recovers. no one knows why. the question is was it all the algos? emma chandra is here with first word news. >> vladimir putin will have one less opponent in march. russian officials formerly -- formally barred the opposition leader from running because of a conviction in a fraud case which has been viewed as political retribution. he could have run if his conviction had been canceled. a spokesman says the kremlin is concerned about the possibility the u.s. might extend sanctions against russia. that took effect in august calls for the treasury to compile a list of business asders of the companies seen close to the kremlin as potential targets for sanctions. last week the u.s. added the names of several prominent russians to the list. almost a year into donald trump's presidency the border wall he passionately promoted throughout his campaign amounts to eight prototypes. no more than 30 feet long each in the desert outside san diego. no funding has been appropriate by congress to advance the the testing phase and despite trump's rallying cry that mexico would pay for the wall country hasn't contributed a peso. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. the first take where we discussed the top stories of the morning. first up that rallying past 15,002 we are also looking at what happens in d.c. as well. lukewarm demand weighing on apple. analysts slashing first quarter projections. and new sanctions. president trump tweeting just now he expects democrats and gop to work on a new health plan and says unfair individual mandate terminated part of the tax bill. he's up. he's doing it. he's tweeting. joining us now, mark reagan and -- mark reagan and marty schenker. i want to start with d.c. what do you make of the rhetoric with north korea and russia and trump saying we're going to work on a new health care plan? marty: i think he is in a little bit of a bubble at mar-a-lago. outside of washington things may seem rosy to him but he's coming back to a completely divisive political environment. not only between democrats and republicans but within the republican party and some major issues are going to stand in the way of any bipartisan effort on health care or anything else. alix: what's going to be the top of the issues? act forhe dreamers instant. donald trump has said he's going to take care of these people. the conservatives in the house especially don't want anything to do with anything that smacks to them as amnesty and the democrats this is a major issue for them and they are going to the democrats to get to the debt ceiling and some of the other things that will keep the government running. there has to be some sort of concession. donald trump is going to have to make a decision. is he going to cut a deal with democrats or is he not and if he doesn't that risk the shutdown. potentially we are looking at continued optimism. donald trump tweeting based on the fact that the very unfair and unpopular individual mandate has been terminated as part of our tax cut bill which essentially repeals overtime obamacare the democrats and republicans will eventually come together and develop a great new health care plan. is making use of that longer tweet space i'm noticing. alix: oh goody. >> all the important legislation that's going to be discussed, the dreamers act and entitlement reform, very important very divisive issues. from the markets perspective i'm not sure how much they're going to care. i think the attention is going to shift quickly away from d.c. back to everything else. now that the tax bill it is through. everyone became armchair political scientists on wall street for all of 2017. for the most part i don't see a lot of market moving news coming out of d.c. going forward. obviously there's a chance for some kind of stumbled. i don't see infrastructure picking up a lot of steam. alix: it's really regulation of this point. marty: the whole narrative the this momentum was pretax cut. that there is nothing in your views that will derail that that inaction is good for the markets. you could see 2018 and conventional wisdom is the democrats will sweep to victory. i would hold off on that. wells fargo, at&t. here's a cash bonus. just hug. talking about momentum and that's bitcoin. it fell last week 26%. now we are up by 15,000. what do you think is the driver here? there was a pretty fascinating take explaining that it's all about the new wallets and transactions per wallet explaining 94% of bitcoins moves. i feel like when we are reaching for something like that to explain the moose in an asset like that its new terrain that a lot of people are on. everyone is an overnight expert on this. alix: i want to talk about the chart we pulled up that is really cool. bitcoin is massively underperforming. you have ripple which i had never heard of. i think that's pretty staggering. marty: this is an incredibly small part of the global asset class. a systemic risk. this is a classic bubble and everybody can see that it's a bubble. what's interesting is regulators are beginning to be concerned and as soon as they and central banks decide they need to clamp down on this this bubble is going to burst. >> is that coming? marty: who knows? that we are talking about regulatory rollback everywhere else. apple, did you guys get an iphone x for christmas? why not? marty: bloomberg issues my phone. all of theseseeing downgrades for shipments and you have to wonder is that a samsung story, consumer story. as journalists everyone is tempted to write the big anniversary story of whatever the event is and i think a smart editor like marty would say let's not write this a must there's a reason to. apple thought they had an anniversary product. i don't think it's catching like theimaginations older upgrade to the iphone. the facial recognition i don't know. i'm not willing to buck up for a phone just for that. conventional wisdom about apple is something you should avoid. they have scaled back on shipments but the shares are down 2% in the market. it's almost at a record. like the olderone of the stocks that goio be a trillion dollars in market value soon i would imagine so let's not right off apple. they do have challenges to growth and they're going to have to figure out a way out of this. 40% or 60% over the last year. thank you so much, michael regan and marty shaken -- marty schenker. we will talk to michael purves next and how tax reform plays into that debate. this is bloomberg. ♪ >> this is bloomberg daybreak. i'm emma chandra. there's a deal in the pharmaceutical industry today. sells drugs for chronic constipation and irritable bowel system. part of a bounce back year for u.s. ipos. four companies sold more than $1 billion in stock this year. 49 percent more companies went public this year than last. the average amount raised also increased to $175 million. apple analysts have lowered iphone x shipment projections for the first quarter siding with demand at the end of the holiday season. 10 million fewer units will be sold in the first quarter of 2018 compared to the current quarter. c's shipments falling by 5 million citing the phones high-priced and lack of interesting innovation. se.: i still have the it's like this small. tracking the trump trade when it comes to small versus large cap. going forward it seems like large cap could win. this is taking a look at forward p/e ratios over the next 12 months. the blue line is large cap. small-cap ande the white line is medium-sized company caps. joining us now michael purves. this does not say to me that tax reform is going to be a big boost to small mid-cap stocks. >> it does say that. interesting if you look at the ratio of the deutsche bank contact index -- high tax index relative to the spx. to thetio relative russell 2000 relative to the spx asio, they both outperformed the tax discussion really gained momentum over the last several weeks. of the largerance capitalization high-tech think companies has been much stronger. 10% versus about 3% just in the last month. it's telling you that tax reform is good for high tax paying companies as well as the large ones. earnings pointan of view with the lower tax bill. to me it also suggests that maybe were not really getting nominal gdp the phone to be hitting the smaller companies. alix: question is will these small and medium-sized companies invest? tax but youegislate can't legislate companies to hire people. companies like wells fargo giving a cash bonus to people, this is like a victory lap. that's not investment. >> exactly. we have been waiting for several years for all companies large and small to commit to the economy and help blaze the way forward and commit to capital spending and we have only seen muted responses. if you are a ceo of a company your job first and foremost is to keep your stock price from going down and make it go up as much as possible. it's not necessarily to employ people and build factories. seems like that's building the case for large cap versus small and medium-sized companies. can we look at multinationals as basically a revenue stream for d.c.? we need extra money, let's tax the multinationals. read to sustain the personal tax rate. it is something we need to start factoring into multinationals. >> may be down the road at some point. with the certainly response of wells fargo and at&t and some of the others after the like presidentms trump, we are with you. thank you. alix: don't hurt us anymore. just give us good stuff. >> and the $1000 christmas --uses might have been very shrewd lobbying and public relations on behalf of the large companies. ther distinction of the smaller caps in the u.s. versus the large global companies which is simply against the backdrop of globally synchronized growth your cash flows are much more diversified if you are in a very large company versus one that is leveraging the u.s. economy and if you look at the rates of the growth acceleration the u.s. has really had some of the more modest growth acceleration of any of the major economies this year. if you want to be levered to global growth you will probably get more bank for your buck overseas and you need the dollar to behave itself but it has been so far. alix: michael purves is sticking with me. some analysts are cutting forecasts for the iphone x. we will have that discussion. did you buy one over the holidays? >> not yet. alix: some analysts we will dis. this is bloomberg. ♪ is is bloomberg. ♪ alix: apple stock down over 2% in premarket after several shukman downgraded expectations for the iphone x for the first quarter. here are some of the downgrades. the published report monday saying shipments over christmas may be as low as 35 million. capital had jl war and saying shipments will drop to 25 million units in the first quarter down from 30 million in the fourth quarter. unidentified supply chain officials as apple has trimmed its first-quarter sales forecast to 30 million units. not spreading holiday cheer for apple. joining us now to discuss by phone is paul sweeney. what did you make of these downgrades? >> it's a little bit surprising. a veryone x had auspicious launch several months ago. let's recall that it came at a very high price point. there were a lot of new phoneonality of the facial recognition but at a very high price point likely limiting the market for this product. a very big launch. it looks like as we go into the alix:.alendar quarter alix: how much of this is samsung recovering from its phone growth -- blowing up? is just appleton, don't really needed? >> it's all of the above. fromly apple did benefit samsung's problems over the past 12 months. when you think about the apple phone product it has always been a very high value proposition. feature-rich high price high value and that works well in much of the world but when you think about where the growth of the smartphone market is today it is an emerging markets and that is where apple typically has not fared as well even though they have introduced the midrange phone. when you think about some of the emerging markets apple is not as well positioned. alix: all suppliers getting hit in asia as well as premarket. what does apple need to do to keep any sales momentum going in 2018? >> the issue for apple over the last several years has been the growth of its services business. to what extent can the services business which is only about 13% or 14% of sales, bigger business for them and they have a goal of getting to 20% of sales over the next several years. trying to minimize the reliance on the upgrade cycle of the iphone. that has been a big issue for them and i think there's lots of leverage whether it's on the app store, music business, apple pay. the question is over time how big can that business be for apple. to the extent that they could grow that faster think that's what the market would be looking doubleause it has the benefit of reducing the reliance on the iphone and is actually the services business as a profitable business for them. goingall of the big guys into that. is apple going to go that way as well next year and can it keep up with competitors like amazon? >> for the last 10 years or so as apple has talked about apple tv which has never really gotten investors have been wondering when and if apple will jump into the deep end of to onlines it relates video because we know that online video is the fastest area of growth on the internet in terms of usage and in terms of advertising growth and apple does not have a big presence at withompared to google youtube. the question is will apple ever really jump in and make a big some bigon and investments. they have already announced they're going to spend $1 billion on original programming this year. that is really just dipping its toe in the video market. i think investors are watching for that. don'ties are adamant they need to make big investment in video for media content in general. alix: thank you for joining us, paul sweeney. still with us michael purves. if you were going to buy apple stock would you buy it for video content? >> i would buy it for valuation. i am not an apple analyst. trailingok at the multiple its four-year highs. is a huge leap of faith that they are going to hit their numbers and that's not necessarily a guaranteed assumption. from the top-down i always look at apple's forward multiple relative to its historic multiple. that spread is pretty wide leap of faith factor is pretty high. relative to the market it's not cash earnings.es it's a very compelling sort of value with a reasonable franchise growth story. i would say risk return is not what it was a year ago. alix: let's talk about the broader market. you are netflix, amazon, google, facebook, apple. apple is the orange line stuck in the middle. or actuallyorm amazon even though netflix also had a nice run. playis your favorite thing -- fang play? >> i will avoid the single stock discussion. i am not a single stock analyst. indicesook at the fang and the correlation with treasury yields its reasonably strong. when economy is perceived to be not doing well stocks tend to outperform on absolute and relative basis. so in theory there's a real risk that if we get an acceleration in rates and growth in 2018 that cycle outs going to of these stocks and by nothing but industrials or small caps perhaps. that's a little bit of a hard assumption to make right now. this basket of stocks is going to continue to outperform. as long as the growth isn't violently upwards this is more shifting from second gear into third gear. these have defensible franchises of growth in so many different economic conditions. alix: michael purves is sticking with us. this is bloomberg. ♪ ♪ alix: this is bloomberg daybreak, i am alix steel. happy holidays, everybody. it is a quiet trading day in the u.s.. s&p futures flat, dow jones futures flat as well. the euro fell for seemingly no reason yesterday by about 3%. stronger, a tiny bit and a modest dollar strength story throughout the session as the yen is the weakest in three weeks. the treasury market, 10 year , around the highest level since march. spread, 56 basis points is how we trade. calm in the commodities market. bitcoin is up after the steep falloff we saw last week. now for an update on what is making headlines outside the business world, emma chandra emma:. emma: a bullish report on the chinese economy. china willys overtake the u.s. as the world's biggest economy by 2032 and three of the four largest economies in the world will be asian at that time, including china, india, and japan. china plans to cap the population of shanghai at 25 million by 2035. policymakers want to manage what they call big city disease, pollution, congestion, and a shortage of public services. shanghai is home to 24 million people. president trump is bucking white house norms and is set to be the first president in nearly a century not to host at least one state dinner during his first year in office. the white house says to expect one early in the new year. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. chandra. this is bloomberg. alix: thank you so much. touched offcks today after a nice rally of 8/10 of 1% last week. that was when tax reform finally made it through the house. goldman sachs saying earnings may rise 13% with the tax rate cut. joining us now is gerard cassidy and michael purves still with us. gerard, do you agree with that 13% upside for the banks? gerard: we think it could even be higher because there are a number of factors in 2018 it are favorable for banks. boostt they received will earnings anywhere from the low single digits up to way high 20%. top 20 banks will see the earnings grow about 70%. -- 17%. the upside is good, assuming the economy becomes stronger in 2018. alix: will that be geared toward regionals or big guys? gerard: regionals more because they have the bigger impact on tax cuts. , ifcapital markets business we see increased volatility as we think we will, we will see the trading revenues for the big guys pick up, particularly in the fic area. alix: was there anything worrisome in the tax package for big banks? gerard: we did not see anything yet, and the devil is in the details. right now, it looks to us that the tax package is very favorable for the banks, and on top of that, regulatory reform coming and that is even more positive for the banking industry in the long run. alix: do you think it will be like a rollback, or things will not get worse for the banks and maybe they can take on trades or clients they would not have done six months ago? gerard: i think it will be a combination of both. there will be changes to the dodd-frank law. the senate banking committee came in and changed -- or would like to change the size of the bank to $250 billion in assets, so legislatively that would be a rollback. on the day-to-day interaction between the regulators and the banks, we think that will improve dramatically and that will be helpful to the banking industry. alix: what do you think? michael: i agree with everything he said. when you try to figure out which sectors to overweight in 2018, the large financials, they kind of check every box you want to see and they are higher probability checks. do we have a regulatory tailwind? are rates going to grind higher? is there value their relative to the -- there relative to the overall market? yes, there is. jpmorgan is 16 times forward earnings. that is pretty impressive for a franchise as important as jpmorgan. i think financials will stay a winner. alix: that wildcard is the yield curve. margins,, net interest what you loan out a loan for and what you need to borrow for, the higher it gets the more money they make. the white line is the spread between 210, and the yellow line is net interest margin. how long can it hold up while the spread impresses? gerard: we expect the margin will start to flatten out by the end of 2000 18, and we would not be surprised if it declines in 2019. that is not a major concern for us, because if history repeats growth accelerates so the actual revenue growth for the industry picks up even though the margins come in a bit. you are right and that the yield curve flattens, it will put pressure on the margins, but i will convince you the yield curve will flatten because the global economy is moving very nicely. thatirst time in 12 years all the oecd countries have positive economic growth. if we see the long end of the curve moving up with the front end, that will be positive for the margin and the banks. michael: i was just going to add, the correlation of the big bank etf at the 210 curve -- 2-10 curve, and sort of through inauguration. that correlation kind of faded and shifted really over the lack several months toward the two-year on its own. i think that is a little bit of a market statement, understandably, that rates even against a tightening cycle, the 2-10 curve will fall that does not mean banks have to be an underperformer or short. alix: that relies on how much demand they will see for loans. how much demanded they have to see to make up for the margins? gerard: that is a good question, because right now if you look at the weekly data that comes out from the federal reserve, on friday, we saw 3.5% year over year own growth. we would expect loan economy -- growth grows with nominal gdp, so if you expect nominal gdp to grow in the 5% to 6% range, and you should expect to see total loan growth 5% to 6%, which would be more than sufficient to offset margin compression. alix: while the loans be two businesses in general or consumers? when you look at goldman, they are trying to bet big on consumer loan growth. incrementally, it can be substantial for their business. gerard: i would say it is going to come from both areas. a area that is still in contraction is home equity loans, socially -- partially due to the loans from 10 years ago that are rolling off. we expect 2018 to show for the first time since the downturn, growth in equity, so consumer loans should be a positive force on the growth as well as commercial real estate side and commercial lending. alix: michael? michael: just going to add, if we see loan growth acceleration, we start tasting a foreshortened credit cycle and economic cycle. right now, the consumer balance sheet is pretty good. the corporate balance sheet is pretty good. if those weekend materially because of loan growth acceleration, and if the banks become less fortresslike, that will be have a relative point where we are in the cycle. if we do not see growth, it will arguably extend the economic cycle. alix: is that good or bad? michael: it is not good for -- alix: but it will build up leverage in the long run. michael: if we get more of this very tepid -- if you look at congressional -- commercial industrial loans, those have been so unimpressive. alix: -- michael: to a degree, but we have not seen -- the banking system has been very fortresslike and his loan growth ,n 2018 stays where it has been that extends the economic cycle and credit cycle, and dampens nominal gdp acceleration but at the same time supports the equity market. it is kind of ironic. let you go, i want to get your take on which will be the best way for you in 2018. gerard: a somebody wants to play the large caps, we go with bank of america. we have to remember that capital return is a critical component to the bank story. juneof america, if they in ask for over 100% of earnings to return to shareholders, we will get a big increase in the dividend. on a regional name, pnc financial has been great this year. we continue to believe financial -- management hasn't -- has a growth strategy, and they own a 21% position in black reich -- blackrock. they might want to monetize that. alix: bank of america potentially giving authorities a $1000 bonus. a pleasure to chat with you. gerard cassidy, and michael purves, sticking with us. what stories wall street is buzzing about today. dan not reconsidered moving jimmy levin to the top of the head spun he. colleaguese into our tom keene and jonathan ferro. carol massar will be in with pimm fox from 7:00 to 10:00 a.m. great conversationalists, both. you can hear that in new york, boston, the bay area, and all across the u.s. on serious xm. this is bloomberg. ♪ emma: this is bloomberg daybreak. i am emma chandra. johnson on theg latest holiday shopping figures. this is bloomberg. now to your bloomberg business flash. uber is making a deal today. u.s.agreed to sell their exchange leasing to fair.com. financial terms have not been disclosed. japanese inflation unexpectedly picks up in november, but prices are still rising at nearly half the rate targeted. excluding fresh food, it increased .9%. the unemployment rate fell to 2.7%, the lowest since 1993. the force is still strong, "the last jedi" topping $200 million in ticket sales for the second week in a row. theattled new releases over christmas holiday. that is your bloomberg business flash. alix: that is what i did thursday night. my husband a big fan. may, not so much. are you a solid fan? michael: no, i'm am a dad who raises kids who are solid fans. i thought it was pretty good. david: made too -- alix: me too. --manure,now or, why a man left a box of manure for steve mnuchin. the wall street journal reporting the saudis seeking $6 billion to free the prince from the ritz carlton. , michael purves, let's start with mnuchin nabu manure, and l.a. psychologist planned to hand him horse meadow were -- manure, but not before the secret service and a bomb squad got involved. talk about gossip and drama in d.c.. gerard: it is one way to get a itsage out viral -- michael: is one way to get a message out viral. alix: he is owning it. michael: look, there is obviously a lot of structural risk, culturally, socially throughout this country. those will not go away anytime soon, regardless of what happens from a policy point of view out of the white house and congress. i think this is to be expected. i will not be surprised to see more of these types of missives happening. just showing how contentious things in dcr and how calm the market is. michael: two very different things. alix: two days before christmas, you wound up getting a note if you worked at ox it that jimmy levin would not get the top job at all. och founded the company and would potentially take over -- jimmy would eventually take over but will not. och did not reveal his thinking. waterskiings -- a -- 11 was a waterskiing instructor. that is a crazy way to meet someone who will potentially take over for you. michael: there is probably plenty of those types of things where superstars are made. alix: the right place at the right time. michael: exactly. the question is -- is he qualified to run a sophisticated asset management firm? i do not know the guy and if i did, i probably would not comment. firms are notcial necessarily operated in the way that at&t or walmart or coca-cola or mcdonald's are. it is a people business. your assets are people. there is a lot of strange things that happen on the way. alix: it seems like there is two stories. in is succession and this -- these big hedge funds, on the backdrop of hedge funds struggling. you have client withdrawals, underperformance, and in general, succession issues. who will replace ray dalio, george soros? what is next? michael: the industry is changing so much, so dramatically. as so many of these luminaries have made billions of dollars and can retire several times luxury ofhave the optionality in terms of whether they want to continue to run these companies. these are public stocks as well. the big question is for the next 2.0, 3.0, how different are they in the age of a different regulatory regime? and of course algorithms and robots playing the role they did not play in the 1990's when these guys were coming of age. from the last story came "the journal," and this is the headline -- "the saudi authorities are demanding at least $6 billion from the prints to free him from detention at the ritz carlton." we saw another royalty from the saudis released for about $1 billion. they liquidated $6 billion in assets. what does that mean? michael: we see these headlines all the time, and because it is saudi arabia, we do not tend to think about it much from a global markets point of view or geopolitical point of view, but it is kind of amazing what is going on. all these billionaires being holed up in the ritz carlton that has been converted to a prison, effectively, it is stunning. these shakedowns are, how much of this is just unadulterated iser grabs and how much, there a legitimate corruption crackdown? i do not think anyone will know the answer. alix: they have to finance a ward basically with yemen and what is happening with iran, so and aave need for cash, valuation for saudi aramco will be less than $1 trillion. $6 billion will not make up for it, what does it encourage -- cover them in the short term? michael: to me, it sounds a little bit more like a drop in the bucket which would suggest it is more about him punishing his rivals then about necessarily a macro financial plan for the country. it really does come back to oil prices full stop. it is not clear if the ipo will a 2018, 2019, it or 2020 event? alix: and will china buy into the story? michael: yes. 2017 said to be the lowest year in volatility since the creation of the vix. michael purves all over it. a bloomberg terminal, check out tv . you can look at our charts and graphics and interact with us directly. go to be tv on your terminal. this is bloomberg. ♪ ♪ eye thist caught my year, the lack of volatility. this is the chart of the year for me. it is the vix at 10, the move index for the volatility for treasuries at 50. michael purves, what does this chart look like next year? myhael: i would expect that base case is maintain. just think of a pretty reasonable assumption, you will see more of the same for those two lines going forward. they will probably be a little bit higher. it gets back to the question about, how did the central banks inflation, anger stronger gdp story? will they still be super gradualist? there is a couple of thresholds they have to get to. what is the number of inflation where they can stop being gradualist, and how fast does that inflation end as the economic metrics move? whole lot for these, and what we saw this morning from the bank torpedoes fulls speed ahead despite the better inflation story. there is a lot to make up for after 2.5 decades of disinflation. you have to get back to this core filler of equity market support, which is dovish and gradual. from a volatility point of view, it is a most the dredge listen -- gradualism -- when you heard mario draghi a few weeks ago talk about, we are going to do this taper to 30 through september, it gets the markets so much room to survive -- surprise. only ones capable of surprising the markets are the economies of the smaller banks, like canada, for example. if that continues, unless we get some massive shock to the system that no one is thinking of, then it is hard to imagine why would the volatility be any higher? a late cycle into the economic recovery and equity rally. to 1960 4, 1960 five, valuations were stretched and volatility was not much lower than it is now, and remained low. david: michael purves -- alix: michael purves, good to catch up with you. --dman gets into crypto, but this is bloomberg. ♪ ♪ itx: bitcoin is back as rallies past $15,000 after falling 21% in the last five years. volatility may not be over. reforms, now what? north korea and russia ramp up hostile rhetoric against the u.s. confidentound, consumers give christmas stores a bounce, but will the benefit be short-lived? a warm welcome on this december, 26. i am alix steel. up --s where we stack quiet, steady as she goes. equities have moved nowhere in the last 60 minutes. weaker,lar a little down 2/10 of 1% as a stronger, broader dollars story emerges on the margin. 2.49 is how we print on the 10 year. crude down throughout. euro-dollar, what happened on christmas? out of the blue the euro falls 3% and then rebounds. not a lot of news or trading, and huge volatility. those are being delayed -- blamed on some reports. look at this kind of movement especially throughout the week, and we will give you updates. yuletide slide, look at that. emma chandra is here with first word news. emma: president trump says to expect a new health care plan. that thed this morning unpopular individual mandate has been terminated as part of the tax cut repeal. the democrats and republicans will eventually come together and develop a great new health care plan. vladimir putin will face one less opponent in the election. officials have barred the opposition leader from running for president because of a conviction which has been viewed as political retribution. he could run if he was given special dispensation or his conviction was canceled. the kremlin is concerned the u.s. might extend sanctions on russia. last week, the u.s. added the names of several prominent russians to the list. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. . am emma chandra this is bloomberg. alix: futures are going nowhere, but bitcoin up 11% after the five-day slump last week. the biggest digital currency is up over $15,000. we are joined by mike regan. how are we understanding bitcoin in the last seven trading days? mike: the amazing thing is, you look at the rest of the asset markets this year and it is such quiet, nonvolatile. this is probably the least volatile year for the u.s. stock market on record, so we do not really know how bitcoin relates back to the rest of the market. we should have some sort of turbulence in stock markets around the world the question -- the world. the question is, how will that affect bitcoin? note is the thought it is sustainable enough to be part of the financial system. i am curious of how it will react in the market to a little bit of turbulence. 2018 could believe be as calm of a bull market as 2017. alix: we talk about bitcoin, but it is about lock chain because you look at the multiple -- block chain, because you look at the multiple cryptocurrencies. you hear about companies buying stuff in cryptocurrencies. blockchain was used when china bought oil from the middle east. michael: we had another good story out today about ibm, some of the old tech companies embracing blockchain in the cloud. it is open source software but allows you to bring all your customers into the cloud on the same blockchain. i recommend people read the story. it is about blockchain, ibm using blockchain throughout the whole supply chain. once you bring some big customers in, it attracts the rest of the supply chain into their cloud. it is fascinating here it we watch these react like long island iced tea when they change their name. what is happening with the old tech, microsoft, ibm, all sort of getting into the business, rejections for blockchain to be an eight alien dollar business in 2018 -- $8 billion business in 2018. alix: what winds up happening with the shakeup last week? mohamed el-erian said -- we saw the shakeout except the most important question facing it is whether the recent price correction will prove to be what market participants refer to as healthy, or will it become a stage and the remarkable historic asset bubble? , andook at it and say managed to shake out a little calmer, or a little not enough to protect individual retail investors, that is the question. michael: camilla russo talks to bitcoin investors and crypto investors all the time. i ask, how do they compare to era?eyday of the dot com they say it is like that. the market is trying to suss out which one is the real deal, which one will carry the crypto flame into the future. when you sit back and think about the dot com days, stocks would pop 1,000,000% and then it would evaporate. it is a similar situation in that it is obviously a revolutionary technology. people realize cryptocurrencies are here to stay. something that will be the center of gravity for this whole asset class is if bitcoin buys ethereal. it is this gambler's instinct on which one you think is the horse to ride. it is fascinating. looking at the volatility last week, i wonder how many people have -- can stick that out. when you go back to bitcoin dropping 30% to 40%, on the backdrop of these completely calm markets elsewhere, it makes me curious what happens if we see volatility in the rest of the asset markets. is bitcoin going to be a victim of fad volatility on a much greaterschedule -- much -- i am not sure if people know where it fits into the asset next. we cansee that -- alix: see that with goldman sachs. where do they house that desk? currencies, equities, or commodities? thecan make the argument volatility is much more like equities than any other asset class. you look at the market structure of cryptocurrencies, there is a bunch of different exchanges. there is potential to arbitrage the price differences between exchanges. you think back on the equity model, where do you call locate your computer? how that all flushes out will be pretty interesting. alix: mike regan joining us from bloomberg, and goldman potentially getting into market-making is a different conversation than what lloyd blankfein told me a few weeks ago. i asked when you would have to get into the currency, and michael bloomberg also weighed in. for small businesses and businesses in general, when do they have to have a bitcoin strategy? michael: not in our lifetime. alix: really? michael: forget about whether you think it is a fraud or a game or not, small businesses have to worry about how they are going to attract side people to produce a product, how they will figure out how to sell it and keep the door open and cleanup at the end of the day. small businesses are aware the rubber meets the road. they are not dealing inexpensive .inancial transactions it is one person selling to one person much more so than all the things we talk about. alix: you have not rejected or endorsed bitcoin. when does goldman have to have a bitcoin strategy? lloyd: not today. alix: when? lloyd: i would say life must be really rosie if this is what we are talking about. alix: i was talking to jeff currie at goldman the other day, and he said the only thing people are asking him is bitcoin. lloyd: yes, i'm thinking about it because i get asked about it. me,e i am is, it is not for but there is a lot of things that were not for me in the past that worked out very well. if it was 20 years forward and it worked out, i could tell you why, but based on everything i know, i am not guessing it will work out. i can say, i will not stand there and say it is a fraud, because it might. michael: people confuse bitcoin with bit chain -- blockchain. there is a technology where you can have different accesses to data. different people can control it. you can see who is doing what. there are places where that is useful. the bloomberg system is a blockchain. instead of having the users control it, we control it, but it has all the attributes. bitcoin is something very different. bitcoin and a bunch of different cryptocurrencies that of been started, that is something very different. whether or not the governments of the world will lose control of monetary policy, i am skeptical. they will not let it happen and should not. lloyd: something that moves up and down 20% a day does not feel like a currency. alix: jeff currie told me it is a commodity and that goes to your expertise, lloyd. what are the unregulated trading world of bitcoin? where is the fraud going to calm? lloyd: the whole concept is -- first of all -- alix: is it buyer, seller, price discovery, where is the risk? who uses bitcoin is a vehicle for perpetrating fraud because you cannot trace it. alix: so is cash, sometimes. lloyd: it is hard to accumulate cash. michael: the world is moving in a different direction. china is basically getting rid of cash. everybody is paying with their smartphone. people begging in the street have a sign next to where they are sitting in the street, people that really need help are begging for money, they have a sign with a qr code if you want to give them money. you point your cell phone at the code and pushed a button. china is heading in the direction, and they have gone a very large way, the same as india. blackn then stop the market and the drug dealers and track where all the currency is going. we will not go in a different direction. america will not be ready to go there, although we will be left behind if we do not. it is hard tooyd: know what everybody is doing with their money. michael: google already knows. alix: amazon. you have to be thinking about investment banking strategy with bitcoin. i cannot believe you are not. lloyd: no, i do not. alix: you are not talking to your guys? lloyd: it is just, we will see. if it works out and gets more established and trades like a store value and does not move up and down 20% and there is liquidity, we will get to it. the original question was, when do small business people have to think about their bitcoin strategy? i would worry about opening doors and producing things people want to buy. alix: that was part of my exclusive interview with michael bloomberg and lloyd blankfein, goldman sachs chairman and ceo. after the interview, goldman sachs did say it would start clearing bitcoin trades for some of its customers, with a put up margin about 100% for the cme and see bill -- cboe. the question is where they would house that debt. coming up, president trump account list the tax reform -- accomplished the tax reform, but can he claim victory for other items in the new year? this is bloomberg. ♪ alix: this is bloomberg daybreak, i am alix steel. an hour until the cash open. equity futures pretty much go nowhere. expect volume two below. a tiny bit of downside in euro-dollar, down 1/10 of 1%. a very muted session and i am guessing a very muted week as well. the 10 year yield ready much goes nowhere, 2.49%, that the three year yield up over 2%. we also get some three-month t-bill options coming out later today and that while doubt being part -- winds out being part of the debt. 58 is how we trade on crude. for the latest on washington, marty schenker. good to see you. marty: good to be here. alix: how can we learn about whether the market is looking for a potential shutdown? marty: the latest estimates are if the government is not able to 19,h a debt deal january the government would run out of money in three months, about the time the bill matures. this is the time of year where central banks are not doing a lot of buying, so you may not be able to read a lot into this particular auction, but it does coincide with the potential of a complete government shutdown. alix: what are the chances? marty: i do not think they are great. neither side wants one, but there are so many issues they have to resolve in order to get , onethis january 19 issue of the key ones being the dreamers act. donald trump famously said he will take care of those people. the conservative wing of the republican party in the house wants no part of any deal that smacks of amnesty. the democrats say this is a redline for them. they must have a deal on the dreamer zach. susan collins was guaranteed this would be taken care of. it is going to be a very interesting week once the congress and president trump get back to washington. beforehe conversation tax reform was that democrats are making inroads in regional elections and they will turn out the in 2018, and then second the tax reform passed media coverage turn positive, and the rhetoric is that it is worse for the democrats because they did not join in and they will look bad because they did not have a part in creating the law and therefore it had to go more to the conservative side. will this play into the next few months? marty: it is all fake news. like everything else, the extreme positions are probably just that. the narrative was after virginia and the state assembly there turning essentially even after having republicans having a 38 seat majority, everybody says, the democrats will sweep to victory in 2018. hold on. the tax bill was passed. economic conditions, every analyst says things are shaping up for a terrific 2018. the economy is growing, labor market is tight, wages are inching higher. future,so far in the predictions about who will take the congress and who will take the senate are just that, idol predictions. predictions. alix: as an investor, what is the biggest thing they need to pay attention to in the next three months? marty: i think january 19, and what donald trump does is key. noises thatmaking there are bipartisan solutions to our problems, he tweeted this morning about health care. i doubt there will be a bipartisan addressing of health care, but there may be some movement there. donald trump needs to provide the leadership. whatever he does and says will be key to providing the gop with cover, and inviting the democrats to go along. it is possible he could be the pivotal person in 2018. alix: good to see you. marty schenker of bloomberg. breaking news concerning saudi arabia, they are said to expect oil revenue to increase 80% by 2023. this is a to full issue. they act increasing -- output increasing as well as oiles and they see $70 prices in 2023, topping 11 million barrels of oil a day. they also see nonoil gdp growth above 3% through 2020. this is a very pretty rosy forecast for saudi arabia as they look to best two things -- oil prices and nonoil revenue up 32%. is any of that true? how much can come through quest -- true? this is bloomberg. ♪ ♪ alix: is it a rebound for retail this christmas season? holiday sales november through december, according to consumer .rowth partners, $671 billion joining us on the phone is the man responsible for this number, craig johnson and also joining us on set is loren coleman lochner. walk us through the numbers for the holiday sales. craig: it is customer growth partners. anyway, this has been a really stellar season for retail. it has been very happy holidays. total sales through christmas eve or 589 -- 591 billion, and we expect this week will add another $73 billion on top of oft, reaching a grand total $671 billion, up five and a half percent from last year. it has really been a great season and it is the fastest growing season in retail since 2005, well before the recession. alix: why? lauren: because all the fundamentals are in place. the economy is good, the stock market is strong, unemployment is low. people are feeling the most secure they have felt in years. alix: what about the fact that christmas is on a monday? lauren: when you procrastinate, as most of us do, i'm still buying some belated gifts, you have that extra day, a full weekend where you can go out and buy those last-minute gifts. great timing. alix: i think it was on amazon, if you wanted free shipping and you were not a prime member you had to order by the 15th, so you kind of had to go into a retail store? lauren: people had to make that mad, last-minute dash. alix: do you have any read on the discounting we had to see to get that $671 billion number? craig: this year, it was not discounting that provided the number. the malls were about the same as last year, but there was a full price selling, particularly on the hard lines. this is a home oriented, hard lines versus soft lines, meeting -- meaning apparel. apple does not discount anything. they were all great sellers at full price. when you go to the home improvement sector, most of the stuff at home depot and lowe's was at full play -- price or vendor supported pricing. craig johnson and loren coleman lochner, thank you. expecting oil revenue to increase. ♪ ♪ >> this is bloomberg daybreak, we are an hour from the open in the u.s., nowhere. futures off by two points, very steady as she goes, not a lot of volume, not a lot of movement across the board. in the currency market is the story of a relatively stronger u.s. dollar, the dollar down 1% after a immediate slide yesterday on christmas day when there was no trading. many were -- dollar-yen is flat although the yen has seen flat across the last week or so, it is near a six-week low currently. year, 2.49at the 10 is how betrayed, three-year over 3%. we have movement higher. the spread between 0.2. the basis going lower. critical in positive territory after saudi arabia is seeing $75 per barrel oil and bitcoin could rebound at 11% in the market today. let's get the update on what is making headlines around the business world. >> chalked it up to another way in which president trump is bucking white house norms. he will be the first president state host at least one dinner during his first year in office. the white house has given no specific reason for this but said to expect one in the new year. in russia the kremlin said officials should not view the opposition leader's boycott to see if he should be breaking the law. barringed into formally him from the election in march because of criminal elections. they say that were politically motivated. and china hosted top of the less from pakistan and afghanistan to mediate simmering conflicts. the first trilateral minister dialogue comes as china expands economic interest in pakistan. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra, this is bloomberg. >> more on the breaking news are lookingaudis at increasing oil revenue by 2023 as oil production will hit 11 million per day, basing that on $75 million oil -- $75 per barrel oil prices. walk us through the bloomberg news. reporter: so essentially saudi arabia has recently revived what it called the fiscal balance program which is a program it is using to balance budget, and that used to extend to a timeline of 2020, but now they are looking out to 2023 before they have a balanced budget. we were able to obtain extra details from our sources, and those show us that in 2023 saudi arabia sees a massive increase in oil revenue by 80%. that is because it sees output increasing, 11 million barrels per day but also because they increasing.es the 2023 budget numbers are based on assumption of $75 per barrel oil price. that was interesting. it shows -- zeb: what about nonoil -- non--- alix: nonoil revenue? vivian: that is going to be increasing because the kingdom is bringing in additional sources not just based on crude, so they have new taxes, a value added tax next year. they are introducing new fees. they are doing a lot of things that are bringing in new kinds of revenue which does not have income taxes, salinity be created. what is interesting -- so they need to be creative. oil will still make up the vast majority of revenue even after 2023. alix: it seems these forecasts are not everything is perfect, this is what we will wind up looking at. what are some of the risks we need to pay attention to? be if oilthink would does not behave the way they are expecting. it could force them to rethink your their budget especially when oil will make up 70% of government revenue in 2023, so that is a huge portion. you also have to watch the spending side for saudi, that could affect them because they are increasing spending quite a lot. capital spending, trying to stimulate an economy slowing down. one of the interesting numbers in these documents as well was their predictions for growth going forward. the economy contracted 0.5 percent this year, and one of the key ways they will stimulate growth is increasing capital spending. they could overshoot their spending targets as well. what does this mean for vision 2030? how does the prince sell it in the rhetoric around the? emma: i think -- vivian: i think fiscal balance is a big part of that, and raising nonrevenue is the trickiest part of his plan because it is something they need to do fiscally. they want to diversify from oil, they want to base their budget on things that are not just oil the same time that requires negotiating a new contract with the saudi people, raising taxes, cutting subsidies. the are measures that are not quite popular. ,lectricity prices could go up or you go out to buy a car and there is a 5% right added tax, something people are not thrilled about. it will require negotiation. alix: thank you so much, great stuff. the saudis are expected to see their revenue increase 80% and 32%.l to be a 32% -- up so what does this mean for non-opec producers? conventional oil producing is expensive, so the focus is on shale. argentina has one of the best shale assets outside of the u.s. , and i spoke with the chairman of argentina's state run energy company ytf about the development on the next shale revolution. ♪ alix: this is the biggest place outside the u.s. that is producing shale and is argentina's answer to the permian. you think the next shale revolution can happen in argentina? miguel: we have everything in place. alix: this is in the patagonia region. the formation covers 12,000 square miles and has 5.2 billion barrels of oil equivalent that can be produced in the future. that is 11% of what can be produced in the permian. miguel: it is better than the u.s.. it is very thick, and the productivity of those areas are three times the productivity of the area that you have in the permian there. alix: the state-owned energy leading this. they own 50% of the region and produce 64,000 equivalent barrels per day. the chairman is optimistic. by 2020 we will double the production. alix: if they are in the third then this place is still in batting practice. they wrapped up years behind the permian and they are expensive. miguel: we don't see how the u.s. market started at the face of which they developed. i think we will reach that point probably starting your five or six from now -- year five or six from now. drillthis rig is going to six wells. each could produce 800,000 barrels of oil equivalent over its lifetime. pablo rizzuto was just promoted to the entire upstream operations. before that he was the head of vaca muerta, and said the key to development is success toss. -- success is development cost. >> we are shifting for the next year [indiscernible] joe: why is that so magical? costcause of development and putting us in competition with other shale development. alix: you could be competitive with permian and eagle for. the goal is to hit that by 2020 which would be two years behind schedule. one problem is logistics. translated into english, vaca muerta means dead cow. it is barren with few paved roads unlike the u.s., so they have to use technology to catch up. >> we are raising development cost. alix: they have control rooms that operate remotely, and the geologists and another sit together to monitored the wealth, and soon they will have 24/7 monitoring. out in the field it can only be 80 to 90 wells, but in the control room it can be 250 monitored. these changes are critical to attracting capital. hasps has the lands -- ypf the land but they need the money from big oil. companiesnce from that went through the same cycle , open ring technologies that we don't have here. total, exxon, they are all here, and ypf hopes they invest billions. >> there are more than 18 companies here. alix: the minister has high hopes for the region. >> we will start moving from $4 billion per year to around $15 billion by 2021. alix: a key piece to that is labor reform. >> there have been some extra charges the union leaders have agreed to reduce in order to become more productive. in the end we reckon that nearly 20% of the current costs can be reduced for the new agreement that has been reached. ramy: alix: joe: the presence -- the president's administration has reduced regulations. the unions, in order to see exactly how many hands you will need to perform an activity. alix: the hope is reform will put billions of investment on the table, but others are not optimistic. >> the conditions outside the united states in places like argentina are not the same. will it be easy to develop? no. the u.s. has a perfect mission. outside, you don't have that environment to attract capital. america,entina is not and political risk does run high. what reassurances can you give them that what you do during your time here will remain when you are no longer in office? >> that is why the people have decided to change their administration. alix: they could change it back. what happens? >> energy business is risky. it happens in many countries in the world. and this is something that can change in the future when you talk about the risk, this will be for friend that's this will be for investors. alix: argentina hopes to entice small independent companies and equity money. >> i have discussed this issue with the united states, because we need also to see opportunity with american medium-sized companies coming to argentina to develop vaca muerta, and we need to work hard to make this as an opportunity for the country. alix: do you ever go there? is a lot of political risk. anytime you go to another country, you go and develop the technology, oil fields, everything is what happens? the government cannot help themselves, they have to nationalize it. alix: you would be scared to go to argentina. charlie: >> charlie: shareholders don't like to be put at risk. alix: the real test will be in the next five years. ypf wants to grow shale production by 50% and cut development cost. theyam sure by that time have connections with neighboring countries. i hope in sometimes some of them will start flowing natural gas to their countries. our aim is to secure energy production for our country, for andpeople of latin america, then they will be opportunity to export as well. alix: the world is watching. if they can pull off significant development of this region, it will prove the shale revolution can thrive outside of the u.s., and if not, it could stunt she'll growth. you want to see more of me in a hard hat, you can check out more of the next half hour. we saw m&a action like the mega deal with fox, but there was also missed opportunities. let's take a look at what will go on with media mergers in 2018 . and maybe you are returning an ugly sweater you got, tune into massar andues, carol others, heard in big new york, the bay area and washington across the u.s. on sirius xm. tim fox knows everything. this is bloomberg. ♪ bloomberg. ♪ ♪ emma: i am emma chandra here in the enterprise greenroom. coming up later, balance of power, a conversation with the former fed chair from north dakota. alix: media m&a this quarter rises in the u.s., but it has been an intimate year. the big names have caught the headlines like fox-disney, but there are questions like time warner, at&t, comcast and fox, and viacom and cbs. we have a reporter from bloomberg intelligence, great to join us today. what deals are going to go through next year? >> that is the alien, billion-dollar question. the fox-disney deal was, i don't think anybody had expected that in their wildest dreams. fox was seen as a consolidator, empire builder, and the fact they went and engaged in a deal with disney kind of highlights the fact that legacy media companies are not in very good shape, and they need to diversify. they need to build scale in order to have negotiating leverage. so obviously that raises the stakes for smaller and ms. scale players like cvs, viacom, what do they do next? vstoxx with viacom have been on-again, off-again with 2016, thisd off in 2017, but raises the profiles for companies like those. alix: comcast was also interested in fox, so which direction would they take? >> comcast is such a formidable company in the media space, they have a great presence via their cable companies. they have a big presence in content through dreamworks. we know they went into wireless this year with their wireless service. we are waiting to see how that goes, but i think the big question you pointed out earlier is this whole regulatory environment with at&t and time warner. everyone expected that deal to sail through, so with the justice department of a harder everybody has thrown into this nervous kind of situation here. alix: i am glad you brought that up. i want to take a look at this on the terminal. this is over a five-year time run a quarterly basis of m&a, he wound up having the green line is the deal count, and the blue bars are volume. you have seen that pickup in terms of volume in the last month that nevertheless it feels like a weaker environment. how much is tax reform now going to help versus the regulatory environment to could -- continuing to hurt. >> media companies are full taxpayers. a lot of them will see quite a bit of benefit once that goes through. that said we still have the reality of the situation which is court cutting, accelerating, tech giants getting bigger and better, amazon and netflix, so the legacy he accompanies have to see how they remain viable and relevant in this new streaming world order. the big wrench in the work is the at&t-time warner deal, so i think it is wait and watch for a lot of these companies. alix: what is the price tag going to be? that volume was over $60 billion, by the last view quarters we were under $40 billion. what was the other megamergers, or will they be smaller? it has become really obvious the smaller players are going to have to find probably homes in these bigger, more diversified companies. multiples have remained fairly high, fairly robust, and this highlights of value of content, so like lions gate or amc networks could become a target in 2018. alix: how does amazon, google looking into original content play into this? >> they are not all after this in a big way. amazon itself spending $4 billion, netflix spending $8 million. none of them have made any huge acquisitions. apple is spending $1 billion. .hey are dipping their toes netflix has not gone after anything big. they are more looking at building instead of binding, same with amazon, but it is likely they could go after a big studio like as the studios and properties become more and more scarce. alix: a real pleasure to talk to you. thank you very much. there is a disturbance in the force for the last jedi. star wars remains number one in the box office, but audience turnout dropped. this is bloomberg. ♪ ♪ emma: this is bloomberg daybreak. -- u.s. natural gas shales sales in china are booming. they stepped up of big demand. china's natural gas could list triple to around 600 billion cubic meters by 2020 and could overtake the u.s. out the largest consumer by 2050. ipo's bounced back in 2017. four companies saw more than $1 billion in stock this year, 49 more companies going public this year than last, fueled by the seller or get -- fueled by the stock market. men large fewer listings, and this one for alix, the force is still strong with star wars, topping $100 million for the second weekend in a row. releases this new holiday weekend including jumanji the sequel. that is your business flash. thursday, i was into it. how is stacked up to other box office opens for star wars. trilogy was $108 billion, but the original movies , not counting for inflation, $30 billion on the high-end. this is bloomberg. ♪ ♪ cannot live without it. so if you can't live without it... why aren't you using this guy? it makes your wifi awesomely fast. no... still nope. now we're talking! it gets you wifi here, here, and here. it even lets you take a time out. no! no! yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi. wifiso if you can't live without it...t it. why aren't you using this guy? it makes your wifi awesomely fast. no... still nope. now we're talking! it gets you wifi here, here, and here. it even lets you take a time out. no! no! yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi. ♪ >> from new york city for our theers worldwide, this is countdown to the open. ♪ alix: s&p 3000, three banks falling, another at 11% next year. we will hear from one of the first strategists to make that call and get his continuation for the full market. bitcoins wild ride continues, passing 15,000 as the rebound begins. is it time to buy or sell? analysts cut the export for the iphone x forecast, citing new problems. here is how we stack up a half-hour before the open in the u.s. futures down. nymex crude is flat. but moving into positive territory after saudi arabia sees oil revenue increasing by 2023. the euro-dollar a little weaker after that splash where the company -- currency dropped like