Transcripts For BLOOMBERG Whatd You Miss 20170505

Hundred 48 schools to save millions. It will relocate a proximally 27,000 students at the end of this month. The islands financial crisis has triggered an exit is to the u. S. For the white house today fired its chief usher. The first woman to hold the job and second africanamerican. The white house would not say why she was fired. The chief usher is the general manager of the white house and typically serves a long tenure. There have been just nine of them since the beginning of the 20 century. She took the job in 2011. Global news 24 hours a day from our more than 2400 journalists in more than 150 news bureaus around the world. I am mark crumpton. This is bloomberg. Julia live from bloomberg World Headquarters in new york, im julia chatterley. Scarlet im scarlet fu. Joe im joe weisenthal. We are 30 minutes from the u. S. Scarlet the s p 500 at age two months i. Joe the question is, whatd you miss . Whatd you miss . Scarlet we dig into the jobs report. Wtide ride for crude oil, falling overnight below 40 a barrel. And this weekend is the second and final round in the french president ial election. It is decision time, macron or le pen . Joe lets look for the major averages stand as we head toward the close. Abigail doolittle is standing by. Another day of unchanged, wishywashy trading, we are looking at small gains thethe major averages and s p 500 is on pace for its first record close since march 1. It can basically close above 2396. Lets keep our eyes there. On the week, we are also looking at gains. A bit of a bullish stretcher. Turning to the top stories on the week, tech and energy. In white, that is the s p 500 tech index. On the bottom, thats the s p 500 energy index, down 4 on the week. Of course, oil has been a big story for the week. Lets take a look at a few of the stocks that helped drive tech on the top sector. Apple has another record as they put up a somewhat disappointing march quarter. They missed estimates, guidance a little bit like. But they are looking forward to the iphone eight super cycle. District systems, up 8 on the week as there is more clarity about who some of their potential eaters could be. They may not sell themselves at all. Expedia and i find are trading higher. Comments are positive on travel demand out of the european travel expo. The stock is a little bit lower on the day. They are saying that they will fight these Online Travel agents. Now its look at the energy losers. We are looking at anadarko petroleum. They were downgraded. The shares are down sharply. Marathon oil, all of these Companies Reported earnings. Of course, we have oil down 6 . What could be next for oil. We do have city saying that the technicals are really driving the markets. This chart mesa suggest back, may not suggest that. This is longer than a oneyear chart. Above the 200 Day Moving Average that has acted as buyer support oil right around those levels, but we also see over the past year there have been areas thatnsolidation in orange caused these sellers to win against the buyers, bring it back down to the longerterm support. Day rock oil below the 200 moving average. But there is a bigger range marks in blue. Marked in blue. This chart may suggest to eric walls of oppenheimer, the , that it isalyst range bound. But we could see the range break to the downside, perhaps the low 40s. That is something our Bloomberg Intelligence strategist is saying could be pretty bearish complexor the commodity and perhaps equities. Very important to keep an eye on oil, of course. Joe thanks, abigail. Julia whatd you miss . Unemployment hit a decade low. Questions remain if and when the economy is set to recover. For more, lets bring in the founder of south bay research. Strategist from bloomberg still having tv issues from the last show. Guys, thanks for joining us. Wage growth,of the payroll, the participation rate, there is stuff there for the bulls and the bears. Exactly. If youd dropped someone in and did not have background, they k. D we had payrolls over 200 what is wrong . There are definitely ways to be bullish. If you dig into the details, all of the macro signals are consistent. Mild growth. At the beginning of the year, there was small expectation. I think i mentioned deed of things are already starting to stagger, stumble little bit, slowdown, rollover. I never bought into the reflation trade. Gdp, 2 if we are lucky, mild level growth and that is what we are seeing, the second half especially. I think the fed is on autopilot, to be perfectly honest with you. Scarlet and they want to be on autopilot. They do. They sit on the panel, we know we will have a recession at some point in the future. We need to shrink the Balance Sheet. We have room after qe and perhaps at some point in the future. It is a crazy way to think about it. The economy has been essentially like this since 2010 be sent, not dipping into recession. This has been an extraordinary long recovery. Not particularly robust. Is there anything on the horizon that could change the trajectory meaningfully . I will say the word trump. I think donald was dragging down the economy. I think you see in q2 is a little release of pentup demand. I think companies are discounting the trump trade. He is not going to affect 2017. There is nothing the man can do except ring us into a war that will change the trajectory of the economy. I think companies are saying, i enough, lets get back to business. Hiringf shows a lot of has picked up. It is a release of pentup demand. Julia i want to tie together a couple things you both said. The fed is on autopilot. If that is the case, it you just said payrolls could weaken in the second half of this year. What does policy mean when we get to september and december based on what they are saying they want to do this year . I think they are locked and loaded for june unless something extraordinary happens. Then they Start Talking about timing on winding down the Balance Sheets and whether they go on december will depend on whether we get 2 growth going forward. But the markets are essentially saying no, but the fed is saying they will go anyway. Julia what does it mean for the dollar . I think it means that we have a weaker dollar. They do not think we have the trajectory. Julia what do you think question here is the dollar expert. This is not a u. S. Phenomenon. This is a global phenomenon. Maybe at some point, the dollar might get a little stronger as china suddenly stumbles and everybody does a safe haven that in every link is back into the dollar. Scarlet but certainly the u. S. Is leaving the world. The expansion and the durability of it we have nine months for we have had two periods with growth like this. This era and the clinton era. 10 years of massive growth. A lot of that came down to the regulations and 401 k s suddenly taking off and i would say basically the and are not and i always come back to the internet isause the internet deflationary, but it freed up all of is deflationary, but it freed up all of this capital. All of a sudden which really speaks to this thing youre trying to say about the internet making companies more efficient. Less volatile than it used to be. That is something a little different that is the pmi itself. You look at the inventory basically, you get back to gdp. There is a huge swing and inventories where companies have to build their stockpiles and that pushes the gdp up and all of a sudden, there is too much. If you go back i in time and you look at this, since this data point has been connected, you get to the 1990s and this crashing and burning and slowing down, so we are not getting as big a peak, we are not getting areig a trough, and we guiding in the review have lower gdp and you do not have the is obscene swings and volatility. We were talking to the Dunkin Donuts ceo yesterday and he was talking about the amazon effect, and the way that the behavior of the labor market now is very different to what it was. You talk about florists and the fact that you never go to a florist now and buy flowers or rarely. You order them online and get them sent. They connect buyer and seller a lot more efficiently. That probably is why our economy as at the forefront. We have adopted all of these market changes and we are at the forefront of this. Julia when the fed is setting policy, do they appreciate these things . They got their phd i think they factor it, but at this point, there is just a tunnel vision. We now have ontime inventories, so we do not need to stockpile supply as much as we did in the past. Joe i have a chart in the terminal of these inventories, andrew. 1950ssee from the through the 1980s these huge swings. We go from the 60s to the 30s with some regularity. Since the more recent era starting in the 1990s, the since then we do not see the big ups and downs of the chart. Chest but its a permanent struggle. You see the retailer. Look how quickly the retailer said, weights, we can have this brick and mortar set up. Lingering over a few years. It happens quickly. Tot speaks to our ability have this longer, but lower business cycle. Im going to switch gears little bit because i need to get your thoughts on what happens before the french elections, the second round or it right now it seems like everyone is a little complacent believing that mccrone will win. The latest poll is 63 , 37 . Theres a lot of complacency. If they get this wrong and le pen wins, it will be a black swan moment. No one is predicting it. No one is expecting it. It will be a crazy sunday if she does. Julia bigger than brexit, bigger than if trump bigger. Way bigger. Julia thank you. Outlook coming up, and on oil and opec and the saudi aramco ipo. This is bloomberg. Scarlet just a headsup that the s p 500, believe it or not, is on pace to close at a record high. The previous record close was 2395. 1. We will see if it can sustain these gains. Julia . Julia thank you, scarlet. Whatd you miss . Stabilizing after yesterdays sell up but wti posting a third weekly decline. More, citys and head of Global Research says it is not just technicals. He spoke earlier on bloomberg daybreak americas. Its all technicals. Nothing fundamental. Nothing has changed in the market. It is expectations i am part. It is technicals in part. We had a record amount of trading for a couple minutes. It was all shorts coming into the market. The narrative for the fundamentals is bearish as well. How self fulfilling is this and how much lower can it go . To call never positive a bottom, but i suspect this is a great buying opportunity. The market is fundamentally tightening up. I think through be a shift in Financial Sentiment and that will help boost the price going forward. We are expecting a big jump in price by the end of the year. Market, but iis want to understand the fundamentals part. You say it is technicals, not fundamentals. What about the reports of the increase . And china . There is softness in the numbers. They are tightening in the credit. How are we confident but that is not triggering this . Was thelly part of this chinese numbers. They were not negative, but less positive than they had been. Iron ore and copper is a china story. Its not related to the rest of the macro world. Is the expectation that gold was going to selloff. We had gold popping up for no good reason and now its going back down to reality. On the oil side, youve got to want,t who is producing who is capable of producing want. We had a real cuts. Eventually inventories will have to respond. What opec did is undermine its own objective. I will give you three of three examples. Between last september 28 and november 30 when they had an agreement, they increased production by 1. 5 Million Barrels a day. That production came in to western market and china in the first quarter. They caused a little exuberance in the market. The price went up. The curve flattened. It no longer was viable oil inially to store tankers. That also came out of the market. That was a good xd billion barrel mark 60 billion barrel draw. Had going into the market, record length if you want to put it in barrels. 950 Million Barrels. Basically 100 of where it had been in the fall. That eventually sold off, but it created a pop in the price and the u. S. Shale industry not only the u. S. Shale industry but almost record hedging levels in the third quarter. We have not seen the surge in production yet. We do not know what that surge is going to be. Jonathan we will continue this conversation a moment. For opec members, have you say you know what, when we debate the next extension of cuts, i want no part of it . For a reason it is low couple reasons who actually cut. Saudi arabia did most of the cup. Theres a little cut in the uae, a little cut in kuwait. They met the opec quota. Nigeria is going nowhere, iraq is going nowhere, it ran is probably going down. Libya may have an uncertain pop up. Venezuela has been losing production at a rate of 220,000 to 30,000 girls a day per month or it they are balancing the market per month. They are balancing the market. Morse that was ed speaking on bloomberg daybreak americas earlier today. Joe Wti Crude Oil prices plummeted and briefly dipped before below 40 per barrel. We look at three charts that help explain oils collapse. This is bloomberg. Julia so, we are going to talk about oil. What a week in trading. We have talked many times about the macro issues. Opec, what are they going to do . Shale production. I am showing you the technicals year. The fibonacci. You see the colors you can see. We took out the 200Day Moving Average last week. In the chart we just went lower and lower and lower. We were talking earlier about the bloomberg markets, about the importance of the 14 barrel 14 40 a barrel number. Them saying that they have reached capitulation, throwing those kinds of words around. The question is, what can opec do when they meet in a couple weeks time, if anything, and can they if gravity on the fundamentals . Scarlet everyone is looking at the technicals. They are also looking at the positioning. You can see, it has gone out pretty consistently over the last 12 months, even this week. There. O to the very end there is the price of oil. The number of contractors are on a record high. Analysts say that this is usually a sign of new shorts and the market. But the problem with oil going to one of our strategist, this has broken down in the last two months and we are filtering to figure out why that is. More telling, he said, you want to look at managed money. Not come outdoes on time, it is delayed by a week. When it does come out, we are likely to see a big drop, and that will be much more telling. Joe with all of this speculative action, lets look at the u. S. Oil rig count. This chart goes back to 2007. The rig count has crashed, of course. We have fresh data out today, as we do every friday. It just keeps going back up. At one point, we were told that the that opec wanted to crush the production in the u. S. , but you cannot keep the u. S. Production down and that is going to keep pressure to the downside on the price of oil. Scarlet much to opecs chagrin. Julia inventories keep building. Scarlet the market closes next. Take a look at the major indexes. Less than four minutes to be close. The s p 500 on track for a record close. So, to you will, the nasdaq. Julia we are minutes away from the closing bell. Whatd you miss . The s p 500 and nasdaq closing at record highs this friday. I am julia chatterley. Scarlet i am scarlet fu. Joe i am joe weisenthal. If you are joining us live on twitter, we want to welcome you to our closing bell coverage from 4 00 to 5 00 eastern. Scarlet we begin with market minutes. An afternoon rally pushed the nasdaq and s p 500 to record highs. At nasdaq to 6100, the s p 2400. Joe almost round numbers across all three indices. It comes on the heels of a betterthanexpected jobs report. Unemployment unexpectedly held. We will dig into that later on. In terms of the breakdown of how different sectors performed, come inside the bloomberg to look inside the inside. Health care and financials were lower, fairly lower. Financials down 1 10 of 1 . There is plenty of green here as well. Energy, the best performers up 1. 6 as gas prices rebounded from yesterday. Telecom companies up better than 1 . In terms of the actual daily movers, julia pointed out we have shorted Energy Stocks leading the advances such as chesapeake. Those stocks getting a big lift on the back of oil prices. Priceline and expedia, both lower marginally. The u. S. Hotel industry will have a lobbying attack on expedia and priceline. The Trump Administration believes they are monica list monopolistic. Joe lets look at the Government Bond market. Week,a quiet end to the two year yield unchanged. The report did not do a whole lot to change the expectations about the shortterm passive rate. Sensitiveand end to banking policy. That topline is strong. Underlying weakness, not much action there. Julia i will start with the dollar, slightly higher. Everyone absorbed the fact we had softer wages. It is a touch lower, but little changed on the day. Little changed for policy, either. The euro trading at record highs. That is what to watch, especially considering the french election. These. Then i want to focus on emergingmarket currencies. I mentioned what we saw yesterday with the weakness from oil from canada. One of the big gainers is the South African rand, pulling back against the dollar. I want to show you what is going on. We have seen 12 returns from the likes of ruble. They say, watch the turkish lira. The currency had a record low in january. The Central Bank Rate hikes started to lend report here. Arounde saying carryover 3. 8 this quarter, it has further to run. The lira is one to watch in carryover trade. Joe finally on commodities, crude oil ending higher today. That was the big story of the week, the big selloff in crude. We were in the midor low 50s, now 47 a barrel. Oil picking up gold picking up a little. Here we see a today chart of oil. Earlier this morning with oil falling out of bed, below 44 a barrel at one point before rebounding. There was panic right there. If we take a longer look of look at oil, it puts it in perspective. We had a march dip and that rebounded. Now we are selling off even deeper, back to levels seen last november. Keep an eye on this one. Scarlet just right after the election. Those are the market minutes. Julia take a deep dive in the bloomberg. Froman find these charts the function at the bottom of the screen. I want to wrap up what we have been saying all week about commodities. This chart shows the correlation in the past between what happens when we saw commodity market selloff and what happened to the equity markets. The s p 500 is the blue line. You can see the commodity index, the white line. The yellow line is the fed changing rates. Since the beginning of 2000 and eight 2008, any connection between the s p 500 and the commodity market decoupled. Given the macro concerns we have, whether it is china in terms of the commodity market, what point if any, do the concerns and tensions in the commodity market still fit into the s p 500 and broader equities , given that we are in a raising rate environment . Joe you might look at that and say it is human progress. We are paying more for metals and rocks than human ingenuity. It is nice to see them decoupled. Scarlet in other words, structural change. Joe whatd you miss . We are joined by matt basel are with charts you will not want to miss. Scarlet for so long during the a lot of people had parttime jobs and wanted fulltime jobs but could not get it. That is keeping a lid on how low we can how much we can lower that unemployment rate. That is one of Janet Yellens favorite indicators. What this chart shows, that is starting to reverse quickly in the last few months. This chart shows the percentage of employment that is fulltime. You can see it surged up to levels that are consistent with the previous cycle. Ago, theyfew months were below even the lowest levels of the previous. Scarlet this is 82. 9 , almost 83 . Yes, 83 of jobs in the u. S. Are fulltime jobs. Slack in the labor market is diminishing. Joe another key question is what is going on with wages, other measures of labor market tightness, we have a chart that you brought us looking at average weekly hours and hourly earnings. What is going on here . Data ine wage growth the jobs report was not great today. This shows wage growth has been rolling over. That has more than made up for the rise in aggregate hours worked. That is a number of people working times the number of hours per week they are working. Total Income Growth if you add the lines together, you can see when one goes up, the other goes down. They have been a Straight Line at 4 for the last several years. That is a remarkable thing. If you look back at previous cycles, we have never seen this kind of stability in Income Growth. Joe you made this point before. To think of the national paycheck, you think of all of this combined. How long we are working, multiplied by how much we get paid for each of those hours. Looking at just the hourly wage component in isolation does not tell the whole story. Really at fulle employment, the narrative goes isshould see job growth slowing and wage growth picking up to keep instant income of growth constant. But we see the opposite. On the fullubt employment narrative. Julia i wanted to point out what is going on between workers between the ages of 35 and 44. Explained was what is going on in this chart. Matt this is another great example of what we are seeing right now. Job growth is very strong. You can see that in this report. The nonemployment rate for men between the ages of 35 and 44, and age group we would think is most likely to be working, right . The number of people in this age group not working, the number of men, fell to 11 . Joe which line . Matt the blue line. Almost 89 of men in this age group are working. That is an incredible testament to the strength in job growth we have. If you look at where we are compared to previous cycles, you can see we had a much higher percentage of men in this age group working. This suggests there is still a significant pool of labor we could potentially tap into and continue to see these big job gains we have been seeing month after month. Is, if you take the steam of these three, the big trends are reversing that we saw from the crisis, in terms of underemployment. There is no particular evidence we tapped out what we could do with the labor market . Matt exactly come about as a message here. We are getting closer to levels consistent with full employment. We have not seen it shown up in the price or wage data. This might be why. Julia tie this to wages and the softness we are seeing. If you put these charts together, we should not be too worried about the softness we see in wages because there is still time for this to catch up . Matt absolutely. The fed, looking at this, is not to discourage. It means they do not need to speed up with rate increases if they do not want to. There is no real pressure. Boesler, always bringing the great charts. Scarlet turning to france, they will decide on our next president this sunday. The latest polls on the macron victory. But what would happen if le pen pulls off an upset . This is bloomberg. I am mark crumpton, it is time for first word news. Health care reform moves to the senate, following yesterdays close passage in the house. Do not expect a vote in the Upper Chamber anytime soon. Republicans say the house bill cannot pass, so they will write their own measure. They are preparing for a long process. Vice president pence hopes for a final bill by the end of this year. President trump has asked a federal judge in kentucky to dismiss a lawsuit by two supporters. They blame mr. Trump for violence against black protesters during one of his campaign rallies. An Attorney Says they are trying saysss blame unfairly and trump cannot be vicariously responsible for inspiring others. North korea accuses the u. S. And south korea of trying to assassinate kim jongun with biochemical weapons. North korean officials said they will ferret out and mercifully mercilessly destroyed agencies responsible for targeting its leader. President trump told bloomberg this week he would be prepared to meet with kim if the circumstances were right. A federal judge in new york city set of february 18 trial date for drug lord el chapo guzman. The defendant escaped from prison in mexico twice. When escape involved a mile long tunnel attached to a shower in his cell. In january he faced charges that he oversaw a multibilliondollar International Drug trafficking operation, responsible for murders and kidnappings. 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. Facing a stark choice when they take to the polls to choose the next resident on sunday. The runoff will be between independent centrist candidate a manual macron and far a candidate Marine Le Pen. Macron wants to reform and strengthen the e. U. And to the euro, a champion of globalization. Le pen wants france to turn away from the block and abandon the single currency, and strengthen borders. Macron has a significant lead in the final day. In a heated campaign, we have more from paris. The last day of campaigning, a manual macron and marine le church and ated a couple interviews. Macron is leading in the polls. He says he does not take the election for granted. Even though we are seeing the effect of the debate in the polls, after the poor performance of Marine Le Pen on wednesday. The manual macron is now leading by 62 , versus 38 for Marine Le Pen. The vast majority of those who onn to vote for macron on sunday also plan to vote for him just because they want to defeat Marine Le Pen, the far right wing candidate. Will have toon reconcile the two visions of france. Marine le pen said on the radio this morning her anger during the debate reflected the anger of france. Bloomberg news, paris. Lets get more insight on the french elections with sebastien galy. He will be looking at the eurodollar carefully sunday night and monday morning. As we head into the weekend and voting on sunday, can we trust of the polls . I am looking at the bloomberg and clearly, macron at 63 , le 37. At 37 provides sent 5 . There is no lack of willingness to express support, woulde degree that macron have to lose it is almost statistically impossible. The first round two weeks ago, we see a big rally in european risk assets after that result. Is there residual anxiety . If we get the results everyone expects, will there be further upside in the euro and equity markets in europe . Sebastien we have to put it in context. Ace people considered le pen we saw asident, anxiety among widespread investors. They want to be invested in the eurozone, they consider it a cheap asset. Done, therection is will be more influence. Isconditions are right, significant amount of inflow will go into the eurozone. It is generally an equity story. Julia lets assume the polls are right and Marine Le Pen loses this. She has been targeting both the left and right in classic populist style. How successful do you think she will be at galvanizing those that did not vote in the first round . How strong could she be . Could she survive this loss . Sebastien the critical fate for le pen between the second and third round was to target the far left. She has been very aggressive doing so. She has been successful in one aspect, to remove their support for macron and make them not vote. Very few of them have actually decided to vote for her. Philosophically, some are completely opposed to her view. Joe minor quibbles. [laughter] both n i look at my own family, i have the spectrum within it. It is the equivalent of shooting their own foot. Joe what happened wednesday night . There was the one debate between the two finalists. Thepolls said macron won debate and is pulling lead expanded afterward. How did she miss on her one chance to connect . Sebastien i view it like napoleon trying to defeat the alliance against him in the battle of waterloo. She has gone in that direction. She did badly because her economics plan is incoherent. She wants an independent currency, whichnapoleon means hr prices. That is an issue where macron hitter very hard. Number two, she could not create a coherent picture on the eurozone or french franc. Everyone, she did not have a significant understanding of economics. That hurt her significantly. Scarlet incoherence was not a problem for brexit or the u. S. Election, according to some people. Turnout will be critical for the sunday vote. Could play a role. It will be raining on sunday. What would that mean . Sebastien there was one part of france that will not seen see any rain, brittany. But the rest will be raining. Some of le pens supporters are on the cote de azure. The degree of attendance is and lent for both macron pen. The voters for le pen have found it difficult to vote for her. It is declining day after day. Julia lets look at the other side. Lets say the unexpected happened and le pen wins. What happens to the eurodollar . Sebastien it would go down in a number of minutes. It would be ugly, across the board. One, people consider there is a market. The market disappears until it reaches a fundamental demand, like corporate demand. That means the most to be very, very strong. Joe lets say macron does win. A lot of countries have their own politics. The issues that came up in the selection of not gone away. How do link those risks to the euro, whether it is ill is italy, greece, germany . Wins, it isf macron the end of populism in terms of a wave. That is good for italy because the italian banks are doing well. Greece has settled itself to staying within the eurozone. Theyve actually done quite well. In germany, this is not an issue. Italy, it is a problem for the next few years. Julia it will be an exciting weekend. Sebastien galy, from Deutsche Bank securities, thank you for joining us. Note, bloomberg tv and radio will bring you special coverage of the french president ial election runup results sunday. Joe coming up, one commodity made steep gains. There is a picture of it, it is avocado. This is bloomberg. Scarlet i am scarlet fu. Whatd you miss . Theerday the house voted on health care bill. How had Health Care Stocks compared to overall equities when it comes to valuation . Lets take a deep dive into the bloomberg. You can find the charts using the function on the screen. We have valuations of Health Care Stocks in white. And evaluation of the s p in blue. Earnings helped stocks trading at 20 times earnings. The panel, i will make it bigger. That is the spread between them two. When it is green, its valuations are trading relative to valuations. In red, it is trading at a discount. It has widened. But it narrowed as we got closer to the election. Both donald trump and Hillary Clinton were talking about how they both wanted to make sure drug costs came down because it was an issue for most americans. The election of donald trump accelerated the discount on health care. If you look at the fundamentals, this earnings Season Health care costs on a sales and bottom line basis have grown up 5. 5 . Joe we do not know what Health Care Reform is, but some Companies Benefit and some do not. Scarlet we are talking insurance companies, hospitals, drugmakers, all of that. Doingommodities are not well, but here is one that is. This is avocado. Seasonality chart. Every year, avocado surges in the summer. That blue line is going absolutely bananas. Everyone is eating avocados this of these days. Demand is growing in china and europe, it is a worldwide phenomenon. They see pictures of avocado toast on instagram and they want to eat more. Julia todays headline, avocados going bananas. [laughter] scarlet we catch up with noted economist john taylor. This is bloomberg. The shows about to start how do i look . Like a bald penguin. [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Mark it is time for first word news. The republican state senator has withdrawn from consideration. Mark green has been facing growing criticism over his remarks about lgbt americans and muslims. Come allement he said false attacks against him had made his nomination a distraction. He is the second Trump Nominee to be Army Secretary to withdraw. The government avoided a shutdown, signing a 1 trillion spending bill to fund the government through september. The president s first piece of major legislation was signed behind doors at his new jersey golf club. Merkelchancellor angela is standing tough against president trumps demands that germany pay more for nato defense. Nato countries are expected to contribute to percent of their Gross National product on defense. Germany includes foreign aid in that total, but mr. Trump does not. Chancellor merkel says she stands by her countries spending approach. On the last a of campaigning before frances election, activists within greenpeace unfurled an antile pen banner from the eiffel tower. Nationalned the french motto, liberty, equality, fraternity, and the word it resist. It was moved after 45 minutes. Examining the impact of Food Insecurity and conflict on crossborder migration shows a correlation between food scarcity and people fleeing for more secure destinations. According to the Study Released today, for every 1 increase in Food Insecurity, 1. 9 more people migrate. Because of the crisis, the conflict, people have to move and find food. When they cannot find food, they go wherever they can get it. That is why you have migration. That is why you have people moving in the millions. Alone, over 5 Million People moved from their primary homes during the countrys six year civil war. 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. Scarlet lets get a recap of todays market action. The s p 500 and nasdaq ending the week at record highs. Alltime highs. Joe got his round number for the nasdaq, 6100. The s p at 2400. Joe just short of three big round numbers. Scarlet it still looks good. It is on the heels of decent job reports, better than expected growth for april. Julia when will that greater wage growth kick in . We shall see. Whatd you miss . Janet yellens term and next year. People are already making a list of who might replace her if she steps down. Down with ay he sat correspondent to discuss the fate of the u. S. Economy. Weakthink the economy was in the first quarter, but is picking up. I think a lot of people expected that. I would like to see higher growth. Growth has been not so good. The main thing is to increase growth down the road. We have relatively low Interest Rates. Janet yellen has preferred relatively low Interest Rate. If the president is looking for Monetary Policy, he may not want to change. Change in thes a way the fed operates, that was an underlying theme to the conference. How the Federal Reserve goes about its policy. Let me ask you about that. The Balance Sheet, do you think a, it worked, and the fed should continue with a relatively large value sheet and excess reserves and reposts, or a small Balance Sheet and target the federal funds rate . I have been skeptical about quantitative easing impact. I argued a more normal policy earlier would have been better. They are normalizing, which i think is good. Continue in awill predictable, strategic way. It will be smooth in the markets. For the most part, the idea of having a Balance Sheet and size appropriate to determine Interest Rate we used be able to determine the Interest Rate by adjusting the supply of reserves. That generated a marketdetermined Interest Rate. I think that was healthy, we should go to that again. Taylor re known for the rule. But how do you use them . You were in Stanley Fischer say today, we look at five different taylor rules every time we meet. Should they be required to . Should they stick to a role, or use it on a discretionary basis . The legislation is out there. They have to report what their strategy for Monetary Policy is, that is reasonable. I asked them to compare whatever their strategy is. They get to choose it and describe it. It is not too far away from what is happening recently. Chair yellen and vice chair fischer have given talks to describe policy in that way. One of the things about this conference which has been beneficial, rulesbased policy during thep discussion, i think the vice description of how policy rules combined with decisionmaking by a group is useful and important. It reflects things they are thinking about right now. Would you, if you are running the fed, do the same thing . Use rules to set the parameters of a discussion but still be discretionary and how you deal with policy . I argued for many years rulesbased policy works. That is how it worked in the 1980s and 1990s. They changed the policy from the past and made it much more predictable, rulelike. For most of greenspans term it was the same. I think it has worked well. I would like to see that type of strategy back, it is quite feasible. One good thing about it, it is clear what policy is. Other Central Banks do the same thing, it will bring about a Better International system. You mentioned the 1980s and 1990s. One discussion here was another view of potential growth has slowed. That has moved down the neutral rate for policy. That may not be captured in a rule. You asked about the policy rules, the socalled taylor rule. Named after somebody we know. [laughter] the late developed in 1980s and 1990s, there was an Interest Rate of 2 . That is because growth was at 2 . The average Interest Rate was about 2 . Not much different from now. There are other reasons that made people think it was lower than 2 . The conference focused a lot on what this level was. Members on average think it has gone down from 2 to 1 . There is a tremendous amount of uncertainty. It is important for the central bank to be aware of that. That was our correspondent with john taylor at the Hoover Institution at stanford university, just over an hour ago. We have breaking news. Scarlet Berkshire Hathaway 2163. Ed first if you look at the range of estimates, berkshires firstquarter eps misses the lowest estimates. In terms of net income, i am looking for the business lines. Earnings did increase. Underwriting revenue operating 263 million. Shares not moving a lot in afterhours trading, off 2 10 of 1 . The Shareholders Meeting is this weekend. Likely facett will questions about his stakes and airlines and wells fargo and ibm. Investors will vote on resolutions he opposed, including such are halfway disclosing political donations and holdings in companies that produce fossil fuels. Joe always love hearing the folksy wisdom out of omaha. Julia we look for quotable moments. Scarlet a professor of economics at uc berkeley, we get his thoughts on the houses Obamacare Repeal bill. This is bloomberg. Joe whatd you miss . House republicans finally got what they wanted for seven successful vote on the repeal of the Affordable Care act. How big of a win was as for the Trump Administration, and what will come next . I want to bring in brad delong, professor of economics at uc berkeley. You have seen decades of health care fight. At the clinton administration, which you serve dan, famously attempted to reform the Health Care Industry and failed. What do you make of the progress i which this is happening . Brad this is something i have never seen before. It is a bill passed by the house of representatives, only after the promises by the house leadership to the key members that this bill would never be seen again. Throw awaynate would and start over with its own bill from scratch. The fact that there were large parts of this bill that they did not like, simply did not matter at all. The senate will take up its own version of the bill, that is one part of the effort. But it was a political victory of sorts because they get to tell other constituents they got this done and it moves the ball forward on other initiatives, like tax reform. Brad it is not clear whether it is a political victory for them or not. They will be able to tell their base, yes, we repealed obamacare. But how many times has the house voted it out . , the this number 17 or so times they voted to kill obamacare . And the director of the Congressional Budget Office, the person who Mitch Mcconnell and john boehner chose to be their keeper of the economic and to hery affects of the laws, will come out fairly soon, saying, this ahca will reduce the number of people with Health Insurance in the country by twitter 5 million or so. That is a difficult thing to have to explain during a recess. I am puzzled as to why they did it. Why they didnt let the senate go first and pick up whatever bill comes out of the senate and house . Why did the house think it had to start this off . Julia i am puzzled why they did not do tax reform first. Isnt there risk when the Congressional Budget Office looks at this and does the costing . It costs the administration and what they can achieve going becauseon tax reform, they cannot get away with as financially. Brad it is hard financially. Brad to talk about this as a bill when it is past with promises it will never be seen again in the senate, and will never come back to the house. Exercise, more an purely symbolic politics, that is not supposed to affect the flows of spending in law in the u. S. Government. It makes it hard to talk about. But it is paid for. It does reduce taxes on rich people buy 600 billion over the next decade. By taking 6 billion that was going to flow into the state medicaid program, taking the 600 billion away from the states. It does not have a net to terry impact over the next decade, or it would not have, if it were to , ifme law, which it wont it were to be taken up by the senate, which it wont be, or the house, which it wont. Health care in the u. S. Needs a deal that attracts bipartisanship. Unfortunately, they did not do that. What is the solution, the deal this government can reach . Brad i do not know if there is one. As Larry Summers said, the interesting thing about obamacare is that it is the most conservative plan you can propose that still has a chance a situations into in which everybody are almost everybody has Health Insurance. You want to go more conservative than this, then you give up the goal of making Health Insurance general in this country. Yes, we willaying, have 30 Million People who do not have Health Insurance and 30 Million People who are scared to go to the doctor because they do not know how much they will have to pay. We will have very lousy Health Statistics compared to other developed countries as a result. Our Health Statistics in aggregate say we are as healthy a country as a place like costa rica, which is much, much poorer than we are. If you want to do anything other than obamacare, you have to go further left. Which is why my friend david cutler was saying yesterday, this vote is the first vote for singlepayer. If obamacare is going to be rejected, and as long as we think everybody ought to be able to get Health Insurance, Something Like singlepayer is going to be the only way to go. Of brad delong, professor economics at uc berkeley, you will stick with us. We will dive deeper into president trumps trade agenda and get your thoughts on the renegotiation of nafta. This is bloomberg. Julia whatd you miss . Political rhetoric surrounding nafta continues. Stay with us more on team trumps evolving trade agenda. Brad delong from uc berkeley joins us. Youi ask your view on what think donald trump has not notified congress yet of his plans for the renegotiation of nafta and kicked off this 90 day review process . He is blaming the democrats. No idea why trump does pretty much anything that he does, with respect to nafta. Idea why first soninlaw Jared Kushner said last week that donald trump was on the point of aggregating nafta and that if he had done so, he would have left us in a good place. I have no idea why it secretary rosss principal beats with the nafta revolve around canadian cheese and lumber. Why last fall, donald trump claimed nafta had destroyed American Manufacturing jobs, when everything i have seen suggests it was a booster to the competitiveness of American Manufacturing Industries Like automobiles, which were able to build a north American Division of labor to compete much more efficiently nafta,yota and bmw after before. It is a great puzzle. Last fall when he said nato was obsolete it is because he did not know much. Then he said he was wrong. Nafta that when he said was a jobdestroying horrible trade deal for america, he was wasg, and that actually, it a pretty good thing that made most of midwestern American Manufacturing a lot stronger by enabling the creation of an effective u. S. Mexico division of labor. You are a clear defender of free trade and nafta, specifically. People say it is an old treaty and it could be modernized. In your view, are there opportunities to improve it . Opportunitiesways to improve everything, especially with respect to the handling of intellectual properties, the handling of ther externalities and procedures of resolving disputes. We are learning a lot more with each decade about how procedures, from resolving arguments when one country says ought to other says y, be handled and the way people game the system. Everything should be reviewed and updated and modernized. In that, nafta is no different than premuch Everything Else we do. Toia do you agree it needs be done fast, whatever the decision is . Look atoncern when we mexico that we have president ial elections. The leading candidate in mexico comes from the far left. Surely, there is a huge risk for influx ofd the mexicans if we get a far left leader in mexico. Something needs to be done quickly on this it is to be done. I think this is a situation in which the Trump Administration has created a problem. It has graded a problem because the president said a lot of unwise things on the campaign trail last fall. He has not yet found a way to politely back down. If you look at what the administration trade policy is, it is incoherent. I heard Steve Schwarzman earlier this week defend trumps opposition to the Transpacific Partnership by saying what we wanted to do was bilateral, not multilateral deals. If you want to do bilateral deals, mexico is the ultimate bilateral, trilateral deal. The arguments commerce secretary wilbur ross and donald trump are using to justify opposition to the Transpacific Partnership should have been arguments for their in dues yesterday embrace of nafta. I do not think it is too late for them to turn on a dime and do so. If they could do it for nato, they could do it for nafta. Julia i think both of those gentlemen would argue there is an asymmetry in trade relations existing from the times of they were made. Those countries have grown and things need to be but they are not here to defend themselves and we have to go. Brad asymmetry . To refer to the nontariff barriers of china and japan. They have no place in the north american discussion. Julia we will see, brad delong, thank you. The heated debate potentially coming on nafta. Scarlet he certainly represents one point of view. Julia that was the point. Scarlet more coming up, including a look ahead to next week. Joe what is going on . This is bloomberg. Scarlet whatd you miss . The s p and nasdaq closed at a record high, this following the jobs report. Ibmsmoments ago, s p cut plus. Rating from a Berkshire Hathaway holds its national Shareholders Meeting in omaha, nebraska tomorrow, after reporting disappointments to investors. Joe we are looking at french elections on sunday. You will want to tune in to bloomberg tv and radio. Julia the bank of england imagines its Rate Decision thursday. Scarlet that does it for whatd you miss . Julia Bloomberg Technology continues. The boston tech i am Alisa Parenti from washington, you are watching Bloomberg Technology. President trump has avoided a with a 1 shutdown, trillion spending bill to fund the government through september. The legislation was signed behind closed doors at his new jersey golf club. Health care reform moves to the senate after passing in the house. A vote in the Upper Chamber is not expected anytime soon. Senate republicans say they will write their own measure with Vice President pence saying he hopes for final bill by the end of the year. Mark green has pulled out his nomination for secretary of the army. He was president trumps second pick for the decision. He said false and misleading attacks against him were a distraction. Several state legislatures planning environmental rollbacks, after Solar Incentives and antipipeline protesters. The epa argues it can curtail regulations, leaving up to the states to decide how to protect against pollution. In an effort to save millions of dollars, puerto rico will close 184