Transcripts For BLOOMBERG Whatd You Miss 20170120

Side. Running a little bit behind schedule. It was supposed to begin at 3 00. The lunch took some time. Joe we saw his remarks earlier, obviously spectacles starting with yesterdays events. Scarlet we will check in with shannon joining us from our washington dc bureau. Shannon, as we look at this spectacle of the inauguration, the ceremony and pageantry, we know that there is violence on the streets nearby, not far from the parade route. Can you give us an update on the protests you have been keeping an eye on . Quieter it seems much than an hour ago when police were throwing these sort of flash grenades that made it among this b large booms echoing through the offices, pushing back a group of disruptive protesters that set up fireworks, they had put them industry and police were pushing them back. And police set off really loud grenades and protesters were throwing items at the police, garbage cans were set on fire and they had set up a barricade policeosks to block the who were in full riot gear. They were spraying pepper spray or some sort of spray that they use on to the protesters to try to push them back. It was all happening less than a 15 minute walk from the white house, a few blocks away from where the parade is it going to take place. Joe how big was the contingent of protesters, we saw these images of property destruction, compared to the total number of protesters . Was it a small minority . Shannon i am glad you brought that up, maybe a half hour before the protest got more confrontational with police, there was a very peaceful protest going down the street. I am bad at estimating sizes, but it was large, the type we have seen in other cities, where people had signs and they were chanting and people were in costume. People had puppets. It was a very peaceful, lively largescale protest. Then a few blocks away from that, where the other protesters were, there are protesters that were looking to cause disruption and they do want to get arrested and instigate conflict with police and those were just a few blocks away. And they got into it with police and then other protesters ran over and joined in, just chanting and throwing and then they were probably not much more disruptive than the peaceful protesters. Scarlet and standing in contrast to what we see right now, this is at capitol hill, President Trump and first lady melania and the Vice President reviewing the troops. Mrs. This is before they go to the parade box and watch the parade at fourth and pennsylvania. We want to go to kevin who is on the scene where the protests were taking place. Kevin, what i understand about washington today is most federal workers, it is a holiday. So the streets were clearly empty except for the protesters who were out. Kevin exactly. I am in Downtown Washington dc where police have blocked off several blocks as a result of the protests. I spoke with several protesters and there is a diversity of the reasons for why they are out here. Some criticizing the rhetoric of donald trump, other raising others raising concerns about his Financial Assets and lack of transparency. You can see that some protesters have come at one point, they lit a garbage can on fire, but for the most part this is a peaceful protest. There is a helicopter circling the downtown and authorities seemingly have control of the situation. There were several reports of pepper spray and a handful of waiting forwe are official word coming from the Washington Police department. Joe how organized where the protests . I know the womens march is happening tomorrow it has been organized for some time. Kevin i am sorry, we have some movement. Police are now moving us. I will throw it back to you. They are moving us back. They are now moving us back and you can stay with me, they are seemingly take a look, they there was movement where we saw Police Officers rushing toward the crowd of protesters. Now it seems under control. As far as how organized it was, we will keep walking this way, as far as how organized the protest were, much of it organized on social media. I have to be honest, this is the type of environment we had seen on the campaign trail where outside the venue of a trumpet event you have these types of protests, a younger crowd, and again coming from many different reasons. Scarlet coming from different walks of life. To what extent have there been protesters from the other side, those that came to washington from out of town to take part in a celebration of the inauguration. Any push that between those attendees and processors . Protesters . With peopleke inside on the capitol lawn and what they told me is that in order to get those tickets, they had to actually apply to their lawmakers and congressional lawmakers at their offices. So police have done a good job in washington of keeping the protests separate from the events going on on the mall, but again, a crowd of several hundred gathering at this area where we are today. Largely people, but as we just saw, at times it is a tense environment. Scarlet ok. Downtown washington. And thank you so much for your coverage. Of the developments on the streets. Adjusts to a. S. New administration, our next guest is learning about the dangers of econ 101 and its affect on policies. James is the author of econ is in. He is with us from massachusetts. James, great to have you. Onomism and how has it led to damaging policies . James it is the belief that supply and demand diagrams that we learn in the first few weeks of econ 101 accurately describe the real world. Because of this, and a lot of politicians think that, look at problems can be analyzed and solved by applying basic concepts. Scarlet so we will take one of the complicated issues, health care, so why change the free market why is it not the answer to change health care for allanswer to change health carer all americans . James what markets do well as they allocate goods and services to people based on their ability to pay for them. But the problem with applying it to health care, if you have a chronic illness that requires expensive treatment, the Health Insurance Companies Know that it will cost tens of thousands and the correct market price for you is tens of thousands of dollars most obviously many people cannot afford. This is an area where the markets might produce sufficient outcomes, but not outcomes that people will think are socially acceptable. That is why obama and donald trump had said that we need to have universal affordable care. Joe james, looking at the big picture, there is anxiety among the sort of business and political elites about the rise of populism around the world. We heard a lot of that in davos this week and nobody seems to know how to counter it. Everybody has ideas. How has this adhered to the political discontent that we see . James one way to talk about that is looking at international trade. Economics,k about trade makes both parties better off. But what people have forgotten is that within 100, say the u. S. , there are winners and losers from trade. And even if the gains from the winner outweigh the costs of the losers, there are so still people who are worse off. And for the last 20 years, many have refused to talk about the issue. Donald trump and Bernie Sanders have talked about it. It is an issue where i think donald trump was appealing to people that felt left behind by globalization and technology and fell behind by the economic consensus. Scarlet ok, so there have always been tradeoffs for years, maybe administrations not acknowledging that he had promising too much, so how can we use free markets to help us find a prescription to fairer trade for all . James think what is important to recognize is what i call economies him economism is you need to understand issues and how to identify to compensate the visit from trade, the one thing people have talked about is job retraining programs. Another thing i think we need to recognize is that we need to have a Strong Social safety net in order to compensate the people who are made worse off by technological changes, because one thing about a safety net, something you also learn in economics, when people feel like they have Downside Risk taken care of, they are more willing to the innovative and Start Companies and find new jobs. Scarlet let me interrupt you for a moment, we have headlines. Apple is suing qualcomm over patent royalties. In this case, apple claims that qualcomm is unfairly withholding 1 billion and is challenging their patents on industry standard. And this lawsuit was filed in san diego. If you look at shares for qualcomm, apple shares moving marginally higher, but qualcomm shares falling to session lows. They are you racing earlier gains and now down by 1 10 of 1 at 64. 35. And apple says they have been overcharged by billions. Joe qualcomm shares are down modestly, actually a little bit of a pickup, but it was down. 1 . Now the selloff is gathering steam, down two thirds of 1 . And apple is suing qualcomm over patent royalties. And now were back with the author of a new book. We talk about the different ways and specific ideas in economics 101, how they can lead to bad policies. We talk about trade and how it is unlikely to create a Health Care System that people like. What is another area where we see this implicit stories about how economics and supply and demand lead to bad policy and unhappy people . James i think one of the most clear examples is the financial crisis. It is preceded by about tothree decades of bipartisan belief that if you deregulate the financial market, not only do you generate prosperity, but the Market Forces would ensure that the system would be stable. Alan greenspan said remarkably, that fraud would not be a problem because Market Forces would deter fraud. And we saw what happened in the financial crisis when we had unrestrained, Financial Institutions and limited regulatory oversight. Obviously the doddfrank act was an attempt to impose new constraints on the Financial Sector and protect financial systems. One thing we know is donald trump and others are likely to hold back much of doddfrank, essentially on this incredible, that deregulation principle, that deregulation is good for the economy. Joe thank you very much. A professor of law at the university of connecticut, james, thank you for coming on. Scarlet we are keeping an eye on the development in washington. This is the president ial motorcade going to the parade box at fourth and pennsylvania where president john and the Vice President and families will emerge from their cars and watch the parade from the parade box. They finished reviewing the troops at capitol hill. From new york, this is bloomberg. This has been the privilege of my life and i know i speak we michelle as well, and look forward to continuing this journey with all of you. I cannot wait to see what you do next. Joe that was former president obama earlier today at joint base andrews and in davos, we caught up with a former economic adviser for obama, Larry Summers. They asked him about the biggest risk under the donald trump and ministration. Administers. Biggest risks are geopolitical with huge provocations, with china, and the unprecedented equating of our nato allies with the soviet union, with challenges to something that has been a centerpiece of american foreignpolicy support for european unity. Theseth unpredictability, will be the volatile middle east big risks in that area. They are big risks in terms of the approach that is being taken to american democracy, the extent to which our new president is engaged in demonization of particular groups, like muslims, within the United States. The extent to which he has called into question the traditional rule of law with ad hoc approaches to making demands of individual companies. Forof that is a cause concern and is certainly an economic area, it is very hard to know. My judgment has been that the current wave of optimism is something of a sugar high and that before long, the consequences of the strong dollar and substantial policy uncertainty will be felt in markets and Economic Growth. That is a judgment. Businessman does not want to trade war, unless it is a tactic. Larry ive been troubled by the attitude of Business People from the United States here. People who maybe two or three months ago where saying that he was a man they would never do business with, they are today hailing him as a great economic statement. 100 it has been a stunning turnaround right. It has been a stunning turnaround. Were terriblywho afraid about what this would mean, are now hailing those that surround them. Reporter it is cynical. Reported they are afraid of defeat. Larry every time you look at some kind of moral disaster, whether it is bullying on a playground, what happened at enron, whether it is europe in the 1930s, the key is not that they were people that did wrong, that will always be. The key to it is the good people went along and did not get in the way. I see a very disturbing tendency to enable what ever the instinct of this new administration is, and i think that is something that over time the Business Community may come to regret. Historic1 it is a day for america and the Global Economic system. I want to take you back to paul sandals and who wrote a text alson who wrote a textbook. It was iconic. Him, whiched it to chapter should donald trump read . Larry i do not think that mr. Trumps problems are what he does not know, it is the things he knows. Reporter 1 give us one of them. Larry it is the conviction that mercantile protection drives prosperity, which i think all economists would agree is a confusion. Somehowe belief that you can base a capitalist system, not on rules, but on individual ad hoc deals. I think that is another one. Be ther 1 what will ramifications of this near was in that we hear from secretary ross, we hear from the president , what will be the outcome for the that hard Trump Supporters die hard Trump Supporters that will be at capitol hill at noon . Larry ultimately, their incomes will be lower because they will be paying higher prices for the products that they buy. Ultimately, they will be for ercause of the cycle poor because of the cycle protection that will begin the economy. And once it goes through exchange rate, it will be the opposite of what is hoped. Think about mexico. Yes, he had a conversation with the ceo and a few hundred jobs got preserved for some interval, but at the same time the mexican peso is down 15 and that means for anybody considering locating a business in mexico or ohio, mexico has a 50 advantage. 15 advantage. It will be counterproductive. Joe that was former u. S. Treasury secretary Larry Summers earlier today. Scarlet on this day, we are keeping and i on the developments in washington. There is the route for the parade. A lot of bystanders waiting for President Trump and the Vice President to appear. There they are going to the parade box. Joe earlier, we saw ben carson walking down the street. We will keep an eye on this parade. Scarlet this is bloomberg. Fu on thism scarlet inauguration day. Equity volatility and Political Risk are diverging. Come inside and you can find a function, the chart using the function at the bottom of the screen. The blue line is the Economic Policy uncertainty index and the white line is the vix. You can see both of them tracking closely. But for the Economic Policy uncertainty index, it is now in november of 250. The average was 142. 19 . In the meantime, the vix has come down to a low, training below average of 20. Joe im usually skeptical of these because they are based on keywords from newspapers, but the fact they track pretty well makes the diversions interesting. Here is the chart i am looking at. Jonesthe ratio of the dow to the s p 500. Colorcoordinated the chart said that the blue line are a Democratic Administration and red for republican. And usually the doubt of the s p 500. Ms so under trump, we might see that. It makes sense, donald trump is a populist and the dow is the peoples index. Maybe we will make the dow great again. Scarlet 30 stocks do better than the 500. The market close is next. Take a look at where we stand before the close. In the meantime, we are waiting for president cap and Vice President mike pence who are making their way to the parade box for the parade. This is pennsylvania avenue. This is bloomberg. Aarlet you are looking at live shot of the parade route in washington. The inaugural parade has begun. And the president is making his way over. Joe i was just about to call him the president elect. Get ready, a new regime. We will continue to monitor this. Scarlet in the meantime, you can see stock markets closing, gaining, but off the highs of the session. Investors shifting of it after donald trump was sworn in as the 45th president. Treasuries rising and gold is also rising, following a fiery in operation speech that promised to update and the political establishment. Im scarlet fu. Joe im joe weisenthal. On twitter, we want to welcome you to our closing bell coverage every weekday. Scarlet we begin with the market minute, stocks rising but coming off the best levels of the session. Gaining, but not quite what they started with. Joe similar to what we saw preenon duration. Anybody hoping this would break us out of the range, it has not happened yet. Maybe next week when donald trump takes actual action. Scarlet and in terms of sector groups, take a look. Come inside the bloomberg and we have nine out of 11 groups riding, materials up by 9 10 of a percent industrials and health care are leading the way down. And i was taking a look at the individual members within the health care index. The big losers for the s p 500 was bristolmyers, the worst performer. And they were falling behind as they race to treat lung cancer and is said they will not seek accelerated approval to combine to existing drugs. That is something we are keeping an eye on. And they were downgraded my closing down 11 . And i just included this one, because that is also testing lung cancer treatments. It is a competitor. Joe and the Government Bond market today, starting with the twoyear and 10 year yields. Tenure is down a little bit 10 year is down a little bit. Way off of the lows of earlier this week. Twoyear yields down a little bit. Manager data. Check out the german tenure 10 year yield, the highest in a long time. The yield of negative rates going further into the rearview mere. Scarlet in terms of currencies of the dollar gave up earlier gains. If you look at the intraday basis, it is suitable for a president that favors the weaker currency. In terms of paris, they are losing ground to the mexican s, the dollarair losing ground to the mexican peso. And the british pound took a tumble. This was shortly before 5 00 new york time, after disappointing sales coming in for the month of december, showing the fastest decline in five years. The pound made a bit of a recovery at the end of trading. Joe commodities, looking at gold and oil. Gold having a fairly solid day. It was down in the afternoon, then picking up. It seemed like the same time as the protest images were happening. I would not read into that. It was not a huge move. And oil with a slightly bigger move, gaining 2 today on news that saudi arabia is saying that opec members are doing well on the output cuts. Oil like Everything Else has been in the range every time we look at it. Scarlet it is. Those are the market minutes. We are looking at more at this historic day. We have the head of strategy and economics and policy correspondent. Mike, we will start with you on capitol hill. Donald trump thinking a view of the economy that is promising to fix, he said condit, a dark vision. And obviously this rings true with a big part of the American Public and it was ineffective during the campaign. He is now in office, said he must come up with a prescription. Mike he is in charge now and you must translate rhetoric into reality. He will start next week with a series of executive orders, some relatively easy to do, withdrawing from the transpacific partnership, but that was all but dead on capitol hill anyway. And will talk to mexicans and canadians about renegotiating nafta. Not canceling it as he had suggested. And things he has talked about things that could be relatively easy to incorporate into a newer version of the treaty. By the way, we hear the mexican president will make an address about donald trump on monday as well. But the harder stuff will take longer, repealing obamacare, getting a tax package through congress and changing immigration laws, that will take some time and that is where the rubber will meet the road, whether he can deliver on promises he is making. Joe there has been a lot of postelection news that seem to be premised on changing policy, tax policy, regulatory policy, so how to do these soon do these have been moved before traders get disappointed . Elsa it is interesting, because the dollar really came through in november, driven by the expectations more than anything else. Now it is trading sideways. Not a lot when you think about tax reform and four adjusted tax, i think there is a lot of that to be priced in. Scarlet i want to pull up something on the bloomberg, joe mentioned this as well, the dollar is one of the worst performing major currencies this year. This is on the bloomberg. It is performing only better next to the mexican peso. And that is not saying a lot. And the british pound is turning around. So do we presume that this is just a reversal of what we had seen in november, or is this a standard now as we wait for more details . Elsa positioning is crowded and it is not just affecting micro investors, we have heard from investors outside of fx and positioning the dollar as part of this reflation trade and i think it has put a lot of people out. Maybe they got into late. We have seen a lot of sharp declines in january. Going forward, i think we will be more focused on the new policies they will introduce and then the Corporate Tax reform will be critical. Joe mike, you mentioned earlier that donald trump plans to renegotiate nafta. Do we have any idea specifically about what he would like to get changed, what are his goals in the discussions . Mike wilbur ross, the incoming commerce secretary said at his confirmation hearings that what they would like to do is renegotiate within nafta the rules on concept of origin, that means if a japanese tv set makers bring the parts into mexico and assemble them there because they have a freetrade agreement with japan and export them to the United States, they could be terrorists free and tariff free and donald trump does not think that is the right thing to do. He is also worried about the Investor Protection clauses where the government your property or materially changes the rules under which you operate, then a company can sue a country. It is not really happened to the u. S. , but it was put into these deals and the nature of the u. S. Was not taken advantage of by developing third world countries. That is something they could negotiate as well. Tariffs are a different story. Donald trump would like to see the mexicans improve their standards, allow unions, those are things the mexicans are moving toward. There is Common Ground they can talk about but tariffs might be a Sticking Point if you want to reimpose those. Scarlet one thing he mentioned was his intention to name china as a currency minutes later. What have an impact on the markets . Elsa he is about five years too late with his comments on china. If you think about china at the moment, we have discussed it before, china is trying to prevent the currency from weakening, rather than strengthen it. The incoming treasury secretary and his hearings, he did say, it is not there whether china will satisfy that at the moment, so i think we will hear more softness on the chinese currency, but maybe a harder line on china. Joe investors want to see Corporate Tax reform, but within that debate there are a lot of issues going directly to fx and currency translations, particularly around the border tax and how could be strong for the dollar. How do you played out or how to traders be thinking about that and who is bondable . Elsa one thing about the address today, we have heard about mexico and china, but the speech today was about america first. It was not saying this is mexico and china. Then we look at canada, one of the largest trading partners and not mentioned by name, but if we do get the border adjusted tax, it could be negative for the canadian dollar. Scarlet thank you so much. Elsa will stay with us. We have more to discuss. Mike mckee, we appreciate your time. We have breaking news on james Morgan Stanley ceo. According to an imo from a spokesperson, they have lifted to pay by 7. 1 for 2017, Million Dollars and they have awarded stock units. Those are restricted stock units. Joe and we have been getting updates for across the board. Jamie dimon receiving a 4. 7 pay hike. So although he will not be getting paid quite so much, he did get a better hike. For the Morgan Stanley chairman and ceo. Scarlet from new york, this is bloomberg. On this enough variation day, the offset to the pageantry and a ceremony on pennsylvania avenue, with more than 1000 protesters gathered in Downtown Washington, protesting against the and operation with some throwing bricks at police. Police have responded with pepper spray and over 90 arrests have been made. Joining us is kevin. As the parade takes place, has the action changed . We did see violence earlier, but it seems to have calmed down, yes . Hundrednly a couple protesters in Franklin Square. And a handful have lit trashcans on fire. And one vehicle they smashed the windows on. I covered donald trump on the campaign trail throughout the country for the past two years and when you look at cities, like chicago, new orleans, whether it is san diego, it feels in comparison to the pales in comparison to the wider spread protests we have seen. That said, this is a divided country and many protesters have raised a variety of issues. Joe i am going to interrupt you for a second. We have footage of donald trump, he has stepped out of the car it is walking down the parade route. We saw with first lady milani appeared and there he is melania. And there he is. We hear the loud applause. Do not get the impression there are only protesters, there are supporters as well. You can see the footage of him walking directly down the road. Scarlet and there is the u. S. Capitol building in the background. Kevin, you are saying in saw onst to what we the campaign joe, these protests are fairly ratame. Attending people here the inauguration far outnumber the protesters, but this is a fairly divided country. I interviewed people this morning that came from all across the country to attend the and operation and being operation and taken the parade in theuguration and take parade you are watching. The weather did get her some people from attending deter some people from attending the rally. Police have arrested more than 90 people, but there are thousands here, so that is not a lot. And certainly not a lot of violence by any means. Scarlet kevin, we can hear the helicopters above you. There is security in Downtown Washington as we see president gauck and the first lady walking on the parade route as president andp see president gauck the first lady walking down the parade route. There is a big womens march this weekend. Kevin that is the more organized protest effort. Starting tomorrow morning, thousands of women from across the country are supposedly organizing a protest for womens advocacy issues. That will again start at the capital and go down the capitol mall along where the inauguration was taking place today. Again, when you look at the type of people who are out here protesting against donald trump, for a variety of issues, whether it is black lives matter, people who are here from a collegiate, those protesting at a concern for Womens Health issues, a large marge is expected tomorrow march is expected tomorrow and they are ready for that. Scarlet thank you. Joe i want to bring back elsa lignos, head of fx strategy at rbc. We were talking about the surprise ramifications, everybody focusing on mexico, but maybe people should focus on canada as nafta is renegotiated. Tell us why people are underestimating the canada risk . Greatit will not be so for canada, donald trump is not looking to cancel it, he is looking for modest changes. Canada could lose more with Corporate Tax reform. There is a proposal from the house that includes a border adjustment tax, it is not his proposal, but he is open to discussing it. If it was implemented it could be extremely negative for the canadian dollar. Scarlet for the mexican peso, we see the devaluation taking place for some time and leading up to the and operation of donald trump it should benefit donald trump. It should benefit the economy, right . Guest yes. We saw the rates above neutral. And inflation is taking higher. At the same time, there has been a big move in the mexican peso over the last year and at some point it will be helping. Joe there is a view put forth by economists that a border adjustment tax would not be negative because the dollar would strengthen and so the importing would not actually change. You are skeptical . Elsa the theory says the dollar would be a perfect offset if you introduce the border tax, it would go up and have an impact. If you look at the data, the comparatively at what happens in currency markets, that is not the way they work. If you did get a 25 rally in the dollar, you would have Collateral Damage from the emerging markets and Commodity Prices and so on. It will not be a perfect offset. There could be higher inflation, higher rates, this is a kind of thing that will happen that will have an impact. That is for sure. Scarlet at the start of the year, the currency trading tends to be thins, until corporate treasures get on board and make hedges and make decisions as well. We present once they get in on the action, what we have seen with the mexican peso will continue or could there be a reversal . Elsa there has been uncertainty. People were waiting to see what the new president would do when he takes office. The first 100 days will be critical. We know some of his priorities, we will have executive orders coming this week. The critical thing is what he will do on tax and what does he do on protectionist policies. Joe after we get some of the uncertainty results and we know what resolved, we know what he wants to do, could mexico benefit from the fact that currency has depreciated so much and by many models, it is undervalued. Elsa that would be a partial upset. If you look at the mexican peso compared to the canadian dollar, it has a relative advantage because it has decreased so much already. One way to play it would be to look for more depreciation in the canadian dollar. You can see through that risk. Scarlet what can the central bank of mexico do when it comes to keeping the currency from tumbling further . Elsa they have tried to introduce intervention and at the same time they have been hiking rates again, but it is difficult, because rates are above neutral. The domestic economy is not that strong. They are stuck in a corner. They are relying on the to a risk in the market and for some people to think that is undervalued, maybe picking it up. Joe one thing that has not come up yet is the Federal Reserve on because it is an afterthought these days. We heard from janet yellen this week. It is your take away from the fed on what it wants to do and how it will affect markets . Elsa it will try to stick to the mandates, the objectives and on the employment side they are doing well. Still more room on the inflation side. You can tell that they are keen to take rates toward a more normal level. And as it happens, the dollar should benefit. It could be a odds with what donald trump wants to do, he has complained the dollar is too strong. But the dollar is going to go up. Joe ok. Elsa lignos, thank you very much. And you are looking at pictures from Donald Trumps inauguration parade. Today, he reiterated his call to make America Great again. President trump we will make america strong again. We will make america wealthy again. We will make america proud again. We will make america safe again. And yes, together, we will make America Great again. Here is a contrast between what is taking place in washington. On the one hand, protests, there were firetrucks earlier there. And protesters came out against the in moderation of donald trump. Inauguration of donald trump. Joe that was a limousine on fire. The Fire Department came and put it out. Very symbolic. Scarlet and speaking of limousines. Joe and on the right side, we continue to see the parade. Scarlet and the president ial motorcade, the president and first lady have emerged and are walking on the parade route, waving to supporters and watching the parade and taking part in festivities. Joe we spoke with the bloomberg reporters down there, the violent protesters are a minority. It is not most of them. Striking images coming out of the protests, nonetheless. Scarlet it is leading up to the big organized march tomorrow with the women in washington march taking place. Joe it will be interesting. Scarlet whatd you miss . We will take a look at the bloomberg and you can find the following charts using the function at the bottom of the screen. China reported gdp numbers, deflation no more. Moving further out of the falling price environment. The white line is what were looking at. It is measuring the level of prices of all new domestically produced goods and services. In the fourth quarter, it went up 3. 1 . And that is up from 1. 1 in the third quarter. You have other lines, the blue line is relative and nominal gdp, 9. 9 . Commodity prices are a big part of the picture with iron ore and Oil Prices Rising and higher inflation is good when you talk about debt. Joe good point. And as you can see, like everywhere else, inflation is on the rise and nominal gdp is picking up in china. I will talk about real gdp, 6. 8 . Going into the terminal, that is the blue line. Notice something about the blue line. Scarlet it is very blue. [laughter] joe very smooth. People are skeptical about it. It does not mean it is necessarily overstated if you compare the blue line with the index, which is an index created to track and measure real economy things, like rail shipments, electricity consumption, bank loans, things that would be hard to fudge hard it data. That is significantly higher than the official numbers. Scarlet 10. 9 since november. Joe it is not necessarily more right, but perhaps if anything, a slight acceleration that we saw in gdp is an understatement. Scarlet that is not the first time somebody said that. Joe you see it on the chart. Scarlet were looking at life pictures live pictures, the president and first lady and Vice President , all of them en route as they watch the parade and their supporters there. A few blocks away, protests as well. From new york, this is bloomberg. Every decision on trade, on taxes, on immigration, on Foreign Affairs will be made to benefit American Workers and american families. We must protect our borders from the raveages of other countries, making our products, stealing our companies and destroying our jobs. Joe that was President Trump n his speech, now we see him with his wife there. Is barron in the picture. We see another one of his sons holding up the daughter in the background. They were in the car for a while, then back in and back out. There is ivana, so the whole family walking the parade route. Scarlet security is a major concern. A few blocks away you have protesters. There were police clashes. Joe right. From these shots it looks totally calm. But from these shots you see the smoke from the limousine. Can you see the burnedout limousine and the firefighters who are still doing something in putting it out. Quite a contrast with the parade route normal looking, there you go, and then the protest, which obviously got violent. Scarlet about 95 people arrested according to metropolitan police as of early this afternoon. Joe what did you miss . The mexican peso was the major performer of currencies today as donald trump became the 45th president. He speak on the steps of the capitol in barbt. For more on mexico and other emerging markets, lets bring in a Portfolio Manager of the blackrock fund. Donald trump in his speech, real americafirst. We are going to take back the jobs that the other countries stole. Fullon, populist, nationalist rhetoric, no attempt to pivot or anything like that. What does that mean, big picture, for the countries you cover. Can he really reverse the tide f globalization . It was a very clear one, a very economic nationalist one. All the policies are going to be based on what is in the best interests of the u. S. In a parochial sense. Any set of countries that benefit from importing and exporting goods to the developed world is going to be hurt. We are already seeing it. Globalization has been reversing for five, six or seven years now. The question you ask as a Portfolio Manager, is this in the price . Is this already at the point where we have adjusted to that . It feels, at least in mexico, that perhaps, perhaps. Particularly because of the prices and the peso, but partly because of the shift in discussion with mexico away from tweets flfment is a more formal discussion on nafta. A more formal discussion on renegotiates trait relations. Perhaps now we are going to enter into a more formal and less noisey discussion. And the market is taking in the other side of it. Scarlet and mexicos leader is going to discuss how his country is going to approach the u. S. In those negotiations. Given all that, what should mexico focus on here because there are only things that it can control versus things it can control. Absolutely. There are a number of things they can do. The first is make sure that the negotiations are done in a formal institutional lets be clear boring way. These are very detailed conversations. I remember the negotiations over nafta itself in the late 80s and early 90s. These were not sexy discussions. So the first thing we do is take them back to the technical aaway from the noise. Joe away between the tweets. Yes. The second thing you need to do is dont look it as u. S. Versus mexico. Make it multilateral. Bring in canada to the negotiation. Make the negotiations not just about mexico and the u. S. Make it about a broader form of negotiations. And they are doing both of these things. Scarlet do you see evidence of canada and mexico working together in that way . Clearly the discussions are ongoing. Clearly they are being called into enter that conversation as well. Clearly the appointment of the former finance minister as someone in charge of negotiations, is someone who is internationalist in his attitude. Joe so if trump for no other reason besides political reasons needs to get something that he can point to and say i got a win on the nafta renegotiations. Is there a deal out there that would give him some sort of political victory without being particularly economically destabilizing . There are tradeoffs. Somebody is going to twin and somebody is going to lose. What is the point at which these things get settled . Yes, there are ways in which we of a discuss the concept 20yearold agreement. They can discuss the relationship on reciprocity, the third period things that mexico has. They can be obtained. I think this is hopefully the best case is that we enter into that kind of conversation. Scarlet and you could argue it is time for it after 20 years. The world has changed a lot. Good point. Scarlet as we look at the globalization of capital markets, companies in emerging markets have been selling a lot of debt in u. S. Dollars and euros. Do they continue to do that with donald trump threatening to rip up trade agreements and renegotiate them . If the last three days is any indicator, it tells you that nobody is worried about this. You have 48 billion worth of new emerging market bonds that got issued in the last two weeks. It is close to a record. It doesnt feel like people are taking on a complete reversal of international globalization. Joe at the beginning of our conversation you say of course trumpian policy is not good for e. N. , but elsewhere around the world, would you say the risks for trump policies arent being affected yet . No. There is one pocket we havent discussed yet. We can focus on uncertainties and the trump policies, and we can focus on the higher dollar. That seems to be a corollary, which is not good for emerging wells. But the other thing is that the Global Economy is doing well. Growth is picking up. The inflationary policies is something that at the end of the day matters a lot for emerging marks. I am thinking higher growth is going to trump no pun intended is going to offset the negative impact of uncertainty and stronger dollar. Joe thank you for being here. Scarlet as you can see, donald trump is walking the inaugural parade with his wife, the first lady. They are waving to the crowd. They have been going into the motorcade, into the limousine and coming back out. Right now he is out and walking the parade and waving to his supporters. In the meantime, the u. S. Senate is back in session with statements and debate occurring. Skip schumaker chum schumer, the democratic leader has said that trumps actions will make harder to get harder to get mo they expect to vote this evening on kelly and mades. Joe going straight to work, voting on confirmations. The Trump Administration getting to work right away on that move on housing. The new administration begins. This is bloomberg. Scarlet President Donald Trump has gone back into his limousine. This is the inaugural parade, and it has been taking place over the last 20 or 30 minutes. He has come out several times to wave to his supporters and cheer with hem on his inauguration day. In the meantime, more than 1,000 protestors gathered a few blocks away in Downtown Washington. They are protesting against the inauguration. Some threw bricks and concrete at the police. Police responded with concussion grenades and pepper spray. Some say about 100 arrests were made. Kevin joins us. Have the protests minely been concentrate inside that one or two block area you are at a few blocks north of the parade route . Yes. I am standing here in Franklin Square, which is ilokaed along k street in Downtown Washington, the business district, if you will. There were a crowd of several hundred protestors that were gathered behind me. What was somewhat peaceful has now turned into a fiery incident where a handful of protestors set a car on fire. That led to a bevy of smoke flooding the area, and police and authorities used what are known as flashbangers to disperse the crowd. They make a large boom sound and the crowd of several hundred folks running in different directions. There has always been a Police Helicopter circulating the area and the perimeter. There was supposed to be some music playing. Now that started and stopped. But a fiery couple of minutes and half hour here in Franklin Square. Joe kevin, i remember reading some stuff about supporters of trump wanting to come in and counter the protestors, perhaps some of the bikers. Has there been any sort of aggressive or visible counterprotest as the protestors have thrown bricks or set cars on fire . Kevin so aside from again what seemingly are isolated incidents, there hasnt been flairups between Trump Supporters and trump protestors. Of course there are isolated incidents, but so far no violence. Can i tell you that just in the last half hour i have seen more than a dozen Police Vehicles move into Franklin Square and descend upon the area, a heavy police force presence in this area, again as a result of a handful of protestors lighting that car on fire. But police utilizing pepper spray and flashbangers to disperse the crowd, ambulances in and out of the area. Some fiery instance toss see the least. Scarlet what are you hearing from the protestors in terms of plans for this evening. There are inaugural balls and another big protest scheduled tomorrow by women on washington. Kevin i have reached out to law enforcement, the washington political capital. They have said publicly that they are prepared for tonight. The Washington Police deparpt. They have said publicly that they are presented for tonight. Look for a heavy Police Presence out tonight. Joe kevin, and then tomorrow, when do things get really started tomorrow . What is the schedule of events . Kevin tomorrow i would anticipate there to be i think we are going to have to throw it back to you now. Joe thank you very much, kevin. Scarlet coming up next, donald trump has made a lot of comments the last couple of years. The ones he is most likely to keep next. We will build new roads, highways, bridges, airports, continues and railways all across our wonderful nation. We will get our people off of welfare and back to work rebuilding our country with american hands and american labor. Scarlet Vice President mike pence waving to the crowd of supporters en route or during the inaugural parade. I keep saying en route because for a while they couldnt make their way over because of traffic. Here he is now waving. He and his wife. President trump was also walking along. He is there with the entire family as they greet supporters. Whatd you miss . . Donald trump is now president , and now he has to fulfill his promise to make America Great again. How will we know when he has done it . Joining us is bloombergs chef intelligence economist. Lets start with factory jobs. One of his big points is how jobs are leaving the United States and going overseas, and he has pressured several companies to change their plans. So factory jobs should be on the up and up . That was a major theme of the campaign. We saw it in the inaugural address. I think that was the start of his 2020 Reelection Campaign as well. The path for him returning to the white house in four years requires strong support in ohio, pennsylvania, michigan, wisconsin, et cetera. He has to deliver something for the factory sector in terms of not only job creation, but just general activity. If the dollar continues on the same path it has been, appreciates about 4 since election day, 25 over the last two years, this is going to be a real problem for exporters and for the manufacturing sector. Mind you, when we think about currencies, we often just think about exports. But there are significance inroads into the domestic economy my as well. U. S. Workers, especially at manufacturers, become more effective as the dollar strengthest. Domestic producers who dont normally think about currency policy do suddenly do that when they are faced with a flood of eap imports squeezing profit margins. Joe what strikes me is we are in a good place cyclically already. Unemployment is already down to 4. 7 . By most accounts the economy is strong by the measures we look at on a High Frequency basis. Trumps challenge is the structural side now. He has to change the economy, whether it is increasing manufacturing, which is less cyclical, or increasing the Work Force Participation rate. Talk about his g. D. P. Goals, because this is something that has been humming along. Right. We have been plodding along at really 2 g. D. P. Goat for basically seven years running to and he is hoping accelerate that pace to something faster, something the fed would welcome. It is yet to be determined if that can happen in an old industrialized economy. It is going to be a big challenge. Maybe there is some confidence effect here through deregulation and a limbered up banking sector, credit will flow more freely to the economy. It may be possible. I dont know if we can hit 4 on a sustained basis, but i think we could push up to 2. 5 to 3. 5 for a while. We will know if that is really happening when can we actually measure if it is happening . One test will be if we see the feds longer run protections for the economy and for Economic Growth actually starting to move higher. Scarlet and of course with that, we are looking for paychecks, wage gains, to continue to accelerate. They have already been accelerating. Well, they have been accelerating, but from an extremely low level. Can came before the election, and the trajectory is in place. It is in place, and that will be helpful to him to maybe get some lowhanging fruit courtesy of the obama administration. We have gone through that, and you get wage pressures. It is a lagging indicator, so it can be slow to arrive, especially if the economy is sluggish. The thing that is different in 2017 is the fact that we finally have removed slack from the labor market, which gives workers more Bargaining Power and wage precious and wage growth will go a long way to supporting consumer spending, faster g. D. P. Growth overall. And back to the point that joe made, even Labor Force Participation should improve as wages and employment income becomes more enticing. Joe you mentioned the slack in the market is just about gone and waging accelerating. Can trump generate economic activity, whether in factories or through the infrastructure stimulus without depriving other resources like home building, where many people argue there is still a shortage of homes . Well, we are getting to the point where there is not that many additional workers available. That is going to raise interesting questions about how do we relief short alongs in the work force when shortsages in the work force when there is lots of dialogue about immigration policy. If we look at the level of , compared to before the impression, we have about a million more workers. Workers that would consider taking a job if conditions improved, there is another million slack. If you look at the general labor force, that is about a million as well. If you look at the labor well, there is a pool of about three million workers. We have been creating jobs over the past year at the pace of 2. 25 million. So there is enough, but just barely, and there are mismatches that. That is telling you that we are really scraping the bottom of the barrel in terms of labor supply. That means if you need a worker sexrately, you had better offer higher wages and poach that, woulder from the competition. Joe good advice. Coach the worker. Scarlet of all the metrics, which is the one most likely to pick up first or give us an indication first . Well, i think what picked up first was an array of sentiment indicators, whether it was household sent i am, Market Sentiment as measured by stock evaluations, home builder sentiments. We have so see if this translates into real economic activity. We saw it in vehicles. Scarlet karl, thank you so much. Joe as we continue our coverage of president Donald Trumps inauguration, we will tell you what you need to know for next week. This is bloomberg. Scarlet the inaugural parade continues on pennsylvania avenue. There is a nice wide shot of what is proceeding in washington. Of course a few blocks away, protestors. Joe we saw a limousine lit on fire, but from this view, the parade looks very stable and like any other president ial parade. Earlier we saw mike pence and President Donald Trump and their families walking down the street. Scarlet whatd you miss . . Equity markets lost steam throughout the trading day, ending up modestly higher. Next week, earnings, earnings, earnings. A up cannle of tech giants reporting next ackley week, including microsoft, and intel. Joe and i will be looking at the french socialist primary that is going to close at 11 00 a. M. Sunday. Politics is going on. This is a huge year for politics. We are going to see who makes it to the next round of the french election. Scarlet on friday, u. S. G. D. P. Numbers are coming out. Keep an eye on that one. The first Major Economic report under trump. Joe it still countsd for obama. Scarlet absolutely. Thank you for watching. Joe have a great weekend. This is bloomberg. Thank you. God bless america. [applause] mark i am mark crumpton. John and i am jon erlichman. Ith all due respect to president obama, sayanora. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org happy, or for many, not so happy, donald trump is president day. Lcome to this final encore episode of respect respect. He waved at the people as he walked down the street on