeachment of the president of the United States for trying to influence a Foreign Government for his own personal and political benefit. Chairman adam schiff of california, the lead manager from california. Served for his 10th term in congress, before that he was a state senator and served as a federal prosecutor in the u. S. Attorneys office in los angeles for six years. Most notably prosecuting the First Federal fbi agent ever to be indicted for espionage. Chairman jerry nadler, chair of the House Judiciary Committee is serving his 15th term in congress, he serves as a top democrat on the judiciary subcommittee on constitution, civil rights, and Civil Liberties for 13 years. Before congress he served at the new York State Assembly for 16 years. The chair of the House Committee on House Administration which has restriction over federal elections is a Senior Member of the House Judiciary Committee, she is serving her 13th term in congress, this is her third impeachment as a Judiciary Committee staffer in the nixon impeachment, as a member of the Judiciary Committee in the clinton impeachment, and now as a manager in this impeachment. And chairman how King Jeffries of new york, he is currently serving his fourth term in congress, he is a member of the House Judiciary Committee, before being in congress he served in the assembly of new york for six years, an accomplished litigator, in private practice before running for office. He clerked for the honorable. Oward bayer jr. Of new york congresswoman val demings of of the, shes a member House Permanent Select Committee on intelligence, and the House Judiciary Committee. She is serving her second term in congress. Before congress she served in the Orlando Police department for 27 years, part of that time as the First Woman Police chief in orlando. Congers men jason crow of colorado as a member of the House Armed Services committee. He served his country, our country bravely as an army ranger in iraq and afghanistan before running for congress. He was a respected litigator in private practice in colorado. Garcia ofman sylvia texas, shes a member of the House Judiciary Committee and before congress she served in and was thesenate, director and presiding judge of the houston municipal system and was elected city controller. She was later elected vonnie nancy pelosi naming seven managers for the seven and the Senate Impeachment trials to begin next week, including val demings, sylvia garcia, jason crow, and we were expecting jerry nadler and adam schiff. Wes a very Diverse Group and will analyze what all means in a moment. Lets get to the white house, speaking on trade we have larry kudlow. The heavy lifting here was getting phase one, nothing like this has ever happened before in history. You may be cynical and thats your job, i appreciate that and i have been on your side of the street in my career, but im least on paper, with enforcement, and the fact that it happened is historic. Was this the only deal . The best deal . Its the best deal, its a terrific deal. And as i said on one of the other programs, the stock market has been rallying for a lot of reasons. Came lot of it is this up at our dinner last night, this is good for americas economy, chinas economy, its good for the world economy. The cooperation on trade and the economy is certainly improving. We have shown it could be done. Its definitive is a definitive or final . We will see, but nothing like this has happened before. In all honesty i know you will say its my job, i dont care which side of the isle youre on, this is historic. [indiscernible] are there any discussions about future tariffs . I did see your text message and i did not want to answer because all of the documents are going to come out today if you have not already seen it. I dont mean to be rude. Point. O slow on this we made tariff adjustments for phase one, which you are aware regarding face two, to quote the president , much of the success of phase two will depend on the success of phase one. If the agreements are accommodated and endeared to, that will make it easier and i think he is right about that. I dont want to predict about future tariffs. I dont want to rule anything out. Guy thats larry kudlow speaking in washington, talking about which is signed. , hesbring kyle back in coming to us from dallas. Enforcement looks like a key win for the white house, thats whats being talked about a great deal. If im a farmer, in iowa, is this a deal i could take to the bank . Because the enforcement method looks highly political to me. Enforcementnow why would be highly political, if you sign a deal with someone that specifically says how many units of a specific commodity they are going to purchase, thats an enforcement mechanism because youre signing an agreement with somebody that has not lived up to anything they have signed up before. I think you would be foolish to sign something that does not have an enforcement mechanism. Guy the reason i say its political is that this is there is not an independent body thats going to oversee this. This does not have the wto behind it. It doesnt have a body behind it. Its ultimately going to come down to ambassador lighthizer, or i assume the president as to whether or not the chinese have kept their side of the bargain. Andf im a farmer in iowa, my certain that the chinese are going to live up to their side of the deal and the president is not going to make a decision that ultimately affects my business . Kyle as a farmer and i will you know right now you cannot trust the chinese as far as you can throw them. They have not lived up to one agreement they have signed. So do you have a sense of optimism if they sign something potentially measurable . I think you have a slight sense of optimism. Are you convinced you can take this to the bank . I think you would have to be foolish to say that the chinese would live up to this. Vonnie i want to get your thoughts on hong kong, it has receded in the new cycle, do you still have trades on, anything new related to either trade in this phase i deal or the hong kong situation . Kyle if you look at hong kong the answer is yes, when you look at hong kong, what you see with the protests against the authoritarian chinese regime and the failure of carrie lam and her government, you see retail sales collapse, they have presars lows and the financial crisis lows. What you are seeing in hong kong is a collapse in their economy, which is the most highly levered economy in the developed world. They have banking assets and gdp at almost 1000 . Thats why ireland and iceland and those other countries in the e. U. Collapsed after the Global Financial crisis. What you will see in 2020 is a full say gail banking crisis. You have such a tightly wound economy in a stage of freefall when you look back at the u. S. Financial crisis, our financial crisis and Mortgage Markets lehman,d in mid2007 aig, fannie, and freddie did not go down, until 2000 and eight. 2008. Do we see this in 2020 . How do you profit . We will see it in 2020, the way we are hedged for this outcome is that we focus on the Exchange Rate between the u. S. Dollars in hong kong dollars. I think that there are a lot of levers that can be thrown by the chinese, and the failed Hong Kong Government to prevent shortselling and things like that of equities. We dont carry any positions, but i would be careful. If you are the owner of a bank in hong kong, i would be careful owning that equity for the next two years. You will suffer significant losses. Just to jump in, does that include hsbc . Know, it isall standard and chartered in hong kong and theyve been doing the bidding of the Chinese Government which is interesting. If you remember, they are freezing the accounts of alleged protesters, freezing their financial transactions. I sit on the board of the foundation promoting the rule of law in china and they froze our accounts because we are doing something that contravenes chinas national government. Hsbc froze our account. Its interesting to see with these british banks are doing at the bidding of the Chinese Government. So i think the Standard Charter in real trouble. Vonnie thank you for joining us, always a pleasure. Kyle bass, heyman capital manager founder and cio. Still ahead, we are back on the impeachment proceedings which are now going to go ahead, and a bloomberg exclusive, Robert Kaplan joining, next. This is bloomberg. Good morning oh no, here comes the neighbor probably to brag about how amazing his Xfinity Customer Service is. Im mike, im so busy. Good thing xfinity has twohour appointment windows. They have night and weekend appointments too. Hes here. Bill . Karolyn . Nope no, just a couple of rocks. Download the my account app to manage your appointments making todays Xfinity Customer Service simple, easy, awesome. Ill pass. , i michael, our International Economics and policy correspondent, joining us as Robert Kaplan. Thank you for being with us. We know that you and others on the fed see about 2 growth for 2020 and 2 inflation, the forecast is not change all that much. How fragile do you think the economic expansion is right now, was something that happens with iran or china. Really knocking us off track because we are so late into a . Robert if anything my estimates for 2020 have firmed a bit, and setting aside some unpredictable that globalll think growth will be sluggish, manufacturing will be sluggish but stabilized, and business fixed investment will be dragged down by energy spending, which will be sluggish, but it will stabilize. If you combine those three things with a strong consumer think we will have a solid year. My confidence might actually be improving. Feelel so consumers you are strongly confident at this point, and the scare of last summers in the Rearview Mirror . Robert put in a different way, there may be months where the consumer pulls back, does not spend, but the capacity is solid. Household Balance Sheets are in better shape, not perfect but of but in better shape. The consumer has the ability to spend and i think they will. Michael the president s signing the phase one trade agreement today, what are ceos in your district telling you about the impact that will have . Robert its positive. It creates stability. It does not remove trade issues, we will have trade issues with china for years. But a phase i deal is much better than the alternative, which would have been continuing with the september tariffs in place and escalating them. This is better than the alternative. Iss not that the deal significant, but the stability is significant. Usmca combine that with hopefully getting ratified and some stability with mexico and canada it does not remove trade issues and trade uncertainty but it creates more pricked ability and stability predictability and stability. Michael should we see more business spending . Robert not necessarily. On balance, anything that helps reduce uncertainty will help business spending. I think it will get a little better and a little more stable. You offset that against the fact that a big part of business spending is energy. And because Global Growth this sluggish, we think energy capex could be down in 2020. You will still see sluggish business spending, but all things being equal, less trade uncertainty will help. Michael and the packing industry has gotten more productive, if we see decline in Energy Infrastructure spending, do we see job losses . Robert we are seeing some job losses, and we have seen some. You are right, the industry is more productive, can do more per well and rigged with fewer workers, all things being equal, job growth in the Energy Sector is sluggish. Michael you cut rates three last time inar, october, as investors saw as a green light for investment. Meeting, december 5 when you forecast no rate moves this year, the s p has been up 5 since then, do you worry about your impact . Michael robert i do. There are three aspects, rates are lower, i was supportive of the rate reductions because i was worried about weakness in the economy. And there is the perception that the bar is higher for future rate increases. I dont know of i completely part with that, but thats of the communication. In order to address the repo issue, we have grown the Balance Sheet. We have done what we had to do, but i am very sensitive that we need to be finding ways to limit and temper the growth. But i am conscious that all three of those actions are to elevated risk asset valuations and we ought to be sensitive to that. I am. , ahael you say its not qe lot of our guests say it is qe, is it not qe if they believe it is . Robert its not qe because we are not buying along the curve. Views on risk asset. Wes a derivative of qe, and inject more liquidity and it injects more into the risk asset. This is why i say growth in the Balance Sheet is not free. We ought to be very sensitive to it and i think we have done what we needed to do. I think it is important that we come up with a plan and communicate a plan for winding this down and tempering Balance Sheet growth. I am hopeful we will do that. Michael we are speaking with Robert Kaplan on Bloomberg Television and radio. How surprised are you that unemployment has gone this low without triggering inflation . Is there a change in inflation dynamics . Robert im not that surprise, weve been talking about the cyclical and structural elements of emplacement. Unemployment being low would have triggered more cost increases, wage increases, it would have led to price increases, thats not happening because of structural issues, technology. Of the distributed Computing Power has really changed the ability of businesses to change prices. I think a good part of this inflation picture a structural, and not going away. I dont know if that is susceptible with monetary policies. I take a different view of how we ought to think about this. I would like us to take action to get to the 2 target, but not at the expense of Financial Stability and creating undue access. Excess. Michael what are we going to see . Robert i think its important that we highlight explicitly that we will consider Financial Stability. I think you could see some changes to the way we articulate the inflation target, arranges something i would be open to be debating, or a longer averaging period. But those are analytics, they are not a substitute for our judgment. I would not want to see is making analytical changes committing us to future actions. The most important thing is the reiteration, for me, that we take a balanced approach which is forwardlooking. That raises a big question in the markets, with . Ates so low, what do you do theres a big debate at the American Economic association, what about the tools . Robert we have had less firepower and we certainly have the Balance Sheet tools. I have been emphasizing this situation and what we see going around a Central Banks suggesting that we need broader economic policies. We need fiscal policies, structural reforms, improved productivity and infrastructure. It cannot all be the central bank. We have less firepower, and for me its not that we ought to come up with new and more exotic tools, it suggests that this is a time that we need a broadened economic policy. There is no Fiscal Authority saying yes we should do that when you talk to members of congress, what do they say . Robert when i talk about sewing workforce growth and the need to itstment in education, hard to not find enthusiastic agreement, but the question is can we get these policies done . Is actiong that there being taken locally on education, texas is a good passed, where the state substantial education reform and there are initiatives to do skills trainings. There are actions happening, we just need to ramp them up. About monetary policy, im not talking about physical business so much as structural reforms. Immigration reform, we have done a lot of work which suggests that we would be well served to look at canada and more skills based in employmentbased immigration system. But if we dont have immigration, we think the workforce will continue to decline. Those are the kinds of issues that we need to be flagging. Monetary policy is not an action on this front. Describingu are secular stagnation, low rates, low growth, Howard Hanson talked about it in the 1930s, is that where we are . Robert i wont give a label to it, but there is no getting around the fact that the structural drivers in the u. S. When you go back to the 70s, and workforce growth at bes or 2 , we think it will less than a quarter of 1 . We have to deal with that we need the policies and we can do things that address that. That othersm glad are flagging it is that michael you may have heard its you are on year hold, as you get closer to november, does that put more pressure on you to stay on hold . Robert it has been a factor in i think my colleagues are also trying to divorce ourselves from political if i feelion, strongly that we need to take action, i will still be i would still be advocating action. Michael thank you very much for joining us. Back to you. You, thatsk Michael Mckee and Robert Kaplan calling the trade deal positive. We will digest more of those remarks in a moment, as well as looking at bank of america and goldman. Out earnings are coming up as well. This is bloomberg. Vonnie i am vonnie quinn. Guy i am guy johnson, time for the stock of the hour. Here is abigail. Looking at target as the big box retailer has essentially slashed his way to the focus, the retailer sharply lowered its samestore sales outlook, and right now, the stock as you can see in the moment, its on route for its worst day since 2018, down about 7 . As i mentioned, when you take a look at the recent comp action and the estimate, you can see the shares are down 6 . But this is clearly moving in the wrong direction, the estimates of the Fourth Quarter are up one point 4 , down on a yearoveryear basis, but also well below the previous target. Behind the weakness are the toy and electronic categories, toys are flat from target investing in that category, thats weighing on some of the other toy makers like best buy and mattel. Into otherhrough retailers is certainly having an effect and thats the big discussion. If you look at the one year chart of target relative to the consumer discretionary, you can see this is extraordinary, the best year ever going back to 1981, outperforming the overall retailers, but with other retailers, and target pointing to weakness, there is a measure of volatility, skyhigh going into the burning the earnings season. Will reporty target in march. That is your stock of the hour. You. E thank bank of america joins wall , atets trading come back 30 in q4, while Goldman Sachs is marred by a legal charge over its settlement over a scandal. Lets bring in alison williams. This is a messy quarter from goldman, willie get cleaner from here on out . That is the hope for investors, the big news is the big charge that took a 1. 1 billion charge. Its obviously difficult because they cannot necessarily say where they are, versus the total potential cost. We have to wait for the final settlement to go with the final costs. Our legal analysts have said to billion for some aspects of risk, but there could be risks beyond that and thats the concern of investors. To be as is turning out weird earnings season, inasmuch as straight out of the gate you get jp morgan blowing away everybodys expectations, and looking fantastic. As bad ass numbers the stock Market Reaction suggest they are. I do think jp morgan is certainly executing at the higher end of all of the banks in terms of their profitability. There is out they are also a leader, and as we have said, this is noticeable, given that they are a leader. I would say goldman and bank of america also have very strong results. If you look sequentially, goldman actually grew from last quarter. Keep in mind that a lot of these percentage gains are not just due to a strong Fourth Quarter, but a weak year ago quarter. There is some aspect of the performance from last year. Whether it did better last year and in terms of looking forward, whats positive on jp morgan there is some stabilization in at whereas costed not grow for citigroup. An overall, expenses for bank of america at this point, clearly is the fact that they have flat expenses, there is less optimism on the revenue side. Have a bitrica does of a different Interest Rate profile, bank of america and wells fargo are perhaps singular similar, wells fargo the weakest in terms of net Income America and the bank of is not in that bucket, but less optimism than other banks. Vonnie how can goldman promise to rein in costs . When really talent is what differentiates it . Talent and technology is one area where the banks continue to invest, but where they are benefiting on the cost side of things relates to efficiency, and a lot of the technology send spending weve seen over the past few years. Goldman and jp morgan are getting some signals that the technology could level off after some major investments, but the other part of it is seeing gains on those investments. So citigroup is talking about gettingenses, they are some of the gains in that investment. Vonnie thank you. This is bloomberg. Guy live from london, im guy johnson. Quinn, thisvonnie is bloomberg markets. Its time for futures in focus. Me,t is in the studio with. Elcome let me inform everyone that we did get some inventories, the u. S. Oil outlook has hit fresh records, gasoline bills were higher than forecasted and revitalization is lower. We are seeing the same trends that we have seen in weeks previous. Scott, you are short on oil, do you stay there . Im looking for that 56 area to cover it with some tight stops on the upside. Whats unbelievable, you talked about the bills, it was about a year ago, we were talking about 10 Million Barrels a day output in the u. S. And we will be about 20 million, thats what opec is expecting. Whats unbelievable to me is that even with the phase i one deal hopefully being signed today, and demand popping up from china, the supply is still far outweighed. When you look at the fundamentals, it is outweighing the global demand. We have the iran situation and suddenly the prices spike. This is 10 higher than it is what do you do in a situation like that . It happened overnight, by the time i woke up and saw the markets, i may have been a bit fortunate. But i did stick with it and actually sold a little more when i noticed it, and had a very tight stop on the extra amount that i had sold. Offs, ane of those one psychological event, a geopolitical risk that we have. Vonnie we know that in hindsight, and we are not even sure we are in the territory of hindsight, so how are you hedged for another situation . You put stop orders out. My stops in west texas are around the 59 area which would make it very profitable. With the geopolitical risk we are seeing out there, anyone whos going to trade and put a line in the sand, you have to use stops, or you get run over. Vonnie scott, thank you for joining us. Today he is in new york city, this is scott bauer of prosper trading academy. Coming up we are counting down to the european close, the big event, the signing of the phase one of the china trade deal. We will view that ceremony live. Lets take a look at how markets are performing, modest gains for the major indices, but they are picking up steam, the dow is up 6 10 of 1 . This is bloomberg. Historic day. Minutes away from the signing of the phase i trade deal between the United States and china. We take you live to the white house. Bank of america and Goldman Sachs trade south. They failed to keep up with j. P. Morgan. Those shock reading reinforcing great expectations. Live from london i am guy johnson with vonnie quinn in new york counting you down to the european close on bloomberg markets. Guy a not vonnie a nice little pickup and u. S. Markets gaining steam. The s p 500 is close to the 33 hundred level. The dow is up 6 10 of 1 . We have the u. S. 10 year yield of 179. Goldman sachs has turned around four percentage points. That it mhe idea