Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170221

Walmart stock unchanged in the premarket. Jonathan we begin coverage in europe, where too many, its hard to reconcile rising global uncertainty with Economic Data that showing resilient economy. We had to france where greg is standing by. I want to begin with the politics. Marine le pen and the National Front touching up in the front for the second round. It has much more to do with security than it does with the economy. If you go back a few weeks, the poll showed are leaving in the first round and getting stung in the second round. Losing, somewhere in the 30 range. Her opponent would get somewhere the 60 range. It takes a much tighter race for the second round. Seeing high 50s for her opponent, low 40s for her. Theres a bunch of reasons. She has definitely had the security issue, but the incident at the louvre recently. There were riots across france after the release after the police brutalized a young man. Some of her opponents took the side of the young men who got in trouble with the police. Of security, not the economy. Alix walmart earnings now crossing, it looks like its a beat. Earnings coming in at 1. 30 a share. Fourth quarter u. S. On sales coming in at 120 . 1. 8 ,ts own estimate walmarts own estimate was 1. 3 . Youre seeing firstquarter earnings forecast on the highend coming in at one dollar versus estimates of . 96. That stock moving up in premarket. Still looking for more details as they come out. This dovetails home depot which beat on revenue and earnings and raises dividends. Macys out in an hour. Will they be as good . Try to compete with amazon by having to delivery. And the question was what it was two day delivery. And the question was what would it do to their stock . Alix holiday sales helped, topping estimates. Jonathan its not what happens , its what happens with the border. You have the structural issues and potentially this big headwind that could come down the road later this year from d. C. I naturally thought this was going to happen. David they havent been shy about complaining about that. And they have a stronger dollar. Jonathan we will be all over the retail players ahead of the open right here on bloomberg. Is live in paris. Marine le pen is inching up and i want to tell me how much this is the candidates targeting all their fire on one man, with a strategy is, and whether its going to work. Greg hes the biggest threat to all of them, it in the sense that the second round recently, its always been that he would beat her by a much bigger margin. Largely because macron is a speaker who can get more people to spend the cash to assemble around him. It are a left voters who might just stay home the second round nf its a choice between fillo and le pen. He is hammered away at him. And macron kind of stuck his foot in it last week. He went to algeria, where there were a lot of dual nationals. He was looking for votes in algeria and you made some stations about wrench colonial rule where he called a crime against amenity. Colonial rule, where he called it a crime against humanity. Crime against humanity is a strong term generally reserved for the holocaust in the second world war. He took a lot of feet for that. He apologized. We will see that the temporary hiccup or that this would be a lasting problem. David fillon has been perceived as the centerright, does he have a chance of regaining some momentum . Greg he does. For the moment, his biggest problem is not the policy that much. Recently was more the scandal that he is a michigan where it turns out he hired family aides. As parliamentary thats his biggest problem right now. He is seen as very much in the far right to the right side of the centerright. Hes not far right in the sense is far right. He is dialing that back on health care issues. At one point he was suggesting that health care would only the state system would only cover extremely serious things and you would have to pick up the tab for regular minor health issues. That did not go across very well. He totally backtracked on that. He is definitely trying to appeal more to center voters, he knows he needs them in the second round. Joining greg viscusi us from paris as we count down to the brexit the French Election. Lets get to the bond market. The Political Uncertainty rises in france, france or germany looks like this. Its blown out to 78 basis points. This is france over germany on a 10 year maturity. I want to bring in Paul Richards , is that is my insurance policy , 70 basis points, is it a big enough insurance policy . Mr. Richards you could ask the same question going into brexit. There is no insurance policy for this. In france coming of nine weeks to go. The latest poll had macron 62 versus 38. Is going to go in the second round, but theres no way you are going to convince the market the spread is enough area its just too difficult. Alix i love the note over the weekend from citigroup saying he just went to europe and the europeans are more concerned about u. S. Equities and whats happening here. When it comes to the netherlands, italy, and france. Is that the right call . Mr. Richards it is. We are too scarred by last year. If we can get through the last the next nine weeks, the ecb is going to have to take all lower out of their communique. Theyre going to be talking tapering in september. But we have to get through the French Election. Its france and the fed. Jonathan the spread between with the bond market is pricing were businesses surveyed by the pmi taping this morning see things going over the next year. That pmi is here a six year high. Why is the bond year outlook very different to the elegant businesses in europe . Mr. Richards people are not buying into europe. If you are a global investor, you are pumped up about trump, but you cant get comfortable with europe. Just give me nine weeks and you are going to be feeling a lot better. Alix we did have better data out of the u. K. And the u. S. , and you got brexit and President Trump. What is the exact correlation between the better data and some sort of change in government . Mr. Richards its timing. One of the issues you have with the u. K. On brexit is macron could be a federalist type access since we havent seen since the 80s. That might make it difficult for theresa may. Whats happening in europe might favor europe and ultimately hurt the u. K. As they try to negotiate into a brexit next year. David the most important date is the polling data and how reliable that is. You said we are scarred from last year. How great is the danger that people might be inclined to vote for le pen, but theyre not telling the pollsters . Mr. Richards im still scarred from the comment i made thing french bowl should be really accurate. The problem being on Live Television is you will play this back. Im praying im right, but they are supposed to be really accurate. In other words, were going to hang on to the polls in the ensuing nine weeks. But you are never going to get accountable. You just know its going to happen. Something is going to go wrong, its all yield serious situation willweek, those polls tighten in the markets are now situation like friday. Or when the left suddenly decides theyre going to get together and blew that one up. Its going to stay messy. Enough thate wide we can be comfortable, but nine weeks is a long time. To kind of want you paint the picture of a shortterm valuation story and a longterm investment opportunity. The shortterm valuation story as they are. The longterm investment opportunity, france for many people still faces economic decay. Is macron really going to change that . Mr. Richards he is very similar to obama. We can probably spend a long time discussing that, but he is very much a centrist, user popular and it communicates extremely well. I think we would see a rally in European Assets if you were to be elected. If he were to be elected. You can go to more socialist than we have in france already, we can expect something a little better, a little more reformist. Alix what is the s p done since trump is elected . Mr. Richards the hero is flat. Everyone to the positive noneurope and that we will see you in a couple of months. Alix Paul Richards is sticking with us. Another look at walmart and home depot, getting a boost ahead of the u. S. Open after reporting quarterly results. 44th Consecutive Year the walmart increases its dividend and you have called sales up 1. 8 . Home depot topping every estimate on profit as well as earnings. The 15 million buyback program. On theup, nick burns state of u. S. Relations with the European Union and nato after Vice President pences trip to europe. Will the feds next move, as late as september . Ellen zentner and where she thinks the central bank is headed this year. This is bloomberg. David this is bloomberg, im david westin. Looking at a live shot of capitol hill, to where they are waiting expectantly for President Trump and his plans on things like tax reform. Endhe meantime, the other of pennsylvania avenue, President Trump has picked is a National Security adviser, Lieutenant General hr lemaster. Joining us is kevin cirilli. We have the appointment yesterday, is this put the National Security issues behind the president . Kevin that is what President Trump and his officials are hoping. This comes as questions on capitol hill from within the president s own party continue to mount. People like senator john mccain, s raisinglican questions about this and ministrations this administrations relations with russia. That said, general mcmaster joins the administration, he is an outspoken individual. Someone who President Trump will have is hoping will have the same lyrical style as he does. David given all these developments, how does the president and his team get control of the agenda . Can you get back to things like tax reform and deregulation and obamacare . Kevin the sources i speak with on capitol hill tell me after this week, they would anticipate new legislation to begin making its way through the congress on issues like repealing parts of the Affordable Care act. After that, theyre going to be toking to craft a new bill get to work on tax reform. But privately, ahindthescenes, theres conflict between conservative members of the tea party as more moderate establishment folks. Despite having control of congress, there are many folks in the tea party who are concerned that the president s progrowth fiscal policies of Government Spending could put them at odds with the more conservative wing of their base. David we will check back in with you throughout the program. Againste dollar is up the chief editor of the dollars trading at a fourweek high. It may have something to do with the Federal Reserve bank of philadelphias president indication that a rate hike is not off the table. Joining us now is Jim Osullivan, highfrequency economic chief u. S. Economist, the number two rated forecaster on the bloomberg and still with us, Paul Richards, Medley Global Advisors. The dollar is moving on harpers comments that march is life. A 36 chance. What makes march live . Mr. Osullivan i think it is live. Question whether they follow through depends on whether the numbers really build on what we have seen over the last month or so. If we keep getting surprises, the probability keeps going up. We get another employment report and another round of numbers we keep getting jobless claims. To riseumbers continue on the upside, why wouldnt they go . If they plan on going three times or more this year, why wouldnt they go in march . They dont want to wait till june. At this point, the choice is between march and may. Alix its how they look at the data. You keep looking at data dependency, which in theory seems more dovish, youre still going pointtopoint. The other is a broader swath of how to categorize the economy. Its getting better, we are near full employment. Where you see the fed going . Hawkish or dovish . Mr. Osullivan ultimately, i think they are tightening. If the numbers start going the other way, sadly weakening, or the markets go back into turmoil for whatever reason, you keep getting solid market numbers. You look at jobless claims, the fourweek average is the lowest since 1973. The last round was week, the next round will be stronger. And obviously, the markets have a positive tone. Why wouldnt they go . The policy is to accommodate. They are talking about going three times this year. I think against that backdrop, if numbers are favorable, why would they wait till june . Jonathan we have this be consensus call, and then we have a squeeze. Its been called the pain trade. This one feels that the frustration trade area you have the long dollars short treasury call. The data validating that positioning. Then we kind of do this nothing. What is it going to do something . To aichards i was talking bunch of managers who are going crazy at the lack of volatility. They cant make money. Something is going to give. The fed has gone on message in a way that in september of last year, they could have done it. They missed that window and i think they learn from it. Now you have the boston charge. Everyone is in step hide her. To jims point, i think this is all about payrolls. Is in play. K may its four days before the French Election, they wont take the risk that when it wouldnt take the risk on brexit. What were seeing is this is data dependent, and its march or june that they want to get going. David jim, you have the floor. Mr. Osullivan there is always risk. Weathers the French Election or brexit or the trump election. All of these things are always risks. So far, weve plowed through those risks. Mr. Osullivan mr. Richards the French Election is just too big. Thats why think theyre looking at this to say we have a window. Is a prettyo 50 on decent payroll number in a few weeks time. Mr. Osullivan if you go back to last june, the real kicker was the may employment report last year when you have virtually zero in limits. Retrospect, we knew that was an aberration and everyone who looks at jobless claims at the time to see there was no corroboration, the clear message was it was an aberration on payrolls. Subsequently, in the minutes it came out that they mentioned the brexit risk as well, but i think the bigger factor in june was the mail plunge report. Fed have what is the to do to get march on the table in a significant way . Speaks to come out in the next couple of weeks. Mr. Osullivan the talk has been in that direction already. There is more clear than the Philadelphia Fed president. Other fed officials, including the more senior people, like bill dudley, that would make that much more live for sure. As you keep getting the numbers strong, and is the fed directly says that march is very much a consideration here, that will encourage people. Jonathan Jim Osullivan and Paul Richards, they are sticking with us. Coming up, he says u. S. Stocks can rise as much as 4 . Robert shiller, youll university treasure Yale University professor will be joining us. This is bloomberg. Jonathan from new york, this is bloomberg. Hsbc dropping the most in eight years, after reporting reporter profits that missed estimates on a surprise drop in revenue. The banks cfo caught up with bloomberg. We continue to focus on investing capital in the growth of our business, but as the opportunity arises from time to time, we will certainly contemplate share buybacks. Jonathan joining us from london is works michael moore. Talking about Investment Capital and growth. Is this why were hsbc is getting punished because of the big mess on the top line . Michael yeah. I think its a big mess and a broadbased miss, according to some of the analysts. They missed on the revenue in every division. So certainly, it was disappointing. Investors to appease with more buybacks of the stock, but certainly, people were very focused on the revenue. Looking of positioning of the company overall, if you boost costcutting measures and you extend the stock buyback, the problem just gross. This looks like a very defensive hsbc still. What can they do to get growth is all in Heaven Stores more costcutting and more buybacks . A few weeksreported ago that they are looking at acquisitions in the Wealth Management space. Not huge ones, but both on acquisitions may be getting some growth that way. Thatertainly, for a bank is so focused on asia, the growth just hasnt been what you might expect from that. Part of that is they are shrinking and pulling back, they are boosting their controls. But i think investors have seen five years of revenue declines. They want to see that ship turned. Alix thank you, bloombergs michael moore. Joining us is Paul Richards and Jim Osullivan. Paul, when people come on the show, they keep saying european banks valuation is off. Then you get a number like hsbc, which does the fundamental underlining story . Q4 was tough. They havent got the Balance Sheet to play in the markets where u. S. Banks could. You can see the Trading Operations are markedly different after the trump move. Going forward, its all about your citations now of what you can expect from the ecb going into the second half. That is where i think they start to change. See the ecb, in june we can lower, out of the medication with the ecb. European banks get a kicker in the september when they Start Talking tapering. Moves could bel offset by communiques from the ecb this year. I think the european banks are second half story. David Paul Richards and John Sullivan are both going to be staying with us. Coming up on daybreak, nick burns on President Trumps impact on the European Union and nato. Later, with the feds next move come in september . Ellen zentner on her latest call for to rate hikes this year. This is bloomberg. Jonathan from new york city, this is bloomberg. Im Jonathan Ferro. The phenotype of the markets. Futures are a little firmer, of. 25 on on the s p the s p 500. Hsbcive about 1 10 of 1 , is over 7 of that index. When hsbc gets punished, the ftse is going to underperform. In the fx market, a weaker euro story. A stronger dollar story on the back of more hawkish comments from Federal Reserve officials. A weaker yen, the euro coming down by. 75 . To yield up for basis points do dollars . 45 on the u. S. 10 year. 2. 45 on the u. S. 10 year. Frank exchanges with President Trump are not for public view. He has had several conversations with the president , but he will keep the details to himself. As you expect with good friends, we are fairly circumspect about what we say. In public. Its important we give very frank advice and a Frank Exchange with our american counterparts, but we dont lecture them through the media. Thats very important. I think to be able to talk frankly, as good friends should. For years, australia has walked the line between supporting American Interest in the asiapacific and engaging with china, its biggest trading partner. Asnas commerce ministers the trade war with the u. S. Shouldnt be an option. He told reporters in beijing the disagreements are inevitable, but history shows the u. S. And china can overcome trade friction through negotiation. Its a court case that has exposed fault lines in israeli society. Us older has been sentenced to 18 months in jail for killing a palestinian children was already mobilized. Argued the soldier acted in self defense. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im taylor riggs, this is bloomberg. President trump may have found all this on promise of jobs and growing the economy, but much of his time has been devoted to National Security issues. Were joined my next burns of the Kennedy School Nicholas Burns of the Kennedy School. Thanks for coming back. Penceg at Vice President as well as general mattis, they went to europe in part to reassure our allies about things like nato and our commitment to the eu. Did they succeed . I was in munich of security conference, and was in the hall when Vice President pence spoke. They said all the right things. The Vice President went to brussels and met with eu leadership. The problem is europeans are also listening to donald trump and they see donald trump over the weekend castigating nato again and openly rooting for choosing brexit, saying he will support brexit and hoping other countries relieve the eu. As existential issue for the europeans. Weak trumpweek a attitude towards russia. Most europeans want to keep european sanctions on. Message fell flat, because theyre looking at the president acting one way and the Vice President and secretary of defense acting another. David if you are european leader in you are looking at the United States right now, who speaks for the united dates United States . Rex tillerson was in europe, they are hearing reassuring words. They want to work with these people. But they cant get beyond the tweets. Last weeks erratic press conference. I think they are worried. The United States has been the leader of the west for seven decades. Think of eisenhower and reagan and george h. W. Bush to name three republicans who stood for freedoms,eemans for liberty, and for strength against the soviet union and russia. They are not hearing that consistently from President Trump. I think he can recover from this, i hope he recovers from it. It was a sobering weekend to hear such concerns about the United States and about what the europeans see is the weakness of the United States. ,avid its not just tweets there was also the problem of general flynn seven down as National Security adviser. The Vice President was asked about during a press conference and nato. Will play his response. Vice president pence i was toended disappointed learn that the fact that had been conveyed to me by general flynn were inaccurate. We honor his long service to the United States of america, and i fully support the president s decision to ask for his resignation. It was the proper decision. It was handled properly, and in a timely way. I have great confidence in the National Security team of this of administration Going Forward. Since was president pence appeared, we have the appointment of general mcmaster to replace general flynn. Does this put it behind this white house . Rick or does it raise questions of divisions when it comes to National Security . Mcmaster is general seen as a stronger point is. Hes an experienced military officer with a brilliant career and a lot of people have confidence in him. I dont think the issue of russias going to go away. Either russian interference our elections back in the autumn or the influence that russia may or may not have with members of the. Rump team theyre on to be an investigation, and general flynns resignation will add fuel to that fire. Its good to see her public and standing up in the senate and house to say there has to be an investigation. Russia is our strong this adversary in the world. A country that does not wish as well. I do see this concerted attempt by the russians to influence the United States, our electoral system, to diminish trust the voters have in the election itself, thats about as serious as it gets in a democracy. I dont think it goes away. I very much hope the general mcmaster will be able to stabilize the National Security system under full professional control. And the Trump Administration needs to get on a single sheet of music. Jonathan i want to zoom in on the russia situation and the role the United States has. Economic sanctions as a foreignpolicy tool, theres a debate is whether that works. For russias a serious argument that if anything, it energized support domestically for president putin. The suggestion they interfered with elections elsewhere, says to me that these economic sanctions havent worked. Is a reset not the right approach, the prudent response of an Incoming Administration . Prof. Burns its the wrong response. Putin went in to crimea and annexed it, there has to be a response. It cant be a military response. But the cost had to be sanctions. Combined with a lower oil price, there has been an impact on the russian economy. Look how furiously putin is working to try and risk lift the sanctions. Angela merkel wants to make sure the sanctions are caps on russia, so that putin doesnt want to get a way grand larceny for stealing crimea. All of your plus to give the sanctions, they are worried that ill trump is going to lift the sanctions i get very little in return. Jonathan is that true . The likes of france and italy are flirting with a new approach as well. Its not just the United States floating ideas. His europe on the same page . Mr. Osullivan they have been some soundings from people who are now out of office that wanted to list the sanctions, but Angela Merkel has been a strong leader, saying europe and north america have to speak with one voice, as long as she is german chancellor. I think those sanctions are going to stay. Prof. Burns why would we give into putin and reward him for stealing other countries territory in Eastern Europe . They dont see that kind of strength from donald trump, but a lot of europeans see it in Angela Merkel. David its a fascinating its notn, but achieving what President Trump said he was going to achieve when you elected. He said he was going to address the european the american economy. You served in the white house on the security of the. What happens when the president was to get back to a domestic agenda but is so caught up in the international . Prof. Burns i think that the promise of the Trump Administration is that its lowering the Corporate Tax rate and lower and middle income tax rates. And regulatory reform. Weve seen nothing from that. Weve seen divisive statements, preposterous statements about sweden and fights with mexico and australia. I think he should get back to the economic agenda. It was strengthen him and give his of administration more credibility. I think it would give us more strength overseas if we are getting our house in order economically here at home. David thanks for being with us today. We want to go back now to Paul Richards and Jim Osullivan. Jim, want to start with you. As you look of the promises made by this Trump Administration in terms of domestic economic growth, are we in danger of falling short of those promises . Mr. Osullivan certainly, when he talks about up to 4 gdp growth, most people would say thats unrealistic for that to happen. We need to see potential growth get much stronger, or the Unemployment Rate keeps on falling and that implies that productivity is the surge or labor force has to surge. The labor force is in confirmation of the immigration policy. Realistically, thats not going to happen. If you look at the labor market, is improving pretty steadily. This was a trend coming into the election, getting close to 200,000 jobs a month. That helped explain why the Consumer Confidence numbers are running a pretty high levels. They have a further list lift says the election as well. The economy in terms of the labor market in particular is doing ok. David he has proposed several major initiatives to give the economy growing. Whether it gets to 3. 5 or 4 or not, how much of what we have seen in the markets assumes he is going to get a lot of. Com list i thought of that accomplished . Mr. Osullivan there is hope that theres going to be a big boost to growth from fiscal and regulatory policy. People are counting on a metamorphosis of the expansion from whats been a 2 rate of growth to the nfib pricing and Something Like 5 growth. Ares extreme, that people counting on much stronger growth Going Forward than we have in the past. Is that plausible . How much room is there for the economy to grow in less productivity starts surging . Im skeptical, i think people are going to be disappointed. In the meantime, the labor market is still improving. Jonathan Paul Richards, great to have you with us. Ellen zentner on her recent call for two fed rate hikes. Surge,ommodity prices and this is bloomberg. Taylor this is bloomberg daybreak, im taylor riggs. Coming up, Robert Shiller joins us. Time now for other stories making headlines at this hour. Im taylor riggs with your Bloomberg Business flash. It agreedy announce on a revised price for yahoos internet assets. Thats according to the wall street journal, the paper says yahoo would knock as much as 350 million off the original 4. 8 billion price. Verizon wanted to renegotiate after yahoo reported two major data breaches. Is inner of burger king advanced talks to buy the popeyes Fried Chicken chain, according to people familiar with the matter. Popeyes and Restaurant Brands of National Held talks in the summer, but can reach a deal. The Worlds Largest visual fund Company Thinks it can expand its foothold in europe. Thinks the passive investment model it pioneered in the u. S. Will become more popular in the region. Regulations probably increase the cost of managing money in europe. Upguard sees that driving the passive investment share from 15 to almost one third percent. Thats your Bloomberg Business flash. Im taylor riggs. This is bloomberg. Alix were watching walmart of over 2 . You have earnings coming in at 130, beating estimates by one penny. Cant sales rose more than estimated, 1. 8 . Online sales also growing 29 . Joining us for more is shelly banjo and Paul Richards is still with us. I was really surprised. Walmart made hundred 85 billion last year, the most of any u. S. Company. Big numbers and come in contrast with what is happened to so far in the past. Target had about Holiday Quarter and other retailers have been struggling. It certainly was a surprise. Alix target had disappointing holiday sales, the move going into walmart wasnt that great. Where were they in a shift to ecommerce . Even the value of what they pull rose. Have exhibited have they pivoted . Shelly the purchase of jet has rose. Haveturned out to be so far, so good, and fast. Included iney online sales is online groceries. Weezer sales that letter initiated online, but then picked up in drivers in stores. They continue to be rolling out, and it seems to be making an effect. They are investing a lot of money. Was it doing to their margins . Shelly walmart is a big, mammoth retailer. They can push sales or push profits. They typically cannot do both at the same time. David when do these investments pay off, in terms of profitability . Longy this is a investment for ecommerce, especially they are going to catch up with amazon. They say profitability will inrt to show stabilization 2018 or 2019, but its going to be a longterm investments. Elephant in the room is the border adjustment tax. Your biggest going to happen. You dont think its going to happen. Sayinghards they keep the same thing. The dollar needs to appreciate 20 at a minimum to make it work. The problem i have with that as a currency guy is the market wont wait to demand this apply to get 20 . Dollar imagine if the will ever get to Global Financial markets . I think they are not thinking about the practicalities. It may happen, it wont happen this year. I think you would cause global turmoil, given the appreciation of the dollar in that speed. Jonathan david brings up the issue of margins. How does the company like walmart prepare for the border adjustment tax . This would be horrible for walmart, which is why they are a of retailers who are trying to lobby against that. People realize the cost of clothing has not gone up since the 1990s. Ple are not ready for the those type of price increases. Commentinge the cfo the border tax proposal is concerning to us. They are at that rhetoric of the story coming out. You have two republican senators in arkansas. Thats going to be a tough one. Etf, upok at the retail about 6 on the election 6 since the election. What do you do . People are out there and shopping. They are online. I think the consumer feels really good. They are ok about trump. Hes lying around on his plane, back out there with those people. They are ok, its the markets that are frustrated with trump. I think everyday people are feeling ok about this new administration, they are shopping. Alix can you make a decision between Apparel Stores or guys like walmart that have groceries versus a specialty retailer . Or just in general . Mr. Richards i think the consumer in general feels a lot better. The sun is going to come out, they are out. Macys out 11 minutes. It is going to be an upside surprise like walmart . Shelly i think macys is going to temper those positive comments. I totally agree that the consumer feels good, but its not spread out evenly. I think were going to see that hit come in macys in a few minutes. Alix shelly banjo and Paul Richards, sticking with us. If you have a bloomberg terminal, check out tv. You can watch is online, click on the charts and graphics and interact with us directly. Go to tv on your terminal. This is bloomberg. David this is bloomberg, im david westin. This trillion Prime Minister discussed his real the australian Prime Minister discussed his relationship with donald trump and talked about trillion u. S. Ties from his point of view. Australian u. S. Ties from his point of view. Our alliance is, built on over a century of fighting sidebyside in every major conflict. It is an alliance, an Economic Partnership built on millions of people to people links and family links. Its very strong and very deep. How youve you view dollar from . He has a big personality. David thats a diplomatic way of talking about is somewhat tempestuous relationship with the new president. We are a month into the new administration, what do we know then what do we know now that we didnt know that about trade relations . The first major leader to visit trump gets it. Then softbank follows and then Prime Minister turnbull is realizing the same thing. Tdd is dead, the u. S. Is done. Tppe china will come in is dead, the u. S. Is done. Inbe china will come later. You think it will be a series of bilateral to the different members of tpp . Mr. Richards its inevitable, but it will take time. These negotiations can take seven or eight years. Every time switzerland negotiate something, its seven to eight years. They are trying to find any all of branch here 20 odd days into this of ministration. This administration. David invest in the u. S. , manufacturing. Mr. Richards it is smart. They are looking at softbank doing restructuring bonds. Australia is not the money to offer the u. S. The way japan right, from as military perspective, australia has supported the u. S. Steadfastly for the last 100 years. They know that not going away. Jonathan when strikes me as quite fascinating is the approach to europe, the change of approach as if the eu was some sort of construct institution that you are not allowed to criticize. A lot of people think its been a disaster. Is it right that the u. S. Administrations as we are nolo going just no longer going to support this construct . President trump is saying we are not just going to keep writing checks. He is using his Vice President to keep the lines of communication open, that he is acutely aware that Angela Merkel is facing an important election in september and october, and shame eight she may lose. Its going to be a contentious situation between europe and the u. S. For the next six months. Alix what is your biggest conviction trade right now . Erik mr. Richards long the nikkei, japan is winning. Alix Paul Richards, Medley Global Advisors president. Breaking news on the horizon yahoo deal. The two companies have reached a deal to lower the price. The merger price was being cut by 350 million. Last week we thought it would be 250 million. The two parties will share legal responsibility of both stocks, getting a lift in the premarket. Jonathan coming up on this program, Ellen Zentner, Morgan Stanley chief u. S. Economist on her recent call for two rate hikes. And she says u. S. Stocks can rise. From new york, this is bloomberg. Jonathan wall street gets back to work. Equity futures gain of the dollar strengthens us Federal Reserve officials keep a marked hike on the table. Rising Political Uncertainty in europe is contradicted by a buoyant economy. The recovery broadens as france outpaces germany. Paying dividends. Walmart posted Third Straight quarter doubledigit online growth as the Worlds Largest retailer continues to benefit from last years acquisition of jet. Com. Good morning and welcome to bloomberg daybreak. Im Jonathan Ferro alongside alix steel and david westin. Alix from macys, earningspershare coming in at two dollars basically flat onto dollars. The estimate was for 1. 96. You had, sales less bad than estimated, down 2. 1 . Interesting moves. You are seeing macys stock in up byrket i over over 3 . Worst, the worst of the in some ways when it comes to big box retailers actually delivering some not terrible numbers. David you get expectations down, you can beat them. Alix you can argue this was needed, when you have all that real estate they are not monetized at the end of the day, with no deals that yet, you can see this underestimated was actually legit. It didnt work out. Jonathan the big question is whether the company can sell itself . David you wouldnt expect to macys to be in the same form a year from today. The question is what different formal that take . Waiting for more headlines as they cross, bring that to you as we continue. Of over 2 in the premarket. David we spend a few minutes on washington. President trump now has his National Security team in place with the appointment of general mcmaster as National Security adviser. Does this mean you will be getting back more to messick issues like tax reform and obamacare . Joining us is kevin cirilli. Is he going to get back to his knitting . Kevin thats what he would hope. Sources in the Republican Party are hoping very much that this president and the administration pivotegin dependent to to the policy issues this president campaigned on. Once they return from recess, you can anticipate republicans are going to start unveiling more legislative agenda, including parts of repealing the key parts of the Affordable Care act or obamacare. The sources im speaking with her telling me the policy proposals are actually being scored right now by the congressional budget office, a nonpartisan organization. Deficitct that it has a it has on the deficit could those problems with the president within his own party, as he looks to win over key members of the tea party caucus. They have several concerns in recent years about deficit spending. Hadd we remember what they to do last time, it was a mess. What about the tax plan . We heard from the president that he is going to have a plan within two to three weeks, and we are coming up on that deadline. At theas we look earnings reports coming across retailers on the bloomberg, its important to note that these same retailers are very much waging a lobbying war against the socalled border adjustment tax. The Retail Industry has been heavily advocating against it. That was the not direct dots with House Speaker paul ryan, his tax plan includes the socalled border adjustment tax. Despite all the wranglings by the Retail Industry group, they do anticipate tax reforms to move forward. The sources im speaking with in the senate tell me this is a mute issue. The dollar jumping to its best day in one month. The Philadelphia Fed president saying he is not going to rule out a rate hike in march. Morgan stanley chief economist Ellen Zentner believes we wont see a rate hike until september. We going to get a lot more fed speak throughout the week. Williams, andohn lockhart, you name it, they are talking. Ellen, great to see you. You see the first fight coming in september, and only two this year. Ms. Zentner were not at a consensus on the number of rate hikes, but the timing is out of consensus. If im looking at the world through Monetary Policy lens, and i know ive undershot my price stability goal 2 for eight straight years, i want to allow inflationary pressures to build, not let the economy run hot. But allow inflationary pressures to build and fiscal policy to take hold. Talk to monastery Monetary Policy makers and they say we dont know whats going to happen with fiscal policy, so we are not building that into the forecast. About half has, about half has not. I want a little more certainty, a clear lens on what the economy will look like in the second half before moving. Alix last week it seemed like the take away from chair yellens testimony to congress was hawkish, that the bar wasnt really high for inflation to move higher. Why was your take away more the dovish side . Ms. Zentner policymakers are more optimistic and janet yellen is as well. She might out of builds fiscal policies options into her forecast, but clearly, she is more emboldened by what can be delivered in terms of how confident she feels about the outlook. She says more gradual increases in the federal funds rate is likely warranted. We could not agree more. We are going to double down on the pace of rate hikes, two instead of one in the past few years. To say wereunny going to double the pace to two. Its right for them to be more optimistic about the outlook. We are arguing that the timing this is a fed that should remain a little cautious and let inflationary pressures build first. In the first half of this year, its going to be tough to get core pce prices up a lot because we got a very tough year on your cost coming, and we still have previous increases in the dollar that have yet to come through. We are betting that inflation is not going to rise at the core level, core pce, as quickly as they would like it to. Jonathan that the probably accurate descriptor the fed chairs view of the world. I wonder if the committee is going to lead a chair yellen, that she still have a handle on the committee . Ms. Zentner she has a strong following in the core of the committee. She is not on the most dovish side of the committee. You still have brainard caring that flag. Carrying that flag. She can still hold together the troops and hold them together. The big question in clients minds is, is this going to matter much if donald trump fills those empty spots on the fed board . I dont think that influences her as some might think lets go ahead and get rate hikes in now or do my policy now that i want to do now because i dont know what the face of the fed is going to look like later this year. I dont think that plays into prudent Monetary Policymaking, and she is very prudent. Some of my clients say they are not going to move in march, but june, they dont want to do it around the French Election, they will go in may. If you were a Monetary Policy maker, you dont just go in may because some disaster may happen in europe after that. You dont frontload your rate hikes. Lookhan we have sold not at rate policy in a vacuum, which is something we have done in the past few years. Sheet and how they are going to use the Balance Sheet. That conversation has built up over the last couple of months. What are your views on that . Ms. Zentner this is going to shock you, we are out of consensus on the Balance Sheet very we think it is time to have those discussions. We think those discussions will ramp up through the year for when the start leading assets rolloff the Balance Sheet. We think in spring of next year, around april, they will start they will stop reinvestment. Not paper, but stop reinvestment of nbs. The reason we updated our view from tapering, in 2015 we said they would start tapering investments. By the time you look at ,repayment fees in early 2018 how much they are having to roll back on the Balance Sheet, its only about 15 billion. The sake of ease of communication and execution, we think they should just sees reinvestment of nbs. They announce in the march meeting that april they would sees reinvestment of nbs. David why pick that place to start . It could affect mortgage rates. Ms. Zentner the thing about why with a deal with the nbs side of the portfolio rather than the treasury side its very easy to protect predicted the fact. Predict the effect. If they get out of hand as you are letting the rolloff the Balance Sheet, you can also start reinvesting those again, and adjust along the way. Its much easier to gauge its effect on the economy than say if you were to taper reinvestment of treasuries. We dont think it touch the treasury side of the portfolio, we dont think it is necessary. Over time, the economy can grow into the size of the treasury side of the portfolio. In 10 years or so, it will be the normal size of the economy. We dont think they have to touch treasuries. Its very easy for them to deal with the mortgage side. David we talk a lot about sentiment indicators. Its been positive on the consumer side and the business side. Itsave a note indicating not evenly distributed across the consumers, which could affect things like retail sales. Its that 35,000 to 50,000 per year household income, that big blue bar. Its different from the more wealthy and poor households. What does that do to the economy . Ms. Zentner we get the question of why havent we seen a bigger boost to Consumer Spending, because sentiment is through the roof since the election. Economists look for confusion. We want everything to be brought spread. We want every sectors be realizing job gains. The same with Consumer Confidence. We want all income groups to be listed. We can see that across income groups, you are getting single digit rises in confidence, but you have more than a 30 a 30 point rise in the middle income group. If you look at the democrat republican income split, is a record high for republicans and low for democrats. Thats giving us big Consumer Confidence numbers at the headline level. We want to see that spread out in order to get a bigger impact on Consumer Spending broadly. With you out of consensus call on the Balance Sheet and the first hike going in september, is the market if the market is positioned for a june height, whats going to be the trade in the next six months . Want to be fair. The risk is that they go in june, all the indicators are there and when i spoke with president rosengren recently last week, the new York Association for business economics hosted him here locally. He says look, we all know there is risk on the horizon. Fiscal policy, other things, things in europe and geoPolitical Risk. It doesnt pollack it doesnt paralyze you today. If the start of the line markets give them an open door, this is probably not a fed thats going to shun that opportunity. I want to recognize there is a risk that they go in june. We think that over the next several months, were going to get some disappointing readings on core inflation, thats going to send markets thinking they should be more patient and take some of those probabilities for june off the table. Alix the bar market getting ahead of themselves. Ellen zentner with Morgan Stanley is sticking with us. We do have a couple of movers as we had to break. Yahoo ,f verizon of reaching a renegotiated deal for yahoos internet properties, reducing the price for 20 billion, reducing it by 350 million. That you are going to share legal and regulatory liabilities. Retail having a good day. Macys and walmart over 3 . Macys fourth quarter, sales coming in 2. 1 , better than estimated. Earnings coming in better than estimated. We discuss later on the hour. He says you stocks can still rises much as 4 . Robert shiller, Nobel Laureate joins us on his call. This is bloomberg. Jonathan from new york city, this is bloomberg. Im Jonathan Ferro. How do you reconcile rising clinical uncertainty in europe with data that does not correspond with the fallout in the market . The political tensions spreads. This is france over italy and france or germany. The spread was 77 basis points over the last couple of months. Weve seen the spread begins a blowout. Richard jones of bloomberg fx and rate strategist joining us from london. Looking at the spread of the Political Risk is one thing, looking at pmi this morning, quite another. If you are a market participant, what are you going to pay data, which the is looking robust, with the politics, which is messy . Richard the data does look robust, and the messy policies politics has been trumping any data. Look this is something that Ellen Zentner spoke about visavis the fed in the previous segment we have to keep an eye on european era core inflation. Get these pmis started approved up and that starts to feed inflation, then you shift to die on the ecb. Investors start to feel more couple. We have a lot of Political Risk. Thats going to be making the most of the running. Watch that core inflation rating tomorrow, thats going to be key for what the ecb does. Jonathan it really moves the dial. If you look at whats coming up in terms of elections, what are Market Participants looking at . What are ecb officials looking at, the day that were elections . Elections . Were richard they cant ignore the little risk. That is why they shifted in the previous minutes. Its the big elephant in the room right now, the thing that investors are really preoccupied with. Does continue to improve, it needs to start feeding into that core inflation. Thats the problem the ecb has had. Even with improving data, the pmi readings are considerately better than what we saw in the Third Quarter of last year. The core inflation is not tracking any higher. Jonathan great to have you with us. With Ellen Zentner, chief u. S. Economist of Morgan Stanley, still with us. We talked about pce in the United States disappointing. Talk to me about the base effect for inflation forces, whether its in europe or the United States. It looks favorable for central banks. Will continue to be . Ms. Zentner looking at headline inflation, we made the annual lap around the base effect for energy. Headline inflation is rising pretty rapidly. , and coreused on core is a much more slowmoving beast. It does take quite a bit of time for that to lift core inflation. In terms of base effect in the periode have come off a in late 2016 of easy yearoveryear comparison and now we are entering tough yearoveryear comparisons, which makes for very heavy lifting to try and get core pce up just because of annual comparisons. And then you have the dollar playing in two when does that explosive rise in the dollar post the president ial election start to feed in to core inflation . It takes a few quarters. Through that will come in the spring as well. Its going to be a tough time at a high bar for getting core pce prices higher. David as you look at projections for what the fed might or might not do, how important is Wage Inflation . We have an important number on march 10 for payroll. Ms. Zentner Wage Inflation is important. Weve seen this nice, steady bleed upward and accelerating wage growth. We continue going back to diffusion and how widespread it is across sectors. Concentratedto be in lowwage paying sectors, which is why you see lowend retailers doing better. Comparatively, low income households are much better off today than they were say one year ago. The fed is watching wage pressers pressures closely. The markets watch that because its higher frequency. Janet yellen prefers a much larger sample size like the employment cost index. It has also shown a steady bleed upward. But nothing to get too worried about, we tell the fed they are behind the curve. If the Unemployment Rate drops materially below where they thankful employment is, at 4. 8. Unemployment think is, at 4. 8 . They may have to raise rates at a more timely fashion. If the Unemployment Rate is that much below full employment, you must assume that Even Stronger wage growth is coming. I think its part of a Bigger Picture on inflation pressures that we do have to follow. David Ellen Zentner of Morgan Stanley staying with us. A professor of economics and a Nobel Laureate, and his analysis suggests the u. S. Could you going up. Robert shiller will be joining us. This is bloomberg. Alix stocks to watch as we head into the open, retail. Depott, macys, home moving higher. Macys up over 3 after reporting solid quarterly results. Giving a nice boost to the sector as a whole. What about the border adjustment tax . Many in the Retail Industry are word. Joining us is Matthew Townsend and what and Ellen Zentner is still with us. Everyone was if he on macys. What happened in retail . Retail bounced back, and walmart showed a lot of strength to neighborhood markets and online. Neighborhood markets are like a smaller Grocery Store or convenience store. And online, they bought jet. Com last year. That acquisition is paying off with online sales of 29 per quarter. Alix macys down just 2. 1 , and fullyear earnings if you back out gains and charges, on the highend. Is the worst over for macys . Where is this still a show me story . Matthew it is still a show me story. They have we comparisons week weak comparisons over the holidays. It still remains to be seen how viable Department Stores are. David you made the point that it depends on which part of the market you are looking at. These are the moderate income households that shop at a macys or walmart. How important is after driving retail sales of this point . Ms. Zentner we want to look at what is the Consumer Experience across income groups. The highend group had a couple of years of a really good run in luxury sales because of all that pentup demand and the stock market rising. And then you had accelerating wage gains at the low end of the pay scale, as relatively speaking, the lowend consumer is much better off than they were a year ago or two years ago. Surely that middle income segment that has not yet fully experienced in recovery thats what we see confidence jump postelection. Borderwe hear about the adjustment tax, probably the pathway to get overall income tax reduction. Go they make it up on the top line because more people will be buying things, so they have more money on the pocket in their pocket . Argumenter thats an if you are a proponent of border adjustability. I think walmart would argue against that and some economists sayd argue against that and we are going to have to raise prices if you hit us with border adjustability. Passing on to the consumer is very difficult. Consumers are priced in tolerance. Alix whats going to be vulnerable . Matthew they showed some resilience, the border adjustment tax is this huge fight the happening right now. Walmart, the coke industries, all against it. Retailers, its the last thing i need to Something Big change to taxes that can really affect their business just when they are still struggling to kind of come out of this malaise from the past five or six months. Alix Matt Townsend of bloomberg and Ellen Zentner of Morgan Stanley, sticking with us. Us is a joining cautious andrew mackenzie, coming up. From new york, this is bloomberg. Jonathan from new york city, this is bloomberg daybreak. After four straight weeks of gains, the s p 500, we kick off a new trading week in new york. Equity futures pushing higher up by 0. 3 . Globalrformance for equities in london down by 0. 25 . About 7 of the index. That is why it is having debt weighing heavily on the ftse. The tale of the data in the dollar. A weaker euro by 0. 75 . The Political Uncertainty is in focus. A strong door work the story of cross of the board. Some of the action, your headlines in the business world. Taylor a court case that exposes lines in israeli society. A soldier has been sentenced for killing a palestinian of. Judges rejected the idea that the israeli thought the palestinian could still attack him. Chinas commerce minister said veteran war with the u. S. Should not be an option. He told reporters that the disagreements are inevitable but history shows the u. S. And china can overcome through through negotiations. The outlook for the economy is the biggest worry for britain eight months after the brexit vote. Those surveyed said the economy is the first or second biggest concern up from 60 last year. Terrorism is second followed by immigration. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor breaks. This is bloomberg. David President Trump came to the changing publisher with trading partners around the world. Australia has had up close and primeal dealings and minister terrible second down to talk about his relationship with donald trump. It is vital we maintain the drive towards a more open markets and free trade. Trade means jobs. Australia is a trading nation. Our future depends on not simply selling thing to 24 million australians but the whole world. Year,aid sag 20 last protectionism is not a ladder, it is a shovel to dig much deeper. David joining us the Jeffrey Schott in washington. Is here. Zentner jeffrey, let me get started. You have a piece that says the tpp, and asian trade of the President Trump campaigned against, may come back. What led you to that conclusion . Jeffrey the tpp was very unpopular with the mr. Trump and mrs. Clinton. Almostvery popular with every business association, form group across the u. S. They saw the benefit of increased trade and the asiapacific region and wanted it. The question is, how do we get back to it in a way that makes it better and acceptable to the Trump Administration . David one of the things the president has been adamant about is he does not like multilateral deals blow bilateral, if you were here, maybe he would say would have more trade, one on one. We will not do the groupthink . Robert shiller the new team have the perception you could get more that you can out of their regional group. They think they can use the leverage of the u. S. Market to rest a better deal than what president obama got in tpp. The u. S. Market is barely open. Have much to give and the u. S. Did not do very much in the tpp. Its got a very good deal. It will be hard to replicate that in bilaterals and trumps strategy is doomed to failure. David do you see any evidence to support your position and hemps dealing with abe and is met with one asian leader and they have talked about trade . Jeffrey schott they told a fair about amount of trade, but they do not talk about a comprehensive trade deal that would replicate what was in the tpp. That would be very difficult to get approval on a bilateral basis. I think more interesting is that the meeting that will take place next month in chile around the summit of the Pacific Alliance where the chileans have invited all of the tpp countries plus china and south korea to get together to discuss how to go forward from where we are today and how to rebuild asiapacific economic integration all along the lines of the tpp or something similar to it. David one of the things we cheer is the downside risk, the approach, how do you put in the model the trump approach . Ellen zentner you have to recognize there is heightened uncertainty because a lot of the price policies are unknown. You take into account that heightened ertainty will probably until we get a clue review of what policies will look like. I love hearing from jeffrey that tpp is not a dead and trump can throw it back and put out Something Different that is more palatable. It was an excellent trade deal. It was something disappointing to the Obama Administration we were not able to get it over the hurdle before he left office. I would love to see it go through. Be done the it to way thats palatable to the Trump Administration, is the question. That could go far in easing some Business Concerns in term of his choice of all the sees. Jonathan jaffer, kelly ripa solve the Trump Administration goals for trade can you reconcile the Trump Administration goals for trade . Deal canchott every be improved. There are areas of the Trump Administration is concerned aret that some businesses concerned about that could be added to the tpp. You could add new provisions for currencies to deter future episodes of currency manipulation. That would be a big plus. It would be acceptable for the rest of the tpp countries because they all committed in a Side Agreement their toroeconomic agreements deter and to avoid currency manipulation. That in the body of the text could be a big plus, plus some other more minor it adjustments could give perhaps of the tpp, may be renamed a different impression and the trump white house. They are all against it. Jonathan if you rename it whatever they would and step back to come up with the deal, how would china take it . Chinay schott i think benefits when the trading partners prosper. Wayink this is seen as a for china to build stronger relationships with the other tpp countries as it is already doing. It has got trade agreements with many of the tpp countries. Some want to augment an update the agreements. Other countries who do not have agreement wanted to join. None of the countries want to isolate china. I think they want to deepen their ties with china and it would be a way for china to get a better agreement. There are we not seeing from the same framework of reference that the president is . He looks at trade issues as zerosum game at the balance question. He looks at the countries with the biggest trade surplus and go after them. Is it away to a dress the president s concerns and do a business wants to do . Is not atner it zerosum game and just because we are running a deficit was another country does not mean there is unfair to trade practices. Unfair trade practices. There are other was we can strengthen current trade agreement and continue to keep open borders in a way that would promote crossborder business. Nafta is one example of a 20 year old trade deal that certainly could use room for improvement, even mexican officials have admitted as that. You do not grab your fingers start from scratch was you go after what kind of deals and we tried unilaterally with china staro not grab deals a from scratch. You go after what kind of deals and we tried unilaterally with each rhino. The wall street journal said trump is looking at the deficit. It does not count as an export which will widen it with other countries and that is in stark contrast with the unilateral trade. I have to smile at that and chuckle because i do not see donald trump saying to the bea we are going to change in the web calculate the trade deficit. You can use it as a leverage, right . Fodder for discussion and that is a within his power, use it as fodder. Alix thank you. Jeffrey schott, a senior fellow and Morgan Stanley Ellen Zentner a is sticking with us. Restaurant brands is buying popeyes. 77 a share. 27 premium. Free market. He it was up over the price of 75 a share. It is all about chicken. King, popeyesger is the world leader in Quick Service when it comes to chicken. Chicken is a big seller and that is what this deal is about. Dave and on the rise. Alix absolutely. Robert shillers is joining us and why he does not think trumps rule is a quick fix. This is bloomberg. Alix this is taylor this is bloomberg daybreak. Robert shiller, Yale University professor a nobel lori joins us. E, joins us. Reat stories makinger headlines. I am taylor riggs with your business flash. Sometimes active it does activist hedge fund activist hedge fund, tiffany will add three new directors. Crystal does bristolmyers will havehree directors and agreed to 2 billion share buyback. The leaders of americas midsize businesses have not been as optimistic in seven years according to jpmorgans outlook, 80 of needle companies are optimistic middle companies are optimistic. The expect the policies of president and congress to have a positive impact on their business. Leasta hopes to raise at a 2 billion from the cell of memory chip abysses according to a person familiar from the sale of memory chip business, according to person familiar. That is your Bloomberg Business flash. I am taylor riggs. This is bloomberg. Alix retailers are in strong focus after solid results. Walmart masons, home depot moving higher after they Beat Estimates and a boost and the rest of the sector. Target up almost 1 . Banjog us now is shelly and Ellen Zentner is still with us. I want to focus on macys. It beat earnings. And wasnue was light down 4 year on year. Help us put it into perspective. Shelly banjo they did better than expected but expectations bit overdown quite a the past year. Looking forward, sells, they be down and they are continuing to close doors and that is not and that is good but not good enough. Last year, they close 100 and more than 10 . They ended up closing 66. An opening another 27. Are they really fulfilling their promises to close those stores and downsize and get their sales in order . Alix the new ceo will be coming. What will they have to do to trust themselves up . Shelly banjo what was said huge portion. They are talking a little bit about what they are doing. Real estate is a huge portion. A huge announcement to move the needle. David is a so much of the success or failure of the company or the plan and if they are executing . Shelly banjo when companies that sees slowing revenue announced they will shutter stores, it is warded by shareholders because you are trying to get a handle on the business. A macys, youike have to think about their Business Model longterm. Is it a viable business if you will not bend to compete online with these monsters like amazon that keep eating share . That the stark reality of it. If we get back and get from quarter to quarter noise, it is very challenging. David what is the answer to the question . Write banjo you can now the size your business and focus on things. We of and i heard maces talk about online sales in a bit. Closinghe focus is on stores and real estate and monetizing real estate. To your point, getting the business to the right size. What about growth after that . Jonathan something you talked about again and again is Consumer Price tolerance. How high is it . Ellen zentner it has become exacerbated post financial crisis that we are less tolerant but arice increases demographic factor. A greater share of the population is aging and that is ashare very priced sensitive we would say. On things like border it just ability, and raise the cost of doing business and just ity, it adjustabil raises the cost of doing business. Its a stark reality of it. Adjustments will have to be made and may look pretty. Jump debate you see sales drop jonathan you see sales drop. Drop, do theyes need to start cutting staff and what does it mean for the administration . Job cuts at walmart are the border tax . Usuallyntner these are what you do not have to consider. President trump has touted trade restrictions will increase jobs in the u. S. Because we will be more domestically focused and meter on demand. The main fratricide of the jobs then is much smaller manufacturing of the jobs equation is much smaller. If we were have to meet our on demand, we do not have the labor force for that. Think about the mac at this well and of manufacturing labor we cannot ramp up factory activity overnight to make of the difference. ,n the end, and equation of yes, you get fairer trade but you will have a hit to demand and more just of the u. S. Over the short run. It is difficult to get policymakers to look past short run damaged during their time in congress. Thats what with the border and justability guest and ustability just drop. It will hit its all sorts of companies. The ones best suited are those who make and sell their goods internationally. Walmart has a fair amount of international businesses. Is sell 60 still 60 of their business is in the u. S. Cheap clothing. If you add groceries, the equation changes a bit. It could hit walmart pretty badly. Alix thank you. Shelly banjo, bloomberg columnist. Ellen zentner is sticking with us. If you have a bloomberg terminal, you could watch is online and click on the graphics. Go to tv on your terminal. This is bloomberg. Alix oil prices on the move up almost 2 . International Petroleum Week in london and outlined the rising confidence he is seeing an oil what it means for opec and the broader market. We have also seen the expectations of the Fund Managers including money positions that they have built up despite the high level of inventories in the United States and that further demonstrates to of and the market the confidence of the to timely in us implement obligations. Daviswith us now is tina and Ellen Zentner still with us. Tina, if the market is so exuberant as Mohammad Barkindo said, why dont we see prices despite that is so high . Eca hal of a lot of inventory around. Which word and the 55 range. There is still a hell of a lot of inventory around. It was interesting to hear Mohammad Barkindos comments about confidence they are in output. A former saudi administer saying we tended to treat is the hallmark. It looks like as Mohammad Barkindo said the investors are believing it is being adhered to. Alix what is also interesting is he said that opec cuts will rely, able to draw down inventories, which leads me to think if we cannot see the drop we saw in october in may, wilson extension of the cuts, we have to . We will see the extension of the cuts, we have to . Weeklyre watching the stockpile numbers and they are coming in fairly barely bearish. They are saying the drawdown will happen. Our colleagues the call is saudi america in the United States. We try to figure off a lower price is good or bad in the u. S. Is opec doing to you as a favor or damaging the economy . Last year, we were begging opec and we were saying be careful what you wish for, you want Higher Oil Prices to support energy and infrastructure in the u. S. , but not to go to high because you start hitting the consumer, which is a much larger share of your economy than energy. Investment is 1 of gdp whereas the consumer is roughly 70 of gdp. We have seen a significant had went into the year and the consumer wallet if you look at the gas prices, there are up more than 30 yearoveryear. They rose in january and if we adjust the numbers. That is less money to households have to spend elsewhere. You buy to see that through into andil numbers in february beyond. Jonathan last year and a year before was a were not using the money they saved to spend an economy in a way. Why is it being reversed not true . Ellen zentner you hope animal spirits, which are sure you will isk with schiller coming up, animal spirits are there and encouragement a new days, and personal income tax cuts are common and gas prices go back that they might spend savings. Is an way back up, it asymmetrical relationship. We tend to tell pullback more when they are rising at that spend when they are falling. Is for ank really jonathan really express your time. U. S. Equities could rise as much as 4 . Robert shiller is joining us in the next hour. The world largests coal mining jumps as Commodity Prices surge. Cl will beliton here. As we counting down to the blue wall street getting back to work. This is bloomberg. Jonathan from new york city, a warm welcome to bloomberg daybreak. I am Jonathan Ferro. 30 minutes away from the opening bell and the city. Futures are firmer. Opposite report. 2 after four straight weeks of gains and at record highs, uncharted territory. , up 2 r 4 weeks of again and debt record highs, uncharted territory. The euro retreat. Treasuries very much off the yield, 4 basis points. Lets get you so movers. See it in the retailers, care learns across the board. Walmart over 3 . And is sold more online. The value of what they sold rose online. Great. Wasnt traffic was up. Home depot, it looks to extend the game. Gains. Increasing dividend payouts and basis better than estimated on earnings and samestore sales. Revenue was light versus estimates and sell 4 year on year. The other big market mover is oil. Crude up 2 , the highest level since july of 2015. The secretarygeneral of opec Mohammad Barkindo saying he is looking for one or 2 compliance when it doesnt 100 compliance when it 100 compliance when it comes to oil of sending the loss from hsbc. Alix steel, thank you. The water market. We are joined by new haven haven,icut and New Connecticut Robert Shiller, yell University Professor and Nobel Laureate. Yale University Professor and Nobel Laureate. A headline you made at up f you made at a forum. Give us the why. Robert shiller in the longer term, it looks highly priced. Around 29, which is really high. But nonetheless, even added that rate, it does not look like, judging from the ratio along, it does not look like a horrible time to invest. Then, we have donald trump. All the bets are off in this environment. Jonathan we were joined by Ellen Zentner and she what is the polls a question to you, if you look at the stimulus hopes around the president and the hopes of stop, the animal spirits so to speak, are they organic because doug consumers because of the consumers are finish or things that may come . i cannot pick up the retail he. This is guessing human psychology. I cannot do it authoritatively. The trump effect is really important, we are not to back to full employment. At first, we were playing catchup. People had postponed purchasing. Factor. Hat is still a maybe still in the process of coming back. Trump dominates our attention. Everywhere in the world, there is a trump effect all over the world. I think they should be stimulative and a psychological sense. A those input perspective. On the one hand, cape ratio, over a 10 period of time. On the other with trump on the other, that is a one off. That is not a longterm effect. How do they square up when you get your 3 , 4 increase in the sdp . Robert shiller it was more than scenario than a forecast. Usually, we cannot forecast the stock market in the short run. I prefer longterm forecasting like forecasting out 10 years. You could do it better. With a case ratio which is with a caper ratio, not as high is 1929, is getting close. That is a bad sign. On the other hand, the stock market is historically done so well so many times, this could be like 1997 again when the cape ratio was around 29. You know, if you held on for 10 years, 2007 and you did just fine. The uncertainty about the stock market. Historically, often done well when it should not to be. It does not look promising. Its a looks like the stock areet and the bond market on par, equally high and expected return if you look at a caper ratio. David we do not have the promise or the hope of an entirely new approach to fiscal stimulus then we do now, what is the danger of disappointment if these things do not want to pass . Robert shiller a decline stock not just thethink fiscal stimulus that we have to worry about but of the whole package of trump. We feel much anxiety has been generated in the first month of his presidency. It is really an uncertain time the stock market could do very well, actually. 10 , 20 , 30 if trump does things well and it works out. Very uncertain times. If may thats a lot of alix thats a lot of ifs. When is at time to bell out of the market . Bail out of the market . What does it look like . Robert shiller i dont know. It is called market timing. In the shortterm, it is difficult to see went to bail out. For template put investor, stay partly in the market are not go overboard. And wait and see. If there is anything a sign to high capers the ratio. Do not go overboard. Do not assume trump will work miracles. Alix fair. What about europe . That cape ratio is low but yet the geoPolitical Risk. , how do you factor that in when you are looking at valuations for countries like europe . I am inspired by the lowercase ratios. We should not overreact to ukraine or other events like that. Ratios. Cape they will not spread, i say maybe. I am more favorable to investing and the european stock market than the u. S. At this time. Jonathan the range of outcome is Pretty Amazing even with the relatively cheaper valuation. This morning, you could have a headline saying the euro heading toward disintegration as a data is fantastic, look at the pmi. Ofk to me about the range outcomes and investing in that kind of environment. Robert shiller i am a professor , can i get professorial. The bottom line is to diversify. People have a homebuyers and too much in their own country. A home buyers and they invest and they home bias invest too much in their countries. It should be multiple countries. You cannot predict what will happen in any one country. Called a freeing lunch. Diversification is a free lunch. For anyone who has not invested in europe, it is a slim d slamdunk. I do not remember them saying it was a free lunch. Is theyre it supposed to be no free lunch, but there is a free lunch. It does not cost you to diversify. You can leverage up so you have the same level of risk and higher expected returns. I teach is that to my students. They have to understand. It is not a joke. It works. Alix i get diversification. , 40 in a bonds. They have been moving together. They do not come to pass. , 40 in a bonds. Environment . Robert shiller we do not know unfortunately, the covariates , i am sorry, the correlation between different Asset Classes is also unstable. If you look at stocks and bonds, it is a low correlation. A good diversification to have in your portfolio. At any point, it can change. You, Robert Shiller. We want to update you on popeyes. It is up by 90 around the offer price you, Robert Shiller 19s of Restaurant Brands. Rest of her embraces of 2 . The Worlds Largest Mining Company. Restaurant brands is up 2 . The ceo will be joining us. Jonathan tomorrow, we hear from and Deutsche Bank and on friday, the governor of virginia. That is coming up and a whole lot more as we count down to the market open. Up almost six on the s p 500. From new york, you are watching bloomberg tv. Alix a town hall event in minnesota. He says the said has a third mandate and it is Financial Stability. Heart is the asset bubbles but he is keeping his eyes open up potential bubbles. He reiterates the stands that it will shrink. He is talking about banks. He is proposing an additional tax on shadow banking and you supports requiring banks to hold 20 equity. Do we see a rollback on doddfrank it into kind of way for big banks . He is saying lets keep some of them involved. Airid it seems like kashk once more regulation. Part of that rise is President Trumps signals that regulatory relief is on the way despite what kashkari is saying. They would have to find 2 regulations to take all all for everyone they put off. Lets start with the sympathy, what what you think about what mr. Trump is doing is right . Robert shiller 12 a fundamental problem with regulations and that is it keeps growing. Their job takes seriously and they want to build the front tier coming up with new regulations. They are not as enthusiastic about looking back over old regulations that are still in force and asking do we still need these. Do they work right . They tend to pile on. Do not delete. You clean your files every once in a while. They do that are not as much as we would like. David back in 1980 when the president was night carter, he said that was will to do it all the time. Why has the statute now work . Robert shiller the statute has worked in the stands at the agencies do regular reviews of past regulation. The problem is that maybe these regular reviews are not as creative and energetic as they could be. There are issues on how we could get them to be more energetic. Idea issident trumps less tiein in regulation, lets tie it to the deletion off 2 old regulations so they have to focus their mind. The regulatory flexibility act of 1980 only said they had to review it. They do not say they had to do a good job. Now, they have to. And iolks is their mind suppose it will have the desired effect. It is a little bit about haver you economics i debt behavioral economics behavioral economics i am hearing from trump to do the job of deleting the phone to. Jonathan who are we talking about . Ofhkari said of the fed has third mandate, stability. To say it on record is different. How will the administration react to the fed wants more power, not less . Knowt shiller i do not how the administration will react. It is right. The Financial Stability has you might say the number one mandate after 20082009 crisis. Systemed like the whole was collapsing like a house of cards. People were upset in 2009. It really has emerged as an important mandate. It is a difficult mandate because it is not something in guide in getting Financial Stability that you could do after the fact. You have to plan ahead for the next crisis. You have to be thinking about regulation, Capital Requirements ahead of time. It is different. Its importantly different. Alix it will get different if you do not have on the fed. He rendered his resignation. What trump can do is different, but he has the power to replace at least three people and maybe four or five on the board. Is he help shift how data looked at, the transparency and therefore have a meaningful shift in regulation also . Robert shiller i suppose he will put more business oriented regulators on. The members ofow the Federal Reserve board can change of the tilt. The doddfrank at created this Financial Research and it is helping us understand things better. But, yeah, i think it would be hard to see what his appointees will do. What trump wants is economic growth. He has had 3. 5 growth over the next 10 years. It may mean he will want a docile set. Well have to see what he means. David he believes as many this is still we have to cut on regulation. If the 2for1 is a month meat cleaver approach, what is a different approach . Steve, ailler representative, has a bill introduced last month that would update the regulatory and by justact requiring that the regulator to have to present some analysis and not just highlight the regulations as the 1980 at called for but do some analysis of the past regulation. Foot alternative regulation, not just a matter of deleting but also make a difference regulation that would be less strict or more flexible. That is another approach that seems to me might be helpful. There is a fundamental issue about how to incentivize regulators to really care about Small Businesses and make sure the regulations are not too onerous. I think we just have to get a good regulators in and make it a good career, give them time and without pressure to think about the real job they are doing. I think they are doing a good job already, as they could do a better job. It is going to be difficult to get regulation absolutely right. Steps to curtail that may be better than the 2for1 rule to dual to deal with that. David and to add more bureaucracy. We are doing analysis if we should be doing that much regulating. Robert shiller yeah, i found theres a little bit of hostility to regulators, maybe you have noticed it, too. With a my own family, the business oriented people, would you bring a regulation, they get steamed. They do not like a. It makes them feel bad. They do not like it. It makes them feel bad about their all lives. They have these people their backs. We need to have a relationship where people appreciate both sides more. Ill its been see you professor. Professor Robert Shiller of Yale University. The Worlds Largest Mining Companys profit jumped. Bhp billiton ceo will be joining us. To that looking for conversation. Counting down to the opening bell. Futures up about 0. 4 on the dow. Switch out the boards very quickly. Headlines from neil kashkari, switching out it may start quickly. The face of this discussion. Basisllar up about four points. A strong dollar dominating that fx market, all of the market from new york, this is bloomberg. Alix we are watching walmart up almost 4 in premarket reporting. Rate quarter of doubledigit online growth. 29 . Brickandmortar change is no slouch. Sales as stores growing 1. 8 . Is one to thetion retailers are able to go on offense rather than defense . Walmart has made the turn in able to play offense. David amazon is start to do brick and mortar. A real clash of the titans. Alix a very different story than a macys. Better. Were their revenue was down 4 in year on year. That is very much of a defense story you can make the argument. Jonathan these stores cannot find growth. The rumors are not for retailers but try to take over unilever. It will not happen. The road takeaway is kraft heinz a saying we cannot find any we cannot findg it a growth. Alix 3g is known for cutting the cost will stop you can only do that costs. Costs. You can only do that much. Underestimated. Anybody wants to try pricing power, its awfully hard. Alix the grocery brand. They have apparel but groceries and that is insulating them in certain respects from that dynamic. You got the border tax and all bets are off. Walmart certainly not happy about a border test. Jonathan it blows my mind. Heres a company that employs 2. 3 million people, the largest employer in the u. S. Jobs, the epicenter of a campaign, at than a tax policy that could damage the biggest employer in this country. David the republican the house have said we have to cut taxes on the only way is with a border adjustability tax. Alix they are dealing with rising wages, walmart. Not only that but that is a dangerous combination. On the band opening bell is coming up. Of to speed, for straight weeks of gains. A jonathan opening bell is coming up. Get you up to speed, watching straight weeks of gains. Wall street is back to work. Opening bell is coming up next on this program. From new york, you are watching bloomberg. With x1 you get the best of the oscars. Youre a funny guy. Funny how . How am i funny . Scorsese finally wins. Could you double check the envelope . Show me best picture. Whats the difference . Show me best actor. I do not take tonight for granted. Thank you so very much. Get all the greatest scripted and unscripted oscar moments on xfinity x1. The oscars, live sunday, february 26th 7ea4p on abc. Jonathan from new york city, this is bloomberg daybreak. 60 seven points on the dow, up about five points from the s p 500 pier 1 third of 1 , almost across the board for the s p and the dow. The unitedrk in states, another record close in fridaysession. You hear the opening bell ring. Here is the situation for the bond market and the fx. Treasury yields up for basis points. Havingg dollar and crude three percentage points. We are seeing another record high here for the dow jones. The close at this level, it would be at an alltime high. Upilar to the s p, we are. 2 but that passes fridays close high on the nasdaq. Another record today and record closing high. Oil, 18 month high. Retailers like home depot and macys and walmart killing it as well. That will help the overall market. I just mentioned a few of them here. Walmart up about 3 . Sales jump about 29 . The value of sales also 36 . Samestore sales, brickandmortar, up. Not had over at walmart as you also had earnings better than estimated. Byeyes also in the market up 19 . Restaurant brands initiating an official takeover bid of 79 per share, 1. 8 billion, a 17 19 premium to friday pauses closing. Crown off by over 4 . Get onpanies could not better ground to make a deal and it will be another six months make kraft heinz can another bid. Overall, the animal spirit, the eighth record high for the dow, make another bid. Eighth gush eight Straight Days continues to be the same in the market. Jonathan remarkable. 2 percent onut the s p 500. Great to have you on the program. That phenomenon, over the weekend, you get back to work. There are various periodswee. Where we have driven markets. 2011, 2012, with the eurozone. Everyone worries Something Big will happen over the weekend. It is too early to say whether that will be a phenomenon with President Trump, because of his englishover the last several yes inclination to tweet on anything at any given time, people will wonder, will he do something, nothing happens over the weekend, it is like ok. Weekhan when did a delivering nothing translate to disappointment over nothing . Askingople have been when there will be disappointed over the fact the fiscal stimulus might not happen for a long time. When will there be a realization answer butow the that is a question Everyone Wants to know and why hasnt the lack of policy been an issue. Find a, people cannot reason to sell. Correlation is really low and the question becomes, is that one of exposing a risk in the market, when you still have trades and hedge funds. The way you put that is really good because there is a view out there that a lot of people are getting hurt, because , it does notations look like there is much pain out there. Inally if we see a pickup correlation, we will see more red across the board. Jonathan we have not seen much pain recently. The biggest Mining Company earnings that Beat Estimates. Over a dramatic reversal the past year of this sector. The ceo of the Worlds Largest , andrewompany mackenzie, great to have you on the program. Buoyantoutlined a commodity market that surged. This morning, the focus on Debt Reduction, a cautious tone on what happened. What underpins the cautiousness for you . Although i am pleased with the earnings, you can overemphasize the things happening on the commodity market. Working toward this outcome fr three or four years, we have steadily been driving more productivity. Costs are down by almost one half in four years and finally, with a pause in commodity a new, we are able to see amount of cash coming through to the bottom line. I am particularly pleased with the number of almost 6 billion after we invested in a lot of growth projects. We have been able to drive down i would reward our with a dividend ratio of 66 . An extra 500 million of cash for shareholders. The caution is based on the fact that some prices are little higher than we would have expected them to be around now, and longer than we would see them being in the longterm, though we are heavily invested in things like charlie him and copper where we see price risk to the upside. I have justution is been listening to the previous part of your program, we are not quite sure where the Trump Administration will settle down and what it might mean for World Economic growth. But we are slightly alarmed by a lot of the sentiment around protectionism. That will ultimately have a bad impact on world trade. We are a business commodity which flourishes when the World Economy grows and the World Economy grows when is growing. Jonathan a lot of things to pick out from that but traditionally, the story was to boost volume as prices pushed higher. The story now it feels for you guys is to take the extra cash and do things like get your debt down. Are you going to continue to look at things like Debt Reduction over investment in more volume . We have a strict Capital Allocation framework that distributes our cash between at between securing our Balance Sheet and giving cash returns to shareholders. Grow the company per se by growing volume. We grow it by growing value. We do that in two ways. We make what we have got a lot more productive. That can mean in some cases more volume. In other cases, the same volume for a lot less cost. Then we add more productive units. One of the great things that we have done over the last two or three years is we have had a bunch of projects that were probably marginal at best. We have tournament to highly investable projects that will allow us to invest significantly, in the next few years. Have deepals you exposure to, copper and iron, a different story. You yourself are skeptical about a rally and analysts think we will see lower prices. How do you protect your cash flow and hedge that . We dont hedge it. The way would protect the cash flows is we protect our margin. We have already driven our production cost low and we believe we can drive them a bit lower with some of the things we have underway. That is the best way to protect that. At the same time, our productivity agenda will reduce costs but also increase volumes. Prices are falling, we can look after our gross margins. Volume is there over price and copper is different. See 8,000 a ton or more before the end of the decade for copper. Do you see that massive rally . Maybe not as quick as the end of the decade, but certainly next decade, we look for the growth and demand for copper, it exceeds what we see as the supply that will come on. By 2020. T certainly copper is one of the metals that even if china is moving into more of a consumption phase, they want to use more electricity, and that will go down a copper wire. That is why in our program Going Forward, it is much more biased to adding copper production. Jonathan lets talk crude. Brent, 6444. Is now a good time to sell . Andrew i dont believe so. I think the price could go higher and i also feel in the shale business that we are working very hard to continue to drive down costs. By driving down costs, we are probably getting ready. Some experiments. We are fracking our uncompleted wells. I think we will go back as the price improves and the costs go down. I dont think we would get that kind of value if we were rushed right now at least our core assets which we value very highly. Offshore number of Petroleum Investments underway with bp and chevron. We are investing in a big pot big project in the gulf. To bet the competition the first foreign country back in mexico to develop a field there and in a weeks time, i will go to mexico to sign the deal and that is another investment we will make. Jonathan here is what interests me. You could have been any ceo in the market and you wouldve told me we will put rigs back to work. Put that together and reconcile the idea of putting more rigs to work but you also think crude will go higher. What will underpin the price growth of oil in the coming year, if a lot of ceos is like result are putting risk back to work. Rigs back to work. Andrew i think they are large if not larger than promised. Growth and aer demand for crude than we would have expected a year ago. Two signals slightly more on the bullish side for price, and one to your point that is slightly more on the bearish side. I think the volumes of oil that will come in u. S. Companies like us putting more rigs some i amon gas and not oil not that large compared to some of the things that are going on in terms of increased demand. You mentioned you have a bias toward copper. A copper problem. Youre now at a day 13. The other two are 14 and 30 days. What makes this strike different than any others . Different. Rike is i dont know how long this will toon, but i am determined continue along the track of making our assets more productive. It makes them more competitive and they guarantee more employment Going Forward. I want us to reach an arrangement with the workforce that provides a degree of Flexible Working and a commitment to productivity. This is a wellpaid workforce and in everything, they will still remain wellpaid and very much part of the higher paid workforce in chile. Want to do that in a way that couldnt guarantee that for a long time. People will be in that workforce for a short time, and they will be for a long time. What is the deficit going to be . A 20 day stop could pullout 64,000 in the market. Do you agree with that kind of assessment . Andrew we run all of our operations pretty much high productivity to we cannot really offset that. I do not know what the actual deficit will be. Better to come up with an estimate once we settle the strike. Away. Has not gone it will still get produced but maybe not all this year because of that strike. Jonathan we always appreciate your insight. Thank you very much. Coming up later this week, tomorrow, we will hear from Equity Group Investments friday, the governor of virginia. Those and more joining the program. Equities very much on the front, up positive eight on the s p 500 and more record highs to discuss. This is bloomberg. Taylor this is bloomberg daybreak. I am taylor riggs. Ing up, matthew talks dartmouth joins us. From new york city, this is bloomberg. I am Jonathan Ferro. Pyramid youpmi factoring at 64. 3. At 53. 9. Comes in a 12th consecutive month of expansion but also a downside. Looking at 55. 8. Previous 55. 8. The reaction in the market, a radical a rather muted one, is there. Just down but still up by. 6 . Treasuries paring some of the losses in the last couple of hours. Data is killing optimism at a 12 year high but then you have some of the data, a little bit pushy and not quite up to par yet. Is michael regan. You get numbers like walmart, killed it this morning. But Consumer Confidence is really high. Walmart is an interesting case. It is pretty much flat since the election. Retailers in general had a very interesting reaction to the election. You basically have to break amazon from anyone else. Another 15 from home depot, one niche of retailing that has been able to withstand the disruption from amazon. You look at an equal weight version of retailers, the xrt aftert really took off the election, up about almost 16 in less than a month and then faded pretty quickly. Sales data was not great, and then you add the macys announcement in early january. Obviously, the border tax is the biggest issue. Sector that is why the is flat as a whole waiting on the border tax. The walmart ceo saying yes, increase costs, joining us, you have an overweight rating with an 82 price target. Numbers wesquare the got today with what microsoft about and the potential for a border tax . Clearly border tax changes the landscape for all retailers. Anyone can actually navigate around a border tech border tax headwind, it would be walmart. Clearly, a border tax is not a positive. At the same time, i cannot imagine a scenario playing out where weaker or lower income demographics is hurt. That is what walmart aims to serve. It does not change our view. Explained to us how it walmart could negotiate its way around this . They are the most powerful player. Are they squeezing their suppliers more to get the cost out of there . It is not necessarily that they are changing the entire supply chain but they have the sophistication well above and beyond what many of the smaller operators out there would have. Almart will be as impacted as target as some of these other retailers. Costco, to name one. Macys, all of them will be impacted. The ones with the positive momentum have the leverage on negotiating. On theany difference impact between amazon and walmart on the other hand . From a border tax perspective . Yes, i guess i would say walmart the actualet about percentage of products they import. They are reluctant to give the number and i would not be able to give you the number for amazon either. My sense is they would both be somewhat impacted. It obviously depends on actual direct sales for the customer. Alix thank you very much, karen short. You can watch us online, click on our charts and graphics, interact with us directly or we want to hear from you. The break, more record highs for the nasdaq, Dow Jones Industrial average, the financial index at its tightest level since december 2007. This is bloomberg. Alix speaking right now at a meeting at the Financial Planning association in minnesota weighing in on the economy and the fed Balance Sheet. Michael mckee joins us now. A string oft of speakers we will get this week. Is nowal stability apparently a mandate of the fed. Michael some people have called it a third mandate and they are concerned about what the markets are doing. The most interesting thing Neel Kashkari had to say is he thinks there is still some slack in the labor market. He has not said when he will vote to raise rates and has not changed his economic forecast. Ready tot of maybe not vote in march for a rate increase. You could read it that way. So many others have said marshes on the table. You saw patrick move the markets this weekend. Leaning in the other direction. David there is nothing he said that would indicate march is something he would be in favor of. He is not sure what is coming down the pike. All of the indications are more, lets take our time. Michael he seems to be more cautious than we have seen of the otherwo voters representing the fed banks. At this point, it is still an open question what they may do. Some of your analysts this morning said it best. The data will tell us where they are going when we get to the point where we see the payrolls report, if it is strong, that will move market sentiment. The headline screams at me, stringing the balance they are serious about this, arent they . Michael they are getting closer to the point. She says we will have further next coupleover the of meetings. It is probably end of the year material and may also be something that she wants to leave to her successor, because there are questions as to how they will do it. It is something the markets can now start thinking about. Michael mckee, good to have you with us. The calm before the minutes. That wraps up bloomberg daybreak. An eighth straight day of gains for the dow. There it is on the session. The s p 500 up. 4 . Work. Treet gets back to from the bloomberg daybreak team, good morning. Markets coverage continues with bloombergts markets next. Vonnie we are bringing you live pictures of President Donald Trump speaking outside the National Museum of African American history and culture. Some comments. Lets listen in. Donald trump i will be back, i told you this. Stay here a lot longer. Believe me. It is incredible. I am deeply proud we now have a museum that honors the millions of African American men and women who built our national heritage, especially when it comes to faith, culture, and the unbreakable american spirit. My wife was here last week and took a tour and it was something she is still talking about. Ivanka is here right now. Hi, ivanka. And it really is very, very special. It is something that, frankly, if you want to know the truth, it is doing so well that everybody is talking about it here it i know president obama was here for the museums opening last fall and i am honored to be the second sitting president to visit this great museum. Etched in the hall we passed today is a quote from a runaway union army. Ined the he believed that his fellow africanamericans always looked to the United States as the land of universal freedom. Today and every day of my presidency, i pledge to do everything i can to continue that promise of freedom for african and for every american. So important. Nothing more important. Meaningful reminder of why we have to fight bigotry, intolerance, and hatred in all of its very ugly forms. Very ugly forms. The antisemitic threats targeting our joy which community our Jewish Community and commute he centers are horrible and painful and a very sad reminder of the work that still must be done to root out hate and prejudice and evil. A great friend of mine, dr. Ben carson, and his beautiful family, candy and the whole family, for joining us today. It is very special to accompany him and his family, for the first time seeing the carson exhibit. I love this guy. Hes a great guy. Really a great guy. You better than me, but i will tell you what, we really started something with ben. We are very proud of him and hopefully next week he will get his approval, three or four weeks late. And youre doing better than most, right . But the democrats, theyll come along. I have no doubt theyll come along. Then will do a fantastic job at hud. I have absolutely no doubt he will be one of the great ever in that position. He grew up in detroit and had very little. He defied every statistic. He graduated from yelp and he went yal