I am glad i had an opportunity to tell them we are close to a deal that will bring the cost down significantly. Alisa james dataset said he is not opposed to buying the f35 but wants the best bang for the buck. The white house has released a schedule for president obamas last week in office. Mr. Obama will hold his final president ial News Conference wednesday. The president and the first ladys will also hold host the trumps for tea friday morning. After the inauguration, they will depart to a destination yet to be announced. Tom vilsack is leaving the Agriculture Department one week before his tenure ends. He has led the department for eight years and was president obama longestserving cabinet secretary. Sean spicer says he expects an announcement on a replacement soon. Mexico has nominated the current head of the north American Development bank, Geronimo Gutierrez fernandez to be the countrys new ambassador in the u. S. The current diplomat will become undersecretary for north america. Gutierrez will be facing president elects trump promised to build a border wall and deport thousands of undocumented immigrants. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im alisa parenti. This is bloomberg. Scarlet live from World Headquarters in new york, i am scarlet fu. Joe i am joe weisenthal. We are 30 mins away from the close of trading in the u. S. Here it u. S. Scarlet the house has enough votes to adopt a Resolution Health leaders approving a measure to enable a swift repeal of obamacare. This is a budget resolution, and that element is folded into the budget resolution the element to repeal obamacare. This had already passed the senate, and we will see how this proceeds. This is the first of many steps taken to retail present obamas legislative landmark deal on health care. Joe the question is what you miss . Scarlet the outlook is writing at jpmorgan, which recorded a jump in fourthquarter profit and recordbreaking earnest. Wells fargo posting a profit decline. We will see with the cfo has to say. Aroundrewsberry joins us president elect donald trump takes the seat in the white house next week. Could one of his first orders of business be to address m and a. We will hear from major r effort balai blair effron. Continues toe vote. It is not the final step. Several things have to happen there is controversy about the timing. Republicans do not want to be in a position where they retail it but do not have anything to replace it. Lets go to Bloomberg News reported Kevin Cirilli on capitol hill monitoring the report. Kevin, what is the significance of the vote, and what happens now . Kevin this paves the way for republicans to take additional steps in order to continue to repeal obama care. Procedurald a hurdle, similar to what the senate did earlier this week. This is where it gets interesting. There is disagreement among systolic and amongst about the timeline and how to offer an obamacare alternative. And the bight, issue is summoned publicans feel they should be a replacement already in place before we go ahead and repeal. How does that play into what happens next . Kevin i talked to some republicans like senator rand paul who argues there should be a full repeal with an immediate full replacement, but then i talk to other republicans, such as the vice chairman of the public and conference, represented doug collins, who argue there should be a full repeal, but wait a little bit, and implement portions of an alternative, because you look at polling amongst her publicans and amongst all americans, obamacare is largely unpopular, but there are key parts of obamacare that remain popular, and Republican Leadership is concerned that if they were to offer an immediate repeal and immediate replacement, they would be proving political poison for some of their republican colleagues who are up for reelection in 2018. A lot of finessing going on behind the scenes. You have the new administration taking office in a week. Joe right, as you said, obamacare is unpopular, but a lot of the elements of obamacare, such as the fact that Insurance Companies cannot deny you for having a preexisting condition and so forth are popular. Carehat is a health replacement look like that keeps the popular portions of obamacare but is not obamacare . Kevin i have been asking some House Republicans aids this very question, and i can tell you they seemingly will be looking at things Like Health Savings accounts, for example, and they are also relying, heavily, on the Incoming Administration, and Trump Transition Team has yet to put out their own timeline for when they would like to implement their own plan. That said, you could see, on january 20, political optics being used to portray and put forth a message that this is a president who wants to fulfill his campaign promises, but also, again, jockey to protect the political majority for 2018. Either way, a lot of moving parts on capitol hill. I can tell you House Speaker paul ryan is working closely with the Incoming Administration to get on the same page. The press secretary for the Trump Transition Team, sean spicer, is adamant they are all speaking from the same political playbook, but a lot of questions remain about the divisions within the republican party, and what exactly they will do. Representative collins told me he would anticipate the next step on an obamacare alternative to happen mid february. Scarlet mid february we will look for that. In the meantime, the vote to repeal obamacare is indebted in the budget vote. What else is part of the budget vote . Maybe we should know the details there. Kevin can you take a broader step of what the budget is going to do, it is funding things like military spending, as well as a portions,her economic and, again, just to quickly talk again about obamacare, and the popular parts of this bill, i feel we have here we have a soundbite ready for representative college. Lets listen to what he had to say earlier. Representative Collins Donald trump won because he made an appeal about a bad law. He said there are parts that they like preexisting insurance conditions being taken care of. Doubleteams, even six years ago never had a problem with that. Here is the problem we had things that could have been fixed there with a simple, or more dr. Centered, where everyone can have access to affordable care. They chose to overhaul of the government healthcare system. We are making sure some of those things that could have been done easily than are now put in place for every american can have access to affordable care, preexisting conditions are covered. The president tapped into that. That is why we are going at this approach taking a very methodically, doing exactly what we told the American People we would do repeal the law and put in a patientcentered, doctorscentered law. You are hearing again, republicans who fought hard to repeal obamacare during the Campaign Season now transition into a period of governance. Scarlet Kevin Cirilli joining us from capitol hill. Thank you so much. Coming up, well hear from one of wall streets biggest dealmakers, blair efron on m and a under a Trump Administration. This this is bloomberg. Joe a new study by harvards joint center for housing studies shows the u. S. Will add 25 million households by 2035, and while that is an increase from the last decade, it is nothing compared to the 1970s. Here to explain what happened is daniel mccue, a Senior Research associate who wrote the study. He joins us from cambridge. One of the cases people make to be optimistic about the economy is there is a lot of demand due to household formation. How whole how strong is the tailwind going to be for the household sector for homes from wrong household formation all of these millions of new households . Daniel well, our Study Suggests it is a strong tailwind. We looked at, kind of, the big picture in terms of the demographics, population growth is leading us to expect for the number of households. It expects a pickup, especially relative to the last decade, where the recession really, kind of, took a hit to household growth. Scarlet right, and we saw household formation growth taper off and plateau. Are we back nature directory that we were on before . Daniel we are. We are talking household growth to be in the 1. 3 to 1. 4 million growth a year, up from the 600,000, more than twice what we had seen over the past 10 years. It is about what we saw in the 1990s. Not exactly what we saw on the 1970s, as you said, when the babyboom was entering the age of household formation. It is, kind of, suggestive of underlying, statistically positive underlying demographics for the future for Housing Demand. Joe do you believe daniel the demand is going to be characterized by growth in a lot of senior households, millennials forming new households, and really a growing number of minority households that will reshape the distribution of demand in the types of housing that is needed. Joe yeah, i just want to ask about that. First, do you believe we are adding to the existing Housing Stock fast enough to absorb the demand, or will we have to kick it up a notch . And second, what is the nature of the homes that will be in demand . We have seen multi family do very well for a long time, singlefamily not as well. We going toe are need, and what the expected the breakdown will be in different types of households sometimes . Well, to hit your second question first, types will be driven by what we see in significant as Significant Growth in senior households. We see a big growth and singleperson households. Demand for consumption of smaller housing units. I think the rise of the millennials and the aging of this large generation from their 20s into their 30s will really impact larger, Single Family homes more than it has more than what was demanded in the past that gave. Recall decade. We call for growth and married couple households, which suggests additional need for ,pace, which is better obtained or more likely obtained through singlefamily housing. Over the next 10 years, growth and demand for singlefamily housing will follow the aging of the millennials in my opinion. Joe forcing scarlet forcing your household, you broke it down in ethnicity whites, hispanics, asians, and blacks. I wonder what kind of housing will be needed in that there tends to be multigenerational households among asian and hispanic families. Definitely, and i think the increasing diversity of Housing Demand will mean a increase and increasing diversity of Housing Stock. Whether it is increasing construction to accommodate different housing types that allow for multigenerational living, or more Adult Children living with their parents in, sort of, separate compartments whether that is a new house, or whether that is adjusting the Housing Stock of current parents or current owners that are getting older and able to use their housing in different ways. , sorte are seeing some of, other changes in demographics. People are getting married later in life, having kids later in life. We also see more senior couples were both spouses are alive just because people are living longer. How do these things affect the aggregate expectations, the headline numbers . Daniel well, you know, i think seniors increases in health and longevity, and, you know, being healthy for later in life has translated into people able to maintain living in their home for longer, and has reduced or delayed, i guess, the demand for living in Senior Nursing home types of situations. It has also, kind of, increased the number of older adults living alone. It increased the need to adjust the Housing Stock to accommodate a growing older population. Part of these projections shows the number of households 80 years old or over is set to double in the next 10 next 20 years. Also, another fact being that, you know, in sorry. In 2035, we expect one in three households will be over the age of 65. So, that really, given the associated growing needs for accessibility and increasing likelihood of having some sort of disability i think that is really going to call for an increased need to, kind of, adjust the Housing Stock to fit this rising, unprecedented growth in the number of older houses. Joe pretty poor. Thank you for coming up. Daniel mccue, Senior Research associate. Scarlet blair efron is one of the biggest dealmakers on wall street. He has advised on transactions including the png purchase of july and that nabisco sale to craft. Earlier today, Erik Schatzker asked him how Donald Trumps policies could affect m and a, and what corporate americas with the president elect . Trump aside. At some of the commentary Jeffrey Immelt from general electric, the have talking optimistic ways. The point, this time of year, imf, they, with estimates. I think it is 2. 2 , 2. 4 growth in the u. S. , 3. 5 globally. For the first time you talk to a ceo, he or she will say there is an opportunity to eat that. A Good Environment on markets. Labor, good. Wages rising. Retail, good. Investment, good. Optimism is a great stimulus. Now on trump clearly there is a level of uncertainty when waiting to see the data points. It is easy to say tax reform is a good thing. Regulatory reform is a good thing. The fact is we do not know what it will look like. We do not know what congress will say it ought to look like, and we do not know the timetable. So i think, for the most part, m , and a, when it comes to cross border war being transformational, needs to get these data points before we go on to the next leg. Erik if things play out the way they are expected to and there is a range of expectations, but there is a direction what kind of deals become more attractive, what kinds of deals become less attractive, or perhaps less doable . Blair great question. First of all, the deal environment is driven by two factors that is much more general. One, every sector is undergoing rapid change on a global basis, whether it is technology, competitive threats that is the biggest factor driving m and a. Combined with if you think you have a stable, global, economic backdrop, you can be comfortable and more comfortable that the first 12, 18 months will look closing your transaction, you will be stable you will have a stable runway. That is the biggest factor now. If i look on a trump basis, obviously it is crossborder. Obviously, it is consolidation. What will the Regulatory Regime say on continued consolidation . This is a big data points. Erik what is your expectation . Blair the expectation is it will be lumpy, and it will not necessarily be a policy that at least through 2017 you can see there are enough data points that you know how it will play out. Every situation will have to be examined very carefully on its merits. Erik do i interpret lumpy as inconsistent . Blair we need to know more. Yeah. I think inconsistent maybe your word. I look at it as you need a body of deals to go through the pipeline to figure out where we really stand. Erik will the president elect, once he is in office, bully companies into doing different kinds of deals, the way he has started with offshore and trade, for example . Blair i think it is very difficult for anyone outside the company to bully someone into doing something. We saw it with the financial crisis, highly unusual. Erik what about what we have seen with ford and toyota an toyota . Blair that is not m and a. Matters,y, language and in some ways it becomes selfenforcing. Erik so it is difficult to bully companies on deals why . Blair because you are spending shareholder capital, and you want to do something that is smart strategically for the longterm, and make sense shortterm. Scarlet that was Center View Partners cofounder blair efron speaking with Erik Schatzker. Banks rally following results. 4 00 p. M. ,rgo at wells fargo cfo John Shrewsberry will join us from San Francisco to break down their results and give us his take for the quarters ahead. This is bloomberg. Scarlet i am scarlet fu what did you miss . The big banks reported earnings, so i want to look at the return on equity, r. O. E. From j. P. Morgan. This tells a story since the financial i want to say collapse, but it is not. Financial crisis. How about that in 2007, jpmorgans r. O. E. Was a most 13 , it took a huge dive into thousand eight, and then slowly began rebuilding 2012, he continued to rise, and then we stumbled in 2013. 2016, for the full year, jpmorgan reported r. O. E. Of 10 . That is down from 11 percent the previous year, and also visiting the midteen target. The Fourth Quarter was a boon, but the Third Quarter r. O. E. For these banks was 18 on average. With the economy slated to do better, joe, and the Federal Reserve getting ready to raise Interest Rates, how that changes the trajectory of r. O. E. For the banks . Joe it shows that banking did not recapture what it was going into the financial crisis, and as you said, a lot of expectations they will surge back now. Lets talk about retail. Here are two lines. One line shows the percentage of all retail that is going to online or nonstore retailers. The other one shows you the percentage of retail sales that are going to department stores. I will not tell you which one is which, but i will tell you one keeps going up at an incredible pace, and the other one keeps going down. One of these lines is department stores. One of them is online. One of them just hit a record high the highest in history. One of them is going into oblivion to it im not going to say. I will let you figure it out for yourself. I think it tells a good story without identifying the two lines. Scarlet this is not typical. This is structural. Joe i do not see any mean revision. Scarlet the market closes next. The dow industrials little change right now, off by six points, while the s p 500 at four points. The nasdaq at yet another record high 5572 for the nasdaq composite index. It is now gained, i believe, in a double last nine days. Incredible run there. Joe nine straight. Scarlet this is bloomberg. Scarlet we are moments away from the closing bell. Treasury yields higher after solid Economic Data altered the case of higher Interest Rates. Financial shares also climbing today. Well be hearing from the cfo of wells fargo and a moment. Im scarlet fu. Joe and i and joe weisenthal. Thank you for tuning in live on twitter for our closing bell coverage every weekday. Scarlet we begin with our market minutes. The dow aging somewhat lower at the end here. Thanks in focus today because they kicked off a big earnings season and not only do you have jpmorgan and wells fargo but also bank of america. Joe early on in the earnings season, were going to break them down, were going to talk with the wells fargo cfo. We start the earnings season with a bang. The nasdaq a record high closing half of 1 . If you look at a five day period, a pretty strong week. It rose eight of the nine trading days and closed at a record four times this week. A shout out to the nasdaq for the outperformance it has made. It has underperformed the doubt following the election of donald trump. Jpmorgan, bank of america getting less than 1 . Wells fargo up 1. 5 . They were expected to see some negative effects on the fraudulent accounts scandal, but it was needed from that perspective. The regional banks dont begin reporting until next week, but they are much more sensitive to the rising Interest Rate environment. Joe lets look at the government bonds of starting with the u. S. Twoyear and u. S. 10 year. Of that those ticking a bit higher. They rose earlier in the day. If you look at the intraday term of the u. S. 10, you see a lot of action around 8 30 after we got Economic Data. If you look at some of the core measures, sales data missed economist expectations. Scarlet a disappointing breed overall from a retail but we saw indications from the company for themselves and the day before. In terms of currency, the dollar rounding off its third weekly loss. This week the dollar declined every day except for tuesday. Even on wednesday it had a big spike up and then it went lower. Ubs management says it expects to the dollar to peak. Move in athe dollars different perspective. This is a fiveyear chart showing the Dollar Holding Near its highs on the back of sizable september and november. The election of donald trump seen as inflationary, but reinforcing that drug or trend. Joe lets look at commodities starting with gold and oil. Gold not doing that well lately. It is down to 1 . We did see some action within the industrial metal, perhaps reacting to some good data out of china. We look at lead, iron ore, all doing very well. These hard metals are having a pretty good day. Scarlet those are todays market minutes. Joe what did you miss . The university of Michigan Consumer confidence data and for more on this i want to bring in our economic reporter. Last seven days, surveys are taking off, whether it is Consumer Confidence surveys or homebuilders surveys. Theyve all been shooting straight up. Peoples opinions about the financial situation. There are two components to the Michigan Survey that i want to look at. The first is how people are looking at their financial situation based on income. The other is how are they feeling about their financial situation based on their debts and assets. What we are seeing now is a lot of people are reporting they are in a better financial situation than they were a year ago and has they are able to pay down debt and the stock market is going up. There is a wealth affected phenomenon occurring. People who are saying im better of than a year ago because what is happening in the stock market and with my personal debt. Even though we havent had a really big change in terms of the hard Economic Data, people are feeling better that the markets have gone up since the election. Recoveryi noticed the since september, a lot of confusion before the election, people thinking it would not do so great. But it has been improving in the lead up to the election. Wanting to people say Financial Markets are not the economy but i think this chart is a illustration that there is more to it than that. In 2016, we had a rough year for market. That was reflected in the Consumer Confidence figures as you see here. This chart looks like Interest Rates. They fell as now they are back to where they were. The same thing with Consumer Confidence. Joe markets are not just a snapshot, but a feedback mechanism. Scarlet how about peoples views on unemployment for the job market . Of 4. 7 ,ar these lows how much better can things get . Until recently, we saw the Unemployment Rate flapping flattening out and people are getting nervous. You can see this chart, the number of people thinking improve is inill blue and it is going up. You have to go back several decades defined to find the point. Scarlet 1984. Joe can we see Unemployment Rate continue to drop significantly . Kelly ca3 on the Unemployment Rate by the time this economic expansion is over . While the narrative was, it is flattening out, it is not going to go down much and. Efore that it was dropping the real worry it was going. Is shifting back to, will the Unemployment Rate fall a lot more. Hearee here you official talking about that. Scarlet and the final chart he brought up is consumers borrowing expectations is tied to the treasury. White line that percentage of respondents into the Michigan Survey who thinks Interest Rates will be higher a year from now. 75 of this month, that was the largest percent of the respondents to see higher Interest Rates since july 2006 and the blue line shows the euro for your the u. S. Treasury yields. You can see consumers and markets track each other fairly closely. July 2006 marks the end of the last tightening. It remains to be seen if consumers are tightening Interest Rates. There are a number of measures where markets wind up very closely with Consumer Sentiment and vice versa. Evenly consumers insist they are not paying attention to the market. Joe matt besler, thank you for joining us. Coming up, wells fargo is benefiting from higher Interest Rates and increased the incomes from card and deposit accounts. Fargo ceo joins us from San Francisco. This is bloomberg. I am elisa for anti. Lets get to bloombergs first word news. Congress has taken another step to change the health care law. The budget prevents democrats from using a Senate Filibuster to stop the repeal of the law. The house has passed legislation that will allow retired general james mattis to run the pentagon. The legislation grants a onetime extension format is that the bars from the law that bars members of the military who have not been out for seven years from running the pentagon. About whetherided employers can file arbitration agreement that prevent them from pursuing group claims in court. The justices agreed to take up an issue that affects many workers breaking class action about overtime and waited disputes. And congressman john lewis of georgia says he will not attend the in migration of president elected donald trump. In an interview, the civil rights legend says he will skip the present the ceremony next week. Aen asked if donald trump was legitimate president , he said no. Global news 24 hours a day powered by 2600 journalists and analysts in over 120 countries. This is bloomberg. Joe what did you miss . Today a statement was put out about the divergence of stocks and bonds, saying it is going to end. I asked the author is it admitted that diversity as we know it will not work in the future . Of the last 75 years there has been a Good Environment for fixed allocation asset approaches. Approaches that do the 6040 allocations between these docs and bonds. That is good because it is been an environment where stocks and bonds managed to rally but the correlation between those Asset Classes has been very low. It is been negative in the last 15 years or so. If we look back over much longer, the experience of 35 years is abnormal. The correlation of stocks and bonds in the last 250 years has , in the last 35 years it is been. 3. Side, of course, in the shortterm, stocks and bonds contract the process of the economic cycle, but ever longer horizons and this means horizons of five or 10 years, it is hard to escape the fact that a bond yields are low and stocks are higher. Our view would be that u. S. Stocks should return something of 5 including dividends over the next 510 years and bonds something of the order of 2 . Joe the beauty of this folio, whether it is 5050 or six e40, both have been in general example markets big bull markets. But you dont get the gains without volatility. Lets say someone sticks with the 6040 portfolio and what will happen is mediocre returns and amplified volatility because they are moving together. Years the, in five returns have been high and the correlation between the asset class has been negative. I think both of those things are going to change. That is not a disaster, but expected the stocks and bonds in positive numbers, but at the correlation goes up, the 6040 loses on both sides. People have this mindset that a 6040 Asset Allocation isnt somehow a lowrisk portfolio. Is somehow a low risk for polio portfolio. 6040 in the a very risky portfolio and risky in the sense of underperforming liability being high. Joe what is the approach if you can no longer set it and forget it, what can Portfolio Managers into two hit their benchmarks and meet their obligations . The asset Owner Community needs to be clear about what the ultimate which markets. The ultimate benchmark is not the40, it is not that by capital markets. It is either a hard outcome are cpi link. People can start look at cross Asset Classes draghi. Theer than dividing of world by assets, bonds and other idea is ones, the can explore the area cross asset risk premium in investing which we saw gain in the last five years or so. Joe can you explain what that means specifically . Cross asset risk premium investing . One way of thinking about that is we have some choices in how we can find out all the assets we invest in. A normal approach would be to divide up those assets by Asset Classes. Also means to divide assets by factors as well and take the view that rather than saying the primary thing that i can buy blocks to equities, bonds and credit, but you could say the mighty Building Blocks mean reversion, momentum, or income. They can be the entire answer. Joe what does a diversified portfolio look like in this new regime . How do you think about diversification if it is not just bonds, stocks and we are not thinking about Asset Classes . It is important to realize one has to think about getting diversification from a collection of Asset Classes are these risk premium factors. We are also forced to think about the allocation of things currently called alternatives. And perhaps loosening that line of buying assets that stand those two categories. Joe that was sanford bernstein, Global Quantitative and european strategies analyst. Up, we are going to showcase your charts on the bloomberg. Looking at the numbers on chinese imports. This is bloomberg. Scarlet welcome back. Im scarlet fu. If you are looking for an early hening sign for equities, suggests watching the correlation to the 10 year yield. He goes back to 1999 and it goes back to the correlation where stocks and bonds were falling together. Each instance, as you can see, it led to declines in the s p 500, which is in the bottom panel. It has worked like clockwork in the last couple of years. Joe something to keep an eye on in case that goes red. Scarlet im looking at a chart about china. The first one was sent to me at the spokes investment group. It looks at yearoveryear. Hange Commodity Prices have a big influence on total dollar volumes of imports. China a big consumer of commodities and when consumer numbers go up so will chinese import numbers. They can also work in the other direction. Finally, i want to look at one aboutchart sent to us macro risk solutions. The fuchsia line is an inversion chinesehinayou on yuan weakens and the chinese economy picks up and when the you want strengthens yuan weakens the economy goes down. He really does have an effect currencyreally affects the economy. Scarlet wells fargo plans to close over 400 branches in the next four years as it tries to trim costs. Chiefg us is the Financial Officer. I look to get straight to the impact from the fraudulent account problems. Much of a fallout from the fraudulent account opening. How far out will we see the effects . The effects we are seeing right now is a slower rate of opening different types of accounts mostly because the people in our branches are adjusting to a new system of how theyre going to be measured and reported overtime. We are implementing that new system right now. The Fourth Quarter, we expected things to be quite. Performance in the quarter and as you mentioned, the use of our products and services by our customers is great. Fourthvery well in the quarter. You mentioned card fees and account fees, they are very strong. Deposits very strong. We produce 5. 3 billion worth of net income from all parts of wells fargo. One of the things we saw a little bit of in the Fourth Quarter, the expenses directly attributable to professional services, people we have helping us with the ongoing work we are doing. We brought in third parties to take a hard look at all of our practices to make sure there is ,othing else of that tim sloan our new ceo, needs to know. 40 million or at 50 million a quarter. That is a direct impact. Opened ants not being year from now would detract from rates of growth. There is a possibility that slowergrowth rate are than they could be. The core business with 20 million retail households very strong. Turning well be the point to indicate that fraudulent account scandal is fully behind you . It will be a while. We are having monthly calls from investors and the mental press and were showing the rates of growth and rates of change in all the key drivers of the retail business. It is the seasoning of this new approach to directing people and meeting people in terms of how they are supposed to be dealing with retail customers and satisfying their needs. That will show up in account openings and i think that will be an indicator. Still a lot of work to do, but that will be an indicator. In the meantime, the reported results are positive. Joe lets talk about the macro environment. Animal spirits in the rate of this election. People expect the economy to accelerate. Interest rates have a downside in terms of making homeownership more costly. It appears to show up in your earnings as well as bank of americas earnings. Talk to me about the effect the high rate is having . , mortgagee lending banking the way we execute it and i assume other large banks as well, it has this component of it where people are borrowing money and we are packaging loans and they become part of Agency Securities fannie and freddie and there is a part where mortgage lending sits on our ofk our books and impacts the Revenue Streams of the bank differently. As rates move up, the incentive to refinance goes way because peoples current mortgage is attractive versus the higher market alternative. So you expect to see fewer refinancings happen and that is present in the application data because rates moved up 100 basis points in the Fourth Quarter. Mortgage rates are still really attractive by longterm standards are mediumterm sanders and home prices are still affordable as a result of ist, so if the economy stronger and jobs are stronger and as long as supply is available, my sense is the purchase market should be very strong over the next cycle if we do impact economic growth. I dont think from a mortgage lenders perspective it will make up for the refinancings that are not there because people already have an attractive coupon and will stay in their home and keep their loan for a long time. We are happy we have a very diversified business model. Mortgage banking is about 15 of our Noninterest Income activity. Ares a great business, we happy to have it, but that component of it is only their if andhere in rallying rates that is quieter. Scarlet we also understand your closing 400 branches in the next two years . How are we to interpret this this this move up move . We have over 6000 branches in the u. S. We have new leadership in our Community Banking business, mary road who is been on the and she is taking a fresh look at how much this is our customers want to do. How much they want to do online, how much they want to do in person and what the requirements are to meet those in need. Those needs. Through that lens, we looking at all of our businesses and ask ourselves, how many points of distribution do we need today . We are looking at what trends are with customers and how they want to be treated and how we want to do business and we will apply that. This move of 200 this year and maybe more next year is a pretty ofest move compared to some the branch reductions that some of our peers have embarked on. Here because mover our bridges have been busy in serving customers and they still are even in light of what we talked about earlier. Theres still a lot of service and a lot of foot traffic. It is a modernization that reflects customer traffic. We are not moving away from the physical distribution approach but how much we have is something that is definitely evolving and people are doing more physically on their phone. So much fornk you joining us. Wells fargo chief Financial Officer joining us from San Francisco. Lets get you to first word news. The white house has released a schedule for president obamas last week in office. He will hold his final president ial News Conference monday. The president and first lady will also host the trumps for tea. After the inauguration, the obamas will the party see on a president ial aircraft to a destination that has yet to be announced. According to people familiar with the matter, another candidate aligned with venture capitalists has been appointed fda leadership. U. S. Ambassador Samantha Power has been urging the Trump Administration not to cut funding to the united nations. She said it would only benefit countries like china and russia and be detrimental to u. S. Interests. In her final News Conference, she said, we lead the world in part by leading at the united nations. For the swearing in include to the and jennifer holliday. Performers include the rock band three doors down and Country Singer lee greenwood. They will perform a free concert at the lincoln memorial. Global news 24 hours a day powered by more than 2600 journalists and analysts in 120 countries. This is bloomberg. Scarlet thank you so much. Lets get a recap of todays market action. The nasdaq notching another 5. 74. D high of 5 85 the dow at 19,8 and is stalling out right under 20,000. What did you miss . Considering all the attention donald trump gets from his tweets, how can twitter benefit president elect. On board, he said, thank you too for four creating 700 new jobs in the united states. This is just the beginning, much more to follow. Joe and on boeing he tweeted, boeing is building a brandnew 747 air force one for the new president , cancel order, the cost is out of control. Joining us now is the cofounder of stocktwits. The president ,s, this is all in your sweet spot. Now from time to time trump tweets. Ocks with his what would you do if you are the ceo of twitter right now . I think they should take big risks. I own the stock right now. I finally bought some that because my daughter tweets. They have a harassment problem. The harassment starts at the top. Trump lives on borrowed time on the platform. He has abused the privilege. Ago and isles years lucky to be on the platform. That is the main problem with twitter. You have to clean the place up. It is a bar, not a social network. Joe you will probably get an abusive tweet. I quit from him just to see what twitter was like without him contributing. In that sense, twitter is a idea platform. I always thought that they were a potential disruptor. Twitter was a social bloomberg, i always felt, and to the financial industry, the noise is a signal. Fun,ing it all day is trading it all day is stupid. The idea of investing is watching without doing. Pitching great ideas a few times a year. We have very low volatility even though we have the highest volatility president of all time or president incumbent. Should kick him off. They need to make a bold move. They need to get in the transaction business and to get rid of spam and that starts at the top. It is not help the stocks. He will mess with twitter during his presidency. Such as . Is in control of twitter. If you dont get rid of these people at some point, they will get rid of the project they will get rid of the product. He is running the product right now. Scarlet i wonder at what point trump isfies it, tweeting something about these companies and im going to buy them or not by them. Come inside the bloomberg, the white line is what we call the oligarchy, companies that trump has praised. The index is funny that makes no sense. Scarlet and the blue line represents the drain the swamp companies. Up oligarchy companies are where is the drain the swamp companies are not. This is what they should have been doing from day one. I knew trump would tweak tweet, and other people like Warren Buffett would use twitter. The world is changing, we are connected and the most important business we see with bloomberg is this is the greatest the business and the world. And, everything is going on twitter is a comedy show of what they could have been. He does not help the brand, you rex the brand. Joe just out of curiosity, ofcktwit was based off twitter. Withyone doing anything facebook or is that a harder nut to crack in terms of extracting signal from that tradeoff . , theere are Many Companies sector is an optimistic group. Ofwere started on top twitter and today there are 130 plus messages a day focused on just stocks. Ts on stocks with stocktwit not happening on twitter. They could have taken advantage of that and now they are just a fragment of the. It is all fragment is now and bloomberg is in a great position. People who can consume all that data really have the power. So they should just keep it to themselves . Not, and build the Worlds Largest hedge fund. That is what google did. Joe what is the bold case for people right here google right here . They are the perfect machine for this era. They take all this cash and margin that they make in running their core business, which is not going away. Even if declines a little bit each year, it will not matter. And they use all their data. They know more than anybody. They are a perfect hedge fund. Googles job is to hire, feed them and they leave. The more they leave, the more they wish they were back at the google. It is a perfect hedge fund. When people talk about the nasdaq at alltime highs, well, google is at alltime highs. You look at volatility, google is the only etf Technology People need to own and to simplify their lives. Scarlet is there any other company that is like the google that could be another technology etf . Amazon. Thinks amazon is expensive, the same with the netflix, were entering the content of them. Boom. Tent completely are underestimating how much content we are able to consume if it is good. We sit and bench and we are supposed to be busy. We are reaching this era where netflixs and amazons are going to rule our time. Joe facebook is the center of a lot of controversy this these days. They are worried about privacy and a lot of Media Companies have put their content on facebook and have not in return. Do you think facebook is going to run into trouble just from the standpoint of policymakers around the world seeing this is something that is needing to be regulated . No, they are unstoppable. I watch my wife as the kids say they hate it, but my kids use it. My wife gets her news from it and she is not dumb. You can only give people what they get. We have to learn to live with these tools. Lindzon, thank you very much. Joe coming up, with the s p hovering at a record, is there trouble ahead for sentiment. This is bloomberg. . Scarlet it is time for a look at some of the biggest this is tories in the news. Says. S. Justice department to cotto will plead guilty to settle a 1 million fine into an investigation into its faulty airbags. Will plead guilty to fraud for lying to regulators. Prosecutors also filed federal charges against three, executives for their involvement in a scheme that ran for 15 years. An initial Public Offering could value the company at about 2 billion. The torontobased retailer is 900 cargo with piety furlined hoods. It is going public in march. The mall retailer is owned by Versa Capital management and could make a decision estimates next week. If what seal decided on they grow see it would be the second in two years. That is your business flash update. Joe what did you miss . Euphoria of or respite in this bull market . Policy plans have spurred animal spirits. The s p 500 index hovering around a record, it is debatable if this sentiment has guns the far that it spells trouble . Oliver renick explains. Were trying to figure out whether or not the movement we have seen since the election has gone since too far too fast. We have chronicled short interests. Look here. Five year 2015. A move up from it was getting close to the highest since 2008. The election, that is all come down. Look at the screen, youre of thely 3. 6 average float across all stocks, which is the lowest since 2013. We went from basically the highest in five years to the lowest. That is obviously a pretty bullish sign. Lets look ever hear and see if we are putting our money where our mouth is. Is at its highest since 2014, the people are feeling good about the market. In we had a couple of bumps november and december. January, they are taking money back out and we are not sure if theyre going to put that money to work. This is a chart that comes from gerald. If you are not using the hr function on bloomberg, youre not looking at correlations right. You look at the next versus the vix. You look at the this red star is where we are now. It indicates is that one of these is doing something irregular. We are in part of a regime shift where it is going to stay high relative to the vix. Vol comes down or andfor the vix comes up that means alot for the market right now. Scarlet investors are not ready to take that next step . The bears are finally capitulating but it is not mean they are going long either. To figure out whether or not the sentiment translate into anything meaningful. We talked about euphoria or volatile stages, but at the end of the day it just matters if evil are putting money to work. Getting a little bit more comfortable in some of the other Asset Managers as well with people comfortable putting their money to work. We are still far away from people putting all of their money and chips on the table. The if you are looking at blows and the data, you would not conclude that this is what euphoria looks like. That itould conclude is, not a reversion, but people reassessing and saying they are a little bit more bullish. The sentiment readings are there and things will get more complicated with the vix stuff. Scarlet theres a lot more conviction that maybe this can continue. Thats right, joe the soft indicators have reversed. Thanks to oliver renick. Of next, china has set regulations to try to ease the fear of a real estate bubble, but is it working . We will take a look next. This is bloomberg. Joe what did you miss . One of the biggest issues in china right now is the department. Roperty at but to our analyst about whether the danger has passed. They have delegated a lot of the property cooling measures to local governments, which allows governments like shanghai and shenzhen and secondtier cities to help. They are trying to delegate to that authority, but it is going to be questionable about how successful that is going to be when it is not national or unified. You one of the things pointed out in a tweet is that the government is not interested in cooling the Property Market too much ultimately. Explain why that is. One of the issues so fundamental to this is that local governments throughout china receive large amounts of their revenue from various real estate activities whether it is taxes from Real Estate Development firms and whatnot. By some estimates in recent years, local governments have gotten 50 of their revenue from real estate related activities. Citi had a note out that found that 4245 percent of government revenue came from real estate. That is going to be a lot of revenue for them to make up in taxes that they are going to have to impose on houses feeling the strain from economic slowdown. Joe some like a situation you might see anywhere else. In the united states, no one likes bubbles but in the end there are a lot of taxing authorities that depend on the asset prices going up. It. Hat is exactly we see beijing behaving very much as you described. In the past year, new mortgage lending is probably going to be up almost 100 and even the total stock of mortgages is going to be 30 for 2016. At the same time beijing talks talksleading to fix about wanting to contain this asset bubble, by some estimates a chinese households have 80 of their wealth in real estate. Joe you dont really hear that much, as a china wants to turn towards a more can the merger of an economy, how expand on that a little more. The degree to which spending and consumption is dependent on that real estate wealth continuing to expand. Basically what we are seeing here is people are trying to be wealth theyout that have from their home. In shenzhen, the city where i are, real estate Prices Higher by any metric you want to use, even midtown manhattan. There is a new building near me that i just went in and the average price of they are paying is 3500 u. S. Dollars a square foot. If you look at the household budget, they are significantly strained. People are coming up with a new and interesting ways to cap the new wealth that they have to drive consumption. Nothing can make you more nervous than talking about new and interesting ways to add to Household Wealth through more consumption. What is the other ways people are using to monetize wealth . Couple of about a American Financial institutions withally offering loans collateral of chinese accounts. That to me seems an incredibly risky aspect. It is also interesting to note that this acts as a capital can borrowpeople abroad against their home in china and he gives them money outside of china already. Joe that was Bloomberg View columnist and University Professor christopher baldwin. Coming up, what you need to know to gear up for next week. This is bloomberg. Scarlet what did you miss . Nasdaq climbing to a record high, disappointing retail sales set the tone. For monday, dont miss it. The World Economic forum begins in davos, switzerland. All coming up. Joe so many interviews from davos. Then on wednesday, obama will host the final News Conference of his presidency. Havenext week will confirmation hearings for wilbur ross and steven mnuchin. Scarlet and donald trump will be sworn in as president on friday at 12 noon. That does it for us. Thanks for watching. Joe this is bloomberg. You are watching bloomberg technology. Congress has approved another step toward dismantling president obamas health care law. Republicans pushed the budget through congress. It prevents democrats from using a Senate Filibuster to derail the bill. This is critical because it takes 60 votes to end filibusters while the republicans have a majority. The house has passed legislation to allow retired general james mattis to join the pentagon to join Donald Trumps cabinet. Law prevented service not beenho have retired for seven years from joining. Takata hasnd admitted to fraud and will be subjected to a compliance monitor