Julie we are seeing the major averages fall. Seen the effect on businesses and people staying home from the storm. No matter theday snow level on the ground. Its having an effect on the airlines. Had 8800 Flights Canceled in the northeastern u. S. , 60 600 today, delta, american, and ual fly. ,e are watching restaurants restaurants with northeastern exposure in particular could see a decline in samestore sales. We have shake shack down 1. 8 . Was one of the restaurants that could lose 50100 basis points. On the flipside, some of the Company Selling coldweather gear are up today. Columbia sports wear catching a bid today. Another interesting weather related phenomenon, natural gas, rising in advance of the storm, and now pulling back as it is not as bad as had been anticipated. Are following as well today, down. 2 . Oil, will it hold or fold on its 200 Day Moving Average . The 50 day, we went right to that. A yellow line is the 200 Day Moving Average. Action has pushed wti prices below that level. Scarlet something we will continue to watch. The Federal Reserve kicks off in washington today. Dc,s worse in washington but not too bad in new york. The central bank widely expected to announce a rate hike. Joins us now. R tell us what we need to watch for. Andfter we see the dot plot the statement, what will janet rest of thebout the year and why it was so important to raise rates in march. A few weeks ago, the markets and saw a march rate hike as less than likely, then we had fed speakers talk up a march rate hike. Before that, they were looking for the rate hike in the june timeframe, so why the urgency to pull that forward. Scarlet when it comes to the dot plot, we will get an update. Has the day that change the outlook for growth or inflation . There are varying opinions. We have not seen it come through in the hard data, although some hard data is starting to park back up. We are seeing signs of a turnaround in business investment, but we are really seeing it in the consumer and business is surveys, confidence going up. Volatility in markets, that is always going to be the first thing everybody sees on their screens each day. Fact. An have a car for a that is what people are reading into this dynamic. Ago, if you want to know what would happen at the next fed meeting, you could look at the s p 500 and have your answer because the two were moving closely where markets were being attributed by investors as indicative of where the fed will go. Now you are having a conversation about s p new highs, how long can this continue, that with the expectation for three rate hikes. Is it possible that the fed will have to look at markets or are they data centric at this point . The stock market has only been going up, right . As you mentioned, the year ago andthe exact opposite come we saw how the message changed from the fed. So now taking the opportunity them or they are worried the stock market is going to high. Either way, they are probably sensitive to the downside if we see that at some point. We have not in a while. Do, youll probably see a scaling back of ambitions and longerterm Interest Rates lower as well. That is what that might look like. We have seen a pullback is in oil prices. As fed described the punch transitory. Do we assume this is transitory again . Thats another good question. It seems like we have some geopolitical stuff in play today and it is probably too soon for the fed to reflect that, but if we get in this cycle like last year where Oil Prices Fall every day, then that will become worrisome for the fed because that can be interpreted as a Global Growth signal, but those fears a start to feed on each other. This is a chart, 6770 five, the white line is the five year treasury yield 0. 03 . It is the real yield, not the nominal. Tell us what the blue line is. The blue line is the neutral real rate. If they were at neutral fed policy come of the federal funds rate would match this rate adjusted for inflation. The white line, that fiveyear real yield seems to track that pretty well in real time. It looks like were having this problem getting back to positive real rates because every time we try to break into positive territory, it has not been long above zero, then we go back down because stocks have fallen or the economy weakens. I call it a zero upper bound because it is about breaking come not necessarily getting about below zero with the zero lower bound, so this is a real issue. Oliver as we start to go up a come ultimately it has been the same situation for the past two years apart from a few reef instances when we have moved across. The question is what will push us through their. There. In december, we had this big move higher in Interest Rates when they came out with the dot plot. The fed drove Interest Rates higher, which is something we not seeingused to because things were either so priced income of and if they surprised, they would surprise on the dovish side. Tomorrow, it will be interesting to see if markets are priced correctly, or does the fed st ill feel like it still has work to do . A real throwback. Oliver great stuff, great analysis. Still bringing us good analysis. Thank you to matt boesler. Tomorrow, full coverage of the fed decision, the dots, and janet yellen News Conference here on bloomberg. Scarlet coming up, insight into the market and what could be ahead for the Financial Sector as the white house looks to loosen regulation. This is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Oliver i am oliver renick. Lets get a check of first word news. The northeastern u. S. Is being hit bys from the could a half of snow. A blizzard warning has been canceled for new york city, but still an effect for areas north and west. Elizabeth, we took a pounding this morning. How will it look later today . We are told right now that the snow is slowly moving out of our area. About six inches fell and central part come and what does six inches look like . This is it. All of this snow is six inches of snow. Minutes ago, up plow truck went through this area, so it looks clean, but there is still some snow and slush left because we are now told we are dealing with a mix of sleet and snow. Is dangerous to be driving in this. Stay indoors. The storm may be moving out of need to, but they still do work on the roadways, and they are hoping that perhaps early tomorrow everyone can get back to work. You have been out a while to it are people heating the warning to stay inside . This is true. I wish i could take their people were heating the warning. To my right, there is a car thats probably not stuck or stranded, but stopped. People are out brushing the snow off their cars. Park, and is central a lot of families have been going there with sleds enjoying the day because of mother nature. Mark elizabeth her joining us from snowing midtown manhattan. The u. S. Is considering increasing financial penalties on Chinese Companies in response to a allegedly growing evidence support for north koreas weapons programs. That is according to the wall street journal citing u. S. And asian officials. As u. S. Secretary of state Rex Tillerson travels to asia this week to try to unify japan, south korea, and china behind a policy to restrict nuclear and Ballistic Missile launches from pyongyang. House speaker paul ryans and planning to make any major changes to the Affordable Care act replacement plan despite a politically difficult estimate of its effect on health coverage. A new estimate from the cbo shows 14 million americans could Lose Health Coverage by next year under the gop plan. It leaves republicans in a bind with a dire picture of the bills of facts. Mccarthyyan and kevin are scheduled to speak with President Trump by phone today to discuss the next to steps. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am mark crumpton. Scarlet thank you so much. Lets get back to the markets and the one sector that has led the rally, financials. The s p financial index is up 24 since election day. Joining us for more insight is christopher davis. Include the davis select financial etf. Great to see you. Thank you for coming in. We talked about that 24 gain in financial since the election. Doesnt that gain already reflect the expected benefits of as risingon as well Interest Rate environment that supports the group . Financials were cheap going in. At a time when Profit Margins at att u. S. Companies are alltime highs, financials were under earning because of low Interest Rates, so you had a possible tailwind from rising a valuationes, discount to the averages that was at or near alltime highs, so a huge discount to the group, strongerroup was in condition than they have been in for the last 25 years, high capital ratios, consult the relation ratios, consolidation. Since then, the markets moved up sharply, financials close a bit of that gap, but we have a decade long view on financials, and from that perspective, this is just the beginning. Oliver regulation takes a long time, health care, Financial Regulation or deregulation. You just mentioned the capital most recentin your letter you talk about the doubling of cash ratios. Arent these the result of tighter regulations on banks and terms of what they have to hold as collateral and how does that affect of you Going Forward if deregulation takes some requirements away . Reduced Regulatory Burden is a shortterm plus, but it is a long term negative. We are in an environment that reminds me of the early 1990s. What we saw been is everyone remember the financial crisis of i goty, financials burned, terrible. In fact, they were safer, better cap allies, less competition, and they were at a steep discount, so we had a 1015 year riod where financials were hated. The fundamentals, psychology both improved and the Regulatory Burden lessened. Stable regulation is ideal. What has hurt the financials is a constant changing of the regulatory environment, crazy competition between different regulatory authorities, race for which regulator comes up with the binding regulation, so a stabilization would be ideal, preferable to a lot of deregulation. Scarlet something that companies can plan around and plan four. The companies that want to get in and grow aggressively, financial high growth is often a red flag. Scarlet can you quantify highgrowth . Andts always the darlings an up sector where the real losses can be made. Think of the horsemen of the they were more, aggressive, higher growth, well , wellstodgy competitors fargo, j. P. Morgan, they werent aggressive enough. That creates the real opportunities. Oliver lets talk on a macro scale it i want to use a function here on the bloomberg to look at your main fund. Im curious where you will take away weightings from. You are roughly with a third of portfolio in the financial space. Would you taking away from that . It looks like you getting out of consumer stocks, staples. Your cache level is average are lower, so what do you see happening sector wise. Where people feel the safest, and so where do people feel safe today . The dividend darlings. They are a mirror image of the financials. Consumer staples, some of the drug companies, these are beloved. They have been bid up because theyre paying a 3 dividend. You know what . A company has to pay a 3 dividend for 33 years to get your money back. There is not enough fundamental analysis on these companies. Slowing units, slowing revenue, consolidated customers in the big retails, amazon effect, private label, and what else . Payout ratios that are 70 , 80 , 90 untenable. Scarlet thank you so much. A pleasure to have you with us. We take you now to washington, where sean spicer is speaking, telling reporters that the cbo attempts to estimate coverage of the Health Care Plan have been faulty. Have 9re finding out you million plus who are getting it now. They have no coverage. More americans are losing coverage, their choices are gone, tax credits and competition that will come in phases two in three will further drop prices, further increase competition. Did not take into consideration that. If you look at their numbers, you have 9 Million People on the exchanges. Says 14 Million People in the first year alone will lose coverage. It doesnt take a ton of analysis to recognize that doesnt make any sense logically. You can only have 9 Million People in the exchange and say youfirst year alone just removing the individual matinee mandate and it will lead to 14 Million People dropping off medicare. That doesnt add up. I would argue that if you look at the other part of the equation, the 20 million plus people who have chosen to pay a penalty 6. 5 main people are saying the plan is too costly, doesnt provide coverage. I think a lot of those people especially they have more choices, can pick a plan that fits their needs or fits their budget, you will see more people want coverage who will choose doesage, so the cbo number not match up with the ability to count people. They are good at dollars, not as good at people. When you look at the additional phases or prongs of this whole comp of approach, that actually changes the equation a lot. Its looking at one piece of a threepart plan, and thats not the entirety of the plan we are looking at, so we dont do those projections. There is no question when you look at the costs, they are saying just this alone, just doing the first prong will take costs down 10 . This year alone, just people in the exchanges come up 25 . The cbo is saying with what we decline in the individual market. That is a significant reduction. That is what we are talking about, bringing costs down and increasing choices. Get, subsidies that people they get a card that does not get them care, and thats what we need to focus on. How many people are getting the care they need to deal with their medical concerns . Thetating as you did primary objective of this white house, the cbo report does not take into account phase two and phase three, are there regulatory reforms the white house is considering as part of this . Tom cotton and others are skeptical. Look, the things i mentioned earlier, allowing people to buy across state lines, to expand , all of those things unquestionably add competition and choice. Sell fromn can maryland into virginia, that competition alone invariably brings down costs. We seen this in market aftermarket where once you allow competition that will bring down costs and bring in choice. Insurancethese companies that have been mandated to create certain packages, you have young people being told to buy packages that have endoflife care that they dont need. You have people in older phases of life having to buy stuff for maternity. That may not be a service they need at their stage of life. The government got involved in health care and started dictating what needed to happen instead of allowing people to buy a plan that was tailored to the needs they want. Those reforms in themselves bring down costs. To go the issues that has back to overwriting this issue, and the president has stated s, ifon numerous occasion we allow this to continue, it will collapse on its own. The costs are unsustainable and the premiums are sky high. This idea of comparing it to obamacare is a false choice. They have no choice. And thece is going away costs continues to get higher through every phase, so to assume that the comparison is apples to apples is a false choice. Critical fromen this podium of the obama administration, democrats, and how they pass the aca. In the interest of transparency you accuse them of not following can you put those details out now . That as that legislation gets done i think thats a great question for speaker ryan. I know he has been working with the team to get it done. The sooner we can get all those prongs out there, the better. This bill online, the president tweeted it out. Anyone in the country could read it. That is a vastly different approach than after we passed it, you can read it, which is what Speaker Pelosi said. Absolutely. The speaker is working with members to do that, but that is an appropriate question for the speaker to answer, not me. With theming to work and there are a lot of members trying to work with speaker ryan and leader mccarthy and in the other chamber as well, and thats why we are talking about all of those prongs so people can understand the conference of nature of this. Question for speaker ryan, so the more we get out there, the better. Why is the white house giving senator cotton full running room to go again and again in the media and denigrate the house plan without bringing him in commit discussing with him what mike was springing up, the alternatives he is suggesting . Why does he have special dispensation to go out . It is a free country. He can say what he wants. I think our team has been working with his team, and anyone else who has ideas. We have been engaged in a very robust a discussion with members in both chambers who have ideas to move this thing forward. Are able tok we tell people what they can and cannot engage in a free society, and senator cotton can make any comments he would like. We would like to continue to work with him, and i think the team will reach out to him and his team to get his ideas on this. He called him, has the Vice President called . I know we have had a robust discussion with members of the house and senate. I would have to get specific details about senator cotton. Checkeve, i would have to on that. There is a group of individuals prayed i dont have that list. I will get back to you on that. I promise. The snow storm shifted a bunch of stuff up, so i dont want to get in front of who can be here and who cant, but i will get those details out. On the same subject, does the white house support the house bill as it is or amending it . There has been reporting that the white house officials are involved in shaping a significant managers amendment. You come is the white house writing this amendment . Horror they just considering backing the amendment . Speaker right is well aware of the amendment. As we have noted on the podium, when people have ideas that are constructive, supportive, or we have heard about from different members that we have engaged with, and frankly once we have engaged with the house and senate, we have always stated the willingness. Secretary price, the president , the president , part of reason we are engaging with these individuals is to hear their ideas and talk about the content and approach, how we deal with different phases and when we go. All at that is part of a comprehensive strategy to engage with members who support us, who have ideas and want to be on board and want to be constructive in the process and achieve the president s goal of having a patientcentric health care system. House in talks with leadership, but the president will be on the phone with speaker ryan and leader mccarthy later this afternoon to talk to them about some of these ideas and paths forward. To clarify, so this, the white house is working to shape this . Yes. It of the deputy Saudi Crown Prince today, can you talk some detail, arms sales, oil . It was wrapping up as we were walking over here, so i want to make sure i get a readout and we will provide that to the pool so i will have more details from that. The middle of all this, how argent of a purdy is this and how concerned regardinginistration the letter from secretary mnuchin . Secretary mnuchin sent a letter noting that the congress had until march 15. He notified them of that. Withll continue to Work Congress and release of budget later this week that is part and parcel of our approach to fiscal responsibility to make sure we talk about the path forward, how we address the ending of fiscal in the budget which would be fiscal year 18, but how we address our budget deficits, our debt, and are spending going for does something that is a holistic conversation that the secretary, dr. Mulvaney, the president , and Vice President are engaging with congress on. Our job under the law is to notify them of the authority and when it expired and the secretary will work with congress on a path forward as far as our debt situation. Let me get your reaction to one of the architects of obamacare. He called the plan you put forward as an scam. Your reaction . I think the plan he helped create hasnt done so well for american seeking health insurance. I would have to go to the numbers, but think about what he sought to do. There was a pool of people who needed health care. They got 9 million of them. People who. 4 million claimed a hardship exemption. Not receiving medicaid. They dont qualify for any other assistance, who cant afford obamacare, then you have another 6 million plus that have chosen to pay the penalty. I would argue that just on what he sought to achieve in the plan that he helped to craft did not achieve great results. Of the people that did get it, their premiums have gone skyhigh. Their choices have gone down, and singlehandedly had a tremendous effect through the rest of the health care system, so people who were not affected by obamacare initially have now paid higher premiums to get less choices. The 175 main people who get employerbased health care, they felt the impact of what he sought to do through higher prices and fewer choices. So respectfully he should hang out at m. I. T. And allow good ideas to continue to come forth so we can focus on achieving the president s goal of doing what he sought out in the first place. The president several times recently said that he would like the Healthcare Plan to have health care for everybody. The cbo story yesterday, thats not the case. After phases two and three, if they are offered publicly, that there will be health care for everywhere, and can you define that . Look at what obamacare did. I just went to the numbers. You have 30 plus Million People obamacare mandated under penalty of law you had to have health insurance. 9 million of the 30 Million People got it, 4. 5 million said we will pay the penalty, and another 14 or so Million People said they will claim a hardship, so that was a government mandated system and they chose not to do it. In many of these cases if people are given the choice and the option to get a plan that sought their needs, tell her to what they wanted and was not forced down their throat, and brought down costs, i register him of the stories of the individuals. We have seen people who got a reasonably priced plan at 150 a month, which for people who are not getting their services through medicaid because of the financial situation, for many middleclass families, that is still a struggle, but an attainable goal. 350,ure talking about 500, thats a huge chunk of somebodys takehome pay. Process that levels the Playing Field allows people who are not getting it through an employerbased system to get a tax credit that lowers costs and creates more competition and choice is action going to give more people the option to have health care and give more americans that ability. Right now, they are choosing not to do it. Thats still not everybody. To getybody has a choice it, and thats what we wanted to. Everyone who wants health care, the financial ability to get it is what the president is trying to achieve, and this is the system that will get them there. Right now they are being forced to get it by a government run system, and a huge portion are choosing not to. By the way, they are getting a system that is collapsing on its own and is only going in the wrong direction with high prices, higher premiums and higher deductibles, and lower choice. Thats what you have now pretty if you are an americans is us Obamacare Exchange come you are paying more, have a hard to duck people, and your choices are going down. That is an unsustainable, unacceptable outcome for americans who need care. , a group thation tracks century cities came out with a report today saying there citiesrly 500 sanctuary across the country, and that number has grown this year. Does that concern the white house, and doesnt suggest your warnings about withholding federal funds is knocking through to people . The last poll i saw on sanctuary cities was somewhere in the 80 of American People dont want their tax dollars used to finance people who are in this country illegally. If you are a mayor or councilman or state representative or governor in a state, you need to answer the people that elected you, whether or not you will support it. From a federal perspective, the president has been clear that we will not use federal taxpayer dollars to support cities that support services to people who are in this country illegally. At the end of the day, this is a question for mayors and councilmembers at the local level who have to answer the people who elected them with a position that is not in keeping with what most americans believe. Can you tell me what this healthl means for Insurance Companies . Will their profits go up or down . Been the focus of the president s proposal. It is about patients. What it means for them as they finally get to create more choice and more plans and allow people to choose a plan that fits them. Right now they dont have that choice. More and more markets, Companies Like anthem, united health, cigna, they are pulling out. The choice and because of the government mandate. What we want to do is allow competition and choice to exist so they can offer more options for the American People. Will they make more money . I dont know the answer to that. That is not the focus right now they are pulling out of market aftermarket leaving the American People with fewer choices, so the last i checked, many of them are doing pretty well, but it is the American People losing under the current system, so there is a reason you can do both. Been listeningve to sean spicer give his daily press briefing, talking about the cbo attempts to estimate coverage. He says those are faulty and do not take into account speaker rines threepronged approach, which also includes legislative action. We will keep you posted on other headlines. Liver lets talk about oil crude tumbled past 47 dollars after saudi arabia disclosed an increase in production. Opecdom told oprah it raised output, reversing a third of the cuts from the previous month. Our next guest says saudis selfreported Production Growth is a concern, and could be a bit of posturing. I want to bring up a chart that this idea between what saudi arabia says it is doing and what opec expects it to do. Back on have they come their promises, but the estimates for what opec says they will output, the orange line right here, this is a communication from the government, the white line is opec. There is the versions, so how do we navigate this . The oil markets are always opaque, particularly opec. What we have to do is come back to the fundamentals for the opec countries. I think the big question is would they rather have a Million Barrels a day of less production and a 10 higher price or a Million Barrels more production and a 10 lower price. If you look at the math, it suggests they would prefer one million bill or host left 50ause the revenue is worth billion dollars, 60 billion, 70 billion. I think thats what it will come back to. They will try to scare people into letting back on the production, and particular the u. S. Shale producers, and thats what theyve done over the past week. Scarlet is there a price level that the saudis are eyeing . I think they are trying to see where u. S. Producers come back into the market and when they pump the brakes. I think we will see this over the next threefour weeks and see what happens to the u. S. Rig count. That will give them a lot of information also probably around 50 is where they get a sense that u. S. Production slows down below that, comes back on above that. Oliver on a macro scale, is there risk other countries will look to see what saudi arabia does . Its possible. Dont think they would do something just based around what saudi arabias doing it they are doing their part for sure. Scarlet how do you translate into actionable ideas . You are looking at Midstream Companies that would benefit whether you have a lower or higher price oil scenario. What opecredicated on does. We are under the assumption that opec continues to keep production down and maybe even carries that through the summer into the fall beyond the next opec meeting. Generally likewe to make is if people are bearish on oil prices it is because they think u. S. Shale producers are profitable at 50 a barrel roughly. If they are bullish on oil prices, from the supply standpoint, there will not be enough coming on from u. S. Shale. In either scenario, you get by hims out of u. S. Shale and that is extremely beneficial to a u. S. Midstream company. It is natural gas and natural gas liquids as well, all the things we dont talk about and dont think about, but are just as viable as the black crude oil itself and the natural gas. Few specificave a companies you are looking at. I want to take on the large cap versus small cap that you have right now. Ill large cap pic is enterprise products. We have been consistent with that. Epd is the most dominant franchise in the midstream space, a 6 dividend yield. When you look at how they cover that distribution, it is an 8 to 9 Free Cash Flow yield and they will grow that at 5 . Everything goes into and gets consumed there or exported, so we like that when it on the small cap side. We like dcp midstream. This is a gatherer and processor in the basin and colorado, and then a strong position down in texas, so this will benefit from increased volumes, but higher ethane prices. You go from ethane rejection to ethane recovery, it is a big swing in the amount of volumes. Scarlet what about the canadian names . Oliver keystone too. The canadian names are a contrarian area we like to look at. People think they are dirty and high margin, which they are also zero decline rates, which is very important when youre looking at the fundamentals of the company come because if you have to invest capital to replace production come its hard to get a dollar of cash flow out of the business. If you look at canadian natural resources, probably our top oil sounds sans pick along with suncor come this is a company that can do 6 billion in Free Cash Flow. There is not a single oil company in the world that can do that. Chris kelly, Janus Capital group, thank you for joining us. Lets head over to julie hyman for today sector spider report. Youre going to look at the xle. This decline is having an effect on oil stocks. The xle is down 1. 2 . You can look at oil over the past year or two and take a picture of that roundtrip. The advance in oil, in particular once the opec agreement was struck, has now been erased from oil prices, and that has been putting pressure on oil stocks. The worst performers within the xle specifically come natural gas providers as well because southwestern marathon and pioneer natural are trading lower. What is interesting is that as we have seen this pullback, it looks like the cost of protection against a further drop in the xle is not that high , so this is this skew for the xle. It is the premium people are paying for puts versus what they are paying for call, and its gotten cheaper. This implies that people who are buying options on the xle are not necessarily bidding up the costs of protection against and falling further, so an interesting window into a perspective on what folks are betting on. Scarlet not what we would be expecting today. Thank you so much. Oliver a federal panel approved a plan to get puerto rico back on the road, we hear from the islands governor on what is turnaround plan means for bondholders and the puerto rican economy. This is bloomberg. Oliver i am oliver renick. Scarlet i am scarlet fu. A first app and allowing puerto rico to start negotiating with on holders to reduce 70 billion in debt. Kevin is standing by with the governor in san juan. All, the Oversight Board approves this plan, and now you have to get to work. How are you going to negotiate with bondholders and creditors . The strategy right now is to initiate conversations with this fiscal oversight plan that has been approved by the Oversight Board. That we can get some title vi arrangement with bondholders. We will pursue that very aggressively in the coming days. What is the timeline on these negotiations . Unfortunately we only have until may 1 until the litigation holds up. We have made a request to extend. It is in the best interest of everybody involved for us to have the opportunity to sit down with bondholders, even though we have some main credits, 19 different credits, so it is quite a task, but we will pursue it aggressively and see if we can find the best alternative and best solutions for bondholders and the people of puerto rico. The concern in washington is that some type of bailout would be needed. There is not much of an appetite for that, but i want to talk about these groups of creditors. , they have people concerns about who will get paid first. How are you, governor, going to decide who gets paid first . That is where it gets tricky. Right, well, let me touch on the point of a bailout. This plan does not consider a bailout. It does not even consider current federal funding coming into puerto rico, so what we have certified is a plan that reestablishes credibility and. Uerto rico the Previous Administration could not get the plan going or get anything certified. We finally got it going. To our effort will fall fiscal agents to devise protocol for payment come and we will execute accordingly. We need to sit down with creditors, the general obligations and have those talks. , ier we get some information will have more information about how that will work. Who is going to get paid first . Is ifnegotiation strategy they dont like what you say, they can threaten with litigation. Are you prepared to face their political attacks . Isnt that going to end up costing puerto rico more money, money quite frankly you guys might not have . Vi is a renegotiation effort. In order to be successful, both parties would have to agree. Areou know, certain bonds against each other, and if there is no resolution in terms of a good faith based renegotiation effort, then these things will three, afree restructuring court, so it is in the best interest of all of us to sit down and renegotiate terms and see how the payment schedule will go and what the vehicles are and what strategies the change to the schedule would be, because otherwise it will be left in the hands of the courts, and different credits will have very different payouts. Graduate. An m. I. T. You have tough decisions coming up on everything from potential for lows, 45 unemployment, money cuts to health care, in addition to all of that, you could also face some procedural roadblocks from implementing this certified plan from policymakers and politicians within your own government, so what are you prepared to do to intle politically at home addition to negotiations with creditors and bondholders . A message for had the people of puerto rico. The message in english so that it could translate to the world. Behind theent is fiscal oversight plan that we we feelo confident about it. We do so because our plan actually eliminates the potential for reducing health ,are coverage to people in need or actually executing for lows, which is a conditional appointment to the certification of the plan, but we are confident we can implement our strategies. We said so from the beginning. Our view, our vision, is to reduce a government that is 131 agencies big into one that is about 35 agencies. 45 years take about to execute, but we are also planning on doing the same thing and healthg the pmpm care. We are doing the same in education. We appreciate your time. We appreciate your time. Make sure to come back and tell us how all that goes. Governor, thank you for your time. Scarlet Kevin Cirilli and ricardo rossello. Oliver President Trump hits the detroitorrow, going to to talk with automakers. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Oliver 3 00 p. M. In new york, 7 00 p. M. In london. Im oliver renick. Scarlet i am scarlet fu. Welcome to bloomberg markets. Oliver we are live from bloomberg World Headquarters in new york the next hour and we will be covering stories from washington and paris. Top stories were following on bloomberg and around the World Markets with about an hour left in u. S. Trading, stocks going back a little bit on low volume. Oil a big story as crude trades below 48. Trump President Trump gearing up for up President Trump gearing up for a trip to detroit, expected to announce fuel economy a change to fuel economy standards put in place by his predecessor, which environmental groups are calling catastrophic. Reaction to investor bill ackman exiting his position in his company. Forill discuss what is next the pharmaceutical firm and whether investors will follow suit. One hour away from the close of getting, lets check on markets, but first julie [laughter] i knew this was coming. If you were watching at this time yesterday, oliver was a little bit skeptical about the snow totals being predicted. A foot in new york, 18 inches. In fact, he was right, i was not. Ice goes up, the Downside Protection was too cheap not to take. Julie predictors saying it is not over yet. And it is not just about accumulation on the ground. You want to go outside . Now turning to markets, in a seamless segue, lets look at what is going on with stocks. A little bit of a pullback going to the fed meeting tomorrow in the Central Bank Meeting later in the week. Volume is below the average. The s p 500 is down. 4 . If you look at intraday chart through the course of the day, it closed just before 11 00 a. M. 11 00 a. M. It would have been the biggest oneday decline for the s p all year. We have some developing news in the past 15 minutes or so. Astrazeneca releasing Study Results with medication to treat ovarian cancer. He says this questions the dominance of another company within this particular drug type. 2 3 of 1 . Shows up well reaction to the company that makes the competing drug, the one already on the market his shares taking a dive and are off by 15 . We will continue to track this developing story. Elsewhere, oil is a big part of the story saudi arabia said it reduced and is pumping a little more oil. Oil continuing to slide. Taking a look at treasuries tomorrow, wefed see a bit of a reversal in treasuries today. Buyers coming back to the market and yields coming back a little bit. Everything could change tomorrow. This is what to watch come not whether the fed will raise rates or not, but any hints about the trajectory for the rest of the year. Especially interesting given what we have seen in crude oil lately, and the pullback. Will they make any comment on it having more of an effect on inflation . Snow torefocusing us on things that matter in the markets. Thank you so much. Scarlet snow matters sometimes. Trading volumes are the wicked president are lower. President trump visits detroit tomorrow and he could come bearing a gift. David walsh joins us with more. Tell us what President Trump will be doing tomorrow. David he is expected to give the Car Companies executive asked for, a Second Review of the fuel economy standards put in place by president obama going out to 2025. Those are supposed to rest up the average fuel economy of a free car sold in the u. S. It is a steep hike from where we are today. Obama before he left office is administration basically solidified the rules, making it tougher for trump to change them. He is expected to come in and say we will have another review in 2018 that will look at the economics and see if the industry can meet them. He is expected to be more lenient on a does the review and that is what the Car Companies have asked for. Oliver how does this compare or line up with anything that trump mentioned along the campaign trail . Give us some perspective on with or not this is something that is important to him, or if it is new on his docket. David well, it is not new. I believe he called the epa at his grace when he was campaigning and said he wanted to gut it. This is a milder version of that, but it is absolutely pulling back or at least giving the opportunity for him to pull back later on, assuming he gets his way. He could stretch out the timeline by which the Car Companies have to meet these new rules or the numbers they have to hit being easier to meet. Scarlet give us a sense of what this means for automakers and the profits and costs. Efforts to increase gas mileage certainly were a costly endeavor bit they have to put more investment into technology and complying with those rules. Any sense of the numbers . David estimate is about it will cost 33 billion to meet these standards. It is best to generate 98 billion dollars in fuel savings and things like that. After make turbochargers have to make turbochargers and all that stuff cost money and that is i you get better fuel economy. If some of the special hardware gets pulled out and cars are less efficient, but even more profitable or perhaps less expensive. Oliver connect a few points between what is happening in detroit to trumps overall , whereh to the economy some people would wager it is not having as big as an impact on the United States economy as it once did, these industries that have either waned or becoming outdated. Coming back, finding regulation, pulling it back, extending the lifetime . David that is his pitch, that these industries are overburdened by regulation and they cannot hire as much and it is not as good for the country. In a case of automobiles, the average cost of a new car has gone up. Well over 30,000 now. Some of that is the hardware in the cars, the fuel efficiency, that sort of thing. A lot of it is things that like being able to get the internet in your car come better stuff in the vehicle. Pulling back on this regulation may make cars a little bit cheaper but that is not been affecting sales. Arguably it wasnt really environmental regulations that hurt the coal industry as much as natural gas is cheaper than coal is. Power plants have been using that much more than they have cold. Coal with some of these it is hard to argue that regulations have heard the industries but hard to argue that they have crippled them. Scarlet have carmakers responded in any way to the concerns . David not so far. Carmakers are laying low on this one. They dont want to talk about what trump is about to say until afterwards. There are executives there who will probably talk after the president has spoken but they are not addressing environmentalists yet. You will see some lawsuits from environmental groups on this issue. Scarlet there is always rhetoric and then there is action. David welch, thank you so much. We are monitoring the White House Press briefing, where press Secretary Sean Spicer continues to field questions on the republican Health Care Plan. You can check it like going on bloomberg and on the right side we have the interactive tv, where you can see the chart we have just been doing. You can do searches for previous guests such as chris davis. Close captioning and everything. Oliver great place to get the charts and pull them up yourself. Scarlet lets get headlines with first word news with mark on to the mark crumpton. The president shook hands with the saudi denny crum prints in the state dining room before joining several white house and saudi officials. The meeting is the highest level visit to washington by a saudi oil member since novembers president ial election. The prince is leading the kingdoms economic overhauled to become less dependent on oil. France president ial candidate has beenfillon charged with misusing funds according to a prosecutors. Investigators are looking into whether he gave his family fake jobs. Election officials in amsterdam are putting the finishing touches on voting booths today as the netherlands prepares for tomorrows election. The vote is considered a bellwether for the future of populism with far right candidate Geert Wilders running behind the incumbent 2term prime minister. It comes ahead of polls in france and germany the next few months, where rightwing nationalists will be key place. New York Governor Andrew Cuomo says National Guard members and snow removal agreement are being moved upstate from new york city now that the storm has shifted to the snow forecast has been four inches but plenty of snow is falling north and west of new york. The wind is blowing up to 60 Miles Per Hour in some areas and airlines have canceled more than 5000 flights. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Oliver still ahead, how jamie dimon plans to turn the oncestaid Business Roundtable into a lobbying powerhouse now that he chairs a group. This is bloomberg. Scarlet this is bloomberg markets. I am scarlet fu. It is decision time for the Federal Reserve. The central bank is widely expected to raise the benchmark Interest Rate this week. Lets look at the charts that make the increase in your certainty. Fed fund futures have made a dramatic shift on the heels of hawkish comments from different fed officials because the market is putting odds of an increase at 100 , or roundabout. Are convinceders that equities played a role in pushing the central bank to make this move. The dow and s p 500 have rallied to records after the u. S. Election. It is supported by improving economic data, which is the white line there. Moving to the upside at the fastest rate in about five years. The indexes driven mostly by survey in sentimentbased indicators soft data and less so by hard data. Even so, we are getting improving him was on the letter front and that is putting reach its dual mandate. Wage growth is picking up, average Hourly Earnings registering a year on your gain of 2. 8 . Labor data is solid enough to point to a rate hike from the Federal Reserve. Beyond expected rate increase, investors will scrutinize the path of future rate increases. The focus will be on the white dots, and whether the number of expected movers for this year or from 3. Reases to 4 the medium dots, the orange line , indicates that fomc voting members will take a gradual path. Starting 1 00 p. M. New york time, we will be all over the fed position right here on bloomberg. Oliver time for the Bloomberg Business flash. Paypal shows were lower today after google announced it would make it easier for users to send and receive money by email on the android app. You can work even if the user doesnt have a gmail account. The future was already available on web browsers in some areas. After scrapping plans for an initial Public Offering in jennifer, Neiman Marcus is considering a sale of the entire company. The beleaguered chain said it is working with Financial Advisors on review of Strategic Options which may include selling part or all of its assets. Hudson bay held talks to acquire macys but with neiman potentially on the table, they are said to be redirecting their attention. Walgreens wants to sweeten its proposal to land the antitrust approval to buy a rival pharmacy chain, friday. That is a going to people familiar with the talks, which says that walgreens is nearing a decision to sell more assets, boosting the number of stores, and adding distinction centers, software, and personnel. Walgreens could present the beefedup package to the u. S. Federal trade commission within weeks. That is your Bloomberg Business flash update. The Business Roundtable survey of ceos was released today and jamie dimon, chairman of the roundtable, was among those who waited he talked about the need for regular performance. You talk about Small Business people, and intuitively and surveys they anecdotally and to ignite Small Businesses and help them and listen to their complaints and help them grow. Oliver dimon is aiming to capitalize on the probusiness agenda of the Trump Administration by turning the Business Roundtable into a lobbying powerhouse. Exactly are mr. Dimons priorities here as chair of this group . He laid one of them out there, regulatory reform. He wants to do tax reform 10 infrastructure. Sort of mentioned the quarterly survey. Ceos want to see that at the forefront of what the Business Roundtable does. The roundtable has all of these ceos but he wants to focus on these three core missions. Moving for to make the real policy in washington. Scarlet how is the Business Roundtable different from the u. S. Chamber of commerce or other big Business Trade groups . Ceo predominantly membership it is cdofocused, these 200 people who are the ceos of the largest u. S. Companies get chamber of commerce is very different. You have state chapters, city chapters, manufacturers, Small Business, large business, owners, employees, all sorts of things. The size of the mandate is a little bit different. The size of the membership that they represent is a little bit different. Some of the priorities are little bit different. Certainly they have been working in that similar space. In terms of lobbying, which is what i focus on a lot of the time, it was the chamber that was moving things a little more aggressively than the Business Roundtable. Oliver from the economic standpoint we had been thenicling these shifts, surge in optimism in sentiment surveys. Im wondering if you see that reflected, and how does that degree of optimism show up in this groups agenda. Theyy definitely see came out with this survey today indexe ceos see a pop partitions, especially for sales and hiring. Certainly the membership sees that. What they want to do is take advantage of this and go to the white house and push those policy items they were talking about. A bit of an interesting point, because you have dimon, once a prominent democrat, still refers to himself as barely a democrat, but he has links to the white house, informal adviser to the president. And then you have josh bolten, former chief of staff to president george w. Bush, but he was a never trumper conservative. You see them trying to mend fences and what they call a business family environment. Brody, great story on the bloomberg terminal. Scarlet still ahead, trading tech in a risingrate environment. This is bloomberg. Oliver this is bloomberg markets. I am oliver renick. Scarlet i am scarlet fu. Time for options insight with julie hyman. Julie joining me is the chief Investment Officer at recon b in your note today, you said we are seeing riskoff on options trading. Across the board in the index those are the european call options, a lot of institutions traded them. More puts being traded, as well as the etfs that tracked py, and like the qqq, s when you look at the vix, two times the amount of calls. We are anticipating an increase in volatility picking up across the board, and they are doing it in every product they can. It, ifon the surface of you just looked at the vix, for example, it would look like no worries about anything, practically, because of the complacency of being priced in. When you look across these different sectors and the different etfs that tracked the different sectors, where are you seeing more activity within that universe . Kevin it is fascinating because we have seen volatility between sectors3, for different have been espousing different views. The utilities sector, a month ago it was 18 and everyone was worried about this rate hike. It is now compressed to 13. A lot of trading is happening to the upside with people buying calls. One fastening part is the correlation is actually dispersed from the overall market. It has had a negative correlation to the overall market even if it is still positive. The health the xlv, care one, people are positioning themselves in there. People are starting to protect themselves on the upside moves in defense of nature stocks. Cyclicals . About the your trade today is on xlk, the technology etf. You would think that one might see upside action if people were betting on economic recovery to continue, etc. Kevin what is great about the xlk is it has had an awesome year so far. Of 9. 2 on the year. A while the run. Volatility wild run. Volatility is completely compressed. 10. 3 earlier in the morning when i saw that. Up 53 right now. Someone did a straddle they struggle that 53 level and what they did is they bought the 53 call in the monthly for april and a 53 put, hoping that even if the volatility picks up to the normal level, where the market levels are, this should make money. This is a great way you can make unlimited profits. You are protecting yourself all the way on the downside, all the way to the upside. The most you can lose is the premium you spend, about 1. 40. As the market was hired you will completely participate. If it goes down, you are protected. Cheaper than the market. Julie you make money when the stock moves. You need to take it into consideration. Typically higher volatile names. Microsoft, alphabet make up 35 of the etf. Those are more gogo names. Going out to april, anything can happen. Macro environment. Volatilitying that will come back in tech specifically get kevin kelly. Scarlet coming up on whatd you miss, valeant tumbling in the session. This is bloomberg. Mark i am mark crumpton. News. Or first word House Speaker paul line is not trying to make any major changes to the Affordable Care act replacement plan despite a politically difficult estimate of its effect on health coverage. A new estimate shows 14 million americans could Lose Health Coverage by next year under the gop plan, putting republicans in a bind with its dire picture of the bills effects. According to a gop aide, ryan and Kevin Mccarthy are scheduled to speak with President Trump by phone today to discuss the next steps. England k, bank of Deputy Governor is stepping down. A Parliamentary Committee said she did not meet the standards required for the role. Lawmakers were concerned that she admitted she didnt disclose her brother works at barclays, which the central bank regular she was hired as the chief officer chief operating officer in 2013. Syria has been described as a torture chamber, the worst manmade