Acknowledge the decline in core inflation in march. The slowdown on Consumer Spending which they say rose only modestly, but supporting their view is a temporary cause, the statement notes the fundamentals underpinning the continued growth of consumption remain solid. And business fixed investment firm. What is not in the statement is any hint of future policy moves. And there is nothing on Balance Sheet policy. We go back to the idea of being data dependent if the fed is going to move in the future. It will have to be proven right about a transitory effect on the economy. All of us here in the dos were really. Free today. Why are we not discussing dots . Michael they only do that four times a year. Every quarter they put out a new dot slot. That wasnt this meeting. They are moving away from the dot plot a little bit. They are trying to show a wide range of what could happen rather than have people take it as an absolute forecast for what will happen. Mckee and richard among others in new york. His wonderful work at columbia. Is where we are right now this comes after my discussion with chairman bernanke e. Is any of this in the normal dsge space . You helped with that theory. Are you working out of a new textbook . Do you understand we are in a textbook world. Rates. Is now hiking the economy is growing. That therk suggests fund rate should be a 2 right now. We will get there gradually. Scarlet out of all the headlines mike davis, what do they pay most attention to . That there is some softness to the economy. U. S. But just in the on a global basis. The fact that the u. S. Economy is showing signs of a modest slowdown, i think its important. The trajectory may change. We may have something to think about. Scarlet mike mentioned the fed is acted data dependent but not all data is created equal. On hard datafocus which is backwards looking or the soft data which gives us a sense of where things can go . Looking at both and probably agreeing with the consensus that there is a seasonable seasonal component. We know that there is bad weather, for example. We have had some softening. And in some ways, the june meetings are conveniently timed. If the softening does continue, we have to factor it in. Fed coverage after the statement and no press Conference Today which means we get to talk longer. Michael mckee will not have to go through the pain and suffering of waiting to ask his brilliant questions. You would have asked about the Balance Sheet. Do they talk about the Balance Sheet in the statement . I feel like i should raise my hand, tom. I was listening right before we went to the decision. You saying the fed makes news now in its minutes. That is the case here. They have adopted view that the First Quarter seasonal problems are going to go away and we will see a rebound. But the Balance Sheet discussion, whatever it was, was going to show up in the minutes. People are going to want to see what progress they made since march. How much more they have come together in terms of how they are going to do the Balance Sheet. And since we didnt get any hint about when they will do other monetary policy, but when they are going to announce their plans. Want to point out that the dow has a raised its decline and is pretty much unchanged. Peering its losses. The nasdaq still lower because apple is a big drag. We are seeing a movement in equities. For thecomes to waiting fed minutes and finding out the detail of what the fed is doing when it comes to its Balance Sheet, are investors just in waitandsee mode . Or do they continue moving on earnings . I think we have to focus on making sure that the employment number coming up, the softness in the data that we have been talking about doesnt persist and doesnt form a trend. If that is the case, i think we are going to have a problem. The Biggest Issue is still truly what they do with the Balance Sheet. That is really the Biggest Issue in the markets. It that is what we will focus on, singularly. The pace, the mixture, the reinvestment. All of those are critical issues. Gained a lot they by giving too many clues. They have plenty of time to do things. Patterndata can form a if the softness is not going to persist. It helps them to wait. Mike you said just a moment ago that using a modified taylor rule, we should see the fed funds right now at 2 . A lot of people say, if you use the specifications that john taylor originally put in there for 2 of output gap, you would get a much higher level app at this point. I suggested for some time that his insights are very important. It does need to reflect the fact that the policy rate is lower because of the Slower Growth in global factors. You get a funds rate of 2 . Thats where it goes gradually. This away from the world of theory and the xyz space of ds. Lets talk about making money or not losing money. Thats what Oppenheimer Funds are trying to do. The low volatility. They have overestimated the volatility. Going to beably less punitive for the markets. It remains a stable as it has been. That is the case as long as Global Growth is stable. In that environment, equities credit even the long end of the short end of the credit markets. The long end of the treasury markets. Tom looking at the bloomberg terminal, lets do a data check. That. 02 should be green. That is a higher yield. You have dollar strength. They are looking at the spreads among other things. The idea of flattening 100. 79. Right back to where they were on november 8. Scarlet we have market reactions to the feds nondecision. From new york, this is bloomberg. Tom Michael Mckee is in washington. It we have to stay in separate quadrants to keep us apart. Scarlet fu is with us with esteemed guests today. Let me start with a conversation with ben bernanke. You can see it on bloomberg Digital Media including our itunes podcast. In the lastchairman hour on the fed Balance Sheet. The fed has released projections about what they will do. I think the best guess is Something Like four or five years. After they begin the process of unwinding to get to some kind of stable level. Tom that is an important statement by the former chairman of the Federal Reserve system. He thought awfully hard about it. And im going to cut right to the chase, professor. Does four or five years make sense . Sense but it makes you cant really answer the question until the fed answers the question, what is the destination . What will determine the size of the Balance Sheet. The Balance Sheet size with currency demand. Once you know that, you can talk about the pace. Tom for the audience, the Balance Sheet is directly linked to the Interest Rate. How are those linked . That byed made the case doing qe, they pushed down the long end of the Interest Rate stimulateit helped the economy. In the ear he, there should be some sort of reverse effect. There wont be a huge impact. The flow will be cut off. It will have a major slowing effect on the economy. This is why bill deadly has been talking about a bit of a pause. The fed needs to move carefully communicating its destination and how it will get there. We hear more about the Balance Sheets. We have more, but it doesnt mean the fed has to provide all of that. I think if you go back and look at 2009, 2010. We were expecting all sorts of disasters. Hyperinflation and all of that. We have that right to be worried about. Made there is a case to be that it may not be as big a disaster. There is some probability that there is a new fed chairman. And i think, in this case, the not thein terms of details, but the basic strategy and game plan will be important. He spent time thinking about this. And if there is a successor to be thought through a reasonable strategy, its not unlike bernanke to yellen. Tapering began under yellen but the tapering plan was essentially laid out by bernanke at the end of the term. If we laid out all the plan and the new successor was radically different, the markets are going to freak out anyway. Tom thank you so much. On this day, a Federal Reserve meeting. A former vice chairman of the Federal Reserve system with princeton university, alan blinder on the original decision that the fed has to make in the coming years. Michael mckee and myself in washington, scarlet fu in new york. This is bloomberg. We dont know who he will appoint. He could reappoint janet yellen which would be, from his perspective, a sensible thing to do. In support of his new book, the courage act, a wonderful conversation today. It will be out in all of my Digital Media. , professor alan blinder. The former vice chairman of the fed. In one of chairman bernanke hes speeches, they talk about the deep dark ages of economic history. Does the present Administration Talk about putting this leader in front of the fed, do they have a respect for your industry . They are bringing back laugher is him on the tax cut. You say that is disrespectful science, but economists think we have a remedy for that. It goes on and on. I think the answer to your question is, there is very little respect that has been shown. There we are. And were are where we are right now. Will need to provide stability to the system . It will depend on how the economy evolves. It is the 2 growth path. It is always scary when everybody is forecasting the same thing. But suppose we keep going along that track. I think the fed is going to gradually everybody thinks the fed is going to gradually raise the short rate 75 to 100 basis points a year. Probably another year and a half to two years. I think thats about the right thing. I think has been bernanke he thinks that too much is being made out of the Balance Sheet. The fed is going to shrink this Balance Sheet in a very quiet way. It will not surprise anybody. The exact path we dont know yet. You do have to the endpoint before you can guess. The endpoint is in the 2. 5 trillion range. And the number that ben bernanke said for five years to get there seems reasonable to me. Lots of things are going to change in the next four to five years, none of which we can predict here. Bring ini want to something the highlight how the fed will shrink the Balance Sheet. The fed has been very talkative as of late. Once upon a time, they did not talk all that much. In 1996, each official gave an average of four speeches a year. They try to give an average of 14 speeches. I feel like we can talk about how things proceed. You have a lot of reserve Bank President s. There is actually a difference. It will go back to the dark ages of 1995. There would not be a lot of screaming and yelling and there wont be surprises. Scarlet Alan Greenspans , and papers sticking out of it. Former vice chairman of the Federal Reserve will be staying with us. We have more insight. From new york, this is bloomberg. Scarlet from bloomberg World Headquarters, im scarlet fu with tom keene in Michael Mckee in washington. Youre watching coverage on the decision to leave Interest Rates unchanged. It was a unanimous decision to keep the june hike option open. Consumption growth stayed solid. Mike . I have a question about the institutional behavior of the fed. The fed wants to get Interest Rates higher and they want to normalize rates. They want to start shrinking the Balance Sheet to whatever target they set. By this time next year, we could have five new people on the fed including a new chair and vice chair. Someone who worked inside the institution. Would there be a possibility that whatever gets done this , that it would be reversed significantly . There is a possibility but i would not call it a high probability. I think you are thinking mostly about the Balance Sheet shrinkage plan. I think janet yellen would like to leave, assuming she does leave, with a plan in place. With the new fed chair, throw away that plan and start on Something Else . I dont think so. I dont think its that important. And unless the new fed chair is a fool, he or she will not want to throw the markets into a tizzy for no good reason at all. Plannk the Balance Sheet that is left to her successor is very likely to be acted upon. The Interest Rate path is a whole different thing and will depend on the evolution of the economy. We all know that our ability to forecast that one to three years in advance is pretty limited. That suggest the Bank President s will take on additional responsibilities . Its not as concentrated as it is now. The chair, the vice chair. They will still be there. The you get from president s different from the governors is more dissent. Its not that they changed the decision. It is less reluctant. I imagine that will continue to be true. My thank you for joining us today. We have been talking to leaders in beverly hills, california. Erik schatzker is standing by. With me in beverly hills, its great to see you. Good to be here. Pricing andt was one additional hike this year as early as june. Could you see anything in there that should change anybodys mind about what to expect from the fed . Not much. It was a milquetoast statement, so to speak. The normal Economic Growth which i assume is 2 to 3 in this quarter and a talked about gradual rate hikes. When you speak to one in terms of what the market expects, and the fed with their charts, they basically look at two to perhaps three. Erik in the futures market, we will see one this year and possibly another next january . Bill i think so. The fed is marching towards a neutral policy rate. Whatever that is. Erik that is perhaps an even more important question. Bill the old model, the taylor rules, they spoke to an oldfashioned financial system. We are in a new world where Interest Rates in many cases are negative. The central bankers are inching its way up very gradually in not create another lehman brothers. The committeeof would love to start shrinking the fed Balance Sheet. How long do you think it will take before they are able to do that . I think a long time. I have been an outlier on this. I said the fed will never, never decrease its Balance Sheet. Before . 5being that trillion currently existing on the Balance Sheet says something about the low level Interest Rates for our economy. It speaks to what theyve done in terms of lowering the tenure rates. The 10 year if they completely went back to where they were. Thinking, Interest Rates would be much too high relative to what the current economy can stand. I dont think theyve marched down that path but they love to talk about it. Erik my next question might be moot. Thes predicated on initiation of the shrinking of the Balance Sheet. But the Treasury Department has said that when the fed finally stop, is it being done by he fed . How would the market react with additional supply. Bill i suppose the additional supply, that quantitative easing and lower Interest Rates are on the 10 year. It would lead to my way of thinking, the gradual increases. When the fed by mortgages along with treasuries, it lowered volatility. Some of that payment volatility out of the market. Erik if the Treasury Department were to issue an ultralongterm bond and i am presuming the 50 year, would you be a buyer . Bill my assumption is it would and5 to 40 basis points something close to 350. Wondering about the lowest level over the last century. It is an opportune time to issue that at low yield. Erik should we be talking about a 50 year issue . Bill others have done it. Certainly that has been in existence. So yes. Obviously, if you are a buyer, you dont want to have something with a low Interest Rates. Erik they love this idea of the ultralongterm bond. Based on what you know about , the Treasury Department, it is currently right over those objections and go for the 50 year anyway . It morewould not give than 50 odds because they listen to the street. Excuse the phrase, they are goldman dominated. The street, the private market wonders, much like when tiffs or 20 yearsced 15 ago about the liquidity and the instrument in the early years, the street loves liquidity. It doesnt like illiquidity because it it is not going to induce the market. I can see why the private side would be against it. Andthere are institutions those that have durations of 40, 50, and 60 years. Erik as a result, it may be less reminiscent or less disruptive. A reduction of tips or the bill i dont think it would be disruptive. It wider than 30s or tens or fives. But so be it. The interest weight rate would be higher. In duration wise, the treasury exactly the right time. Citizen theht be most dominant characteristic is the lack of volatility. , it with gold and with oil is most part of the currency. That is difficult for me because what does gross do . Basically, you temper your a profitable and structural trade. The price is not right. Erik you said your april Investment Outlook that productivity and the prospect for productivity gains do not justify stocks at their current levels and credit at current spread. Bill right. Erik how long before the trump trade unwinds . Bill i think it unwinds it gradually because the policies become more obvious as we move along. Right . I think risk market we are highyield bonds and spreads, p e ratios and other risk investments. This is subjective, but i think that 3 growth is what they might expect. Obviously, they expect a lower corporate tax. Even at higher profits 2 growth. Unless they get 3 growth, i think there were they will have a disappointment. Erik i want to get a sense for how much conviction you have in that view that the markets are overpriced. Have you gone so far to short credit or short stock echo bill yes. Or short stock . Bill yes. Erik right now. Bill it makes all the sense in the world to me. Erik best rate out there . Bill highyield spreads dont have anymore to compress. Thosep the kerry which is basis points. What i think theres very little danger in terms of further compression unless we move that 3 nirvana that markets seem to be expecting. Erik bill, its been 2. 5 years since you started at jana. How would you rate yourself . Bill im going to sound like trump here. In a minus in terms of performance. 4 tell clients to expect a or 5 return with very low volatility and that is what we have reduced. Almost like a money market fund. Prefer instead of 2 billion and it is growing for it to be 200 billion . Of course. From that standpoint, we are a little disappointed. But performance has been my main criteria. So im liking myself. Erik good to be here on a day when bill gross likes himself. Scarlet, the incomparable bill gross. Back to you in new york city from beverly hills. Scarlet Erik Schatzker at the Milken Institute global conference in beverly hills. Tom fed coverage will continue and we will get lots of talk as Michael Mckee here in washington and ira jersey of Bloomberg Intelligence will stop by as well. Here is a statement by ben bernanke. Lets less listen. In terms of putting people back to work, it wouldve made more sense to have tax cuts in 2013 or 2012. With unemployment at four point 5 , the case today is a little weaker. There is always a case for improving the quality of the tax code. Making it more fair, efficient, so on. But in terms of benefiting the economy, it wouldve been better a few years ago. Scarlet this is the fed decides. Scarlet fu in new york, tom keene and Michael Mckee joining us from new york. Now we have the decision on not to raise Interest Rates and keep options open for june. U. S. Rate strategist ira jersey and chief u. S. Economist carl. Iccadonna our International Economics and policy correspondent Michael Mckee. Carl, you had written a preview of the fed decision today and you correctly called there would not be any major moves. We have nothing. What are you looking for the fed minutes to likely say as we look ahead . We werent expecting anything on the Balance Sheet for actual statements and they had to it knowledge or transitory growth law. Theres really knows a prize. They didnt even have that much of a communications challenge in terms of pushing for that june rate increase. That is when futures moved higher for the june meeting as well. Given the easy task they had before them. They had to address the much more difficult task. They will start to tell us more about how they will modulate that unwind because i dont think they are comfortable with just the passes ending reinvestment and each month or quarter will be a different amount of the Balance Sheets. They are probably clarifying how they will control scarlet that. Ira, i wanted they will control that. Bring in awanted to chart that you talked about. Fund upperfed target, the yellow line is inverted. Keep in mind when it is going down, the fed is raising rates. We dont have an inverse correlation right now. Ira the market has gotten much flatter than you would expect based on the policy rate is the Federal Reserves own these treasury securities. , and thetative easing fact that it has persisted tells me that the market still thinks the fed is going to hike. After the meeting today, you had a pop in the very front end of the curb but also a little bit of a selloff. The fed will hike a little bit. That is certainly what the market is telling you today. There is confidence that the fed has got this under control. The fed is doing the right thing. Scarlet the data certainly bears that out right now. Nobody is saying it is out of control. Mike let me ask about this Balance Sheet question because you are the rate guy. The Treasury Borrowing Committee suggested that they will have to take action and increase the size of auctions to make up for the securities that the fed will no longer be buying one they start bringing down the Balance Sheet. . Ow much can the market absorb if you are at the fed, what are you thinking in terms of what you can put in front of the market each month, say, if that is the way they do it . What effect would that have on Interest Rates . Reservesederal Balance Sheet has maturity every month. It depends on how much the Balance Sheet decides to run off. The treasury will have to issue more. What impact does that have . It depends on how the treasury does it. They can issue more bills on the front end, sixmonth bills or threemonth bills. I dont think it will have that much impact on the market. Bond, itssue a 50 year is possible that you can wind up with a steepening of the yield curve and yields selling off a little bit. In the treasury secretary told Bloomberg News that they like the idea of a treasury, of a 50 year treasury, the long end of the curve sold off quite substantially. We dont like it so much. Im wondering how much the market can absorb in the fed is looking how much to put into the market each month. How much can the market absorb right now . On a monthly basis, it is tens of billions. It is initially not really the set that matters but what is the path of issuance that it has to be because of budget deficits . We have this issue coming up where a lot of baby boomers are retiring. Increases ofbe deficits just because of the increases in Social Security and medicare payments. Will the bond vigilantes come back soon . I dont think so. In a year and a half or two years . Perhaps as deficits start running away regardless of what the fed does. Tom i dont think its a secret to anybody that i needed help speaking to mr. Bernanke. Carl riccadonna saved the day. Carl, i asked your princeton colleague about the buffer needed for higher Interest Rates as we did our ballet with the Balance Sheet. Need does the target rate to be before we reach Balance Sheet nirvana . How many more rate increases get us to where we need to be . Carl sure. The minutes are going to clarify that to some degree but it looks like they get two more rate increases before they tom is that enough . At 1. 5 puts the rate and i would like to see a closer to 2 . If things do go horribly wrong with the Balance Sheet unwind. That is not my expectation but i want the insurance policy. 150they want t basis points buffer and i want to hundred. 200. Tom they said everybody has to keep calmer about the Balance Sheet unwind. Scarlet reduce the hysteria and look at the data the way the fed is. Speaking of the data, i wanted to bring up this point, the divide between hard data and soft data. Our data is the numbers are reported and the soft data is numbers based. The white line has gone up and up and come down a little bit there. It has stayed pretty steady. Does the Federal Reserve put less weight on hard data and soft data because of this divergence . Tol i think theyre trying reconcile the two and in some regards, they are writing off the weakness in the hard data of the First Quarter due to other factors and the seasonality that seems to be impacting gdp year in and year out. Forecasts are now rising above 3 . 4 . Cast is running over because of the unusual noise which janet yellen referred to, they are stepping back and looking at a longerterm trend. And when they do that, they see the animal spirit of the soft data saying that there can be some improvement over that 2 underlying pace in the economy. Tom our thanks to ira jersey and scarlet our thanks to ira jersey and carl riccadonna. Michael mckee is in washington at the Federal Reserve. Thank you so much. Tom, give us a data check. Commodities,es, quiet meeting and quiet data check. That there were some interesting nuances to say the least. The dow doesnt know what to do. There is a bid to it right now. Yields move up and that should be green. It three basis points higher yield from 2. 28 up to 2. 31 . Yield. Higher crude oil is a quiet story. 47. 8 a barrel. To the second board, please. The vix with the nine print earlier. , up threear yield basis points. It should be green on the screen. It flattens out almost towards where we were november 8 with the trump election. Anybody on any fed day, even ira jersey once a dollaryen. The weaker yen as well. It has been a most productive trip to washington. Absolutely, between your conversation with former fed chairman ben bernanke he and the analysis of the fed decision. Coming up, more reaction to the fed. What it means for equities. Are we knew the top . We will be from washington and new york, this is bloomberg. Is 2 00 p. M. In new york and 8 00 p. M. In london. I am scarlet fu. Welcome to bloomberg markets. Julia we are alive and bloomberg World Headquarters in new york over the next hour, plus covering stories out of washington, berlin, and palestine. Here are the top stories were covering on bloomberg and around the world. Markets, one hours left in the trading day and stocks are paring losses. This after the fed announced it is leaving rates unchanged, signaling it is not concerned about the recent slowdown in Economic Growth. Theolitics, the fate of healthcare bill hangs in the balance with the Trump Administration saying the house is just two or three votes shy of a majority. Will they get it done this time around or will it be another blow to the president s agenda . Plus, do not bet against Warren Buffett. One investor who tried and failed. Will share important investing lessons he learned along the way. One hour from the close of trading, lets get a check on markets. Julie hyman. Julie we are seeing ripple effects from the fed. The seeming sticking with the plan, another of rate increases this year going into early next year. The dow has turned positive up two points. The s p and the nasdaq on the decline. Lets see what the reaction has been. It has been quite interesting in the bond market in particular because we see a flipflopping. We were seeing buying at the shorter and and selling of the longer end. That has reversed. In the wake of the fed saying it will on rates but nonetheless, still signaling signaling that june is on the table. The three basis point increase in the 10 year yield, if you look at theyve the the year to date chart, it does not look like much at all. Of 14e seeing a decline basis points in the 10 year yield and the increase we have seen as of late has not really paired that decline in yield to a substantial degree. Check the u. S. Dollar. A similar reaction to what we saw there in the bond market. The dollar up about one third of 1 . The institute for supply management nonmanufacturing, a Service Report for april that kim and better than estimated. Earnings are another part of the story, and a big part and other earnings related stories. Take a look at the movers we are watching today. Delphi plans to spin off its Powertrain Division and autonomous driving in it by march of next year. Reporting pain capital as well as carlyle, those shares not earnings related story obviously. Getting punished, those are the two worstperforming stocks on the s p 500. What about apple . This is the big earnings report. Apple is not really moving at now. It has been coming back since the lows of the session. Now it is very little changed. 10 or 11 . A negative like reaction and pessimism over disappointing unit sales in the First Quarter, it is now switching back to the next aversion of the iphone coming. Ut later this year thank you. Textures have lifted major measurements notably the nasdaq. Those need to be balanced with data showing the economy got off start to what does this mean for the aging bull market in equities . Joining me now, peter, you see combination of slow growth across across a variety. You are looking at bond market, gold, and the dollar. Why is the equity market flashing red . Markets take time. Everyone should panic to have one down day in the nasdaq after all of these updates. We should be concerned. Listen to the markets. I said more money is lost by anticipating things happening than being patient and waiting for things to happen. We see the breakdown of commodities. Are Early Warning signs but your automobile can go a with the gas tank flashing the little light thing, you are almost near empty. But can you measure exactly when it will stop . No. Be patient. You have had a good run here and you need to be conservative. There are tremendous Warning Signals out there, but it is not time to just say, hey, hundred percent. You think facebook earnings represent a shortterm high at the moment. What kind of pulled back are you talking about . It is easier to measure in terms of the s p rather than the nasdaq. If we think the critical level 2320, we are not talking far. The issue is if and when Something Like that happens, does it met gather momentum . Seen this in transportation. These are flashing signals. You have noted there is narrow participation in the equity market so far this year. To 86, the top five stocks leading gains. Familiar names. App on facebook, microsoft, amazon, alphabet. Outweighthey buy far the s p 500 in light. He started looking at it from topary of 2016, the performers now include jpmorgan and bank of america. They only make of a quarter versus about one third of the s p 500. Why is this important to look at how narrow participation is . It is extremely important because in this debate over active versus passive management, if you are a person from each onehool until whatever, you learn you are supposed to buy low and sell high. Industries are created exactly the opposite. You are supposed to sell loan by higher because weightings go up as much as the index goes up. Fundamentale a disposition to Say Something is wrong and you want to have Risk Management and be prudent, you are penalized particularly in the hedge fund space. Everybody is not that bright. The question is we always say over the longer run. Short aing you a chart here now. The difference here between the s p 500 and the ordinary s p 500 is 1 , not that big a deal. I will show the one year here. Oliver had an article related to this to give a plug to. It was an excellent article. You have to distinguish what is the reality people are participating in . If you are an active asset manager, you are penalized for not Holding Stocks not grossly overvalued. If you look at tesla, how does that make sense . Either ation you there is a rationality can last at what we do is disciplined Risk Management. No way should you try to be smarter than everyone else. Championships and in a long run, that will help performance. You have been warning on energy, saint demand has not picked up while the white house is pushing for more supply which puts more pressure on prices. Talk about why this is the thread that, if you pull on it, may unravel, and all of the optimism we have seen across markets . Look at energy and everyone tries to look at it in isolation but it ripples through yesterdayy, as we saw with automobiles. Continuation in which case, you sit at home and do your shopping and you have fedex or ups deliver it. That means in the aggregate, les miles driven. Efficient and then deliver it in all the neighborhoods. If it is snowing out, we think about it as an urban phenomenon. It is not. If you talk to people in the suburbs or even experts where you have to drive a long way, you are not going to do it. That reflects in retail and automobile cells sales, the Energy Prices themselves. Chief strategist at quad group, thank you. A check of the headlines now with mark crumpton. Fbi director james comey said it would have been catastrophic to conceal newly discovered he mills for clinton before the president ial election. Testifying y is democrats blame him for undermining the Clinton Campaign by disclosing just before last fall passes for that the fbi had reopened his investigation into her you mouse. He says disclosing the pro was the right choice and also discussed russian interference in the election. The Intelligence Community passes assessment had a couple of parts. Clinton, whollary putin hated. Necessarily, they supported him. He added that russia remains the greatest threat to the united states. In the white house meeting with president trump, Mahmoud Abbas said he is hopeful for bringing about peace with israel based on the 1967 calling for peace, just and combines of, and told donald trump he believes we are coming into a new opportunity, a new horizon that could lead to peace with israel. Believed he ishe the past and your leader who can help get a deal done. I want to support you in being the houston in leader who the final and to most important Peace Agreement that brings safety, stability, and prosperity to both peoples and to the region. President trump the middle east Peace Process is something that is frankly maybe not as difficult as people have thought over the years. Turkey holding tough on a situation in syria and the restoration of full economic ties between the two countries. Russian pleasant president Vladimir Putin told her line at the start of todays talks their ability to discuss key issues, including syria, shows relations are being fully restored. The meeting at president putins with talks incide kazakhstan cosponsored by russia and turkey. German chancellor Angela Merkel is criticizing protectionism, arguing countries can only weaken themselves by trying to withdraw from international competition. Chancellor merkel made the con the comments to a g20 business gathering in berlin and said people may expect shortterm advantages from protectionism, but in the long run, the ability to innovate is hurt. Tough talk today from both sides of the brexit negotiations today. Warningy david has a for the european union. He is willing to walk away without a deal if provoked. He says the u. K. Will not pay a brexit bill of 110 billion. Negotiatorthe eus says the eu wants to reach a deal with britain, but he warned the clock is ticking and time is short. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. This is bloomberg. Julia thank you. A second shot at the bill to repeal obamacare. Can they do it this time around . We will have the latest from capitol hill next. This is bloomberg. Julia this is bloomberg markets. The Republican Health care bill with a newnew life 8 billion amendment to help those with preexisting conditions. Here is a representative of michigan at the white house after a meeting with the president. I think it is likely to pass in the house. We will see what happens, but then it goes to the senate, there will be a conference, and the bill will change from where it will likely change for the better. Joining us is Bloombergs National political reporter. Great to have you on the show. The white house is saying they are to her two to three votes short. What is the Freedom Caucus saying at this moment . Meadowske to mark moments ago, the chairman of the fitted caucasus Freedom Caucus. They continue to be supportive of this amendment. It is a net gain. We know for sure there is a net gain of two republican votes, who came out against the bill on monday and are now in favor of it after the amendment. This is probably the closest House Republicans have ever been but it is not quite there yet. Question is are we going to get it this week . I spoke to one republican congressman in the last hour or so who said he has heard rumblings of a potential vote tomorrow or friday. It is possible. I would not rule out a potential vote in the house in the Health Care Bill this week. Defending legislation is headed for a vote as well. A fight on who prevails. On when thelatest bill will go to voting . The vote in the house is happening this afternoon, then is expected to go to the senate both. Eeze through how Many Republican votes will it loose in the house . Speaker ryan and the Leadership Team want at least a majority in their conference. Them if they keep most of the conference on board, that is what remains to be seen, a government funding bill, democrats have celebrated as a victory and defeated other divisions like planned parenthood, the white house come republicans, 15 billion in additional money for military spending, something the president has been calling for. There is something in it for everybody. What have people said about the apparent catfight about who won the battle of the budget here . The Freedom Caucus made it clear they hate this bill. They do hate this bill. The chairman of the Freedom Caucus told me most of the Freedom Caucus members will vote against it due to a lack of conservative priorities in it. Democrats havehe been celebrating have given conservatives pause. Withdont like to see that republicans controlling the house and senate, they were not able to get more of this. The big question is this will set the tone for future spending bills. If they cannot get victories now, why should they expect democrats to cave later . That is the question on their minds right now. To watchl continue this. This will be interesting. The debt ceiling in play as well. Coming up, facebook shares traded for the first time in eight days, down for a record high. Announcing today they would cap up their review. From new york, this is bloomberg. This is bloomberg markets. Scarlet timeout for options insight with julie hyman. Julie thank you. Joining us is the equity derivatives strategist for macro risk advisors. The first round of the French Election is over and done with. We will talk about another phenomenon that may be affecting the market and volatility. It has to do with . 50, not the wrapper. The rap artist. Basically options that payout when the market crashes and volatility spike, they buy these call options for . 50 each, and what is amazing is the sheer persistence. They spent about 120 million year to date. 90 million of that can never come back. We see them almost every day out there. Agnostic aslevel long as it costs . 60. What could be the strategy behind doing Something Like this . There has been a lot of speculation about it. News articles, some doomsday guy, we think this is a large of some kind who decided to set aside money. That is a lot of money but to them, it is maybe not that much. To spend thisd much money and hedging and they will go out and protect themselves this way. They really do not care if he will know what theyre doing or not. To them, it is a fixed cost, their insurance. What effect does this have on ae market when you have such large and consistent buyer . It is a good question. There a lot of other people out there, they dont traded such a distinctive style but people out there price insensitive who just need to buy protection and always be protected. Line, youney him a cannot afford to have it loose , so a lot of people are out there buying protection and that is one people one reason why protective volatility has been such a big problem because people are out there buying options the matter what. Entity was not there, with the vix below are . It is something you see outside the u. S. , that is one reason. What do you do from a trading perspective knowing the buyer is out there so consistently . For todays trade, i will take a page out of . 50s book. They have gotten so cheap relative to history. Only comes once every few years. 13, it is not like it is usually elevated volatility. He used to be a low for the vix. All right. Thank you for helping us breakdown what is going on and how to make sense of it. It has been a hot topic among traders. Thanks. Back to you guys. , still ahead, Warren Buffett is he going long hedge funds versus the s p 500 . With funds prevailing, we hear the lessons learned. This is bloomberg. Mark lets get to for first word news. Marine le pen facing off hoping for a knockout in the french president ial election race in their only oneonone debate. Much is at stake for both sundayss before runoff vote or the debate marks the first time a National Candidate is taking part in the free runoff tv debate. To congresstestify next week, she expressed alarm to the white house about president Trumps National security adviser contest with russian ambassador. Expected to account in detail on monday, her january 26 conversation about Michael Flynn and say she saw discrepancies tween the administrations public statements about what really happened on to a person familiar. The cost of finding zika is climbing. Miami Officials Say the county thehes combat mosquitoborne virus, nearing 30 million, up 5 million from 2000 tm