Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20161213

Secretary of state. To discuss, we bring in our eam, marty, and Michael Mckee, bloombergs International Economics and policy correspondent. Lets start with you, marty. Its the worstkept secret in d. C. The last couple of days, but the confirmation could be difficult. Walk me through it. There have already been a number of key republicans who have expressed some doubts about the tillerson pick. Marco rubio being on the Foreign Relations committee, john mccain being an influential republican in the mainstream. But ultimately i think theyre probably going to give donald trump latitude on this one, and i would expect him to get confirmed. Jonathan mike, ive been watching the news here in United States, and the obsession by Rex Tillersons supposed relations with the president of russia, mr. Putin. But to quote Bloomberg View just today, a new russia policy needs the exxon c. E. O. s skills, and i can quote him, trump can hardly do worse to get the kind of advice and relies on a different contained of expertise. This is aware of how business is done in todays russia. Its far superior to that of career diplomats, academics and maybe even spies. What do you make of that view . Michael well, thats one view. The other side is tillerson is completely inexperienced as a diplomat. Diplomacy is not business. Trump is obviously he has promised throughout the campaign that he is going to appoint Business People and tough negotiators to important positions. Hes keeping that campaign promise. The question is, when there comes a military conflict or some sort of decision that has to be made that involves the delect threading of diplomatic needle, would he get the right advice . Jonathan to that point, will he get the right advice . We have a chief executive in the white house, now talking about cost cuts when he looks at every single government contract there is, and now we potentially have the chief executive of exxon going into the state department. How significant is that shift from where you sit . Marty well, i think its very significant. One of the things that i keep coming back to is that while he obviously knows Rex Tillerson, he doesnt have a long relationship with him. In fact, many of his cabinet appointments hes gotten to know these people in the last month. So he does not have years of experience. Hes going to obviously if hes 100 right, it will be great for the country. But i dont think you can count on those odds. So one of these picks is going to be a mistake. Jonathan looking at the exxon c. E. O. Himself, hundred million in stock, michael. What happens to that . Michael 238 million at todays prices. And we can also talk about gary cohn, 207 million worth of Goldman Sachs shares. When you go into government at a certain position, federal ethics laws known as the certificate of divestiture allow you to sell those shares without paying Capital Gains taxes. Now, youre really deferring them, because if you put the money into Something Else like Treasury Bonds and you sell those eventually, you do have to pay the Capital Gains there. But it obviously lets you defer it, perhaps pay a lower amount in the future. So it is a very good deal for people who have a lot of money in stock going into the government. Jonathan potentially for tillerson as well. Martin over in d. C. , thank you very much for joining us. To bring into the conversation now, we can bring in joyce chang j. P. Morgans global head of research. I look at the latest events, and over the last couple of weeks its been overwhelming, strong dollar, high treasury yields, and rhetoric coming out of the Trump Administration over what will happen with trade. But these kind of movements dont seem so bearish for the likes of russia to me. Joyce Higher Oil Prices have really helped russia even more than the rhetoric. Were looking at oil prices to hit close to 60 next year. At 22 move from the lows this year in oil prices has been the first thing. But i think the key thing to watch on the sanctions is europe. What is europe going to do . They have the bigger trade relationship. Jonathan the likes of france and italy would maybe appreciate and pivot away from sanctions towards a more draws strategy that ties a little draws ties a little bit close we are russia and the United States, and then europe can pivot as well, michael. But overwhelmingly, theres been a view of the Trump Administration that would go towards protectionism, to deglobalization. The state department and the role in foreign diplomacy, are they going to be more open than many people realize . Michael thats hard to say at this point, because we dont know exactly where mr. Trump wants to go, but it will be tilted probably towards the oil industry, even if Rex Tillerson isnt openly advocating for exxonmobil, he will be seen as an oil man. That could have important implications, not only with russia, but with the middle east. The middle east tends to see politics in terms of petroleum. Theyve nationalized the Oil Companies there, and they will see somebody who maybe represents oil in the administration as the secretary of state. Jonathan a man over the years that has done deal with countries that actually put the company against the views of maybe the administration, how do you expect that pivot to change over the coming years with the administration to make that move, joyce . Joyce i think trump has already signaled he wants to negotiate better deals. I think youre going hear more about how he will reach out and get bilateral deals done. Can he get a better deal with mexico . Can he do something hes called nafta the worst deal ever. Can he get a better deal that actually has something that benefits the United States . Thats been a consistent theme that he has put out there. Jonathan joyce, just to wrap this up, the overwhelming view here in the United States is that this pits a guy getting closer to an ally over in russia called president putin. Its a very, very juvenile, kneejerk response towards a situation. For me, there seems to be something a lot more complex happening here. What is your view on some of the nominations we have seen that have come out of president elect trump so far . Joyce i think hes chosen people who have very strong business background, who have untraditional backgrounds, and who are also ones who will look to strike specific transactions. I think youre looking at something thats going to be much more transactionbased than what were used to seeing. Jonathan Michael Mckee, our International Economics and policy correspondent, sticking with us. Thanks to joyce chang. At 8 00 a. M. , we will shift towards the Federal Reserve in a big way with former Philadelphia Fed president Charles Policer. He will join us on bloomberg tv and on radio for special coverage of the Federal Reserves decision on wednesday. That will begin at 1 00 p. M. Eastern tomorrow. That decision, of course, at 2 00 p. M. Lets get you up to speed on headlines outside the world of business. Emma thank you, john. Angela merkel says it will be necessary to extend e. U. Sanctions against russia again. Merkel spoke after meeting with frances president Francois Hollande in berlin. The sanctions were originally imposed because of russias meddling in eastern ukraine. E. U. Leaders meet later this week in brussels. In italy, its the fist full day on the job for the new Prime Minister, and already he phase a confidence vote in parliament. Hes outlining his agenda to lawmakers in rome today. Hes hoping to have his government in place before a European Council summit on thursday. He says he wants to boost Economic Growth. He also says italy is ready to collaborate with a new u. S. Administration. People in venezuela are rushing to deposit bank notes or are dumping their cash savings all together. President maduro says hes invalidating their largest bill because of what he calls an attack on the countrys liquidity. Venezuela has suffered a hard cash shortage while inflation soared toward 500 . Maduro says his political foes are smuggling currency out of the country. Global needs 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Jonathan thank you very much. Coming up on this program yellens next move, a december rate hike is already baked in, but will the fed give any clues on its 2017 path . Plus coming up, the former Philadelphia Fed president joining us at 8 00 a. M. Eastern time. The markets, dow at alltime highs. Futures positive, up 65 points on the dow. The dax prints a new high for 2016 in frankfurt. We trade higher by. 6 . Treasuries, yields higher. And dollaryen just creeping back towards 116. This is bloomberg. Jonathan from new york, this is bloomberg requested daybreak. Some change away from a Federal Reserve decision, widely expected to deliver a rake hike. The markets, the dow on a sixday winning streak. Futures up positive, up 65. The dax high for 2016. Likewise in paris as well. In the other asset classes, just very quickly, we just got to the bond market. Bonds go nowhere with yields up about a basis point. The f. X. Market is stable. To get to some of the movers, close over to abigail, where all the focus appears to be on italy. Abigail indeed, good morning, and you are right about that, the focus is in italy. We have shares of the italian bank trading nicely higher on the news the Company Plans to raise 13 billion euros in capital. They are also targeting 1. 7 billion euros in annual cost cuts by 2019. All of this in a bid to boost profitability and capital and perhaps the stock. Shares of unicredit are down more than 90 from the record peak back in 2007. Mixed trading here, but surging are shares of mode i cant set, on pace for their best day ever in 20 years on the news that vivendi has acquired a 3 stake in the italian tv company, and it could go up to a 20 stake. Some are saying this could be the beginning of a hostile bide. Turning here to the u. S. In the premarket, we have shares of boeing trading higher. Yesterday the company did deliver some good news and bad news. The bad news, theyre cutting production on one of their biggest moneymaking claims. The good news, however, they 30 ed their dividend by to top estimates. They also implemented a 14 billion stock buyback. And we have the shares of boeing right now set, john, to open at a record high. Jonathan abigail, thank you very much. Lets get to the Federal Reserve story, shall we . We usually talk about federal uncertainty, but theres a whole lot of certainty about this decision. 100 , if you look at the rate hike probability, and we have been there since late november and stayed there. Thats the probability looking at fed funds futures. To discuss, we bring in Michael Mckee and joyce chang. Michael, a rate hike baked in. We say that a lot, but this time it really is, isnt it . Michael it really s. The markets have accepted the idea the fed wants to raise rates, so they can go ahead and do that. The interesting sque what theyre going to say about what they do next. Since they dont know what tromp is going to be able to accomplish as a matter of fact, we dont even know what tromp is actually proceed pezzing since hes propose sodomy many things on so many different sides of the issues, theyre probably going to leave well enough alone. I would imagine their forecast will be very similar to what they had before, and this will essentially call for two headache heights next year, because they can only go on what they know now, not what is likely to happen. Jonathan the dots look like this after tomorrow, what are the dots really worth . The market is in line with the dots. No one knows whats coming next year. These forecasts, these plots, these yellow dots, all the fomc officials and where they think rates may or may not in the coming years, theyre even more worthless than theyve ever been, arent they . Joyce right now, it is premature to change the outlook, because we dont see what the Trump Administration is going to do. The key thing the market is going to focus is on the dollar strength. Thats going take away from the growth forecast later on, and will that lead to a change in the dots next year . But its premature to talk about that right now a few even n, since he hasnt taken office yet. Michael although the dots may not that be far off from reality, and even if we knew what trump were going to do, Congress Takes a very long time to do anything. So the effects of any tax cuts, the effects of any Infrastructure Stimulus Program probably wont be felt until late 2017 or into 2018, so the fear is, by stimulating the economy to get faster inflation, the fed has to change its path, they may not have to do that in 2017. Joyce i dont think they do in 2017. Were looking at 200 billion in the tax cuts. Thats not very much. Thats like a quarter percent for growth for 2017 and 2018. Right now, we have two fed hikes in our forecast in 2017 and 2018. Jonathan do you have a firm hoogeeds what the Federal Reserves reaction actually is, given the blurring of the lines weve seen . At one point we were talking about talking the highpressured economy. Now . Joyce well, i dont see the forecast that we have is going to bring inflation up that much, theyre going to have to change the dots. I think the strong dollar is what you really need to watch. I mean, we estimate that if you have a 10 real appreciation of the dollar, you take one percentage point off of growth. And so the quarter percent growth that were forecasting, if you continue to have dollar strength, weaker f. X. , those are the things to watch. Jonathan michael, weve had a series of fed officials speak since the dollar started strengthening. Why are they talking about it . Michael well, they have talked about it as something to watch. But at this point the dollar hasnt gone up enough to significantly change the forecast. It has gone up some, and that will have an effect on trade down the road. But it hasnt reached that 10 level. It hasnt reached the level where its really going to subtract a whole lot from g. D. P. But now the e. C. B. Has sort of told us theyre not going to go any farther in stimulating, and we dont know exactly whats going to happen next with the japanese, so does the dollar strengthen on a relative Interest Rate basis . Hard to tell. Since we dont know whats going to come out of congress, we dont know whats going to push that higher. Weve seen the kneejerk reaction in the dollar to the trump election, but when the policy actually goes forward, whats going to happen . Joyce i think the markets are looking at this. Are you going to talk of tapering earlier than expected by the e. C. B. . Everybody thought this was a late 2017 scenario. Is that going to happen earlier . I also think everybody is going to look at the day one announcement, is he going to talk about trade . Will he talk about china currency manipulation, some of these issues . Weve had a 5 move in the dollar. Its not 10 . But dollar is at a 14year high. Jonathan tomorrow, you get a 25 basis point rate hike, the dots remain largely unchanged, 2017 uncertain, and thats likely to be echoed in the news conference. Beyond that, you get this rotation at the fed, the natural rotation as the voting members of the regional fed come on board and the others drop off, but then you get two seats on the board, the fed chair and vice chair terms expire in 2018. Have you got a handle on what the fed might look like in about 18 months time . Michael no. You can sort of make the supposition that it will be slightly more hawkish, but you dont know, because donald trump has been on both sides of this. First was very critical of janet yellen, now he seems to like her a little bit better, and the word coming out of trump tower is that they can perhaps work together. Does that mean he keeps her on . We dont know. As far as pointing different people to seats and the rotation that comes with the new president , thats a problem really for joyce. [laughter] michael its just more voices. You have to cut through to figure out whats actually going on. But when you really come back down to it, it depends on what the chair, vice chair, and president of the new york fed have to say. Theyre going to drive what goes forward here, and at this point, thats not going change. Jonathan joyce, you tell me, how much time are you thinking about, the composition of the Federal Reserve in the next 18 months and how it will evolve . Joyce i think the market is expecting a lot of change. Very few fed chairs have stayed on after their term as chair expires. Theres the expectation that youll see a lot of change. But i think the question is, how much of a pro growth boost are you going to get out of the trump announcements, and how much will that change . Right now, the forecasts are modest, hundred pillion for the tax cuts and 150 billion for infrastructure over five years. So i dont know if you have the dots change that much. Jonathan michael, final question. Twitter, domp. President elect. You get a rate hike, 25 basis points. What does he write . Michael thats an interesting question o. Campaign trail, he said the fed should have raised rates earlier. Then hes also criticized the fed for raising rates, or talking about raising rates. Its hard to know where he comes down on the issue. Maybe we will finally find out. Jonathan great to have you with us, michael and joyce. Coming up on this program we will take it to italy. The largest lender there raises nearly 14 billion in a share sale of unicredit. Its cleaning up its Balance Sheet and further cost cuts will come as well. Well talk a man who owns a couple of European Companies in a big way. Its he joins us on the European Bank situation. And on well get a shareholders take on glen coasts new strategic partnership. From new york city, with stocks at alltime high, on a winning streak, six days and maybe more. Futures positive. Jonathan from north korea, this is bloomberg. In the world of banking, its all eyes on unspid credit, italys larger lender. The Bank Announces a 13 billion euro write offer and 6,500 new job cuts. The stock soaring in trading in italy, up by 7. 84 . Joining us now to discuss from rome is kevin costello, ploorgs western Europe Economy team leader. Kevin, great to have you with us on the program. You tell me why the positive reaction from analysts and investors alike to what was announced today. Kevin well, obviously unicredit is cutting a lot of costs. The total amount of jobs that will be cut by 2019 is about 14,000. You can see that investors think the bank is really taking this seriously, and their plans to go ahead with profitability will go forward. Jonathan kevin, what does this bank look like in several years time . Im trying to get a handle on that. Billion euro 13 write offer, and theyre going to be a lower and leaner bank. But what does the bank look look like . What is this bank . Kevin it will be probably be meaner and leaner. The bank plans to cut 944 branches in western europe by 2019. So you can see there that the bank is locking to make sure that its ready to compete in the future. Jonathan is leaner sustain able, smaller and leaner . Whats the actual strategy . For instance, barclays tells us theyre going to be a transatlantic bank. Credit suisse is going to look more like u. B. S. As they pivot away from Investment Banking. What is you be icredit, kevin . Kevin i think it will become smaller, at least on the number of personnel, and they will be Going Forward competing in this market that has been having a lot of trouble recently. Jonathan 13 billion euro write offer scheduled for the First Quarter, significant, because this will come after vienna hopefully for many investors, solve their problems. Can you give me the line towards unicredit and how those two stories may be related, at least in a small way . Kevin well, for one thing, he has a huge amount of nonperforming loans they have to take care of, and unicredit is trying to compete as well as it can in this market. The exact lines perhaps still need to be defined. Jonathan just to wrap things terms of terms of politics, ho positive will it be for this bank as they try raise money . There is at least some stability in the government in italy in the last 24 hours. Kevin well, the new government will be doing everything it can to finally solve the italian banking problems. Of course, they have been in the headlines. Unicredit is now taking the Strategic Plan to build its own strength. The government will be working with the backes to make sure that those banks are profitable and continue to be so. Jonathan kevin, great to have you with us on the program. Thanks very much for joining us. Kevin costelloe, team editor in rome. Coming up, an update from the Worlds Largest container c. E. O. They talk consolidation and president elect donald trump. That is our must watch, next. And the markets then, two hours and change away from the cash open here in new york. Futures up 69 points, and the dow positive seven. And in frankfurt and paris, we have new highs for 2016. In the bond market, a lot of supply comes to this market in the last 24 hours. Today, its 30. Yields on the 10year up two basis points to 245. And in the f. X. Market, dollaryen up to 115. 30 in todays session from. New york, this is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Zpwroip new york, this is bloomberg daybreak. Heres what you need to know this hour tillerson for state. Donald trump to nominate Rex Tillerson as his secretary of state. The Federal Reserve decides the probability of a rate hike this week is at 100 , but the big question remains for next year. What will the for cast be for 2017 . Unspid credit planning a nearly 14 billion stock sail, hoping to attract investors with cost cuts and a big Balance Sheet cleanup. That wraps up three of the stories you need to know this hour. In the markets, we look like this. Futures positive, dow on a sixday winning streak, up about a third of 1 n. London, positive session as well, up by. 5. Bond market, we look a Little Something like this. I said earlier, a ton of supply comes to this market in the last 24 hours. And crude positive, up. 9, almost one full percentage point on w. T. I. In todays must watch now, the Worlds Largest container carrier plans to make up for the roughly 10 billion in revenue it is set to lose from the separation of its Energy Business boosting growth at its trance division. In todays morning must read, matt miller caught up with the chief executive officer to talk about consolidation. On container shipping, theres a very clear conservation wave ongoing right now in the last more than 12 months, control of seven out of trumps 20 carriers, what used to be have either merged or announce and had one has even gone out of business entirely. So we are seeing the industry consolidating the old model of growth through acquiring new capacity, building new ships, its not working any longer. Theres too much capacity and the Industry Needs to consolidate. So if you want to invest in shipping today, youre going to have to buy ships that already are under water. So youve recently purchased or youre in the process of purchasing where do you see . There were 20 large shipping companies two years ago, and as you said, seven have been taken out. How many of you see room for in the future . First of all, i believe that consolidate ue and the industry becoming more efficient, say cast out the number of players in our industry that has not been profitable for a long stretch. So i see consolidation continuing. Long term, i would expect that our industry would end up looking very much like the packaging industry, where you have d. H. L. , fedex, u. P. S. , those are also businesses where you operate capitalintensive global networks, distribution centers, we do it, but its a similar type of business. I would expect that long term our industry would converse towards that model as well. Matt about 19 of the global market, let me ask first, whos next . Whos next . I dont think we have any plans today. Matt nobody in your sights right now . No, were going to take first of all, we have to clear this action through regulatory approval, so its going take six, nine months, and then we need to integrate it, so i think thats going to be the strength that we want to do in the short to medium term future, and then well see, once we have consumed that transaction, what happens next. Jonathan to discuss this, lets bring in our team from europe. Matt miller is with us from copenhagen, and guy johnson joining from us london. Matt, just to begin with you, to build a ship, these Companies Need to plan decades and decades ahead. Next year is looking uncertainty. Next decade even more so. Consolidation, is that the only route for these guys, because they dont know whats coming in the next couple of years . Matt yeah, absolutely. I mean, not only are they not going to build any new very he wills from now on, but theyre also going to tighten capital expenditures. Theyre going to spend less money on the ships that they have. The only way then to keep a strong fleet is to try to buy up the smaller players. Thats the plan, although as you saw there, he wasnt willing to tell me who his next acquisition target is. Jonathan guy, you and i have use this had company to gauge global trade and whats happening in the Global Economy. Looking specifically at the story of consolidation, it doesnt speak too positively about whats coming. I do wonder what a Trump Administration means for all of this, for Companies Like maersk. Guy in the short term, it can be quite positive, as the u. S. Economy kicks into gear, maybe we need more kicks and maybe morrie quiment and maybe more stuff, and as a result of which, maybe thats going to be imported to the United States, though a lot will be made in the United States. In the short term, it can be quite positive. But if you think about what it could mean in the more medium to long term if we were to see a more protectionist white house, then that in the medium and long term could be more negative. So i guess, like so assets right now, priced in the short term, lets deal with the longer term further down the road. I guess thats not an option for maersk. Jonathan what do chief executives have to say about that . Matt well, he said exactly what guy is saying, which is that there are positives and negatives, but Goldman Sachs has quantified it in the note that they put out on maersk earlier this week. They said it should take the trump effect about 1 to 2 off of Global Growth for the industry. So even if you hear a 45 tariff on china during Trumps Campaign speech, Goldman Sachs doesnt think that the effects are going to be incredibly great, 1 or 2 . Jonathan guy, the story internationally for trade and what it means for china, etc. , is one thing. The data quite another. You and i were talking about this this morning. The domestic data is pretty solid. Guy i think were seeing stabilization, and again, to kind of take it back to the global stage. What we are seeing is the trade coming through. Weve seen the p. P. I. Data turn positive, so were grad weight pushing our way out of that spiral that weve been in for so long. The retail Sales Numbers are solid. With such a critical year politically coming up for china, i dont think they want to draw any attention to the fact that the economy is doing ok, but they just need it to stabilize. They dont need any drama right now. I think thats exactly what were getting. Its good. Its better. Its probably not good enough to take away the stimulus, and i think theyre quite happy with that story right now. Jonathan matt, guy and i often joke about his company. You said earlier, analysts target 13,000 danish krone i cant. Did you ask him about the potential for a stock split . Matt i did not ask him if he was planning on splitting his stock, and he didnt really want to talk much about the shares themselves. He did talk a little bit about the breakup of the company, because, you know, as you know, theyre selling off the energy side of it. The interesting thing i think for Moeller Maersk is a positive right now that the oil prices are rising. Thats exactly the kind of thing you want to see when youre selling those assets. Jonathan going to talk about oil now. Matt miller teeing it up, joining from us copenhagen. Guy johnson joining from us london on what the tradest trade data means for the Global Economy. Talking about the International Oil agency, theres going to be a deficit in the first half of 2017. Joining us now is will kennedy, managing editor in europe, middle east and africa. Great to have you with us on the program. Not just a supply story, but a demand story out of the i. E. A. That seems to be improving, at least in their view for 2017. Just walk us through it. Thats right. I think what todays report shows is the opec deal about which many have expressed skepticism could have a dramatic impact on the demand supply in the oil market. Switching from what weve seen over the last three years, inventory is building week after week, to quite a large deficit in the first half of next year. And yes, as you say, thats also driven by pretty good demand forecast as we see pickup, as stabilization in the Global Economy. Of course, the real question is, will opec and nonopec countries working with it stick to its agreement, and that remains to be seen. Jonathan supply is one thing, and response is another. A real debate has emerged over whether u. S. Shale will respond to higher prices. Where are we in that debate, and where does the i. E. A. Sit on it . Its, as you say, its going to be the really big question for the oil market as we go into 2017. We heard the Saudi Oil Minister say over the weekend as he announced a deal with russia and other countries, i dont expect to see a big response from shale in 2017. Goldman sachs put it out immediately on monday morning saying hold on, we think that people could come first. The i. E. A. Also acknowledges that they do think that the shale industry could add some bells. It really remains to be seen. Jonathan do you think shale producers will look at the compliance picture, to wait to see whether these cuts do get delivered, and maybe theyll respond, or is it all about price . There are a couple of elements there. One of the things weve seen in the market since november 30 when opec agreed to cut is that theres been a huge amount of hedging by Oil Producers since the shale producers. We can see that in the forward curve of oil that a year or two out, the prices have not risen as much as they have for other time periods, which shows people are really selling. But having sold, theyre going get reduced. Thats one thing thats going on here. The second thing thats going on here is that were seeing where sued vabe cutting sales, theyre maintaining sandashe cutting sales to europe and the u. S. , and thats going to make u. S. Crude relatively expensive and might snent few shale producers. Jonathan great to have you with us, will kennedy joining from us lone con on the latest report. Crude responding positively, an upside move by. 9 on w. T. I. Up on brent. Coming up on this program were live on the Trading Floor at Credit Suisse with its c. E. O. From Capital Markets to get his take on what may drive growth in 2017. Thats coming up next, as we count you down to the cash open in new york. Futures pushing to session highs, up 74 points on the dow, up seven on the s p 500. A decent session evolving in europe as well. From new york, this is bloomberg. Emma coming up in the next hour, harris sorkts chief executive officer will talk about the glen coast deal. Jonathan u. S. Stocks have continued to rally in the wake of a trump win. For more on what may happen in 2017, cory johnson is disrupting everyone from getting their work done. Cory, good morning to you. Cory id like to think people are getting work done. Theres a lot of work to be done. Im joined by the c. E. O. Of the Investment Banking group, as well as Capital Markets here for Credit Suisse. First of all, new Trading Floor for you guys, a massive Trading Floor. A lot of trading going on postelection. Whats the tenor that youve seen thats different in the last four weeks now that its been four weeks . Core i first of all, thanks for coming and joining us here at Credit Suisse. What weve seen from the election has been a significant pickup in volumes and also a rotation. The rotation has been out of typically and more in the cyclicals, and some of the sectors that have been, you know, well bid have been financials obviously. Weve seen some of the Energy Companies. And, you know, weve seen some infrastructure, companies that people think will have an infrastructure angle. Weve seen a lot of activity around. Cory banking and infrastructure, maybe the expectation of a change in legislation. But oil may be more about energy, or is there a notion that Energy Policy will be so different that it will change demand . Jim i think what youve seen is a lot of expectations about the president elect and his policies. So things around regulation of Financial Services, maybe pharmaceutical companies, and Energy Policy has caused a lot of stocks, people to think about them, and rerate them in a sense. Cory the selloff in the bank stocks, facebook, amazon, netflix and google is one of the other characterization when you look at the s p and you see a 50 because point difference in the performance since then. The initial speculation was maybe trump is going to go after social media or hes going to tax amazon or the f. C. C. Will reregulate netflix and youtube so netflix and google suffer. Theres another notion that certain investors are preparing for a snap chat i. P. O. With your banking hat on, i wonder if you see is that something you hear about from investors, certain investors are getting their dryer, if you will . Jim there are a couple of things i would comment on. First of all, technology traded down, but it was a little more rational in terms of why it traded down initially, because if you look at companies, Technology Companies actually have the highest percentage of Foreign Trade in terms of exports. So when you look at potentially trump coming in and having a more protectionist policy, there were some fear over retaliation and other areas, so a lot of the big Global Tech Companies got hit. Cory but more on the Enterprise Companies . Jim thats right. So we did see some momentum down. I think theyve recovered. So tech overall is up modestly, not as much as some of the other areas, as you mentioned. But i do think theres a lot of anticipation around some of the large private Technology Companies coming in 2017, and i think, you know, if you think about the size of those companies, the potential size of the i. P. O. , i think investors are starting to think about positioning themselves. Cory i would imagine the bankers are as well when you look at a company like snap chat, thats going to be a feather in their cap. Jim thats right. The bellwethertype i. P. O. s would be in that category, very hotly tested and all the banks want to be involved. Cory most often in san francisco, we see this with very Big Companies that are still private, uber, snap chat, drop box, airbnb, pinterest. Do you think theres a seachange now where we might see some of those Companies Look at the Public Markets in the coming years . Jim our expectations a number of them will come to market in 2017. We think because at a certain point, youre going to want more liquidity, and i think its also good for these companies to the extent they want to do acquisitions to have a public stock. That makes it a lot easier compete, and we do think that m a generally across technology will pick up in 2017 as well. Cory weve seen this remarkable year with so few i. P. O. s compared to recent years. When you look at the tables, the number of deals, you look at even, you know, we havent seen the kind of activity weve seen in recent years. To what do you attribute that . Jim a couple of things. If you look at funds flow and equities. Since 2008, theres been 1. 4 trillion going into fixed income products, and equities sthrab flat. The biggest mover of equities have been corporates doing share repurchases. Thats had an impact. The other thing is, theres been a lot of volatility this year in the market. If you think about it, q1 was all about commodities. But q1 was about commodities under pressure. Q2 was about brexit. And then we had the elections coming up. I think that had an impact as well. And then, unfortunately, if you look at q4 i. P. O. Performance, about 2 3 of the companies that came within the first week traded down or flat, you know, which is not typical in what investors want to see in i. P. O. s. Cory the pricing environment, too. Weve also seen a ton of secondaries in the last four, five weeks. Whats that about . Jim a couple of things. Number one, weve had a lot more financial sponsor companies go public, and as you know, their m. O. Is to sell down completely over a period of time. And with the indies performing well, i. P. O. s not performing so well, theres been a real otation and a lot of demand in terms of people wanting to get some exposure, and secondaries are an area that typically picks up. Cory certainly an interesting time both on the offering side and also the trading side. Were going to be here all morning here on the Credit Suisse trading. Jim amine, c. E. O. , here at Credit Suisse. Like i said, well be here all morning, so well catch the tenor of the trading where it actually happens. Imagine that. Jonathan cory, looking forward to catching up with you throughout the morning. Cory joseph on the Credit Suisse Trading Floor. Headlines, lets get across to emma. Japanese company has been targeted. Theyve shorted the most. The firms report says shares could fall as much as 52 from yesterdays close. Nidec is accused of using highly aggressive accounting to boost profits. Japan has agreed to buy s. A. B. Eastern beers from Anheuserbusch Inbev for 7. 8 billion. That brings inbev closer to meeting antitrust requirements. The move strengthening their foot hold in europe. Earlier it agreed to buy a. B. Inbev. Three major banks caught up in a u. S. Investigation of currency manipulation are now helping the investigation. The government is using information from barclays, j. P. Morgan, and citigroup to widen its investigation. The three banks all pleaded guilty and will be sentenced thursday. Prosecutors have asked for fines that are lower than outlined in federal guidelines. And thats your Bloomberg Business flash. Im emma chandra. This is bloomberg. Jonathan emma, thank you very much. Coming up we look at some of the key events happening in the next 24 hours, including another dead auction, this time 30year bonds. The Federal Reserve beginning their twoday meeting this morning ahead of tomorrows rate decision. The question isnt if there will be a right, but how much will they hike next year . That is next. This is bloomberg. Jonathan from new york, this is bloomberg. We look at some of the key events investors should be watching. On the agenda today, the Federal Reserve convening at 9 00 a. M. To begin their twoday meet ago head of tomorrows rate decision. Thats at 1 00 p. M. In the u. S. Treasuries, its set to auction its 30year bond a little bit later at 1 00 p. M. Thats whats coming up then. To walk us through it, were joined by our blood vessel intelligence our Bloomberg Intelligence economist. Yesterday there was an issue with threeyear debt. The auction came in, yields high nest three years, among the weakest since 2009. We can chart that very quickly. Whats the signal thats coming out of the debt auction yesterday at the front end of the curve . I think a weak demand is telling you that investors are not quite sure how far this yield has to run, so theyre kind of sitting on the sidelines a bit tentative, worried that it could run significantly further into next year. The question is, when does the honeymoon end here on this expectation of much faster growth and more inflation, the trumponomicsled miracle that shakes us out of new normal type of growth that weve seen over the past eight years . When that happens, and i think you get the day of reckoning for yields, but investors dont want to stand in the way of that Freight Train in the meantime. Jonathan into tomorrow, you see the weak demand at the front end, an incredible amount of uncertainty about rate hikes. I sit here, and you have have the conversation, what is the projections ing at tomorrow and how wrong will it be by the back end of 2017 . Carl its probably going to be really wrong, but not so much for 2017. I would argue the conversation tomorrow isnt worth the paper its printed on, due to the fact we will have fiscal changes on the fiscal front coming down the pike in 2017. So there should be a very big question mark written next to the projections we see in the s p, not so much for the long rate or even the 2017 forecast, because i suspect trumponomics, whether its a tax cut or fiscal stimulus, will be more of a factor moving the growth needle in 2018 than 2017. That being said, theres more uncertainty than usual, and we should certainly take that into account. Jonathan ill Charles Police hear he will do. Whether you understand the function at this point, and what on earth is she going to say tomorrow in the fed conference . Carl sure. I think shes going to be mindful of the backup in Interest Rates and the impact that could have on interestsuspects active spending in the economy, things like housing could be jeopardized by the backup and mortgage rates, which certainly is significant. Also, Consumer Spending on bigticket items like autos. Jonathan carl, not worth the paper its written on, that was Bloomberg Intelligence chief u. S. Economist. Coming up on this program here it is again, Charles Plosser, former philly reserve Bank President , joins to us look ahead to tomorrows fed decision and beyond. From new york, this is bloomberg. Jonathan welcome to bloomberg daybreak. I am Jonathan Ferro. Joining me is Lisa Abramowicz and alix steel. Streak a sixday winning on the dow. Is featuring the 10 yearht and yield is up two basis points. Dollaryen is 11532. That is the market action. Lets get you up to speed and what you need to know. Rexld trump nominate tillerson as secretary of state and the fed decides the probability of a rate hike. What will they forecast for 2017 . There is a 14 billion stock sale. Attract hoping to investors. We begin with our top story. Donald trump will nominate Rex Tillerson as his secretary of state and the tweed from the president elect himself. Joining us now from outside our washington correspondent. Lets begin with you. The reaction so far, whats it been . Weve heard all kinds of reactions. We heard some republicans and democrats concerned about the pic. His close ties to russia are a cause for concern. We hear reaction from Business Leaders and the kremlin saying he has experience all over the world is a businessman. He knows the various World Leaders and he has experience dealing with foreign governments. Thats one of the reasons donald trump picked him. It he has these ties all across the globe and he is worked extensively in the countries where the United States is doing foreign policy. We see all kinds of different reaction. Lisa the kremlin put out a statement that he is a great professional. I want to bring you in. This raises questions about how much support Rex Tillerson will get from congress. What kind of fight do you expect . Some weve gotten expressions of concern among certain key republicans like john mccain. Ultimately, the president elect is going to have wide latitude to pick the people he is comfortable with. I think once those people are assured he will have the National Interest preeminent over any other interest, he will get confirmed. It will get a bit messy. He will make it to the senate. He has an exceptional understanding of the u. S. Role. We talked all morning about how Rex Tillerson is going to bring a different approach to the department of state. He ran a global company. This guy knows how to run a business. That skill set, how will that help them run this particular part of the government . Marty i do think that donald as hehas decided that said during the campaign he is going to be taking excellent business acumen and put that at the top of the list of the people he chooses. , its full of people who have vast visit business experience. One never knows how a diplomat is going to act in times of crisis. Hasainly, Rex Tillerson wide experience and i think its going to serve him well. Lisa we knew that mitt romney was in contention. He has been shafted. Tillerson is a privately accepted candidate within the trump cap so far. We heard about how the nomination came to be. Donald trump brought in a lot of foreignpolicy experts, including condoleezza rice. Donald trump doesnt have a lot of experience with tillerson. There hasnt been a lot of pushback against tillerson. We saw that with mitt romney. Several people were telling donald trump he should go a different route. The same thing with rudy giuliani. This is a pick that seems to have consensus across the trump cap and all the switchback we have seen so far is from people who of been outside trumps inner circle like john mccain and marco rubio, who were not part of his circle during the campaign. Thank you very much. We turn to something a little bit more predictable now. Its the Federal Reserve. The chances of a rate hike tomorrow are 100 since the november end of november. Join this is the former president of the Federal Reserve bank of philadelphia. Im going to put you on the spot. I am going to ask you, where would you move your. Tomorrow. I assume it would to the north. Maybe above 2 . Where do you take that . Think i would still be north of where the median is. I probably wouldnt move it a lot. Amm my perspective, i already on the high side relative to some of the people. I would be moving up somewhat, but not much. Most of the committee will be uncertaint and they will wait. Lisa i remember when you came out and said it the consequence of the Interest Rates being low word damaging to the financial system. Rates, aredoes raise we going to see asset bubbles unwind that could be damaging . Charles i dont think we know where asset bubbles are for one thing. I do think whats become very clear now is the fed with this rise in markets, the fed doesnt control rates the way we think they do. Or willis now in a rush be under pressure to raise rates more than they might otherwise have because they are falling behind the curve. This is something they didnt want to have happen. It was the danger of waiting and not gradually moving up. There is a risk of having to chase the money. Thats a challenge for them. Fed doesnt know whats going to come out of washington. If youre going to stimulate the economy at a time when youre close to full employment, you risk inflation. Can the fed stay ahead of the curve on that . Do they risk falling behind . They dont know whats going to happen, i think its very challenging to them to figure that out. Will the stimulus or the actions be traditional. Is it going to focus on productivity gains . We dont really need a lot of demand right now. Thats not the economys problem. I think its going to depend on what comes out of congress. You warn that the yield curve could get steeper quickly . Yes. Es whether that will or not i dont know. Thats more of a risk that it was a year ago. Lisa one things you talked about what you expected inflation to pick up more than the inflation fed was expecting. We are seeing expectations pick up. Why is it happening now . There are as many stories of that as there are people trying to. I think its partly what matters, the fed doesnt always know. Our forecasts are difficult. The fed underestimated Economic Growth for a long time because there wasnt a mechanism in their model that allowed for the massive regulatory state that has evolved over the last 10 years and what that would do to the economy. Forecast growth for a well. Inflatione story on is not settled yet. The jury is still out. The question is going to be can of fed during this process unwinding its Balance Sheet control it as much as they think they can. Jonathan can we talk about yields . Aggressivemilar backup for yields. With that concern you at this point . Charles yes, it would. It would not concern me as something had. It would signal to me the prospects and expectations are higher. Whether this back up and yields will persist is a question mark. Thats going to depend and what policies get past into law. It should be a concern. Yesterday, they dont think the fed should make this meeting a nonevent. He said they should telegraph four rate hikes next year. You agree . Quite whatwouldnt it that way. This will be a nonevent. The biggest worry i have is that they dont do anything tomorrow. The fed knows how many rate hikes its going to take next year. Points. At 75 basis that is still a full percentage point below the rate of inflation. Massiveill got accommodation in place and the fed is going to have to see what pace they can get away with over the next year as the economy evolves. Its a tough choice. Michael we were talking about how donald trump is taken both sides on janet yellen. Now he thinks he can work with her. If you were to sit down with him, what would you tell him about the fed . Charles i would probably tell him a couple of things. One is be careful. The fed is an important institution. Important thaty its independence be reserved both in reality as well as perception of that independence. Respect its independence, appoint good people to the board, let them do their work. Lisa charles is staying with us. Michael, thank you so much. Emma chandra is here with news. Emma Opposition Leader in russia says he will run for president in 2018. That will be against Vladimir Putin who has been in power for 17 years. He is an anticorruption activist and he is currently facing a retrial. The European Court of human rights said his first trial wasnt fair. Angela merkel said it will be necessary to extend eu sanctions against russia again. She spoke after meeting with the president of france in berlin and the sanctions were imposed because of russias meddling in eastern ukraine. In syria, rebels of suffered a terrifying elapse in the face of an assault by syrian troops. They retreated from their stronghold. They have gained 99 of the rubble place. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. I am emma chandra. Lisa lets go over to abigail doolittle. Shares weve got the trading nicely higher on word that japan has agreed to buy five b are brands from the country company. It looks like a good deal. And thisthese assets is full and great for in bed. Monsanto had a lawsuit thrown at yesterday. If the deal does go through, there are lots of things ahead. Finally, okra and proctor and gamble shares are trading lower on a down grade over deutsche bank. Cocacola is saying wellness related concerns face them. Schmidt does see migration out of the consumer staple space. Jonathan coming up, a december rate hike may already be ached in. What about the future of the Federal Reserve . What does the future hold for janet yellen . That is next. From new york, this is bloomberg. Jonathan we are 24 hours away from a decision. The future of the Federal Reserve is uncertain. On the board of governors, there are seven seats. There are two of the noble ones. Donald trump does the the opportunity to change the capacity of the Federal Reserve in the next 18 months in a significant way. Back was this is Charles Plosser. Joining us from washington is the ceo of independent Community Bankers of america. His group was asked to provide recommendations of executives who could fill one of the two open spots on the fed born of governors. We are going to start with you. What was your response . We will be submitting names of qualified committee bankers to the trump transition people. Hopefully, they will pick one of those names. There was nothing wrong with our land in it, who was nominated by president obama. Or even aot a vote hearing on his nomination. Wouldt the president reappoint our land and. Its possible. We would be submitting names of qualified Community Anchors to fill that seat. Jonathan can you walk me through this . The participants have become very juvenile. For you, the credentials, what is lacking that donald trump wants to fill . Eight, we have been opposed to the Monetary Policy that chair yellen and the board have been following for the past few years. We are more in the Esther George camper we do believe they have been too accommodating and thats been hurting mainstreet america. We want governors that reflect mainstreet america, the andltown, Small Businesses have that view heard on the board of governors. A seat for aly why Community Banker was created on the fed board. Sure charles would agree. Publicly janet yellen has said it she doesnt Pay Attention to politics. She tries to carry through her mandate to support the economy. Do you think thats true . Charles i think the fed works very hard at trying to be a political and not worry about politics. In this environment today, thats really hard to do. Its hard to ignore all the noise thats going on around you. Political. Be a i think it would be sad of whatever came out of congress made the fed more political rather than more accountable. Cam was talking about, how would their approach differ from the current composition of the board . Would they be more hawkish . Torles i think its going depend on the individuals and what their views of how the economy works. I think one of the things you do find is many of the president s whether it be Esther George or myself when i was there, other president s do have an ear for whats going on in community banks. The washington crowd has the bubble instinct to it. I think its very important that the president s be there and share whats going on in mainstreet and whats happening in the economy. Its hard to see when you are in washington. The d. C. Bubble and how the board of governors will be changing, can you give us a little tease . What are the names you might submit . Cam i wouldnt want to put an individual Community Banker on the spot. Those names will probably become known as they are submitted and leaks occur and so forth. Thats the nature of washington dc. We do have a list of names. We will be submitting those. Theree with charles about bubble mentality of washington. Thats why you need the district president s voice in the fomc. We would even favor increasing the district president voice on the fomc. There are some bills that would do that. We believe the district president s are more in touch with the economy and the real economy and the people of the country much more than the board of governors in washington. Jonathan maybe you can name a Charles Plosser to the board. Cam we would love to have him on the board. Jonathan i am sure you would. Do not miss the special coverage of the feds decision beginning at 1 00 tomorrow eastern time. That is just over 24 hours away. Futures are up and equities are at an alltime high. From new york, this is bloomberg. Jonathan we go straight to the floor of credits we swear cory johnson is standing by. We spent the last couple of weeks talking about how lush the market is. Do you see that there . Cory johnson i dont know if i sense optimism. There is a lot of trading going on. This brings us to credits weeks. Its a giant Trading Floor, one of the only buildings in new york where it does the entire block. A lot of activity across all different kinds of markets here. The most excitement here this morning was about equities. Companies are putting a big block trade on. They are putting a very big block trade in place overnight. They placed a lot of those trades this morning. Things a big the firm like credit suites can do, blocks of hundreds of millions of dollars worth of trades in a single name over a short amount of time. Fingersres a lot of into a lot of names and knowing whos interested in this kind of stock and they do that with some skill this morning. Lisa weve got so much political news this morning. Our traders talking about it . There is a notion that the market is trading in the belief that there is going to be biggest spending in infrastructure and legislation around banking will be changed. Jonathan looking forward to catching up with you a little bit later in the show. Coming up, investments. This is bloomberg. Jonathan this is bloomberg daybreak. A sixday winning streak on the dow with equities at alltime highs. The longest winning streak since november 15 this year. Eight points on the s p 500. We look like this in the bond market. Yields are lower by three basis points. Maybe a little bit of stabilization in the bond market . Lisa one or Foreign Investors going to come back and take advantage of yields that are at record highs . Jonathan we did not see it in the 10 year auction yesterday. These are the stories making headlines. Rexld trump will nominate tillerson as his secretary of state. TheFederal Reserve says probability of a rate hike is 100 . The question remains what is in store for 2017. There is a 14 billion stock sale hoping to attract investors. That wraps up three of the things you need to know this hour. Shares are ripping higher over in italy. The stock is up after announcing a big cleanup of the Balance Sheet at a big stop overpaying joining us from the land milan. Is a daylong presentation. They call it a Capital Market day. We heard the ceo speaking earlier. I kind of liked one of his comments. It was very simple in the sense that the strategy behind this was simply to create a nice commercial bank, well structured , wellcapitalized commercial bank. They make acquisitions in the billions of euros throughout europe. Now they are scaling back. We have seen the fail of pioneer. Seen the stake in an internet back bank. This is on top of all of these asset sales and its going to be interesting to see if they can pull off the stock sale. Lisa a nice commercial bank, isnt that all we would want. Plan to move 17. 7 billion euros of debt off the books. Also, pimco will take on a majority stake in some of these did can you walk us through what the relationship is going to be . Dan they are basically going to be involved as shareholders for lack of a better word in this unit that will be acting as the vehicle to absorb these nonperforming loans. This is a structure we seeing quite a bit in italy. The Italian Government authorized a few months ago the isation of this fund which kind of doing the same thing. Jonathan the Stock Offering is for q1. Maybe its resolved. How critical is the story with italys thirdlargest bank . Dan its a well structured deal. They have an underwriting consortium already in place. Its a big number. January, they are hoping the First Quarter will have improved. Maybe the situation will be under control. If you remember, the banks they are advising decided in this latest tweet not to actually form a guaranteed consortium. To try to replace that stock by the end of the year. They have not formed a consortium like the credit has. Jonathan we appreciate your time. Thank you very much for breaking that down for us. That cio ofow is international equities. Its great to have you with us on the program. This is another bank in europe, this time in italy trimming up the Balance Sheet. The question i want to ask from you, the Growth Prospects for these financials from here. What are they . Attached toanks are the macro economies they exist in. Expectations,ter better environment for loan growth, this is good for the banking. These cleanups are good. It enables growth to happen. The banks are basically the conduit two and economy. Banks, ite healthy helps the economies improve their health. This is long coming. Thing in thatod they are coming to grips with some of these banking issues. We are starting to see better loan growth, we are seen better loan losses and aspects of Bank Earnings that are positive. Lisa are you going to be per dissipating in the capital raises . Are you going to be buying . David we have shares in an italian bank today. Its a very healthy bank. Its very wellcapitalized. Italy,posed to northern which is the healthiest part of the economy. We do have italian bank exposure. We will take a look at these and see if we can get them on the cheap. They represent good value to us. Jonathan we talked in the past about the valuation. Have you been pairing act some of your positions . David i really wont comment on it current trading. You are exactly right. Two or three months ago there were huge valuation differentials within the Global Equity market. People were overpaying for safety. They were underpaying for Consumer Discretionary and industrials and financials. We have seen some of these valuations compress a little bit. We are still nowhere near where we should be. To use a baseball analogy, we are probably in the third inning equalization,ion maybe not equalization but compression story. You have differentials that are too large, not as large as they were. There is still a lot to happen. Jonathan you holistic niva get stake in the country company. You hold a significant stake in the company. What does the new administration for the legal threats Like Deutsche Bank and it credit suites . What the finesee are that are out there, it does not appear anyone is in a hurry to settle. The fines dont seem to match the crimes. Crime is probably not a good word. Mortgage they sold backed securities which the government wanted them to do. For this, there are talks of these big fines. If they wait out and have more legal outcomes are more likely. Who knows what is going to happen ultimately. Clearly in the case, the punishment doesnt fit the crime here. There could be a reason to wait it out. They loweredek, their profitability target. It was heralded as a good sign to a lot of shareholders because it seems like the management was getting more in line with reality. You have confident confidence and can meet their targets . David i think their targets are reasonable. What they really need to do is execute on the plan they have outlined. Its a good plan. Its a solid plan. It makes theoretical and logical sense. Put more capital in the higher growing business. Take a little capital out of those areas which are more volatile. There is a low probability of hitting those return targets. Take the capital out of there. That in itself is a good thing. You have to execute it and you have to do it in a way that does not destroy the earnings power of where you are shipping the capital from, and then you have to the point that capital where its going to in a disciplined fashion. We spent a lot of time with our management, capable people and i am confident they will accomplish this. Jonathan lets talk about glencoe. You hold a significant position in that company. It appears to be heating up in a significant way. Do you support it . Would you expect a more conservative approach from management allowing for greater returns to investors like yourself . David what we want is when free cash is generated, we went to analyze what they are going to do with that free cash. If they can make a value enhancing acquisition, do it. If you cant and youve got too much debt, pay down your debt. If you dont have too much debt and you cant take it acquisition, give it back to the owners. When the Balance Sheet is looking strong, they do have some flexibility. Week wasthey did last a very small amount of capital. The headline look like larger capital. Coming out of there pocket was only a few hundred million. As long as they carefully analyze, we are all for it. Highestat is your contrarian bet for 2017 . David i think if you look at how our portfolios are position, we have this exposure to financials. I think these are the sectors that are selling at attractive valuations. Even now. Selling to cheaply. I dont see the earnings collapsing. If anything, they should continue to grow. I think these kinds of businesses are still selling at two low pricing. They have spiked up a little bit since the summer. August, these stocks and especially the financials have been absolutely hammered. They have been up 20 in some instances. Its nowhere near where the fundamental value is. Jonathan with your investor had on, we have had a run in the last five weeks. At what point you see signs of euphoria getting way ahead of fundamentals . Where the signs you are looking at . Banksallocations to jumped to a record high last month. David dont forget this is coming off a record low. For eight months, the first months of the year people were saying stay away from financials. They wont be able to earn money. Stay away. Stay away. Now there are valuations that are up a little bit. Some of these names are too high. Telegraphingare better operating conditions, better earnings conditions ahead. I think we are on track for this. A new administration is really more procapital than the last and. It doesnt take much to be more capital than the lasted ministration. If you look at the cabinet choices, this is the antithesis of what weve seen the last eight years. This should be conducive to earnings growth. Surprised if we dont see better earnings next year. Need to askdont you about your positions anymore. Coming up on this program, Rex Tillerson may be the news of the day. Its the latest businessmen it to head to washington. We look at the bankers lining up to replace them. From new york, this is bloomberg. Emma this is bloomberg daybreak. Theng up in the next hour, sky Bridge Capital partner and senior portfolio manager. Lisa Rex Tillerson for secretary of state is the latest businessmen to head to washington. Were looking at the line up to replace gary cohen. Michael, we have a short list of contenders from harvey schwartz, david solomon, who is the front runner so far among the people you have spoken to . Michael if you look at what goldman has done, they have liked coheads of his mrs. When gary at the job, he was copresident and you may see more than one person in this role. If you look at the diverse city of their businesses, they tend to like to have somebody representing different parts of the business. You may see somebody from Investment Banking. Harvey schwartz has a background in that. He is currently cfo. Somebody whod see has had a breadth of positions like marty chavez. Lisa with the focus on technology, they have been trying to reshape themselves in towardsera and move technology and trading that has gotten away from other banks. Rolewill Goldman Sachs tell us about it is shaping itself Going Forward . Michael it could tell us something specifically about the individual and who they are grooming for the next job. It could tell us something about the direction of the firm. Chavez,went with marty that certainly would be a strong signal in that direction. He is certainly one of the more prominent executives. Story a great individual as well as representing a lot of the future in some of their tech initiatives. Do we have a firm handle on why gary decided to use leave Goldman Sachs . Michael it could be a variety of things. Its a prominent position. There has been a long history of people going from the sea suite to washington. It could have something to do with his future at the firm. He was seen as the most likely person to take over in the event of a quick succession. He may have aged out of that role for the next generation. Certainly we have reported that he was not seen as the most lloyd person when ultimately decides to step down. Podcast released a explaining his tenure at Goldman Sachs. Lets listen to a soundbite from capital, regulatory reasons, the landscape has changed traumatically. We are is uniquely positioned as we ever have been in the competitive landscape. As i look forward, its as exciting as ive ever seen it. Lisa clearly he sees these landscapes as being exciting. Handems like he wants to the economy more broadly. Jonathan michael moore, great to have you with us. Can you believe that . Do you buy that . D. C. Is more exciting than wall street . Ok. Thats an exclusive. The u. K. Inflation hits a twoyear high. We will have a chart to show what that means for your wallet. Thats coming up next. From new york, this is bloomberg. Jonathan this is Bloomberg Live from new york city. Its time now for battle of the charts. Lisa, but begin with you. Lisa i wanted to take a look at u. K. Inflation. We saw u. K. Inflation accelerate to the highest pace in two years. The question is why. Is this good inflation or bad inflation. We are looking at a chart showing this is not the right chart and this is the right chart we are showing the price of oil priced in pounds. How expensive is it for people in the u. K. To purchase gas. It is going up, almost in tandem with an put prices. Words, this is showing you that the Higher Oil Prices are behind this. Powerowers the purchasing of people in europe, in the u. K. The pound is getting weaker. Is this good inflation or bad inflation . Some people might say its bad inflation. It does seem like the weaker pound is the main driver. You are going to follow it up. I am looking at financial conditions today, we are looking at two measures. , whichst one is the cbx is a basket of credit default swaps. You can see that since the election, these have really come down quite a bit. Now they are at the lowest level since mid2015. Measure we have is the blue line which shows the premium to protect against deflation in the United States over the course of the next 10 years. That has also fallen a lot people a lot. That is really important for highly levered growth Oriented Companies who need it to pay and be able to service debt. They need that nominal growth. The fact that markets are less worried about deflation has led to easier financial conditions. Even though we do have a higher dollar and higher Interest Rates since the election, these are offsetting it and leading to a more positive financing environment. Jonathan i feel bad for doing this. My vote goes to lisa. The data is surging by 15 . Its the most in five years. We just did a Bloomberg Survey on the next move for the bank of england. Say itk of participants will be a rate hike and not a cut. That is the backdrop. Its great to have you with us. Lisa is the winner. She has to join a the next hour as well. Lisa you dont want me to be poking you. Jonathan more on Donald Trumps pick for secretary of state. Where there is opportunity in the credit market. York, the dow as at an alltime high and futures are positive throughout much of the session. This is bloomberg. Jonathan welcome to bloomberg daybreak. Five Jonathan Ferro alongside Lisa Abramowicz. Were continuing to count down to the bell. Markett bit in the bond as well. Yields are lower throughout much of the session, down by three basis points. The dollaryen has taken a dip. We are at 115 flat today. That wraps of the market moved. Donald trump picks exxon mobil chairman grexi Rex Tillerson. The fed decides the probability of a rate hike at 100 . The big question is how many hikes in 2017 . Getting back on track. Unicredit boost italian equities and bonds. That is what you need to know this hour. Before we get into the top stories, lets get to the markets and crossover to abigail doolittle. Abigail we have futures indicating games for u. S. Stocks. We will be watching on the day to see if the dow can close for the seventh record close in a row and the longest winning streak since july. We will see if the dow can finish closer to 20,000. Were looking at one of the fastest 20,000 point increments for the dow ever. It took the dow 35 days declined back,000, the longest was in 2007 when it took the dow 2000 726 days declined to 12,000. Right now we are on pace for 21 days to 20,000. C it today is the day. Let us see if todays the day. Boeing and exxon mobil trading higher. Boeing on a dividend boost along with a stock buyback. Exxon mobile Rex Tillerson nominated by donald trump alphabe. Alphabet looking to recover from postelection losses at levels it has not seen. Lisa back to one of our top stories. Rex tillerson is the choice of donald trump, president elect, for secretary of state. We are joined now from trump tower in manhattan. In of the biggest questions my mind with Rex Tillerson is his holdings of exxon. He owns more than 200 million of exxon shares. Will he divest himself of the shares . Will he put them in a blind trust . What is the path forward and what is expected . Thats the question that a lot of members are congress are wanting to know. They want to know what he will do with the large shares of exxon mobil. Everyone has said it is operated almost like its own country with its own foreign policy. As he goes through the confirmation hearings, there will be a lot of questions about his own personal stake in exxon mobil. If heof people will ask is making decisions for the u. S. Government or whether he is making decisions that will affect his shares. If he puts all fishers into a blind trust, that will assuage a lot of those concerns. Those are things that we are waiting to hear for what Rex Tillerson is going to do with his large stake in exxon mobil. Lisa we talk a lot about Rex Tillersons experience with russia, but we dont talk about his experience and all the rest of the world. Country wherether he has had extensive experience that could be somewhat telling him what his policies would be like . Toluse definitely. Exxon mobil has a huge footprint all over the world. Rex tillerson work for a while in yemen. He was also the head of the company as expanded expanded to the arctic and latin america. Relation withy leaders. Orldl world he is working through diplomatic channels and government leaders. He has worked all over the world. A lot of those situations that he has with these various World Leaders are going to come to light during the confirmation hearings in the senate. Jonathan great to have you with us on the program outside of trump tower. Troy. G us now is great to have you with us. And Michael Mckee is joining us around the table. How many times have we heard people say im going to blowout d. C. And change things . And then someone comes along and says i will create an administration thats an uite. Tar c s troy in the passive ministration, there were a lot of career politicians and had experience in organizing and nothing to do with job creation. For those in job of defense, they had no experience in military. It makes no sense to have someone in charge of the nsa or other organizations and careers overseeing security. With linda mcmahon, she is real to be as creating jobs. She took Small Businesses and made it successful. Lisa youre talking about the wwe. Roy creating jobs the Entertainment Industry is a big part of the presence of campaign. This is a woman who tried to run for senate and cannot win, but now is in a position where she can create jobs for people in small business, which is very important to growth. Lisa one of the Big Questions i have is at what point are we going to see the effects of the cabinet members and the economic policies of president elect trump trickle out into the comedy . Economy . Ive heard conflicting debates and convictions on when we may see an effect. What are you hearing . Orhael late 2017 or 2018 before we see these. Rex tillerson might have a tough time getting through. We are talked about what may be a more important appointment then secretary of state john bolton. Dekinis a possibility that hes very antirussia. How those two will get together no one knows. Go into a 2018 budget and not a toy 17 budget. While that is happening, the president elect trump will be working on track to get through tax reform and possibly some sort of infrastructure stimulus. That is going to take quite a while. When president reagan tried to put tax reform back in 19 new six, it took more than a year. 1986, it took more than a year. It will take until late 2017 early 2018. Leadern Senate Majority Mitch Mcconnell speaking yesterday talked about the dangerously high debt and how any tax cut needs to be revenue neutral. Are we going to find it difficult for the truck tax plan to get through congress . Michael the normal dynamic is repulsive versus democrats republicans versus democrats. You have the tea party saying they were totally opposed to deficit spending, but the one to bring down the deficit. Do they mean democratic spending is bad and republican spending is good . That remains to be seen. If they are true to their word, they will fight against increasing the deficit. All trumps proposals so far are about decreasing the debt specifically. Lisa i think of the plate spinning act with all these plates spinning. As an investor, you look at all these plates spinning and all of could be incredibly monumental in their own right. How as investors do you work with these and implement some kind of strategy . Troy theres always the possibility of recession. Lisa thats actually contrary and. Troy the are sure we will lose money and we all need the u. S. To not lose money to have a recession. Thereinto the election, was a very low probability of a recession. With the trump victory, we can disagree on income disparity, but protection form always leads to growth. Cutting regulation is a priority. Our contention for quite some time is the hyper Regulatory Burden on small and midsize businesses has been strangling growth. You get those two together and what it leads to is a lower probability of recession. We feel much more comfortable that recession probability is low and the us economy can grow 2. 5 or 3 . That is very solid growth compared to what we have had since the recovery. Jonathan what has changed in the last month . Troy the Financial Service sector has benefited substantially. It is also more than likely going to benefit from targeted regulatory relief, particularly for regional banks. Theres an interesting esoteric market. It sounds complicated, but they are cdos backs by trust preferred. Lisa it sounds complicated, but it is complicated. Troy even without Net Interest Margin increasing, youre going to have more cash flow. You look at the forward curve, it has gone up a lot. Inventory relief should help banks. Its hard to find that combination. Certainly not in highyield bonds are now. Lisa sky Bridge Capital troy gayeski and mike mckee are staying with us. For an update on news outside the business world, we got emma chandra. Government troops are almost in complete control of the city of aleppo. The eastern part of the city used to be a rebel stronghold, but those rebels are held in a tiny enclave along with civilians have not been able to get out. A victory in aleppo would give the government control of syrias largest city. Germanys Angela Merkel says it will be necessary to eu sanctions against russia again. She spoke after meeting with frances president in berlin. The sanctions were imposed because of russias meddling in the ukraine. Eu leaders meet later this week in brussels. In italy, it is the first day on the job for the new Prime Minister and he already sees a confidence vote in parliament. He outlined his agenda to lawmakers today and he is hoping to have his government in place before European Council summit on thursday. He says he wants to boost Economic Growth and also says italy is ready to collaborate with the new u. S. Administration. News 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, im emma chandra. This is bluebird. Jonathan coming up on this program, the Federal Reserve begins its two day meeting. What are investors watching for most closely . We will discover that next. Also an exclusive interview with the u. S. President and ceo of Credit Suisse holdings. The dow at an alltime high and futures positive. This is bloomberg. Jonathan from new york, this is bloomberg daybreak. 24 hours away from a Federal Reserve decision. Earlier we caught up with the former Philadelphia Fed president on what he thinks needs to happen tomorrow at the Federal Reserve. Take a listen. This will be a nonevent that they will raise rates. The biggest worry is that they do not do anything. That would be the worst outcome. I think the fed knows how many rate hikes its going to take next year. Even if they raise tomorrow, you are at 75 basis points. That is still a full percentage point below the rate of inflation. Jonathan still with us is troy gayeski and alongside him is Michael Mckee. Bloomberge had intelligence saying the summary of Economic Projections was not worth the paper it was written on. Charles really didnt even know what to do with his. One of the forecast for tomorrow and what do they need to anybody . Michael taken with a grain of salt. You have the trump tech conference going on. Interesting timing. The fed has got to put out the forecast. They do it four times a year and it comes up at this meeting. They dont know whats on tap next year because we dont not know what kind of fiscal stimulus is going to come out of washington. Thats the important thing. Or members that we are close to full employment. The economy at this point is not at recession which is where you get fiscal stimulus. You could see inflation accelerates dramatically or might not. The fed does not know what it will have to do next year. All can really do is make a forecast based on what it knows right now. What it knows right now is pretty much what we already know. The economy is growing at 1. 5 2 rate and inflation is rising slowly. That calls for two rate increases next year. Lisa i feel like this marks the end of the feds dominance. It officially taps their dominance over marker. Am i wrong . Troy it is nice to see the real economy starting to take over as opposed the fed policy hikes. Youre right. The fed will always be an elephant in the room, but that being said, Going Forward, given moderatelytion of tightening policy with the yield curve already steepening in anticipation of that, one would suspect the future performance of risk assets will be much more driven by real Economic Growth as opposed to what has driven it historically. Lisa already we have seen such a run up in riskier credit. It is already priced in. People are detached from fundamentals, but now fundamentals are coming back in. Could we have already priced in a recovery that has not yet happened . Troy that is the tricky thing with liquid efficient markets. You look at Financial Services and they enjoyed a monstrous rally and we think this time its for real. How much of the steeper yield curve regulatory as president . Is priced in . Its hard to say. Are we going to get 2 inflation or will it stay 1. 5 . Its very hard to add an edge or take advantage of efficient markets. You look at much less efficient things are more complex. You see financials are doing great in a steepening yield curve, but these prices have yet to respond. Thats where you can add value as an investor. Jonathan i find this so unnerving. Seamlesshis kind of transition of Monetary Policy from the end of Federal Reserve dominance a to fiscal policy that isnt to be seen yet. Troy no one said seamless. Jonathan it isnt seamless at all. It has just begun. Does the fed really make a move because it hasnt yet . When it does, we will know whether it is the end of Federal Reserve dominance. Michael you have the fed hiking, which is almost a certainty. We think markets are accurate to present to hikes next year. Or maybe it isee one, but in terms of the portfolio, they started discussing let that wind down. The fed will always be a dominant force in markets, but the point is that real Economic Growth will become more important at these elevated elevation valuations for stocks. Where markets are expected hikes, unless you get followthrough with real Economic Growth which leads to Topline Revenue growth, which has been absent from s p for most of the recovery, ultimately Equity Investors will be disappointed. That is what we are talking about terms of a handout. His top of the fed is going to go to sleep and only cares about what the fed is going to. Lisa they can hike with confidence and no one will care. They can even telegraph to hikes next year and the market what with that much. Michael no, the focus moves down constitution avenue from the fed to capitol hill the this year. The focus may be moves a little bit in washington. Lisa i dont know. It feels like there is a big shift. The other question i have is how much is the fed watching what is going on with the ecb continuing their program and the yield steepening we are seeing in the boj . Michael a lot of it has to do with the dollar. If the ecb is out of it, the dollar may not go up as much. Lisa thank you very much bloombergs mike mckee. Try will be staying with us. It is our special coverage of the feds decision beginning tomorrow at 1 00 p. M. Eastern. Coming up, the rotation into risky assets. Are there areas in the bond market immune . Thats next. This is bloomberg. Lisa joining us now is the pilot capital cofounder and cio. Troyng us now is still gayeski. Credit is on the table and im so pleased to speak to two people who focus on it all day. One of the biggest debates i hear is the highyield bond market. From jps some people morgan and others saying they expect highyield bonds after a 17 so far this year to still return to 10 next year. Do you guys agree . Troy 10 to us seems a little bit rich. When you adjust for future loss, its 2. 5 to 3 . Could highyield make 10 . Yes, but youre more likely to get a few points of upside. S a lot more sense than 10 . Is a strange feeling. I felt bullish during the temper tantrum. I guess i can feel bullish again, but to your point troy well said. Arl its been a painful year for bondholders. Loans are up a bit from that and the outlook is a function of several things. , defaults andes youve got fundamentals. Wheres our coupon going to be from here to there . You can get to some of those midsingledigit returns fairly easily because the fundamentals are looking better in general, especially the energy space. Lisa i want to bring up a chart. If you take a dive into my theinal, im looking at yields on energy junk bonds versus the Broader Energy market. You can see back earlier this year junk bonds of Energy Companies were yielding more than 10 Percentage Points more than the broader highyield market. That has collapsed. We have seen a complete compression. Is this overbought . Mark 86 of the loan market today is trading above par. Crazy per se,lly but because you have a coupon and you have floating rates that are coming in here, theres a lot of bid for that. It makes sense and it takes time for the street to create more loans. Its not a crazy thing, but it really captures upside to a couple of things, which is the coupon. The coupon and a floating rate environment where the fed is going to go to her three times next year thats not a bad thing to have. Its not crazy per se, but certainly the 10 or 11 will not repeat next year. Energy peroint about se is that there is still a lot of moves that can happen for some of those bonds and loans in that space because they are trading wide on a coupon basis and also on a dollar price below the index. Lisa so you still the value in energy . Mark absolutely. Troy a lot of it is restructuring of the stress companies. Depreciation,ice Going Forward is about restructure and get closer to equity. Oil can stay closer to 70 and that is where the future is. Mark theres a lot less distress now than there was. Flows from 15 were awful. We had like 36 billion flow out of highyield and loans. We have seen 7 billion and flow this year. You are a quarter of the way back from the money lost out of the market in 2015 just from a flow standpoint. Could it get even more tighter from here . Jonathan you guys make it sound so easy. Troy, thank you so much. Mark is staying with us. Were counting down to the opening bell. Futures positive and treasuries big 24 hours away from a fed decision. This is bloomberg. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Jonathan from new york come this is bloomberg daybreak. More record highs in the sp market. 97 point and the dow up 1. 5 as we approach the sixday winning streak. Bond markets big and yields lower throughout much of the day. From the highsck we have seen since october of 2014. The euro falls back to 2 10 of 1 in crude is higher as well. As you hear the opening bell ring in new york city, lets break some of this down for you across over the abigail doolittle. Abigail were looking at another strong open for u. S. Stocks and more record highs. We have the dow and s p 500 at records. We have the nasdaq close but not quite there. That theanding out is dow is less than 200 points from dow 20,000. If it happens today, it would happen in 21 calendars day, the fastest move ever. It will be interesting to see if that happens. We have lots of big names. First up, anheuserbusch trading higher after japans Company Bought five of the Eastern European beer brands. They were saying it was a great deal for ab inbev. Monsanto is trading higher as a shareholder suit was thrown out yesterday to block the buyer merger. If that deal goes through, theres lots of hurdles, but if it goes through, and will climb from current levels. Tradingwe have boeing higher after the company boosted dividends by 30 . It will also announce a 14 billion buyback. We have boeing trading at a record high. Lots of records on the open. Lisa thank you so much, abigail. U. S. Markets are open and we go straight to the Trading Floor where coryson johnson is with Credit Suisse in new york city. What are traders watching . Thirdlargest in volume, third in commissions and its important on the Trading Floor because all kinds of stuff trades here. Those taking place this morning. The buzz on the floor starts to pick up as we get closer and closer to the open. As i mentioned in the last hour, Credit Suisse trading really lisa looks like we might have lost it. Cory ive got the guy that runs this place. Talk about what you see after the markets today. In thelast six days market, the s p has been up on straight moves since the election, which has been terrific. Yesterday we saw a positive some of the industrials and materials leading the markets. Cory its a little relief from what has been happening. We think thats likely to continue. Europe has been strong, and in particular italy has been strong. The italian banks have had a significant recovery at 20 or so. Cory 20 . 20 and i think thats helpful to the overall global markets. I think we will continue to see strengths. Sector rotation will continue to be a theme around retail sales and obviously the fed meeting. Cory is it across the entire for . Oor . Across the floor i think we will see trading in sectors per w. Cory we will take a deeper dive here Credit Suisse later. Lisajonathan moore alltime his to speak about. Up and yesterday closing equities pushing higher. We are up for tens of 1 on the dow and the s p 500. The story for me and lisa as well is the 30 year bull market captured by this chart. It will come up eventually. Not this one. 10 year treasury yields going down and down after 30 years. Market 30 year bull is the 30 year bull market over . Joining us is Joe Weisenthal and still with this is mark. It is a massive call and you will acknowledge that. What gives you the conviction that chart will start turning the other way . Mark it is flows and what is going on with the real economy. We had 1. 5 trillion of retail flows into bond funds over the last 10 years. And absolutely nothing into equities if you look at it. It is starting to turn a bit. As the flows go the other way, we will have a tilt against the bond market percent. We turned back to the really big or think thats going to be driving this and that is fundamentals to the real economy. I do believe at this point where we have full inflation for employment, where you have wage pressure starting to move in the economy and we are going to see this sort of flip from deflation to inflation as far as what the Central Banks and the governments are dealing with. You cannot paint a picture where bonds continue to compress and go down and rates go down in that sort of scenario. ,oe is this a cyclical call one based on the current state of the Global Economy and perhaps some fiscal stimulus at a time when we are close to full employment, or is there some thing structural that the fines the general last three decades or so that pushed yields down that is going to shift and sort of cause im not structural rise in yields Going Forward . Mark i think its a little bit of both. This is going to be bumpy. The election is really less about trump and more about the suite. Its a government focus much more on progress but can get something done. That means fiscal can really happen. I think we will have a little of both. Its going to be bumpy and take time. Chartan lets take that and bring that back up. The journey begins in the 1980s and its nominal yields getting crushed. The inflation target begins with Central Banks in the big way. We have the structure issues really starting to come into play. The debt overhang, the savings glut, etc. , but its only going to get a lot more stronger. That is the story we have seen involved in the more recent decade. I think to joes point, the nominal crushed yes, but the real got crushed in the last decade as well. You need a change in the demographics and the debt overhang and the statements. How does that change . Mark i dont think Monetary Policy works for what the world needs at this point. I think what that does is balloon savings even more because theres a certain very Large Population that will not invest more. They just save more when you have negative rates. If that flips and starts going the other way, i think thats a positive. I think raising rates could be a positive for the economy. Lisa but raising rates and the end of the bond bull market are two different things. You talk about flows and thats an important point. What about all the investors in germany and japan flooding to the u. S. To capture higher yields . Why are they not coming out or are they . Mark theyre going back because of this tilt we are seeing. Perhaps this negative Interest Rate thing is not a good thing. If we tilt that higher, that money wants to be at home. It is flowing back that way and that is why the u. S. Bond market is backing up per se. The bushg back to years, we saw federal deficits explode and what perceived to be in retrospect loose money that cost of bubble, but we did not see much of a trend in Interest Rates them. Policies and fiscal policies and spending, bush cut checks to the entire population to boost the economy. If that did not cause rates to turn around, why would it be different under this administration . Mark we have had eight years veryy a very subpar a subpar rebounds in the us economy after huge massive amounts of stimulus. We have to point to one thing as to why thats happening. We have had no progress on the fiscal front in washington. I think the markets are rightly looking at this and saying, i think were going to have a different outlook now as far as fiscal. Happen, i think some of the scenarios we are talking about have very different outcomes. Its not going to be straight up and its going to take time, but theres a massive shift in sentiment around whether its monetary or fiscal driving the economy. Next year,ick will there be tech losses for Government Bond funds . Mark i think they of already seen that coul. Its a painful experience. I do not think theres much upside fro for them from a rebound. That pain is being felt and i think you will see a rotation because of it. Jonathan mark, very great to have you been looking forward to you coming back. Coming up on this program, credits we strategy Credit Suisses strategy to grow its business. We have an exclusive interview with its u. S. President and ceo next. You have been hearing it. Record highs and the dow approaching 20,000. The s p 500 up 1. 5 . Mark is so bullish that he feels uncomfortable. This is bloomberg. Emma this is bloomberg daybreak. Im emma chandra and the hewlettpackard enterprise greater. Of theird, ceo construction giant on his outlook for infrastructure. Highsan intraday record across the board. Lets get to the markets for you. The dow on a sevenday winning streak, 100 points away or 95 to be precise from 20 k. Lisa dont get ahead of yourself. Jonathan you probably would have. The nasdaq is up as well. Lets cross over a movers with you with abigail doolittle. Ongail helping those gains the dow and s p 500 are some of the Big Bank Stocks trading higher. This does include bank of america, jp morgan, and citigroup as Morgan Stanley is saying they see upside for global banks and 2017. They prefer u. S. Bankshares and u. S. Banks are one of the best sectors out of the election. To gain a sense of how the out performances, when we go to g vtb 4695, this is a six month chart. We have the s p 500 not flatlining could it is up 6 from the election. You see the bank sector has really taken off, up more than 18 . The question with this big momentum, is the sector overbought . We take a look at another chart on the bloomberg and this is 728. S p 500e have the bank index and we see the big gains over there to the side. We also have the relative strength index. Indicator. Omentum when it goes above 70, many investors see that as a sell signal. That is the longest stretch since the election over the last month or so. The question is whether or not this is signaling that some caution should be taken for the banks ahead. Jonathan great work. Thank you very much. Coming up at the top of the hour with erik schatzker. Whats coming up . Erik we have one heck of an 11 00 hour. Its a onetwo punch with john greg, head of Global Real Estate at blackstone, followed by the president of Morgan Stanley. So much to discuss with so much of them. John was interviewed by donald trump as potential treasury secretary. We know that steve minute should is the treasury secretary nominee. Theres also a lot to talk about with his meeting with donald trump. He knows the trumped from his dealings in new york real estate. What does he expect from the new administration . How does blackstone feel about being a buyer or seller in these what isl these going to happen with real estate with this huge slope in the yield curve . Lisa good to have a sense of whats going on inside the inner circle since the have connections to Steve Mnuchin or gary cohen . Erik i do not know if the connections are that deep. Steve schwarzman, john grays boss at blackstone, was just appointed to head Donald Trumps Kitchen Cabinet of business advisors. Theres also the issue to take kelleher as to whether the big up with we have seen from jamie dimon speaking at the Financial Services conference extends across the street. Olm kelleher is going to tell us whats happening in the Fourth Quarter with Morgan Stanley. We can also ask him about the prospects for Financial Regulation under trump. Are we going to a limited the vocal rule for example . Our Goldman Sachs and Morgan Stanley going to be able to go back to prop trading the way they did in the glory days . Lisa the onetwo punch coming up. Erik schatzker, sounds like a Great Program coming up. We are to head to Credit Suisse and cory johnson is there. The ceo says it wants to focus efforts on its business, but trends in the area have not been too friendly. Is still on the floor of Credit Suisse with a special guest. The special guest is that president and ceo Credit Suisse usa. Cory eric, im glad to have you on here. I want to talk about how important Asset Management is to the company, but this is a giant Trading Floor. You are third in both volume and commissions. When the rest of the market is pulling away from sales and trading, how important is it to the company . Eric its highly important. About thed to our ceo importance of the u. S. Business and the sales and trading business, i really do think this is going to be one of the big differentiators for us in 2017 in terms of performance. We spent a lot of time restructuring the business and really waiting for some of these tailwinds we are starting to feel the markets. Cory ive been around a lot of Trading Floors for a lot of years and this is a really big block trade this morning. Not a lot of friends can put that much stock away. And thats without denting the price. It was an enormous amount of shares traded. It seemed to be really quick. Eric we traditionally have been very strong with equities and distribution. We are ranked third globally for the last decade. It is a gem of our business and it is something we do very well. We have the capital and great distribution. Cory you were sitting on an enormous amount of stock that you not be wanting to sit on. Eric thats what we are good at with Credit Suisse were the number one distributor of leveraged loans. We are really good at structuring and distributional. To the extent that you are going to serve your customers and your investors, youve got to be able to present right and make sure you do not move the pric price. Cory the Banking Sector has been really strong and your number two in energy. Industrials are number four. That business in terms of ipos and so much m a has been really slow this year. Eric it has. E have done a lot of work he has done a really good job in building out the talent base. We have been in three of the top five m a transactions this year. What i think is exciting is some of the policies we are hearing about from the new administration. Repatriation of capital, lower Corporate Tax rates, less regulation is really want to drive growth. You will see the ipo calendar really build you will see more m. Youll see more m a activity. We are excited about the future and 2017. Cory what are your goals and what do you think will happen with Credit Suisse . Eric Asset Management is pretty consistent with our strategy. We want sustained longterm growth and Asset Management gives you pretty predictable cash flows. Last year was a tougher your for us and after that management. A tougher your for us in Asset Management. I think this year will be a good year for business. We have great opportunity for growth and to 2018. Cory would you expect those assets to come from . Eric asiapacific. It has been the number one new area and asset growth, but we have had consistent growth in the u. S. , europe, and switzerland. We seeing a lot of asset flows from asia. Cory those customers, they are obviously looking for return and safety. In this era of such low rates and s such low returns, what you hearing from customers . Eric we had a lot of successes and Asset Management. We launched a bond fund that was somewhat mediumterm induration of five years. We raised about 4 billion in a very short. Of time in a specific discipline, listening to clients and what they needed. Clients really want yield coul they wan. They want Good Management and they want to know controls are in place so that money is protected. Our brand is our biggest asset. Giving edge to product clients. Cory the brain gives the safety is what you are saying. Eric what is behind the brand. Whether it is the u. S. Business or Asset Management, were really focused on quality. Are the controls good . Are they going to get the service . Are we going to give them flawless execution . Thats really what we are focused on. Cory eric, president and ceo of Credit Suisse usa, thanks for having us. Jonathan we appreciate your time. Great work from the Credit Suisse Trading Floor. In december rate hike may be priced in, but what the markets expect from the fed and 2017 when president elect on trump takes over the white house . Alltime highs in the fc market. This is bloomberg. Jonathan from new york, this is bloomberg with Jonathan Ferro and Lisa Abramowicz. In the markets, intraday alltime highs, you just short of 20 k. We are up 95 on the session. The s p 500 up 6 10 of 1 . All this 24 hours away from the Federal Reserve decision. Heres what the former president of the Federal Reserve of the bank of philadelphia had to say about that. In the background you have president elect donald trump with kanye west at trump tower. That is kanye west at trump tower on the day you get the nomination from the state department. You get kanye west meeting with donald trump. Lisa theres not a whole lot to say except kanye west and president elect donald trump in his building. That is the same building that so many dignitaries and business officials have walked through. Jonathan should we get to the sound from charlie . Thats the former president of the Federal Reserve act of philadelphia. I would probably tell him a couple of things. One is be careful. The fed is an important institution. Its incredibly important that its independence be preserved in both reality as well as the perception of that independence. Respect its independence. A good people to the board. Let them do their work. The market is exciting theres going to be a lot of change. Very few fed chairs have stayed on after their term has expired. How the question is much of a Program Booth are you going to get out of the trump announcement and how much will that Material Change the thought . Our forecasts are pretty modest on that. 150 billion for the infrastructure over five years. I do not know if you have the dots change that much. Jonathan that was Charles Plosser of the Federal Reserve bank of philadelphia and joyce chang. That is all ahead of tomorrows decision and we have full coverage right here on bloomberg. That is tomorrow. Today the unknown is 2017. Lisa its amazing the number of unknowns compared with the painfully bullish mark okada. Jonathan thats the quote of the morning. I feel so bullish im uncomfortable. Next up is number markets with erik schatzker. A. M. In news 10 00 york. I am vonnie quinn. Mark i am mark barton. Welcome to bloomberg markets. Vonnie we will take you from new york to london and cover stories out of moscow and tokyo. Here is what we are watching. Hesidentelect trump says has a choice for secretary of state. We look at the impact of the selection with the former nato ally commander. Mark all three u. S. Averages hit alltime highs. The 20,000 point mark. Will the gains continue into next year . Then, whoestion with has one of the lowest s p targets on the street. Vonnie