Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170802

The adp employment report in july ahead of the jobs numbers on friday and at 8 30, the treasury refund announcement. They are refunding the treasury. They are going to be trying to limiting the effect of the fed reducing its Balance Sheet. Also what 8 30 this morning eastern time, alix steel will interview Goldman Sachs Ceo Lloyd Blankfein. Lesters speaks at a business conference, and John Williams speaks in las vegas on Monetary Policy. Late yesterday we got news of Apple Earnings for its Third Quarter and the tech giant Beat Estimates on earnings per share, robust growth and strong projections on revenue for the rest of the year. Here to take us through the numbers is angelo zino. He has a 170 target of the price and is joining us from adam sitslittle as area, bloombergs tech reporter. Give us the numbers that are most important to you. Adam the biggest thing is now about looking forward. There have been some concerns about the next iphone that adam apple will be producing will have some delays but the company is showing optimism about what they will be able to do with this new advice device. David what about services . Services were up dramatically. Adam that has been a story that apple has been anxious to tell, ranging from the app to movies you buy through itunes. The Company Continues to grow that piece of revenue, but it is still important to see the company through the lens of the iphone. Even though the Services Business is growing, User Services built largely on top of the iphone. Think apps and things like that. Jonathan lets talk about the future, the future iphone and the average selling price of the Current Quarter. What is in the asp that indicates to you at all, if at iphoneat they can get an 4000 and there will be a big demand . Interesting, we look at apple and their ecosystem. Marketlook at apples share in the u. S. And over 40 of the smartphone market, it is interesting what type of customers apple caters to. It is the kind of high end, affluent customers and because of that we are likely to see customers in the next iteration of the iphone cycle be willing to pay for that higher end device, 1000 or north of that. Really when you talk about the actual, the way the senate here is with apple, installment programs whereas may be a customer now is paying about 27 40nth, going up to maybe 45 a month is something most of these customers would be willing to do. Adam, looking into the story, the amount of demand for an iphone at 1000 a unit, what are your thoughts about that currently . Adam it is going to be a test for the company. At a price like that, some people will say i hope there is an app that prints money. Be a new design, a new hardware look. The screens are supposed to be edge to edge, new augmented reality features, better camera. The sort of incremental changes something that many customers are probably going to be willing to buy. Company has shown over and over again it can get customers to pay a premium price for these devices, but this is a test. David one place they are not being able to get premium prices is china and that may be a little bit of a cloud on the horizon because the report in china was not as encouraging. What is the problem in china . Adam like many companies, they have struggled, particularly american companies. The issue is knock offs. There are a number of different knockoffs available. There is also some local competitors that do well, and the App Ecosystem is very different. A lot of the services that chinese customers do, they go through things like 10 sent, which is a whole sort of different channel to go through rather than going through apple. It is almost another app store. In those ways, if you are not using the same kind of software it diminishes a little bit the need for why am i paying this premium price for an iphone if i can get Something Else that also has we chat or other chinese services. David you have a strong buy on the stock. How concerned are you about limitations of where apple can expand in places like china . Adam we are optimistic and i think the challenges they have had in china presents a good opportunity. We think that that tends to be a market where consumers are willing to kind of go with the trend, and as apple moves some of the features, whether it be wireless charging, that moved to the 3d technology we think will , and wee opportunity think the china customers will gravitate towards that. I am going to give you another challenge, a cash call of about 260 billion and how do you spend it. What are they going to do with it . Angelo if you look at recent years, the cash has been building but so has the debt levels, and they have been essentially raising the debt in order to continue to buy back the shares. If you look at what they have done since 2012 when they embarked on that Capital Allocation process they have done, they brought back about 21 of their shares. That is what they continue to do and we think they will continue. Jonathan the Capital Return Program is a monster and does it make sense they are waiting for repatriation to come through from d. C. Anytime soon because they do not need to . I can borrow from the debt market easily. My question is, is there any indication from apple that they know what to do that money apart from send it back to investors . Angelo if you look at apples dna, historically they have not been the risk takers willing to make those big deals. The biggest deal they ever made was beats for 3 million. If you look at what they are willing to do in the future, odds are they probably are not going to make that big deal. That being said, do we think they should make a big deal . Yes, but our view is for the time being there shares remain very attractive and they should continue to aggressively buy back their shares. David you report on this company tech general around the world and we also saw said things about whole foods. Is there anything the market thinks is really attractive for an apple to spend a lot of cash on . Look at theve to areas of where the opportunity is and where you can see where they are going. Media is one area which they are showing more and more interest. They hired executives from sony to begin making more original programming so maybe that indicates that is an area they can be looking to acquire more. They are also working more on Autonomous Vehicle software so that is another thing. Rumors about netflix or tesla, things like that get thrown. Bout, they are sexy rumors apple certainly has the cash to make those sorts of deals, but. T is not the companys dna they do not do these transformative deals so to handicap that, you have to assume it is not likely to happen. Was likely tot happen and you had those choices laid out in front of you, netflix or tesla, where would you want them to go . Angelo i would rather than look at the tesla opportunity than the netflix opportunity. I think netflix is something they can do internally. Out 10 billion to 20 billion, but why throw 100 billion when it is something you could do internally and probably pretty well . Tesla is so far ahead of the game, i think the opportunity in kind of thens connected home and connected car market and that would be a great opportunity. Jonathan one company, amazing, they are burning cash and one company is making cash. Angelo zino, thank you for having us on the ship being on the show. With us, Matteo Andreetto will be joining this program. Corporate ownership, shareholder rights, we will get to that in a moment. From new york city, you are watching bloomberg. Russell istse threatening to boot around 30 come trees as companies from their benchmark. Companies from the benchmark. Snap and blue apron are among the companies that would be affected. We sat down with the ftse russell ceo last week following the news. If you think about who our big clients are, the big Institutional Investors of the world. We are the big Pension Funds. These people, they want to be companies fornce good Corporate Governance reasons and when you have Companies Come to the market with no voting rights, very difficult for the shareholders very difficult for the shareholders to have an influence. Jonathan joining us now to the Matteo Andreetto, stock ceo and head of the Index Services at deutsche bus group. The move of some of your competitors, what is your thought . Matteo we assess on a yearly basis, so what is important for investors to understand, all the big banks, big Asset Managers and funds in the world, we look at the way they tend to invest in two Different Companies and we assessed on a yearly basis what are their needs, taking into consideration what the market is telling us. Jonathan what do you think is the philosophy of the business now . Looking at your competitors, saying it is our responsibility to make sure there is a big amount of shareholder rights baked in. That is a pivot from what we usually think about this industry. Matteo indices are becoming more and more relevant. If you look at the etfs and 2017, as of the first of we are talking 700 billion in assets tracking european indices. That is a significant pool of capital and that is why the stoxx is different from similar competitors. Our indices or rulebased and there are no committees so effectively there are no this. Every time we make changes we follow the methodology. Our policies to review the methodology on a regular basis, but there will be no surprises for the big asset funds and retail investors. Also said he had spoken to these big investment funds, these big Pension Funds, and they were for this. What are they saying to you . Matteo for us, it is more regular process, it is down to transparency and the way we regulate those road rules. David it is more than transparency. He was saying he has his big investor did Institutional Investors are you hearing that sort of thing coming from your big essentially customers in the form of institutional shareholders . Matteo we see the relevance of governance coming out more and more, especially in europe. Theme for all the big Pension Funds and institutions in the world. The relevance in europe is clearly higher than elsewhere. To follow themng in the industry requirements is not only looking at our rules but Investment Strategies that cater exactly to that investment need. What we have done over the past we focus oneader est related strategies, focus on the environment and governance. Governance is an important driver and in our economic and Financial Investment research, esg might become a more significant factor similar to revenue and growth. David explain that to me if i am a Large Pension Fund and am concerned about it. What will you give me to be able to influence esg . And we we make a choice crunched a huge amount of data, look at the Balance Sheet and different data contributors. For example, Carbon Footprint is something we are quite unique. We are taking the current and committed Carbon Footprint and create a synthetic score. That will create the highest exposure to those particular investment themes and we make sure they are properly reflected in your portfolio by creating a portfolio that caters to your needs. , theyan at ftse russell think that changing the rules this way is an added premium for the index. I imagine s p and dow indices are thinking the same. Does that mean you guys do not have that premium or is it achieved elsewhere doing Something Else . Matteo i think it is down to reviewing regularly, exactly what our departments and investors, and taking our yearly review of the rules. The second side is making sure that every time new investor needs come up, we have the right solution. Jonathan is the right solution that they should go active and stop being passive . What interests me here is the active manager is pushing you guys to do something about it because at the moment, all the passive money is going in regardless of whether there is earning shareholder rights at all. This is what i want to get too, should it be down to the investor to work this out or the index to sorted out . Matteo the Index Provider should provide tools, that is for me pretty clear. As long as the tools are rolebased, transparent, and the investors know how to use them with our presence in the market. If an investor wants to express particular views on companies, clearly they have the proxy. Jonathan is that an expensive way of saying, it is not our responsibility, it is the investors responsibility and if you want to make sure you have adequate shareholder rights, do not invest in an index, invest in a stock . Matteo that is not what i said. As an index buyer, we have to make sure the investor needs are reflected in the rulebooks and second, to create strategies that allow investors to express their views and to have the best possible set of tools to allow investors in a transparent, liquid, rulebased way to access those markets. David one of the big stories in markets has been a shift from active to passive which affects your business. What has it changed . What pressures do you have now that you did not have five minutes ago five years ago . Matteo we have seen a significant migration into Something Else, called smart bases. There are 700 billion in global strategies. ,e have seen new definitions how do you define this . Froms that migration active into passive taking form and investment portfolios of institutional private banks and wealthy retailers individuals and retailers . We try to find the best source of data married with the best source of research to create the best Investment Strategy to address the risk remy a. Premia. Jonathan what is the number one question that comes up . Matteo surrounding europe, will it be stable or not. We have seen on one side, european markets lagging the u. S. In general, the euro having the strongest rally ever, and intotart for a relocation europe for european equities as an asset class. Investors are telling us there is significant demand for europe in general. Europe has been underweight, germany as well. We saw a shift from broader european exposure in two countries most likely driven by the general stability in europe, and it is interesting that the first wave is representing to the currency and then migrated potentially into other asset classes. Jonathan the question that comes up is whether you can have a simultaneous rally in european equities and the euro as well. This is a reflection of structural reallocation back into europe from abroad, when after the second round of the financial crisis in europe and got damaged significantly. Are you saying a lot more foreign money coming back into europe . Matteo we have seen a lot of interest in european equities driven by investor allocation and also the fact that there are valuations that a been compressed, but also there are new possible investment things exposed to in europe. David Matteo Andreetto, thank you so much. Sachs chairman and Ceo Lloyd Blankfein will be joining us live at 8 30 a. M. On bloomberg. Emma this is bloomberg daybreak. Delez is retiring and will be replaced by dirk manner field of mccain foods. They posted sever secondquarter earnings that Beat Estimates. Societe generale is still struggling with the burden of litigation. Francis Third Largest Bank Increased its legal position by 340 million. Bloomberg spoke with socgen ceo. What we decided to do was add a provision to the general provisioning. There is no Significant Development in the investigation. We still have to put behind us onlknown litigations and potentially followup in the u. S. He tried to put that behind us as quickly as possible. Emma profits fell 28 in the Second Quarter, matching estimates. In italy, the Business Plan will focus on wealth. Praised theo acquisition. Tesas ceo praised the acquisition. Earningspershare create acquisitions of the point of the deal is for sure a good deal. Governmenttalian gave them more than 4 billion to take on the failed banks performing asked nonperforming assets. Jonathan coming up on friday, it is payrolls friday right here on bloomberg tv. We have an allstar lineup to react to the jobs report. Alan krueger, rick reader, and bill gross. Mohamed elerian is on vacation this week. We will miss him, but that is your lineup on friday, the payrolls report right around the corner. For coverage on bloomberg tv. For our viewers worldwide, you are watching bloomberg. Jonathan jonathan from new york city, for our viewers worldwide, you are watching bloomberg daybreak. Alltime highs potentially on the dell, futures positive 30 points. The big pop on asphalt in the premarket helping things out on the dow and the nasdaq. The story in the bond market as follows, stable, yields are higher about two basis points at 2. 27. A lot of people will discuss euro strength and they will talk about cable at 1. 3232 but to me the story is the dollar that cannot catch a bid. The cable rate stronger even though we had a really soft construction pmi in the u. K. , we were looking for 54 and we got 51. 9. A dollar that is not going anywhere anytime soon, the cable rate up to tens, eurodollar up why a quarter. You an update on the headlines outside the business world, here is emma chandra. Emma the senate has confirmed Christopher Wray as the new head of the fbi. The former federal prosecutor has a big task to steady a Law Enforcement agency buffeted by political pressure and criticized by the president. The Trump Administration is planning to take on affirmative action on college campuses. The Justice Department may investigate a few college over admissions policies it believes discriminates against white people. U. S. Air force may strike a peculiar deal for the next air force one planes. A person familiar with the matter says they are in talks to earmarks for a defunct russian airline. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. David that is one way to save money. Jonathan if you could write a story, a short story, that would probably be it. David from russia to air force one. Staying with washington, it is trying to shake off that failed attempt to repeal and replace obamacare and the focus is shifting to economics. The need to pass a budget and bumping up against the debt ceiling. Here to give us a sense of what going on is isaac boltansky. Take us through that trilogy i just laid out tax reform, a budget that has to be passed, and debt ceiling. How will they play out in the next 60 days . Isaac lets start with the optimistic part, tax reform. We have started a hard habit to tax reform give it pivot to tax reform. Timeline that is i think willfully woefully isressive and something that not realistic in any way, shape, or form. They want to get this tax reform bill through the house and the senate and to the president s desk by the end of the year, but we have major hurdles between now and september in particular. I am worried about these fiscal follies and deadlines that you mentioned. David exactly, what you are saying and the markets have discounted the possibility of tax reform but there is the budget deficit, the overall deficit limit as well as the budget. The market is incorporating those and discounting the tax reform . Isaac i do not think so. I do not think the market is fully prepared for the shift from congressional inaction to congressional dysfunction, and two dates matter, september 29, the best deadline we have for the debt ceiling which once again has returned, and september 30, the federal funding deadline. It is important to highlight both of those because the entirety of the month of september is going to be spent on those deadlines, and lawmakers are on recess in the house, soon to be on recess in the senate. A will return in september with a ticking clock behind them and two must act deadlines regarding fiscal policy. David which poses the greatest risk to markets . Isaac the debt ceiling is far more important. Our view is the debt ceiling will be addressed. Lawmakers generally understand the importance of the debt ceiling but i fully believe there will be a Government Shutdown at the beginning of october, and we have got to start thinking about how those fiscal missteps or moments of fiscal uncertainty might even impact the Monetary Policy at the fed. David when we shut down the government, it has bad effects throughout the economy. How long do you expect it will last . Isaac it is anyones guess but i think it will be relatively short. It isican still believe important to show a capacity in government. It is going to take time to get the 218 in the house necessary because of those disparate groups, in particular the House Freedom caucus. Jonathan i like to explain things in simple terms. If i get a phone call over the weekend from someone outside of politics and Financial Markets asking me, how can you have a republican president , a republican congress, and they are going to shut down the government . What is the simple explanation . Isaac i think part of it in reality is that the gop, at least in the house, has three different contingents. You have the leadership loyalists, the moderates, and the freedom caucus. They have 240. You only need 218, that each one of those contingents can shut down progress. Honestly not dissimilar from the scene in Blazing Saddles where the sheriff holds himself hostage. I think we will get a resolution but there is going to be some volatility between now and when a deal is brokered. Jonathan Blazing Saddles, that is the easiest way to explain it. Isaac boltansky, thank you for joining us. The drama continues to unfold on capitol hill. Stocks continue their march toward record highs. Since President Trumps election victory that joe has jumped 20 the dow has jumped 20 . The dollar, a different story, has now held up well not held up well. Round 5 . Joining us to look at the u. S. Currency in london, paul dobson and on the phone from stamford, connecticut, michael orourke. Mr. Dobson, lets begin with you. The currency market absorbing pretty much the whole story in d. C. , the euphoria in europe as well, but the dollar cannot catch a bid. What is the story . Paul it is exactly as you have been explaining, and International Reception of the u. S. In terms of political reform and planning is that it is just a bit of a mess. We had comments, for example, from the European Industrial Company Involved in america yesterday cutting their forecast for the u. S. Performance and sort of talking about how everything has been a disappointment so far this year. Not sort of apportioning any blame. Fx markets love stories and narratives and if you have this kind of lack of trust going on, that is really going to start weighing on the dollar. In addition, you start looking at the economy, it is performing ok but the data has been mixed and the odds of a fed hike again this year are slowly falling out of the market. It will be important to see what we get in payrolls data, whether that could turn things down. Jonathan michael orourke, what are your thoughts on that . Why is it the only place seemingly absorbing all the attention in washington and elsewhere . Michael i think you made some great points earlier, especially when you talked about the u. S. Federal Government Holding itself hostage. The dollar, it is a very simple way to express the uncertainty about the debt limit situation. The Trump Administration have these very lofty goals for legislation and reform, and the bottom line is nothing has been accomplished. It appears like nothing will be accomplished. Like your previous guy said, we will come back in December September with these deadlines that makes the dollar the easiest place to go for investors globally to express that. On the flipside, even though we have had a pretty good earning season, the stock market in the u. S. Is making alltime highs, it is a very expensive market and most investors over the course of this year have become very concerned about valuation. Even the fed has expressed concern about valuation. Overseashis rotation to europe by institutional Money Managers and that is another factor coming into play, in addition to the uncertainty in washington. Jonathan if you had a choice and i said, you can buy the dollar now and go away until october, is that a choice you would make . Michael i think the dollar is going to bottom and is pricing in all of the weakness that is expected. Interesting, i was saying this to my clients last night, dollar down 10 since the start of the year. That is a pretty significant move. When you think of last year in gavember, the fed governor a speech about the 20 appreciation in the dollar from 2014 to 2015, equivalent to 200 basis points fed funds hike. It is almost like we have had this 100 basis points fed funds cut if you apply the logic, and it is probably for the most part priced in, this weakness. A great point, thank you to paul dobson and michael orourke. Coming up, tom fanning, we will talk with him about his earnings out minutes ago and the looming question of whether he will have to walk away from a expensive Nuclear Power plant. Live from new york, this is bloomberg. Emma this is bloomberg daybreak, i am emma chandra. Coming up in the next hour, Lloyd Blankfein, Goldman Sachs chairman and ceo speaks to our very own alix steel. This is bloomberg. David this is bloomberg, i am david westin. Gas 29n Company Delivers states, making it the secondlargest. Southern announced its earnings earlier, posting its biggest loss and a quarter century. Joining us from atlanta to talk about the earnings and the plans Going Forward is the ceo, tom fanning. As i read it across the bloomberg, you actually beat on revenue and profitability in your basic operations but you had to take a writedown on the clean coal operation, is that what happened . Tom that is exactly right. The base business is performing wonderfully well. Charge we took was associated with a project conceived in 2009. We committed to build a clean coal facility that would have a Carbon Footprint equal to or less than natural gas. We fulfilled that commitment, built the plant, but in the meantime Natural Gas Prices fell. At the time we started building the plant Natural Gas Prices were 10 per million btu and now they are around three dollars. And ourult, the project regulator issued some guidance that said they would not allow recovery of those costs. So these charges reflect the reality that we face in mississippi. David which reflects the nature of your business, a really big capital business where you have to put a lot of take bets over a long time and then you have gas changes that happen. You have a couple of similar problems with Nuclear Power plants where you have a lot of money in, a fair way to go, and have to make a decision about whether to shut it down. Where are you on that . Tom this one is different. This is a project being built under a turnkey contract by westinghouse. Westinghouse declared bankruptcy this spring and we have been in the process of trying to assess whether we go forward or not. We are right in the middle of that process. It is not just us, we have coowners in that project, and we have to work certainly with the purview of the Georgia Public Service commission. David i understand georgia is putting pressure on you. Will you have to make a decision by the end of this month . Tom i do not think that is pressure. Everyone, given the magnitude of cost involved wants to do everything right for georgia customers. Is certainlybody working with a sense of urgency, but at the same time recognized we have to do our due diligence. Our expectation is that we will reach a recommendation to the Service Commission and an agreement with our coowner sometime this month. If i i would be remiss did not talk about renewables because that has been a Major Initiative of the southern company. Are you as sure of that, how is that working out . Tom sure, absolutely. From an energyy standpoint is about the size of the nation of australia. Became chairman, our penetration renewables was essentially zero. Now we are about the largest owner of solar in america. We are pivoting to wind. We Just Announced a wind deal yesterday. I think right now our Energy Production out of renewables is about 9 of our total portfolio, so we made a terrific inroad. When you think about this all of the above notion, we remain committed to this principle. Is sos why nuclear important and represents i think a National Security issue for america. Gas, coal, natural renewables, energy efficiency, we are doing it all. David that is tom fanning, ceo of southern company. We are joined by libby to dos an investment manager focusing on oil and gas and other energy investments. Talk about what is going on in energy as an investor because that is really the capacity you have. Given what has happened in but also from the Trump Administration with deregulation, how is it change the investment in energy . Libby i think right now unfortunately everything is captive to the movements of crude oil, and there is not a lot of focus on the fundamentals of business. If you think about energy equities, we really have the producers and the midstream businesses. The producers right now are continuing to produce. About 50, aged little less than 50 accrued this year, and it is economic at that level. The southern ceo just talked about natural gas, the cheap price of natural gas has driven demand and taken share from coal. They are continue there continues to be good things happening on the energy forefront, but really in the midstream space is where the are going to benefit the companies and you are not seeing that in the stock prices. Ofathan you mentioned some these companies are held hostage by the oil price, but i whether whether the sensitivity to the oil prices has diminished somewhat over the last couple years. Has it . Libby there are certain time peruiods that we have seen that diminish. If you take the aggregate of 2015 through where we are at the close of july, we have had a pretty high correlation. You would expect that from the producers. You would not expect that from the pipeline type companies. David that is libby to dues of cushing asset management. If you have a bloomberg terminal, check out tv. You can check out our charts and interact with us directly. This is bloomberg. David this is bloomberg, i am david westin. China, the second largest economy in the world has become a dominant influence on the markets worldwide, and hsbc has been there since founding in 1865. China remains the center of hsbcs strategic plan. Hsbc operates in the United States through a subsidiary, hsbc usa and we are pleased to be joined by their ceo, pat burke. You are based in the United States, they do have u. S. Clients but you have a focus overall in china. How is that . Pat i would say the relationship between businesses in the u. S. And china, characterize it as one of a lot of optimism. If i simply take our own numbers of the past year to year, the first half of this year and the last half of last year, we are rough up 30 roughly up 30 . To hear a fair amount about restrictions on capital flows from china outside into the west. Are those affecting your clients . Pat there will be some cases where you have a client that may have been interested in doing a deal in the United States and they may have to slow that down, but i think the way we think about this is not so much in the immediate term what is the impact, but is there this longterm interest . Thehave huge sectors of economy in the u. S. That are very attractive to chinese companies, and regardless of the capital flow and restrictions that interest will remain. Under two years ago there was a fair amount of disruption in the Chinese Market that discouraged a lot of people. Is that all past . Are your customers comfortable with the course Going Forward . At the way you have to look it is, this is over an arc of time but a tremendous amount of progress has been achieved and i anticipate that will continue. We are likely to see further tensions and some surprises in the future, but if you look at this as a longterm investor, the steps the chinese are making to open their Capital Markets i think are quite substantial and substantive. David when your institutional and corporate clients come to you, what are the biggest impediments or hurdles they see doing business in china . Pat i do not know it is so much an impediment question. A want to make sure that what they are doing is going to achieve their objective, and that is one thing we can help with so we have clearly a lot of experience and boots on the ground in china. We can help our clients decide, this may be the right place for you or if they are thinking about something that is not, we are happy to share that with them. It is not so much about impediments as understanding how to navigate. David when we look at opportunities on the other side, what is their top list . Pat what you have to remember is china is moving from being the worlds factory into one that is an innovator and a Technology Oriented is this environment. They are very interested in things like health care, biotech, technology itself. They are going to try to do is learn how it is done in the u. S. Through an acquisition perhaps of a u. S. Business, and apply it in their own market. David you started by saying your business is up yearoveryear 33 . Pat u. S. In china. David can that pace keep up . Pat i think it can. You have a tremendous amount of growth in china, 6 to 7 , and the u. S. Is growing also, albeit somewhat slower. The amount of interest that both countries have and that businesses of interest to the other are growing and is strong. We see an almost unlimited amount of growth in the next two years. David that is pat burke, hsbc see ceosident and and president. Jonathan coming up, Lloyd Blankfein. Coming up in about 34 markets minutes time is the markets open. Bear in mind that apple makes up about 4. 5 of that index and apple is kicking higher in the premarket. Jonathan apple searches to a record. The forecast of betterthanexpected revenue for the quarter. Sets the dow up for another alltime high as the stock market continues to shakeup in an effective congress. Currencymarket market flees the optimism over euro. The euro climbs to a new 2017 high against the u. S. Dollar. From new york city, good morning. You are watching bloomberg tv. Im Jonathan Ferro alongside david westin. Alix steel is in baltimore. What is alix steel doing in baltimore . Alix im doing some pretty cool things in baltimore. I miss you, but i will be , theng to Lloyd Blankfein ceo of Goldman Sachs, as well as Mike Bloomberg. The reason why is Small Business. For the first time ever, bloomberg philanthropy and Goldman Sachs will donate 10 million to Goldman Sachss Small Businesses. It will help set them up to grow. On top of that, we will get into the d. C. World and what the dysfunction means for their businesses as well as Small Businesses. It is Lloyd Blankfein, so i will ask a little bit about gary cohn and the fed and fixed trading turnhat might help the business around. I might miss down 22,000. Jonathan i just think he will miss it. Looking forward to the conversation. Futures up firmer as you are looking at the s p 500. The eurodollar is the big story. New highs for 2017. At one point in the session, we were seemingly approaching 1. 19 its a dolla. Is a dollar weakness story that surprised many people. 2. 27 is the yield on the u. S. 10 year. David you probably know already that apple announced its thirdquarter earnings and the stock shot to nearly recognize. Record highs. Joining us now is a telecom and mediatech analyst who has a buy rating on this stock. So pretty bullish. Vindicated by what happened yesterday . Apple is feeling badly kidded that this thing is not that. David it was all about the iphone 8 and lo and behold the ipod, i thought it was gone. It comes crashing back. Walter it was an amazing performance. When you sell a million or two more ipads than you expect, thats a couple billion dollars of revenue. Obviously thats great news for apple. Its resonating for government and the pricing is lower and you had multiple years of a trough, so there may be an upgrade cycle kicking in as well. David as you go across their products, you saw good news. I watch and Everything Else, but the focus really was on this iphone 8. They gave pretty encouraging numbers forward looking for the revenue for the rest of the. Does that mean we will get the iphone 8 sooner rather than later . Newsr the ipad was great for the quarter, but its really about the guidance. The revenue guidance, no matter how bullish you can be on ipads or services, it certainly implies a new product in the quarter. The has to be sequential growth in the September Quarter and i was a major concern existing in the markets the last couple of weeks whether that would be some delay that pushes out all the products into the next quarter. Jonathan the average selling price of the previous quarter, how is that going to evolve from here when this branded phone comes out. . Walter it better go up because for consensus estimates to go up, thats where you need to have it. In the First Quarter come it was a little soft, but they were flushing inventory of the iphone 7 and seven plus. Next yearsat las estimates coming in to see mid singledigit growth and that belies the concept of a 1000 iphone and whether consumers will buy it. Spoke to tim cook emily chang and he said that the rumor mill is in full turn. Round the new phone it may be took something away from the previous quarter. Do you see evidence of that . Walter that is not accurate from what we saw from a lot of the wireless providers. It actually flipped it up for a lot of operators in the quarter. That could of been the galaxy s eight. They created activity where the upgrade rates did start to invert. That does not mean they cannot go even higher in the third and fourth quarter. I do not know if wireless operators will be aggressive as people expect. As it takes the upgrades higher, thats obviously good news for apple. David China Remains to be a challenge for apple. They did not have a lot of good news to report on that. Is that a longterm problem they will need to overcome . Called cook on the talked about hong kong profiting. Troughing. There was a 9. 5 decline in china, and that includes hong kong, better than the 14 decline. Jonathan you touched on it at the beginning of the conversation. Tim cook also pointing out that its become a fortune 100 company a lot quicker than he thought it would. How big is the Company Going to be ultimately and when do we have to start thinking about the way we think about how to value apple because of that business, the changes in the multiple that should apply to a company like apple . Walter whats amazing about apple is that you have a couple million ipads in its a couple billion in revenues. And even the watch, which everyone thought historically was a terrible product, they find billions of dollars in revenue. As far as the Services Business, where that plays into the value is that it sustains the gross margin. People talk about this is a recurring at revenue business, but the iphone is recurring revenue business. When he was in the valuation of apple coming look at topline growth and Earnings Growth and where is that gross margin. That gross margin has really sustained. Youre looking at multiples of the company and its still a one or two turned discount to the market. They are putting up 10 Earnings Growth and sustaining that gross margin and tell you they have differentiated products and services. Theres no reason that as they continue to execute on that growth story that the multiple cannot expand further. Jonathan it allows them to be an absolute cash machine. They have 260 billion in cash now. I understand they raised a lot of debt and they spent some of that money without bringing it home. What do they do with it . Please, obviously the second part of the question really was as long as investors are doing well, which they are, i imagine theres not much pressure on the company to do anything with it. Walter first of all, r d is a record high 2. 9 billion. They are trying to make siri and maps better. They tried to make more things for the watch. Theyre still generating 65 billion to 75 billion a year. David there went up 5 billion in that one quarter alone. Its like the sorcerers apprentice. The farther you go, the worst you get behind. At what point does it become a problem for the company . Walter it has been growing at a percent of revenue, but it sustained and they are giving them a path on the fact that percent of revenue has gone to 6. 5 . Why not use your cash to buy the companys . The billion and they have 15 billion in anothers and spending 15 billion on cap x, they have another 45 billion to buy stock back. That gives you 50 Earnings Growth 15 Earnings Growth. Compare that to the market multiple and tell me why it should be trading at a discount right now. Seven minuteslast was just a very expensive way of saying by apple. Walter right now they are in a sweet spot. Growth is accelerating. They are topping doubledigit net income and Earnings Growth and they are buying stock back on the way. Its a good time to buy apple. David thats why you have a 184 price target. Jonathan it is the most researched company on the planet. Walter thats true. Jonathan if we all know this, why isnt it there already . Walter people didnt know about the ipad performance. That 2. 9 billion r d budget quarterly is a new product category that people have talked about but have not been released. Ishave to figure out what that incremental revenue and profit opportunity thats going to come. Jonathan do you remember when they had the Investor Committee meeting and the guys after the table said i like apple . The whole table lacked at him. He wouldve done well. Walter, thank you very much. Apple poised to open on a record high and the dow has posted 31 of those. That 22,007 the march to the 22,000 level could happen. Joining us now is the commonwealth financial chief investment officer. Lets begin with the earnings story. Stocks are record highs and a lot of people said the earnings story was going to be important. It has delivered, has it . Nt it . Brad it certainly has. You certainly expect earnings to the upside. This quarter, we have seen a mostly quarters of companies surprise on earnings and also revenues. Its not only good earnings, but theres very strong topline growth. Thats very positive for the fund metals. For the fundamentals. Jonathan much has been made about the s p 500 and apple has been waiting a major benchmark here in the United States. The earnings of those companies how critical where they to evaluate the price action we have seen so far and what are your expectations next couple of quarters . Brad i think we will continue to see outperformance and i say that for a couple of reasons. First of all, technology as a whole has done very well obviously, but it is still valued only at the level of the market as a whole. Much as you are saying a couple minutes ago about apple, why should it not be trading at a premium given the growth out there and given the potential for future growth . There is this perception that technology is expensive. Its not apart from a couple of marquee companies. And there still is upside. David that all makes good sense, but why is it anywhere i go in new york these days, they say whats going on in the market . Im getting nervous. Some others are not as encouraging coul d. The u. S. Dollar has really weekend and we have the looming specter of the Balance Sheet being reduced the fed. Why are people so nervous about these levels in equities . Brad they should be nervous in some respects because the market, depending on how you look at it, is at the third highest level ever. The market is very expensive and we should be nervous, but that does not mean it cannot go up. We know what causes serious pullbacks. A recession is one of the primary indicators. We just dont see that. We see corporate earnings rising. Should you be nervous . Yes,. Should you be immediately nervous . I dont think so. David how much of it is a weaker dollar and moneys overseas and cheap money . Their costs of capital have gone down substantially with this accommodative fed. Somethingp capital is to keep an eye on, but again, thats a trend that has played out over years and is not likely to change. One of the Things Companies are doing now is locking in that sheet cheap capital. They would still have access to that cheap money for years. The cheap dollar on the other hand we just saw an expensive dollar over the past couple of quarters. We are just pulling back a little bit. , but its probably added its a little giveback from previous quarters. David brad will be staying with us. Coming up, Goldman Sachs chairman and Ceo Lloyd Blankfein will join us live at 8 30 a. M. New york time. This is bloomberg. Jonathan from new york to our bureaus worldwide, youre watching bloomberg. Futures are positive on the margin on the s p 500 and positive on the dow as well. Appetizer before the main course on friday, it comes out at 178,000. We were looking for 190,000. The print is 178,000 and the survey was 190,000 and the previous number was a revised 191,000. Better than expected the previous month, but below expectations the previous month. You fastforward to payrolls that come out on friday and the estimate 180,000 friday. In line with the median estimate of the Bloomberg Survey so far for the payrolls number that comes out on friday. Joining us to break down the numbers is stephen friedman. Still with us is Brad Mcmillan of commonwealth financial. Pretty solid . Stephen especially when anything about the revisions of the prior month. The labor market has been performing all year long and that will continue to july. Jonathan the big question is 0. 2. That was average Hourly Earnings on the previous month. Economists looking around 0. 3. Set me up and prepare me for it. Will it be a series of questions on where is the wage growth . Stephen i think that is exactly where everyone is focused on given that they could have implications for inflation. At what point will be run out of trained workers versus workers . Stephen theres already a sign of shortage of skilled workers in a series of sectors. We see continued reports of difficulties finding trained workers. Weve seen it in the fed meetings as well. Jonathan how does the Federal Reserve interpret the jobs report . We know how they used to interpret the jobs report. The market used to see a good number as a bad number because it meant the Federal Reserve is going to do something. How do we see things now . Brad the fed right now has pretty much said we have one on employment. Job growth continues. Its likely to continue strongly. The fed is more worried about inflation now and that is where the wage growth number will be critical because thats the missing piece. David whats the reason for that . This is the biggest question pending right now. Given our level of unemployment, very low by historical terms, why have we not seen more wage pressures . Atd when i think you look the way people have been moving to the labor force, i mean last month we saw the Unemployment Rate take up. There still seems to be a poll of labor that is flowing to the labor force, so the Unemployment Rate is a little misleading. We are getting to a point where we have to see wage growth where something is broken. You can argue with the economy getting more concentrated with the companys that theres less need to raise wages. That would be a material change. That is what we need to see. David to what extent is the sort of alive of pricing a lack of Pricing Power on the part of employees . You no longer have the labor unions the way you did in the private sector. Basically employs have lost pressing power. Stephen thats one part of the picture. Ive also been focusing on low productivity. When productivity is low, and makes it difficult for profits to be passed on to workers. Through the middle of last year, we have been in the middle of a corporate profit recession, that is why we have had a slowdown. With Profit Growth taking up, theres that are prospects for wage growth. David stephen friedman, thank you so much for being here. Brad mcmillan will be staying with us. Moving to mining. Jonathan a big us coming up now. Eattempt to rio tinto reaping the benefits. Its increasing and share buybacks by billion dollars this year. Rio tinto will pay a 2 billion interim dividend. The country reported earnings that more than doubled a year ago. Im very pleased to say here to discuss is the rio tinto ceo. Thanks for coming on. Good to see you as well. Jonathan lets begin with the numbers. Investors have been feeling good about rio tinto. You and i have talked about this value over volume stories that you guys have embraced. At the previous cycle one investors were paying the miners to go out there and boost volume and growth. That story has changed. How long do you think that will play out for . Let me set the scene first. As you just said, a very strong set of results today. 3 billion of cash returns for shareholders and 2 billion of dividends, which means in practical terms, it was the highest interim dividend in the history of rio tinto. We have done pretty well in a very uncertain and volatile environment. We have the momentum and the treasury is working. I can tell you the entire company is focused on continuing to diversified the cash returns for shareholders day in and day out. Jonathan youve got a monster of a Balance Sheet. The whole industry looks at it as the benchmark. Rio tinto is a cash machine. Youll get 2. 5 billion later in the quarter as well. What are the plans for that money . What are you going to do with it . Jeansebastien the priority first is to get the money on the Balance Sheet. Everything is looking good at this point in time. You saw that in the Earnings Call this morning. We will do what we do all the time, which is use capital framework to allocate money between cash returns for shareholders, longterm growth, and midterm strength of the Balance Sheet. As soon as we look at the money on the Balance Sheet, we will go through the process again. Its a good problem to have. Jonathan lets focus on the problem the gearing is low of the range of the target previously. Is there target for the gearing at this point . Jeansebastien we do not have a target per se. We want to die first cash returns for shareholders. For us to do so, we need to have a simple business model, which on assets. Last but not least, the strength of the Balance Sheet. Its accommodation of all three ingredients that give us our business case. It will allow us to deliver superior cash returns for the short, medium, and longterm. Jonathan i want to make up a company. Lets assume it doesnt exist. Its really big and diamonds. It takes all the boxes for you. I think it will have a market cap of about 60 million in sterling. Would that be a company that interest you . Jeansebastien yes, we will that but we will not grow out. We have m a and thats absolutely clear. When he was in the valuation of the recent transactions, very good price for the solution. We are one of those. We sold 8 billion of assets and we did sell them for the right price and for the right value. We will keep it brief in terms of m a. Until we are confident that we can create lots of value, we are not going to move. Jonathan would you be looking at assets or would you be looking at overall businesses and companies . The company i put out there is angloamerican with a great diamonds portfolio. Youre big Company Looking for or assets in the same way you dispose of coal assets . Jeansebastien lets be absolutely clear. As i said, we want to grow. Its about smart buying. The strategy has not changed. The priority is to build. This mongolia and silver dress and in australia. That is priority number one. However, if we find the right opportunities, we have the Balance Sheet today to do whatever we want. Its about creating value for shareholders and the short, medium, and longterm. Bc 3 billion of return to shareholders and thats a good example of what we mean. Jonathan lets move on to china for a moment. Positives was how china delivered half of the steel demand and a big boost there as well. Its all coming from china and it surprised a lot of people. How do you see that playing out when the clinical pressure continues to build for the likes of the chinese to cut back down on steel capacities . Jeansebastien i am spending lots of time in china. I go there every other month because china is one of the largest customers of ours. That itsubt my mind restructuring its steel business. However, lets be clear that its not a reduction in output. For them to reduce output with fewer capacity, they need to have a better burden of better input material. That is what you see in the marketplace as we speak. It has been very strong and you can see a go between highgrade and lowgrade being significant. This creates opportunity for us. Am i confident about china Going Forward . The answer is yes. Justhan Janko Tipsarevic those two minds. The ankle just purchased those two minds. Have you begun the process of selling them . Jeansebastien i do not comment fashion. Any theres lots of assets that we fully diverge on the call to us. We run them very well. And sees valuees that we do not see, im more than happy to enter the into conversation. Anyou are interested in assets of rio tinto and have a big credit card, you know my number. Jonathan i would like to play the middle man. Great to catch up with the. Thank you very much. The ceo of the second largest miner, rio tinto. Goldman sachs chairman and ceo look like fun will be joining this program as we cut you down to the market Lloyd Blankfein will be joining this program as we count you down to the market open. The s p 500 up by 10th of 1 . Thats the story of equity market helped out by those betterthanexpected earnings from apple. The story in the bond market is as follows. Yields are higher by two basis points. No drama there, but the story in fx market continues. Dollar weakness and euro strength. The eurodollar up by a quarter of 1 . You are watching bloomberg tv. Had 31 recordave high closes on the dow so far in 2017. Will we make it 32 . Lets get to the scores quickly. We are about an hour away from the cash open in new york city. The doubt positive the dow positive. Bear in mind that apple makes 3. 5 of the s p 500. It is helping to give futures a bit of a lift given that apple in the premarket is up 6. 5 so far. In the treasury market, heres the story for you. The bond market yields are higher by two basis points at 2. 27. We do get a notice from the treasury that they will be selling 62 billion in notes and bonds next week. We are looking for more announcements coming from the treasury throughout the morning. We will get them and bring them to you from bloomberg. Lets head back over to alix steel. Alix i would like to welcome our Bloomberg Radio listeners joining us as well as our tv viewers. We are here at the Baltimore Center stage with two very blankfeinests, led and mike bluford Lloyd Blankfein and Mike Bloomber g. Tell us why we are here in baltimore today. Lloyd we are here and baltimore to attend the graduation of the first cohorts in our program of 10,000 Small Businesses. The program that educates its a program that educates really an mba for established Small Business people who are in the threshold and have the potential first post of growth. We provide a lot of education, mentorship, and in some cases financing to get over that hump and have them grow. We get them on that Virtuous Cycle of more hiring and employment, and therefore more Small Businessman get their products bought, etc. , etc. It is the 15th example of a program that we have done in 14 other cities around the country and it has been very successful for us. Alix for the first time, Mike Bloomberg philanthropies and goldman will usher 10 million to the fund to promote in baltimore. If you have had this when you are starting out, what would have been like for you . Mike i mightve been successful. We are copying to some extent goldmans 10,000 Small Businesses with mayors. We have had a program where we bring in mayors and train them. We do a joint with harvard university. It is management that makes these organizations work, whether its a company or a government or even your family. Andbody has to be in charge no have to bring people and make them Work Together and bring them along and train them. 10,000 Small Businesses reaches out to people who have already started their business. Now they have something going and now they need management training. Bloomberg philanthropies is happy to partner with them, but we are also doing them for mayors who have already been elected and giving the management skills. Alix lloyd, you obviously run an enormous company. For small for Small Businesses, whats hard for them . Lloyd its about whether the investment will pay back over time and what the economic climate will be and the risks that you take and limitation of resources. Do you have the bandwidth and enough people to manage a bigger enterprise and one of the consequences of it not working out . Yeley problem is that ceiling only problem is that for a Small Business person is thats magnified. Maybe its you and you and your immediate family or 10 employees. The consequences are much more dramatic. It is something of that at the end of the day that Goldman Sachs has departments to deal with regulation, planning, and setting the definite return on a capital good that we buy. In Small Business, you dont have that. What we are trying to do is we are trying to give people the information lessons. We have done various segments that we bring people through. We have things on Business Planning, negotiations, strategy, how do you negotiate with the bank for financing, how do you estimate the return profile of an investment you make in your business . One thing we do start out with is that these are fabulous people. We are taking people, as mike has alluded to, who already somewhat successful in their business. Their commitment is established. The capability is established. They are on the threshold possibly of a breakout. And that really is a sweet spot for growth relative to the investment you put in. By getting them over that hump and in addition to Everything Else we give them, we give them confidence in who they already are and what they have accomplished. Alix part of that comes from that support, but it also comes from visibility in the economy. Right now it feels like visibility and d. C. We hear nothings going to get done and no changes going to happen. Is that the correct story . Mike i dont know what that future is going to hold. The Trump Administration has only been in office for six months. I was thought trump should focus on building a team. He will eventually get it right i think and i hope. The country needs that. The bottom line is that its Small Businesses that create most of the job growth in the country. Big businesses are doing ok. The economy is better than most people thought. The stock market certainly seems to like whats going on. The future of this country is to create Small Businesses that will take people from the Old Industries that will eventually downsize and maybe even disappear as pace change Technology Changes in the market place changes. This is where the next group of big businesses will come from. They start out small with somebody with an entrepreneurial spirit. If Goldman Sachs steps in or others and give them skills to keep growing, they can transition from doing it all yourself to learning how to delegate and bring in other people. Its of the toughest thing the toughest thing for Small Businesses to do, giving up some control for a bench if you will to continue to grow. That is what Goldman Sachs 10,000 Small Businesses can do with bloomberg philanthropies with them, and a similar thing with the mayors. Alix you talked about regulation. You have a whole department geared toward that. A Small Business does not have the opportunity. What will be the easiest part of regulation that you feel like will be material for growth and for goldman . Lloyd the one thing that people are talking about the administration there are some things already getting done. Theres a bit of a change in the sentiment and attitude. I think the way that rules are implemented and the attitude of the the new class of regulators that are coming in. We operate obviously in the financial services. We are a big corporate advisor business and we get involved in every industry. Every industry is regulated. To tell you the truth, in this day come a lot more highly regulated than they have been. I would say almost an instantaneous thing that in some cases doesnt need approval, in some cases it does, but it certainly doesnt need legislation. Its just the way regulations are implemented. I think we are already witnessing and some of these industries of change in the sentiment. Ise what i find fascinating Goldman Sachs is a big company known for being aggressive and a profitable and successful firm. Its a great history that goes back a long ways. Theyre focusing on the next generation of Small Businesses. What do they know about Small Businesses . All businesses like all cities are the same. People need respect and recognition. They need to have a product that people want, whether to service its a service or something you can physically touch. They need to be able to adjust as the world changes. We want to create jobs. Find fascinating is that goldman is taking all their resources or some of them and working on the next generations problem. Some of those 10,000 Small Businesses someday will be goldman customers. Theyre making an investment in the future, which is great for the country. Alix you have to keep growing. Lloyd if i can elaborate a bit. These are very Small Businesses. We are very institutional firm. A lot of the impetus for us is to have and demonstrate on a human scale what we do on an institutional scale. ,f you go into pharmaceuticals you really want to find cures for things. People have an ethic and a narrative and a sense of purpose that goes beyond making a living. People in our industry also we believe in capitalism and the Capital Market and growth that gets created by finding capital for entrepreneurs and a virtuous circle of people making money and then paying families. They in turn byproducts from other things. We believe in that. Sometimes in our business we can lose sight of the Human Element of that because we operate on such a governmental or big corporate or big institutional level. You dont see the human scale of things. What makes it so attractive and our firm is not that 30 years from now someone might grow and become a customer. What makes it is that it becomes a validation of really our purpose in life other than a mere factor we make a good living doing what we do. We really believe. You can do philanthropy and write a check. You could write that check every year if its strictly for life. Philanthropy. Thatu build a business and indoors and survives and gross, its not only good for the family that has the business but the families employed by them and thats the virtuous circle we believe operates at a huge scale across the country. We get to see it on a human scale and are 10,000 Small Business program. Alix i would like to welcome our tv and radio viewers. Myare here in baltimore with bloomberg and ceo of goldman whatlikely find. Goin Lloyd Blankfein. Can you help quantify what the volcker rule did . If it was still not in place, what would your profits be . Rule, with the volcker when they were going through financial regulation, you can regulate the amount of capital. You can regulate prophecies and leverage. You could regulate activities. You can do this transaction. You cant do that kind of a transaction. What the volcker rule did is that imposed a little bit of a state of mind test. You could take positions, but they wanted to damp down speculation. The line between speculation, which as a word seems we should all back off of, and market , i. E. Facilitating other peopless trading and taking the other side of what your client wants to do, its also risk taking printable activity. The line between the two is very blurry and and distinct. What the volcker rule says is that if you are taking positions or points of view and anticipation of a specific client operation, thats good. If you are doing it away from that specific, it is not good. If you are market maker sitting at a desk, its very hard to know where that distention is, because what really makes a market is a Million People all the same time buying and selling because someone thinks its going to go down and someone fixes going to go up. Clients enjoy that moving sidewalk call the market. Really in practice it has been very cumbersome and very hard to do. You have people sitting on trading desks very nervous. Is that itsone had a dampening effect on liquidity in the marketplace. By the way, the regulators did not cause that. The regulators will filling in the regulations of statutes. I think now that it has been in place for a while and they see how it operates, i think theres a consensus it has to be reexamined. Mike what we have in this country is a problem with employment. We want to create jobs. If you want to create jobs, you have to have banks that have money to invest. Banks make money by taking risks. Nobody wants speculation. Its hard to tell the difference between an investment and speculation. If it didnt work, it was speculation. Nobody knows in advance what to do. We want to make sure the industry cant get in trouble the way it did back eight years ago. Nevertheless, if it doesnt pull back and stop taking the risks that would generate the capital that let us expand our economy and give everybody the ability to feed their families and create money for curing diseases and advancing art and all those things we want. Whether or not this piece of regulation goes too far, that is lloyds expertise. Lloyd some of the rules are so obscure. Alix we only have a couple minutes left so i want to ask a question about Goldman Sachs pacifi specific business. How can something not be wrong after the last two quarters . Lloyd we do not make as much money comes that was wrong. As much money, so that was run. Wrong. We are diversified Business Group and everyone performed well that we did well as a firm. Our return on equity doubled. It is still doubledigit r. O. E. That being said, we did not perform well in sick. Its a risk business and we cannot always perform well. Other people and other firms operating in the same environment did better than us. We are on the balls of our feet. We are concerned about it. In my 35 years doing this, there have been periods a lot longer than this where we have underperformed only to outperform. It has been very newsworthy not because we are a chronic underperformer, but because we have been a chronic outperform or. Er. That being said, we underperformed and we know what we have to do. We are doing it and its an execution matter for us. Thats what we do. Alix execution seems to me like its cyclical. Many are saying theres a structural problem in the commodity business. You stood by euros. Do you have to rethink that you . View . Lloyd we all cut back a lot because we had to meet the environment. The fact of the matter is that we were simply bigger if we were sickly bigger and have more assets, we wouldve made more money. The expectation is we would do better because historically we have, and we really havent. We know there are several reasons in retrospect that we can look at and say we may have slipped up. We tend to be overly weighted in our business to a client base, which is a perfect client base that we will never abandon, but we are disproportionately involved in trading clients who trade a lot and say hedge funds and other things. The more corporate banks will have much more business with corporate than others. That is something we should fix. We should not let it get that disproportionate, but we will fix it. Some of the products we tend to focus on are in the commodities business. Commodities have been in recession. Very few other banks are in that business. If you are out and about and look at other firms, that has been in a bit of a recession. Thats a cyclical matter. Do i think that oil is always going to be this price and within three dollars of this price for a long time . , yout think so, but still have to scale it to the environment that we are in. Whether its the decline of things that we trade, we have to focus on. Whether its the people we serve, we should be serving everybody and not a disproportionately more focused base. And we are working on it. I cant say that we are right all the time, because we are obviously not, but i will tell you we have a good reputation for resiliency and annotation. That is our core skill set. Markets are always changing but never that dramatically. Lloyd ive been watching Goldman Sachs. Mike this is a firm that has changed with the times and certainly has had down years and appears. Theyre still around. If you go back and look at the list of companies that were in this business in 1966, 95 of them have gone. Yo hes terrific. Sit here and are you to be like jamie dimon on the financial call . Lloyd mergers and acquisitions are number one. Doing great and equities. The investment businesses are doing great and theres a slow time for active managers. Growing assets consistently. Theres a ton of things. Everything is going well. But i do agree that believe me, none of us are hysterical about this. Im sure you are going to tell him is the solution to the problem is more terminals and more services from bloomberg. Alix obviously thats number one. You wind up seeing a lot of goldman employees now in d. C. I want to get your take on gary cohn in the fed and Steve Mnuchin. Is that a good thing for you . Mike gary cohn i know very well. Steve mnuchin ive met once or twice. The fact that goldman has these people that government keeps wanting to take says something about the kind of people that goldman hires and what they learned goldman. That of them have records is really impressive of these people, goldman alumni who have done enormous thanks for this country, including paulson and steel when they went and bailed out the country and the crisis. Goldman has an awful lot to be proud of. Ioyd you didnt ask me, but will say that im enormously proud of the goldman people. I think they are very capable. And i think they have done that at a enormous personal sacrifice to themselves. I support them totally. We miss them, but they are doing a lot for us because of what theyre doing for the country. Alix thanks so much. It was a blast to have both of you talking. That is ceo and chairman of Goldman Sachs, Lloyd Blankfein, and new pr person, michael bloomberg. Mike you still have your job. [laughter] jonathan she will be back with us tomorrow. Of commonwealth financials is still with us and joining us now is allison williams. Allison, were not going to find out if gary cohn is a hawk or a dove. Lets begin with regulation. The interpretation of the volcker rule its difficult apparently. Are they going to make that easier . Allison the biggest thing that banks have complained about is the operational implementation of the rule. That is sort of what Lloyd Blankfein had talked about here. Deciding is this trade this or that, but its also the documentation of that. We have heard about that from goldman and jpmorgan both from jamie dimon as well as pinto, who heads that business. Thats one of the biggest things that the banks have been asking to change. Jonathan how do you expect the adoption and changes of regulation for wall street to change in the coming quarters . Brad i dont think theres any doubt that we are going to see the government backing off. One of the areas that can be changed are the Current Administration without legislative action is regulatory. We are seeing that and the number of areas and i think we will see more of that on wall street. David is it possible when specifically talking about global coral is it possible to amended so its easier to follow . Lloyd says is a difference between speculation of market making, but when youre sitting at a desk, you cant tell the difference. Is there anything to do short of repealing . Brad it would move to a more principlesbased interpretation. The more specific you have, the more you have to worry about guidelines and actually complying with them. If you go to principlesbased come you can make a case and that makes it much easier if youre doing the right thing . David the other thing was interesting was talking about his ficc position. He said they had problems in into fix them. When alix steel pressed him, he said his client space and that he deals with hedge funds and they are going to have to address that because other banks have an advantage over them. Thats something interesting. Alison that is something they have been addressing over the longterm. Any given quarter you will see the impact. If you went back maybe five years ago, it was even more focused on the hedge funds and Asset Managers. They have done some work to try to build up the corporate base and balance out the mix. Hes basically saying not enough and he wants to do more. That theres always going to be in any given quarter of this type of client does better and that business is going to do better. The important thing is that he is talking about changes, but i think hes talking about changes more at the margin and not an overall restructuring. Just keeping your eye on the ball and focusing on the daytoday to any Business Manager or Portfolio Manager might have t. Things will not always go perfectly lets reassess and approve Going Forward. Jonathan he did have a few, some regulation. Comments on regulation. Lets listen to what he had to say. Lloyd people talk about the administration theres things already getting done. Theres a bit of a change in sentiment and attitude. I think the way that rules are implemented, the attitude of the new class of regulators that are coming in. Jonathan this day class of regulators lets look at these new classes of individuals. Lets ask about the Goldman Sachs alumni. Gary cohn potentially over at the Federal Reserve. A lot of economists have been asked about it. What are your thoughts on that, gary cohn running the Federal Reserve . Brad i think it potentially could be a very good thing. We have not had a real market perspective at the fed in a long time. It has been run by academics. I think that has had a lot of benefits. At the same time, bring in some new blood and putting in a real world perspective can only add to the breath of the decision capacity. I would like to see that. David you can never argue against new blood. And a perspective, that sums good. In a perspective, that sounds good. You need someone who is the chair of the fed that is steeped in Monetary Policy if are no other reason to command the respect of the other people in the fomc. Does gary cohn have that background . Alison its very important to have that background, but think about all he has learned from Monetary Policy from the job that he is dumb over decades done over decades. In the market, its more about understanding sort of what the real world implications are rather than liquidity. It is something that you can spend tons of time analyzing, but theres a saying that liquidity is a state of mind and it goes away like that. I cannot even tell you the es that lookedys at that says liquidity is fine. At the other the day, it was not there. The theory is important, but the realworld practical experience of this is what it looks like and this is how to change is i think also very important. Jonathan is that the key point for the Federal Reserve . Theres an understanding of Financial Markets and treasury markets specifically when he starts on one that Balance Sheet. Brad i think thats a critically important point. You are absolutely right. We are embarking on a policy that will not depend on monetary theory in economics but on the actual implementation of the Capital Markets process. How thats going to happen and how will react when some unforeseen happens, that will need real world experience. Thats a valuable point they gary cohn would bring to the table. Jonathan brent mcmillan, thank you very much. Else in williams, thank you very much Brad Mcmillan, think of a much. What an Earnings Report that apple delivered. We are poised for more alltime highs on the dow. Just 34 minutes away from the open, the scores as follows. Futures firm on the s p 500 and the dow. The countdown begins right here on bloomberg tv. Jon apple surges to a record. The betterthanexpected revenue for the Current Quarter. Better earnings at the dow. The stock market continues to shake off an unexpected congress. Highuro climbs to any 2017 against the dollar. Good morning. Ofarm welcome to our viewers bloomberg daybreak. 30 minutes from the opening bell. Futures are firmer. We are up by 0. 10 . Remain off a yield prior by a single basis point. Treasury announcements coming through. And bondsn in notes to be auctioned off next week. Crude is up a small bit. Lets get you up to speed on some movers. Lots of earnings movers in the premarkets. Carmen shares are popping higher after they beat consensus estimates earning 9 for the Second Quarter. They raised their fullyear view across the board. Investors were long in these chairs must a happy, but there is a 17 bearish shortage risk. Some of this could be a short squeeze. I shares they are up about 6 after they beat secondquarter estimates. They boosted the fullyear forecast and are expecting topline growth by the end of the year and apple is up about 6 . Record to open and a new high. Quartersed the current revenue estimates. This is allaying fears around delayedities of a iphone eight. We can now focus on the iphone eight super cycle. Here to give us his thoughts is who has an outperform. Ating on the stock lets start with the iphone 8. That they give us higher estimates for the Current Quarter indicate we will get it sooner rather than later . Guest the confirmation we got from the guidance was for them to guide just over 50 billion in revenue. It is better than they have done in the last five years. The could not deliver that guidance unless the new iphones would come out on time. They narrowed the Gross Margins range which is unusual. If the market is anywhere around 38 , that is a great base from which to build Going Forward. The new iphone will come out largely on time. We have profitability now once we get the launch. On the question of the iphone 8, tim cook talk about the expectations just after the earnings came out. This is what he said. Is that right in your estimation . Is this more of estimation . We at Credit Suisse have been writing about this for 12 months. Typically, you get the feature set firms up between three to six months. Since last year we havent talking about apple putting up potentially three funds, one of , and we have more and more confirmation. That has to have had an impact on the computer. Consumer. And the iphone has not contracted year on year. Well when we think of the impact on which the iphone may grow over the next 12 months. Jon we had surprises across the board. You assume that the watch is doing well as well. Soft spot, it is the regional breakdown. What is happening in china . What we have compared to all of the other regions is a little bit of loyalty. Between 19 of the users who will buy into the iphone. Sensitivity in terms of how people upgrade. Given that the iphone 7 was a relative disappointment, you have new users that they will attract. Our Analysis Shows that the chinese user that they do attract 90 use multiple services and by multiple products as well. The Chinese Market we think will go from tricking to growing. Spot. S a weak that is when the investor will continue to look at. We are relaxed around it based on the services they have done and how invested chinese users are. Apple gets more up stall revenue from china. The users are not the highest in china. That tells us people still invest in the ecosystem. Jon how do you expect that esb to evolve from here . What is the read . Our basic assumption is that apple will bring out the space phones at the basic price. 1000e probably will be a plus iphone. What affects the overall i think they could raise prices more. Less have shown they use rice it last six. Price elastics. We haveirst year, assumed that new phones are about 45 of their new volume. The build plans from asia suggested could be higher. We think they will head to somewhere between 720 to 730 over this product cycle. To pull offanaged several price increases over the last few years. Rapidly,es are growing but as important is the margin. It looks like they are over indexing for the margin. We think server indexes is about 15 of gross revenue. Services is about 15 of gross revenue. The Services Business is diversifying away from the iphone business. Now you have where iphone gross profits might be only half of the business overall. Over the growing 20 year. That is the highest growth margin within the services. We thought it would get to one third of gross profit of gross profits in three years, but they seem to be getting in germanyr jon there was an unprecedented summer between the big oil makers along with the german government. Aey are looking to hash out future for diesel. We have a headline across the bloomberg. Automakers agree to software fixes. Vw hadthat thick skin that big scandal a couple years ago. That is the story in europe. Lets turn back to apple and the record high you could see in the open. The dow has already crowed closed this year. After six Straight Days of gains, the 2000 is within striking distance. The longest winning streak since 1997. Is jonathanyork krinsky. What do you think of the numbers of apple and how supportive will that be of the market . Guest you had an excellent review on apple. The key points were no delay in the phone. More annuity and service revenue. He did not have time to get there, but the cash flow is improving. Green light for apple. Another exclamation point in this long strain of reported earnings that have been better than expected. Setting revenue and earnings marks higher than people thought in the market keeps drifting higher. Jon david and i were talking about the amount of people who come up and ask us about the politics of d. C. And white has not affected the stock market. But it has had a big impact on the fx market. Why . Guest i think the earnings strive stocks, not washington, d. C. Thankfully washington, d. C. Has been a sideshow to equities. The two things to watch our tax cuts. The market is expecting a modest one. And the geopolitical issues that are festering. Off to the side, we watch earnings and they keep coming through and people keep buying stocks. Take us through the technicals. What about people who say how can this in the stock market keep going on . The trend is the most important factor. Before we start to think about maybe this is the top or the end, you have to see some smaller tops or signs of distribution. Big nudow, 22,000 is the mber. If you look at the trading range from march to may that gives you a look at about 22,000. Look at the trend, and there is no evidence of a meaningful top despite smaller convergences. Jon lets get into this for a moment. Appropriate mark for that company yet. Have we figured out how to value the worlds Biggest Company . . I think that apple is an above average grower, with aboveaverage quality, and they havent multiple above the market and they have a multiple above the market. And i want to get too greedy, but i think theres more momentum in apple on the decent news we have seen and havent seen. Jon you will be sticking with us in the next part of the program. We will bring you some of the highlights with the Goldman Sachs ceo. The opening bell is about 18 minutes away. China boy regulators on wall street have agreed to rewrite the vocal role. We asked the ceo of Goldman Sachs about the potential rewrite and his thoughts on the efforts as a whole. Dude washe volka rula a little bit of a state of mind test. They wanted to damp down speculation, but the line and marketculation, ing otheracilitat Peoples Trading is also a risktaking activity. The line between them is indistinct. That if rule says is you are taking points of view in anticipation with a specific client operation, that is good. If youre doing it, it is not good. If you are a market maker, it is hard to know where the distinction is. What makes a market is one Million People at the same time buying and selling, and clients join that moving sidewalk. Veryactice, it has been cumbersome, it makes people who look on trading desks really nervous. It has had a dampening effect on liquidity in the market place. Egulators did not cause that they were filling and regulations of statutes. Now that it has been in place, they see how it operates and there is a consensus that it needs to be reexamined. Jon bob, lets begin with d. C. Investors about 75 of them say that d. C. Has nothing to do with equity market action. The few that do say the regulatory story is a powerful one and we are beginning to price it to the equity market. Do you believe that . I do. For the trumpcism administration but one of the pats on the back is the slow rollback of regulatory policies and the loosening of interpretation and enforcement. On doddfrank, i believe i agree with what Lloyd Blankfein was insinuating. We want a healthy system. Everybody should want that. Of europe. Eminds people say these countries are reforming, but they were not identify the ways they were reforming. In the United States, this regulatory story is powerful. Is it perception or are we seeing changes to rules and regulations . It is definitely the case that regulation has been rolled back. It is benefiting the financial or, the health care sector, is there more to go . I would not deny that but there are changes being made. The changes being made this far are not in the regulations themselves. We are told we need to rollback rules. Is that why the banks are making record profits . The profit line does not suggest they are oppressed. In terms of regulation, the biggest change so far is no new rules. About what gets rollback, how long it takes. Its important to the valuation of banks. The profitability, not the valuation. They are making a lot of money. What is the case for them say we are being oppressed, we are not making the loans we made . You are talking an absolute and we do not know what the opportunity cost is. Maybe they could be making more money and more loans. When you look at the biggest banks, if you put a few banks together, that bank will be more profits inave record a stronger economy. It is not surprising that mortgages remain tight. Aboutne of the things banking regulations is to get gdp from a 2 to a 3 handle, maybe it would to do that is relief on wall street . That would certainly help. I dont know that we get to 3 . We also need tax cut and tax reform, but it is a step in the right direction. Williamsyou to allison and bob doll. Bob, you will stay with us. Friday, a new payrolls report, rick rieter of blackrock, and bill gross from janice anderson. David with the dow poised to break the margin of 22,000, people want to know how long it can keep going. Still with us is bob doll. Come back to earnings. We have had a good earnings season. As you look to the second half of the year, do you think the earnings can stay up . I think they will be good. Will they be good enough . A necessary condition for good markets is good news on the earnings front. The Second Quarter was not quite as good as the first. Revenue growth is also strong. The Earnings Calls and willingness of Corporate Management to look forward is higher than usual. Confidence that the earnings picture looks pretty good. One of the questions has been, are ceos willing to invest in their business to keep that coming . There has not been enough for the longterm. They have been hiring workers. More workers means more out what. More output. In terms of longterm investments, they are investing in workers and that is increasing business. David all of us have been talking about the lack of wage pressure. Do you have any concern that it could kick in and cut in to the profitability of corporations in the second half . That certainly is a worry for a lot of people, how do we get it isin the cycle related to productivity, but we could get an Inflation Program problem if those wages start taking off. Jon bob doll. Sticking with us. Bell. Get to the opening futures are firmer by 47 points on the doubt and we are up a by 0. 1 on the equities market. The story of the bond market is as follows. The treasuries bond announcement comes through. Some people were thinking about a flag of for the things ahead, but not much from the treasury. Yields up by about 1 . It 2017dollar faces high a 2017 high. The opening bell is coming up next. You are watching bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save when you choose by the gig or unlimited. Call or go to xfinitymobile. Com. Xfinity mobile. Its a new kind of network, designed to save you money. Youre searching for something. Whoooo. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if. There was a single site. Where you could find the. Right hotel for you at the best price . There is. Because tripadvisor now compares. Prices from over 200 booking. Sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. Jon we are about 25 seconds away from the cash open. Futures are firmer with a big bump to nasdaqs futures. How can really account for much apple makes up in that index. 8 and more. It has been up about 6 in the premarket. In the bond market, lets get to that quickly. Yields are higher by a single basis point. The dxy is struggling to get a bid. The scoring in the equity market is front and center. The dow is stopping 22,000 for the first time ever. We are looking at a bullish beginning for trading on wednesday. The dow, and the nasdaq are trading higher. Up seven days in a row, the longest winning streak since february. The s p 500 is higher by a fraction. That is due to that 8 waiting to apple. Apple opening at an alltime high as well. Applerst record high for since may 13. Shares have flubbed over fears that the iphone 8 could be delayed. The june quarter delay those fears given that the outlook for the September Quarter came in better than expected. Said we could see sequential growth of 10 or better. That is what everybody is looking for. Apple is a component and of the doubt as well. Lots of focus on whether or not include boeing, united health, mcdonalds, caterpillar, and 3m. The biggest news coming from boeing on the recent quarter. The dow is back through 22,000. Several schools of thought on this. One is, who cares . But it does matter because psychologically, it encourages more people into the market. Where do you sit . I agree that these numbers are not official, and they can be barriers, hopefully 22,000 becomes a floor and not a ceiling. It goes back to cash on the sidelines. Returns on that are low. Earnings are coming through. Stocks are the story. Jon lets talk about whether it doesnt courage retail to get doesin whether it encourage retail to get back in. I get the talked to a lot of Financial Advisors around the country. There is still a lot of skepticism. The market loves to climb these walls of worry. When i see people enthusiastic about stocks that is what i will get cautious. A lot of people make it you have that hit the peak of the market until everybody is happy and everybody would like them to collect the most unloved bull market in history. I wonder if the enthusiasm is elsewhere. Matter forly will the equity market. What are your thoughts on that . I agree. Stocks are still not expensive. This is the market that we need to watch. Treasuries if treasuries struggle that will put a damper on the rest of the market. Inflation remains low and the bond market is watching that very carefully. So far, so good. David the nasdaq was driven by those Apple Earnings. One version of the iphone 8 could cost 1000 or more. We asked an analyst if people would really pay that much for an iphone. We are likely to see customers in the next iteration of the cycle be willing to a for that higher end device. Right now you are in the sweet spot. We are joined by mark lehman of jmp securities. 1000u going to buy a iphone . I dont know if i will but i know my kids will ask for them. There is a market for that. Half a Million People put money down on the car they may not buy from tesla. Markete segmenting the and it is one that they will be able to tap if it has the features and the abilities they think. That is the market they will test and a think it will be a good one. Was anmuch of it encouraging set of signals about the iphone 8 . Particularly as they made projections for this Current Quarter. Be much of the iphone 8 will the other business with apple. It is a great combination of all of those things. I think they will get a little bit of extra credit. It is a continued belief that apple will be able to reinvent themselves. Apple is going to be one of the greatest mercantile companies out there that they are able to monetize things on the timeline that investors want to see. If you look at it relative to other growth stocks, apple is not that expensive a stock. Jon is it a growth stock . I think that it is. People want to call it a hardware stock, but if you look underneath that with the Software Store and things in other markets, i think you will see the continued ability to price it more like a growth stock and a hardware stock. Jon we have had several analysts and one of them pointing out that the Services Businesses will have the market story. It is a cash machine. Big like 200 billion in a tile somewhere. It is not. It is distributed in markets around the world i am sure. Is the pressure on them to invest that or is it about capital redistribution and returning it all to investors . You are seeing them invest in other businesses. There is a legacy from steve jobs. You look at what they are doing in automotive, health care and other markets. I dont see this as a limit to what they can do with the kind of products that you talk about. I think that investing in the type of growth businesses we have talked about could lead to much higher stock prices and earnings. Fought be very thoughtful. Youre not going to hear about it until they can execute it. There is a little snapshot about tim cook the leader. He has shown he can manage his company and execute on the plan that they had. We have not seen him make any bold moves in the new direction. What in his track record would indicate which way he will go . As opposed to making a bold new move. It is a great question. Tim is a very tempered person. I think Corporate America is driving some of the global policies in the stock market. I would say that you dont get credit for things you dont do. Tim took the helm very rapidly. Jobas done an unbelievable of taking this company to the next level. I think you are going to see it. I think he is that kind of visionary. What he has done to talk to wall street has been terrific. I think it is a cry it and stoic company. They are moving at 100 miles an hour every minute. I think health care will be a huge driver Going Forward. He is not going to splash it on the papers every day. Hes going to be in that market faster than people think. Jon about 11 minutes into the session, 10 minutes into the session, the story is as follows. Gains are up 67 points on the dow. Alltime high, up by about 26 points and apple is adding 32 points today. 0. 1 . P 500 up about a record there as well. You are watching bloomberg. This is number daybreak, i am emma chandra. Later we will bring you is on the Rate Decision. This is bloomberg. Highs on the doubt and the s p 500. The dow hitting 22,000 for the first time ever. The s p 500 is grinding out a bit of a gain. That is the story in the equity market then. Bmwswagen, daimler and agreed to upgrade or than five dozen 5000 bmw cars in germany. Matt, or can he threw what we have learned and how unprecedented this kind of summit is. Difficult very balancing act. The carmakers and the politicians are so close together and have been for a long time, it is fairly understandable because 800,000 jobs are provided directly by Car Manufacturers in this company and every fifth german has a job related to the Auto Industry. They have got together to try to sell diesel to the consumer public to convince people they are still safe and viable because they need to be able to sell these cars to meet the stringent regulations by the eu. Theyre what in the u. S. You would think of as cafe standards. The cannot do that without the diesel engines even though we have recently found out they pollute a lot in terms of nitrogen oxide. Jon the other balancing act is politics and business and how close those things have been over the last two years. You and i discussed about how much of a political for shoe lyrical football this issue is. The rest of the world is not onng to go nicely or softly the german automakers. What are the doing about a balancing act between politics and the suggestion that maybe they got too close . Hearing itw were could be a huge political issue. But are they willing to really attack this industry that is there credit and butter . The political opinion is a distrust of the automakers. Outchief economist pointed that the German Economy is much more reliant on the Auto Industry than it is on greece. They will do anything that they can to keep the Auto Industry alive. Attackingre how much will see. Daimler and porsche are located, he is behind the automakers as well and he is a green candidate. Betweener balance here performance and accurate reporting on the emissions. In the United States, to make the car perform they could not perform accurately. The software, will they undermine the performance and make them less desirable . Good point. Carmakers are arguing it is not fair to force these real world tests upon them and compare that to the lab tests that they were required to follow previously. In the lab there only allowed to admit eight 100s of a gram of oxideof nitric nitrous per kilometer of travel. Those tests are so different. There are other industries to keep their realworld results close to the real world results. Heavy trucking does not emit nearly as much nitrous oxide as passenger cars. When you say performance i think of horsepower and torque. Fuel efficiency and miles per gallon. All of those things which the consumer is concerned about maybe put in peril as the nitrous oxide emissions problems are fixed. Cities are saying we will ban these diesel vehicles because we have to comply with these requirements and we are not because you have not been performed performing accurate data. Will this take care of that problem . It wont. Cities,ike berlin, auto four years they have been too toxic for eu regulations. I have far many region oxide articles. 30 the reduction of 25 to of the nitrogen oxide in missions from these diesel cars will not put a dent into that problem because theyre going to put up a half gram of tylenol of this pollutant per kilometer of travel. There are 15 million traveling in this country and every one of these cities. About 18 minutes into the session. A session that looks like this. We are up from the doubt about a 10th of 1 . If you strip to pack apple from the mix here which is up about 5. 8 . If you took apple away from those benchmarks we would be lower across the board. It is a little bit of a soft session even with those big headlines. Big weighting. Your to check out tv go. You can click on your charts and graphics and interact with us directly. This is bloomberg. David the deteriorating situation in venezuela has been in the news and senator marco rubio met with President Trump on the subject of venezuela. Our chief correspondent spoke with the senator earlier. I spoke with marco rubio who is to go to senator on this issue about the new sanctions that the administration and Steven Mnuchin have imposed on dictator maduro. Freezing all of his assets as a result of the volatile situation. I asked if more sanctions were on the table beyond the maduro administration. I saw the president yesterday. We have been in Constant Contact with them. I think you can expect of its every time that maduro do something outrageous the white house will respond with something additional. Other countries will join us. When the president section those people last week. Multiple countries in the hemisphere concluding panama announced they would sanction the same people. Are Oil Sanctions on the table . They are. Oil sanctions for venezuela are on the table coming from marco rubio. They are on the table, will they be used because Steve Mnuchin quite specifically said they were holding off because they thought it would hurt the people of venice where let rather than the leadership. Is there any realistic prospect of oil sections on venezuela what the right now administration is saying that there is a situation where they want to keep the focus on maduro , they are saying that they know this is their way of really impacting the venezuela market. As it evolves and the situation in south america continues to shift a think you could know this could become something as senator rubio said a hotbed for extremism and an opportunity for the russians and the chinese to make inroads on. That is clearly impacting their thinking as well. To do also have the opportunity to talk to him about other things on the hill such as health care and tax reform i asked him and he said this is something that likely will lets receive a vote ahead of the august recess but if there is another vote it would likely be in september. There is something of a disagreement between the senators and capitol hill but how important it is. Administration would like this Health Care Bill as soon as possible but lawmakers like senator rubio are saying lets back off. It is now looking like they are working with democrats have some kind of fix it. Whether or not they would be able to get the votes of democrats and lose conservatives remains to be seen. I can tell you there is a big push working from conservative outside groups that will be pushing and august during the august recess in districts threat the country to urge their representatives to pivot to tax reform. Thats what is missing from the conservative circles i spoke with yesterday at the does nothing to be an impetus with tax reform from the conservative base. If we are not going to get to health care or tax reform or the debt ceiling or the budget, what with a to do in the next 10 days . There are a lot of confirmations they have to put their stamps on. About all of these meetings are continuing on health care and tax reform and right now they are trying to figure out their agenda, but the month of september its looking like a lot of politics to be festering over the Treasury Department is adamant that there will be no government wranglings with the debt limit but there is a policy and ideological divide between conservatives and moderates on how to raise the debt limit. Director of the white house has a different point of view from Steve Mnuchin. Eporting from capitol hill jon that wraps up the program in new york for bloomberg a brick. Lets wrap up the market action. Were 26 minutes into the session, the dow is through 22,000 to the first time ever. Propped up by apple which is up for following those betterthanexpected earnings. Elsewhere tomorrow, the big story the bank of england, we will bring you live coverage of the Rate Decision at 7 00 a. M. Eastern and the News Conference with governor mark carney that follows. Live and full here on bloomberg television. Markets is up next. What should i watch . Show me sports. Its so fluffy look at that fluffy unicorn hes so fluffy im gonna die your voice is awesome. The x1 voice remote. Xfinity. The future of awesome. Vonnie im vonnie quinn. Mark and im mark barton. Welcome to bloomberg markets. Vonnie here are the top stories we are covering. 22,000 for the first time as the index heads for an eighth consecutive quarter of gains. A look at some of the trends fueling this milestone. Investors are pouring into apple. Forecasts a stronger start for the next iphone. Are things really as rosy as they appear . Congressional republicans are pivoting towards tax reform. After the failure of the health reform, will tax reform be any different . Here as we cross another milestone. We have said many milestones together