Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20161222

Ewsprint t tenants names carl icahn to head of his deregulation campaign. And Peter Navarro to head a new trade counsel in the trump white house. That is what you need to know at this hour. Bankthe future of italys with lisato milan martin. Have we got any color on what the plan is from here . The next 40 hours will be critical. Paschi, the indication at the moment there isnt much there. The bank will seek some kind of government intervention. The bank as a Firm Deadline by the end of the year to offload a significant amount of bad debt. What we expected here between now and friday is the government approving a decree that will set up the rough outline of how it will put up to 20 billion euros on the table for monte paschi but potentially for other lenders, too. Jon with the prospect of state aid on the table, how do you implement burden sharing and protect bondholders as well . How do you do that . This is what is going to be key. What we have seen in similar situations earlier this year was for lenders that were veiled in, some of those Retail Investors were offered compensation. It was means tested. It it will take a while for those refunds to be put through. The government will be trying to do whatever it can to limit the canboth in the way it refund at how quickly and effectively it can refund. They probably should not have bought that riskier debt in the first place. Latest on italys thirdlargest bank and the worlds oldest. David we go now from italy back to the u. S. Bank of america has not yet changed its Economic Outlook the secondlargest u. S. Bank is already seeing signs of improvement out there in the Business Activity. I asked Brian Moynihan what changes he has seen today as we headed to the trump economy. Aian bank of america having fairly decent sized customer billion seeing that 50 yearoveryear and growing faster, those are all very good things. The economy is in good shape and is growing ahead and making progress. On the business side, the in Midsize Companies, they feel theres more there feelwill get done, they better about the prospects of the Regulatory Environment in their businesses, they feel better about the possibility of instantaneously, the Consumer Confidence and the Business Confidence shot up. We can decide to do something or not do something. If we feel better, we will do it. Meansdo it, that things happen. Just feel people are saying, hey, lets go try it and see what happens. David are you seeing that specifically in the Midsize Companies . Brian we are seeing that lending row. Bit more on the lines which means they are putting their money to work. Becauseo fall through its been six weeks since the election, the timeframe is relatively short, but attitude is important for that group of companies. For Big Companies like us, we always have to figure out something to do tomorrow. We have to make more money, get more efficient, generate more revenue, take more expense outcome of light or technology. Midsize companies can make their decisions differently because they are privately held. When they are excited, that is very good for america. Your jobrt of description is to be a macro riskist manager. What do we know, what dont we know . Brian we have the number one Research Team in the world for six years in a row and they just got their sixyear. We will increase to 1. 7 which would be a step up. Fundamental belief of that has not changed since the election. We believe the economy in the u. S. Will grow and the economy in the world will grow and its more of an upswing. That wethat uncertainty went through this year has been handled by the markets and by people predicting outcomes, which is pretty interesting. Between brexit, the telling referendum, the french elections all that. Election stuff that people thought if this happens, there will be huge disruption. The market disrupted for a few hours and then came back and said life goes on. There is a tremendous momentum behind us. Are more active, they are talking harder. You are seeing that go on. Count is going up. Clients weof our talked to and Regulatory Burden is it will come down. Theres other serious concerns. Labor is trickier than people think. Right labor in the right place at the right time is tricky for people right now. You have to have some great Wage Inflation but more portly the right jobs. More importantly the right jobs. The sole difference that happened the last six weeks is enthusiasm. If that falls through, it will be interesting. David your Research Team has not taken their gdp Growth Numbers up in response to donald trump it has the market overreacted . The markets have reacted as if gdp is going to grow faster. Aian they took theirs down it is ant interesting viewpoint. Test it willthey be interesting to see how they think about that Going Forward. Think tax reform is coming, they will wait to see what it might say because they might be losing an advantage by doing something now. There is a solid u. S. Economy and solid World Economy and the risk factors have gone out because the markets reaction to the u. S. Election and brexit is behind us. There is still always another ction come always another they have not raised yet because that is based on real items and real trajectory. You will see them keep it in the 2 level, would be my guess. David some people have said the markets are taking all the good possibilities out of what we heard out of donald trump and are not really pricing in some of the unintended consequences where are you on that . What are the unintended consequences we might not be thinking through . Brian im not sure you can say any president ial candidate or the president elect doesnt have the same problem. Theres a series of things that have been prioritized. Tax reform, repatriation, immigration reform, Affordable Care act, things like that that people are focused on. This great view of alignment between the senate and the house and the presidency will help that through. These things get harder when they get done with brass tacks. They are never easy. The markets enthusiasm is at least we are going to try. We have to see the followthrough. David i found this particularly interesting. This is the Second Largest Bank in the country. They are particularly involved in the middle market space. They are out their daytoday dealing with privately owned companies. He clearly sees a difference in the tone of the discussion and the interest level in Business Activity. Jon for him, confidence is one thing, now, what are you going to do with it . Are you going to go out and spend . Will these companies go in spend or wait . Maybe they will wait to see what these policies look like before they act. It will be a story for 2018. David it may come later on. They might be better off waiting that doing it now. Jon lets bring in laura keller , who knows bank of america inside and out. For this company specifically, how wellpositioned is it to take advantage of that story, the Midsize Companies feeling more frisky . America is really attuned to what is happening in these midsize markets. Across the at country, what institutions do we have that know what were doing, no what someone in florida is doing four bank of america, these have what they are doing is lending. They have credit cards, loans and often do things like issuing debt. They understand what kind of deals they are doing, they have some understanding of hiring. What kind of business are we expecting from this type of change . Four bank of america, when someone decides to take out a new loan or build a new factory, that means Good Business for them. Whether were talking about Interest Rates rising, that is something that helps the bank as well, but this specifically is the general traditional banker. Someone who is lending money and making the economy grow. David the critical issue for brian is the demand. They have so many deposits, they have to put them to work somewhere. Its important for them to get that money out the door. Laura theyre looking for opportunities to put those deposits. A low interest environment, theres not a lot of assets they can make a good return on that of risk. E with a bit using them change their auto loans, for example. It is a place where they can get a bit of yield. Now, maybe there will be some new opportunities. Heards a point i have not maybe we will not see it people arebecause expecting this to be a quick kind of come a while, tax reform on Donald Trumps first day in office. Be that is too jon that is how the customer feels. We will hear a lot more later on the regulatory side of things. David he definitely thinks theres room for recalibration. Not so much fundamental change. Lets get back to the markets very quickly. Price action, not much of it on the major benchmarks. Lets get across to abigail doolittle. Abigail one stock where there is lots of action, micron after the chipmaker put out betterthanexpected firstquarter, beating earnings estimates by 19 . They also guided the Current Quarter Sales Forecast much above the street by as much as 15 . The ceo saying the supply demand dynamic looks positive. All this on a stock that is already up 45 this year. During less welcome a shares of alibaba after the Company Segments on a blacklist over counterfeit products. Investors are not liking that at all. Nokia trading lower over in europe on the news that the company is suing apple over patent infringements in the u. S. And europe. Right now, nokia is among the worst on the stoxx 600 technology index. Coming up next, and exclusive businessweek interview with j. P. Morgan chase chairman and ceo jamie dimon. From new york, this is bloomberg. Jon earlier this month, j. P. Morgan chairman jamie dimon was named chairman of the business roundtable, a prominent probusiness lobbying organization in washington. This issue of Bloomberg Businessweek features an exclusive interview with dimon himself. He talked about how he expects immigration policy to change with the Trump Administration. That wase rhetoric terrible during the election if you are black, jewish, lgbt, africanamerican or women, we will support you and that cut of diversity just the way we did before. Has gonehe rhetoric away. Even the rhetoric about immigration, President Trump says if you break the law, we will deport you. Come1 million undocumented only 800,000 have broken the law. Business bracket has already supported immigration for that reason. It is a projobs, pro growth argument. Most people when they get worried about immigration, its not that they dont like morerants they are afraid that the american way of life is changing. You can be multicultural but still support the american way of life. Lincoln, we dedicate ourselves for this nation, conceived of liberty and dedicated to the notion that all men are created equal. This the only nation in the planet that was an idea. A lot of people want to make sure that doesnt change and some people are confusing somehow weal that are going to change, that we will tolerate just wont tolerate different opinions europe you travel in where this is also a very deep phenomenon, we see it in italy and germany and france and the , the you think this is a temporary phenomenon or a generational phenomenon . Will it wed itself out or is this a permanent movement of people who are more focused on redrawing national borders, national identity, regrouping around that in what has been a decade of constant disruption across the money stabling forces in their lives . Jamie there were completely different forces for brexit. Some were antiimmigration, some were for open and free trade. People voted for a whole host of reasons. Theres the same frustration on income inequality, growth in 25 oft jobs people between 21 and 35 are not working. Is that a sustainable thing if you have another generation of that . Theres legitimate frustration about why is that, how did that happen . A lot of it is government policy, some of it is frustration i wanted change. They want a wrecking ball brought these governments. There were not voting for the things a lot of people said. They want something very different from what theyve seen. We want to see something different. Ultimately its about facts, analysis and detail to make that happen. Populism itself can be very disruptive. Look at cuba, argentina which is g the other way they have had peace since world war ii. They did not have peace for 2000 years before that. The are benefits. There are benefits. Jon that was jamie dimon. Joining us now is megan murphy. This word populism, we will hear a whole lot more about it. Did you get a handle on what it meant for jamie dimon . Its a really good point in terms of positioning himself as the chairman and ceo of j. P. Morgan and also as a broader civic leader and a leader of are we going to see this ability of ceos, of the executive class to really reposition themselves as thought leaders and to weigh in on issues like populism . Its interesting to hear him talk about inequality there. Are they going to offer solutions the American Public is willing to hear . Jamie and other people will be will thedavos American Public be ready to listen to these topics . David jamie dimon is important that of j. P. Morgan but also the new business roundtable. He said jamie dimon will be heading the business roundtable. Important position here he talked about immigration, one of the most polarizing issues. Has beeness roundtable counter to what people think the servative Republican Party they will be focused on trade, focused on immigration and what that means for certain sectors of the economy and also focused on Corporate Tax reform and tax or four more generally. Tax reform more generally. Theyre bringing the top rate down, making america more competitive and potentially tying it to a major infrastructure boost. Jon how do you keep up with all these different positions . Tol icahn yesterdays going be the trump advisor on rolling back regulation. We have Kellyanne Conway announced this morning as to any of usnating who cover this campaign, we put a lot of blood, sweat and tears on the trail, but he is caring through so much of what he said he was going to do putting people with business rollingce in roles back regulation and stripping that back, whether it is doddfrank or energy reform, that was the thing that got him the most popular in the most applause on the trail. We will see what he is able to do. Isid Corporate Tax reform very popular with businesses entering this country. We will have to pay for it some way and not everybody will be happy. We have to pay for these things as well . This will be the big tengion, isnt it . Even though the Trump Administration will come in with a Republican Senate and congress, theres a large portion of that party that got elected on being deficit hawks and being really neutral. We will see what theyre going to do in terms of getting the money to pay for this great new promise of infrastructure and Corporate Tax reform. David the devil is in the details. Thank you so much, megan murphy. If you want to read the interview, that is an Bloomberg Businessweek. Also, watch tonight at 9 00. You will see it only on bloomberg television. Conflict of interest . Deutsche bank scrambling to restructure donald trump 300 million in debt. Can they keep these two things separate . This is bloomberg. David heres what you need to know right now. The banks weigh in. Speaks out on the wave of populism and the need for fundamental tax reform. Brian moynihan sees new animal spirits in the board room of his clients. We hear from the leadership of two of the nations biggest banks. Monte paschi on the brink. Admitting now it is not likely to meet the deadline for raising the capital. The next step looks like government intervention. Trumps new lieutenants. Sendsesidentelect a strong signals about where hes heading and it doesnt look like hes backing down. Peter navarro to head a new trade counsel in the trump white house. Jon i just cant keep up with these appointments. In theot is happening markets. Futures are dead flat. A quiet churn in europe. Even some of the ecb has gone home. They will return at some point heading towards toys 17. Treasuries and the bond market yields up to basis points. Above 1. 04. A muddled session in the fx market at the moment. Germanys largest bank has found itself in the crosshairs of yet another scandal. This time, involving its most high profile client, donald trump. Geiger and others right that the bank is trying to restructure some of trumps roughly 300 million in debt as part of an attempt to reduce any conflict of interest between the loan and his presidency. Great to have you join us this morning. To establish the story, is this a regulatory issue or a moral issue . Be fair to Deutsche Bank, this really isnt an issue so much for Deutsche Bank as it is for the Trump Administration. Client happened to become the president of the United States, so now, they have to deal with a very unchartered territory and how you manage credit with someone who appears we dont really know how all spans. The bank needs to figure out its its exposures are, what upsides and downsides are and on the flip side, you have a president that has documented a mere you conflict of interest through his sprawling Business Empire and this is just one piece of that. Beid would they restructuring this loan at all if donald trump had not been elected president . Keri obably not probably not. Theres nothing unusual in the way the loans are set up. These are all tied to projects incompletion or done or projects moving ahead. Restructuring would not have happened unless it was related to the way the Business Model was set up or something internal with the way the loan was set up. This is a completely new issue for wall street. Deutsche bank just happens to be one of the few banks that does deals with trump. That goes back to early real estate deals a couple decades ago. They happen with trump for a long time. They are still with trump and now, they have to figure out how to manage that relationship Going Forward. Jon this relationship is critical that he might be one of their most highprofile clients. Donald trump will go into the white house and oversee an administration that will dollar how does the conflict of interest emerge there . Keri it is a fascinating question. We talked to analysts about this issue. When you have a president that is overseeing a bank that he does business with and that he owes money to through a series of deals and loans, how do you manage the issue of that bank is under investigation on several fronts by the u. S. Government and your political appointee will be overseeing those at the Justice Department . We have never seen anything like this before. How do you ensure that there is no conflict or influence on how those cases are looked at . Jon keri geiger, thank you very much. This is not a scandal at this point. But scandalous is a word that some people might use. David it is certainly a very hot potato for both sides of this. Jon there were a lot of reports suggesting the report might come as soon as this week. Do you wait or get it done . David some of this loan was for the hotel on pennsylvania avenue. Jon another potential conflict of interest as well. David we turn from the Deutsche Bank situation to emerging markets. The election of donald trump has been good for u. S. Equity markets emerging markets have not fared as well. Jeff dennis it has had a rough time since the u. S. Election. We have underperformed the developed markets by about 900 basis points. Didince the u. S. Election most of that occurred in the week immediately after that. We typically do well when the dollar is weak and do badly when the dollar is strong. When you have a weak dollar, money tends to look for yield and tends to go towards emerging markets, risky assets. David joining us now is Raman Srivastava, codeputy chief one of theofficer things we talked about is the relationship to the strength of the u. S. Dollar. The dollar setting new records in the index. Where do emerging Market Investments stand . Does the dollar need to we can to make those investments make sense . Raman not necessarily. Certainly, emerging markets have taken the brunt of the hit postelection given the strength of the dollar. You dont need a weak dollar for e. M. To perform. Income,ook at fixed look at the starting point of where you are in emerging markets, you have a strong yield advantage versus developed markets. If you think the components of what drives a return in fixed income, certainly currencies is one of them. Currency stability would be enough for markets to over perform outperform. Will drive a rotation back into emerging markets at this point given the fact that they been a decline in recent weeks . Raman part of the reason theyve been in decline is the lack of certainty around what is going to happen. Weve been hearing about it all morning in terms of what is the policy going to be with respect to trade and immigration. You need some of that uncertainty to be released. Also, theres some tail winds supporting emerging markets. Commodity prices have stabilized, that is a big driver for these economies. That should support the Asset Classes general. Class in general. It doesnt stand out as such a cheap asset class within fixed income. Jon lets talk about the politics specifically overnight, weve learned that , a frequent critic on this program of china and trade practices there will lead a newly formed White House National trade council as an assistant for the president elect. I dont really understand what that will actually entail. Tot know what its going mean for relations in terms of trade between the u. S. And china. As an investor, what does that appointment me to you . Raman it means more uncertainty. This is why the markets have taken a hit. Certain markets will be directly hit by whatever potential protectionism comes out. If there is an import tax or a specific tariff, it will affect china and mexico. In the selloff, youve seen in a discriminate selloff to some degree. Even countries and economies where we think theres opportunities which wont be directly impacted by these policies, youve seen them selloff as well. You see volatility go up, you see correlations come down, you have winners and losers, it is a ripe environment for active managers to perform in emerging markets. Jon i spoke to a guest in london two words were mentioned. Economic warfare. Whether we see something emerge in the next couple of years where the likes , things could get messy in the future. Does that concern you . Raman it is not our base case. If you look at the policies and the ultimate rotation we think we will see certainly, there will be something done on trade. Something done on immigration. We dont think this will be a dramatic enough policy change to really drive some of the things weve been hearing about would be big enough to drive the ld into a big down drop they would be a big hit to financial assets. We dont think this is the aim of the administration. Is the basenk that case. Certainly, the risk exists and that has been reflected in asset prices. Want to ask about china specifically and its relationship with e. M. As an investment. However china goes, this goes most of emerging markets. China does well, emerging markets will do fine. If not, no. Do you share that view going into 2017 . Raman that is true to a level. China slowed. This year, youve seen the renminbi we conversed the dollar. En versus the dollar. In a volatile time, that is certainly true, but when you pick through the rubble, what youll find is the chilean economy, yes, there is a link to china or the argentinian economy, but you will not be directly tied over a medium basis. It creates some opportunities. David that is Raman Srivastava joining us today from boston. Coming up, president elect trump names carl icahn as a special advisor charged with rolling back regulation. Icahn said fewer regulations would been better business. We will talk about that, next. This is bloomberg. Ma coming up, or from our schools of interview with bank of america chairman and ceo Brian Moynihan. More from our exclusive interview with ink of america chairman and ceo Brian Moynihan. David donald trump yesterday named activist investor carl icahn as a special advisor to help him overhaul federal regulation. Bloomberg spoke with icahn just a few weeks back. Carl what i think is sustainable and the president can do very quickly is show business that we are getting rid of a lot of the regulations that are strangling you. If you are a ceo in this country, the way you will get business invested, cash invested, capital invested is to get rid of a number of these crazy regulations. Joins us now from washington with more on what this really means. Im at a loss. Is a successful investor paid im not sure how much experience he has in washington. What is this job . What authority does it have . What it shows is the type of people that president elect trump is going to surround himself with in regards to financial regulatory issues. Carl icahn is someone who has been an active critic of doddfrank. Trump has said repeatedly that doddfrank is something he would like to scale back. In terms of what we are seeing now in terms of the types of folks that are surrounding trump in addition to icahn, you have steven mnuchin, a probusiness, profree market crowd. If that continues in the first 100 days, that lends itself to the more Global Economic worldview. In the sense that it will allow the u. S. To perhaps be able to take a more offensive approach with regards to be regulating the economy. Deregulating the economy. Not add in extra layers of management, extra layers of hierarchy. You want to streamline business to get things done. You mentioned the first 100 days. These are roles weve never heard of. How are these guys intended to get things done quickly when they all have to come together in a way that weve never seen before . Kevin i put that question to some senior trump transition officials. Told me is that quietly behind the scenes, the trump team is beginning to formulate that first 100 days exactly in terms of how that will work and cohesion with the congress in addition to some senior officials. Earlier today, Kellyanne Conway being named a counselor to the president he is surrounding himself with the same type of folks at an administrative level. The cabinet has largely been already filled out. How exactly this is executed, that remains to be seen and that is a great question. That relationship to congress is quite frankly still evolving but evolving very quickly at this time. David many of these jobs already have people in the government who think it is their job. Peter navarro has been named to head a new trade counsel in the white house. How does that work with things like the special trade representatives, how does it work with wilbur ross who is in charge of commerce . Mr. Navarro be over these people . Kevin he will be under them. What i found interesting with regards to trade in particular in the Transpacific Partnership and trump repeatedly saying on the campaign trail that he would get rid of that he named Terry Branstad the ambassador to china before he picked Rex Tillerson to be secretary of state. Honestly quite the old Republican Party establishment were quite receptive. Peter navarro has had a combative relationship with china. He is not well known in the in crowd of economic economists inside of washington or wall street. Hes a bestselling author of sorts but more of a flamboyant type of character, if you will. We will have to see where that fits. I dont expect him to be making heavyduty trade decisions. David thank you very much. You take someone like a carl icahn im not sure these people will have Actual Authority to do things. Jon earlier on, i brought that quote to you unless you know that is this right now. I dont know what this guy is going to do, i dont know what this role is, i dont know how much power he has. Things this belief that will get market friendly. If Peter Navarro is going to have a fundamental play, a voice in the trade policy, you would say fundamentally that is bearish to global trade and for china more specifically. At the same time, it is possible that donald trump likes it this way because he can cut through everything and make the decisions himself. Very respected individuals david he is attracting some topnotch talent. In the next hour, dont miss an exclusive interview with boris epshetyn. Jon lets say good morning to emma chandra. A supposedly bipartisan deal to kill north carolinas law known as the bathroom bill has collapsed. In our Brian Moynihan exclusive interview on why it is a costly piece of legislation. Brian north carolinas losing business because of this. We have 16,000 people in the state we want to major that state is one of the best states there is. As was not helping them. The controversial measure requires transgender people to use the restrooms that correspond to the general their grip certificate. Uber has pulled its self driving cars from the streets of San Francisco after california proposed legislation for the vehicles last week, they had begun rolling out economist cars without permission. Tesla makes electric cars that include a feature called autopilot. This is bloomberg. In a corporate history, wonder how much free publicity one company has got david 16 vehicles. In may look ahead to what you need to know for the rest of the day. Lots of Economic Data in the u. S. Before the opening bell. We will break it down with a preview, next. From new york, this is bloomberg. Jon now for todays agenda u. S. Thirdquarter gdp, initial jobless claims drop at a club 30 a. M. Eastern time. 8 30 a. M. Eastern time. Carl riccadonna joins us now. Great to have you with us. These data points will not be pretty. Karl the gdp numbers will be pretty. This is the third print on the Third Quarter. A bit of old news. Durable goods orders come economist are expect a big pay back. We will watch for something on the order of a four or 5 decline. We have jobless claims. That will be passing news. Jobless claims will get more attention over the next couple of weeks because the auto manufacturers have announced that they are ramping up layoffs and pulling back on production heading into 2017. Jon it will not look like this anymore. Carl it cannot go down much further. Its been trending sideways to lower. We did see some drift higher in january. This isnot to say that the beginning of a deterioration in the labor market. That will be one shortterm story to watch. The most important data point of the day, at 10 00 when we get the personal spending data, consumers are so critical to the Economic Outlook at this juncture, we need to see spending hold up and income creation is robust as well. David animal spirits . That is the big theme for 2017. You have a dollar for every time ive heard it nomicss the way trumpe impacts 2017. The shovel ready products are not quite as shovel ready. Projects are not quite as shovel ready. That is a 2018 story, most likely. That means we dont see a lot on the 2017 front. It continues to be a consumer driven economy. The benefit is that maybe some animal spirits from both households and corporations give the economy a bit more vigor. Jon can you spend before you get the taxcut . The anticipation effect. Jon Carl Riccadonna with the data to back up the opinion. Coming up, more from our exclusivity respect we hear from the leaders of the nations two largest banks, bank of america andjpmorgan, Brian Moynihan jamie dimon. Jonathan this is bloomberg daybreak on this thursday. Alix steel is off. Night. Ne singing silent more in europe, price action nowhere to be seen. There is her action or lack thereof elsewhere in the bond market, yields up a single basis point on the 10 year and the euro stronger in the fx face. Fx space. David the banks weigh in. Speaks out on the need for fundamental tax reform. Brian moynihan sees new animal spirits. We hear from the leadership of two the biggest banks. Monte dei paschi is on the brink , admitting it is not likely to meet the deadline. The next step looks like government in government intervention. The president elect sends strong signals about where he is heading. Icahn to headrl up his deregulation campaign and Peter Navarro is going to head a new trade council in the white house. Lets look more in depth at the monte dei paschi story. It really hangs in the balance and we turn to rome. We know we dont know what the entire government is likely to do. What are the options open at this point to the Italian Government . We have been speaking to a senior Government Official who says the plan is for a meeting of the and possibly this evening, possibly tomorrow but after markets closed because of the expected failure of the monte dei paschi plan and this would be a cabinet to approve a degree that would use the fund of 20 billion euros in extra public debt, which parliament approved yesterday. That would be used for monte dei paschi and possibly other troubled lenders. David is a possible that the 5 billion euros that punt that monte dei paschi was trying to raise earlier was the requirement for the Italian Government in the shortterm . The 5 billion does not seem to we dont seem to have achieved that number, partly because of the failure to find it anchoring anchor investor. A senior official tells us the government would step in and make up for any shortfalls. The government will use a billion euros to make up the gap. David thank you so much, john philae and reporting john follain, reporting from rome. Jonathan lets turn to the u. S. There isere significant recap and they put some money to work. Editorrg Businessweek Megan Murphy sat down with jamie dimon in detroit, in an exclusive interview. She asked if he expects to see changes to regulation over the next four years and if he thinks people still blame the Banking Industry for the financial crisis. Jpmorgan did not jeopardize the system. We have three times more capital than we had, back then. How much do you think we lost in the nine quarters after the lehman crisis . Billion. 30 we did not jeopardize anyone. We saved 30,000 jobs. I understand the concept. The American Public saw a disaster that was not their fault and generally it was wall street and washington. They have the right to say we want a safe and sound Banking System that does not take down my economy. That does not mean therefore all these rules regulations are good. The American Public has been told that whatever the banks want, dont do it. It is not accurate. A lot of the things in doddfrank had nothing to do with the crisis. Pet peeves of certain democrats who put these in because they felt like it. Barney frank and i agreed with some of the things that should have been in their. Anytime you do major regulations and they are different, it is perfectly reasonable for people to look back and reanalyze and recalculate and talk about what good it did, what damage it did and how we can help. We have not solved the Housing Market with mortgages. Because we have not solved that issue, banks and other institutes are afraid to make mortgages to firsttime buyers and selfemployed. Not in one case was it avast a bad person. They deserve a second chance, and we have not fixed that. It does not create more safety and soundness. Vital k is not the is not the bible. Hugeually, these legislations need to be opened up and looked at to reduce the negative part that causes no benefit while still a couple she the ultimate goal. It is reasonable to look at where you need to do better as opposed to a kneejerk reaction that everything put in place is good. Megan talking about minimum wage has been one of your big pushes. We now have a nominee for labor secretary who has been one of the most open advocates against raising the minimum wage and has been quite firm about that. I dont think so. What he said is that the government should be very careful about raising its minimum wage. It should be a decision made at a local level because a lot of businesses can afford california can afford 15, but upstate new york probably cant. He is not against states raising it thoughtfully. I am in favor of that. I am not in favor of the federal government doing it. If you can afford it as a business, raise it, share the wealth. I tell the people at j. P. Morgan, i am worried more about the pay of our lower people that our higher people. Our higher people. If you are a Small Business that needs dollars an hour to get by, but cannot afford it, then this can help you. You can attract better people, you will have less attrition and can maybe afford more benefits over time. There are solutions to it. Jonathan that was jamie dimon, the jpmorgan ceo. Lets begin where that started. Wall street bashing. Is it over with the new administration . Fascinating to see that when we saw a campaign ran from both sides of the spectrum, clinton and trump both ran on a platform of wall street bashing. When i talked to Brian Moynihan what is executives, interesting is the level of optimism that they had that this will work, what the ceo model can bring. Lets see we can smash this model and bring Something Else in. The issue they will confront is you have a very limited time span to make this work. The American People were very much very much elected donald trump because they were so upset with what they see as insider washington with the Banking Sector to put in people they identify with this. They will be full one time, not twice they will be fooled one time, not twice. David it is easy to underestimate the momentum. This is not a partisan issue within the beltway. Infrastructure built to resist change. Megan i think you are exactly right. There is an entrenched bureaucracy that has become a hyper partisan society. People resist bills that even have 90 support of their own constituents that are backed by both parties because people will put in other elements that people do not want to go forward with. Anytime we have people that think they will go in and change washington, this has become more difficult over the years. It is optimistic and i love how jamie is an optimist. Jonathan a bank with over 240,000 employees. Jpmorgan andabout bonuses, we talk about front office trading, but some of those the bulk of those employees, we are talking about tellers and people that work at chase, etc. The minimum wage issue is important to him for many reasons. Toan it is hugely important him and they took a public stand as a bank in raising their employee rage employee wage. How much a two dollar difference can make in those in those households. He believes boosting wages is a fundamental part of growth, Going Forward. We have heard some appoint if youg voices that say keep that wage down, it keeps flexibility for Small Business owners. Playis the clash that will out, whether or not when he to take that wage up, particularly with those households struggling in this economy, or whether keeping wages down is a more successful growth strategy. That is two opposing forces. David it is great to have you here and this is a great interview. She is the editor of Bloomberg Businessweek and you want to read that entire interview for yourself in Bloomberg Businessweek. It is the issue that is out, today. Watch at 9 00 p. M. Eastern time. We debrief the conversation with jamie dimon. Lets get an update on what is making headlines outside the business world. Russian president Vladimir Putin is an annual end of your meeting with the defense ministry. He said the countrys military is now stronger than any potential foe. This press conference is set for tomorrow. This years event was delayed by a day so he could attend the funeral of andre karlov. Relatives of workers of the fireworks market that was destroyed by a deadly chainreaction explosion are searching hospitals for loved ones. This is authorities updated their list of dead to at least 34 people with another dozen missing. In the u. S. , we have not seen the last of the present the Campaign Manager of president elect donald trump. He has been named counselor to the president , serving as a Senior Member of the trump transition team. Global news, 24 hours a day. This is bloomberg. Jonathan in the markets, xp markets go nowhere. Week after the big breakup, we have news that j j and antillean are back in talks for a merger after a breakup, last week. This puts french firm santa fe out of the picture. We do see that actelion is trading higher. J j higher on the year, but it has been a volatile year. As for boeing and lockheed martin, we have mixed trading action after the ceos of both country desperate both companies met with president elect trump, saying they will both deliver air force one below 4 million 4 billion. Investors may think they are somewhat vulnerable. That bath and beyond shares are tumbling on a Third Quarter miss. It looks like online surged by 20 . Brick and mortar is down. David coming up, we speak exclusively with Bank Americans bank of americas Brian Moynihan. Specifically, what roles he would like to see changed when it comes to banking. Jonathan from new york, this is bloomberg daybreak. Lets get a check of the markets. In the u. S. , stocks go nowhere. That is your headline. Futures positive three points on the dow, nowhere on the s p 500, literally unchanged. The price action nowhere to be seen. A stronger euro and the fx market. Dollar dominance, definitely the story at the back end of this year. Haveems a lot of people gotten home gone home from vacation already. David talking about bank regulation. Bank regulation has been on a steady upward climb ever since president obama took office. Donald trump was outspoken during his campaign about the need to cut back on regulation across the board. We spoke exclusively to Brian Moynihan the brian about what he would do with the industry and his answers may surprise you. Brian if we had 89 versus a 10 Capital Requirement if we had a 9 versus a 10 Capital Requirement, whether we actually make the competition would increase. We would not change what we do in credit, but if you took that is a big number, and we would not change what we are doing because one of the things we learn from the crisis is to stick to our credit appetite and just drive at that. Talking about the risk growth, we stay in credit and giving back to our shareholders, david Capital Requirements are one thing, behavioral requirements are Something Else. At least amending or reforming doddfrank, are there particular aspects you think maybe have gone too far or just not fit for the purpose they were intentionally meant for . Brian largely our industry is in the same place. Not anot just it is lot of the parts we talked about, it is just getting the calibration right. For Smaller Companies that get caught, because we are Bigger Companies and you can see that, or should be some relief from it, but we are talking about the application of rules, not necessarily that you have to change rules. There is not an effort that we have to get rid of doddfrank, if we take something and apply it to far, and that is more getting a debate going a bit about where we should finetune this thing. That is a debate everybody believes we should have, whether you are in the Regulatory Framework are not. It is a responsibility of the industry to think about this and get this right because that calibration goes back to the growth question. David there are two seats on the fed, one of which is supposed to be in charge of regulation that was never filled. Does that put a premium on exactly whom donald trump points to some of those key regulatory positions . Brian we are a highly regulated the fdic, the fcc the sec, you can keep going. We have a lot of people that have a high interest in making sure we have highly qualified people working. Lets talk about how we run our company. If you took volcker out tomorrow, we would not change what we are doing. Our job is to facilitate the flow between our issuing clients and our investing clients in helping the investing clients get access to product and also access to markets and our research and talent. We are not there we take Principal Risk in the middle, but if you think about it, with voelker, the intent of the problems caused by when you stored risk and the cdos building up on the balance equity thatprivate got stored, we have 60 billion in private equity. We are down to like two. It our investors want to invest if our shareholders want to invest in private equity, they can invest in private equity. Ofhink it is a real question are we over engineering a solution to a simple question, which is we should not have a lot of our capital risk and invest in risk. That is how we will run the business. David what about the stress test . These are devices that the fed has really used to regulate. Good idea . Bad idea . Overdone . Brian very good ideas. I wont bore you with the details, but lets think about what the stress tests really says. It confirms to society that you take all these banks and you run them in the mountain without any warning at 100 miles an hour and what do they look like with very little building to adjust your Business Model. That, and the losses for our company come down every year. A good governor on the Business Model because it is saying you have to assume you almost did things wrong and hold a capital so if you did do them wrong, you took too much credit risk but you have the capital to survive. That is a very good rule because it does give comfort. It isg will is integral to figuring out the question of if you take these large enterprises, you have to understand them. If they do hit the shoals, you can take them apart. As a person who spent a lot of time fighting fdic, liquidating institutions and things going back to my first of it being around tanking around banking, it is important to know where everything is. It has sharpened our pencils. The recent determination is really critical. In the selfinterest of bank of america, why is this important . The fdic fund is government guaranteed. The industry bills that fund up, so it is relativity. We have a higher interest than anyone else in the country, as our economics are on the line to fill that fund. It is my great interest to make sure we can take people apart if they hit the wrong position. Those are two good aspects of the regulation. David as you watch Brian Moynihan, he is a cautious, careful jonathan without a doubt. David he came to the job after countrywide, after things have really gone bad. He has seen it go wrong, and he is not in a rush to lower his credit standards. Jonathan a lot of people would assume that these banks would like the Capital Requirements to drop, and and they would go out to make a load of loans and make loads more money. Not listening to him. That story, what they want and what they will do afterwards seems to be a bit of a disconnect. What do you think Brian Moynihan does want . Said, hego on what he has jumped on the bandwagon of maybe these Smaller Banks have all of these things going on, maybe they cant bear that kind of weight, so lets get them off the bandwagon. That is something a lot of bank ceos have said. Another thing that is interesting is he picked up on this complaint that some of his peers had, about the Capital Requirements which is total loss absorbing capital. Meant so that taxpayers do not have to bail in, again. He is saying we can make more money and you are curtailing my growth and he puts a number on it. He says to investors if he had 1 of a change, 160 billion. That is something he sees as a change that he would want. David he mentions the possibility he might return it to shareholders and he says that would be ok. Laura certainly something he is looking at, a little political. Jonathan before we get excited about a return to the golden age, some of the ceos want to stay boring. As he said earlier to david, this is a man who has seen the dark and had to bring the banks back. It is not something he wrote would relish returning to. Weerest rates are rising, are making loans without all of these regulators breathing down our neck. I dont think they want to get back to that fear where banks are bad. Jonathan you mentioned the experience of Ryan Moynahan against the experience of jamie dimon. He makes money. Disco very different experiences. David he has not seen those dark days that Brian Moynihan has. He thinks he can make good money off of basic banking. He keeps coming back to that one fact where everyone hundred basis points, they get more than 5 billion in incremental revenue. I asked him if that is Still Holding up and he said yes. He can make money on basic banking. Laura he has not changed his strategy, yet, so maybe that is good things to come for the following year. Jonathan everything thinks everyone thinks good things are coming. Come, anill to exclusive interview on the latest with the trumpet not duration. Boris epshteyn, the man helping to plan it all, spending his entire holiday. We look forward to speaking to him about what is coming up. We will find out. This is bloomberg. Jonathan from new york city, i am jonathan ferro. We await a lot of data coming out of the United States. Futures pretty much going nowhere. , not mustw we are set not much price action with yields up a single basis point. Action in the fx markets, surprise surprise. The marginal euro strength, energy 10 space. The data drops across the board, let me begin with durable goods orders coming in a 4. 6 . Capital goods orders come in, an upside surprise. We were looking for a meeting estimate of Berkeley A Bloomberg survey. Initial jobless claims kick hires to little bit from 254. Let me throw this altogether if i can, quarter on quarter for the Third Quarter coming in at 1. 7 , with expectations, dep quarter on quarter has been revised upward three point 5 from 3. 2 previously. Im sure i have missed something in here. Moves, tof the market your yields up just a touch up the back of this data. Market, looking at futures just a tick higher on a dow up by seven points. David we are now joined by brooklyn dryer, the bmc economist. Have at it. What do you make of these numbers . The gdp numbers being driven by better consumption is a good thing. We are seeing that spill into spending, some of the data on the spending side is a bit more current, which is november number four spending looks a bit soft. We have a downward revision, as well. We are not seeing that spill over into the final quarter of the year just yet, but we expect that to continue. Jonathan the november prelim read for capital goods orders, is that looking good for you . Good, might be a bit of an overstatement. It is solid, those numbers are really noisy. It is they bounce up and down a lot. There was a lot of individual factors in play, but the trend has been very positive and improving, which is a good sign. David for someone who does not follow this nearly as closely as you, what are the numbers we should care the most about . The story is that the Third Quarter of the year was a good quarter. It is probably going to spill over into the fourth quarter, which looks on a pretty good trend in the consumption side, the question is is nearterm volatility going to prevail over the longterm trend . Be thek that is going to case, so we think the momentum is good. Jonathan that takes us to the data that comes at a little later which is personal spending data. David caught up with Brian Moynihan and explored how these boardrooms would react to the policies that are going to come down the pipe from a Trump Administration. His view was maybe they wait before they act. The consumer wont wait, though. How will they react . That is the billion dollar question. Will people anticipate a tax cut and start to spend or when that tax cut comes in 2018, will they start to spend at that point in the same thing on the business side, if you anticipate some kind of repatriation or Corporate Tax cut, how they weigh that against changes in trade policy and other things on the horizon. David want to these numbers tell you about where we are in the Business Cycle . Tax cuts, things like that. Is this the time to put the pedal down to accelerate further or do you back off . According to janet yellen, no. When the Unemployment Rate is at 4. 6 , well below what people think is the natural rate, that suggests we are beyond full capacity or should anticipate some kind of slowdown. Pushing on the gas pedal, it is the wrong timing to do that unless it ends up boosting productivity, but that is really tough. Jonathan that is some way off in the next decade. The question is, lets assume you will do what you say youre going to do and push hard on the economy with very little Spare Capacity how does the fed react to that . The right prescription for the fed is offset it. You need to implement tighter Monetary Policy and offset it. That is a very political move. Janet yellen will do that if she wants to keep politics out of the fed. It is a delicate balance. Deal with that higher inflation that is likely to come, but not upset the politicians. Wire thank you, birkeland bricklin dwyer. Jonathan lets get to todays morning meeting where we hear what key banks are looking at. Just yesterday, we spoke to the cio of equities at federated investors on the equity rally and whether it has gone too far too fast. We are due for a pullback. We have had a street move up. The question is how deep of a pullback . I think the pullbacks are likely to be shallower and shorter. We are not all in, ourselves. Toare advising our investors buy the debt as well as as opposed to selling the rallies down. Jonathan you see everyone shout 20,000 points on the dow. Do you look at the valuation and say it is fair, it is ok, but not overstretched . We would say we are at full valuation, but investors have definitely reacted based on expectations, and i think 2016 has been that year where was all about shifting expectations and you see investors that were probably underweight, trying to think about how do i square up my position or benefit from this thesis and reward myself for doing so . Takes reflationary theme place and higher nominal growth, that should potentially lead to higher corporate profits and that should be advantageous for being equity investor. And thereme very far is probably some warrant for consolidation, but i think the trajectory is still higher and you want to adjust expectations and we will not seen this cap see this kind of level as we go forward, next year. Jonathan it has been quite straightforward for anyone that has followed the trump train. You jumped on the train, you write debate data wave and you keep stocks higher. You ride the data wave and you keep stocks higher. One of the questions we get a lot from our clients is we have this reflationary thesis and how durable is it . We think it is very strong. If you look at it from an Economic Growth standpoint, we expect it to grow higher. We are comfortable because we have come off the body bottoming of the commodity bear market. In terms of output, we are operating close to full potential economic output. Forant to be positioned thinking you are rewarded for equities, but you have to think about shifting positions or rotating portfolios. Highway from didnt dividend paying stocks sectors of the bond proxies and loading or rotating toward the cyclically oriented sectors that will be rewarded in the improved economic environment. Valueoriented stocks or financials, particularly. Jonathan one of the signs you are looking for . What are the signs you looking you are looking for . It seems that we are 100 fake den that we will get some large fiscal stimulus. I worry up we are 100 baked in that we will get some large fiscal stimulus. It all seems to be this rosy scenario that means investors have to rethink the Asset Allocation framework. It is probably important to have a risk on stance, but make sure you have balance and the portfolio. This leads us to fixed income investing. Jonathan we appreciate your time. Terry simpson, at black rock. Hope that he is going to do the stuff we want and not the stuff he talked about because that is Just Campaign stuff. David still to come, an exclusive interview on the inauguration of donald trump. Boris epshteyn, the man helping to plan it all will join us next. This is bloomberg. Emma this is bloomberg daybreak. Exams up, Julian Emanuel the strategy at you bf at ubs. David this is bloomberg. January 20 will be a big day as donald trump is sworn in as the 45th president of the United States. It will happen right here at the u. S. Capitol. At the center of this important day is a group of people who sadly are working through the holidays to make sure it goes off without a hitch. Joining us exclusively from washington is Lawrence Boris epshteyn, chairman of the inaugural committee. He is a political strategist, lawyer an investment banker. I know you are busy. Boris its my pleasure. David what can you tell us about what we can expect . Any big announcements . There were reports to the press about some music . Boris we will have the tabernacle choir performing and we are so excited for that to be happening. This is their sixth inaugural. They will be performing here at the donald j. Trump inauguration on january 20. Members, a true american story and a Great American group to be performing. David it will be beautiful. There was a report about the beach boys. New york post had it. Boris a lot of reports. Until it comes from me or someone in our office, dont believe everything you hear or read. David give us a sense about this inauguration. Trying to send a message to the American People. One of the central messages you are trying to structure this inauguration to send . Boris it is about unity, one america. Donald trump will be the president for americans. It is about being a workmanlike inaugural. He is ready to get to work. You saw that with the stimulus. Isald donald j. Trump ready to get to work and make sure americans are secure in their homes and jobs. You will see fewer inaugural balls. Donald trump will have three. You have a shorter parade. It will be exciting and wellplanned, but it will be a bit shorter. All in terms of the messaging of getting to work and this being an inauguration, a celebration of freedom and democracy, not a coronation. How are you paying for this . To what extent do you have Business People stepping up to help you because it would be a pretty big tab . Boris americans from all over the countrys have been contributing all over the country have been intruding. Have been contributing. Individuals have been contributing to an exciting and uniting inaugural. Is a because donald trump business businessmen first, you must have a budget. Boris we dont have an exact number. We have raised enough money and we continue to raise money to cover an inaugural that is going to be representative of the trunk movement, are presented of of the people, by the people and with the people in any amount raised about that will go to charity. David how Many Companies have maxed out at that Million Dollars . Put out thatl money that number when it is appropriate. We are bringing the trunk movement to washington, d. C. , we are draining the swamp and we are making sure that america is back in the right direction and that is that is where it is heading with this president. David who else is on your team . Who were the other key members on your team . Boris tom barrick is the chairman. Sara armstrong is the ceo. He is a great leader for us. Jeff larson is a Senior Advisor. We have a great team from all walks of life from people in corporate politics, people in business, a very representative and diverse group. Donald trump is putting together his team for the white house. We heard two announcements, Kellyanne Conway and carl icahn as well as Peter Navarro. Talk to us about those appointments because you were a Senior Advisor to the campaign before you got involved. What will be carl icahns role . Boris carl icahn is someone who is a successful businessman and a leader in the business community. He will be advising the president elect on a huge array of issues and using his experience and relationships to help america get to where it needs to be which is 3 annual gdp growth. We will have that and much more. David you know washington terribly well. You know there is some resistance when people come in from the outside. People talk about that, it is hard to get done. What is the secret sauce for donald trump and carl icahn to cut through that bureaucracy . Boris it will be working with congress and going straight to the people and being their voice and saying this is what we want. We want the market to be high in a real way, not inflated where it may be right now due to low Interest Rates, but really growing substantially and substantively. David Peter Navarro, someone who has been on this program in the past. He is outspoken when it comes to trade and china. Is the president elect sending a powerful message about his stance with china on trade, Going Forward . Boris Peter Navarro is someone who is extremely smart and successful. I worked with him closely throughout the campaign. He will be a great voice in discussing trade with china and overall and making sure that we are part of smart trade, globally, not just free trade, a trade that keeps jobs in america. Peter is somebody with a big a great background. David thank you so much. It is fair to say that the whole world will be watching and we wish you well. Boris epshteyn, director of medications for the donald trump president ial inaugural committee. It is time for other stories making headlines. Here is emma chandra with the Bloomberg Business flash. Jonathan the effort emma the effort to kill the bathroom bill has failed. Here is Brian Moynihan on why it has failed. Peoplewe employ 16,000 in the state and it is an important place for us and we want to make sure it is one of the best states there is. This was not helping. Emma the controversial measure requires transgender people to use Public Restrooms that correspond to the gender on their birth certificate. An embarrassing blow to alibabas credibility in the u. S. It is being labeled a haven for knockoffs by the federal government. Placempany has had its restored on the list of notorious markets with an unexpected unacceptably high level of counterfeits. Alibaba saysys it is doing all it can. Jonathan there is little price action in equities and little bit of selloff in the bond markets. Next up on this program, white 2016 may be a landmark year for junk debt investors. Jonathan from new york, this is bloomberg daybreak. 10 00, bothday at u. S. Personal income and u. S. Personal spending will be released. As the board room waits for the policies to come through, whether consumers react and spend that tax cut before they get it . David now it is time for battle of the charts. Laura keller takes on josie l. A. Joe seeley. Laura i take you to this chart which is about u. S. Highyield. I want to take you to the very edge, 2016 returns. Year,return for this which is great. If we want back here to 2009, it is the very best year since then, certainly better than 2010 , 2012 and 2015, which was the worst year and a long time for these highyield investors who buy up these beatendown debt of these Corporate Bond issuers. A lot of them had problems last year with buying up these over this year with 2016 where it is, i think it is a great year. David it looks like they are buying low and selling high. Joe . Joe i will be talking about financials financial stocks, a big winner in the s p. A lot of this has to do with banks, up 24 . If you look at the top chart, this is Short Interest at it as a percentage of shares on banking. Investing is high. It has rarely been that high. It is well above its average over that period. This is the broader s p 500 financial etf in the red line reasons the average and it is right in line with the average and in late november, it reached an alltime low. What does this tell us . It tells us there is a bit of the session in the ranks bullish on stocks, not so bullish on banks. Maybe the looking to buy up insurers, brokers, nonbank financial stocks. David two great charts. I will have to ask laura to explain this, i will go with you, today. A great chart about highyield. Jonathan laura has done so much for us, already. Coming up, is there such a thing as a veritable . That andl dig into more from our exclusive interview with bank of americas chairman and ceo, Brian Moynihan. 34 minutes away from the cash open. Futures go nowhere. Equities in europe treading water. Jonathan good morning and welcome to bloomberg daybreak. Down here in new york city. 30 minutes and seven seconds away. Stocks go nowhere. Equities flat in europe as well. Boring, boring, boring. There is your guide right there. In the bond market, treasuries will have some price action. Capital goods, an upside surprise. Decent data out of the United States. Yields of four basis points on the u. S. 10year. A little bit over where we work an hour ago. 1. 04. David here is what you need to know. The banks weigh in. Jamie dimon speaks out on the wave of populism and any for fundamental tax reform. Bank of america leader Brian Moynihan seek new animal spirits in the boardroom. We hear from the leadership of the two largest banks in the country. Monte dei paschi on the brink. The next that looks like it will be government intervention. It doesnt lucky is backing down. Inamed carl icahn to head of his deregulation campaign. That is what you need to know at this hour. Now over to abigail for movers. Abigail this does mean the dow 20,000 is at least in hitting business distance. The fastest gain on the dow ever. This is a chart of the other 1000 point increments. Back in 1999, the fastest on record. 35 days. We are on day 30 from 19,000. If it happens today or tomorrow, it will be the fastest. After tuesday, no cigar. Doubt 20,000 is psychological. Ore than anything else micron surging after betterthanexpected firstquarter. Cedi earnings by 19 . They also raised sales for the Current Quarter. This is helping wdc, western digital. This is a positive. We have intel trading higher on the announcement of a partnership between micron and intel. Rising tides lift all boats. David one of the questions we keep coming back to is whether the markets may be overreacting to the hope many have for Donald Trumps economic policies. When i set them up Brian Moynihan, we talked with some of the assumptions people are making about changing things like tax reform immigration reform. And whether the markets are properly pricing in not just the possibility of potential difficulties. There is great view of alignment between the senate and house and the presidency will help that through. That is the real trick. These things get harder when you get down to brass tacks. They are never easy. Enthusiasm, at least they will try. That is over now to see followthrough. David he was cautious and didnt want to say they were overextended. Manager you a risk become a very effective diplomat. The hope is there and i hope it happens for you, but maybe not. Joining us now is gershon. Thank you for joining us on the program. Pimco theyve been boosting cast positions. Gershon there is no pricing the market is pricing and there was no question the market is pricing in good stuff and not some of the bad stuff. We know it will be a predictable. Risk markets have gotten ahead of themselves. Thats part of the reason we can continue to call for lower returns for both equities and for securities like junk bonds. Jonathan lets talk about how you have adjusted to that. To dod the opportunity you risk some of the aspects of your portfolio. Areion gershon we seven or eight years in tune expansion. We are due for a pullback. Being more cautious, owning less triple cs, and moving away from the court junkbond market to generate income and other ways is the smart thing for investor city going into 2017. David we just saw a chart showing the returns in a highyield were better in 2016 since any time since 2009. Are you saying there will be a reversal of the possibility and the next year . Gershon i was here about a year ago, the day before new years. We talked about how the likelihood would be that junk bonds would outperform equities over the next three to five years. You have gotten a lot of that in one year. If you look at the starting multiples in the equity sides, and you look at where highyield yields are, you will have comparable returns. You will get cycles where it can do better, high yield could do better. They key is highyield protects a lot better on the downside. Every time highyield is down 5 or more over the past 20 years, equities are down a lot more. Jonathan what is that happened . Gershon you are basically taking credit risk in College Equity risk. When something bad is happening, there are fears of recession or other political turmoil, risk assets selloff. Jonathan but what is it im performed the debt in a scenario . Gershon leverage. Is leverageity that on the Balance Sheet and it amplifies the negative and amplifies the positive. We just saw in the past few weeks. Equities do a lot better than highyield. And the downswings, equities do a lot worse. Jonathan you are talking about rotating out of u. S. Bonds in the global bonds because of what you say is Interest Rate roles. Walk me through that. Gershon were seeing more volatility in the u. S. , whether it is Inflation Expectations or trunk policies in general. Trump policies in general. Why would i want to invest in 10 year bunds on 150 basis points or more . The answer is as a u. S. Investor, buying bunds and heading back to the u. S. You pick up most of the yields. The yields are similar on ahead basis and a makes sense that are survived. David and we talk about the credit cycle. You get too far into the credit cycle and it starts to turn on you. As Donald Trumps election extent of the credit cycle . Gershon i think a lot of things have extended the credit cycle. Two or three years ago we were talking about we were in the seventh or eighth inning. Despite the fact that hit the Energy Sector hard, it was good for most of the rest of the market. Whether itome ways, is real or just peoples perceptions of what trump is going to do, that will extend it further. The law of cycles. Nine or 10 major cycles since the great depression. This is one of the longest. We are due for some kind of pull back. Im sure it will be blamed on trump or whatever the news of the day, but this is a normal part of markets. Jonathan it will make sense we look back on it. That is the way it works. Bank loans specifically. You say there is an emerging risk around that. Walk me through the why and how. Gershon i think people naturally are gravitating towards floatingrate securities. They do this very much in 2011 32013. They thought rates are going to go up. The problem is because so much money gets thrown at the market what ends up happening is the credit quality gets compromised. It is very important that offsetting rates go up, there is an option embedded that most investors are not aware of. They could be called at any time. Whether you are the spread can contract. Companies can call 60 of the loan trading above par and they get reissued at a lower spread. That is why the investors during tantrums, they did better for a short period of time but in a year highyield did much better. David he started investing highyield bonds overseas. Are you still wonder about dollar denominated debt . You have a never strengthening dollar and its more and more difficult for companies and countries to service the debt. How big of a concern is that for you . Gershon that is part of the analysis. You look at the individual companies and you have to see whether expenses are and where they are hedging. From an investor perspective, as long as you are not taking a lot of currency risks, because its more quality than equity risks, you benefit from the nurse occasion from the diversification. Its also about finding income from other sources in the u. S. If you want floatingrate debt, we think part of the structured Mortgage Market did something interesting. What fannie and freddie have been issuing, they are floatingrate subject to not exactly the same risk in the broad economy, more of the Housing Market. That could be an interesting way to get income as well. In our portfolio we have over 10 allocated to these types of securities. Jonathan its very quiet in markets. Is christmas coming earlier for you . Gershon the end of summer, the last week of august has been very quiet. Sorry, not as quite as usual. It has been transformed our death definitely christmas started early. Jonathan ap director of highyield and credit, special i see you. For more news lets go to emma chandra. authorities across europe or scribbling to track down a tunisian man that drove a truck into a Christmas Market on monday, killing 12 and injuring 48. One of his brothers is urging him to turn himself in. Noticeve issued a wanted that he can be violent and armed. The market where the attack happened is reopened. In north carolina, a bipartisan apart in aslen stated deepening acrimony. Corporatation and International Events will stay with the state. Ofhave not seen the last Kellyanne Conway. She has been named counselor to the president. She has been serving has a Senior Member of his transition team. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. David coming up, more from exclusive conversation with bank of americas Brian Moynihan on what he says individual businesses across the country and especially what it means for Midsize Companies. This is bloomberg. David this is bloomberg. Americalynch, bank of Merrill Lynch is the Second Largest Bank in the country. It has one Million People going to its branches every day. They have a unique perspective about what is going on throughout United States and the extent to which we are seeing business pick up since Donald Trumps election. I spoke to the chairman and ceo and he said he could see the difference already. Lets be first about our team. We have the number one Research Team. David congratulations. They have u. S. Growing around 2 next year, which is an increase of these year from 1. 5 to 1. 7 . 3 , that would be a step up. That is not changed a lot since the election. We believe the economy and the Russell Crowe and the economy of the world will grow and it is more on the upswing part of that uncertainty we went through this year has been handled by the markets and by people predicting outcomes, which is interesting. Between brexit, the italian referendum, the french election, the u. S. Election. All the people thought it just happens. They will be huge disruption. The market disrupted for a few hours and then said life goes on. There mr. Menace momentum and capability and size behind this. Momentumwas tremendous and capability and size behind this. They are talking harder. You are seeing the other things in oil and gas business. That is good for capital expenses. You think the belief of our clients about Regulatory Burden will come down and i will help them do things more quickly. All of that they believe is good. There are other serious concerns. Labor is trickier than people think. Getting the right labor in the right place at the right time is kind of tricky right now. Jobs init is the right the micro sense with ways pressure. We had wage pressure. This old difference that happened the big difference is enthusiasm. If that follows through, it will be interesting. David that was bank of america ceo bank of america Brian Moynihan. He focused on middle sized companies. This isnt necessarily the mid cap companies. He was saying the onus of these companies could make decisions and say lets go for it. Jonathan and make up the bulk of employment in many countries, especially europe. Mario draghi was talking about how they can facilitate easier credit channels for small and medium enterprises. In the u. S. As well, it is the engine of the economy. David this is been a theme for donald trump. They said this is going up have to make progress in this country to generate jobs. Jonathan jobless claims in the u. S. Increased to a sixmonth high last week. We will talk about some data that came out in the last hour only count down to the cash open in new york. Futures flat, flat, flat. We are down eight points in the futures market right now. 1 on the s p 500. We tread water in europe. Here is the state of play. Yields off three basis points. Financial solid data outside of the initial jobless claim. The euro aarket, little bit more strength in the last 10 minutes. A euro is 1. 04. This is bloomberg. David some headlines and Economic Data out of the u. S. Today. Thirdquarter gdp was advised to 3. 5 . Orders for business equivalent. Increased more than forecasted jobless claims jumped to the highest levels since june. Carl to take us through this. What should i care about . L gdp on stronger footing to what economist for anticipating in the Third Quarter. It is a mixed message because there is a transitory aspect from exports surging with a onetime pick up and i are cultural exports, soybeans in particular. That is resetting into the Current Quarter. Despite that reset we are starting at a higher level for consumer spending. Business investment a little bit better. Housing a little less bad. This tells us the economy is a decent footing for the Current Quarter. Consensus is around 2. 25. David this is preelection, Third Quarter. There has not been anything in the election in the markets coming up. Carl animal spirits and increase confidence not yet showing up. Jonathan 36 is his animal spirit, not mine. David durable goods . Carl we have these violent swings into transportation orders, aircraft in particular. We had a look at ex transportation orders. We see there is a steady but very gradual pace of increase. If we tie the two reports together, we have corporate profits, which are on the chart on the screen. We have corporate profits and basically durable good orders. We can see they correlate together and the fact that corporate product have finally ended this profits recession. They crossed back into positive territory. That tells us corporate profits q3. Up 52 5. 2 in this should build momentum heading into 2017. It is something we have not seen in Business Investment spending. They profits rebound is critical to that pick up in Business Investment spending. That means consumers will be less lonely and the growth landscape in 2017. Jonathan we in the boardroom, sitting around the table, and we talk about whats coming down the pipeline from a Trump Administration. Then right part comes up with an idea. I am the ceo. I really dont know what is coming next year. I cant really invest on the premise of hope that something good is going to happen. Is that how these boardrooms are going to work . Some hope ofs lower taxes or smarter tax policy, the regulation. Deregulation. Hold house,cans senate and white house the hope is greater they can actually agree on what jonathan i want to know what they will do with the cash and how to deploy it. Carl look at a nominal gdp figures. The economy is accelerating. We had a close brush with stall speed earlier this year. We are really accelerating reaccelerating. They are generally taking the view that Business Activity will be stronger. Isid i want to ask psychology in the boardroom changing . But you back shares, have to wonder about what your competitors are doing. Did he think there is a rebound coming and demand will be up and they are investing so they can take advantage of it and you can get left behind. Jonathan the fear of missing out. Carl you fortify your Balance Sheet. When you see the economy going faster, you started make Real Investments to take advantage of Stronger Economic processes. Stick with us because of what to get to some of the bloomberg trends. Wasier on when europe really in the driving seat was this story. U. K. Consumer confidence. You can break this down between Consumer Confidence right here right now, then the consumers Economic Outlook. On this chart on bloomberg you can see this. The blue line, Consumer Confidence currently. In the u. K. , the outlook dropping to 23. Not quite the brexit low, but certainly rolling over. One of the Amazing Things we have seen so far is that yes, we have the vote to leave the european union. But the cyclical data has piled up in a big way. What is it mean for the consumer . We can take a surprise election of the Trump Presidency as an example. What does this mean to the consumer in the here and now versus the projection in the outlook . Carl if we look at the u. K. Example, you see a currency devaluation. It is been great for exporters and businesses trying to do business in continental europe. Then you get this inflation shock hitting the economy. I think the consumers are responding to the fact they had not seen the sustained acceleration of growth, but they see this price shock coming down the pike. Here in the u. S. We have seen a rebound in confidence across the board. Whether it is consumers, university of michigan revisions come out tomorrow, Consumer Confidence. You see small Business Confidence. Homebuilder confidence, ironic given the back up and mortgage rates. There is a honeymoon taking place. Typically around elections would you see a surgeon confidence it has to be a flash in the pan. The real test will be if we can get into january Economic Data and households and businesses reasonableis a prospect to deliver on its promises from the campaign trail to see if the confidence will hold up. Jonathan animal spirit in all things connected to it. Our chief u. S. Economist here in bloomberg intelligence. Up next is the opening bell in new york. Futures go nowhere. Where is the volume . We count you down to the holiday, that is next on 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. York, this is new bloomberg daybreak. Counting down to the opening bell. The stage is set like this. Futures flat, flat, flat. Features down around 10 points, literally going nowhere. Continue through the open as well. In the bond market we have a little bit of action for you. The treasury yields up three basis points. A decent capital orders print as well. A stronger euro story getting momentum in the last 24 hours. Up about one third of 1 . We are about 20 seconds into the session. But strip it back and get across the abigail doolittle. Abigail flat, flat, flat is right. Average is largely unchanged. They are all down slightly, but this does keep is on record watch. It has is watching if the dow can climb to 20,000. Yesterday it was the smallest daily rains for the s p 500 old year. All year. As for one market where we see lots of movement, base metals down sharply. This includes i am, copper and lead. Most are on pace for their worst performances in months. Copper is down two weeks in a row, the First Time Since the election. All of this trying to rebuild the stockpile. This is waiting on the mining iscks, including freeport trading higher. The stocks are down slightly on the day. On the year its a different story. Freeport back rent up more than 300 . Year. El holding 386 this jonathan thank you very much. Lets get back to the broader markets. Drumroll please for the third year in a row every strategist surveyed by bloomberg is bullish. The s p 500 index will rise over the next 12 months. The equity strategists are bullish in the bond guys are bearish and sometimes it is a workout like that. Julian emmanuelle, who i would define as a bearish bowl. He is tied for the most bearish in those surveyed with 2300 on the s p 500. Julian, talk to me. Julian if you look at the last eight years, and we do not think the bull market is going to and in 2017. That is why we believe. If you look at eight years, this bull market has climbed an absolutely unprecedented wall of worry. I think even discussed in part of investors. Whether it is uncertainty about earnings growth, which we have not had for two years and we are about to have once again. Whether it is the application of an Oil Price Crash on the economy. Or lets face it, incredible divisiveness within the political sphere in the u. S. Perversely, and the logic of financial markets, the last six weeks have really taken down that wall of worry and replace it with a really deep sense of optimism, almost euphoria, that we think in the mediumterm is perhaps reflecting these prices. Jonathan thats right you are on the lower end of the target on the streets for 2017. When do you think that catches up with the rest of wall street . Theeuphoria thats his run table and says i believe we will get those good things. Yesterday we caught up with federated investors. It is not a wall of worry, it is a wall of hope. Take a listen. We are due for a pullback. We have had a street move up. The question is how deep of a pullback . I think a wall of hope and firemen, they are likely to be shallower and shorter. For sure we are not in all ourselves. Advisors toing our buy instead of sell the rallies. Dips . An buy the steve we think that will be the story in 2017. Vix at 11 right now or so and that is a sense of complacency. It could well be that the hope that is built up over the last six weeks does give materialized over the course of 2017. But the fact is 19. 2 times 2016 earnings and been applied growth rate of 12. 4 in earnings next year, a lot of it is in the price. Where we would differ is we think the volatility episodes are actually likely to be sharp on the order of what we sell prior to the election and prior to the u. K. Referendum. David it is one thing to have is there a spread on the bullish calls. It is also unanimous. I wonder if one point to be get nervous because of unanimity. We are well into this run. Maybe is not over yet, the bull run, but does it make you nervous on that ground alone . Julian we would prefer being contrarians. Make no mistake about that. Again, this surge of optimism is something that strangely in the logic of markets does happen is concerned. Where we are more concerned is actually if you got a surge of optimism, a wall of money coming into the market, and then the legislative agenda starts to grinding as opposed to moving quickly. It is about looking get accomplished. David the good news is that has never happened in washington. If thats really what we are betting on, it is moving fast. I wonder if we expect donald trump to defy gravity. What we are expecting is a tall order. Julian if you look at it, the other side is by the logic of past situations where republicans have dominated both the executive and legislative branches. They have been able to deliver in terms of equity market returns. But this one is a little bit different. The bad feeling that has been there for the majority of this year still seems to be below the surface. But the confidence in the economy is there. Jonathan lets talk about emotion. 20,000 been going crazy, at a certain benchmark. Is that important . Julian in the shortterm it is. But the fact is crossing through 20,000 is not likely to bring that surge of money because when we look at our data, can fact the Asset Allocations that the fed has engineered by keeping rates low for the last eight years has caused equity exposure to move to its highs and money market exposure yielding zero to move to his low. Carl talked about fear of missing out. The idea after competitor will take market share from you so you should do the same. The fear of missing the upsides in markets, how pervasive if that is that . This fear of missing out, is it becoming more dominant . Julian the option market is sending a clear message. The fear of missing out is ruling markets at the moment because out of the money calls are now priced historically expensive relative to after money calls. 2500,are moving to 2400, which a surge of a motion to get assuming the first quarter, people actually fear it rather than are trading for it. Jonathan is it an opportunity to go short . Julian is an opportunity to look at the sectors that are likely to work in a sideways way. Basically we found that if you look at the past 20 years or so there is a pronounced effect for the prior years losers to outperform in the first month of the new year. What is interesting about this particular cycle is that post the election, areas Like Health Care and technology have really been left behind more than usual given this sort of surge of in infrastructure that is carried industrials and energy and financials to new heights. We think those sectors are likely to really be bought once it is over. David thank you so much for being here. Julian emmanuel, u. S. Equities and derivatives strategist. Deutsche banks trump dilemma. Two negotiators. One with the empire of restructuring that is 300 million in debt. How can it handle each without looking like it is influencing the other . Through the apparent conflict of interest. That is next on bloomberg. Emma this is bloomberg daybreak. Stay with bloomberg for more of arts interview with bank of america chairman and ceo Brian Moynihan. Jonathan from new york, this is bloomberg. Lets get up to speed on the markets. As the shape of the day begins to evolve equities are down. The s p 500 up by about one third. Price action subdued cross action. Lets cross over to abigail doolittle. Abigail one stock underperforming in a big way is red hat. Shares of the company are plunging on a disappointing quarterly report. What is worrying investors is the fact that billings growth came in at 8. 7 yearoveryear, the worst in 11 quarters. There are at least two downgrades. They are very concerned about the fact the cloud growth could be really hurting red hat. As for a winner, micron absolutely sobering after the memory chipmaker beat firstquarter estimate earnings by 19 . They made . 32 per share. Quarter sales above estimates by about 15 or so. The ceo says the supply demand dynamic with good Going Forward. The chart probably supports his contention. 2888. This is a longterm chart. Back in 2012, 2013 we see a bullish golden cross. It moves up through the 200 day moving average. Low in the hold, a massive move higher by about 400 . This year, micron put in another golden cross suggesting the strength, up more than 50 of the year, could just continue. Largest bankys has found itself in the spotlight once again. This time involving its most high profile client, u. S. President elect donald trump. Terri joins us to discuss her article. This is Deutsche Bank. Deutsche bank has about 300 million in loans out the donald trump, personally guaranteed by donald trump. And a Justice Department investigation. Entered into the uncharted territory between wall street and basically what is happening at the white house. Donald trump is in banking the Deutsche Bank for close to two decades. He is a longtime client and has done many deals. A couple of major legal fights with them over the years. They continue doing business. In his disclosures he disclosed for his giant empire he does not have a lot of debt. A lot of the debt is with Deutsche Bank. Deutsche bank, on the flip side, is under investigation for mortgagebacked Security Issues which we have seen all across wall street. Every bank has had to deal with that, and issues related to its russian business. We are looking at this thinking, ok, send the Justice Department will be overseen by a political appointee of Donald Trumps choice of a bank that he has business with and currently has outstanding loans to. David this seems particularly difficult. Normally he would wall himself off of the corporation and has his sons and daughter monday. Corporation but this is a personal guarantee from him. How to get out of that personal guarantee . Keri it is a tough spot for the bank because its not one of their fault their client was elected to president of the United States. David it is not his fault the bank of Deutsche Bank. Keri it is this novel issue were both sides will have to come up with a solution. President elect trump is looking at several ways to decrease conflict of interest issues and the appearance of the way his Business Empire could be affected by his presidency. This is just one of many issues that will be involved in that. Jonathan as you probably identified, theres a big difference between a gray area and separating a moral issue, a legal and regulatory issue. Is this a moral issue . Keri i think it is an ethics issue. According to the people we talked to, there is concern it could influence decisionmaking. This is just projected right now. We think we know who is going to be heading up the Justice Department. We dont know how that person will be handling this. He can be completely handsoff and say whatever is best is asked. There are whatever is best is best. And there is concern with have this push and pull of political influence from running your own business. David it is far from the only case right now for there are possible conflicts coming up. They have sent basically the conflict of interest laws dont apply to the president of the United States. Keri there is nothing illegal happening. David what but there is an appearance issue. Keri so much of what we deal with is the appearance of how things look. With Donald Trumps presidency and empire, that comes down to octaves. David when it comes to optics, he has blown past a lot of traditions about optics already. A president ial candidate could never say that, never do that, he has done that. Even on this issue, not necessarily Deutsche Bank, he said they knew when they elected me that i owned these towers with my name on them. They dont golf courses so they implicitly endorsed it. Keri that is what is so hard about this. Weve hade first time this issue and we dont over the longterm consequences of how this will be got with will be. Jonathan one way this could be they got together before the end of the year. There were reports we might get a resolution this week. Where are we in terms of the big doj finding coming down . Keri you have two parties on both sides the table that are scrambling and trying to get this thing settled as quickly as possible. Not just because the risen inauguration coming up not just because there is and and on duration coming up, but everybody was to get this wrapped up. Jonathan keri geiger, great to have you with us. Coming up, julie hyman coming up. Julie we will talk with Michael Purvis from wheaton and company. We have not yet got no forecast from him for 2017. He will roll that out on the show. You will learn about his outcome for next year in my why you might want to sell the inauguration, even though we could see the rally up to it. We are getting more details on from those comments from jamie dimon and Brian Moynihan of the Business Environment right now, particularly for Midsize Companies. We will get more context from their comments. Jonathan that is up next. Bloomberg markets at about 11 minutes time. Next up, donald trump filling out his Economic Team with big names, including activist investor carl icahn and what that means regulation. Where are we . 19 minutes until the session. A marginal move to the downside, 10 of 1 of the dow. We know go where we go nowhere on the ftse. Treasuries. Ket, after a decent series of data about an hour and 30 was ago. Up 1. 04. The euro is from new york this is bloomberg. David this is bloomberg. Some key data coming out today at 10 00 a. M. Eastern time. U. S. Personal income and personal spending will be released. Jonathan to see whether you are spending your tax break before you get it. Donald trump named activist investor carl icahn as a special advisor to help him overhaul federal regulation. Bloomberg struck with him just a few weeks back. This is what he had to say about regulations what i think is very sustainable and the president can do it quickly is show business we are getting rid of a lot of the regulations that are strangling you. If you are a ceo in this country, the way you will get business invested, cash invested, capital invested, which they are not doing that, is get rid of a number of these crazy regulations. Jonathan one of the most experienced, most successful investors on the planet. A man of those businesses inside and out and should know how to make this is more successful and more effective and more streamlined. What regulations need to come out and stripped out. That is a positive. But they will always be pushed back. The other side of this debate is the story of regulatory catch up. You understand regulatory catch up. David i was a washington lawyer. Jonathan i feel it will be an issue over the next couple of years, given the names we are seeing in positions. They will take care of stripping so that regulation back david learned it is much easier said than done. Carl icahn knows well what is going to get American Business going again. He will not find a lot of people disagree and the business community. The question is, does he know how to get Washington Office regulations . Sure, it would be nice not to have regulations that had he gets at that point . Jonathan and these banks, that talking about banks specifically, they look at the regulatory issues in say a want them gone and expand my business. I want the golden era of investment baking back. The you speak to the ceos answer is, no, they like the wait is now. 1 i asked Brian Moynihan about the volcker rule. Brian i think it is a question of, ill we over engineering a solution to a simple question which is we should not have a lot of capital invested in principle risk. It should be invested in turning risk over to facilitate markets. But that is how we will run the business end of it. David as you just said, is an care one way or another. If youre investing in private equity, find a nice private equity fund. But that is not our business. Jonathan conditioned by experiences. A very tough time. It seems to be the thing. David the model if rates are going up. He is a basic banker. Jonathan Brian Moynihan of bank of america. We will have more on that the runner coverage on bloomberg throughout the day. That wraps things up for bloomberg daybreak. In the markets lets wrap things up. 25, 26 minutes into the session. What session i hear some of you scream. We are counting down to the holidays. Futures are going nowhere. Equities roll over, slightly to the downside. The s p 500, 2 10 of 1 . By. 019 . Off market, the euro will get you about 1. 04. Up one third of 1 . From new york, this is bloomberg. York, claim. In new julie hyman. Mark i am mark barton. Welcome to bloomberg markets. Julie we take you from new york to london in the next hour. Our exclusive interview with jpmorgan chairman jamie dimon weighs in on the rise of populism around the globe. Mark and another exclusive interview, we hear from bank of america chairman and chief executive Brian Moynihan on the state of bank regulation. Arabian says budget deficit will fall, even with an increase in spending as they look at their longterm plan to overhaul the economy and get the kingdom off of oil. Lets bring you some breaking news on the economy. A number of different Economic Data points coming out in the