Transcripts For BLOOMBERG Whatd You Miss 20170215

Came as americans drove more. The council also cited lower gas. Rices global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Live from bloomberg World Headquarters in new york, i am scarlet fu. Joe i am joe weisenthal. Selling phones on stronger retail sales and Consumer Price inflation numbers. Joe the question is, what did you miss . Haslet Andrew Puzder withdrawn himself from consideration as u. S. Labor secretary. Act on capitol hill telling my birth of the house that the economy is in pretty good shape and so are americans, even under doddfrank. Plus, we will hear from the regulatory what watchdog. This thoughts on the future of Monetary Policy and banking regulation. Look at where the major averages stand as we head toward the close. Abigail doolittle is standing by. Moreil another day, records are heading to the close. Day five of simultaneous record highs. The s p 500 now up 11 days in a row. That is the first time we have seen that winning streak since 2013. This is sort of interesting. The vix is actually trading higher isnt even as stocks are rallying. He just told the team it could have to do with friday plus, it does not take much to move the needle there. The yen has been flirting between small gains and losses. Safe haven bonds once again trading down by 10 year yield trading up three basis points. Overall a risk on a day. Top sector once again up five days in a row. The top sector clutch times, real strength here for the banks. Jpmorgan at another record high. Goldman sachs the worst. The reason the banks are rallying, the rise in yields helping investors think this would help the banks lending activity. The worst sector is utilities. Some of the big utility names also trading lower. These are high dividend yelling yielding stocks. They look less attractive to investors and help explain why they have these stocks trading lower. The sector competition is similar to what we have seen out of the election. 54, we haveg btv 4 the utilities trading lower. Still the financially financials trading lower. One thing worth noting, initially, technology have been down and now technology is the secondbest sector out of the election being helped now by apple. Joe thanks. Lets stick on questions on the justistration, mounting as on u. S. Intelligence agencies. Fbi watch multiple investigations tofbi watch multe investigations to determine the contact President Donald Trump and his advisers have had with russia. Paul manafort said earlier today i have never had connections to putin or the russian government directly or indirectly before, during, or after the campaign. To next guest says Companies Take a strong stand against russian president Vladimir Putin and he is very familiar with russian politics. The u. S. Ambassador to the ukraine from 2002 until 2006. He is the director of the Atlantic Councils Eurasia Group and joins us now. Thank you very much for joining us. Where should the president go from here . What does the president need to do at this point to demonstrate untoward relationship with russia . The first and most important thing he needs to do is adopt policy. He said he is a man who will negotiate from a position of strength and has identified chinese activities in the southeast china sees as a danger to our security. He has identified iranian to our tests as a danger security and he has reacted stronger to them. With russia, he has demonstrated weakness after weakness and seems to be look for an excuse to ease sanctions. That is completely out of character. It contradicts vital interests. Scarlet the question for President Trump is what exactly are his interest in russia . We do not have any disclosures from him when it comes to his tax returns. You have got a commerce been from congressman from both parties calling for investigations. Your understanding about his business interests in russia nfluencing this . I wont go there appeared what i can say is his policies are naive and inconsistent with his overall approach and damaging to our interests. It would be good for the United States if he pursued a more realistic policy and it would also help defuse the political crisis which would emerge as a result of his strain russia policies. Is it fundamentally illegitimate for a new president to say i dont like these old policies, i think russia can be an ally in the broader threat against terror, and change things . Wouldthe president and it be his prerogative to say lets go in a new direction, would it not . It is his prerogative but the man he nominated to be secretary of defense said the kremlin is the Number One National security danger we face. The chairman of the joint chiefs of staff who nominated obama says the same thing. Worlds Great Nuclear power along with the United States, russia, is saying the prince both by which he changes those balance those in the ukraine apply provocations from nato planes flies his dangerously close to a warships, which happened just this week, and the president of the United States is throwing flowers at the kremlin. Something is wrong. Scarlet you said he needs to pursue a more realistic policy when it comes to russia. What is your confidence in the people who surround him and advise him on russia . The secretary of defense is first rate and understands the danger. Secretary of state tillerson in his Congress Confirmation hearings said roughly the same thing. The u. S. Ambassador said the same things. They all seem to understand the problem and Vice President pence seems to understand the problem, though i dont understand why he was advocating a lifting of sanctions last week. People closest to the president , their views are not known. At those who have responsibility for National Security all show a very realistic understanding of dangers posed by mr. Packins policies. Putins policies. Joe do you have confidence that will be a curve curb on any risky moves coming out of the administration . Think they will serve as a break. I think congress serves as a break. Democrats,n not just in a state about russia policy under trump. We have seen speaker of the house ryan, we have seen Senate Majority leader, mcconnell. We have seen the head of the Foreign Relations committee. President resent trump. This will eventually have an impact. Senator mccain believes there is a vetoproof majority in the senate or the legislation that could stay the president s. The fact thats bigger ryan spoke up against this a few days the house might also be able to join the senate if President Trump continues a policy which can be called a policy of appeasement. I remember after the 2012 debate mitt romney cited russia as our key geopolitical threat and a lot of liberals and democrats and pundits in the media mocked him for this. How do we know this is not just another partisan thing where the party has switched sides when they are out of power, for being too easy on this perceived foe . I think it is safe to say part of the motivation for democrats is partisan. That mr. Also true putin doesnt fact represent a great danger to our interests. He wants to weaken nato and the eu and the relationship between the United States and europe. The basis for the great stability, the great prosperity of the past 70 years, has been the strong relationship. This is a vital interest for the United States, economic security. Scarlet thank you. We appreciate it. A former ambassador to ukraine. Coming up, our exclusive rview with dan this is bloomberg. Scarlet we have some breaking news. Andrew puzder has withdrawn himself for consideration. This is according to the associated press. Hearing wastion scheduled for thursday and will likely be canceled now following following the withdrawal. There have been a lot of questions about his background. Controversy over his personal life and private sector background. He had an ugly divorce. There were allegations of domestic abuse. Also questions by conservative republicans over his proimmigration stance. Today, the influential conservative magazine the National Review coming out today saying puzder had to go, specifically citing the fact that he was fairly liberal on immigration, the classic wall street view of immigration, open borders, their argument that that was inconsistent and that for labor and not consistent with the values of the administration. Some one, songs the of the more rightwing elements of the conservative base had attacked the nomination. Scarlet cnn was reporting at least four and as many as 12 governors were voting against the confirmation. A withdraw before the confirmation hearing would take place. Conglomerate, including carls junior and it would make sense that would make up a lot of his employee base. We talked to the Dunkin Donuts ceo saying the reason why immigration restrictions concern them would not make sense at an another fast food ceo with a similar perspective on immigration. Lets bring in bloomberg newsss restaurant reporter to get more context about the withdrawal. Bit more. Little is he friendly with donald trump . I know they see at july on a lot of things but with a friendly . Prominentbeen in republican circles for a long time. He gave money to some of the other candidates, to ted cruz and marco rubio and jeb bush. It was not really until trump locked down the nomination when he and his wife gave a big donation to the rnc and trump and he became an advisor to trump. He backed other horses but once it was clear trump would get the nomination, he got on board. That was a time when a lot of mainstream people or not supporting trump even on the republican side of things. Joe from an ideological perspective, it was always sort of a long i fit because of puzders stance on immigration. From the perspective of the Restaurant Industry, how big of a deal are some of the restrictions that may be coming down from the Trump Administration . I would say a fairly big deal. The labor market is very tight right now and one thing that has is that laborts and Health Health care costs have gone up. Restaurant prices have gone up. People are seeing cheaper food at the grocery store. I think in general, the Restaurant Industry was excited about this. Talked to in the Restaurant Industry were excited about having one of their own in the job. Owned a Andrew Puzder success substantial stake in the company. There is interest about his to vestments. Divestments. Some say the delays are probably the reason why he this will not happen for him. It was issues with how he would to vest the stake worth more than 59 that sort of delayed it. He never filed the paperwork or he deleted and that is how he got to this point. Scarlet all right. Craig had an exclusive story for Bloomberg Businessweek on Andrew Puzder recently. Be sure to check it out on bloomberg. Com. Early in president president obamass tenure, he became the point person for constructing a new set of regulatory structures designed to make sure the 2008 crisis was not repeated. Last week, the governor announced he is stepping down in just over a month. In an exclusive interview, he joined Bloomberg Radio and was asked what remained broken in right with tory structure after eight years in the fed. Areas wehink the two are trying to concentrate in in the last eight years, still need attention. The first those, of course, the largest firms characterized as too big to fail. There has been a lot of progress there but more work is needed. The nature of the crisis in 2007 and 2008 reminded us that the nature of funding in the Financial System in which traditional lending and Capital Markets are so integrated is just as runnable as in the 1920s when they were not insured. It is securities and finance transactions. The ability of that funding big drop in key asset price housing, is what produced the prices. We need to be constantly on the withut for vulnerabilities runnable funding. I think that is an ongoing exercise. You are not going to say i am done, now lets move on. Too big to fail. We have gary a week ago. The executive order came out and we have not really addressed too big to fail. We will play a little thing about what of what the congressman had to say. What is most important to the american people, to get out of the bailout business. Doddfrank did not end bailouts and enshrined them into law. That has to change. So,re they right and if what needs to be done to fix the problem . They need to say somewhat Different Things. There has been a lot of progress made in a dressing the to be too cap too big to fail problem. It is substantially greater than a decade ago. Capital levels are way up because of the ability and mentioned in moment ago. We have liquidity regulations in place and much better liquidity Management Systems by the largest institutions. Progress and will is too big toirm fail and cannot be resolved. I dont think we are there yet. That is one area where progress is needed. Someone comes and tells you we have solved the too big to fail problem, you should get worried. Because the Financial System adapts so readily and so expertly in a lot of ways to create new opportunities for making money, the financial regulatory system needs to be attempted attentive and change. I do wonder, if we are getting into a cycle where people are forgetting the financial crisis. That is an excellent point. To 12 yearso back ago or a decade ago, what was the state of the Financial System then . Markets andcapital traditional lending had been integrated, when firms priced for risk, a lot of the instruments in which they traded, they did not take into account the credit risk embedded in those. More to Mortgage Backed securities were among those. The were not attuned to possibility that across the system, you can have a liquidity squeeze as everyone says we are not sure about asset prices. In many instances, they did not even know what their own risk was. In 2009, when we ran the first set of stress tests on the fly, we sent out requests for information and more firms than one would have expected, we are not able at anything like a reasonable time to aggregate risks to the same counterparties from across their big firm. Those are things that produce regulatory changes we put in place and those are the things which should not be forgotten as a historical matter but the kind of at occasions in the Financial System mean that new risks were created along the way. That was part of our exclusive interview with dan tarullo. Tomorrow, we will meet with Stanley Fischer in an exclusive at 6 30 a. M. In new york. This is bloomberg. Scarlet even before softbank announced, there was a lot of movement around the deal. For 3. 3 but fortress million 3. 3 million. The bottom is where it gets really interesting. The focus on the bright blue ane here, that is a volume on lush options. It jumped the most since april. The number of calls in march with a price around the current level, the stock almost quadrupled. Always very suspicious when you see the huge options moves. We have got an interesting view of Economic Data. One data point i want to zoom in on, the cbi report, finds that inflation pressure continues to build in the economy. This is one of my favorite tracks taking it down. Line, the purple inflation. That is really accelerating. Measure, thatfed tried to energy, sort of mediocre p a line, core inflation excluding housing, also not that hot. It is one number but do not jump too much. A reasonthis might be for the fed to because shes. Joe it is solid. Market closes less than four minutes to go before the close. A record high for the dow, s p, and nasdaq. The dow this is bloomberg. Scarlet we are moments away from the closing bell. Whatd you miss . U. S. Stocks alltime highs, inflation taking hold. The fed could move as early as march. Im scarlet fu. Joe i am joe weisenthal. Whatd you miss . If you are live on twitter, we welcome you to live coverage every day 4 00 to 5 00. Scarlet another day, another record high. All indices making highs, the s p 500 gaining for a seventh straight day, the longest win streak since 2013. , strongid Economic Data day for the u. S. Economy. Scarlet if you look at industry groups, seven out of 11 rising. Health care of the biggest gainer, up by more than 1 . Sectors gaining by at least. 5 . The laggards utilities and bond prior t proxies. F,want to focus on the xl higher for a fifth day. The highs by the way since december 2007. It gives you a sense of how it has gone up over the last couple of months. Interestingly, you would have think the vix would have fallen, but there was a spike at 9 00 a. M. And another leg higher as we approached the close. We did get a rise over the last two days, most of that today. Salesforce. Com, 13 f filings show hedge funds took stakes in the company. This is a company with a market cap of 50 billion, but maybe they will agitate for change. Joe interesting to see. The government on market, starting with the twoyear and 10 year, both up a little bit today. ,fter the Economic Data including inflation, retail sales, all shot higher. The 10 year yield had been higher earlier in the day, but in a are two solid up days row with the perceived hawkish testimony from janet yellen, todays strong cpi. French 10 year yields, that is the new gauge of Political Risk in europe with the looming election, but unchanged on the day. Scarlet the dollar did spike higher. It faded. Dollaryen shy of 1. 15 then faded. The pound stock and a Holding Pattern here. On to arent holding lot of things until they get clarity on fiscal policy. Hold ther is likely to fed with the increased odds of a rate hike. P, worldook at wir interestrate probability. The probability of a hike has gone up to 50 . Yesterday,are it to 40 . 29 s go back to a week ago, so a pretty steep move over the last 24 hours. Joe finally on the commodities front, oil and copper, not a lot of moves, but it is interesting how oil is stuck in this range. ,here has been good news on oil capturing peoples attention that oil can break out of its range despite the fact that there should be some positive stories, and similar with copper. We talked about the strike yesterday for copper, but not much movement. Joe what would happen if opec was not complying. Scarlet those are todays market minutes. Joe i want to bring in Deutsche Bank security chief global strategist, the most bullish strategist on u. S. Equities with a year and a target at 2600. His prediction exceeds the highest estimate. Thank you for joining us. You the most bullish strategist on wall street. Callay that when people this the trump rally, it hasnt started yet. What are we getting wrong . That is one way to put it. The other is that the market does what it always does around a president ial election, flat forfive months into the election. Coming out of the election a end solid 5 rally by year which is what we have got. A charthave demonstrating this idea that it market tosual for a rally after election. , it ishe simplest level the uncertainty risk premium coming out. It is the exact same story for the 10 year yield. There are some differences because it was falling earlier ,n the year because of brexit what the fed was communicating, and then both go up because we got a pretty clear resolution on november 8. , thatr dimension to this is the market as a whole, then you can ask the question, what about the composition of the rally . Our taxes playing a role or expectations changing, government spending, the list the on, and really resounding evidence is that the biggest drivers have in the 10 year yield. Scarlet this of the chart you were referring to, joe. The election day is that white vertical line. Stocks represented by the s p 500 wavered, then really take off. What is different in 2016 is we saw a huge dip before the election, so part of that sharp rebound was off that very low base. It is catching up back to where it was. There were some peculiarities about this election. Outlet how can you rule the hope for stimulus and policy action was not part of the rally . For weeks afterwards, that is what everyone was saying. Absolutely. Look atat you need to the sector, industry group, and stock level. Clear, once you do that, it has been a move up in Interest Rates that has been the biggest driver of relative performance. Charte have another showing how that 10 year yield is the key factor that is behind it. Explain that further. Talked about the uncertainty risk premium and equities, if there was an uncertainty risk premium and equities, there must have been one in the 10 year yield, so the 10 year yield moved up sharply. Given where the 10 year yield is , very low levels, when it moves bigike that, it has a impact on stock performance, so people say that the rally in financials is all about deregulation. There may or may not be some of that, but if you look at financials relative to staples, were not talking about deregulation for the staples right now, it is perfectly and line with what has happened with the 10 year yield. Scarlet another theme extended from the previous and carnation of this rally is that you have demand from companies, stock buybacks. Be buyingsector will back their stocks the way they were before, energy and materials for instance. Sure. Theyre way we prefer to think about the impact of buybacks is at the market level. There are a number of features in buybacks the way they take place in the u. S. , so i would not say that beyond the signaling aspect of a particular Company Announcing a big ive back that that stock will keep performing. I think if it is a new announcement, it will outperform for a while. I would argue that the impact of the buybacks is due to the market level more than anything else due to many reasons. Joe Deutsche Bank securities chief global strategist, you will stick with us as we talk market stuff, and we have breaking news. , matchingisco results analysts estimates. As for the quarter that ended, . 57 was adjusted eps, one cent better than expected. Losing the Cash Dividend to . 29 expectingome analysts . 30, so that might account for the decline. Joe earnings from cvs, q4 , 1. 11, beating estimates of 1. 05, 32. 5 billion versus estimates of three to 6 billion, revenue also shy. The stock not moving after hours, still unchanged. Scarlet another company, kraft heinz, Fourth Quarter adjusted eps, 90 one cents, better than anticipated . 87. Fourthquarter net sales, 6. 8 billion, higher than what analysts were looking for. The stock is unchanged at the moment in afterhours trade. We will continue to follow the moves in afterhours trading and keep you posted. This is bloomberg. Mark it is time for first word news. Withdrawing his nominee for labor secretary. Honored to have been considered by Preston Donald trump to leave the Labor Department. His confirmation hearing was scheduled for thursday, but some republicans raise concerns about his failure to pay taxes for five years on a former housekeeper who was not authorized to work in the United States. Welcome Benjamin Netanyahu for their first facetoface meeting. At a joint news conference, the president said the u. S. Would push for a peace deal with the palestinians. Our administration is committed to working with israel and our common allies in the region towards greater security and stability. That includes working towards a Peace Agreement between israel and the palestinians. Prime ministerg netanyahu, President Trump said israel should hold back on settlement construction. T says both sides need to make compromises in order to achieve these. Mike pompeo met in secret with palestinian president in the west bank yesterday according to palestinian officials who expressed concern over the Trump Administration suggestion that a two state solution is optional. The white house had no comment. The official said the talks took aace at president bbasheadquarters. Police officers want a manslaughter case dismissed, prosecutors want the case to go to trial because it is unclear if he was impaired by marijuana or whether the officer saw a gun. His girlfriend was in the car and livestream the aftermath of the shooting. The decision could come today. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am mark crumpton. And we have breaking news on canada goose, the company that makes basically every winter jacket you see in new york. It looks like that. Although usually it is a darker color. They are going public trying to list on the nyse. Fiscal year 2016 revenue, 290 million. The year before had been 218 million. We will see. A trendy brand that a lot of people know. Montclair, a competitor in the same space, they will , that is a basis of comparison. Canada goose looking for a dual listing in toronto and the nyse. They put in a place holder of 100 million. Throughl sell shares credit suisse, goldman sachs, and rbc. We are back with Deutsche Banks chief Security Global strategist. On the s p 500 to in the year at 2600. How will we get there . What will drive it . Most of it is earnings growth, number one. There are five reasons to be constructive equities. Vshaped recovery in the s p 500. Growth has been taking place since q1, minus seven percent, 3 , plus 3 , plus 7 , and we should get up to plus 12 or plus 3 . Argue two bank, i would we dont see equities on an absolute basis as particularly expensive. Is highermultiple than the historical average, but if you look at the multiple in terms of historical drivers, it is in line with where it should be. The multiple does fluctuate over the cycle. The third point i would make is that equities on a relative basis are very, very cheap, so common measure is the equity risk premium. If you think where the equity risk premium is today and compare it to where the equity risk premium has been prior to the cycle. The last time we were at levels like this was back in the 1950s, so equities are very, very cheap. Number four bank, we talk about buybacks and strong, steady bid theequities argues demandsupply point of view, sually 10 to 12 of buyback alone without inflows, and after to bring years of outflows in u. S. Equities, there is good reason to expect inflows, especially as growth picks up and earnings. Any that doesnt sound like particular policy out of this administration, tax cuts, fiscal stimulus, is baked into your target, and as a followup to that, people have been asking, why doesnt the turmoil at of washington dc not affect markets and they seem so unfazed. Why is that . Have the first question, i not baked in any policy changes because we dont know exactly what they will be. Theink many of them such as regulation in my view are unambiguously positive. You dont need deregulation. Just need a slowing of inflation. The magnitudes are difficult to tell, but not only earnings growth, but gdp growth, coming back strongly, so it reinforces that view and increases confidence in that view. Itave not baked it into that will do better, but it could do that. And i have not baked in the policy changes because i think many of the narratives about what they will be and what has been proposed tended to be quite different. Corporate tax reform for example, a lot of people expect they will get a lowering of the tax rate him a but that is not what has been proposed. What has been proposed is a lowering of the tax rate that will be paid for or elimination of deductibility and a border tax. A neutral tax policy does not strike me as particularly positive. Scarlet so how do you bake in the fed . Janet yellen sounded relatively hawkish. How do you bake that into your forecast . I think they hike at least three times this year, maybe even four, and that has been my view all along. We can all read and listen to Different Things that came out yesterday and today. Is, what i would say anxious but still going to be gradual, and really talking about the risks of moving too late, and less talk about the risks of moving too early, so i would argue that we should get the rate hikes, number one. Number two, it has been my longstanding view that high from are positive for, fundamental point of view for growth in the u. S. I think of low rates being a large tax. And from a bondequity perspective, rising rates means reallocation away from an asset ss where prices are falling. Joe great stuff. Fascinating perspective. Looking forward to seeing if quickall comes in, and a programming note. Tomorrow, Stanley Fischer, Federal Reserve vice chairman, joints bloomberg tv and radio at 6 30 a. M. In the york. This is bloomberg. Learned bloomberg has that the sec may make it harder to investigate wrongdoing. They are said to be examining a rule known as delegated authority. What does delegated authority mean exactly . The sec is comprised with a bunch of commissioners nominated by the president , and below them there are 4000 Staff Members. Essentially what has happened over time is that Staff Members have got to not increasing amount of power to open. Nvestigations, issue subpoenas in some cases, approved certain financial products, all without having to go directly to the commissioners for a vote. In the enforcement division, the division that would investigate wrongdoing, this grew a lot after the 2008 financial crisis. In two thousand nine, the chair of the sec gave them subpoena power. Attorneys now say that is pretty important in terms of their daytoday investigations. Joe so what is the argument for centralizing the process, bringing the power back towards the top and making it harder for lawyers to act on their own . Commissioners, and it is worth pointing out that it is not just the acting chair that has come out expressing concerns over this. Side,also on the democrat karen stein has expressed concern over a different delegated authority. Staff can essentially be moving ahead and they are not involved in the entire process. Commissioners still have to vote on settlement for example or actual rulemaking. That is not delegated to staff, but in the day to day workings , staff autonomy has become a bigger and bigger deal. Essentially what the acting chair did was he directed a senior staff asked to basically list all of the delegated authorities they have in their different divisions with the idea some could be cut, some could be added, but in the enforcement area, this is something that got a lot of peoples attention because we hear sec of attorneys depend on these delegated authorities. Joe thank you so much. You can read his story on bloomberg. Com. The sec and initiating what is called a delegated authority here. Andrew pozner with a drawing his nomination as labor secretary. We will get you the latest on that. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Word it is time for first news. President trump says he would do more from allowing iran to develop nuclear weapons. The president spoke with Benjamin Netanyahu at a press conference. Challenges faced by israel are in normans. Including the threat of Irans Nuclear ambitions come a which i have talked a lot about, one of the worst deals i have ever seen is the iran deal. Mark the president said he would like to see israel hold back on settlements a little bit, but said both sides must make compromises in order to achieve peace. While introducing Bipartisan Legislation to give congress the ability to review changes to sanctions on russia, House Democrats spoke out against alleged ties between the Trump Administration and russian officials. This act will ensure that the Trump Administration cannot you do a lot or a repeal or less and sanctions placed on russia and Vladimir Putin by the United States in response to their pernicious behavior in ukraine and their meddling in our elections. Lifting sanctions on russia without a clear change in russias behavior would be nothing more than an appeasement of putins destabilizing agenda. President trump plans to hold one of his signature rallies in florida this saturday. He promoted the event with a toet, inviting people to join him at 5 00 p. M. Local time. It is the president s first rally since he took office, and his first since he took a thank in states that he won in the election. In brussels today, an ultimatum from defense secretary james mattis. He told allies at a nato meeting that if they dont increase defense spending, the u. S. May alter its relationship with them. Nato countries pledged to spend at least 2 of gdp on defense, but many have not lived up to their commitments. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am mark crumpton. Scarlet thank you so much. Joe lets get a recap of todays market action. Green across the board, record highs, this in spite of concerns about a hawkish fed, the combination of Janet Yellens yesterday, strong data, strong cpi, concerns that march or may is on the table, but not bothering equities, new highs across the board. Scarlet although we did see the vix move up a little bit. With afterhours earnings. Trip advisor missed estimates. Down 5. 2 percent in afterhours trading. Cisco with results, its forecast matching estimates and raised its quarterly dividend, still not much of a move there, down. 6 . Conference call has just begun, eps beating the highest estimates, but sales tracker down by fewer nfl games. Kraft heinz off by. 3 . It did top estimates, bowing to cut costs to deeply. Look for more cost reductions from the buffet 3g team. Joe whatd you miss . Up for the Trump Administration. Andrew pozner is out for labor secretary. In a tweet he said, i am withdrawing my nomination for secretary of labor. I am honored to all those who supported me. Cirilli andin kevin susan burr fifield. Kevin, i want to start with you. Ultimately, what did Andrew Pozner not get confirmed and withdraw . Republican support was quickly do to rating and the upper chamber. I spoke with tim scott from south carolina, and he was still having reservations about Andrew Pozners nomination for the department of labor. Rallieds cohesively against the nomination and said he was somebody out of touch with the american people, and despite having the support of prominent ceos, including the ceo of mcdonalds and other fast food chains, they ultimately were not able to get this over the finish line. A devastating blow for the Trump Administration. For the it is a blow Trump Administration, but susan, you chronicle what Andrew Pozner as a person is like. You say his personality makes them very trumplike. Has you see with the tweet. Scarlet exactly. We called him that because as the ceo of this company, he has casually denigrated his own workforce, and as we probably know their ads. Ron chi, your choice of words, andworkers and bikinis, that is an allamerican thing. And he made the point that reflected his own personality. So that is why we called him trumplike. All of those things are why he came under criticism. Joe are you surprised that he did not get through at the end . How shocked are you buy this conclusion . Andrew pozner, from what we learned, is very tenacious, does not give up easily, but i think he wasnt used to the criticism he received. He has been running a private company for a while. Inspeaks usually an front of friendly audiences. He wrote a book and called himself a job creator, and a lot of people took that at face value, so when you have somebody picking apart your record and is obviously, that very stressful. I dont know if he would have stayed in had these republicans finally decide they could not support him. Since there was opposition from republicans and democrats, what you hearing about who might be the nominee now . Be seen, butns to what we were here within the next 24 hours this is the second post that President Trump has to refill. , soident trump has resigned leaving an opening for the Trump Administration, but i have been speaking with sources on capitol hill who are quite apprehensive that perhaps the president is utilizing too much Political Capital on other legislative agenda items, including tax reform. Were attoday, retailers the white house expressing opposition to the border adjustment tax. We will have to see how the wranglings around these two openings and new concerns administrations relationship with russia, how that impacts their ability to pass agenda items. Joe one of the things that was controversial about Andrew Pozner was his liberal attitude towards immigration, more open borders than the Trump Administration, so how important was that to his ideology . Very important until about a month ago when he tried to walk it back, but too late. For a lot of people in the service sector, which as we know is the fastestgrowing part of the economy, where trump promised to improve working conditions and prosperity for these people, and the immigrant workforce is important to that. , hehe department of labor would have overseen some of the guestworker programs, including h1b visas. A lot of republicans were concerned about his earlier support for open borders. Scarlet kevin, i want to switch gears. This afternoon, Michael Flynn yesterday and today, they are distracting and overshadowing the statements by Benjamin Netanyahu in washington today. What was accomplished in that meeting between the tubing leaders . Was a major meeting between President Trump as well as israeli Prime Minister Benjamin Netanyahu earlier today. They spoke at a joint press conference before they met privately with each other to begin discussions regarding middle east peace. Lets take a listen to what the israeli Prime Minister had to say. Under your leadership, i believe we can reverse the rising tide of radical islam. This great task as in so many others, israel stands with you. And i stand with you. Have it. Re you Prime Minister Benjamin Netanyahu optimistic he might be able to get some policy initiatives accomplish with this Trump Administration. He refuted claims that President Trump is antisomatic. He also had one moment in which he said he looks forward to when itart of the deal comes to their negotiating tactics. Joe russia, members of the president s Campaign Team had contact with people in russia during the campaign, Paul Manafort, who was Trumps Campaign manager, came out with a statement today. What did he say . Manaforte with paul today. He is the second of three Campaign Managers during the campaign. He told me open i have never had any connection to putin or the russian government, either directly or indirectly before, during, or after the campaign. This comes following reports that the New York Times suggested he talked to russian intelligence officials. Allegations. Se i spoke with sources on the capitol hill said the joint Intelligence Committee might call Paul Manafort and general flynn to testify. Joe thank you very much. Check out the great cover story of Andrew Pozner, if not for that cover image alone, which you will never be able to unsee. This is bloomberg. Joe whatd you miss . More evidence the fed me be ready to move as early as march. Two charts from matt basel are. Matt basel are inflation reading that on the service look firm, and on the core as well. You found some interesting components. What are you seeing here . The biggest jump in core inflation last month in many years. It is interesting if you dig down below the surface like you said. There were four categories that saw these crazy outsized gains, that is the white line here. Household goods, transportation goods, new car prices, apparel, and recreational services. 2. 5ll had to point standard deviation move spirit we never get big prints like that. That is probably not sustainable, so we are looking for that to unwind. The orange line is shelter and medical care, normally the two largest components of the cpi, so the fact that is decelerating a bit perhaps calls into question the sustainability of showingse have been pricing pressures for a long time, even as the headline cpi, these are steady upward drivers essentially. Isyeah, absolutely shelter some of the only inflation we have seen for some time. Medical care explains that large gap between the cpi numbers and the fed preferred target, so to the extent that medical care inflation is slowing, there is still a lot of gap there, but that will continue to cast doubt of being able to get core inflation back up to the 2 target. Scarlet does anyone in the fed break it down like that and look at it the way you just did . Joe nobody does it as good as matt. Scarlet true, but do they draw conclusions from that or is it a situation of where we are more data dependent than we were before . Janet yellen has done a good job of looking through these noisy upanddown movements in inflation, so at the top of the fed as well, they are definitely looking at this and making judgments about what are some of these one off moves, what is likely to be more persistent . I imagine they will get this data and say we are not too concerned about runaway inflation because a lot of this stuff will turn around. Scarlet in terms of the second chart, Inflation Expectations. We know those have been pricing, that is the white line, and of course the 10 year treasury yield got to around 2. 5 today. What does this show you . The bigger story because the white line shows you consumer Inflation Expectations. Scarlet this is just survey data . Matt thats right. It shows Inflation Expectations are highest in 19 months, so when you compare that to treasury yields, the orange line here, which you can see as that both took a dip last year in 2016, concerned about the global economy, sagging Inflation Expectations, and you can see they rebounded right back up now , and so int the year terms of what the fed will do, kind of think about it like last year, every time they were talking about rate increases, it was like the markets were pushing back and questioning that decision. Now they dont have that opposition, and so it is like everyone is on the same page now and agrees we can raise rates this year. Thats great. Joe in that last chart, what drives what . Good you make the argument that higher rates drive Inflation Expectations to the extent that Inflation Expectations, rates are an important part of the overall show . Matt it is more likely you have the same factors influencing both things, so this is another underrated story, right . In the this big slowdown u. S. Economy over the past year or two largely from the oil crash, global slowdown. That started to turn around right around the time donald trump was elected, so we can attribute a lot of the rise in Inflation Expectations to the unexpected election of donald trump, but also the fact that the Economic Data were starting to get better and have continued on that path. Scarlet the fundamental supported it. Quick last question, obviously the retail sales data today suggest that march could be a possibility in terms of the fed moving to raise rates. Some people are suggesting march will not happen, but may will happen. Get a one where you dont live news conference, so people have been writing it off. Do you think it is likely the fed could move in may . Matt the odds of a march hike or better than one in three, so onlyu think about it, not the march meeting, but the may meeting, if the data comes and well, markets will put more weight on the possibility of a may move, and that in and of itself will give the fed more confidence that that is a reasonable option for them. Wantare also saying they to raise rates three times this year, and if they do that in may, they can still space that out, so that could be attractive to them. Scarlet matt boesler, thank you so much. Coming up next, part of our krugman, hish paul thoughts on Donald Trumps first month in office, and what he makes of the president s economic plan. This is bloomberg. Scarlet whatd you miss . Andrew pozner is out. Someone not shy about criticizing the president or his cabinet picks, paul krugman. In anns Kathleen Hays exclusive interview earlier today. Andrew pozner was a very weak we were wondering whether anything could derail one of these nominees, and i guess there was too much stuff accumulating. Maybe they will nominate someone someone who who is believes in the mission of the Labor Department, a prolabour guy rather than an antilabor guy. The Labor Department head is not one of them most important cap net post. Strategic, but there is a lot that hinges on it, modest policy, enforcement of rules, enforcement of the law on union organizing, and some of the most important statistical is under theirls aegis, so it matters that you have someone who cares about the mission. , lets cut to the chase through your columns and tweets, we know you are adamantly opposed to much of what donald trump has done, what he has said, and policy. You are an economist. Is there any scenario for you where Donald Trumps fiscal policies work . Tax cuts . Maybe they lead to more investment, more jobs. That is one. Infrastructure spending, that creates jobs. Maybe you reform doddfrank, which many people say has hurt lending to Small Businesses and community banks. Is there any scenario to that . I have been arguing for fiscal stimulus. The case is weaker now than it was because we are close to full employment. Downturn . Ere is a Interest Rates are close to zero. A badlyl stimulus, even constructed fiscal stimulus, could be a good thing. Idea is so bad we have no of policy, but there is some case for that. There is aure, tremendous case for a large infrastructure bill, but we dont have any proposal, and the closest thing we had during the campaign is something that would not generated any new investment, a privatization scheme disguised as an infrastructure scheme, not love spending their at all. I dont believe in that part. Doddfrank, there is zero evidence that doddfrank is holding back the economy. There is a lot of evidence it is doing good. It is just setting up the next crisis. Small business lending and loans hasof it in cni shrunk. Small Business Employment is down. There is a compelling case to be made that Bank Regulations are hurting retail customers like Small Business through the Small Business lending channel. There is a regular survey of Small Businesses where they are asked about their problems, and the fraction who say they are having any problem getting loans is near a historic low. There is just no evidence. Everything we see suggests the reason they are not borrowing is they dont have stuff to spend on. You are reaching to find something, the very people who should be complaining about it are not complaining. Is the fed wrongheaded to think it should start raising rates . Janet yellen seems to be on board with two or three rate hikes this year. Are they heading in the right direction . Wouldnt. I understand the reasoning. They are not stupid. We are still probably not at full employment. Inflation is still not at the two princeton target, and the 2 target itself is questionable, and there is a strong case for letting it over shoot a bit, dont shoot until you see the whites of inflation size, so i would not be doing this. They are making 2 look like a ceiling, not a target. Scarlet whatd you miss . Take a look at how u. S. Stocks close the session, all three at highs, better than expected and cpi data. At initialow, i look claims and Housing Starts at 8 30 a. M. Eastern time. Scarlet you are watching bloomberg technology. Andrew pozner has withdrawn as President Trumps nominee for labor secretary. He said he was honored to have been considered. His confirmation hearing was scheduled for thursday but some republicans raised concerns about his failure to pay taxes for five years on the former housekeeper who was not authorized to work in the u. S. Donald trump welcomed Benjamin Netanyahu to the white house for their first first aid first facetoface meeting. The president s of the u. S. Would push for ap still with the palestinians but urged israel to refrain from constructing new settlements. Kellyllerson and john plan to visit mexico next week according to mexicos foreign ministry. They will meet with the Mexican Government to continue the dialogue started on the phone by President Trump and the mexican president in january. Global news 20 for hours a