staying with commodities, my chart has to do with the most heavily traded brent spread. february versus march. now it is unchanged. this is all about the pipeline that leaked. david: we are back to oil and copper. major turn. time for the morning brief. we are going to get consumer price index numbers. feds decision day for the at 2:00 this afternoon. the federal reserve is expected to hike its rate again with a janet yellen news conference. at 3:00 this afternoon, president trump will speak at the white house giving his final statement on tax overhaul urging congress to get a bill to him for signature. that is all coming up today. last night, the news out of alabama really rocked the world as wanted a most republican states elected its first democratic senator in 25 years. doug jones addressed supporters late last night. crossroadshas been a . we have been a crossroads in the past. we have usually taken the wrong fork. tonight, you took the right road. welcome kevin cirilli. it really was an epic night. put it in context for us. kevin koke it was a historic night for the state of alabama which is not elected a republican to the senate in 20 years. doug jones when he arrives in the senate before january 3, will really the and historic senator. night.ith roy moore last he did not concede. it is unlikely that he will be up to beat doug jones. all the precincts have been reported and got a two percentage point lead. a couple of takeaways, first and foremost, what this means for the president policies, this is a razor thin we poke and majority now. he said he could only afford to lose two votes. when doug jones gets to washington, he can only afford to lose one. that puts a lot of pressure on republicans to get tax pressure -- tax reform done by the end of year. means andmoment represents for this cultural moment that we have seen. the politics of this, the steve bannon versus mitch mcconnell, that tension is going to be on full display over the next couple of days. >> you have the dichotomy between president trump but he really asked roy moore and then senator shelby who really came up and said i am not voting for the man. his donald trump really wounded? kevin koke david, senator shelby is really the one who drove the right in with just the right and with 2% of voters writing in a candidate. we were talking to republican voters, they were not excited to vote for roy moore. we talked to democrats, they were eager. they want to measure to get out and vote. president treat just president trump tweeting, he says the reason i endorsed his i said roy moore will not be able to win the general election. the deck was stacked against him. a lot of republican strategist late last night said went to bed last night completely perplexed as to why worry more was even able to run in the first place. allegations he denied but the voters deciding last night that they didn't want him. david: great reporting from memory. that alabama election is one of the top three stories that we're following. doug jones upset republican roy 2%re by margin between 1% in . the other top stories include text as trump gets his closing argument and houston senate conferees move toward a compromise. the fed issues is final rate decision and janet yellen holter last news conference. marty, i want to put the numbers to show the margin. how close it really was. it was a victory, 1.5%. get to get down to .5 to really have an automatic recount. is any question that doug jones will be the center marty: there's no question. there's automatic recount that is triggered it would 5%. it doesn't look like it is even going to get close to that. he will be seated after the first of the year. they will be him to get a tax boat done before that. looks like the tax bill is going to happen without doug jones. alix: can you go through the details for us. marty: one of the interesting things is this suddenly makes susan collins a very important person for the republican party. she had considerable leverage. she knows how to play that leverage and now with the margin razor then, what susan collins does on taxes and what she demands for her vote will be something you really have to watch. david: let's turn to the text overall plan. we got conferees that are tried to reconcile the difference. key -- compromise is the that appeared to be emerging. we are going to have a corporate tax rate of 21% now moving up from 20%. an individual rate of 37% down from 39.5%. and it passed through compromise of 20%. marty: it seems like that is what is emerging out of the conference. these are all deals taking place behind closed doors. the cake will have been baked by then. with the gop is facing is a difficulty trying to convince the public that this is a middle-class tax cut. when you're cutting the top rate for top earners, 37%, that is going to help the most wealthiest people in america as opposed to people who are middle-class. david: this is a question on how this will help the economy. will any savings for texas be spent? will it be saved and help financial assets? that is something that somebody's details will matter about because if you want up getting lower corporate taxes, does that spur more by back? does it mean there's going to be more capital investment. alix: how do you look at the market over the last 24 hours. you had a dollar reaction there was a little bit negative but now we seem to be ignoring those. we have been in this low volatility environment. almost every market at or very near record lows. the risk here is we are pushing on a string in that eventually the string is going to break and we are going to wind up having a massive ounce back in volatility . i suspect there's been a lot of volatility. as there is more volatility selling programs, at some point you get a little bit of a pullback in the next thing you know, volatility spikes more than anyone suspected. >> janet yellen is going to announced this is her final decision onpullback in the nextu know, volatility rates come evey is forecasting an increase today. the real question is what is going to happen? what do the dots show in terms of 2018? alix: it is kind of like your producer. marty: did i do that well? alix: we are looking at markets pricing, they are now pricing to rate hikes for next year. the first time in nine months that the rising you are seeing. what are we going to see today? ira: her press conference is going to be interesting, more academically than it will be for the outlook for rates. some of the dots will matter. a lot of the people who are creating those dots are still going to be on the fed next year. will be moreeserve hawkish because of who is going onto the fed. because of that, too hikes will not be surprising but the doctor still saying there will be three. does the market wanda pricing for little bit more little bit less? alix: 52 basis points are where we are. how much more selling can we see in the front end? ira: we are priced for too hikes next year. the question is, or the answer is you can see a lot more just based on the expectation with that. youhe fed were to realize, would see another 25 basis point selloff into your notes and therefore you could get 25 basis points of flattening in the curve over the next 12 months. alix: if you're in, you're like, please d d d d d d d d d d d dee aspects of the tax cut. they were not willing to bake it in. now looks like it is happening in by some measures $1.5 trillion of tax cuts could have guessed could force the fed to accelerate the rates next year. jerome powell will have that on his lap. david: i love it. marty schenker and ira jersey, great to have you here. the final time janet yellen will presser.the fomc more on what the investors will be watching for next. this is bloomberg. ♪ >> this is bloomberg daybreak. i am emma chandra. toshiba have ended a lengthy legal baddie just legal battle that ended a deal. to auld derail this -- group led by bain capital. in return, toshiba will and claims against west digital that could cut the company off from his supply of products. looks like airbus left to find a new chief executive. will not renew his contract in may of 2019. this comes as airbus is struggling with a bribery investigation and falling demand with biggest plane. --di aramco is asking banks for the world's biggest share sell. according to people familiar, the oil giant hasn't told banks where it plans to list this shares. that is your bloomberg business flash. alix: thank you so much, emma. if fed hike is seen as a done deal today the fed meets but the question will be what it means for 2018. here's the chart we are good to show you all morning, dots . the white and purple line are the market expectations. joining us now, stephen stanley who has worked at the richmond fed. joining us from washington, tim -- duy. tim died is it hawkish, is it dovish. you guys have opposing views. stephen: the dots are likely to drift up. i don't know the leading dots changes. i think my view is the physical's end up moving four times next year but i'm not sure that is going to be reflected medium. just yet. >> it makes sense for the fed standpoint to hold the fire little bit as a move through this transition to a new chair. i certainly would expect to see a move upward and some of the individual dots versus september. if you look at some of the developments in the economy, strong growth, the unemployed rate dropping, tax bill probably passing and inflation seems to have bottomed out starting to creep higher. you within the margin the dots would be moving high. alix: what do you say echo tim: -- what would you say? tim: i don't expect the median. to move higher. it is a little early and they will like a little more confidence on inflation. i think you have a problem with .he issue of the terminal dots if they start raising the near-term dots for 2018, they're going to moving up more quickly to neutral than they are comfortable with. alix: tim, you wrote a column that was really interesting. you said some parts are looking to slow the pace of rate hikes next year. perhaps you should call off a december increase altogether before worrying about 2018. walk us through what you are talking about. tim: what i was thinking about here is if you look at the forecast for this year, for 2017, we saw a significant decrease in the inflation forecast. if you look the way the fed has behaved in the past, you would've said, that decrease was sufficient to call off a rate hike for december. then risk the possibility you might have to move more quickly in 2018 then you currently intend. the fed on this front, they would really like to maintain this gradual pace of rate hikes. they don't want to be stopping and starting, moving more quickly and slowly in this process. mikio: the are two puzzles and one of them is why we're not getting more inflation. the other one is, the fed has hike rates, it is not tighten financial conditions. i wonder why that is. stephen: i will take the easy answer. i don't think they are getting were close in tim's point about the terminal.com i think that is not a battle we are going to face today. in my view, the fed is going to be moving a lot higher than that. the cook to make this clear, this blue line steps up -- david: to make this clear, this blue line steps up. 2017uch of that is because which is that relevant period was a time of a weakening dollar? how much were financial conditions build out? factor in thea financial conditions. i would note, we've seen this another tiny cycles where in -- several rate hikes, you will see easing financial conditions. that was a puzzle that some of those reserves worked with in the past tightening cycle. stephen, what do you think it is? stephen: just to do the math. betrend growth is likely to two or higher, the tax package by encouraging investment is going to push that up. 2% inflation, we are adding up pretty close to 4%. that is the neighborhood around which we think about neutral. the question is how far above neutral does the fed have to go to get things halted after years of super easy monetary policy. alix: how far? stephen: it is been 5200 basis 50 to above neutral -- 100 basis points above neutral. alix: it is the opposite of on the other hand. stephen: we do know that trend growth is lower than it was in past cycles. the terminal rate should be lower than it was before. in most cycles, if you go back over the last few cycles, the rate has gone into the fives or even the success. desk even the sixes. -- even the sixes. david: if there is a difference stephen, i and wonder if that is reflected in the fomc itself. do you wait until it happens? you say it is coming but not quite there. stephen: you got people like evan and some of the other doves were like into lucy 2% inflation, i am not going to believe it. we haven't been there in a decade or close to it. you have others who are looking at not just -- they are looking at the on upon rate. they're looking at financial conditions being very easy, growth has picked up and they are saying, look, it is not here today, but it is coming. even if we don't get it german this increase -- don't get a tremendous increase, the asset price is something the fed needs to think about. alix: guys, thank you so much. well.y, you as don't miss our special coverage of today's fed decision. we are going to hear from randy kroszner, all of that is coming up at 2:00 p.m. eastern time. some breaking news when it comes to oil. opec has its monthly report out. it raised its outlook for non-opec supply by 300,000 barrels a day. it really is about shale and how much shale they actually expect coming into the market. the question, brent is not moving on the news. brent really being led, although what is happening in the 40's pipeline in the u.k. and the leakage. we will talk about this later in the show, digging deeper into opec's monthly report. coming up, the u.k. loses the most jobs since 2015. we are going to find out what this means for the bank of england next. this is bloomberg. ♪ david: great britain lost jobs at the fastest pace in almost 2.5 years. assigned to the labor market is slowing. wage growth accelerated. it lagged well behind inflation. this is a continuing story with the economy in the u.k. and the struggles they are having. we heard from mr. carney repeatedly. alix: it is interesting if you look at the market reaction it yet sterling rising against the dollar. you look at the amount of jobs lost, that is not good news. wages went up. markets like the snoozing through the data. instead, looking at the overall trend of where we are and we are still lower. remember when cable was what -- was at 135. david: you have to factor in the political. they have a bill right now -- theresa may has a bill to enact brexit. alix: you cannot keep track. take a look the bloomberg. what the u.k. is up against structurally. the white line is pti inflation in the blue line is basic wage both going up but the gap still persists. .hat is what we are doing with that will be there no matter what will be happening with brexit. david: we are going to hear from governor carney bit of this week. when he comes up, he talks about this problem. alix: we will see this tomorrow. in the market here, this is where we stack up. two hours before the cash open in the u.s. s&p futures a little bit flat on the day. the dow was up about six points but a softer tone. if you switch of the boards, take a look the currency market, overall, it is a mixed dollar picture. we did have a strong dollar rally. the euro-dollar is flat, dollar spot is flat as well. yields continuing to rise higher. five days of hire 10-year yields. jim tisch.ion with this is bloomberg. ♪ retail. under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alix: this is bloomberg daybreak. i am alix steele. steady as she goes as we enter the decision day. but s&p13 points futures completely steady. as well in europe, not movement happening. the bloomberg dollar spot index but now we are soft on the margin. take a look at other asset classes. up .2% despite the fact that employment actually fell in the u.k. and real wages are still not up to par. the bond market, the big movers, what is happening in italy, will be have elections. that really percolating in a bond market yield. the spread, twos intense, guess twos and tens. still getting a bit of brent outperforming the pti. let's get an update with what is making headlines, emma chandra is here. emma: here is election results that shows president trump's influence in the damage sexual misconduct allegations can do. doug jones won the special elections for an open senate seat. he beat republican roy moore. the loss narrows the republican edge in the senate. president trump has backed moore, so had steve bannon. secretary state rex tillerson says u.s. is ready to negotiate with north korea without preconditions. he says before talks with kim jong-un begin, the u.s. wants a quiet rio without just quiet period without nuclear missile attacks. it is close to his goal of rebalancing the oil market. mohammed barkindo tells bloomberg that the stock piles strike. it is a sign that opec and its allies are making progress in the efforts to curb oil production ensure a prices. -- and shore up prices. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am u.n. charter. this is bloomberg. await the we president speech on tax reform, the clock is taking for the republican to marry that to tax proposals. joining us is mike mccain -- mike mccune. it feels like sort of splitting the difference, like mortgage deduction, they will split between 500 and one million, they will take 750. individual tax rate comes down to 27 -- comes down to 37. areael: in many cases, they . the big news is dropping the tax rate to 37%. that is for the wealthier taxpayers who'll be heard the state and local tax deduction limits. it is a political problem for the republicans going forward. looks like it's more for the wealthy than the middle class. it will apply all over the country, even in non-high-tech states. -- high tax states. they are the looking at the house version of it. that is going to satisfy republican critics like johnson and danes. given on board to go the 20% level. medical it feels like sort of it is a most inevitable -- david: it feels like there is going to be a compromise. up, could that be a problem. are they going to get the math right? >> they are going to get the math right but coming under their cap. that could be a problem because you've got senator corker who voted against this in the senate because it created a much bigger deficit. yesterday we had a tweet from rand paul, not referring to the tax bill but sing we cannot add to the deficit and i won't vote for anything that does. if we lose another vote, it is a 50-50 tie that puts this whole thing in jeopardy because you have ever does she have several of the senators who have concerns about particular aspects of the bill. it is not a done deal. nick: things for joining us -- david: thanks for joining us. we welcome james tisch. he is a big investor. it is good to have you back. let's start off with this tax bill. i'm going to put up a chart. it illustrates part of the issue about the corporate tax rate. the president said we are not competitive internationally. our tax rate is too high. if you compare the united states with other countries, it is true . is that a big issue for you? for lows, because we're a primarily domestic company, it is not as big an issue but for the economy it is an enormous issue. there are two things in the tax bill that will generate economic growth, one is the fact that oversees dollars will be repatriated back to the united states and number two, the provisions allowing expenses desk dispensing of capital goods. -- expensing of capital goods. both of those signal that domestic manufacturing will increase significantly. i think that the joint committee on taxation is calling for very little economic effect to come from this tax bill is dead wrong. growth forthat they, the next 10 years is going to be one 9%, it is going to be significant higher at my guess is this tax bill will pay for itself. david: explain why that is. borrowing, it is historically low. if people want to invest, they certainly could do it. why is it going to change things if we cut their taxes? james: they are going to have the equity. it is not going to be borrowed money. playing the were tax arbitrage. they were going overseas because taxes are lower. then they earn money overseas and it got stuck there. there are many large companies that are cash poor in the united states, cash-rich overseas. they are borrowing here in the united states to pay their dividends. when they are able to bring the money back, they will continue paying their dividends of the tests are there will also consider investing here in the states. alix: before we get back to the capex story, manufacturing at its highest level since 2011. the problem has to do with wages and the demand side. you need people to buy stuff. james: wages have been growing. they have started to move up. part of the problem we had is all calls have been going up. we saw yesterday, the ppi index was up .3%. this morning, we are getting the cpi numbers. inflation is something that the fed is going to have to carefully look at. alix: to be sure. let's go back to the buyback conversation. charta chart -- we have a that shows we haven't had as many buybacks as we are used to. the longest gastric since 2009. you can ask to money from the tax budget companies will get extra money from the tax reform. what do you do with it? james: we have been buying back shares. we have been out of the market for a while because we thought prices -- stocks were just so high. in fact in the fourth quarter, with but back to .2 million shares of our own stock. just bought back to point to -- but back to .2 million shares of our own stock. in terms of corporations overall, in my opinion, buybacks and dividends aren't a terrible thing. buybacks and dividends are capitalists way of recycling cash and capital from cash-rich companies to cash poor companies. when a company repurchases its shares, that money is going back to investors who are going to reinvest that money in other businesses. it is being recycled to .usinesses that the capital alix: that is not the money we're talking about. we need to have my mom to have more money to go out and buy. i will ask you. how much would you do on buybacks versus capex for your firm? said, if a firm doesn't have something to invest in, they will buy back shares and that capital will then be reinvested by individuals and investors into companies that do capital. i think also that with the decline, with the expensing of capital goods, what we are going to see as a company, they're going to be investing more because the government in lowering the tax rate have lowered the cost of capital for corporations to invest. david: them we talk about another aspect of tax reform and that is the state and local tax reductions. -- tax deductions. we talked to jerry brown. he said it is basically declaring war. >> as originally drafted, it is meant to punish california voting for hillary clinton. it is meant to punish new york, illinois and other states that have taken the effort to raise their state income tax. what is that for echo half of it goes to education, goes to health care, goes to public health, to combating disease. this is a terrible war on california and new york. the member, these states that have an income tax are the engine but a very critical part of america's prosperity. >> what effect will this have on your businesses? is it going to affect your business? james: it is not going to affect our business, per se. it will to medically affect new york, california, new jersey. governor brown says it is punishment. my view, it is not punishment. it is the result of not having a bipartisan delegation from the states in the house and senate that can look after us. new york doesn't have very many republican representatives and no republican senators. guess what? we are not represented in this tax bill. that is the way it is. that is the sad truth. alix: my co-op is freaking out. president trump says he might open offshore drilling in the u.s. east coast or that is what some of the people in the administration are saying. would you be interested in that? james: if they do in fact open it, it is going to be ages before it is productive. there are very good prospects to be drilled in the gulf of mexico, all around the world at offshore drilling has come to a standstill. issue is that oil companies have to get we liquefied with cr with oil prices at $60 a barrel. i think they are going to come point back into the exploration and production of all sorts. there have been dramatic underinvestment in productive capacities in the oil -- in the oil markets over the past three years. laterk sooner rather than , you will see oil companies starting to allocate more to the capital budgets to drill for oil . alix: that brings us. go back to the capex conversation. the composition on mp's is we are going to do capital buybacks. we're going to invest the we are going to focus on capital returns. do you buy that question mark -- by that? james: in my opinion, they are eating their seed corn. if they are not going to be growing their reserves, then down the road, they are not going to be up to produce the income that they need in order to pay in their dividends and fund buyback programs. alix: how much i buybacks next year? james: will have to see what happens to the markets. it is not about not telling you because i don't know. it is because i truly don't know. we are one of the few companies that are very careful about our buyback program. we buyback when we think the stock is cheap. we don't buyback every quarter. alix: fairpoint. coming up, let them keep doughnuts. why europe's traders took a doughnut for bonuses desk could get donuts for bonuses this year. david: you can tune into our colleagues tom keene and jon ferro over on the radio. pimm fox will be joining the competition from 9:00 until 10:00. live from new york, this is bloomberg. ♪ emma: this is bloomberg daybreak. coming up in the next hour, senator judd grassley just senator chuck grassley, this is bloomberg. ♪ alix: time now for wall street beat. first up, banks, bonuses, europeans again second in class u.s. rivals. plus, he has had the worst year relative to opportunities and third, hey google. i might diversified. jim tisch, the ceo of loews. ed hammond of bloomberg news. let's kick it off with barclays, deutsche bank, credit suisse. we're looking at bonus slashing. donuts means you gets nothing -- you get nothing. >> it is pretty miserable. some of this is to do with the market environment. a lot of the bonuses we are talking about would be in trading and trading is suffering because in 2016 you had a great year. if you look at present, all this trump, all of this volatility. was is thinking that 2017 would be a continuation of that. every strange political shot, the markets existing through because we expect weird results. we expect the uncertainty to be there. we haven't seen the volatility so traders have been suffered. -- have suffered. one of the interesting outliers is the royal bank of scotland, 70% owned by the government so taxpayers hate it because they are burdened with it. they said they are not go to shrink their bonus pools. david: are they losing money back of ed: they are losing money but they're still making big bonuses. alix: the brain drain. are we going to see an opportunity for guys like you to hire smart guys? jim: you never know, but there is an important point. the people that are producing and earning money for these institutions, these institutions have to pay them because if not, they can and will leave and they will go somewhere else. .hat is a brain drain alix: what is also interesting is the m&a divisions might hold up. european m&a really beat up north american m&a. with america mix of a stronger portion of the market share at 44% of the amount of deals, stronger in europe. ed: in europe we are seeing a lot of m&a. -- a lot ofhat deals that were potentially going to happen got held up as people didn't want to go and pull the trigger because -- pull the trigger until there were some clarity. some people said it is going to be like this for the future so let's get on board into the deal. yet seen this high volume of deals. -- you have seen this high volume of deals. david: european may be doing well but has funds are doing macro hedge funds. this is a he did an interview where he said he is having the worst year he is ever had compared to the opportunity. in fairness to stand, if you're looking at macro hedge funds, they're not doing well. if stan cannot make it work, who can? ed: this comes back to the issue of volatility. has made it very difficult for hedge funds. how do you play any real entre strategy when you have the market going up. he does say that he is done well in the case. he has a bad on the macro stuff. you must us next up is he is the latest hope for our financial system. he says -- i'm not an expert on bitcoin. i follow it. he says bitcoin is very unfriendly to the climate. he says the amount of the competition power to do some of these traits, it is something like you could power nine houses a day for every single bitcoin trade. green.oes not just that is not green. -- that is not green. the cleveland this chart, the white line at the bottom -- david: this chart, the white line at the bottom, jim, you oversee several large companies. you are also an investor. what is the situation with hedge funds? jim: their day of growth has gone. in my opinion there's too much money in the hedge fund world. arethe different strategies having reduced returns because of all the money. it is all being peter down and it is a vote yes being competed down and it is a real problem -- being competed down and is a real problem for hedge funds. 5% -- iftting 4% or they don't get the returns, they are more expensive than alternatives. they are charging more. james: what i say, don't look at what has front proprietors are making, look at what you are making. again, i think that the low returns because of the low volatility and the enormous amount of cash that has been invested in hedge funds does not order well for the returns going forward. alix: jim, what do you think of bitcoin? james: i am not going to be jamie dimon -- alix: no one can be jamie dimon. james: jamie may ultimately be right. there's the old saying, there is no there there. there is nobody acting it out. -- acting it up. there's just -- backing it up. there's just a network of computers. maybe one day we will see the emperor has no clothes. i am not good to put up money to bet against it, nor am i going to vote for it. alix: this is one of my favorites. the idea i can say hi alexa, where should i put my 401(k)? if she can give me an answer, that will freak me out. fascinating. this is a big theme we are seeing which is where is tech going to come in and cause disruption? we have seen amazon and they have done with it did to grocery. there is this fear that they come in, some of like amazon, they come into the money management world is a complete change the paradigm. one of things this piece goes into is because these are heavily regulated industries, it is harder. they are done more overseas where there is less regulation. alibaba apparently they launched their own money market fund back in 2013 and it is now the world's largest. me the most has many piece is better.is doing much who has the money for the best coders? google, amazon. money, it is't right for people to get scared. they have a smart as people in the smartest people -- and the smartest people want to go and work for those companies. make a great to have you with us. this is what caught my eye today. it is about the alabama election. you look at the exit polls to figure out what happened, who voted which ways. two things that came out, one is men and women. we usually talk republican and democrat. there is a real shift. women overwhelmingly voted, there was a 17 point margin voted for doug jones. the men who were alike 11.7 way. perhaps triggered by some of the accusations about sexual harassment. alix: support for men. what about racially? i am curious. numbers of vatican americans came out. much more than hillary came up for doug jones made a big difference. alix: is this transferable to other regions in the u.s.? regions because it may not on a state to state basis. david: who knows. with had a little bit of a pattern in new jersey, virginia and alabama. one blue state, one in between and one very red that is gone away from trump. is there a pattern? you have to show something now for sure. david: time is a wasting. alix: in advance of the president's speech on taxes, we are going to be joined by chuck grassley with more details on how the final tax regulation rates -- legislation is coming together. what he thinks about the senate race and that outcome. much more coming up. this is bloomberg. ♪ is this a phone? or a little internet machine? [ phone rings ] it makes you wonder. shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. choose by the gig or unlimited. and ask how to get a $200 prepaid card when you buy any new samsung device with xfinity mobile. a new kind of network designed to save you money. click, call or visit today. roll tide. a monumental shift in alabama politics as the state lacks doug jones, its first democratic senator in 25 years. what it means for tax overhaul and a spending bill. last yellen announcing the decision as the head of the fomc. a rate hike seems to be a done deal, but what about 2018? see the bank traders worst results in years, maybe doughnuts. david: welcome to "bloomberg daybreak: americas." i'm david westin. goes into the she fed decision later this afternoon. futures flipping into negative territory, s&p futures off a little as well. the dollar is mixed after that senate election in alabama. you are seeing selling picking up at the margins in the 10-year market, moving up one basis point. 2.42. percent, a nice rally underway for the base industrial metals. oil prices, this is a february spread, the most actively traded contract, using it as a barometer to see how traders are looking at that pipeline blowout in the u.k. that is a question percolating now in the market. it is all about oil. time for the morning brief. in just under a half hour, we will get consumer price index numbers, that comes on the heels of ppi yesterday. and it is decision day for the fed. they are expected to hike rates again with a janet yellen conference to follow. and at 3:00, president trump will be speaking at the white house giving his final statement on tax overhaul, urging congress to get a bill to him before the end of the year. there was big news in the political world, when alabama decided to send doug jones to the senate in a close race against roy moore. after most of the returns were in, jones talked about what he thought the race was about. roy moore said the race wasn't over. to make sure that this campaign was about finding common ground and reaching across and actually getting things done for the people. >> i really want to thank you for coming tonight and realize when the vote is this close, it is not over. we still got to go by the rules about this recount provision. kevin cirilli is on the scene in alabama. is it over, despite what judge moore has to say? it is over. i spoke with a prominent republican lawmaker who told me in terms of the policy that we are going to see, how this impacts policy, it will have very little impact, at least according to this prominent republican lawmaker who asked not to be named. this lawmaker one so far to suggest that as early as next finally advance to the president's desk. the president will likely meet with a bipartisan group of republican lawmakers in , not here in.c. alabama, where they will talk about the conference committee. then the senate will likely push that again, according to the lawmaker, next week. david: if the republicans have their way, it will be too late for doug jones to affect the tax bill. what about continued spending for the government to keep it open, the debt ceiling, how will that complicate life in the senate with a margin of only one vote? get complicated because now president trump has a razor thin majority, only one vote is what he can afford to lose when doug jones goes to washington. when you look at the calendar year and what the president hopes took office next year including financial reform, there may not be the most -- there are not the votes for sweeping dodd-frank reform. there is some common ground on community banking regulations. when you talk about infrastructure, some democrats want to see that. the right-wing does not want to see more government spending,. . i have been talking to republican strategist all morning. it looks like the president will have to -- his hand is being forced to work with democrats in 2018. that said, the back-and-forth between leader mcconnell and steve bannon's political orbit are colliding. you are seeing people tweeting about that. i want to get a read on your sense. was this a pro doug jones vote or an anti-moore vote? roy moore.i- all of the press, talking to voters on the ground here, the allegations against roy moore, which he denies, there was an understanding here in the state that this race took on new meaning. i spoke with a prominent aid to republican leadership members who told me they are not viewing this as a referendum on president trump but more as a referendum against roy moore and the allegations. they have their eyes on the congressional pennsylvania district outside of pittsburgh. president trump ultimately carried that state with the first time since the 1980's, and that state put him in the white house. there is a special election there. onto that race in march to see what that signals for 2018, what it could be as a bellwether. alix: thank you, kevin. probably have not slept in 28 hour 48 hours. kevin: [laughter] coffee. alix: now we are trading .1%.ively neutral david up .oining us now is drew matus what did you make of the market's lack of reaction to what happened in alabama? drew: as kevin noted, it will not affect whether or not we get a tax bill or not this year. the market is focused on the tax bill. we are trying to figure out what the repercussions will be based on how it is structured, designed. that is where all of our focus is, my focus is right now, on that. whatever happens next year, happens next year. david: when you look at the possible compromises coming out, do any of those potentially affect the markets, are there some that are so important were the market says wait a second -- for example, business interest deduction -- i didn't know it would go that way. drew: you will have to look at the bill in its totality to figure out what will happen. there will be things people like, things people don't like. it's all happening in a way where we probably will not know it until we see it. where it is hard to do the play-by-play. you need to look at the final score and see what you think of that. of 21%,rporate tax rate individual rate of 37%. needle in any the way, if you are looking at the market? when you are talking about a percent here and there -- beforehen you get a sigh the answer, that is a no, by the way. drew: for me, the biggest thing is how partisan go to simplifying structures. simple structures are easier to work with, people feel more confident in a structure easier for them to understand. to the extent we get a final bill that is simpler for people to do their taxes, in my mind, that is better. alix: drew matus will be sticking with us. the big event of the day is the fed. david: we will get the latest rate decision, the final time janet yellen will speak as the fed chair, at least in a news conference. more on what investors will be watching. live from new york, this is bloomberg. ♪ emma: this is bloomberg. honeywell has set a 2018 profit forecast that fall short of analyst expectations. that is despite growing demand for refinery services and warehouse automation equipment. upeywell is trying to speed sales growth to add to the cost cuts and efficiency gains that him driven earnings. airbus will have to find a new chief executive. not review -- renew his contract when it expires in 2019. that comes as the company is struggling with a bribery investigation and falling demand for its biggest plane coming the a3 80. when the first time in four years, bond insurance is back for wall street complicated securities. assured guaranty has guaranteed small portions of asset-backed securities against default this year. the firm was one of the few standalone bond insurers left after the financial crisis. that is your bloomberg business flash. on dvdall eyes are today. with a rate hike seen as a done deal, the focus is on the year ahead. joining us now from d.c. is mike mckee. i will put up the dot plot. the green line indicates what the fed members say, the average of what they say will happen. the blue and the white is what the markets say, significantly lower. what are we expecting they will signal today? economy have a strong over 3% growth, 4.1% unemployment. the fed things that will push inflation higher over the course of 2018. the forecast in september when they last updated the dot plot, that we would see three rate moves in the coming year, two more in 2019. people want to know does their view change because the economy has remained strong and because we may get additional boost from tax cuts? does that dot plot move higher or does the persistence of low inflation push it down a little? we also have a changing of the guard with who is on the fed, and that may have an effect. that is what the markets are looking at today, the forecast for 2018. the world point out looking to the fed in september, when we last heard from them, and today. how is it different? there were productions of pretty weak gdp growth and now it is much more robust. mike: we are looking at roughly a 3% growth rate for the fourth quarter. 3.1% in the third quarter. third quarter last couple of years has been weak. will that happen again? if the fed things we will see strong growth, that all right ratify a rate increase today. maybe could lead them to raise the dot plot. that will be the question from analysts, what are their economic forecasts for 2018, how does that play into the rate increase? janet yellen's last news conference, she will not be around to oversee what they do in 2018. be interesting to hear from her, maybe unconstrained janet will give us some opinions of what may happen with the tax-cut. david: we will be watching, mike. thank you. alix: janet yellen letting loose, i don't know what that would look like in the press conference. wasake a look at what might talking about, this was the market pricing in two rate hikes in 2018. still with us is kevin logan, hsbc chief economist, and an drew matus. kevin, i brought that chart up for you. you were the dove holdout. you saw two rate hikes between now and 2018, now you see four. what changed? kevin: the tax plan. congress is moving much more quickly than we anticipated. they are not spread out over 10 years. many of the tax cuts expire in the later years, so that pushes a lot of the stimulus into the early years of the program. now we are looking at an economy that is more likely to get a boost. that changes the anza were inflation may be going and may change expectations at the fed as well. alix: is a flatter yield curve potentially flat in the first quarter, does that meld with that call? kevin: the fed is slowly moving up the rates. the backend is not really reacting to u.s. domestic conditions, but international conditions. yields in europe are still negative. 10-yearn japan, a estill and zero. international investors are still moving money into the u.s. it's the attraction of higher yields into the u.s. that is keeping down long end rates. alix: what do you think the peak in yields will be for the 10-year? at 3% nexte looking year. we have to the viewer hikes in 2018. thereason being, we think fed talks a great game of the not worry about the shape of the yield curve, but when push comes -- they feel like they have to bring in the short end of the yield curve because of fiscal stimulus. other central banks are sitting on the long end. you have to flatten the yield curve. what do they do in that situation? drew: while the pressure is significant, it is starting to wane a little bit. the ecb is making steps to move away from that. the bank of japan has been pretty successful so far. we have seen nor inflation that more were anticipating. the u.k. is moving retire, bank of canada. we are beginning to see some of that pressure come off. it is not enough to change the ballgame but it is, on a marginal basis, making the difference. david: kevin logan an drew matus will stay with us. is tickingthe clock for congress to put together a tax bill. chuck grassley of iowa will be with us. live from new york, this is bloomberg. ♪ david: chuck grassley has represented his home state of iowa as its editor for 36 years now, serving as the chairman of the finance committee and now chairman of the judiciary committee. senator grassley joins us now. good of you to spend some time with us. with the news overnight, surprising to some, election of a democrat as a senator, doug jones coming from alabama. how does that affect your life as a republican senator? i think it doesn't only affect my life as a republican senator but there are 51 of us now, at least there will be after the first of the year. we have to consider, do we want to govern or not govern, do we want to be in the majority or not be in the majority? supposed to have consequences. we ran on a platform, not exactly the president's platform , but he ran on a platform. iselieve strongly a platform not something you just stand on but serve on. we have to continue to try to deliver. with just 51 members, it will be a little more difficult, but everyone has to decide, are we going to pull together, or would we rather be in the minority? in the process of not keeping our promises to the voters of the united states? david: let's start with a tax legislation, you are on the finance committee. is it essentially too late in your estimate for this to change that? in other words, are you going to get a new bill to the president that will be jointly from the house and senate in time to sign before doug jones takes office? a week from today or tomorrow, maybe as late as friday, we will have it through both houses of congress and to the president. we will have the votes to get it through the senate. david: that raises questions when you talk about governing of other issues coming up like continuing resolutions, the debt ceiling. does the election of doug jones make the republican caucus more bipartisan, we need to reach across the aisle and work with them, or do you double down on the approach of the we are doing this with our slim majority? down to theyou get knots and bolts, it is difficult for me to see one senator making that sort of a difference what it does bring me back to something that the senate is all about, reaching across the lines, and when you have reconciliation, you know only need to pass with 51 votes. that is a rare exception. maybe 1% of the work in the senate is conducted that way. when you have to have bipartisanship or nothing gets done. it can be done. my judiciary committee, we voted bipartisan,, all and 18 got to a democrat president, so it can happen. , the people only read about conflict in congress because that is the way journalists operate. when people are getting along, you never read about it. point andt is a fair you are welcome to come back anytime you want to talk about the times you have gotten along. did me a sense of when you have gotten along. situation,, the daca is that something where republicans can go along with the democrats? of the funding for health care, could that be an area compromise with the democrats? chuck: absolutely. we have a republican president, wants daca to pass. republicans, a vast majority want it to happen. all the democrats want it to happen. you have to get 60 votes. democrats have things they want, republicans have things we want. me ands simple as senator durbin sitting down and reaching an agreement, similar to when i was on the extreme right, he was on the left for criminal justice reform come and we got a bill that came out of my committee last year. if we can do it on criminal justice reform, we can do it on daca. david: you are chairman of the judiciary committee, very important position. there is anence, extraordinary position where there are two individuals of for judicial office where you have said, mr. president, you should pull back on those nominations because things up come to light that are deeply disturbing. explain that situation. chuck: one is the nominee for the state of texas. evenhite house has not sent him up here, but there are things that he has said that are very controversial, that will keep him from getting a majority of the united states senate. why bother? i have told the white house about that through my staff a long time before i was interviewed yesterday. they knew my feeling ahead of time. in regard to the other one, it was a case of them coming through our committee coming getting voted out of committee probably on a partyline vote, now on the floor. it will be up to leader mcconnell if you want to bring him up. but there is a whole lot of new information of things that he had said that are very controversial that question his judgment. now that probably will not get through the united states senate. but that is mcconnell's decision, the other is the president's. i'm just giving my advice as i see controversy. we need to spend our time on 147 vacancies in the judicial system and not be messing around with people who will be controversial. david: doesn't raise questions in your mind about the vetting process for these candidates? some of the things that have been set by the gentlemen are pretty remarkable. suppose -- first of all, let me tell you, something comes up from the white house, it is three or four weeks before it gets on the agenda. there is plenty of time to do vetting. in things that i cannot talk about, that we have material on, there is a lot of information. but i don't know how you can be guaranteed of everything being made public. with social networking, the ability of people to communicate very easily now, it is easy for somebody to forget something, maybe they wanted to hide something. eventually, you will have transparency, if it is really bad. david: chuck grassley, thank you for your time committe. alix: coming up, we get the latest cpi report. how will the fed interpret that? in the markets, we are pretty much flat heading into the fed meeting later on today. this is bloomberg. ♪ alix: this is "bloomberg daybreak." futures up by 16 points but not a lot of movement heading into the fed decision later on today. is a mover in europe, sterling -- it was. now we are flat on a day after wages came in slightly stronger than expected. selling in the bond market in europe. yields move up by seven basis points. steady as she goes as we wait for the fed and the wait for the data. here is where we stack up. year on year coming in letter than it estimated, down sequentially, 1.7%. .1%. on month basis, up software cpi reading. take a look at the dollar index dropping on that news. 10-year,look at the also, yields moving lower as buying comes in. down by one basis point. dropping like a stone. equity futures, not a lot of movement but the dow jones giving up those 16 points. core cpi year on year misses estimates. 1.7%, down sequentially as well, same for month on month. makes the job a little mark obligated for the fed in a few hours. still with us are kevin logan and drew matus. kevin, apparently a reaction in the market. we keep waiting for this inflation to come, full employment, we think. what is going on? kevin: there is this controversy whether it is persistent or transitory factors hitting cpi right now. had ar in the year, we big drop in wireless telephone charges. people would say that is transitory, but what is going on? the data suggest there is. why the cpieasons core came in low today was there was no change in prices for , commodities, services. this is a big change in the inflation trend. those are up 1.7% over the past year. medical care used be rising 3%, 4% a year. now it is trending down. there seems to be a permanent shift in the trend for inflation. medical care is a bigger component of the cpi now. we could be seeing a shift in the fundamental force that drives inflation. were up byer costs .2%, that was a wild card. used vehicle prices climbed in october after nine months of declines. -- posted a by just 1% gain last month. that is an interesting read. wireless phone prices rose .3% but airfares fell. the wireless market, supporting inflation, but then you have airfares, that was a l boost. these vehicle prices creating a cloud as well. airfares are volatile month to month. it depends on the petroleum prices. motor vehicles is another interesting aspect. for the last few years, prices on average have been falling. we have deflation in consumer durable goods. is this a persistent aspect of inflation now? is medical care prices consistently going up at a lower rate, motor vehicle prices going to be persistently falling? then we will have lower inflation. many people expect, at full employment. david: what about the health care costs, 70% of gdp. it is -- 17% of gdp. it is a really are long trend a moderate those prices. that can have an effect on the economy. looked atve always health care and health care spending, because of the amount spent in the u.s. -- i don't want to say a lot of it is recreational, but there is a lot of desire to spend more, a lot of talk about how we over test, we use a lot of things. tests,want those extra those extra things. people are willing to spend on them. just because people have a preference on spending on health care does not necessarily mean that we spend too much on health care. david: do you have a hypothesis about why it is that those health care costs are much higher? the affordable care act had an effect. government activity in the medical sector of the economy is growing. right now it's estimated that the medicare system, medicaid, and the veterans administration account for 50% of all medical care spending in the u.s. also organizations administer the prices they pay. there is no free market in medical care services. price lists. are there is budgetary pressure on medicare to keep prices down, and they do. -- theycare system is tend to pay lower prices than most other providers. the affordable care act expanded the medicaid program. a bigger share and you pay lower prices, you are bringing down the average price. david: i want to make sure i understand this. v.a.,e saying the medicare, medicaid, accounts for 50% -- kevin: of medical care expenditures in the u.s. think about how many people are covered in those systems, everyone over 65, april with low income, and veterans are in the millions. particularly medicare, they are big consumers of medical care. people in their middle years may not be buying that much medical care but over 65 -- the: i want to get back to details in the cpi. there was talk that it would see a nice boost because of the excise tax in california and energy prices. is the number more detrimental than we think because we did not see the boost, where there should have been offsets? kevin: energy prices were up quite a bit for the month. that is why the overall index was up .2%, offsetting some of the weakness in the core. to the degree we concentrate on the course will get a better sense on the trend, i think it is still good information. what stands out to me is the medical care, and we also see power prices are falling. saw in ppi yesterday, producers paying more for inputs but not able to pass that on to consumers. kevin: i think that's true, final demand is not growing fast enough to allow producers in a competitive environment to push prices up. david: does all of this complicate janet yellen's last news conference? she has been saying, it is coming. it is going to be harder to say that today. drew: she has been stepping back from that. we have all been wondering why. this may be a reason. enough, fors close my perspective, to the target. danger oft at deflation. that is the only reason they chose two to begin with. if you look at the data, there is no real good reason to take it, other than if there is not enough data. do you prepare yourself for today's fed meeting when you have this inflation trend? drew: the rate hike is a done deal, i think. but it speak for kevin, guess what he will be looking for is the dot plot, whether there is further movement on where they believe the terminal rate is. alix: better of shorting the front and come along, what will be the best way to look at the meeting today? drew: our view is there will be to debbie will rate hikes next year. we are probably pretty close to where the market is on that. , -- mostrticipants economists have four hikes next year and i think they are getting ahead of themselves, suggesting that that relies more on theory rather than how the markets will respond. if the yield curve starts to approach a much latter perspective -- alix: what is flatter, by the way? 40, 20 basis points? kevin: if we get close to 20 basis points, they will probably stop. there is too much historical precedence to suggest an inverted yield curve is a signal something is going on. it doesn't cause the economy to slow but is beginning to signal growth prospects are not as robust as one would think. then it would not be appropriate for the fed to continue tightening. drew: this time around, we modeled off of the 10-year. kevin many thanks to logan and drew matus. days, the white house committee kaisha's director anthony scaramucci captured the imagination of the nation. andade a lot of headlines he joins us next to talk about alabama's surprising election last night. colleaguese into our on the radio from 7:00 until 9:00 every day. fox joins the conversation with tom keene at 9:00. it can be heard all across the united states. live from new york, this is bloomberg. ♪ emma: this is bloomberg daybreak. coming up in just a few moments, we speak with former white house communications director anthony scaramucci. stay with us. now to your bloomberg business flash. teva pharmaceuticals plans to fire more than half of that 400 workers in israel over the coming month, according to an israeli businesses paper. they are trying to cut costs as it struggles with $35 billion in debt. fori aramco is asking assistance in the world's biggest share sale. the oil giant has not told banks where it plans to list shares. they are seeking to sell as much as 5%. when it comes to bank bonuses, europeans will be second-class citizens to their u.s. rivals. traders in the region are facing some of the worst bonuses in years. meanwhile, their peers in the u.s. are likely to fare better. that is your bloomberg business flash. thank you. more bad news in europe as well. on some bonuses, the cuts could be as much as 25%, and there is a conversation about some not getting any at all. how can they compete when they are not able to pay their employees? but i willn't know, give me the answer from the c-suite, that is the average, not the distribution curve. the people that are really delivering made even be doing better the last year, but those that are not, that is life. alix: you have the fix so low, volatility, fx, treasury markets so low as well, that is permeating returns. on the flipside, m&a in europe is holding up well. we could see discretionary awards of up to 10% there. we have seen an m&a boom in europe compared to the u.s. in the past, a substantial part of my salary was from bonuses, but that is life. if the bonuses went down, it was not our fault, but when you work in these big companies, you should know that. interesting, but i didn't know that european m&a was much stronger in some respects. david: the flipside is also true. you could have a banner year that was not because of you and you get a lot of money. that is sort of the way it works. a big upset last night in the political world with staunchly republican alabama sending democrat doug jones it to the senate in a tight race against roy moore. some republicans are blaming steve bannon for the loss. joining us is someone who knows firsthand what it's like to work in the white house of donald trump, anthony scaramucci, former white house committee case director. he just came over from bloomberg radio. he says steve bannon may have some explict to do here. anthony: that is a tough loss for steve bannon. his whole strategy, his excessive. very tough loss for him. but don't underestimate steve bannon. he is a warrior. that is one battle. there is a bigger war. bannon has to be defeated by the republican party. you don't want this level of disunity and level of contention. that was a good day for america thatrday in the sense bannon lost. i don't think it was a great day for the republican party either way. as the president said, there is another opportunity to go after that seat pretty quickly. david: we don't have that many people that can give us the inside story, and this is a question on a lot of americans minds. there is a report that there is a battle going on for the heart and soul of the president of the united dates. onve bannon on the united -- one side, and there are more moderate, measured people who are fighting. is that true, is that overblown? anthony: i think it is overblown. the president has been his own man for the 50 years he has been in business. he makes his own decisions. he was his own campaign strategist. he won the presidency. anyone trying to take credit from him on winning that presidency is party. personal brand building, in my opinion. the president is his own person. indoorsident did try to big luther going into the -- indoors big luther going into the primaries. this is a short-term setback for him. you know, i asked my liberal friends the same question, i will ask you this as well. tell me one policy thing that the president has done that you strongly dislike. the economy is booming -- alix: because he has not really done much of anything. david: i can give an opinion because i'm a journalist. maybe about the only journalist that doesn't give their opinion. alix: on the flipside, you can say that he is not gotten anything big through. deregulation on the margin. anthony: more than just the margin, but also if you think about it, the presidency represents the bully pulpit of the united states. he is a decidedly pro-business president. the's been reflected in markets, employment growth activity, real wages, and in the gdp prints we have had since he was president. but you are right, he is not getting a lot done on the legislative agenda because the permanent political establishment is out there blocking this president. they don't want him to succeed because he is an antigen in their system. he is not a representative of what is formally known as the swamp. not just the political establishment and not just alabama. new jersey tends to be a blue state, went blue. region you come in between, went the wrong way. and now we have alabama. problem with the policies of the trump administration, or a problem of communications? that is your specialty. are they getting across effectively? anthony: new jersey typically has been a blue state. it was chris christie's personality that turned it red. i had to see the point. as republicans, we lost virginia. alabama, i will use a trump ward, a disaster. should never have had roy moore as the nominee. i am not looking at those as individual and discrete. somebody on the other side would say that is a wave, movement on the president. i don't see it that way. if the economy stays strong, it is very hard to unseat a sitting president. go back to 1880, 137 years of data, you don't unseat presidents without very strong declines in economic activity or high unemployment. very hard to unseat a sitting president. alix: individual tax rates are front and center. what do you make of the optics when you have senator rubio saying lowering the top rate to 37% is not what we want. that is a senator in the republican party. how do you deal with optics? tax thing think the is a little bit problematic. one of the big issues here is that it doesn't seem like it was super well thought out in the beginning. that is my opinion. itebody asked me about yesterday, i gave my opinion. it is better than what we have right now but far from perfect. it will be interesting to see if it gets passed in the current configuration. david: better for whom? the branding right now, whether right or wrong, whether this is good for people who are wealthy and not good for the middle class. anthony: it is mixed on the middle class, if you look at it, david. certain citizens are benefiting, others are not. particularly people here in the eastern states, coastal states or you have the adaptability going away, they are clearly not benefiting. it is uneven, but this is the problem we have in politics right now. i wish we could sit down and reframe the tax code from an apolitical perspective. what's happening is you have all the special interests, lobbyists beating up the republicans and democrats, and you are getting this nonsense tax code. i am sure the president would agree with me on that. if we had an apolitical group of people that could build the tax code irrespective a special interest, it would be better for growth and the american people. david: let's ask about sky bridge. hna,seems to be hung up, what is the issue? anthony: i think hna gets unfairly beaten up in the press. i understand it. it is a fortune 80 company with $100 billion in revenues, 400,000-plus people, 45,000 people here in the u.s. they don't import anything into the u.s.. if anything, a net buyer of u.s. assets, like boeing aircraft. we made the decision to sell to them. we looked at all of the metrics, up.it is sung -- hung i cannot comment on that because i don't know directionally what decisions will be made. david: is it going to be cleared, when? i would be hard-pressed to understand why it would not clear. i don't see -- if you look at the statute, analyze the statute , there is no national security reason why sky bridge cannot be sold to hna. alix: if it doesn't, what do you do? anthony: there are so many fun things. sky bridge had a phenomenal year. if you look at the performance measured volatility in the markets, twice the hedge fund index, a phenomenal bond surrogate as a product. 2018 will be phenomenal for sky bridge, whether it is can the loan company or part of hna. my prediction is it will be part of hna shortly. i don't see why the treasury would block a deal at this. in 2017 that a lot of things happen to you that you don't expect. the good things about entrepreneurs, the culture and sky bridge, this is a culture that knows how to adapt and pivot and excel. we have put him or performance. alix: good to see you, anthony scaramucci. good to catch up. anthony: i'm going to say merry christmas. i don't know what you are a lot to say anymore on these television sets. alix: in the market, we are looking at what's happening with cpi. the dow jones still up on it ties of the session, up 17 points. other asset classes are taking the heat. the dollar index dropped .2%. yields moving lower. goes flatter. gold up a bit by five dollars an ounce. this is bloomberg. ♪ alix: what caught my eye this morning is the region of cpi in the market. disappointing, core coming in at -- overall coming in at 2.2%. core disappointing. medical service cost flatlining. use car services up only 1%. an interesting breakdown. up, how itbrought it relates to cpi. is it a pricing power problem? alix: is it going to be a consistent laggard or are we playing catch-up? one of my favorite charts, gdp versus core cpi. about a six-month lag before core starts to pick up. that divergence continuing. willie bridge that gap? that will be front and center for the fed today. you are seeing a reaction in the markets, dollar around the lows of the session, buying coming into the 10-year market. as we await the decision on that weaker for cpi. david: that does it for bloomberg daybreak. stay tuned for bloomberg markets. ♪ jonathan: from new york city worldwide, this is the countdown to the open. ♪ jonathan: coming up, republicans lose in alabama, cutting that gop senate majority, adding more fuel to the race to complete tax cuts before the end of the year. the house and the senate leave the corporate rate at 20%. markets wait for one more hike from chair yellen and look for guidance going into 2018. counting down the opening bell, futures this morning are pretty much unchanged throughout much of the day. we are up by 1/10 of 1%. the big moves in the bond market and the fed off a softer read, dropping a bit into treasuries, fueling some dollar weakness with the euro-dollar up 1/10 of 1%. the big headline, that is where we begin. the gop

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