it is a stronger dollar story this morning. yields much higher on treasuries by flavor basis points -- four basis points. alix: look at the two year yield. 1.29% on the two-year yield, up three basis points. watching over in france, the yield up by thre two basis poin. watching that selloff as we hear that fillon will stay in the race. david: taking us to president trump's speech to congress last night, we are joined by kevin cirilli. in new york, we have michael mckee. what were the highlights of the speech? what did you take away from it? kevin: it was a different tone from trump, but it did like policy specifics that traders on wall street were looking for. he did call for an increase to u.s. notary spending. he also called for a $1 trillion infrastructure package plan to pass. he also vowed to cut funding from the environmental protection agency as well as the state department and foreign aid. either way he did not take a position on the border tax or tax reform or a host of other issues, but he did look to project a unifying tone to this congress. david: a tone that may be to include democrats as well as republicans. is that the reaction from the members in the chamber last night? kevin: republicans viewed this as a political home run. he will have to work to attract more moderate senators like heidi heitkamp. senator heitkamp was at the white house yesterday, participating in an executive order assigning. there's no question that the white house feels they delivered on a positive speech last night. they actually canceled planned executive orders on the controversial temporary ban to seven predominantly muslim nations on immigration. they canceled that and delay that roll out until next week. david: long-run tone and may be short on substance, but at the same time, how are the markets and business reacting? is a positive enough with the tone itself? michael: it may be. if you strip out everything else, this was a laundry list speech running through campaign promises without any specifics about really anything. itwas notable only because was donald trump and everybody was waiting for him to say something outrageous, which he did not do, and that made it notable. at the end of the speech, all the democrats got up and walked out en masse as republicans were giving applause. even if he reached across the line, he didn't make a lot of progress last night. on the other hand, he didn't create a negative story. for the trump administration, right now that's a positive. on capitol hill, you've got to get something done. talking about the promises you make isn't the same thing is proposing ways to get them a compass. david: they walked out of the speech was over. out duringtc not walk the speech. for things like tech chiffon, is it more likely to get done if he is want to reach across the aisle? it is hard to tell because he did not put forward any kind of specifics. michael: that the structure plan is something he talked about during the campaign. he offered no details. he offered no details as tax reform. they want to do it as a package, but what kind of rates are they going to put forward? are they going to adopt the border tax? memo that came through. the markets are left wondering and so are people on capitol hill. what are we going to be voting on as we go forward? he offered a little bit of specifics, looking for tax credits to help finance people's purchase rather than some of the taxes that are imposed on people right now. beyond that, not much you can hang your hat on if your trading this morning. david: thank you so much, mike. kevin, i suspect we will be coming back to this throughout the program. jonathan: we will have fungal height.al we had several people come around the table and say that the hard facts need real details. wake up this morning and futures are big. i know there was a big effect in the market right now. the market is patient and still patient. >> the market is more reacting to tone as you alluded to before them actual substance. definitelyge of "we need to flesh out regulatory reform in terms of dodd-frank repeal. penciling's plan is different than what the trump administration has discussed, so we need some consolidation there and we need better articulation of whether there's going to be import tax or not. is this going to be a revenue neutral tax reform, which a lot of previous plans have been, or is there going to be a meaningful tax cut paid for by dynamic scoring? that is an issue that we think will end up playing out. they were very light on details. traders and investors are left grasping still at the fact that trump is more optimistic, we're going to get more progrowth regulatory reform. even though there were not many specifics on infrastructure, at least you got the chilean doll number. of elect to see how long they plan to spread it out. -- i love to see how long they plan to spread it out. he did specify it will be public-private partnerships, but that means a lot of the projects will have to be told based. there has to be some revenue behind it. there were more specifics and in some would say, but traders are waiting for the key information. jonathan: mohamed el-erian was on the program yesterday and he said the three things important our content, timeline, and approach. how much longer to be have to wait? >> my perspective on the market side of it, i was looking toward health care, tax, and trade. on health care, there is still forward on aca reform. the longer they take on aca, the less time they have on tax reform. i put out a piece of an eye can see health care now getting pushback they were hoping to get it done in the first quarter of the year. it more likely looks like early next year. upgrading of america their end of your price target for s&p to 2450 based on sentiment and technicals. meaning of, do the markets care about the specifics shawn is looking for? troy: clearly markets care, but what they are basically alluding to is that we are going to take it on faith that we are going to get progrowth reforms that lead to better revenue and earnings. because of sentiment and technicals, we will get further multiple expansion, which is still a question. we are fairly high multiples, which you know. they are discounted future growth, but in order to have better gains, that is the missing piece of the puzzle that enters the question of their forecast. jonathan: may be a case of price at narrative for the guys over at bank of america. their target was 2300. we are north of that anyway. a lot of people are chasing their tails. alix: we have not seen equity capitulation. that is still to come if we do get what is delivered from president trump. the day question of courses tax reform. he did not mention border adjustment tax, but he did reference present obama's huge deficit and how much a group. is that a reference that he wants something revenue neutral? shawn: i think his team thinks it's going to be revenue neutral whether it's a big border tax or they use the house republican plan. their goal is to create something revenue neutral. i do not see the path forward for border adjustment tax. you do not see the votes in the senate. as are other colleague just mentioned, from an investor point of view, they expect to see some of these changes. you talk about the repeal and replace of aca and we expect to see a repeal and replace go forward. david: the present has set among others that they are going to have to do obamacare before they get to tax reform. he was fairly exposed on the outline of health care reform. it sounded like what speaker wright has been talking about and secretary price , which is a pretty radical reduced. o. shawn: you basically say i want better care and better provisions but to cost less money. you have a lot saying they do not like the current draft in the most of noxious part of them is the taxes. if you get rid of the taxes on day one and keep the benefits, it becomes really spence of overtime. alix: after yesterday, do you change what your bets are on? troy: the base question for us in the short-term is our banks. banks have had a very strong rally. they have liked here recently, but a lot of the forward upside to banks will now be dependent on policy implementation, not promises. again, back to tax reform. banks are one of the biggest beneficiaries of a corporate tax cut. how long will that be? it's a meaningful difference. dodd-frank reform -- the big banks have really ripped here, but had siblings plan for reforming the banks is different from what's coming out of the trump administration. on the margin, given how they have run up what they have, they could trim back this quarter. there are still a lot of good cash flows out there and we really do for a correction, a real pullback in banks after this meteor rise they have had. that is one specific thing around banks and financial services we would've liked to see more details. it is not look like we will see it in the next week or two. n, you are and shaw both sticking with us. we welcome our twitter viewers. "bloomberg daybreak" is streaming live. don't miss it. fresh reaction from president trump's speech to congress. center chris coons will be joining us. later, check out shares of best buy. down nearly 10% despite quarterly earnings beating estimates and revenue missing as well. not enough to entice investors is morning. this is bloomberg. ♪ >> time for other stories making news at this hour. emma: america's spending more on their earnings that beast at the -- the estimates. s released a forecast that was higher than expected. uber ceo travis kalanick admits for the first time that you need leadership help. that comes after the ceo got into an argument with the driver over the copies fares. >> some people don't like to take this possibility. they blame everything in their life on somebody else. good luck. a: he says he apologized to the driver. last month, more than 200,000 people uninstall their accounts after the company was accused of undermining a taxi trike protesting president trump refugee band. former president obama and his wife michelle have signed book deals. no details have been exposed, but the deal is in the tens of millions of dollars. they plan on dealing a portion of it to charity. i'm emma chandra. this is bloomberg. alix: yesterday was bill dudley for the wind, talking about a potential rate hike increase in march. take a look at the bloomberg here. it's one of my favorite functions. the green line is where we are right now. the yellow line is where we were just in the beginning of september. a bigly have we seen rewriting in the front end, but we have also seen a berating. and shawn are still with us. i thought was present trump leaving the market, but the fed it wasl -- i thought president trump, but the fed is still leading the market. troy: is the economic data slows down, we doubt that. it's a very different outcome for net interest margin going forward. furthermore, a lot of the rally in anything financial services related has to deal with how much the yield curve steepens. if we get softer loan growth, it will be much more challenging. finances is one of the sectors much more dependent on the fed. the broader market is still hyper dependent on monetary policy. that will never go away. alix: you're looking at one year the implied policy rate to be over one and a quarter percent -- 1.25%. can the fed stay in the way of fiscal stimulus? where does this fall in your outlook of tax reform and obamacare? shawn: trump is talking about this $1 trillion infrastructure plan. those numbers i think are just way optimistic right now. in 2009 withs that the stimulus plan and recovery act that you had the dow at 10,000 and unemployment near 10%. he had a $900 billion total plan. $100 billion of that was infrastructure spending. that chilean dollar number is a little too high and will be tailored back of it. -- that trillion dollar number is a low too high and will be tailored back o a bit. there will be said members replaced. you have to think about the macro potential regulator. who the: we don't know fed chairs going to be next year. given the conversation we had at the start of the program, it's want to take so long to do everything else. is the federal reserve really at the forefront of their minds right now? shawn: i'm sure it will way into the fed, but the fed does not talk politics when i've asked them about this. they always go around the issue. alixjonathan: does the of ministration think about the complexion of the fed? so, but fornk president trump, he probably has a lot of friends in the markets he can talk to about this and they are probably putting forward names. less so on this up in court and may be relying more on the senate and folks that they want to see as justices going forward. david: this is not janet yellen. this is president deadly from new york. withhing that baffles me this is that there is no new surprising piece of economic data. i do not see the day that they are dependent upon. they went from 50% to 80% likelihood. as president trump is thinking of replacing some of the fed on a question that we should be more will dependent and less capacious? troy: the only new data is softer told growth. all one can think of is again that they have some type of insight, which they clearly don't, it's a future government policy. we are all debating future government policy. tax reform goes through, that should boost growth, but until now, they're not really incorporated that into their forecast. perhaps they are starting to do that and coming back with the feedback loop that leads to higher inflation. jonathan: i wonder if that is what is actually happening. some investors sit around the table and say it should move. all this happened overnight. we have a key for member -- fed member saying we are ready for a move. david: we should of been moving all long. is that what is going on here? d.c.: for the folks in thinking about this, they are only thinking through their own policy window right now. i do not think they are worrying about what the fed is when to do. and congress, they are a lot smarter on these issues and are worried about it. as a talk to members on staff, they are focused on a couple of things -- one health care reform and then tax reform. outside of that, they cannot worry about anything else. troy: there is no clear reason why those odds just went up and markets will be left scratching their heads. back to your point, is it a rules-based debt or more capricious? the more capricious, the more unstable markets are. alix: if we get a march hike, do you have to rebalance what you're doing? troy: one hike in march will not make or break us. certain streams will go up and some will go down. there quite a bit of floating exposure right now. anyone with any financial service exposure is going to be reading fro for more hikes. going from 50% to 80% is not quite a shift our dynamics. toathan: troy struggling understand the reaction function of the curve. troy: i'm trying. [laughter] david: always good to have you. shall is going to be staying with us. we get news from both sides of the aisle on president trump's address to congress. to talkons is here about why he agrees about bring new manufacturing jobs back. later, the only former fortune 500 ceo in congress. david purdue on why he is against the border adjustment tax. live from new york, this is bloomberg. ♪ >> i believe strongly in free trade, but it also has to be fair trade. i'm not going to let america and its great companies and workers be taken advantage of us any longer. ,hey have taken advantage of us of our country no longer. david: it was a big night in washington last night as president trump addressed a joint session of congress for the very first time. i've seen a lot of these state of the union addresses, and i do not member one in which the markets were this focused on what the president had to say in the chamber. wilbur ross said his priority will be renegotiating nafta and leveling the playing field with china, which he calls "the most protectionist major nation." he says the u.s. will pursue tougher enforcement of trade rules with china. take a listen. >> much tougher enforcement. there's not a lot of point making trade deals if you don't enforce. >> china the most? >> everybody. >> specifically with china, what are you looking to do? >> in force. us.d: troy is still with abouts this thought problems with trade or maybe even a trade war. what about the problems with investing? troy: there's a little of good trump and that trump. bashing and no focus on trade wars, but there was focus on corporate tax cuts, but the same time there was a warning to other countries that we need fair trade and not free trade. he focused more on the progrowth side again and corporate tax reform than on the negative side for trade wars and protectionism. jonathan: the heart of this. -- i'm thesident president of the united states another president of the whole world. there has been one big winner in the last decade and that is china. troy: and germany. jonathan: much less protectionist than china, but i really grapple with that at the moment. how do you go to the chinese and say i we do not like -- we do not like the trade barriers needed to lower them? alix: it's about the other ways that there are obstructions to imports from the u.s. do is you back down or we are going to put tariffs on you. do.than: and then they coming up, democratic senator chris coons joins us from washington on what stood out from president trump's address to him. later, steve ratner. from new york city, good morning to you. this is bloomberg. ♪ . jonathan: from new york city, this is bloomberg. a check on the markets. 1%.res up about half of on the doubt, we snapped the 12th -- dow, we snapped the 12th day record. if you switch of the board, the fx market, about the president but the president of the new york fed and not the united states. the case for rate hike has become more compelling. the dollar-yen, up by 0.9%. yields push higher by 4 basis points. that is some of the action across the market. some of the news with emma chandra. emma: first word. in the u.s., president trump sounded a different tone in his first speech to the congress. instead, the president laid out campaign promises with few details on how to turn them into reality. he called for the repeal in a obamacare and a massive building project. to launch ourp: national rebuilding, i will ask congress to approve legislation that produces a $1 trillion investment in infrastructure of the united states financed through public and private capital, creating millions of new jobs. emma: the president said will perform on immigration is possible even though he stuffed his pledge to build a wall and he wants a closer examination of anybody being allowed to immigrate. president trump: he is not compassionate above reckless to allow entry where proper vetting cannot occur. indicated thatns the president's plan and there are big differences between president trump and his party on a number of issues. a new report predicts that the superrich will continue to flock to the u.k. the number of people with $30 million or more living in london will rise by 30% in the next decade. the report says the new york is the top spot for the ultrarich. in france, the candidate said he would not drop out. he says only voters should decide who will be france's next president. the case has to do with him employed wife as an assistant. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. this is bloomberg. jon? jonathan: for more on the french election, we will hear what people are watching. you with us on the program. stays in, does it boost the chances, what is your take? risk fork the key markets, both sides is clearly politics. we tried to quantify political risk in the last few weeks. --ends, -- friends will be france will be the focus. and ary and it is le pen pathway toward integration and we think it is unlikely that a -- candidate winning. we thing as it plays out, there's a lot of upside risk in equity markets. jonathan: you labeled it a volcano. walk us through. >> when you have very high level of investor uncertainty especially around high level risk events, which clearly is the french election has turned out to be, it is very hard for investors whether hedge fund to aggressively commit what would otherwise be. we have a kind of paralysis in financial markets, the french and german spreads, broadly where they are. on the flow side, we have three months of nothing. inflows or outflows. a lot is sitting on the fence. winhink le pen it does not and the whole market moving the same way. you get this mini volcano. we wrote about this before the brexit vote. jonathan: sky bridge is still with us. to own the volatility of french bonds? : staffing back, we say why not either? there are so many opportunities and we still favor the u.s. with that being said, the sydney, you'ree nervous. hem our point of view, alluded to it, and there have not been inflows or outflows. all last year, europe was liquidated. technically, it is in a stronger position. if we had any bias in europe, which we don't, -- which we do, it would be modest especially of continental europe. jonathan: you captured the upside in your. hsbc pointed out if you want the cyclical recovery, europe is more industrials around 20% versus the united states. is that the way to do the cyclical recovery template equities versus the u.s.? >> this year is all about earnings. u.s. equities will be fine. u.s. shares moving in line with earnings. we are very likely to get double-digit in europe if we do not get high-level little risk realized. europe becomes re-rating. it becomes a double up markets. that is how we are playing debt. that is why was he a tilt toward overweight. very cyclical strategy and we continue to be positioned. jonathan: jonathan stubbs, great have you with us. alix: without personal income and spending and core pc later. paid,ployment, new orders looking to the fed chair janet yellen's speech pretty here with us is michelle girard. and troy gayeski is still with us. -- yellen's speech. and here with us is michelle girard. what's myirard: expectation is we would and we had revisions to the numbers yesterday for the fourth quarter that maybe make it more difficult. we will be very close. we will hit 2% whether we see it in january or in february, next month, we see 2%. the fed have to fill that are at both of their mandates, both inflation and we look ahead to janet yellen's speech on friday and the fed meeting later, you have to think the markets are the odds of the fed making the move sooner rather than later has increased. consumption at 3%. today, we will learn how they are paying for it. our consumer spending their savings or making more money? michelle girard: the income and spending numbers are going to look a little bit cautionary. we are seeing income growth especially in real inflation slowing. it is growing more slowly than the pace of spending. you are looking at a situation where consumers have drawn down savings. it is not a situation that is sustainable. ,f income growth slows presumption -- consumption would follow. i am going to be more hopeful. i expect income growth will pick up. i am optimistic about the economy. if you look at how high consumer confidence is, it rises. i do not want to get too caught up in what the picture looks like today. i think the outlook over 2017 is very bright. a question ong hearted data versus soft data. slowdownalking about a in consumer spending is incomes do not hold up. do we see the survey data move down? bet one girard: i will survey data. i think consumers and businesses are rightfully feeling confident about the outlook. even though in some ways, markets are concerned about the president to deliver on a lot of the progrowth stimulus. you can see companies remain very optimistic. in part because they are encouraged about what they see so far. what the president has been to do unilaterally. what i am sensing is consumers are positive. they see the labor market as very strong. l for theat bodes wel survey data winning out. the pc numbers that the fed focuses on. if michelle is right, is it behind or ahead as we heard from mr. dudley? travis kalanick: behind the curve. : behind theski curve but we understand why they have not. she said people are spending down savings in the short-term. you have to look at the bigger picture. 2012, consumers went through deleveraging. in 2014.evered given the confidence numbers and the sentiment among businesses and improving manufacturing, we tend to agree you go with the sentiment for now and a so real income will catch up. alix: are you backing yet? you companies saying we are optimistic. are you trading off a potential? from ourski: perspective, the key to our positioning is the u.s. a voice a recession. recession risk we think is low. -- the u.s. avoids a recession. we were relies more upside. -- realize more upside. david: thank you to michelle isard and troy gayeski staying with us. democratic senator chris coons joins us to go over what he agreed with and disagreed with in what the president have to say. this is bloomberg. ♪ emma: i am emma chandra. hour, thein the next only fortune 500 ceo in congress , david purdue. chris coons has served as senator since 2010 as all four relations and judiciary. welcome, senator. you are in -- you were in the chamber last night and you applied it at certain times. tell me no one substantive thing you agreed with. that and you are plotted as cert ded certain times. sen. coons: that we should hire americans for infrastructure. one of my concerns was how we were going to pay for this and make sure an ambitious package actually does build new infrastructure rather than simply enriching certain investors or refinancing an underweight project. david: paying for it seems to be the rug. that?are you on are you willing to increase the deficit? willing to i am increase the deficit for infrastructure. we shall look closely at what tools we use to make sure we are creating a high-quality american jobs and invested -- investing in infrastructure that makes economic sense and getting participation. david: one of the things our audience is interested in and i expect your constituents are tax reform -- is tax reform. where is the process? we are told we have to go through obamacare for us. if you were advising a business leader, when would you tell them they could expect tax relief? sen. coons: when could they expect has relief, i would say no sooner than the end of the year. night, thelast president is clear he intends to repeal and somehow replace the affordable care act. republicans have not come together around a consensus plan and there is disagreement. if they choose to repeal and replace the way it was enacted through the reconciliation process which takes 51 votes, they are going to have to do it first. that could take months. tax reform is very difficult. when you added a new tax like the border tax that the president is proposing, you could raise revenue and increase one sector and punish another. there will be a lot of fighting about which taxes go up. david: are you open to the border at adjustment tax? i would have to see the details. other countries impose a tax or other taxes. there is a way we could create a border and adjusted tax that would actually pass muster and not create a trade war. if we're going to do some of the bold things we can agree on like strengthening our military, supporting veterans, we are going to any revenue to pay for it. i am open to any reasonable proposals from this administration. alix: what would you be willing to cut to get a lower corporate tax rate and not a border tax adjustment rate? what are you willing to cut from discretionary spending? ought to bewhere we looking is where we have loopholes and we have tax exemption and there are ways we can broaden the base and a lower rates through tax reform. our discretionary spending, as a percentage of spending is at the lowest levels since the eisenhower administration. if were going to grow our economy by investing in education or doing medical research to find cures the president talked about last night, you cannot simultaneously do it by slashing medical research, health care and education for this country. david: senator, the president addressed lost manufacturing jobs in recent years and that is something you are sympathetic to a europe taken it up as i think you want to pursue. let me put up a chart a you can imagine it. it comes from the united nations. across the world including germany and japan, over time that has been declining. can that be reversed? sen. coons: i think we can stabilize and grow employment in the united states. we cannot go back to the high agol we had 10, 20 years because despite the rhetoric about free trade agreement being the main reason we lost jobs, the main reason is innovation. it takes fewer people to make the same number of things. so, there is a combination of things we should and can do to fight for american manufacturing. a republican and i have joined together to form the competitiveness caucus on things we can do with taxes and immigration and intellectual property to try to strengthen the case for manufacturing and grow the number of high skilled, high wage jobs in this country. david: this is clearly a priority for the new administration. do you think they are going about it the right way? sen. coons: well, they have made broad a brush proposal -- broad brush proposals. i look forward to meeting with the new secretary of commerce. -- dow the ceo of doubt tappedn cap -- has been as an advisor. i do think this is the area where we can cooperate between where americans are hungry to see and restore strength and manufacturing. david: do you agree to the president is addressing trade issues, countries with the deficit like mexico, such as china? sen. coons: yes. we have to do a better job of getting fair trade. the president said he believes and supports free trade but he wanted to be fairer trade and that the be a constructive conversation. berating our competitors is not going to make a big difference. tweeting about it, giving both speeches, i do not think will make a lasting change. there are ways we can work together. one of the ways the president promised is to designate china as a currency manipulator. to the best of my knowledge, he has not done it. there were number of steps he said he would take and what he is done is step back from tpp. what he has not done so far is to engage some of our allies and strengthening relations and find ways we can strengthen enforcement. something i pressed obama on repeatedly was to strengthen our intellectual property. there are lots of things invented here no longer manufactured here because other countries are stealing our inventions or copying them. i think we can do more to defend american inventions and the things we invent are made here. david: many thanks. that is senator chris coles. alix: a lot of room for agreement. -- jumpinghighlight over 8%. it beat on revenue. it was better than estimates and nicotine's advance toward earnings target of six dollars a share. watching that stock. and if you have a bloomberg terminal, go to tv and watches online and click on charts and graphics. interact with us directly as well. tv . of course, i can pretty david: use it -- of course, i can. -- david: you said it was cool. alix: this is bloomberg. ♪ alix: i am alix steel. sky bridge capital portfolio manager covered a lot of range. what is your strongest prediction? >> we love wireless spectrum. a supply-demand mismatch. there has been a change in how data is transferred. it used to be voice was the number one and now it is data transfer and it works way for me to demand. quite a few companies invested in the past. mid-band.works for many years later, you see real value where you think about what hedge funds do is try to make money in a non-correlated way, not sensitive markets. , theer the fed hikes twice head winds, it will not impact spectrum value. what we're waiting for is one of the big strategic to make a place to beef up. is going up.mand both mobile and video. a huge bandwidth hog. troy gayeski: if you look at softbank, they are pursuing all of the above strategy. and have various plays spectrum, wireless. you look at yesterday with the web one, that's basically going to give them another potential of distribution platform for data transfer. our standpoint, we do not have all of the information. they have start to move with ultrahigh band which is more for the internet of things. carriers are moving. and the reactivation of title ii for net neutrality, it has freedom for carriers. -- freed up for carriers. cap ex for carriers. jonathan: more reaction from donald trump's speech. from new york, this is bloomberg. ♪ jonathan: short the details. president trump pledges unity. patiently waiting for news on fiscal policy. the fed's march meeting with one official saying -- from new york city, for our views worldwide, a welcome to viewers of "bloomberg daybreak." switch out of the boards. 0.6%.s this morning up by put a rocket under the dollar. a weaker euro story. down by 0.4%. rate hike surging higher. , you do have a backup in yields by one basis points. often the high of the session. a two-year market, yields 4 basis points. gold a little softer. a relatively calm markets. david: for more on speech, we will turn to kevin cirilli. great tone, not a lot of substance. he touched on jobs and infrastructure. what does he have to say and how was it received? trillion a $1 infrastructure plan. both the democrats and republicans including former president obama have try to have the infrastructure spending allocated and they failed. president trump making the case he believes now is the time to have it. he have to win over concerns within his own party, especially if he wants to spend $1 trillion. i spoke with several tea party members yesterday at -- after president trump speech including .or shills -- fred shields they have concerns about how exactly he will pay for it. we do not get any specifics. there is a proposal that would seek to use -- utilize money through leveraging the corporate tax rate every creature to funds patriated fees- when they come back. david: it is not just republicans. democratic sen. coons said he was concerned. is there support today? point i woulder raise about how democrats and whether or not he wants to get them on board, they're concerned president trump was seek to pay for infrastructure by providing a tax cut for wealthy americans and providing corporate tax relief because that has been an idea floated in washington as a means to utilize to pay for the $1 trillion proposed infrastructure plan. with of democrats worked president obama to try to have infrastructure spending through economic stimulus. they like that. as we heard from sen. coons, there is tension right now on whether or not to just provide the economic stimulus. david: thank you. we will check in with you later. ansident trump laid out ambitious program. he pretty much stayed away from specifics. he gave us numbers with the infrastructure. listen. president trump: the time has come for new program of national rebuilding. approximatelyent $6 trillion in the middle east. all the while our infrastructure at home is crumbling. with the sing street dollars, we could have rebuild our country twice. for $1be asking congress trillion investment in infrastructure of the united states financed through public and private capital, creating millions of new jobs. this effort will be guided by 2 core principles. american.n and hire david: joining us now is steve rattner. , steveany other things served as chair and lead advisor to president obama's task for spring when you look at the speech and you can include infrastructure, is it an agenda wishlist? steve rattner: i think it is both. it is a wish list. despite good feelings and cooperation with the democrats and so forth, getting through congress will be difficult not only because of democrats. blocs withint congress that will make anything increasing deficit debacle. thed: do you take likelihood of an infrastructure plan or do you discounted? steve rattner: it is hard to separate anyone think out. is market, as a whole, assuming that trump will get a considerable amount of his companies andteel your sin optimism. -- and you are seeing optimism. perhaps too optimistic about him getting some other stuff done. alix: what is the timeline? gove rattner: you have to through the budget reconciliation process. as trump said to governors, you have to do the affordable care act first and tax reform. we are looking at the two years of congress to pass or not pass the agenda. jonathan: you get the affordable care act dealt with. could we be here in two years and that has reform has been sitting waiting? : both arener possible. tax reform can be done just by the republicans using reconciliation process with 51 votes. if they can keep more conservative members on the side, they could come up with a that theyike bush did could jam through congress. health care is different. any sensible plan requires 60 votes which means the congress have a block and we could be sitting here with nothing done. jonathan: the president has done one has to be done before the other. you say it is not the case? steve rattner: it gets, kate with the reconciliation process. the way they set it up, they have to do it before the other. -- it gets complicated with a, -- reconciliation process. these obamacare exchanges could die of their own weitght. they are on life support the trump administration has told the irs to stop imposing the individual mandate. it is possible while it is going on, tim william americans that their shores through the exchanges -- 10 million americans get their insurance through the exchanges and they could collapse. david: let's listen to what he had to say. president trump: i am calling on this congress to repeal and replace obamacare. remember, when you were told you could keep your doctor and keep your plan, we now know that all of those promises have been totally broken. action is not a choice, it is a necessity. i am calling on all democrats and republicans in congress to work with us to save americans from this imploding obamacare disaster. we should ensure americans with pre-existing conditions have we have acoverage and stable transition for americans currently enrolled in the health care exchanges. and finally forces get the job done and get it done right. david: you wrote an op-ed piece in which you explained why that might be harder to do than it was to talk about. steve rattner: what we learned last night, he bolted to the paul ryan view of health care. -- he bought into the paul ryan view of health care. it is sounding a little softer. the ryan plan for all of this good packaging is very harsh. it would reduce the number of people on medicaid and eliminate subsidies and replace tax credits by age and not income, disadvantage lower income people. he didn't go in that direction. i do not know how you -- he did go in that direction. those kind of benefits required huge enrollment as significant plans and not skinny little plants. -- plans. he said he would not insist on that. it is hard to see how it comes together. david: during the recess, many heard about health care. hold bothner: they sides. people lost their health care because of obamacare and people who had pre-existing conditions and got coverage because of obama care. he can say it is an absolute disaster. but 20 million and 23 million americans have insurance now and did not six years ago. alix: the other big thing was drug prices sank he will hammer drug prices and he will hammer down and wanted them to be lower. what is the process? steve rattner: remember when bush pass the prescription plan, he promised legislatively to the drug companies the government could not negotiate medicare drug pricing the way the veterans administration do. if the president means what he is saying, part of his obamacare perform replacement or whatever you want to call a package should include provision allowing the government to negotiate drug prices. alix: steve, good to have you. steve rattner, you're sticking with us. the only former fortune 500 co in congress, david purdue -- ceo in congress, david perdue. and later, david rubenstein will be joining us. a tale of 2 retailers. relative keeping americans going to their stores. , truly ugly. falling ahead of the open and missing on estimates. weak demand on gaming. a shortfall on product availability. this is bloomberg. ♪ david bang from new york city, this is bloomberg very i am a jonathan ferro. -- jonathan: from new york city, this is bloomberg. i am jonathan ferro. fillon promises to stay in the election. bloomberg's deputy bureau chief joins us. great to have you waited. campaign. a lot of drama. what have we learned? >> a chaotic morning. basically, fillon said i will stay in no matter what, even if i am charged with miss you of public funds -- misuse of public funds, i am staying in. he rallied his base by saying the judicial inquiries are in regular and amount -- a regular and amount -- irregular and amount of political attack on him. tough to say. ultimately, both of them, for now, talking to pollsters and they say hang on. talking to people in a bound the country. frustrated and want to discuss -- in the country and they are and want to discuss issues. saying iowae people to vote for le pen because of anger and others saying readily to support -- we will see what happens in the polls. jonathan: do we have the same issue like in the united kingdom with the brexit referendum and the u.s. election between hillary clinton and president trump, people did not show their hands to pollsters when asked? >> i think we can debate how accurate the polls were in the you k and u.s. -- u.k. and u.s. the link that everybody is looking for in france with those situations is the simple anger of voters. and is the anger of voters strong enough to overturn gorything and essentially for a le pen presidency which would be dramatic economically and for european policy. jonathan: great to have you with us. thank you. for more europe, we are joined by michael cuggino. still with us is steve rattner. the sense of france is different than the united states. let's get out of the way. pen, do is marine le you share the view, she is a high risk candidate for the markets? michael cuggino: i do not claim to be an expert on the french electorate, but what i look at is structural. they do not have a union between the currency and political power in europe and they have now for while and represents big risk and that common currency going forward. too little degree that you had brexit laster and france and germany comic to the degree that it is a domino effect and puzzled the european -- and puts europe in question, the countries will figure how to trade with us and everybody else. short, their kobe dislocation and recession and a -- there could be dislocation and recession and a mess. jonathan: it has been in the slow grind. i wondered, as you were a candidate in the shape of manuel, will he make a difference or a short-term all the good that we do not get le pen? : i am not an expert on for us either. throughhe can get it it's like what we were talking about here and if you can get the support of legislators and who knows and france has been this way a long time and it is hard to be too optimistic there is a change of the program. david: what does it say to an investor about france? steve rattner: this estimate recently cautious. >> stay on the sidelines? >> when i look at our exposure, we have a fair amount in the stronger parts of europe, northern europe, other parts, the u.k., even spain and ireland. very few of our money managers are doing much in france at all. david: much better returns in other places without the risk? >> that is the question. i do not see the risk-reward in european debts. you look at the u.s., i think the u.s. is playing more attractive without political risk. when you have dislocation that presents opportunity, you have to be very careful and we are relatively conservative investors. for us, there are better returns. alix: did you said the u.s. has no political risk? : not as much as france. -- theyey have more have a better relationship to trade globally. : european growth has been much more worse for the united states. alix: but better. "bloomberg daybreak -- michael cuggino: it is improving. 2% growth is not good enough. in europe, it has not gotten to that part. yes, there's political risk here. there is a dynamic, a momentum of lower regulation, potentially higher corporate profits. that is a better business climate. i am not an expert on french politics. i know more about u.s. politics because i love here and observe all of that. yeah, there's less political risk here than over there for u.s. based investor. if you tuned in and been away and listened to the conversation, you would think it was 2011 a part things were pretty dire -- it was 2011 and things were pretty dire. >> inflation is picking up which is good. the growth rate is picking up. you have the political risk on the side. yes very europe is trading three multiple points lower which is pretty much the widest, the wide end of the historical range. three multiple points. beat u.s. from dynamism. issue trade at a discount. -- you should trade at a discount. david: michael cuggino and steve rattner will both stay with us. republican senator david perdue turned around dollar trade and this here to tell us where he agrees and disagrees with what president trump have to say. this is bloomberg. -- with what president trump had to say. -- this is bloomberg. ♪ jonathan: this is "bloomberg daybreak." i am jonathan ferro. a check on the markets. who moved the most, the united -- the president of the united states or the president of the said? -- of the fed? latter and not the former. features in the united states. the bond market and the fx market i want to talk about. bonds are softer pretty yields are up five basis points. the fx market with a much stronger dollar. a rate hike probability in march climate. outlook's 2% today. -- alix: 82% today. hikee prospect of a rate is more compelling to power? with us.ve rattner is nothing necessarily change in the data in the last 24-48 hours. steve rattner: most people think it is because bob dudley to have a speech free alix: many have given a speech. steve rattner: kiss the vice-chairman. -- he is the vice-chairman of the fed. they speak more in concert with the entire fed than your typical governor in kansas city. the second thing that is not moving in the market is the dollar was the president and when the president gave a very, credible, good, whatever word you like to speech which was uplifting. alix: janet yellen speaks on friday. wait until you hear yellen spin. what does she need to do to paul march -- two-putts march -- to put march up? alix: they say next meeting. >> they do not know. in practice, they do not know on till they can into the room what they will do. i do not think she wants to see the percentage go up. her goal is to put on a glide path to 100%. way that there any president dudley would have given the speech without janet yellen knowing about it in advance? >> i think it is highly unlikely. as i said, traditionally, new york banks' president and governors coordinate. jonathan: does it make a difference whether they go in march, june, september? .> it does not matter to us if you are investing in fixed income, it might matter to you all lot. they go up and down. from our point of view, it does not. one of the interesting things to think about is higher interest rates good or bad? theyyou look at history, are bad for the obvious reasons. in the short run, they can be good not as a causation but a signal that the economy is quite strong and equities might be worth more. jonathan: steve rattner great to have you here it coming up, economic data across bloomberg. that is next. you are watching bloomberg. ♪ jonathan: from new york city, you're watching bloomberg. i'm jonathan ferro. really nice tone for the balls out there this morning. ulls out there this morning. 1.63% in germany. yields are higher. the dollar is stronger. his name is mr. dudley as he talks about a rate hike over at the fed. alix: taking a look at personal spending. up .2%. for january.me .4% spending later income -- spending later -- lighter, income stronger. if it had reached 2% it would have been the first time since 2012. inflation picking up. still below the fed target of 2%. joining us more is stephen michael cuggino and michael mckee. your initial reaction to the data dump. >> it's right on expectations. a .3% rise is a very strong number. the fact that year-over-year it did not rise this because we had some strong asus. confirminghurdle for the core pc inflation number. this is a very strong number and it's consistent with what we are seeing. it's not just in housing anymore. the other part of the story is personal income and personal spending. does that give a sigh of relief to the market? >> it's one data point. alix: i'm sorry, michael mckee. we will go to michael cuggino next. bill dudleyomething was talking about yesterday. we have seen an increase in confidence since election day. you can see how we have seen confidence go up and spending follow it. would see spending went up at a decent pace. not as much as expected. that's what the fed is looking for. a sustainable continue to justify a rate increase. ass is not as positive michael was saying. it's just one month. we get the jobs report next week. we will see if that holds up and the field -- the fed will feel may be justified in march. jonathan: the dollar rolls over a little bit. treasury very much on offer across the board. the inflation pressures. increase ishe price something to really pay attention to? >> i do. it is something we always have to be cognizant of when we are looking at the isn. one of the things we are seeing in the economy is growing evidence that investment spending is picking up. that would be a welcome change after two years. inflation pressures bubbling away. you don't see it in the wage increase the way the fed would like to see it in a big way. do you see it? >> not as much as you mentioned. i think the broad take away from this is the data continues to strengthen. we get consistency and economic well.nd all of that roads -- bodes well. track for that move over the course of the year whether it is march or june, september or december is less relevant to me. the economy is strengthening and gradually rising interest rates are a byproduct of a healthy economy. it is definitely driven by momentum as well with the expectations in washington. being misunderstood or underreported is the strength of economic data in the last six months. it is been an underpinning to equities. alix: if you take a look at the real personal spending inflation-adjusted purchases did fall by the most since 2009. inflation-adjusted to disposable income had the biggest drop since 2013. inflation picking up is starting to bite when it comes to real income and real spending that has to have the fed on notice. david: before you have an infrastructure build, what happens if you tack on to those sorts of numbers the sort of plan that the president has laid out? >> i think we're in a situation now where the fed will probably raise rates two or three times this year. if there is support in congress infrastructure spending has support as well, three b comes your base case. what is the risk that the fed will have to play catch-up and raise rates really fast or overshoot? science.ot an exact there is always that risk. i would agree with steve. the one thing that's missing is clarity in europe and the effective fiscal policy and stimulus policy. those would be the wildcards once the fed gets more information on that their path becomes clear. be definitely the base case based on what we are seeing. unemployment remains low. you have the dual mandate being met. it's definitely time for probably more than one. >> you could also see the fed doing rate increases this year, even without the fiscal stimulus that's been talked about in washington you are seeing strength in the economy and at the same time you are seeing financial conditions actually ease. i have a chart that shows when the fed raised interest rates the last two decembers. dudley noted that the conditions for expansion in the united wetes are ever stronger and could see this kind of growth continue even if we don't get much out of washington in 2017. alix: we have also seen real rates fall as well. you wind up having an easier situation. jonathan: because the markets did not believe in the growth story. that's why the dollar rolled over. that's why yields rolled over. michael? >> i would agree with that. jonathan: it's not as of growth projections have picked up among anybody. alix: it depends who you are talking to. jonathan: the message in the bond market is we don't believe you. >> to some extent i think that's the case. financial conditions remain quite easy. increase inthis investing spending in the pipeline. consumer confidence is high. the fed wants to make sure they don't fall behind the curve. what's happening in markets is very different from last year when just the suggestion of rate increase caused a significant equity market -- alix: dow jones futures are. triple digit rally underway. friedman,stephen michael mckee, and michael cuggino. julie: a man who turned around -- david: a man who turned around dollar general. republican senator david purdue of georgia congratulated the president on hitting the ground running and keeping his promises to the american people. he has also said he is against a border adjustment tax saying it would create more losers than winners. senator purdue joins us from the capital. >> good morning. david: as a former ceo, what did you find most encouraging? saw a president hitting his stride last night as the leader of the free world. i saw him laying out his vision for getting the economy going. also saying we are going to reengage with the world on many fronts. the trade front as well as the political front. i was very encouraged by his sense of leadership last night. david: were you at all concerned about the lack of specifics? >> not at all. what he needs to do is set the vision. we have been meeting with some of his cabinet members and there are a lot of details being worked out a high net. last night we saw him lay the priorities out there with regard to getting the economy going and how to reengage with the rest of the world. i give him high marks for doing that. david: we have an election coming up next year. doesn't he have a limited window of time in which to really make hay? >> the white house is moving at a business pace not that a government pays. congress needs to catch up. he can't even have a staff meeting. we are going on the slows pace of confirmations since george washington was in office. you referred to the president as the leader of the free world. could you give me detail on what you actually mean by that? i'm not sure that he subscribes to that. jobe's got to take care of one. job one is getting america healthy again. the rest of the world needs america to be healthy again. you have been talking about how the markets are responding to his actions so far. america needs to tell our allies what they can depend on. we have been retrenched for a. of time. the postwar order has been questioned by this administration. the leader of the free world used to mean something. doesn't seem like it means the same thing anymore. >> you're right. after the last eight years it doesn't. it sounds like a hollow comment. . have traveled the world a lot i'm a member of the armed services committee. america to lead again. that doesn't mean they want our armed services with 100,000 troops in syria. apply your business acumen to what you are facing right now in congress. let's talk tax reform. there is a critical path here. you have to get through obamacare. realistically what can they do to get us there? we have to get the cabinet confirmed. the senate has been running 24 hours a day for most days in the last few weeks. we've got to accelerate our ability to move on to some of these other issues. we've got to get reconciliation and health care taken care of. thehave to move on to second budget this year. within that reconciliation we hope to deal with tax issues and features of dodd-frank. a lot of people out there are very eager to have tax reform. your republican colleagues have said there needs to be a border tax. you have come out against it. we talked to chris coons earlier in this program. listen to what he had to say. >> my gut instinct is to be against it. i would have to see the details. it is true that other countries impose other taxes. there is a way we could create a border adjusted tax that would actually pass muster and not create a trade war with some of our opponents. david: you were against a border adjustment tax. is that an impediment to getting tax reform through the congress? >> i hope not. let's be clear. the border of adjustment tax is only to pay for the corporate tax rate and the repatriation tax reduction and to simplify the individual tax code. will are three things that actually grow the economy. the only reason border adjustment is being talked about is to pay for those. i don't believe it's necessary. the u.k. in 2009 reduced their corporate rate from 30 to 20. they didn't have a scoring model. they knew the economy would more than pay for that over time and i believe that as well. alix: that's a lot of ifs. would you vote for a tax reform without order tax adjustment that raises the deficit? time i don'tint in mind increasing the deficit in the short-term. if in the long term it's going to deal with the debt. we've got to get the economy growing again to deal with the debt long-term. we have to deal with our archaic tax structure, overburdening regulation environment and unleash our energy potential. i fully subscribed to that formula for growing our economy. have a more to level playing field with the rest of the world with regard to trade. that do any of individually we won't be successful. it's a combination of all of the above. you were back as a ceo and you were putting together your budget right now, when would you bake in tax reform? >> this year. i'm very hopeful that we would get it done this year. right now you hear some disagreements inside the republican party about this. we're going to get to a conclusion. saysone of those that let's go 24 hours a day until we get this done. job one is to get this economy growing again. we know what to do. we just have to get the fine-tuning details worked out and i believe we can do that this year. david: senator david or of georgia, thank you for your time. jonathan: coming, more reaction to president trump's address. neil dwane joins us. in the markets, a huge bid. futures up 155 on the dow. up .7 on the s&p 500. it's very much risk on. yields up. 246 on a u.s. 10 year and a much stronger dollar. treasuries down. the dollar stronger. president dudley changing the conversation around mark. from new york, this is bloomberg. ♪ emma: this is bloomberg daybreak. coming up, david rubenstein joins us from berlin. from new york city, this is bloomberg. i'm jonathan ferro. across the board. the s&p futures up this morning by .7%. european equities by over one full percentage point. bulls into sway the goal the president's address. it's a weaker euro story and a stronger dollar by half of 1%. for more on the markets on the brink of yet another milestone, still with us is stephen friedman and michael cuggino. thank you for being here. what's it going to take to keep this going? >> at this point details. what i heard last night from trump is that his priorities have not changed. an increaseto see in military spending, tax cuts, now it's down to the details. when are we going to get more information? jonathan: we said that yesterday and we didn't get any and the market rallied. i think the momentum -- he looked very presidential. the speech continued the momentum. the positive feelings, the expectations. it wasn't going to be detailed last night. i think increasingly we need to get to that point. senator purdue talked about expecting to get everything done this year. i think that's ambitious. with thetle concerned timeline. you have the midterms coming up in less than two years and you need these policies to be implemented and have some impact on the economy otherwise voters may not understand or put the two together in time for the midterms. that's a risk for this agenda and the republicans have been here before. 2004 through 2006. they had the presidency and they frittered that away. michael mckee was talking about easing financial conditions. the rolling over of treasury yields as well. equity markets have rolled up and been a lot firmer in the last month. how important is that going to be? i think of when we look at financial conditions you have a potentially stronger dollar and higher rates. equity market does seem to be buying into the trump reflation story. that balances out the first two. it makes corporations feel optimistic about the outlook as well. alix: you keep talking about facts versus optimism. bank of america raising their year-end target. they were highlighting of those things. sentiment and technical. could that keep the rally going despite the headwinds? >> with respect to technical you have great corporate earnings. and the yieldues curve is sloped properly, peas will continue to raise. that's a positive. that's probably how i would look at it. the next step is something on the fiscal front to drive the next level of dynamic equity performance. you can bleed out quite a bit from here just based on corporate earnings. definitelyre sounding more pessimistic on the overall trajectory of the market. how do you invest with those handles? not pessimistic. i'm actually optimistic in the longer-term. i just think it's going to take a while to get done so let's get going. anythingt doing specifically trump oriented. we are lower duration and high quality balance sheets and fixed income. we have some precious metals like gold and real estate to have the harder asset component as an offset. i think the sectors that really benefit are those geared to growth. energy, industrials, financials, transport. biotech. opportunity inf the equity markets here. well things are going on in d.c. steven friedman and michael cuggino, thank you very much for joining us. check out tv . you can watch us online and send us messages during this segment. this is bloomberg. ♪ jonathan: a really decent bid to the market this morning. futures up i almost 170 on the dow. strongerr a whole lot on the back of comments by several federal reserve officials. one key one sent them surging. alix: you see it also on the two-year. about four. up by gold picking up and selling as well. coming inncome stronger. spending a little weaker. it was real personal spending that was weaker as inflation continues to move up. jonathan: isn't it funny that everybody said we needed details? i just wonder how much of the market rally this morning is about one thing and one thing only. they don't want been erratic president. he was not that last night. if you look at where the economy is going, it's quite fine. david: it was reassuring. he is paying attention to the stock market. alix: it leaves room to care about the eco-data. jonathan: we will bring you that from new york. this is bloomberg. ♪ jonathan: another day another milestone. futures surge after president trump's speech. the focus turns to the feds march meeting. one key officials saying the odds of a hike above 80%. city, a warm welcome to bloomberg daybreak on this wednesday, march 1. i'm jonathan ferro alongside david westin and alix steel. a whole lot firmer. up by almost .9% on the dow. the ftse up but over one full percentage point. look at the action in treasuries this morning. the prospect for the rate hike increased takes the dollar with yield stronger. down by half of 1%. that's the situation across assets. let's get you some movers over the open. alix: that curve turned steeper. bank of america up 2%. said wemon yesterday could see a very bright future if trump reshaped taxes and regulation and we would see much faster growth. of rate hike probability course helping the banks. we have earnings continue to trickle out. in seven cents better. revenue better by $400 million. buy got absolutely hammered off by about 10%. it disappointed first-quarter outlook and lost on everything. it raised its dividend by 21% and announced a buyback. the headline numbers pretty ugly for best buy. david: president trump said he was for free trade last night. but that trade had to be fair. one-on-one.i had a notuch tougher and there's a lot of point in making trade deals if you don't enforce them. >> from china as well? >> everybody. >> what are you looking to do? >> you will see when we have written up the enforcement cases. as soon as we have a proper case prepared. kevin joins us from the the white house. there was some talk about trade in the speech last light. the president didn't hit it very hard. didn't target china that much david. when you take a listen to what secretary ross had to say last night he seemed to indicate that if they had a case to go after china they would do so. that lines up with what secretary mnuchin said the other week. i spoke with one senior lobbyist .ere in washington what he told me is they were quite confident and had a good feeling if you will when trump alluded to harley davidson in his speech last night. that is one of the predominant companies that backed tpp. now the business community is here in washington hoping there .ill be peace in the tpp david: this is a far cry from saying i'm going to declare them a currency manipulator over in china. are we being told it's a much longer time frames and perhaps we ought. it's also a change in tone from campaign donald trump versus president donald trump. the business community here in groups such as the chamber of commerce walking away from last night with the sense that perhaps this is a slightly more moderate centrist approach with regard to trade and that there might be some areas of tpp they could make its way into these different bilateral trade agreements. the president also weighed in on the markets during his address last night. take a look at this. market has gained almost $3 trillion in value since the election. a record. taxpayers hundreds of millions of dollars by bringing down the price of fantastic and it is a fantastic new f-35 jet fighter. can we will be saving billions more on contracts all across our government. jonathan: joining us now is neil dwane. great to have you on the program. we have aesting presidential put in the market. someone that references the equity market being at a record high. is that important to you? >> to some extent not really. after, are about to see less detailed than maybe people would have liked. we are now going to get into the sequencing of his policy and what is achievable from congress's perspective and potentially that the fed is behind the curve. indicators are off the clock and if they don't move soon they're going to be. i think we will see the real world start to impact the markets rather than the sentiment of president trump. jonathan: yesterday a guest in this chair would have turned around and said we needed the detail. we didn't get it. futures are up. that's without the detail. are we gripped by irrational exuberance? if you look at some of the actual corporate results in the , show me consumer stocks that are doing really well. profit them are having warnings. they are closing stores and laying off people. i think the real world is in a tough place and that's what the corporate's are telling you. that's the interesting dynamic is the market sentiment. we are no longer in the world of funny money market pricing and zero interest rate. we are in a world of fiscal stimulus. that comes at a cost and the cost is probably going to be a stronger dollar and rising u.s. interest rates. alix: what kills the rally? walk, we fed walks the know they are talking about three rate hikes this year. if they are behind the curve it could be five. i think this issue can't go away because your trade deficit is surging at the moment. you are simply being the buyer of losses as you have always been for the last 20 years. trump wants to reverse that. difficultfiendishly -- is it possible we are looking at this the wrong way around? he is a businessman. one of the things you learned is if you measure it you will manage to it. they were concerned with the bond market. president obama was concerned about jobs. he is really concerned with the stock market. did that give us some reason to think he's going to figure it out? >> possibly yes. some of the historic parallels are where one has to be quite careful. interest rates are going to be rising. all the data shows that when you have rising rates the s&p the rates. stretch to see where he's going to find the $5 trillion to get the economy growing at 4% not 2%. with rising rates we know the housing market and the consumer is very sensitive to the level of rate that they are charged. feels like a natural break on some of the positives that will come out of his policies. david: the absolute rate level is really low. you have a fair amount of headroom to grow before you really start to bite. do you think the ceos are wrong? he's got a business guy, going to take care of us and create a business environment. the opposite of what they perceived with president obama. >> it is a change of tone. he's clearly not interested in what we would call playing politics. he wants to have a budget and stick to it and clearly his appointments are very practical in terms of they are very used to running big global organizations that hit targets for shareholders. i can't underestimate where we are today. 20 odd times on earnings. the economy is still only growing at 2%. the fed is going to be raising rates. the dollar is now very strong. that's not where reagan was in 1980 and even reagan had a recession before he got his boom going. in reagan, his budget was revenue neutral. not even dynamic. my favorite topic is the border tax adjustment. if we get it and that big appreciation in the dollar, what happens? importeryone who is an the border adjustment taxes a nightmare. you can see the corporate may like the business side of it but the actual detailed some of these policies -- tax reformess wants and that is what kills the rally? >> the dollar doesn't help the rally. if you are losing money in income and japanese and european bonds for the last three or four months, do you buy u.s. treasury that looks like it may be going to 3% or do you buy the s&p on the basis it might go a little higher? you can kind of see tactically why people want to trade it. jonathan: great to have you with us, neil dwane. we are anticipating a higher open. 20 minutes away from that open. coming up, more reaction to president trump's address. david rubenstein will be joining us. later this week we are launching a new program, bloomberg real yield. focusing on fixed income every week at friday midday. don't miss it. from new york, this is bloomberg. ♪ jonathan: are investors ditching u.s. stocks in favor of the european peers? a significant rotation out of u.s. equities and into europe and japanese equities as well. this is according to strategists at hsbc. still with us is neil dwane. this is not necessarily about a leap of faith but may be play on global growth. >> and where you are trying to find returns. with the bid for unilever, there is a lot of cheap assets in europe. the politics is unclear. the direction of europe with britain leaving is unclear for the next year or two. 20 of reasons to go, i really don't want to play with it. takevestors we are paid to risk. some parts of europe look rather attractive to the u.s. jonathan: you wonder when the reward comes. earth will we get significant reforms that change the trajectory of an economy like france or italy? that means you get the rewards in europe. a long way off. there have been signs that the european union could allow industries to merge and look more like the u.s. in terms of economies of scale. it feels that has been kicked down the road. i think 2018 is a time to think about the restructuring story. this year is simply to navigate most of the election hurdles. holland isok like going to cause any problems. we think marine le pen will lose in the second round. final round.n the a lot of global investors will go, they really are thinking that she could be president. equally it feels like germany will not rock the boat which leaves us with italy. if we feel like they're trying to extend the next election through till may. i think the valuations already look quite attractive. is populism actually a popular force in europe? the mainstream political parties in europe have been incredibly lazy for a long long time. at the heart of the financial other the germans wanted governments to go out there and make the forms. ecb didn't do it and the belt them out. we are doing the same thing six or seven years later. and thenke brexit things like populism in france. it that something that would shake the foundation? >> i would argue probably know the kids i think you will get fiscal stimulus. the bustle will be the traditional type of stimulus we have seen. that's where president has changed the narrative. maybe even changed our site college he. we prefer fiscal stimulus to austerity. at some point we will worry about debt sustainability. even if trump blows $5 billion in the next few years it doesn't feel like the markets ought to worry about it yet. not if the central banks have nationalized the debt market. >> we will see global monetary divergence. the more the congress give him the credit card the more janet yellen is going to have to raise rates. nowhere do you see that in the two-year yield. widest since 2000. how do you take advantage of that kind of dislocation? >> we would argue you have to short. people are so concerned that you might get the redenomination of either the italian or french debt. if you think europe navigates its way through and they are the irrationally priced assets. alix: neil dwane sticking with us. thank you very much. we have breaking news. looking at forward. light vehicle sales down 4%. taking a look at the stock popping by about 1%. overall car sales down 24%. continue to track that as we head into the open. david: coming up, president trump making his first address to congress last night. david rubenstein will be joining us for a fresh reaction. this is bloomberg. ♪ alix: president trump and the fed reflecting the trade. nearly 23% since the election. look for another big jump today. wells fargo, bank of america up 2%. still with us is neil dwane. do you want to buy the banks here or do you want to sell them? >> i would say they have had a good run. i would be more of a seller than a buyer. i don't buy the reflation narrative. the is that some point highly leveraged corporate world and the consumer world may see rising debt levels. i think there is a natural check and balance. hugeo think there is pricing competition that's now emerging in the financial sector with what's happening with fidelity and everything. i think pricing pressure is going to come to the u.s. financials. you are basically also making a call on the treasury market. you're saying that's the wrong call because it's not going to work. >> i think positioning is positioning for a reflation trade. a short the 10 year for the right reason. if you really think we are at 2360 and on our way to 2500, we should be at 3% on the 10 year. market is dissonant from what the bond market is seeing in terms of the real economic progress. alix: wells fargo had a press release. there talking a lot about compensation. it's going to be a struggle to get the 3% sustained growth. maybe you can get there in 2018 but you have to sustain it. david: their internal investigation ongoing. there's another aspect to the growth of the banks beyond what's going on with the yield curve. that is overall volume. if things really pick up there is more demand for loans. couldn't that be a source of growth? but whether it justifies the move is the thing i would say. are fixed.nks they are healthy. they are in a market where the fed did too good a job. there's too much competition. not enough banks died in 2009. in europe they are not fixed. youou want to own banks come to the u.s. because there is no solvency risk. i wonder what the underlying growth prospects are. why does it work that way instead of the other way around? europe hasn't got it fixed yet. there may be an opportunity there. yes. we are talking about may a trillion euros of hidden losses and maybe 200 or 300 billion euros of new capital. they alone need 13 billion. if you look at the top 20 european banks and say quite a ,ot of them are short capital you're going to write a lot of checks before you see the 23% move. jonathan: you are pricing in the hope that european politicians are going to actually fix it. i don't know if you want to go there. the sentiment on the price of equities. the reality for you is in the bond market? >> i'm nervous with the political calibration of how much further equities can go. hunt for income is something all of our clients around the world are looking for. but you canng risk earn a 6% or 7% return. risk you headline think, i will settle for that. the volatility of the equities is something from here we need to be concerned about and certainly for american investors the value lies outside the u.s. equity markets around the world are much less stretched in valuation. thethan: neil dwane, sure dollar? >> soon. if we get a border adjustment tax you will get a 10% re-rating or something and it's all in the price. jonathan: and the same applies treasuries? >> i think it will take president trump time to affect a lot of his stimulus and spending. even the defense spending will take time. economic growth remains dull in the u.s.. maybe the treasury market is more attractive in terms of maybe it heads down to 2% twouse the s&p is going to and a half thousand. whether that's tobacco or some of your telcos or even just straight growth stock. there's clear reasons apple is going up. it is a cheap very powerful company that will at some point benefit from the repatriation tax. i would look at some of the other areas. maybe the social media areas concerned that the values are actually very high. my kids are turning it off at the moment. perks isnal parks -- people are using them less. jonathan: we've got a bear in the house. coming up on this program, the opening bell on bloomberg daybreak, minutes away. a much firmer global equity market. futures positive on the s&p. this is bloomberg. ♪ jonathan: from new york city to our viewers worldwide, this is "bloomberg daybreak." ofare kicking off the month march and wrapping up for months of gains. the longest monthly winning streak since july of last year. 80 five on the dow, positive 19 on the s&p 500. a much firmer global equity market. nothing in the last 24 hours is getting in the way of the sentiment. as the opening bell rings, switched up the board. yields are higher. yieldslar is going where go. stronger up three quarters of 1% on the dollar index. let's get to the market open. 12 seconds in. .lix: 8.4 points away we first surpassed the dow 20,000 back in january. we are very close to breaking the next big milestone. also of significance is the percentage gain we are seeing. .9%. we have not seen 81% move since the beginning of december so also, a lot of movement to the upside there. a large part of that has to do with what we are seeing in the treasury market. a steeper yield curve with 10 year yields backing up i six or seven basis points. two-year yields backing up i three basis points. at one point, it had the highest level since 2009. and that is reverberating through the bank stock. right aroundca is the record high -- excuse me, a new record high for bank of america. morgan stanley, record high. goldman sachs, a new record high new recordargo, a high. the big banks are making record highs as we inch to the 21,000 mark. didn't get specifics from trump but it didn't matter. did you: how may times just say "record" this morning? david: every day. [laughter] jonathan: a broken record. is on there it screen. we go there. does that change things for you? neil: no. i think the dow is the wrong type of index as to how it calculates. he s&p 500 is much more -- dow truther? you a give i think it doesn't you real insight into what is going on in the economy which is why i think the s&p 500 is much more reliable. that headline will be on the front page tomorrow. does it make a difference? moving intoetail is this market and it will make them happy and validated. but you have to look underneath it to see, what are the investment opportunities? what risks and my running? and now we have implementation risks. what can congress and trump get done and how long does it take? what is the sequencing of those events? and now we have the them limitation risks of the fed with raising rates. up until two weeks ago, everyone was expecting a rate rise in q4, not march. the sooner these things start calibrating, the more we will see the underlying threat to the market. the thirdevery time quarter comes around, they are going to improve. forward earnings on the dow, historically, that is not huge. my question to do is, if we are experiencing irrational exuberance, will be analysts see the earnings recovery? one thing is that i would take half the growing shares out. but that will accelerate if we get the repatriation from the health care industry because they own the cash overseas. once you strip that out, the underlying earnings growth is pretty much what the u.s. economy is growing at. in which case, why are you paying 16 times earned for that growth? pretty expensive. david: to get back to jonathan's point about french page newspapers, it is your average person out there feeling better about their pocketbook, rationally or irrationally. can animal spirits drive this market? neil: i think they have. the u.s. and u.k. consumer have done the same cars -- borrowing to buy and drawing down on their savings to keep their lifestyles going. real wages are being crimped by inflation at the moment and will probably continue. that is unsustainable. we know the u.s. hasn't saved enough for its pensions and we know that the u.s. has borrowed quite a lot. alix: you are making a really fair bayer case. what is the risk? coming active managers in the market. if you get some kind of equity movement going in and out of the bonds and stocks, and you miss on the rally, how do you hedge that risk? neil: as i said, we are looking globally but i like the equity rally and i like the reflation story that if the u.s. gets going the rest of the world will continue that maybe the value isn't in the u.s. equity market. so what the u.s. is reflecting is not in the u.s., at the end of the day. jonathan: rerate lower? neil: the fed will raise -- the more they get clarity on trump and the traction of his policies, they more -- the more they will feel confident to raise rates. they always have and they kill a lot of the runs in the market. neil dwane, truly it has been great to have you with us. six minutes into the session and at the moment, the dow up at 21000 and we stay there. .8%.&p 500 up by alix: auto sales are rising. the estimate was 2.5% and a lot of americans are spending money on cars and it continues to be the case. suv salesarlier that are killing it as well. very: now, we have a special guest. jason kelly is special but with him is david rubenstein. he is the carlyle founder and ceo. jason? thank you so much. yes, there is a lot going on and we are lucky to have david rubenstein with us. in addition to all of your roles, you are also the host of the "david rubenstein show." 21,000 the dow just hit. your thoughts on that and what it means for public equities before we talk about private equities? equity.: the public market enjoys what the president is doing or talking about. i don't think anybody anticipated this on the day of election. the financial service areas are up and private equity has benefited from that. public equity goes up, private equity goes up as well which is good if you are selling things. if you are buying them if makes it more expensive. generally, this indicates that it is bullish about the economy. why is private equities so bullish? what has the president said that makes people enthusiastic? david r.: people from all over the world are here and they are not affected by what happens in the united states completely but the u.s. is dominant in what the private equity market does. so the reason people are excited is because they feel there will be less regulation of private equity in some ways. i think some people don't like private equity because they think private equity people don't do great things and therefore, they feel there is some feeling that we are not as good as we think we are. the feeling now is that the administration will be focused on other things and not beating up on hybrid equity. not that the previous administration did. that private equity is welcomed into the financial community. d regulations coming off washington and lower taxes will be favorable. jason: so when overall bullish view on private equity? david r.: at this point, i have been coming here for 20 years and i haven't seen anything quite as bullish. jason: one of the topics that has come up and the president reiterated last night's infrastructure. something we haven't heard a lot about and suddenly it is everywhere. how realistic is the trillion dollar figure that he is talking about? david r.: at it is unlikely that it will be quickly going into effect. it takes a long time to build infrastructure and to get congress to authorize it and then you have to figure out where the money will come from. so far, no sources have been identified. i think that money that comes overseas,u.s. markets that might only be $200 billion -- not that it isn't a lot -- but $1 trillion is a lot. it may take many years to get it done. i think there will be private partnerships. our firm is one of the firms everyed in investing in structure so there is money there. the interesting thing is that in the old days, congress in projector was -- now, we recognize we need these things and it is called infrastructure and everybody likes it. inon: the enthusiasm here berlin is not just the current administration but overall for the industry. fundraising is hitting new sustainables, how is that? are we at the peak of a cycle? david r.: you never know you are at a peak until the cycle has peaks and you are in a bubble that has burst. i do think that people think that there is a lot of good returns that have come out of private equities. we are still 800 basis points over public equity returns, on average. as long as those averages stay 800 basis points differential, people will put money into private equity. we have a lot of operating managers that add value to companies so i think the industry's bullish nature is justified. perennialen the overhanging the capital and this dry powder, how quickly can managers like yourself put it to work? david r.: in context, if you think of the stock markets around the world, $85 trillion so private equity is just $4 trillion total with the money in the ground and the money that has yet to be invested so a relatively small percentage of the money available. i think the money can be invested. yes. jason: is money still easy to raise? you're out around the world all the time. david r.: if it was that easy then i wouldn't be around the world all the time. it takes time. would like to call up singapore and say, semi-me the money but i have to show up as do other firms as well. but people do want to put money into private equity because they think the returns will be higher than any other asset class and the risk-reward is better than anything else. evil or saying they want to be in the first closers of the fund because we don't want to get shut out. in toeople want to come get the fair allocation. so i think it is a good time to raise money. good. there he david rubenstein, always good to hear your wisdom. you spoke to a packed house earlier and we appreciate you being with us. david r.: my pleasure. jonathan: thank you. you can watch the season two premiere of the "david rubenstein show" at 9:00 p.m. tonight. anotherp, another day, record. risk on, rally on. one of the stocks that has led the way is apple. we have the analysts up next. this is bloomberg. ♪ emma: this is "bloomberg daybreak." laureate later, noble time.0 p.m. eastern ♪ jonathan: 14 minutes into the session. the dow topping 21,000 for the first time ever. we are up by 200 points on the dow this morning. the biggest one-day pop since the beginning of december. up by almost 1%. we are up by .8%. david: do you know what is helping out? apple. shock. -- has just raised the price target to 160 five dollars. to $165. walter joins us now and still with us is neil dwane. wellhe top but you are above the average. what drove this? of ar: it is a little bit different called and was a year ago. a year ago we were in declining revenue and earnings growth. at the time, we said look, if he returned to gross, you can multiply that and that has been happening. and the multiple has also been rising. so the question is, what is the catalyst to do real that at this time? there is and is the patient the phone. we haven't had a substantial difference since the six and six s came out. so multiples continue to come out. if you look out a year at 2018 earnings with growth, if they can deliver mid single-digit growth, you could get more run out of the stock. david: let's talk about catalysts to the rail. samsung is coming back. they will come back sooner or later. walter: there is plenty of catalyst for derailing. sp's are going up. press releases have been about a $1000 phone and people are paying more. for 2000 seven, for apple to maintain this price level on their phone is amazing. as now we are expecting for s&p's to go up higher. so if they push back on a $1000 phone, that could derail earnings on the stock. jonathan: where does this come from? walter: the idea is that this is the most important consumer electronic of your life and apple is the one that you are stuck in their ecosystem right now. so they are going to the wealthier people and saying, pay more. why would you pay $30 more for the iphone 7 plus, that camera doesn't cost $30 more. they are looking for more ways to get revenue out of the existing customers. alix: we talked a little bit earlier about financials taking it off the table. what you think about apple's new record highs? optimism but downside risk? neil: i do think it is cheap relative to some of the others you could own. the reason i think it is interesting is because they are one of the beneficiaries of the repatriation. so i would be interested to see how much of your price target allows for the share buyback that will probably come. trump wants to make america great again. buildrgest company could the apple iphone in pennsylvania or minnesota -- how will they respond to the fiscal pressure not to just put a sticky label on the iphone for they sell it in the u.s.? [laughter] neil: those are the things i think will be interesting. walter: what is interesting is that they have been using it to turn decline in net income to increase shares. so they are borrowing money at a low rate right now in order to use it which is a massive amount of cash. continues tonce rise over $150 billion. so if there is a repatriation event, i'm not sure companies will drop a special dividend. but maybe if you pay a dividend yield up to 5%, you could triple the dividend and take the difficulty end -- take the dividend yield up higher. i have seen this with at&t and verizon. companies that are holding onto the investor base is because they have a dividend yield of 5%. jonathan: has that been factored into the $155? walter: none of that has been figured in. that would take the multiple down to 14 times. you have downside, if a call to say, can you make the iphone in the u.s. and the cost go up, how do you think about that? walter: it is nice to be able to have the cash but if we are not growing -- we have seen what happens to apple stocks in the past will he goes right time where revenue has a decline. and if there is a concern that you don't have the pricing power anymore and you start looking at the gross margin. the gross margin has been an amazing thing holding up at 38%, year after year but it is a tech company. you can't ignore the fact that things could unravel. but right now, people are willing to pay a lot of money for it. jonathan: let's talk about what investors are willing to pay for it. this time last year, it traded at 11 times earnings. wasn't 10e said it times or 11 times the earning -- is it 16.5 times? walter: we are 10 years into the cycle of the iphone. so all the concerns that have come in has effectively fallen by the wayside. it is perceived not as a tech company to go out and sell new phones each day but a recurring revenue stream. customers keep coming back. lengthens and shortens but right now, it is perceived streamliable revenue that investors can pay for. if we are willing to pay 16 times -- we have snapped which will be priced in ipo tonight. who is buying into this? walter: that is more the rich greenfield area of expertise and that is certainly more challenging to figure out. i think he has had an interesting call on twitter and the engagement factor on twitter. twitter was oversubscribed by a massive amount. alix: so what do you make -- don't want to have to beat facebook and miss out but you are afraid of being twitter. what do you want to do with snap? neil: i am interesting because i think the valuations of its peers are especially high. i wouldn't be that excited about it because i don't like the government issues around the stock. i tend to feel a lot of the silicon valley entrepreneurs -- at some point they will raise significant issues about where the company is going because of the dual listing. you know that the family sits behind that and they have run the firm for 70 years but some of these people in their 20's have no proven track record of looking after all shareholders so i would be interested but i'm not addicted to it. david: that is pretty much true of all of silicon valley. viewersd engagement -- are engaged but the monetization hasn't been there. engagement and monetization. has snapped gotten past that? they are getting revenue. although they are losing money. neil: the ultimate cost on snap for me are my kids and they love it. but whether they would allow themselves to be monetized, if the mobile left stopped being free, my kids would move to wherever the next free opportunity is. that is the challenge. owningse book and google 60% of digital advertising space, there are price credibility issues with potential monopoly type issues and collusion issues. that makes me feel more questionable about some of the values in the social media space. after the ipo,k, there were concerns about their ability to monetize. did inn't and than they a big way. and now revenues are generating. this bleeds into your world because snap is out there calling itself a camera company. when we talk about snap, we don't talk about it seriously as a camera company. is this the type of company that apple would take a look at? are lookingink they for services. i guess you could maybe define that as service? i think people are looking at netflix as a service you could add on to the ecosystem. yesterday youtube launched live tv and there is the expectation hulu will do this in april. certainly, it is a part of apple's future because there is a nice tailwind to create the recurring revenue stream. so i don't know if it is snap or twitter or netflix or whatever it is, but apple has the flexibility to find other services to help that business a long. an investor, would you prefer to see apple put the cash back towards the investor base or to a big acquisition? walter: this is a big debate and i'm sure i will offend some of my clients but organic growth and finding businesses that help you grow is always better in the long-term for the valuation of the company. especially if you have a great cash flow. they can use the cash to buy it. they are not issuing shares. or support your existing business to grow revenue, i think that is a better use of cash. david: where are you on that issue? in the definitely am organic level. the reports on m&a -- adding value to shareholders. apple isresources -- not constrained by resources. so i think to diversify into other areas where they could disrupt like they did with cds ad music and tv has proved bit trickier but they could learn from netflix and amazon and how to disrupt tv -- they will disrupt the banking system somewhat. billion.hey have $150 it's not like you can't do both. we will know whether president trump's policies are working when apple puts money to work and invest instead of giving it back to investors. alix: a bold prediction. [laughter] david: many thanks to walter neil dwane. thank you for spending so much time with us. alix: we actually saw it and we surpassed it. 13 of the 30 dow stocks making new highs. jonathan: what a novelty. 26 minutes into the session. up to 30 on the dow. a much firmer tone and more coverage coming from bloomberg. "bloomberg markets" is up next. from new york, you are watching bloomberg. ♪ vonnie: it is 10:00 a.m. in new york and 3:00 p.m. in london. from new york, i am vonnie quinn. mark: i am mark barton. welcome to "bloomberg markets." ♪ vonnie: we will take you from new york to london in the next hour. stories out of washington, d.c. and paris. here are the top stories we are following on the bloomberg. dow, start out of the 21,000, as in u.s. stocks surged to new highs. optimism about the trump agenda helping to lift financials and industrials. how can president trump start to implement his agenda following last night address? is there suddenly any reason for the fed not to hike this month? , awill ask austan goolsbee professor of the chicago booth school. europe, francois hollande plans to stay in the race. after facing charges for

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