Transcripts For BLOOMBERG Whatd You Miss 20170221

That is up from 16 a year ago. Terrorism ranked second, followed by immigration. Chinas congressman said a trade war with the u. S. Should not be an option. Told voters in beijing the disagreements are inevitable. But history shows the u. S. And china can overcome trade frictions through negotiations. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Amanda live from bloomberg World Headquarters in new york city, im amanda lang. Joe im joe weisenthal. U. S. Stocks are rising to records today and the dollar resumed its advance. Joe but the question is, whatd you miss . Amanda the Philadelphia Fed chief says a march rate increase is not off the table, after clevelands loretto mr. Said the same thing. Traders are a long way from being sure of a rate hike next month. And macysalmart rallied after results from the Holiday Season exceeded wall streets pessimistic expectations. Ad, tesla stock has been on tear, up 48 in the past three months. Analysts considered tesla more overvalued than at any previous time. We will dig into the company ahead of its earnings. Look at where the major averages stand as we head towards the close. Abigail doolittle is standing by. Abigail once again heading into the close, we are looking at stocks not only trading higher but on pace of record highs. Lots of strength for u. S. Stocks recently, the dow, s p 500, and nasdaq all higher. The s p 500 is now on pace. The fifth week higher in a row, the first time that could happen since march of last year. The dow more than 300 points away. Lots of momentum for u. S. Stocks. As for what is behind some of the record highs at least from the dow and s p 500, we have the banks trading higher. Goldman sachs and jpmorgan are hitting new record highs. Strength for bank of america, city, and citigroup. Yields have fluctuated a bit today but for the most part or trading higher. That tends to help the financials after investors believe it will help the banks lending activity. One question is what is ahead for rates per the fed. We look at the 10 year yield on the year. We see it is right about flat, up just slightly from the standpoint of bonds trading higher. Thats why we had the 2 basis points down represented in green. Again, about flat. We see lots of volatility, plus of uncertainty about what could be ahead for the fed. After the fed chair janet yellen did testify before Congress Last week, investors started to think there is a better chance that sooner rathereave than later. The world interestrate probability for the month of march jumped up to 40 , less than 30 . Investors may be a little bit early. We have a great chart, this is be gtb. 6128. This is the 10year yield going into the second rate hike in a decade last december. We see down near the brexit, for the world interestrate probability down around 20 and then it gained into that rate hike it was about 100 . We are about a month away from that event and right now we are less than 40 . If we were to take what happened at the end of last year and where those probabilities are right now, it seems as though it is relatively slim but things can always change as we know. Amanda thanks so much, abigail. Joe speaking of fed rate watching, the philly fed president Patrick Harper said he wants to factor in all the data before making a final decision. He spoke with reporters earlier today. Here in the state of the economy, more or less back to normal, free, modest rate hikes for 25 basis points each is appropriate for this year of 2017, assuming things stay on track. Joe for more on Monetary Policy and the markets, lets bring in david kotok. Great to have you back on the show. Even really talk about Monetary Policy that much because so much of the emphasis is on the fed and white house these days. What do you see Going Forward . And how do you see it affecting markets . David nice to be here, always, with the stalwart. Every fed speaker has to keep every meeting live. As part of their job. They are datadriven, need more information. It looks like we will, but we dont know. They cannot commit in advance to a meeting. We all know that this is a fed speak game that goes on all the time. I think theres a different thing at work here. We talked about it off camera for a minute. In japan, you have a governor whose very clear. He says two points on the gilt curve will be managed around zero, and therefore you can predict all the Interest Rates from those two. In europe, you have draghi who anchors at 40. And he has to deal with credit problems among the opponents. Now you have the fed. These are the three banks accounts. The u. K. Has its own set. The secret sauce in the fed is, dont shock anybody. Be as predictable as you can. And so we are going to get this conversation. Until the markets when the markets get enough to price in the likelihood of the hike which they are now saying is june, we will get that. Amanda weve had reaction, whether its overreaction or not, from some of the fed speakers the last few days. You do see the probability creeping up for march, still only at 36 . The real issue on the table is normalization. Fed getd can the reflation . What it matters for the economy, for stocks, for everybody. What is your view of that macro question . Will it happen . David thats tough. They committed themselves to getting an inflation rate at 2 . Have to get over 2 and stay there. There is a debate as to whether it is core pce or pce. Its nuanced. They are not there. They are getting close. They have to be there long enough to normalize. They have 1 trillion in excess reserves, depending on how you calculated rate they dont want to shrink the balance sheet. They dont want to upset a Housing Market recovery by raising the mortgage rate, by letting the gse debt run off. No shock. The secret is no shock. I think thats the unspoken term. Joe so thats the key to understanding all the decisions, the least shocking thing. Obviously the big thing is what is going to happen with fiscal policy, which has been out of the equation essentially since the stimulus right after obama took over. What the you think the market is pricing in with regards to spending and tax cuts, and what do you think we will actually get . Politicians care about deficits. The market doesnt care. The market wants tax cuts, wants a repatriation bill. Market says we are going to get it, and if we get it, the stock market goes much higher. If we dont get it, the stock this market believes this white house is going to deliver. Amanda its interesting, we are seeing almost the same disconnect between the experts on electionehaving day. Experts are now hitting our year end targets for the s p 500. David thats a great metaphor. We are there. S p a forecasted at 2350, year from now, you should sell everything and go to cash for the next year and go fishing. The fact is, we are there. How do you take the case from 2350 on the s p and go to 2600 or 2700, which you hear . You need a tax cut to do it, and you need 1 trillion repatriated or you dont need it all at once, as long as you know its cut. Joe this idea that there is a gap emerging on the policy side between what markets are looking for and what the government may deliver, people have been talking about the last few weeks. What would be the point when markets care . We can say it doesnt look like they are moving that fast. There will be all kinds of stumbling blocks. At what point will they say, this might take a while . When would the markets change their mind about that . David first showdown is one week away. President trump is supposed to lay out a plan at a joint session of congress. He will read it. It is being written and rewritten, and every word is parsed. It will be the first time we will get a message, we hope, and that message will have, we hope, clarity. Hope is not a strategy for investing. Joe that speech to congress which is not technically a state of the union, that doesnt have clarity, you think that could be a problem . David the market could stumble if it has any indication that theres a shock or surprise. Amanda you have written i think its a wellmade point, even if the white house has intention, the daytoday is so distracting, some of the core players. You mention folks at ways and means who should be working on a tax bill. David thats awful. We have a messed print you brady, the spokesperson for ways and means. He has to spend time in an interview defending the flynn fiasco. Thats a horrible use. The chairman and ways and means should be talking about tax policy, his own memo, and how to lay it out and get to passage. Joe david kotok, Cumberland Advisors chairman and cio. We will be watching that trump speech next week to congress. Be sure to watch cleveland fed president loretto mester on Bloomberg Markets asia tonight at 8 10 p. M. Eastern. Amanda the reversal of fortune for malaysian and indonesia. We will tell you what is driving those forces. This is bloomberg. Amanda we have breaking news or want to share with you. Dow jones reporting carl icahn has taken a stake in bristolmyers, and the stocks ops today during the session according to people familiar with this matter, is because he sees bristolmyers as a potential takeover target. On a day where we are seeing less of interest in the market, potential m a activities in the food space, we see more interest for bristolmyers. Joe whatd you miss . In a Bloomberg View column today, matthew winkler, bloomberg editorinchief emeritus, analyzes the rise of crony capitalism and how it impacts prosperity. Case in point, the reversal of fortune between malaysian and indonesia in Southeast Asian neighborhoods. Here to explain what is behind the trend, matt winkler, they for joining us. I used to live in malaysia, so very excited about your column. How do you view the diverging fortunes of malaysia and indonesia . Tell us about the relationship between governance and economics. The world right now is rife with populists who are emulating autocrats. Just about every part of the world, we are seeing that really expand the globe, from azerbaijan to zimbabwe. Malaysia and indonesia are two very interesting examples of this reversal of fortune. Malaysia historically was a very country,idiosyncratic but was mostly free of any kind of what we would call corruption that predominated, for example, in indonesia for a very long time. It was nothing but crony capitalism. 1998. Igned in more recently, the president , the leader of malaysia, has gotten into a very difficult predicament having to do with his own personal fortune. In the past, really for years we have seen for the first time, first with the currency, but then with other assets, a complete reversal. Indonesia is becoming more and more the better performer of the is lagginglysia behind. Amanda which suggests a Global Investors do care about what happens, whether cronyism exists. Should that give us confidence . The thing about markets is they are not ideological. Markets, if they detect the relative value is being undermined by something that is not part of the market, the market will reflect that variable. And that is what is happened with malaysia. Where it used to insistently outperform indonesia as a currency, as a stock market, as a bond market, all of those things have shifted in indonesias favor. Joe is the lesson also that these things take time, it is a slow burn and does not happen overnight, or people say there is a new administration and they are not as good, and so the market immediately reprices, but investors overtime internalized that a new regime has come forward . Thats right. Scandals take time to fester, to become scandals, and it takes a while for the market to digest a scandal in the making, and the case of malaysia is one that has been going on now for several years. It goes all the way back to 2014, 2013 when it really started festering. Amanda you noted this move away from globalization. Does that lead you to suspect that this will get worse, there will be more cronyism and not less . If you think about what populists have been saying, they are generally protectionist. In oure also right here backyard, things like america first. That isnt necessarily about the free market. It isnt about global trade. Its about protecting something. Once you get to that point of itscting something, inviting something close to crony capitalism red joe since you brought up the u. S. Administration, one of the stories there have been numerous articles already about this why dont markets seem to be concerned by the apparent and whyat we have seen, has this rally since the election when so many pundits have predicted a selloff in the event that trump won, going back to the last thing we talk about, if there is a sort of corrosion of governance or change in the system, the lesson in malaysia be that down the road eventually, it weakens the economy . Malaysia, indonesia is a cautionary be that down the tal. Inherited one of the best economies anyone could inherit. He did not inherit the mess he. The obama economy, by the close of the administration after eight years, is one of the best, in fact the best in the developed world. The u. S. Is the only country in the world with record gdp after the financial crisis. No other developed economy comes close to that. Very low debt as a percentage of gdp by the time obama finished. Tohing has happened yet undermine what is essentially a very nice situation. As we just heard on the previous on this program, donald trump is like santa claus. He is promising tax cuts. Corporations love that, shareholders love that. Nothing bad has happened yet. Amanda one thing donald trump has promised to do is back away from policing the world. It was the department of justice which brought the malaysian heads of state to bear. Program, donald trump is like santa claus. He is promising tax cuts. Corporations love that, shareholders love that. Is this going to get worse, because countries are looking inward and they are going to stop helping each other and cooperating . It remains to be seen. That is a real wildcard. Changee world significantly because the u. S. Is no longer there, where it once was . We dont know. Thank you very much, matt winkler, bloombergs editorinchief emeritus. Amanda we take a look at the biggest stories in the news right now. The Henderson Group is betting the failed bid for thank you vet unilever could lead to dove selling assets. Unilever has a six month window to prove it made the right decision because a takeover rules in the u. K. Shares lost half of their gains from friday. Popeye says it rejected an offer from arbys before eventually settling with restaurant brand international, which also owns burger king. Unilevelpeople familiar with tr say the arbys offer would have been structured as a reverse takeover trade Restaurant Brands agreed to by the popeyes Fried Chicken chain for 1. 8 billion today. Wells fargo has fired the head of its Credit Solutions department and three other senior managers as part of an ongoing investigation. The bank is facing calls for higher scrutiny after he was fined by a legislators for opening 2 million retail Bank Accounts without approval. None of the executives will receive a bonus for last year. They will also forfeit their unvested equity award and vested outstanding options. Gotham as it management is exploring a new Fee Structure that ties pay to performance. They say the 6 billion money manager is in talks with investors about charging either the greater of a 1 Management Fee or 30 of returns that exceeds the funds benchmark straight hedge funds have been charming fees following the backlash over lackluster returns. That is your business flash update. Next, as instability lies dormant, some traders are cashing in. We will look at the data. Trump this is bloomberg. Amanda im amanda lang. Whatd you miss . Some traders are profiting from calm waters. We talked about the reduction of volatility in the vix in the market. That is the low line here, you can see on this chart. If you want to profit from it, theres a way. You are looking at velocity shares, Exchange Traded notice, the reverse vix. See Massive Gains in the reverse vix in recent periods. The question about what drives this and where you go from here is why volatility is so low and whether it stays there, could it be a fed move the changes that, could it be some other shock to the markets. In the last little while, if you wanted to capitalize off calm, this is where you do it, joe. Lot of moneymake a just shorting the vix, which was less than 20 at the end of 2016. Lets take a look at europe. That is where a lot of the action right now is. Here are two lines. This white line is the citigroup economic surprise index for europe. It has really been shooting higher. Theres been a lot of data out today, including french pmi and german pmi that beat expectations. In a normal economy, better data, higher rates, more rate hikes. Not happening. This blue line is shortterm german bond yield. Yields have continued to plunge through the floor, deep into negative territory at the short end of the german yield curve. So much anxiety about france and italy and the netherlands, and german elections, that people are really piling into German Government debt, particularly at the short end. Normally you would think good data, higher rates, but not happening. Everyone wants to although safe haven assets. Quite a divergence opening up. The market closes next. We want to leave you with the major averages. We are less than 4 minutes before the close. This is bloomberg. Scarlet we are moments away from the closing bell. Whatd you miss . U. S. Stocks closing at record highs, german by enthusiasm in mergers and a look at the economy. Im joe weisenthal. If you are tuning in live on twitter, we want to welcome you to our closing bell coverage, every day from 4 p. M. To 5 p. M. Eastern. Taking a look at stocks on the move, it was a broadbased rally across the board. The dow jones, the s p, the nasdaq, hitting record territory. As we discussed today, in some cases the s p 500 hitting above the average strategist yearend target. Freeport mac moran, one of the biggest percentage decliners on the s p. This over some disappointment over a failure to reach an agreement over the government with indonesia on exporting copper there. It is the secondlargest copper mine in the world. Falling, despite moving higher on commodities. We have been talking about enthusiasm for food stocks today after the kraft heinz deal with unilever fell apart. Gaining on some of that speculation. And we also have jams smucker, partly because it reported its numbers with lower guidance missing consensus, enthusiasm had been running ahead of the fundamentals. Joe lets look at government bonds. Lots of action. Not so much in the u. S. , actually. Modest uptick in yields today with a risk on selloff in bonds, but not a ton of action in u. S. Government bond yields, which were little changed. If we go to europe, we can see where the real action is. Lets look at the greek twoyear yield. Obviously there is news today on the talks over the bailout restarting. The short twoyear yielding greece has been sensitive to where they are with the latest tranche of the bailout. Today, anyway, a lot of optimism there. Higher rates also in france, new polls showing Marine Le Pen continuing to do well, gaining on her oppositions. Arise there, we will talk more about france later in the show. Italy again, a similar story, the same old concerns. These are not that high when it comes to borrowing costs for these countries, but they are taking higher as the concerns mount over all the pressures in the eurozone. Lets switch to currencies, a strong day for the u. S. Dollar, perhaps some of the fed helping, perhaps some of the general risk called a trump trade, who knows. The dollar, gaining a little bit today. The flipside being the euro with the affirmation eurozone concerns having a week day. The korean won, strengthening, down, because of the dsw, strengthening after some strong export data. Naturalkeep your eye on gas. We may be enjoying warm weather, but it hit that commodity pretty hard as expectations or a continued mild winter will take a hit out of demand. Taking a look at copper, trading lower, but in the context of a bullish view by citigroup that we have been reporting on based on fundamentals, copper traded lower here today. Many commodities, oil the largest of the commodities, that moved higher on the session today. To those are todays market minutes. All right, i want to take a deep dive into the terminal and take a look at all the charts and functions at the bottom of the screen. I want to start with oil. We have been looking a lot at what has been driving oil and the agreement to cap production. Opec members, the optimism that they will do that seems to be arriving. You are looking at hedge funds that on oil, passing the billion dollar mark on the contract for the first time. You can see that massive spike. Of can see it from january last year, about a year ago. The question of course, is, is this born out or does it turn . When it spikes this way you will see major selloffs and momentum plays. The question is, is there a dramatic downturn in this . So can see this joe fascinating to see this at a time when oil is hardly moving. Amanda momentum seems to be the name of the game for a lot of hedge funds there. Joe lets take a quick look at the chart that david mentioned earlier in the show. The s p 500, already at its target for the year. You see the index . The yellow line . Thats the average index for the year end, speaking to how fast the start we have gotten. Everyone can just take off vacation, the year is over. Are one of those strategists, when do you revise or targets . Joe questions on when they crank higher. One thing movie in todays trading session, walmart had its best day since may. The Worlds Largest retailer, seeing its best u. S. Growth in four years on a samestore basis. It appears to finally be challenging amazon in ecommerce. Here to discuss what ,iscussed walmart and others shelly banjo, gadfly columnist. We years we have talking havent talking about walmart not being able to get it together. That it went out and bought jet. Com then it went out and bought jet. Com. Is that working . It is coming across as a good sign so far. What they did shift today that was interesting was a focus on u. S. Ecommerce sales. They used to give out this global number it actually did the u. S. Ecommerce numbers grew by 29 . Joe home depot had a strong quarter. It wasnt as disappointing as some people thought. What are they getting so right . Also ecommerce. 19 growth in ecommerce. Ecommerce is 16 of sales for a retailer that literally, as i always joke, literally sells. Joe exactly. When you think of home depot, you think of heres one retailer that might not be that much in trouble because it sells big, heavy things, things that people want to check out and. Tuff how has the corbyn been doing . Is that under threat how has the core been doing . Is that under threat from amazon . Shelly everything is under threat from amazon, but home stopped building new stores a very long time ago. Now it is taking those investment dollars and instead of wasting them on new stores they are putting them into ecommerce. As amazon might encroach a little bit, home depot kind of takes it back. It has been able to defend itself for quite some time. Amanda i want to talk about macys. A retailer that has been struggling, though it managed to deliver some surprises, it is still a business that is in decline. Why was there such a positive reaction today . It was a mix for retailers today, but with macys it is lowered expectations that caught people by surprise. They did better than they thought they were going to be. Closing the store did seem to help quite a bit. Instead of the sale being down 3. 3 like last quarter, they were only down 2. 7 . A slight little acceleration, it didnt go down as much. Fundamentalsl the of that business that are extremely challenged. Joe lets elect to walmart for a second, as noted in the samestore sales, not bad. What are they doing on the physical retail side that appears to be working . Shelly samestore sales were more than a bad. They were good, they were the best and prevent they have had in four years. Think, part of this, i has to be food. Walmart has been investing in lower prices. Especially when it comes to things like bananas, milk, things that you really need to go to the store for. Joe did they say anything on the call or anything about concerns over tax policy . Walmart being seen as in the crosshairs, potentially, of a potential border adjustment tax. Is that something people have been talking about with walmart today . Shelly sure. Investors try to ask about it. Walmart isnt readily tightlipped. They said they are trying to work on it with the government. Border taxes would be particularly bad for walmart, particularly because they are such a low margin built business. Importing so much from abroad. A big part of their business is still in the u. S. Lotda those margins look a more like grocery than major department. 2 is not a great retail margin. It is a Great Grocery store margin. As they grow, do they want to grow away from food, which is a razor thin business . Shelly food can actually be a big thing when it comes to border adjustment tax. A lot of the food is grown in the United States and sold in the United States. It is things like clothing, all as none of which is sold in the united made in the United States, they could hurt them. Joe looking at the retailers in total, maybe these three ones and beyond, do you see any interesting macro stories . When people are truly trying to figure it out, the consumer with the optimism surge that we have seen, are there any trends that you see to give us some insight into that . I think the consumer is doing well, but there is not enough spending to go around for everybody. There is way too much retail. You are seeing a quarter where not every retailer can hit it out of the park. Walmart may be up, you saw target down during the holidays. Enough for everybody to go around, but the consumer is going to keep spending, keep going. Amanda weve been focusing a lot on the online space on the digital side, but what about International Growth . Maybe less so for macys, but for walmart or home depot . Shelly you are seeing walmart pull back a little bit from the international. Especially when it comes to be car mers, going back in china, focusing more on the u. S. And then you have countries like mexico, which has been a huge for walmart. Enue second largest in the United States. Who knows what is going to happen then in terms of trumps policies and what happens between trade in mexico and the u. S. Joe so, theyre pulling back a little bit in their mexico investment . Shelly walmart has not pulled back yet in their mexico investment. They have pulled back in areas like china, india, countries like that. Who joe knows what will happen with mexico. Joe all right, thank you very much, bloomberg gadfly columnist shelly banjo, thank you very much. Amanda cant get enough of momentum, even though it means embracing an Investment Strategy that they hate. We will explain, after this. Joe we want to tell you that if you have a bloomberg, you should really check out tv. Ive talked about this function before. Its really awesome. Its a future of tv. You can watch the show on there. Whats better about normal tv or other tv is you get all kinds of charts, everything, comments on the right side. Totally interactive. I think its the future of tv. This is bloomberg. Mark im mark crumpton. Its time now for first word news. Tensions are in high in jewish communities across the United States as police in missouri investigate vandalism at an vandalism at an Historic Jewish cemetery. President trump addressed this was speaking at the African American museum of history and culture today. President trump this is a meaningful reminder of why we have to fight bigotry, intolerance, and hatred and all of its very ugly forms. In all of its very ugly forms. The antisemitic threats targeting our Jewish Community and Community Centers are horrible. Mark the report of vandalism came on the same day that the white house denounced a series of recent bomb threats against Jewish Community Centers Across the country, including 11 threats that were reported yesterday. European Commission President jeanclaude younger warns that the u. K. Will have to pay a large bill when it leaves the european union. The british people must know that they wont be allowed to leave for free. Its estimated that the bill could run 64 million. In asia, billionaire casino owner Sheldon Patterson Sheldon Adelson sees japan is the ultimate business opportunity. Lawmakers there voted to legalize casinos. Adelson says that he would like to build a resort there, featuring 10,000 slot machines. Four times as many as he has in his singapore resort. Dr. Jill biden has been named board chair of save the children. Teachesn, who still english to college students, says she was honored to be asked to chair the International Aid organizations board, and thought the emphasis on education was a perfect fit for her. Save the children works and 120 countries, including here in the u. S. , focusing on the health, education, and safety of kids. Operations are headquartered in fairfield, connecticut. A global news, 24 hours per day, powered by more than 2600 journalists and analysts in over 120 countries. Im dark crumpton, this is bloomberg. Amanda . Amanda thanks, mark. Whatd you miss . By everg to a study core isi, hedge funds are pulling back their bearish bets on value stocks while becoming more reliant on venture shares. Burger joins us now to break down this trend. Both are increasing at the same time, so why . Funds traditionally love momentum. Momentum being shares that have gone up roughly in the past nine to 12 months. Again, hedge funds love these does it is something that has worked well throughout the entire bull market. Now, if you look at the flipside, Value Investing has not worked well this past decade. Buying stocks that are cheap, generally, has put you in the bottom category of hedge fund returns. Recently, after the election of donald trump, after crew picked Energy Materials companies have picked up and become closer associated with momentum. In a rare instance, hedge funds are buying both value shares and momentum at the same time. Joe so, these things can kind of hurt ones head. Saying this is value share, this is momentum. Is it partly that the value stocks have momentum right now . That theould say inherently weird thing is just that, value has momentum. If you think it of think of a value stock, it cant have momentum for a long. The price will take up and it is not a momentum share anymore. Exactly. The danger here is that hedge funds are so reliant on momentum. This is the biggest momentum exposure they have had since ever core started tracking the data in 2010. Where that becomes an issue is crowding. People say look, they are crowding into these shares when value shares are not momentum. If they are forced to rush out of them because the switch happens where value is no longer momentum, it could create some issues. My colleague had a great story earlier today, there is not much liquidity in these crowded shares. Lets go inside the terminal. With her story, there is a great look at the lack of danger for hedge funds. The great thing being that if there is a need to pile out, there are no buyers. Just to show you this little dot on the far lefthand side of your screen, that is 2007. We are similar on a relative basis. There was a huge lack of liquidity. I dont know if you can look at that and say that that means something of a Credit Conditions or any macro issues, but generally when you see this it means the market is going to decline at some point not long after. Dani exactly. If you combine it with the nature of momentum, it does have a tendency to mean revert. If investors are feeling burned, they need to shy away from those. You can have a massive exit from ishares. To break down whats going on, these are basically quant about. We are talking momentum describing how performance being applied to other peoples portfolios. Do the Hedge Fund Managers themselves acknowledge that they are working towards momentum stocks right now . Or do they have the pretense that they select all these stocks based on their own characteristics . Dani this is actually a trend that picked up in february of last year. You will remember some strange market happenings. Obviously, the s p hit a low. Suddenly all of these managers got burned on their investments. That this we know portfolio is better. If you had done this factor, this factor, this factor, you would have been fined. Suddenly these inventors investors were calling up their managers and saying hey, why didnt you know about this . We have a tool on the terminal where you can run traditional portfolio. There has been pressure. Look, at the end of the day, a factor can be a risk. You had better be able to explain to those holding your portfolio why you are taking on those risks and why youre not. Amanda one of the dangers of a market that looks like this is lack of liquidity. Is momentum big momentum a catalyst that takes people out of this position. What would we look for as a potential catalyst . Dani if we look, for example, at what happened in the middle of last year, hedge funds love momentum. They love these really growthy names. Suddenly they were doing as well. Now energy is taking off. Those who caught the Energy Trends moving upwards did well. Its hard to say at zachary the catalyst is going to be. It could very well be that value is not going to play out as well because we have gone a while without a recession. The economy cannot uphold these cheap stocks. It can be Something Like that. But at the end of the day there are definitely signs when people are running towards the exit. Amanda dani burger, good to have you here. Joe coming up, snap is making it the case to investors that it is a good bet. Our investors buying the argument . Well talk more about that, next. This is bloomberg. Amanda whatd you miss . Snap was trying to generate confidence, officers bringing the investor roadshow to new york. Sarah frier was on the scene and is here to fill us in. One of the questions, of course, is around valuation. What were you hearing there that people were asking to be justified for the rich valuation . The biggest sarah the biggest question was about the slowing usage in the last quarter. What was the explanation . They gave the same excavation that they had in their ipo prospectus, an issue with their product. But investors are thinking what about instagram . What about the fact that this facebook app with more users copied one of your most popular features in august . Did not have anything to do with your slowdown in growth . Didda today at joe they address that at all . According to the people that we talked to, snap said that instagram had a different use case. Its unclear if they totally bought that argument. I think that the company is going to have to explain to people well, basically heres the issue. If they come out in their First Quarter after the ipo and growth is still slowing, its not the android product issue anymore. Theres something else. They are saying that this is a one time thing and investors are saying its a long term thing. Amanda you said before that there is a comparison the can be made to twitter. Does that actually hurts snap, languishing as a bad example . Twitterretty sure that had its roadshow presentation in the mandarin oriental, too. [laughter] ah yes, slowing loser slowing growth, high losses, those were all factors for twitter and the ipo. Investors are hoping that snap is different. Now, theyre all they there are a couple of things that are different. We cannot compare them out right. Snap has had a lot of interesting product innovation. So much so that facebook close to copy their products. So, we can give them credit for that. Every time that they update the product in a way that appeals to users, we do see a bump in the user growth. The other thing that is very different is that snap is under lead. You have evan spiegel at the top, making visionary decisions. One of the issues at twitter was that there was not a lot of conviction about what they wanted to do next, who they were and where they were going. Joe you spoke to someone about evan spiegel. We have a bit of that. Take a listen. I think he came out strong, studious. I think a lot of the answers were somewhat rehearsed. These guys knew what kind of questions they were going to get. You dont really see him as the creative once in a generation guy that the Morgan Stanley bankers were pitching him as, but certainly he came out well. Time will tell as to how much of an innovator he really is. Mentionednow, you earlier the twitter comparisons, but one of the knocks on twitter is that they havent updated or innovated anything in 10 years, whatever, and theres internal dysfunction. It doesnt sound like there is the same level of anxiety with snap. Sarah i think youre right. And the pitch that they went out with on their ipo, another big differentiator, is they went out and they said we want to have all the potential users of the world on our platform talking about whats happening in the moment. Going out and saying we dont really need everyone in the world to join the platform, just the most developed countries. Amanda thank you very much, sarah. Much more tonight at 5 p. M. Eastern on bloomberg technology. More on the roiling french election, coming up. This is bloomberg. Im mark crumpton. Its time now for first word news. Was laid out today for reshaping the way that the federal government defends air and water. To assurett attempted epatics that a reformatted could remain effective. Hundreds actively battled his confirmation. In his first speech since he was sworn in, he said that we as a nation can be both proenergy and jobs and we can be proenvironment. We dont have to choose between he two. The u. S. Supreme court has cleared the way for the execution of a convicted murderer in alabama. They had tried to block the of botchedse executions. Justices voted against taking up the appeal. Justices sangha soda mayor and Stephen Breyer said they would have taken it. An australian Appeals Court has appealed her request to extradite a man on corruption charges. A surprise decision that opens the way for the ukrainian tycoon to be sent to the u. S. For trial. But that could be delayed after the case took another unexpected turn minutes after the verdict on tuesday. Plain clothes Austrian Police a separatertash on spanish warrant. Magistrates charged him with Money Laundering and engaging in organized crime according to a document seen by bloomberg. It was not immediately clear what impact the case would have on the u. S. Extradition bid. Chinas push for more Nuclear Power may be delayed by nextgeneration reactors, the worlds fastestgrowing work late Nuclear Market has announced plans to greenlight eight reactor projects this year. China wants to become the first country to bring online the socalled thirdgeneration reactor. But construction delays have slowed the process. News, 24 hours a day, powered by more than 2600 journalists and analysts in more than 100 20 countries. Im mark crumpton, this is bloomberg. Joe . Thanks, mark crumpton. Now, lets get a recap on todays market action. Record highs, once again, across the board. Its crazy. We are just 250 points from dow 20,000. Seems so recently that we were on dow 21 thousand watch. Solid gains, point 06 on the 500, half of 1 on the nasdaq. Amanda amanda . Thanks so much. Were watching tesla, set to report after the bell tomorrow. With a preview on what we are looking for, these are the first reports as they closed their 2 billion deal for solarcity back in november. Tesla and elon musk have declined to comment on how they plan to incorporate the solar panel company. Here is what we do know about tesla. Today, the numbers dont lie. Despite the lack of earnings clarity regarding solarcity, shareholders have driven the stock to a record high. The stock rising more than 50 since december 1. The gains in the stock have driven the market cap closer to gm and ford. Tesla, holding a nearly 45 billion market value, not far behind the major oh auto markets. A major valuation for every car sold in the last four quarters. Analysts, not positive, the median target was as much as 48 last teslas stock price week. You can see that is the most pessimistic view from wall street since tesla became a publicly traded coming. Part of it stems from the new model three. Very few analysts seem to think that elon musk will hit the forecast in the second half of this year. Tesla needs the model 32 excel model three. Very few analysts seem to think that elon muskto reach its 2020e million total deliveries. Total sales have to increase at a compound annual rate of 19 to hit the ultimate target. The Company Loses money every year as it builds the infrastructure that it needs for that kind of growth. Especially when you factor in giga factory. It will soon be the worlds biggest battery factory. Tesla says they are expecting significant benefits from the common nation with solarcity. One analyst expects the merger untile earnings noisy teslas new products have the ability to prove themselves, uncertainty remains. Joe . Joe what it you miss . Election what did you miss . Marine le pen, france. In lets bring in the International Government executive editor, joining us from the d. C. Bureau. I want to start with what is happening with macron . It looked like he was going to be in the final runoff, but that seems to be reversing again. Before we get to le pen, why fortunes and hamons flipping again . Its not really surprising in some ways that we should see all the front runners and second runners alternating positions. Macron made a statement where he referred to the actions of france and the french government during the time of when of june was colonized as a crime against humanity. Some of the actions the french government perpetrated there. That did not go down well. Madeinland france, le pen huge hay out of that, saying that france was sick of having to apologize for itself. Illon, timeth f passes and you think that these scandals that you think will derail a candidate go away. So he has some breathing space now. Driving thisis outcome . In the u. S. It was about people and how they felt about the economy. What is it in france . John the economy is important. France is a Company Country with an economy that had malaise, high unemployment, but really it is the security issue that is the number one issue for french voters right now. After all the terror attacks of the last two years or so, that is the message that marine le hammering home over and over. She is strong compared to the other candidates, most strongly scoring on that. Security, number one. The economy, second. Herselfpen john le pen, was goinghn, le pen to meet a religious leader today, but then the meeting was canceled because she would not put on a headscarf. Im going to ask a really cynical question here, but was the meeting possibly set up for the express purpose of her canceling it . Obviously she was never going to put on that headscarf. That would be an absurd thing to do for her, on its face, given her stance. John it has certainly played sry well into le pen narrative. Interestingly enough, as someone who will stand up for the way that she sees it for french, for secular french women. This is a story that we will be publishing on bloomberg terminal. An interesting piece that looks at how le pen is reaching out to women voters in france. Women are much less likely to vote than men, historically. Thats a huge reservoir of potential extra support that le pen can give for herself. Looking into the second round. Historically, if you look back , women2012 elections voters like male voters, in , 12s of voting for le pen points. Now it looks like she is 20 7 from both men and women in the first round of the election. 27 from both men and women in the first round of the election. Thats a very calculated push. Amanda resonating and other parts of the eurozone, of course, how might it unfold over the next couple months . Shaping electoral outcomes in italy, germany . Germany is certainly the other big one this year. In berlin last week, talking to german voters, really it is a very different political culture there. Of course, the German Economy has been doing much better than most of the eurozone peers. There were the horrific attacks of the Christmas Market before christmas, but germany hasnt quite had the maelstrom of attacks that france has had. Talking to german voters, they are looking for stability. Looking for stability on the economy and looking for stability on security. In that, Angela Merkel is still looking pretty strong. John, real quickly, who is looking like the strongest challenger against le pen in the final round . John macron, probably. Better, butoking that scandal is still hanging over him and you wonder how much he can get in the next month with this scandal hanging over him. Macron right now, is still right now, macron is still looking reasonably strong. Joe thank you for a much. Amanda still ahead, an exclusive interview with Malcolm Turnbull. He will talk about his legendship with donald trump and the australian intent to continue with the tpp, despite withdrawal. This is bloomberg. The whatd you miss . Australian Prime Minister , Malcolm Turnbull , says that u. S. Elationship with the remains a strong, despite the initial dustup in the meeting between the leaders. In an exclusive interview with bloomberg, he was asked about his current exchanges with trump as well as the us trillion desire to continue with the tpp, even after the u. S. Withdrawal malcolm . It is vital that withdraw. Malcolm it is vital that we maintain trade. Trade means jobs. Australia is a trading nation. Our future depends not only on selling things to australians, but to the entire world areas as i said at the g20 last year, protectionism is not a ladder to get you out of the low growth trap, it is a shovel to dig it much deeper. That is why we are committed, australia is committed. Indeed, china is committed, too, as the president said at davos, to free trade, to opening up more markets. It has been an important element in our Successful Transition historic,eak of onceinalifetime terms of trade, but in the peak of a massive mining construction boom, it came off, as was going to. Many economists said that we would have a hard landing. Well, we get. That was in large part because of opening of those big markets in asia. As has been said, when it comes to picking up australian assets, we have seen that. Six there were specific circumstances. There will always be specific circumstances where Foreign Investment is not regarded as being in the National Interest. But generally, you have to say that there are very few countries in the world i can think of any, in fact that are more open for Foreign Investment that australia. There are very few barriers to investment in australia. Obviously,ome, and naturally, as the government we determine what is in the natural interest National Interest. But there is strong investment from all the countries you mentioned, and others. Australia will welcome it. We always ensure that it is in our National Interest. In australia we have these protectionist, rightwing voices getting a louder say in parliament about what kind of Foreign Investment goes on. In terms of one nation, in terms of dealing with our own kind of protectionism, following what we saw with brexit, with the trump victory, do you think you are engaging in the right way . Malcolm yes. Because we make the case, we explained that more trade means more opportunities for australian businesses. Australian businesses are the best in the world. Australians are smart. Our projects are the best in the world. We want to have the biggest, widest Playing Field to run onto. We dont just want to sell to 24 million australians. We want to sell to the whole world. That is why we want to see more access to that. The really concerning factor in terms of protectionism here is , which the labour party has historically been supportive of free trade, has become increasingly protectionist. This is a populist move on the labour partys part to shorten things to be politically advantageous. To be fair,be Prime Minister, that kind of level engagement, is that just encouraging the rise of popular sentiment . Important tos understand, particularly for your nonaustralian viewers, in most parts of australia we have a compulsory, Preferential Voting system. So, you have to number of square next to the name of each candidate in the ballot paper. So, there will always be the allocation of preferences. But just because preferences are directed to a party doesnt mean that you support them. Quite the contrary. We always will say quite liberal, but national. How we allocate the preferences on the card is really a political calculation, as always, designed to maximize our vote. Just as other peoples vote. Ards are, too moving onto president trump, it has become something of a aslor game, guessing game, to whether the president means what he says. And your interactions that have been well documented [laughter] in the media [laughter] malcolm well documented, but accurately is another matter. As to clearly its a different cp temperament, but there are parallels to be john. You both came from business. You are a goldman alum, he seems to have a pension for hiring for hiringchant them. Malcolm we have had several conversations now that have been constructive, frank, and forthright. We have a very deep engagement with the American Administration and every American Administration. You know, the australian u. S. Reliance alliance, relationship, is very deep. Its built up over a century inr fighting sidebyside every major conflict. Its an alliance. Its an Economic Partnership that is built on millions of people and links. Its very strong and deep. How do you view him as a man, though . Personalitys a big that has a big job. In terms of the added difficulty of decisionmaking because this is a brandnew world. These someone who does diplomacy through social media, twitter, there is certainly an element of the unexpected. Does that change the way the deal with the u. S. . No, we pursue our National Interest methodically, calmly, consistently. Frankly,ur case very forthrightly, when we are speaking to our american friends. You would expect with good friends, we are fairly circumspect about what we say in public. So, its important that begin of frank advice and have frank exchanges with our american counterparts. But we dont do it we dont lecture them through the media. Thats very important, to be able to talk frankly, as good friends should. Part of ours exclusive interview with australias Prime Minister, on bloombergl daybreak australia. Coming up, a panel of three female ceos about how the landscape has changed and how entrepreneurs can gain an edge. This is bloomberg. Amanda whatd you miss . Scarlet fu talks to about theirs strategies. She asked of the Group Whether a scarred up could be small and still considered a success. Not as a Venture Capital business, i dont think. Scarlet it has to be scale . You toy investor wants be enormous and profitable. And theres just a fine line. I think that you can be both of those things in the right amount of time, if you have taken the right steps to get there, but i dont think that these smallscale profitable businesses are in line with a Venture Capital model. What about you, claudia . What do you think . Claudia it is the first question you should ask if you are starting a business, how you finance it . Venture is looking to to do something its truly scalable and not what you are signing up for. The environment has changed the germanic play. I agree, it has been wonderful for our business. Also, insanely challenging. Because one thing i think you can lose sight up site of as an entrepreneur, in the early stages as you get wrapped up, the most important thing that you do is serving the customer, operating the strategy and how it comes to fruition. Frankly, it is just as important as how you finance the business. And its a strategy as well, thinking strategically about how you will approach that. You are always meeting with people. It is never done. What yourre part of job is. Managing investors, thinking about new investors and the new products out there. What is the right way to finance your company . It should be a real question. I am interested to see what will happen. This is an important correction that is great, but the market will continue to go through the ebb and flow. Once there are many about massive scale and about reaching that factor, they have longerterm success. Right now there is only one example and it is amazon. Business,le unfocused, breaking all the rules on what we are supposed to think about and prioritize. The market will heat up again, but i think it is really critical to control your own destiny. Dont let anybody or any advice ever make you shift your mentality that you will be in control of your destiny if you control your unit economics. You can still pursue growth with that. Scarlet what do you think . I actually think that profitability is a number 1 its like on all of our what whiteboards. Like, profitable. Its naming the freedom that you have to pursue a different path forward. For instance, in the media world, a lot of potential acquirers wont really want to talk to you unless you are profitable. It hits their bottom line, ultimately, if they are a public company. Try that equity firms, the same thing. So, i think that that lever is actually a massive lever in a business in terms of the way you want to exit. At the same time, i think that a lot of entrepreneurs or want to be entrepreneurs and get the only way to do it is to raise Venture Capital. One of the biggest pieces of feedback that i give people is to really think that through. Because you can build a Good Business that is solidly profitable out of millions of dollars and have a great lifestyle and you dont have to carry the burden of a we all go through in terms of Venture Capitalists and Growth Numbers and all of those things. So, there are pros and cons to both, but the minute you take Venture Capital, you have to be off to the races to reach that scale. That was scarlet fu and her panel. Joe coming up, what you need to know for tomorrows trading day. This is bloomberg. Manda whatd you miss . Stocks closing at record highs ahead of some rather important numbers. Tomorrow, coming up, in the u. K. , fourthquarter gdp data that may surprise to the upside. Looking atwill be u. S. Existing home sales that are out at 10 a. M. Eastern tomorrow tomorrow. Amanda the fed minutes, we will see what they have to say about the direction of the hike from the january meeting. That is all we got for whatd you miss . , thanks for watching. Joe you are watching bloomberg technology. Lets start with a check of your first word news. President trump says a new immigration order to replace one blocked by a federal Appeals Court will be coming out soon. The Homeland Security department issued a pair of memos on immigration calling for a crackdown on undocumented immigrants. Thousands more Border Patrol and immigration agents hired. The regrets are praising his choice for National Security adviser. One senior democrat called army general hr mcmaster a certified cardcarrying grownup who is respected by his peers. John mccain called mcmaster and outstanding choice. New Environmental Protection agency Bosque Scott Pruitt has laid out his vision for reshaping the way the u. S. Safeguards air and water. First each as he was sworn in he tried to convince skeptical federal employees that the agency can remain effective. He said the epa can be proenergy, projobs, and proenvironment all at the same time. Conferenceold a news tomorrow to discuss the discovery outside the solar system. It led to speculation it could involve new findings on planets