Transcripts For BLOOMBERG Whatd You Miss 20170501

Federal Appeals Court ruling upholding californias 2012 first of its kind law. The measure prohibits a form of counseling known as conversion therapy. The Trump Administration is preparing to roll back some nutrition standards for federally subsidized school meals. As his first major action in office, Agriculture Sector secretary sonny purdue is planning to announce the changes today. School nutrition directors have said many of the standards are unworkable, and argued for changes to whole grain and sodium requirements, in particular, saying its hard to make foods that are high enough in whole grains and low enough in sodium that kids will eat. There has been another highprofile departure from fox news. Copresident bill shine is said to have resigned as a network struggles through a scandal over the way it handled Sexual Harassment against top executives. Shine hasnt been publicly accused of harassment. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Live from bloombergs World Headquarters in new york, im julia chesley. Im joe weisenthal. Families of abramowitz and for scarlet fu. I am Lisa Abramowicz in for scarlet fu. U. S. Stocks rising near records with bankshares rallying. Joe but the question is, whatd you miss . Breaking of the big banks, that is what the president told bloomberg. Why he is weighing a revival. Plus, hurdles remain. White house and Republican Leaders are still trying to build momentum for a Health Care Vote this week, but skepticism remains a stumbling lock. Coming up this hour, wideranging interviews from a number of newsmakers, including teri duffy of cme group. First, lets take a look at where the major averages and as we head towards the close straight bloombergs Abigail Doolittle is standing by. Abigail we are looking at bullish action for the major averages heading into the lows. Dow, s p 500, and nasdaq trading higher. What stands out is the divergence between the dow and nasdaq. You can see the dow is barely higher, being dragged down by the industrial sector, while the on pacep 8 10 of 1 , for its best day in a week. On paper, you have another record closed the helped by technology. The dow as that industrial drag, plus not enough tech exposure. The big story is not only tech, but the banks. We are looking at the usual suspects, apple, facebook. We have netflix and tesla trading higher grade apple and facebook ahead of reporting their march order reports this week. We have netflix trading higher by more than 2. 5 , which is a Consumer Discretionary stocks, but shares are higher according to Bloomberg Intelligence analyst Paul Committee do the dish networks numbers dropped, tot this may provide reason believe that many people are dropping their pay for Cable Services for online streaming. Look at tesla, one of the top percentage performers for the todaq and nasdaq 100 up percent after ceo elon musk recently did have very constructive comments about the company and the idea that there could be more factories to come. Butlets turn to the bank, the tech, that is the top sector. Thanks right behind it. All day. Not the case this is the intraday chart of the s p 500 financial sector. Right around one 1 00, a big dip. Toldafter President Trump Bloomberg News that he is considering breaking up the big banks in line with a 1933 blast. It could be a 21st century glasssteagall and the ad yet it to break up the Consumer Lending units from investment banking. Since then we see a decent recovery. Lets tie this in very quickly on the year, g btv 760. Up top we have technology up 16 the best on the year. The best performing sector on the year. In the middle, we have the s p 500 up 7 and a bottom, the banks up about 2 at this point, 1 point negative. This is the third worst sector on the year. We could actually have the s p 500 not quite so much, but those banks dragging on the year, joe. Joe we will be watching those bank stocks. Whatd you miss . The Milken Institute global conference is underway in beverly hills, california, bringing home bringing together leaders in business and government for its scarlet fu is standing by with the president and ceo of pgim. Scarlet . Scarlet thank you, lisa. David, as a look at what is happened so far, the first 100 days of the Trump Administration has come and passed. How has it changed your outlook and how you invest . David whats interesting is at the moment, marcus fundamentally disagree about the first 100 days of trump. Lets take the real estate market. Largely they would say having a builder in chief is pretty good news. We have seen increased demand for real estate assets. We have seen a believe that probably the turn of the real estate cycle has been pushed off a couple of years. Conservativeople in their allocations, but i think generally feeling very positive. I would contrast that with the bond market, which is sending a very different signal. Saw an initial enthusiasm, now youve seen the 10year yields drop considerably back. Theres a real belief that growth can be as high as the administration has said, no matter whether these plans come through or not. And theres increasing skepticism whether the plants will occur. And so the bond market i would say is saying,s how me. A right now they are not believing. The stock market has a different interpretation. First of all, the economy seems to be in pretty good shape grade earnings have been quite good. There have been some regions like europe which have surprised to the upside. Now i would say at the moment, they are pricing in a progrowth agenda. At the moment you have markets a little bit at war with themselves, they are sending off different messages. Scarlet which market is right then . David our belief is that growth probably cant return to the numbers the administration has put forward. Scarlet 3 growth. David 4 growth we dont see any prospect of. That is because no real amount of Infrastructure Spending or tax plan is going to change the fundamentals of our labor markets, particularly the demographics, and the fundamental equation around productivity. Without changes to those two, its virtually impossible to get back to those growth rates. We are much more muted. In terms the low twos of growth rates for the year, and we would say that is the u. S. Economy growing about potential. We are doing fine. Theres no reason to be discouraged. But we dont think that the expectations the administration set out are realistic. Thelet as you speak to Large International investors who put money with you, what is the significant change in how they invest them, given this environment, given the mixed signals . Thed its interesting reaction outside the u. S. Versus inside the u. S. I spent a lot of time outside the u. S. In the last six weeks or so. I would say particularly in asia, there is a huge sigh of relief. So the fact that the Trump Administration has essentially reversed itself on the china currency situation, on nafta, on really looking very hard at supporting japan and south korea now as allies, you can just feel a breath go out there of relief. In the United States, there is much more of a sense of yes, but we havent seen enough real action on the core probusiness andda we were hoping for, we like to see some of the pronouncements now turned into real action. So for them, theres a sense that we would like to see more. Very different reactions from around the world. Does that get reflected in the assets they continue to buy or chase . David one of the important things to understand about longterm investors scarlet we are talking 10, 20 years out. David if you are looking 10 or 20 years out, your view is unlikely to move dramatically depending on any particular political movement. I cant think of a client that has gone back to their Investment Committee for reallocation of europe, despite the fact that we have a general election. France coming up. We have italy. Their job is to take risk. They get a risk premium for a reason. They will stay investment. The biggest difference weve seen is people are keeping more cash. I think there are two reasons for that. One is to the extent their shortterm dips, they want to be able to buy and get in at a more attractive level, and secondly, if we did have a larger liquidity issue, they want to make sure they dont have to sell risk assets to meet their benefit payments. We are seeing clients build in more liquidity buffers than we have seen before. Scarlet are they building and more liquidity buffers as well because they are chasing or investing in alternative assets, as its not as liquid as stocks or bonds . David that is certainly part of it. As it becomes a larger proportion and they know they year to year,fund they send out a lot of benefits checks. They do need cash to be able to do that and they have been funding that from the public securities markets. Scarlet you talked a lot about the blurring of traditional and onernative assets, and how thing that was considered alternative is now more traditional. Can you give an example of that . David sure. This whole notion of alternatives is one of the things that means everything and nothing at this point. It started with this notion that there were classes of assets that were alternative to the equity market. Its an sort of morphed into anything that actually had carried interest, almost like an organizational or compensation arrangement. I think all of those definitions really dont work today. What we have seen is that a lot of the techniques which had been really founded and perfected in the alternatives world are now becoming quite commonplace across traditional asset managers. The best example of that is short, which we still see absolutely in alternatives that we now see a wide acceptance of that right across the markets. At the same time, real estate, which used to be a core part of an alternative platform, is now seen, particularly the core pieces of it, as something that along only manager would manage, Management Funds are making larger and larger allocations. Scarlet what is the new alternative assets . Is we are good news moving to a world where Pension Funds and others of his gated investors have a better understanding of what their real correlations are between their asset classes. The answer to that really depends on the actual on their portfolio. What might be an alternative for one pension fund isnt for another. It all depends on what the correlations are for their particular portfolio construction. Hunt, thank you so much for your time. David hunt, president and ceo of pgim. Lisa, back to you in new york. Lisa thank you so much praise that was our own scarlet fu with david hunt, president and chief executive of pgim live from the Milken Institute global conference in beverly hills, california. Coming up, Erik Schatzker sat down with the citadel founder ken griffin at the milliken conference just an hour ago. Highlights of that interview coming up next. This is bloomberg. Whatd you miss . Erik schatzker sat down with citadel founder ken griffin. Erik started by asking him about the outlook for hedge funds and the future regulation. Space foren in this almost 30 years now. Over 30 years there has been an explosion in the number of funds that 3 trillion of capital. It has had an unbelievable growth story great like many growth stories, we are going through a period of reach ranch meant as the Playing Field are changing. Retrenchment is the Playing Field is changing. You see secondtier firms that dont have a competitor advantage. Erik why is it so hard to generate excess returns . Ken excess returns come from market inefficiencies. Work that everyone has done over the last 30 years to come on if news, commodify, data, information means our markets are much more efficient in the short run. Erik is there less output to be had . Ken think about a Company Matching earnings. Today those earnings will be analyzed. People have preemptively decided, Companies Going to announce this, heres what we are going to do. That literally within seconds of the earnings announcement, you are already seeing a stock price move and adjust to where it should be to reflect all the news that we have. That takes an interquarter period, when you are looking at that data that comes from Consumer Credit cards, for example, giving you into site insight into how the quarters are evolving. All these dynamics are making the markets more efficient, more fair. For the industry, for all i said managers is reducing the amount of alpha that is available to us as a community. Erik citadel is notable for the speed and conviction with which it has responded to changes in Market Regulation structure. More recently, in fixed income you fill the void left behind by banks and market making. What about the approach that new administration is taking on regulation interest or perhaps concerns you . Ken its way too early to tell. The move toeet, reduce regulation in the United States, i applaud. This is the single greatest lever they can pull to get our economy to go faster. As you recall, i started my business in the dorm room at harvard. 260 5,000, and i could launch a hedge fund in 1987. You cant launch a hedge fund today with less than several hundred million dollars, given the high cost of compliance and other regulatory matters need to deal with. That has really discourage new business formation and asset management. This outside of asset management, the energy space, the transportation space. Its everywhere in america, the weight of regulations reducing new business formation in america, and that is a tragedy. The administrations focus on reducing the Regulatory Burden on the american who has a dream, i applaud that vision. Erik President Trump told my colleagues in washington today that he is taking a serious look right now at steps to break up the big banks. Would you be in favor of that . Ken i wouldnt. I believe when a market becomes overly concentrated, you reduce competition. Competition is the lifeblood of what makes the free economy work. When you have many firms that are vigorously competing to get ahead, thats when creativity happens, that is when innovation takes place. It is how consumers win. A a financial crisis of 2008, number of decisions were made very quickly that resulted in a massive consolidation of the u. S. Banking system. I dont think that serves the interest of our country well. What i argued to break these things into many small what i argued to break these banks into small banks . No. Erik a new glasssteagall . Ken i would be excited to see that. I think it would be great for the economy. Erik would it be good for your firm as well . Ken no, we would have much more vigorous competitors at these newly created investment banks. I think what American Investment banks are at the forefront of innovation. Not all innovation is good. Time, the majority of innovation creates meaningful value for our economy. Julia that was Bloomberg Press Erik Schatzker with citadel founder and ceo ken griffin. After middling up for years, korean experts have made steep gains over the past two years. We have a chart with the details and a quick check on longer dated bonds. We cited a big jump up in yields on the 30year, treasury after treasury secretary Steven Mnuchin said he was still entertaining the idea of a 50 or 100 year treasury bond. Again, 30 year yields spiked higher right when he spoke. This is bloomberg. Joe im joe weisenthal. Whatd you miss . Korean exports are on a tear great people sometimes look at korean trade data as a bellwether of the Global Economy because it is so sensitive to changes in world trade and all that stuff. You have got to like what you see here on this chart. The white line is the yearoveryear change in korean exports of 24 , 24. 2 year over year. That is a major surge. If we go back to the beginning of 2016, they were in negative territory. Really exemplifies the shift in the Global Economy. The blue line, yearoveryear change in u. S. Industrial production, this relationship was pointed out. Its a good sign for the world, possibly a good sign for the u. S. , a key bellwether looking up. Carry trades here versus global risk asset, its a great chart you can see behind me. Have a chart here showing the type of risk. This has continued to rally since the middle of 2016. Thats the blue chart you can see behind me. Then it could carry trades. You sell allelic flash low yielding currencies. If you look at the divergence we have seen since february of this year, you have carry trades coming under pressure, yet risk appetites seemingly manageding to push higher. You have a lot of things here. Australia, kiwi, canada. If we go back in history, look at the middle of june, you can see that generally carry is what leads risk sentiment lower. When we got a divergence you can bighere now in 2017, the question is, do we see a pullback in risk sentiments, or does this divergence continue . Lisa super interesting. Yet another sign that things are not exactly what they seem. I want to take a dive into Consumer Credit and look at Synchrony Financial compared with some of their competitors, Synchrony Financial is the former ge capital, specializes in loan such as credit cards. You can see the white line is Synchrony Financials charge operates for u. S. Credit cards straight it has been ticking up pretty high to 5. 3 of the total portfolio. Hascan see a similar uptick been observed in capital one charge operation. What does this mean . Subprime borrowers, which is capital one and synchrony consumer base, the fees of borrowers are defaulting on their Credit Card Debt more frequently than they have been for years. This is something incredibly concerning to analysts, especially as you see delinquencies. Even though people have been saying the consumer in the u. S. Has been driving this recovery, maybe not. Maybe they are a bit weaker than people think. Too withind of fit spending data in qe1. Other signs that perhaps overall optimism, consumers arent that strong. The market closes next. Lets take a look at the three major averages, less than four minutes ago. You can see kind of a mix today. Nasdaq leading the way, now a bit lower. This is bloomberg. Whatd you miss . U. S. Stocks near records. Shares rallying on President Trumps remarks that he would consider breaking up giant banks. Im joe weisenthal. Lisa im Lisa Abramowicz in for scarlet fu. Joe if you are training and life on twitter, we want to welcome you to our closing bell coverage every week they from 4 00 to 5 00 p. M. Eastern julia let me show you whats going on with some of the majors today, who are still managing to hold. The nasdaq too, the tech stocks here well and truly outperforming some of the earnings. Apples report this week the one to watch. Let me show you whats going on with the banks. They came up behind, they were trading earlier on in the session with comments from our interview with President Trump suggesting he was actively looking at perhaps breaking up the big banks. We can see they are Still Holding in positive territory. Perhaps a bigger question for the likes of j. P. Morgan and citigroup. Other comments President Trump made here as well, open to a gasoline tax. That would then be funding Infrastructure Spending. Watch stocks like cbi refinancing here. Injury energy off 4 10 of 1 . Market, Government Bond we see rates higher across the board kind of in fitting with this general rally we are seeing in a lot of areas. Not dramatic. Long end of the curve getting more action with the 10year. As lisa mentioned in the last block, a lot of the story is at the long end, the 30year. Secretary Steve Mnuchin still open to the possibility of doing ultra longterm borrowing, theoretically, as something they may want to look at with rates this low. We saw bill action here a little bit before noon when those comments came out, 30 year yield of 3 . Lisa you can see the dollar versus the yen, dollar strengthening versus the classic trade of the yen. Is is the u. S. Avoiding a Government Shutdown as some people had been at acting, and some concern over north korea and the potential of Nuclear Conflict over in that region. Also want to take a look at the mexican peso versus the u. S. Dollar. Yes, the mexican peso has gained some value this year, but certainly is well below its level before President Trump was elected in november, so despite gains we have seen in recent weeks, still a long way to go for the mexican peso. Also, i want to take a look at the dollar, dollar spot. Bloomberg u. S. Dollar index down. Again, this is a total reversal of what people expected coming into this year. They expected dollar strength. It had been the opposite. We saw the yen losing value as opposed to the dollar. The euro is gaining inflation, picking up in europe and people going there more than analysts expected going into the year. Commodities, we always take a look at these declines. 1. 2 in oil, dropping below 49, little selloff in gold. Salteal action was in the commodities, the greens, wehat, rallyingbeans, all during huge surprise storms in the midwest over the weekend. Snow that was totally unexpected destroying lots of crops over the weekend. 5. 5 ,g gainer, wheat up surging higher on the day after those storms. And those are todays market minutes. And now lets take a deep dive into the bloomberg. You can find all of the charts at the bottom of your screen, and i am looking at ea go. I want to set the stage here. We are getting a lot of politics talk about taxes, health care, trade, all kinds of stuff. I want to make a point, which is it your eye on the ball. What really drives things are real data, earnings, the economy, much more than the noise. This is a look at ea go, our chart that assists how are in a season is going. If we look in that middle area where it says sales surprise, we can see the 293 out of 497 companies have reported a sales surprise. That is the key story. There are a lot of these this quarter. Almost everyone agrees it has been an excellent earnings season, estimates for the rest of the year are coming up. When we look at the stock market rally in close to alltime highs and people say, they havent pass this legislation, dont worry about it. The point is, the data, Underlying Companies has been solved. Julia its about the forward guidance. I want to give you some stats on this. Q3 earnings estimates and 9. 5 . Q4, its double digits. What we are hearing from the company ties to the expectations we have gotten, and it is clearly giving some support to investors. This rally might be able to continue here. Lisa whats really interesting to me is despite the positive guidance we are getting from companies, the Economic Data has been coming inconsistently below analyst expectations. I want to take a look at the city bus economic surprise index. It has gone negative, the most negative since the end of last year. This means that the economic in, isat is coming coming in at a lower pace than analysts have widely forecast. Today alone we had u. S. Manufacturing expending less than forecast and able according to in, is coming in at ism data. Consumer spending stalled in march with inflation going to below the feds target. This question, why is there this disconnect between the Economic Data, the incredible expectations of analysts, and the positive of corporations. Joe hopefully some element of the q1 seasonality which has been depressing numbers for a while for q1, this is a key thing we have been watching. Todays top story as we have been reporting, President Trump said to be actively considering a breakup of giant wall street banks. Pres. Trump we are looking at that. Some people want to go back to the old system, right . We are looking at it right now as we speak. And doddfrank is going to be seriously changed so the banks can go back to loaning money. Joe on that news, we briefly saw the banks tumble and then they moved higher. Here with more details and highlights of the interview is our senior white house reporter, whose outside of the white house. Margaret, fantastic interview, great work. You made so many headlines straight lets start with this news about the bank breakup theoretically being thought about. Heres was interesting to me. Its not really that new great we talked about it on the campaign trail. Other times its been reiterated. People dont seem to take it seriously. The market reacted for 5 minutes and bounced back. How seriously should we take these comments . What we are going to see in the next few weeks easy to say, it is something i think about. Sometimes it is something im thinking about right now. And nobody asks. With trade, to a doddfrank comment, i think we are looking at these two pieces jointly. He talkedu are right, about could this be glasssteagall, with the rhetoric weve heard before but where does it go. So many folks from wall street now that are really important to the Trump Administration, gary that it has raised questions about whether hes thinking on all these issues around the u. S. Economy, has it changed as he has moved from campaigning to governance and gotten guidance from experts in place. I want to know like you do, what does it mean and when will we know . Lisa i would love it if you could square the proposal weve seen out of congress to repeal and replace doddfrank, which were hearing some information about now, with a potential resurrection of glasssteagall. How do these things Work Together . Ret im not sure how they work on the calendar. All of these questions about wall street, the big banks, doddfrank, this came at the tail end of a 1 2 hour interview. The president wanted to talk about the Health Care Bills the congress is looking at, about the extension of the spending decisions through september, about how to square all of that, about tax reform. He has a lot on his plate right now and hes working on the parts where he gets this sort of competing contingents, republicans ready to get on the second page, nevermind the democrats, where you see him start to think about how to bring the democrats into the fold. It is certainly not over reforms or changes to doddfrank. We see them start to talk about how to bring the democrats into the fold, it is not on any of these banking issues. Its on another issue entirely, which is infrastructure. The possibility of raising the gas tax is part of that process. Its not clear how much of a priority this bank is you issue is, where it falls, other than, and perhaps it was because of his meetings today or discussions of community bankers, not clear at all today as far as his thinking on the timeline with this. Thea lets not even bring democrats into this at this stage straight lets say a we are looking at what the banks will see going forward, we bring gary cohns comments, some regulation of the banks, the bank breakup rate than we throw in a shakeup of doddfrank. How likely is it to get broader republican support, nevermind the democrats . Margaret its a fantastic question and part of what President Trump was trying to do today. He certainly understands how the media works, when hes making news and who he was talking to, was to focus up here without offering a whole lot, get people talking about it, trying to gauge a real weather bank about what the reactions would be, in terms of the market, in terms of republicans on capitol hill. Joe moving away from bank regulation, he also made news with respect to health care, saying it was important for him to preserve protections for preexisting conditions and hunting hitting the current language of the Health Care Bill may not be final, which is problematic given the efforts just to get this far and to get the Freedom Caucus on board. Is this sending a signal to republicans that they are going to theoretically be voting on a bill that doesnt even have the final language that they are going to have to recount their members . Essentially henk is trying to assuage those in his core base, for whom they want the repeal and replace obamacare but they dont want to let go of that coverage for their loved ones, if they have preexisting conditions. What he seems to be saying is, the house has to pass something and the senate has to pass something and this will change before it reaches my desk. Assuming it reaches my desk, give me until then to decide. Give me until then to decide if this adequately covers people with existing conditions. The problem is what he is saying, trust me. And for voters who have cancer or diabetes, or any of these other issues, some voters will be ok with that and say we trust the president. Others will want to see a little more of an acknowledgment that this house bill as it stands right now and is poised to pass, create such a loophole with the states and the ability to opt out, the ability for president s to rise. Lisa thank you so much for joining us and for your great reporting. Our senior white house correspondent. Coming up, we will head back to the milken conference. Scarlet fu will be interviewing harry stuffy. This is bloomberg. Time for first word news. Police in austin, texas have tweeted that one person is in custody in connection with multiple stabbings at the austin campus of the university of texas. Police ad there is no additional threat to the campus. Local abctv affiliate kvue reports that three people are hospitalized with potentially serious injuries. Those stabbings happened around 1 36 local time. At this time theres no word on a motive for the attacks. North korea has been President Trumps most Urgent National Security Threat and hisignpolicy challenge in first 100 days of office. In an Oval Office Interview with Bloomberg News, the president did not rule out a facetoface meeting with north Korean Leader kim jongun. Under the right circumstances, i would absolutely meet with them. Most political people would never say that, but im telling you. Under the right circumstances, i would meet with him. Mark the last top u. S. Official to meet with a north Korean Leader was secretary of state Madeleine Albright in 2000. House Speaker Paul Ryan is strongly endorsing a 1 trillion catchall spending bill, saying budget increases for the military and Border Security will make the u. S. Quote, stronger and safer. The speaker says the bill again, quoting, acts on President Trump s commitment to rebuild our military for the 21st century and bolster our nations Border Security. British Prime Minister theresa is not backing off her position on brexit talks. May insists that britain should be able to line up a free trade deal with the European Union at the same time it negotiates its exit. Over the weekend, eu leaders suggested that mays ambitions for the upcoming talks are unrealistic. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Lisa whatd you miss . We are going back to the milken global conference in beverly hills, california, where scarlet fu is standing by with the cme group chairman. Scarlet . Scarlet they do so much, lisa. Teri duffy here with me, head of the biggest Futures Exchange in the world which creates every futures and options on everything and Interest Rates to real estate to fx. So, lets start with what you see right now. Trading drives 80 of your revenue, and volatility fairly muted in the First Quarter. Talk about what kind of effect that had on asset prices and the impact it had on Trading Volume. Terry Trading Volume for the First Quarter for cme group was at record levels. We are still managing a lot of risk. People can afford to manage risk on the Balance Sheet like they used to. Even and low volatility times, highly liquid products we have, people still need to manage and were so Cost Effective to do so. We are seeing more people manage the risk with our products today. Scarlet do you see that volume picking up when volatility gets more exaggerated . Terry volatility is difficult to predict, so we try to stay away from it. Theres no question that volatility is a big component of the volume. More volatility will drive additional volume. Scarlet our people using your products to manage risk as opposed to a year ago . Terry you look at the equity markets are at alltime highs, so a lot of people either missed the up or if you are going to sell it its tough to be short on the market. They look for a derivative to mitigate that risk. If you look at the Interest Rate markets, they are at historical lows and people are concerned they dont want to get caught overnight by rate increases, maybe more than what the fed has been advertising. Its going to be interesting to see how the president reacts to the fed, and does he decide to keep chairwoman yellen or not. A lot of people still need to manage that risk. Scarlet is that a call on what the fed will do on wednesday . Terry no. We have european elections going on, and a lot of people around the european communities manage their risk. That is not something that benefits our interestrate products immensely. Scarlet how do they do that . Terry we have the eurodollar futures contract, which is the largest Interest Rate contract in the world, and thats where they primarily mitigate their risk. They also do it in Foreign Exchange and equity markets. New areasne of the of focus is derived data. What is the difference between derived and Historical Data . Terry theres a lot of misdirection about what is derived data, what is it used for. If you look at derived data, one of your earlier guests was talking about a new structure process. He would go out and look for new data in order to put into that index, and he might get it from a whole host of different sources. One of the might be the cme groups data that he put into index. Example ofbe an derived data. You create a new structure product of existing products today. Historical data is used to plug and play, listening to can griffins interview earlier on, he talked about how important Historical Data is. Machines cant teach you something if you dont plug something into the data. Historical data has become very popular because it helps mitigate risk, give examples of past market performances, and people plugandplay that into their system. Company like ours, it is 180 years old, that has been tracking that data for that many years. We are in a good position to go ahead and disseminate that data. You always want to distribute it on a fair basis. It is transparent data. Ken also talks about how important transparency is in the marketplace. All the data cme is is done on the central book which everyone participates in, so you could not have better transparency in our data. Scarlet when it comes to your derived data, the outlook is not as robust as you would have expected. You do not see growth in 2017. Terry what we said is we will not give guidance for the balance of this year. We just started to put new hires into our data complex, sl this data. Were going to take the audit function and bring it in. We are not going to outsource it. Theres a couple things where we are being a bit more cautious as it relates to our data revenue. We are doing a lot of revenue in factors, these two new which will not give the guidance with the balance for this year. Scarlet the president today told Bloomberg News that he would actively consider some kind of 21st century glasssteagall, some kind of division between big banks and investment banks straight what might that look like to you . Terry im not sure. When you look around the world, nobody else has a glasssteagall in place. Right now one of the most capitalized x in the world are in the United States of america. You wouldderstand why want to put those at a disadvantage. When you look at our Financial Services system in the United States, it adds so much to not only the economy but national security. A strong Banking System does that, they go out and raise money in the Capital Markets so people can rebuild hospitals in their communities and Municipal Bonds as they auction off all the time. Our are integral to economy. Anytime you put additional burdens on a Banking System, and im not seeing saying glasssteagall is a burden, but the bank went through a huge overhaul after the 2008 financial crisis. I think you need to let that simmer, let that get into place, let that adapt to the rules, and the cost of those rules before you start to break them apart again. Scarlet cant you make the same argument for doddfrank . Its not 100 implemented. Should everyone see how it goes for a couple of years . Terry thats a great example. Glasssteagall was 37 pages long. Doddfrank is 2300 pages long. You can see the difference in the laws over the years. I think doddfrank is something we need to continue to look at, and the rule writers or regulators can work around this from the fringes to make it more efficient. At the same time, we needed to have new regulations after the 2008 crisis and there was a lending crisis we had, scarlet. Is not you mention it 100 implement it. Why is that significant when we discuss doddfrank . You said the doddfrank is not 100 implemented. Terry 80 implemented. Scc sidehe same on the. When the president got elected, i believe that was a deregulation in and of itself. We probably wont see a lot of the implementation left from doddfrank guide what is left there will probably be about it. It will not roll back. I think the regulators will rewrite some of the laws, the rules, which goes to the way congress interpreted it. When Congress Votes on legislation, the rule writers have to interpret what congress is. Some say the last administration misinterpreted what doddfrank was all about. This administration will try to revisit some of these rules. Scarlet what about the vulnerable . Volker rule . Excludede volcker rule certain products. When you can market make in cash treasuries but cant make in the futures contracts, it makes no sense to me. Im not a fan of the volcker rule the way it is written today, it needs to be modified or dispelled. I think the chairman has put a comprehensive bill on the table, knowing he will probably have to negotiate some of it out. That he can use the regulators as i mentioned earlier to implement a lot of that without having to go to congress. Scarlet great thoughts. Terry dutchmen terry duffy, thank you. Lisa terry duffy is not a fan of the volcker rule. He is the ceo and chairman of the cme group. Julia coming up, market seem to have priced in a president emmanuelle macron sitting in the french palace, with european banks rallying. We have a chart with the details, next. This is bloomberg. Julia whatd you miss . Frenchgermanthe 10year spread versus european banks. If you dive into the bloomberg, you can see priced out the risk of le pen victory in france. What a boost we have seen for some of these euros and banks. Its not just about repricing of risk. The average earning supplies has been 33 so far in earning season. That matches what we have seen for the u. S. Banks. Clearly First Quarter where we see a better performance for these guys. Stay with us. More to come. This is bloomberg. Time for first word news. Israeli Prime Minister Benjamin Netanyahu is criticizing this weeks plant white house meeting between President Trump and palestinian president mahmoud abbas. Forking at a ceremony victims of militant attacks today, Prime Minister netanyahu said quote, how can you talk about peace with israel while simultaneously you fund murderers that are shedding the blood of innocent israelis everywhere, gray police in paris fired tear gas at protesters during a may day workers march. Demonstrators threw gas bombs at security forces, who then fired back. No word if anyone was hurt. The march included calls for voters to present far right candidate Marine Le Pen for winning the presidency in sundays election. Thousands of cubans led by president rebel castro marched through havanas revolution square today and what is considered one of the Worlds Largest celebrations of mayday. Todays observance was the end of an era. Castro has said he will step down as president in february, making this his last mayday parade is head of state. One protester with a u. S. Flag briefly disrupted the start of the parade. After a struggle with the security officers, the man was led away. The United Nations human rights chief says his office is quote, watching the United States very closely under President Trump. You and high commissioner for. N. Highghts the u commissioner for human rights warned that President Trumps election could be dangerous for the world. Speaking in geneva today, he said he had noticed what he called a change in rhetoric since the president assumed all this he expressed his hope that his quote, worries some trail rhetoric on issues like torture, would dissipate. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Julia lets get a recap of todays equity market action, give you a look at the majors here. Dow jones just tilting their, down 1 10 of 1 . Gains for the s p 500, a record close once again for the nasdaq higher by 7 10 of 1 . Gains for the Third Straight day. What a run. The likes of alphabet, amazon. Last week,e earnings continuing to rally here. Record close for apple. They are the earnings to watch this week. We also have facebook as well. We also want to join your attention to the banks today. They were also rallying today. Presisidenttrump dent trump warning about the possibility of a break they cap. An interview with treasury secretary Steve Mnuchin as well. What a day. Joe what a day. We continue now with our coverage of the annual Milken Institute global conference in beverly hills, california. Scarlet fu is joined by the dow chemical chairman and ceo. Scarlet . Scarlet thank you so much, joe great andrew, id like you to give us an update on a delldupont merger dowdupont merger. We know the European Union is requiring more visitors in pesticides. Divestitures in pesticides. Sothe european remedy was full some, talk much longer, as you said, and introduced the new hypothesis on creating competition, in essence innovation as their thesis. We dont expect a whole lot more from anyone else, because in essence the European Union since the drumbeat for everyone else. Everyone waits for them, and thats unfortunately why it has been somewhat delayed. But no, if there are some more things, they are minor in the scheme of things. Scarlet does that mean a deal is likely to close by your august target date . Andrew thats our plan. We were very deliberate this time. We didnt want to say june, wake up in june and say august. We have a lot of good information around the remedies and getting things ready for the divestments. And as a result of that, a confidence in august is pretty high. Scarlet for investors and analysts out there, what does that really mean for your tenure at dow . Rew i said as recent as our Earnings Call that our board is discussing many issues, in terms of the merger itself, the governance process, the spin, we made another announcement around spin, how fast can these companies be ready. Management continuity is something they are addressing. Nothing to say about that. Clearly it is a poor decision about what they do do. Beachoking forward to a in australia one of these days. Everything im doing here is setting up the company for its future, and im very proud of what we have done as a company for management. I will go wherever the board wants me to go. Scarlet we want to know what what what one of these days means. Andrew i dont have an answer. If my wife were be were sitting here, she would be asking tougher questions than you are. Scarlet dow investment, 6 billion to boost asset production in the gulf coast, and that was to take advantage of cheap shale gas, right . Those plants are now opening. Do you plan to invest anymore along that scale . Andrew i certainly hope so. I would say the key part of your question is, on that scale we have been in freeport, texas a and time, over 50 years, the same in louisiana. Weve never seen an opportunity like this, since the original one back postworld war ii, which is abundant inputs for petrochemicals. We certainly put a big bet in place. The 6 billion is beginning to start up, and as recent as last week on the Earnings Call and the week before with our board, we are beginning to lay out the next fiveyear plan. No announcements yet, but we are growth oriented, and the u. S. Opportunity is so good that if we were to do already one thing in the next five years, that would be a major, topoftheline thing to do. Tax reform or repatriation of your cash would allow you to make that kind of big investment . Andrew there are headwinds in the u. S. Economy that have meant slow growth, means any investors, including the ones we have been talking about, have had an export orientation as well as a domestic orientation, just as the domestic market hasnt been growing fast enough. We export 20 of what we make in the u. S. Hereu can stimulate growth through tax, infrastructure spends, and you can overcome Skills Shortage in jobs, which is a bottle maker bottleneck in u. S. Expansion i believe you can do more year for the domestic economy, and these facilities you dont have to just export from, although it is still a competitively placed export from, we export to latin america from here. Im hopeful the headwinds of regulation cost, high tax burden, slowness in bureaucracy, infrastructure, not being worldclass, you remove those, it should allow a more investment from people like us. You head up President Trumps American Manufacturing council. What recommendations have you made that he has taken you up on . Andrew the four areas we discussed, the one area that could be almost immediately acted upon is reg reform. All the companies on the council and then beyond, many others in manufacturing, supplied inputs to us over 100 rigs the need to be real dressed for the modern economy, and thats part of it. Its not just add rigs. Its rigs that arent current. Were using rigs from the 30s and 40s. We using the Clean Air Act from the 1970s. Thats ang the regs, lot of early action and a lot of recommendation on that. The second area which you dont hear a lot about but you will, is work of the future, all the displaced workers from the Old Industries need to be reskill or retrained. In the School System, we need to pot not just stem, the vocational training. Weve got to put that in. The School System is such that we can overcome the supply chain issue we have, have a million open stem jobs in this country that we are still filling with immigration. We should be employing our own people, upgrading their skills, giving them full compensation and benefits. Thats another area of strong recommendation. The third and fourth are the ones you asked me about, infrastructure and infrastructure modernization. A lot of recommendations there are airports, freeways. Last but not least, tax reform. Scarlet you mentioned clean energy. President trump of the paris climate agreement. Dow insulation abandoning Climate Change goals be bad business . Andrew we are supportive of paris. We do believe and a of that type is better than no accord an accord of that type is better than no accord. If you want to renegotiate a theer accord, that is prerogative of the government. We say Climate Change is an issue that has to be addressed. We have products that can help address it. Were a net saver of carbon in the economy. When you look at the products we make that help consumers not him as much carbon i was with the major automobile manufacturer on the west coast. Lightweight Technology Saves fuels. All of that is proClimate Change records,s and then that will be a great business opportunity. Carlet the chairman and ceo of dow, thank you. Joe that was our own scarlet fu with the dow chemical ceo, live from the, milk and conference in beverly hills, california. Lisa coming up, stephen starker weighs in on President Trumps marketmoving comments. This is bloomberg. Lisa whatd you miss . Today President Trump told bloomberg that he is taking a serious look at breaking up the big wall street banks, Kbw Bank Index fell briefly on those comments but made a recovery by the end of the day. For more on trumps comments and their impact on markets and the financial sector, lets bring in stephen starker, cofounder of btig. Lets say u. S. Regulators did break up the major wall street banks. Would this be good for btig or would this create more competition . When you listen to President Trump, the devil is always in the detail. As it relates to btig, we manage our risk. Our partners are very hands on. Any type of migration back towards glasssteagall would benefit us. ,e manage our risk very tightly and any type of advisory business back the way it used to be would play into our strengths. Julia you obviously got involved with bond trading several years ago. Then there was a retreat. What do you see as opportunity in the markets right now . We saw an 2008, 2009 opportunity. Spread is really widened and we saw an opportunity to build out our credit business. Most recently over the last 4, 5, 6 months we saw an opportunity to dig back in. There was a lot of talent on wall street. The banks have been headcount, headcount reduction mode. We brought on 2 senior guys to build out our model. Its a very entrepreneurial culture, where you partner with your clients and we think we have found 2 athletes that will be able to rebuild the highyield for us. Lisa where is the opportunity . Is it prop trading type of activity . Withn it is in partnering your clients, trying to find a natural liquidity, and finding the other side of trades. The entrepreneurial type of culture we have lends it to hiring a lot of good quality talents on the street. We think that will play into our core strengths. Joe i want to ask you about the market environment right now, lets of conflicting signals. On the one hand we are very close to alltime highs, very little volatility. We go inside my bloomberg, a chart of the vix going back 15 years. We havent been this low since 2007. Implied volatility, extremely low. What the sentiment look like from your perspective . Steven sentiment continues to be bearish. That is a tailwind for equities since every 2016. The vix hovering in the 9, 10 range. If you look back at historical levels, anytime the vix is trading down close to 9, you see a 3 to 5 month jump in the market over a 2 to 5 month period. Joe how specifically does that manifest . Steven if you look at the Aaii Sentiment levels, they are at historical type of levels, both sentiment, both volatility, both seasonality are all playing into another leg of in the market before you get kind of any type of retracement. The other thing to note is this bull market has had an eight year run. This is the longest weve gone without a 5 retracement in eight years. Look at seasonality statistics, you will probably get one more. Katie stockton our technician is looking for probably 2450 on the s p and summer seasonality were you get a pullback in the market. Btig, where is the biggest opportunity in trading . Steven equities, equity derivatives. And now our credit business. I think it is an equities business. Equities are at alltime highs. We continue in all of our businesses to partner with our clients and look for opportunities to find them good liquidity. Julia which one do you think has the most value . The u. S. Looks expensive, shirley. Steven the u. S. Looks expensive. We have been underperforming versus the national markets. Over the short to intermediate term, the u. S. Will have to form julia charity day tomorrow. Steven 14 years, 40 plus million dollars. We are excited about it. We started out with the yankees who came to appear one day. Now we have thousands of clients who support us every day. We have 50 or 60 celebrities tomorrow. Theyre a jeter, alex rodriguez, shaquille oneal, mark cuban, a bunch of, celebrities will join us. They really, truly show how partnering with us and our clients and giving back is a great way to show how the good side of wall street is. Starker, btig cofounder. Thank you very much. And we have some more headlines from our bloomberg exclusive interview with President Trump. It has to do with white house personnel, trump telling bloomberg that bannin in private, they are not going anywhere anytime soon, bannin and reince priebus, when asked if they will be in their same role he says, quote, i think so. He says bannon and his soninlaw Jared Kushner are getting along well. Saying everyone is staying still. From new york, this is bloomberg. Lisa its time for the Bloomberg Business flash. Federal prosecutors have charged ubs with manipulating the u. S. Currency market. The Justice Department issued subpoenas last month and has been examining the 14 trillion treasury market for about two years. There is been a shakeup at alliance bernstein, a money manager that oversees almost 1 2 of 1 trillion. The ceo has been fired and nine Board Members were ousted. Jpmorgans said bernstein will take over. Robert zoellick will be chairman. Axa said it was time to put new leadership in place. And that is your business flash update. Julia turning back to the annual milken, Institute Global conference in beverly hills, california earlier today the bloomberg editorinchief spoke with u. S. Treasury secretary Steve Mnuchin. They discussed how the Trump Administration plans to support longterm infrastructure investment. Mnuchin we are studying ultra long bond strength that is something we are considering at treasury with a working group, looking at it. We think it is something that make sense for us at treasury. On the infrastructure side, the president is determined we make a major investment. They are a huge part of the infrastructure that needs to be rebuilt, and we will do that in different ways through publicprivate partnerships and different financing so we dont believe in the budget by 1 trillion. Fundamentallyk governments look at infrastructure in the wrong way, at the moment everything gets checked into general accounts . If you are running a company, if you put into longterm investment, that would be counted differently than shortterm cash flow. Is that one of the restrictions you face . Sec. Mnuchin absolutely. When you are running a business you have an income statement and Balance Sheet. When you are making an investment that has a 20 year or 30 year payback, you dont dispense it all into a one day one or look at it as a complete expense. The government budget treats it all his cash, was makes it difficult which makes it difficult. If you had to bring investors into finance that infrastructure, is it merely to do with pricing, longterm . Sec. Mnuchin i think weve seen lots of interest from our counterparts, investing in the United States, whether its infrastructure or other opportunities. I think this is something that we are going to be able to get done. Plans to boost growth come in the end does that come back the same . This idea that you cut taxes, and you get rid of regulation, that that will push growth by itself . Sec. Mnuchin we need regulatoy relief and we need trade reform. But simplifying taxes and making businesses competitive are a big part of it. We have trillions of dollars that u. S. Companies have left of sure that we expect will come back and be in great be reinvested in this country. You talked a couple times about trade. That is the one area where you are perhaps more and conflict any ofsiness people than the other issues. Most people like the idea of cutting taxes and regulations being sorted out. The idea of turning against free trade, do you think that is a problem for the administration . Sec. Mnuchin i think its the opposite. We believe in free and fair trade and where we are attacking things is where its not free and fair. As i said, if you are charging someone zero tax and they are charging us twice percent or 25 , that is not free trade. Julia that was Steve Mnuchin speaking with our editorinchief. Joe coming up, what you need to know for tomorrows trading day. This is bloomberg. Julia whatd you miss . Let me give you a look at the market close here, slightly lower. Higher for the s p 500. The nasdaq all about tech stocks, all about financials. Dont miss this. Tomorrow, april u. S. Auto sales data. Joe tomorrow i will be looking at Apple Earnings at 4 30 p. M. Eastern, the Biggest Company in the world, you wont want to miss this. Ofa another full day interviews from the Milken Institute global conference in beverly hills, california. Fora and thats all whatd you miss . Joe bloomberg continues with coverage about the newest unicorn on the block. Lisa have a great evening. This is bloomberg. Alisa i am Alisa Parenti in washington. We start with a check of your first word news. President trump has not ruled out a meeting with kim jongun. He tells Bloomberg News he would be honored to meet with the north Korean Leader under the right circumstances. The last top u. S. Official to meet with the north Korean Leader was secretary of state Madeleine Albright who met with his father. The u. N. Human rights chief says his office is watching the u. S. Very closely under President Trump. The u. N. Human rights high commissioner for human rights warned last year his election could be dangerous for the world. Hasu. S. Supreme court lifted a California Law that bans licensed therapists from working with children to change their Sexual Orientation from gay to straight. The justices rejected an appeal amid concerns among religious right voters. Top economicmps advisor says he thinks republicans have the votes in