my chart of the morning has to be with carper -- copper. ,ou are looking at nine-day run the longest winning streak since 2004. what it means for inflation, we will dissect that. david: let's find out what is going on outside the business world. emma: some new jersey transit riders are facing decades of tax hikes to subsidize a new $12 billion -- into manhattan. outgoing new jersey governor chris christie proposed a surcharge in his state until at least 2038. he canceled the hudson river rail tunnel in 2010, saying he did not want to burden taxpayers. the great lakes is dealing with record-breaking snowfall. yuri, pennsylvania was hit particularly hard with 63 inches of snow since christmas day. at least another five to 10 inches are expected. china's leading policymakers plan to discuss amending the national constitution for the third time since 2004. the decision was made today at the meeting headed by the president. the party will convene in january. there are no details where possible changes could be provided. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. alix: time now for daybreak's first take, where we dissect the top three stories of the morning. commodities charge, copper rallying to a three-year high. then you have retail rebounding, tech stutters. apple nosedive and jcpenney's come back. new year, new fed, the white house is said to consider rich new position.e i have a chart for you, because we are talking about commodities, global synchronized new position. growth, but this is the question mark i have. copper. versus what does this chart tell you in the context of a global synchronized recovery versus we are dealing with some shut in for supplies. peggy: i think copper has had a rally, in part to china shutting down due to pollution concerns. it is a reminder that with china as it is growing into the global economy, there are things where it is still a risk. the government just comes in and shut something down. it is not only copper but aluminum that analysts are seeing head into the new year on one of the strongest bounces. alix: when i think of a commodity rally i think expect -- inflation expectations will rise. matt: these individual idiosyncratic movements in various commodity prices may not be all that important for the u.s. inflation outlook or policy outlook, but the effect they are having on break even inflation rates, it is up to 1.5% this morning. it is a must back up to the fed is so concerned about. that is the highest in eight months, so the extent that some of these movements take that downside risk to inflation off the table for the fed, that is what the have been focused on. that argues well for additional rate increases. david: you think copper is indicating a broader resurgence in commodity prices. how much does that affect the u.s. economy versus emerging markets? peggy: it effects emergency markets more -- emerging markets more. follow that trend in terms of outlook, and oil in some ways is another big factor and has taken a slump in the recent days. alix: the china survey it overnight and an interesting , inventories accumulating, manufacturing orders stopped accelerating, hiring stopped accelerating, wage gains stopped accelerating. that is a different story than copper at 7000. matt: another thing i think is on a lot of people's radar in china is the property price cycle that has started to turn down. that has been a reliable leading indicator over the last several years of broader swings in the global economic cycle. when we are coming off several months where we have seen a real upswing and upside surprises to growth around the world, if we are settling back into a more thatl trend, then perhaps kind of removes some of that impetus. that is something i will be watching. preliminary sales numbers indicate a strong holiday shopping season. aresee the big retailers up, but the chart also shows that apple is not sharing in the holiday cheer, at least yet. disappointing sales of the iphone x. what do we read into the retail sales? peggy: it is in courage in, because people seem to have more disposable income -- encouraging, because people seem to have more disposable income. they did some sales ahead of the online -- holiday season and are trying to deal with online. i was in macy's a few days before christmas and they was teeming with people. they had a lot of things to attract people like the opportunity to buy something online and pick it up in store. alix: where are the sales? i was expecting to get everything 80% off and i was really shocked. it was not a free-for-all like in the past. matt: we saw a big gains in electronics and household furnishings. it has been a very strong retail sorry -- season, the best in many years, but coming back to and tooktion outlook, a lot of discounting to bring people into the doors. it is not really clear. a strong consumer is good news for the fed and the economy, but does not necessarily translate to hire inflation. alix: the saving rate is lower? a bit of ais concern. we are seeing an uptick in income growth so maybe we will see a floor under that. lingeringstill questions about not only the health of the consumer but the price outlook. --id: you wonder well this whether this will read into the fourth quarter gdp numbers. we have seen some pretty robust growth. important toalso remember with retail numbers, they often shift in the first quarter because a lot of us by things and return them. a lot of the companies did up the sales ahead of time but offered free shipping. we will have to see how it levels out. apple did not have as strong sales as people expected with the iphone x. we will have to see how that plays out. alix: did you get the tend? i bit theave a x. bullet. there were such promises about huge iphone x sales. alix: and virtual reality stuff. david: it is face recognition. the third story as we head into the new year, we will find out home president trump will nominate for vice chair, replacing stanley fischer. a former economic adviser to lindsey isush, larry under consideration and rich clarida is also in contention. we do have some openings on the fed, and this is an important position. how could this influence affect how the fed addresses the economy? matt: we are going back to conservative fed tykes. -- types. larry lindsey and rich clarida both served in previous republican administrations, that richard clarida is well-known for his pioneering in the new macro framework that is kind of the benchmark and baseline for fed policy in central banks around the world. larry lindsey has been talking about, we need to worry about asset price inflation. it is interesting that we are in this time of a lot of uncertainty about how the economy works and how it has changed since the crisis. you see the white house going back to these names that pioneered the framework prior to the crisis. all of that taken together, probably augers for highly or -- higher interest rates. david: it would be interesting if the white house planned keynesian economics. peggy: that is one of the things that richard clarida has said as recently as december, it does look like we are going into 2018 this goldilocks environment continuing, but we may be at peak in terms of the economy, and there are not as many levers for the government to pull once the tax cuts are out of the picture. interesting that he has recently said on bloomberg news that he sees four rate hikes next year because of the tax cut and the current economy, if inflation picks up. alix: clarida probably will not come onto television for the for seeable future. coming up, we dive deeper into the commodities rally. the outlook for energy stocks in the new year. ♪ ♪ alix: the commodities story of the day is copper, supply cuts giving it a boost with prices hitting a three-year high, china ordering its top producer to stop production. and fun to getsy hyped up when it comes to a higher commodity price, but is it sustainable? there is some feeling that we have something of a supplied french coming -- crunch coming. the market probably got ahead pricing in shortages that were not necessarily justified, but we are starting to see a turn. there is not that much tonnage out there that will come across and give relief. what we are seeing in terms of the etf flows is a play on global growth. we were making references to the goldilocks economy. that certainly seems to be what we are seeing in energy and base metals. alix: what do you make of the gonethat iron ore has not with copper? stuart: it is a little bit of a bellwether a little bit like copper, but do not pay too much attention if you want to bet on gdp. iron ore is a different story to the rest of the complex, and it has been incredibly volatile this year. what it comes down to is how much more attuned is this to what is going on in the chinese economy? trying to get the balancing act the between pivoting to a economy, away from the manufacturing base, but making tweaks along so you do not have a huge drop-off in growth. that is exactly what we have been seeing. david: talk about the demand side and how it relates to china, whether it is copper or iron ore. how important is that to the construction level? stuart: very important unit there is also some geeky stuff you can look at in terms of the purity of the oil they are buying. that tells you something about trade patterns between australia and chinese domestic production where you get the lower grade oil. the higher the steel prices move, the higher the oil grade from australia and south america. sector, construction there have been attempts to prop up that sector and that plays into the base metal demand. in 2018, i do not think there is a great sense that that will change. they will have to make adjustments to keep growth rates rather stable before falling off a cliff. alix: stuart wallace of bloomberg news, good to see you. it is not just copper rallying, but oil as well. yesterday you saw wti over $60 a $70.l, brent also at let's bring in walter todd who joins us from columbia, south carolina. i have a my terminal energy withs have not kept pace oil stocks. theblue line is wti and white line is energy stocks versus the s&p. does that gap close next year? walter: we think it could, and it is started to close in the last few weeks. the white lineenergy stocks in genee under owned by investors because it has been the worst performing sector, or one of the worst this year. as we move into 2018 and see this reflation trade starting to take shape in the market, we think energy stocks are poised to do well in the new year. alix: how would you be playing that? walter: there is a variety of ways. explorationon -- companies, domestic and global. you could look at bp on the integrated oil side, conoco phillips on the e&p side, and also the service names have been extremely hard this year and we think are due for a rebound in 2018. a global operator would do well. david: follow that segmentation. where do you see the biggest opportunity? the service companies as opposed to the e&p, where are the biggest opportunities? to go: if you expect oil higher, the lower down on the --lity side the more integrated is probably a more stable move down to e&p's like, go, and farther. the service names, schlumberger above whereot much it was when oil was trading at $26, so i think there is some significant catch up to be had. alix: let's burn it out to commodities in general, commodity prices versus stock prices. the ratio between commodity prices and stock prices are at a record low, surpassing the low we saw in the late 1990's. do you want to be playing the energy theme throughout the commodity sector? walter: i think you can play that for the extreme, as you said, valuation disparity you are seeing in commodities versus paper assets or stocks. at levels of the internet bubble, you cannot see that in materials, in energy, through the industrial sector. there are ways to play it in multiple different sectors for this reflation trade that we think we will see in 2018, because the economic growth is extremely hot. packageprior to the tax hitting the economic growth numbers in 2018, so we think the economy may be at risk of overheating and 2018. , i hope it istodd a live shot behind you because it looks a lot warmer and sunnier than in new york. walter: not quite warm. david: next, we will be talking another sector seeing a rally, retail. live from new york, this is bloomberg. ♪ ♪ david: consumers gave retailers a christmas present this year, the best sales in years. could this be the start of a longer rebound for retail stocks? still with us is walter todd joining us from columbia, south carolina. let's start with retail, consumer discretionary. where are you on that? ,alter: consumer discretionary broadly speaking, has been under pressure. looking at the retailers for a lot of the year, but the past few months you have seen a rebound starting with black friday, and we have seen reports that sales have continued to be good as we moved through the holiday season. i still think there is opportunity in retail, although we have seen some pretty big moves in the last few months. a have benefited from the tax reform, which a lot of these country -- companies are domestically oriented and will benefit. david: give us some names. what do you like in the retail space? walter: one is to stick with the winners that are somewhat protected from the behemoth of amazon, like home depot or or cost go, but also the branded companies like ralph columbia.ford, and through multiple channels and do not have big retail store exposure. alix: what do you make of the rally that we saw in names like jcpenney and kohl's yesterday? it oversold because their sales were not terrible? walter: the expectation level on a lot of the department stores got very bad earlier this holiday season, so i think you are seeing a bounce. i think those are still challenged is this models when you look at the department stores going forward, but you could see some m&a in 2018 and the space. there is talk about amazon looking at other retailers like coals. -- kohl's. david: you are fairly confident into the first half of next year but have questions in the second. why? that thehe fact economy could potentially overheat, and this could cause the fed to get more aggressive in the back half of 2018. comparisons from an economic growth and earnings standpoint get tougher as we move into the midpoint, and a midterm election . in midterm election years, the market tends to be more volatile . the average drawdown is about 18%. david: how much will the tax overhaul carry us through that? walter: i think the tax overhaul is really starting to be priced in and i think will provide a lift in the first half of the year, but i think the overaggressive fed is, midterm elections, more difficult comparisons on the back half make that more challenging. i do not think the tax deal will be able to necessarily overcome those factors. david: thank you so much for joining us, walter todd of greenwood capital. alix: did you do your part for the retail industry? david: i did my full share. alix: i really want a baking .tores -- storage unit i was scouring stores yesterday and they are expensive. david: use the jars with the screw tops. alix: it is too much. david: i have these old-fashioned glass things. i am an old-fashioned guy. the oscar-winning producer who financed movies like "bird man," once cryptocurrency to finance future films -- wants cryptocurrency to finance future films. ♪ ♪ alix: this is bloomberg daybreak, i am alix steel. happy wednesday of the shortened holiday trading week. dow jones features up about eight. closed lower yesterday. european stocks relatively flat, that the metal and mining index copper, inoil and particular, seeing a nice rally. broadly, a weaker dollar story, the dollar index down 3/10 of 1%. the euro gaining 11% against the dollar this year, and strategists do not feel good about the dollar. i put the three year in here except for the 10th test instead of the 10 year because it is at the highest level since 2007. the front end of the curve could be under pressure, so interested in watching that. oil softer, copper slipping into negative territory that it has had a nine day winning streak, the longest since 2004. david: it is your kind of day, a commodities day. a good day for alix steel. let's get an update on what is making headlines outside the business world. the latest united nations sanctions in north korea are likely to deter their nuclear ambitions. the un security council unanimously approved new sanctions, to cut the trillium products almost 90%. -- petroleum products almost 90%. in germany, chancellor angela merkel under fire by the former head of the democratic social party. he says they will oppose her bid for a coalition government unless she backs reform in the european union. in an interview, he pointed to health care as a chief issue, saying she cannot allow people with state health insurance to receive worse treatment than those with private insurance. allies of benjamin netanyahu are pushing bills to decrease future investigations for corruption. they are recommendations to state prosecutors. has said any new law would not apply to current investigations. he has denied investigation -- participation in two separate corruption issues. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. value,ebating bitcoins fluctuating after stabilizing. future ofr about the the world's most volatile cryptocurrency. joining us is final the rot. -- lionel laurent. -- mohamedd arian el-erian wrote about bitcoin last week. what is your read? : i think we could tell it was not the dive moment for bitcoin that the bears have been waiting for. correction that stabilize the market and considering it is the christmas holiday season, it has done quite a healthy, slow creep back. the real question to ask versusf is, is bitcoin the 999 other cryptocurrencies will bitcoin win all the money, all the retail investors it lost before the correction? there are fundamental problems with that coin that i think may have come to the fore. david: at -- the least of which is the transaction cost. theof the determinations be extent to which institutions get involved. the other and cryptocurrencies going to survive if institutional players do not get into the market? , weel: i think on bitcoin saw announcements from some people that had planned to open hedge funds. they may have put that on the shelf for a bit. if wall street figures again trade this kind of volatility -- and i do think it inks that. i think investors and hedge fund managers think they can trade that. so you will see other product, other derivatives happening on the cryptocurrency market. this is 99% retail market. this is people in the space you are not institutions, are not sophisticated. as is the first ever massive market selloff and i think they will be calling the shocks -- shots. they will decide which coin gets the flows right now. i do not think this is wall street calling the shots. david: an interesting question is what kind of asset is this bitcoin? commodity, a currency? is there any asset class that has 99% retail ownership? lionel: no, and this is not a financial asset. it is not behaving in the way other markets behave, it is not correlated. as we saw with that correction recently, it was a crypto specific meltdown, not anything to do with anything related to the economy or fundamental news flow. what is happening right now is just uncharted in the amount of speculation and the amount of dreams. the new people coming in, surveys show, still want and expect a 10 fold return on their investments before they think of selling. that means bitcoin at $200,000. in practice, when there is panic, the heard cells. this is driven by unsophisticated financial and it is something utterly unique. it is a most as if there was a silicon valley startup suddenly made available to the public. it is a bit like if uber or facebook were made available to the public. alix: tenfold, i would like that return. yesterday, i was honing in on china buying middle east oil through a digital platform for the first time ever. markets wind up saying bitcoin related products and services could reach $8 billion in 2022. walk me through the ancillary effects that could be here to stay. lionel: i am a bit skeptical about firstly, whether you can profit from bitcoin without touching and trading bitcoin. andave seen the companies the governments and the markets who have tried to extract the technology, which is frankly clunky and complicated and not entirely obvious. just have not made any money from it. i think there are plenty of announcements and experiments. maybe they work, maybe they don't hear it maybe they are good for efficiency or extract extra money from the margins, but right now, this is what we have seen from wall street. if you are in the game taking big risks and trading this stuff and not getting compensated, if you are trying to be smart and do something completely different that has blockchain in the name or in the press release, i am not sure there will be that much value to extract right now. david: many thanks to bloomberg's lionel laurent. the public being able to fund a startup like uber , what if they could fund movies through cryptocurrencies? he is launching his own blockchain based token called movie coin. i had the opportunity to talk to him about this new funding venture. will do an: we offering by the end of the first quarter 2018, and investors will have the opportunity to buy into movie coin, and their investment will be tied to a slate of .otion pictures david: are you making a limit on how much you can mine question mark -- mine? christopher: initially we are going to raise $100,000 and based on the success of that, there could be future slates and quite offerings tied to the performance of individual films or libraries of films. david: you will offer $100 million worth of movie coin. that will be blockchain technology. do you know how you were going to price this? what investor are you looking for? christopher: currently, we will price them about one dollar a piece. the investors that we are going investors -- are around the world that are interested in investing in hollywood. david: a dollar movie coin, that is pretty democratic. almost anybody could invest and have a little piece of a major motion picture, is the theory. christopher: that is the exact theory. value how is it that the of the movie coin somehow reflects the cigna -- success of the movie? the movie coins are worth more. christopher: they will be tied to the performance of the film in the global market, so as the films succeed the price of the coins go up. david: does the coin give you some entitlement to some part of the revenue or profits coming off the movie? how are they tied? , profither: exactly participation. david: and it goes through the reciprocal hollywood way of describing it after costs are taken out? christopher: exactly. david: how many movies do you want to fund through the initial offering? christopher: i think eight to 12 pictures to be financed through movie coin, and thereafter, the possibilities are endless. moree excited about this, excited than any new financial technology to come into the movie business in more than 10 years. to 10,if it is eight $100 million, that is a modest sized budget. you were producer on "bird man." that weher: the capital raise for our movie coin will be used as equity for the pictures, and about 25% to 30% of the budget is covered by the equity. fundingnd you will find for the rest in some other way? christopher: traditional entertainment banks will be providing the rest. david: have you lined up the scripps you are interested in shooting or du have them in development? christopher: we are putting together a slate that is very exciting, including a list stars and top-tier producers. david: if i am an investor and want to invest, how do i know i am being protected? if i am investing insecurity -- security,ity -- in what regulating body will apply? christopher: attorneys that are experts in cryptocurrency, security experts, we want this to be compliant. we want this to be a great experience for investors and we hope this is the very beginning of what will be a new wave in hollywood. david: when is the initial coin offering going to happen? are anticipating by the end of the first quarter 2018. david: are other people doing the same? christopher: we are the first movers trying to bring this into hollywood. in a mainstream way. there have obviously been a few people who have done it, but we are the first people trying to bring it into mainstream. movie producera at heart, not a computer programmer. where did you get the expertise? i could not put a blockchain together to save my soul. christopher: outside of my career on wall street and while i was there, i met a lot of really smart people. a guy i had known about 20 years approached me with the technology, and at first i was a little skeptical, but he was very persistent he after about six months of talking, we decided to jump in. the way youis works hope it does in the first initial offering, when would you have the money and when would you go into production and see a movie in the theaters? christopher: we anticipate in andfirst quarter of 2018, we anticipate putting the first films into production in the first half of 2018. they will be in theaters about a year later. david: that was my discussion with christopher woodrow, founder of moviegoing. how should wall street firms respond to the new u.s. tax regime? if you cannot watch television, listened to the radio. tune in to carol massar and pimm fox until 10:00, in four tom keene and jonathan ferro. it can be heard all across the united states on sirius xm radio. live from new york, this is bloomberg. ♪ ♪ nejra: this is bloomberg -- emma: this is bloomberg daybreak. coming up in the next hour, gene munster. this is bloomberg. now to your bloomberg business flash. tax overhauls the to have a favorable impact on the company and its operations in america. that is primarily due to the reduction in corporate tax to 21%. they even expect a change to be reflected in their fourth-quarter results of this year, but said the analysis is not yet complete. theway technology says sales of its consumer business has been detained in a corruption investigation. police have taken immediate action for "suspicion of taking bribes." chinese consumers sales as the inpany rose to be the top cell phone sales. south korean prosecutors want samsung heir apparent to spend an additional seven years in jail. lee is appealing his sentence. of three judges is expected to decide the matter in january. that is your bloomberg business flash. alix: returned to wall street beat, where we cover three things wall street is buzzing about. first up, leon black's -- could alter the model. bond investors' next big trade is betting on u.s. homeowners. joining us is joe weisenthal. black to kick it off with . when you wind up having the tax overhaul, do you want to become versus an llc to attract investors but your taxes go up? joe: it is fascinating. all these companies that are public traded are the same, but because of the different tax treatment to get, as our reporting shows, it is complicated for funds because you get the k-1 filing. it is an interesting dilemma. deeply ironic, because this is supposed to simplify taxes. you do not want to change people's behavior for no good reason. there is no difference in the economic affect. alix: but if you are an eye and isn't that rate 40%. david: they -- joe: it is going to be really funny, because this sort of broad philosophical outline of the tax reform, republicans have been pushing it for so long, but there are all these details we will not know about the ramifications of for a long time . lawyers will be mulling through this stuff. all kinds of weird treatment. none of us have any clue of what kind of distortions it will make. alix: the juicy topic of the day, how the world's richest people got a lot richer. the world's richest add $1 trillion to their fortunes in 2017. that is a nice move. , a 23%e got jeff bezos increase in the bloomberg billionaire index. bill gates has held that spot since 2013 and was replaced in october. you have warren buffett as well. you have some hidden billionaires. some of the chinese billionaires out of the most, guys you have never heard of. hui added $29.5 billion. increasing his net worth 350%. joe: the tencent executive, that is one of the top stories of the year. the degree to which that has been driven by some of these behemoths in tech, particularly in china, one of the arguably undercovered stories of the year , a secular shift in em equities, real big tech players. fascinating to see that show up in terms of wealth games. david: i have got to call up this chart, because it shows that house prices have really gone up. we have got it. alix: let me point out that joe loves housing. david: i did not know that. numbers have really gone up and it turns out that people are making out like bandits in bonds to hedge some of the risks from fannie mae and freddie mac. the best-performing bonds are people backing up the most speculative mortgages. joe: it is sort of like the common thread that ties all this together. what is it that connects alien heirs to making a trip -- billionaires to making a trillion dollars this year, if you are farther out on the risk curve, whether it is in emerging markets or housing, you have done pretty well in 2017. it is a dominant theme. alix: those who bought subprime mortgages back in the day, they are now returning. if they want to invest in residential credit, the place they could go are these credit risk transfers. fannie and freddie take the next level of hit. david: it is a reverse of what happened in 2006 to 2008. house prices are going up in income is going up so they are able to pay their mortgages. exactly as you say, it is literally the opposite point of the cycle. the riskiest part of the risk pool is where the money is made, and one day, where it is lost. david: joe weisenthal, thank you for having -- thank you for coming. why volvo is getting a lot of intention -- attention from foreign investors. alix: go to tv , check out our charts and graphics. this is bloomberg. ♪ david: what caught my eye today was volvo. buy maybe, theto company that split with although when ford bought it in 2010. they split these two companies and a chinese company bought the cars. now they are buying a good chunk of the trucks. alix: i like what the chinese company will do with it, use their tie up to increased electrification and conductivity for the truck maker. peak oil and the advent of autonomous cars, where you do not need to go and buy a ford or volvo. david: lithium will do pretty well. alix: cobalt would be good, copper will be good. about theit say buildout of these kind of cars in 10, 15, 30 years? david: one thing we hear uniformly is this is coming. they are around the corner, and this is yet another step although the shares took a tumble. not like the investors like the idea of geely coming back in. .lix: coming up, gene munster he will talk apple, bitcoin, and more. apple falling the most in six months yesterday. are the iphone x fears actually founded? this is bloomberg. ♪ david: commodities charge into the new year. a three-year high as china cuts prospects for pollution. retail up, apple, not so much. a strong holiday shopping season but whatever people were buying, it wasn't the iphone x. and we speak with rich clarinet about the open fed chair job. welcome. with alix steel. alix: welcome back. an hour and a half until the cash open in the u.s. we closed lower yesterday. story. broader dollar you really see that in retail. strategists for 2018 are not optimistic on the dollar upside. 10 year yields moving a bit lower. in the back buying end of the curve and selling in the front end of the curve. crude is a little softer. $59 a barrel. eml hart of the day is the prices. the longest winning streak since 2004. my question is, if it is supply driven, can it be sustained? i thought $6,000 was a big number. alix: what does this say about the global recovery? david: we will find out. >> the new jersey transit riders could see tax hikes in order to a billion dollar into manhattan. chris christie is funding the project with a surcharging fee until 2038. new york plans to cover its share of the tunnel. one person was injured when two new york subway trains collided. the metropolitan transportation authority says the worker is being treated for nonlife threatening injuries. said the morning commute was not affected. and during a meeting on december 24, emmanuel macron urged -- the ending of the blockade in yemen. says that ending the blockade will allow humanitarian aid to enter and that the two tables -- the two-party should return to the table. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. i am emma chandra. this is bloomberg. alix: thank you. with a not so merry christmas for apple, they suffered the biggest drop in more than four months yesterday. multiple reports over concerns about ship for the first quarter of the new iphone x. munster.s now is gene good to see you. reports aboute the shipments being bigger than estimated? need it sounds bad but we to put it in context. every year during a cycle, apple will rewind six months and give reports to suppliers to the old eight boatload of phones. as the cycley year starts, typically in the month of december, we hear about the contraction of orders. think about a coach telling a runner to run a three minute mile. they tell the suppliers that they have to hit the ground running with this in reality, they only want them to run a four minute mile. so they have to say, here this back. it is normal operating procedures. if you take the numbers for face value for the production in the march quarter, that would imply about 50% of the next phones in the next year will be the iphone x. investors are expecting that number to be 25%-30%. so i think this is expected and i think it is actually a positive. david: take us back to the fourth quarter? 8 andought the iphone iphone x out at the same time. over have any indication whether they made that up? gene: we have an indication by looking at the supply. and some of the builders, the suppliers, they have been struggling to keep up. we check this every day and we look at 140 stores in the u.s. and they are just reaching, now, full supply. my point is this. there wasn't a lot of demand for this phone then you would have more supply. the numbers are going to the reported in the next three weeks and i think they will be better than expected for the iphone x. alix: you mentioned the three minute mile being a four-minute mile, why is that a positive? part of the report yesterday, they are on track and are telling suppliers to build 30 million iphone tends in the march quarter and if you normalize that for the year, half of the phones are the higher-priced iphone x. over the next two quarters into one thought, this story is the thought that the average selling price of the iphone will be going up and i think that is a key factor. david: talk about that, specifically. there are reports that there is resistance on the price because it is over $1000. do we know whether customers are getting price apprehension? the: look we look back at suppliers. demand has been tight which is an indication that it is good. bsp's will go up. meaningfully. and it is important to note that the vast majority of people who buy iphones, greater than 80% globally, buy them on a monthly basis. so the eight dollars difference is reasonable for most people. alix: does that mean they have to sell less but the asp's will go up? gene: yet think you can fire on both cylinders. i think people recognize this id it is a big number, $1000, think people do recognize the value they are getting. david: china has been a big target for apple. when you get up to those kinds of prices, there are much cheaper competitors out there. as good of at have sense out there. the iphone cycle three years ago did exceptionally well. the last two years was more difficult. i think competition will chip away. alix: when you look at the strategy for the phones, do they ind lower range strategy tandem with the iphone x? or do you think it is ok to put a lot of the eggs in the high-profile basket? gene: it is working great for them and i think it will be the focus, going forward. another quick point, they have a of prices and the cheapest new iphone is $450. alix: does it actually work? does it do stuff? a little controversial lately but it is only two years old. they do have a broad mind when they are thinking about half of the phones being the older phones. full disclosure, i have that and everybody asks if it is the iphone two. how quickly can apple build out those things? gene: it is important. 13% of the revenue today. it accrued last quarter at 24 expense -- at 24%. quarter, 22 percent and before that, 21 percent. so accelerated growth in services. from an investor standpoint, this is a more gettable revenue stream. they are intensely focused on building this. years,next one or two they focus on original content. to answer your question, i think the services piece is a critical point. we model this out for five years that they should be able to grow the business above 20% which compares to an overall growth rate of apple by 5%. david: is there a killer mobile app out there? potentially health care applications for apple, measuring blood pressure and blood sugar -- is that real? or is it like the great white whale gene:? the average person sees a doctor a couple of times a year. but many people never see a doctor. the only way to improve health .are is through wearables and apple realizes that. your eardrum is one of the best ways to get medical information. if you think about the air po ds, it takes measurements from inside your ear and i think the -- it is a huge opportunity for apple health care. alix: it doesn't sound creepy at all. it up on bitcoin because there is a debate in the -- isity about what it is it a commodity? it currency or equity? i think it is a currency and i think it is in a bubble -- i think it could technology will redefine how we use that. i think we can have those of those. a bubble and be in the future. the internet was in a bubble years ago. i think bitcoin is the same way. i look for one of the pivotal moments around bitcoin when retailers start to adopt it. it won't adopt it today and the reason is that when you have fluctuations in the value, retail won't want to take that kind of currency risk. it as soon as we see stability, you will see this move higher. david: -- so much foryou coming in, gene munster. i wish you could see his shoes. way cool. we ask out the heads of two big banks how they are dealing with this challenge. this is bloomberg. ♪ s is bloomberg. ♪ david: madame brexit. that is what a translator mistakenly called theresa may on her visit last week. but she laughed it off and swore she would get it done and then do everything so her legacy is more than just taking the u.k. out. that may be that a large amount people have to deal with the .ncertainty i recently asked brian moynihan and -- of citibank. >> we are watching it closely. from our perspective, the prudent thing that we have to do is assume what has been termed as a hard exit. meaning there is no transition and there is no sharing arrangements that are put in place. because we have to be open for business on that day for our customers. to make sure we can facilitate the things they need us to do. and that is the way we are approaching it. we have latitude and flexibility in our model because being a global institution, we already the 26 eu 22 of countries. so we are already there and are already on the ground. so it is not that we have been operating in the u.k. and going into those territories on in ad hoc basis. we been there and we have the conductivity. areas where we have chosen and where we think fit us well into the future -- years ago before brexit we did a significant and weent into ireland have our european bank is already headquartered in ireland. it gives us full passport capabilities across europe and the continent. so that is done. and we are the final stages of deciding on the trading and clearing activities taking place. we have been in late stage conversations with frankfurt on that. david: there was a report overnight at some of the banks he wash wilbur ross when in london and said that time was wasting. is that true for citigroup? or you looking at the possibility of moving a lot of people? >> going back to the business mark, we'll have the same construct where we already have a majority of our people in today's eu outside of london. so we have significant country presents. so the answer is no. we won't be moving as many but we will have some things we need to move and we are preparing to do that. but it likely won't be the same types of numbers or percentages that other people have or don't have with the presence already. david: that was part of my exclusive interview. i broach this topic with brian who addressed how brexit will affect his firm. brian: you just don't know. as negotiating is going on we speak. in the newspaper one day it looks like this and the next day it looks like that. it is hard. you are trying to rewrite tremendous 30 years of history as how they came to this. nobody can predict the outcome of that. i don't think it is good for europe, overall as a move along. people spend a lot of money figuring out what to do as opposed to spending that time helping customers. but ik it is a negative don't think it is a strong negative. there is no incentive then to make this with a growth rate. david: you are spending time figuring out what to do. the negotiations seem to go on forever. expecting you to say what you will do today but when do you need to decide? is there an advantage for the bank to say ok, we are going to paris or frankfurt or dublin? brian: if there was a decision you could make then it would be an advantage but it wouldn't be the first move. it is tough on people there. i was there a few months ago and our teammates say, this is real people who have real kids in school who are trying to figure out where they're going to live. and this is very difficult. so as soon as we figure out what is going to happen, we will tell people what we don't have the rules yet. ireland will be the new entities housing. our cfo is there and he is trying to steer through and we are building upon capacity. those are structural things. but the real thing is where you can live and work and work with customers. all of these kinds of things still he to be worked out. it is tough on people. . think people forget people raise her hand to say they want to go down now. oft there has to be a space where they can be located. we do have to garner space and make it work. it is very difficult on people. david: that is my exclusive interview with ryan moynihan. -- with brian moynihan. of 2018ay by the summer they have to make some decisions. alix: i love how people on the great.say frankfurt is know.t david: and sometimes when you move a lot of people, they don't move. and you lose a lot of people. alix: coming up, commodities are charging into the new year. we look at what it says about the global recovery next. this is bloomberg. ♪ xt. this is bloomberg. ♪ alix: copper trying to close out the year on a high note. a.l. me prices are rolling forward. this puts it into perspective. this is the price change for the rivalingper and it is what we saw in 2005-2000 six. the question, is the supplier demand driven? stewart, your call, supply or demand? stewart: supply. what is going on is that the chinese government, globally, is trying to figure out the have seen theou shutdowns with the steal industry and the coal industry and power plants. and value star to see it with copper. it is being told to shut down for a week. they'll find a solution and then come to a conclusion about how much you can restart. so it is about capacity cuts at this stage. china will be very important for the components of the demand side next year. so they're playing together, today. alix: we have seen investors pour into commodities. the third year in a row they have done this. the idea is that it is a real bet on growth. , is the supply driven fundamental thesis wrong? stewart: i don't think so because the demand side is being focused on. and the notion collectively is that it can keep growing at a healthy rate. within commodities, there are definitely things to worry about . the agricultural crop or a, they will be dealing with the weather -- you see very low prices. but on the other hand in the oil complex it comes down to what is opec and russia primarily doing in the first six months of next year. if their output agreement starts combatg, then how do we that and what is china up to and what to and what we see on the demand side. talk about china. i'm struck by the fact that they have cut back and stopped a major copper producer. toleratewilling to debt andth to combat pollution. if this is a serious goal, does it mean the supply on these products could remain low for some time to come? wallace: yes, we are already starting to see that. so profitability within our sector is pretty good. and it should get a little bit better. and that obviously plays into the commodity story in terms of where they go with the materials and what makes the most economic sense. but china will be trying to get the balancing act and pivot away from being a manufactory economy to a consumerism economy. and they forever have to work to make sure they don't fall off the cliff and make sure pollution gets better and that i am large the well-being of the population accounts for as much as the gdp growth number. alix: rounding it out here with oil. 2018-2019. arece and steep -- prices higher now. is that sustainable? stuart: i would say the marketing structure in oil has slipped act and forth and back and forth again. so it depends on what timeframe frame you look at but short-term it looks pretty well fed in that structure. but it is the oil market so anything could happen. that structure could flip entirely on its head in a matter of hours. alix: truer words were never spoken. stuart wallace, great to see you. coming up, new year, new fed. how it could affect policy in 2018. this is bloomberg. ♪ this is bloomberg. ♪ cannot live without it. so if you can't live without it... why aren't you using this guy? it makes your wifi awesomely fast. no... still nope. now we're talking! it gets you wifi here, here, and here. it even lets you take a time out. no! no! yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi. or a little internet machine? it makes you wonder: shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. alix: this is "bloomberg daybreak." .ne hour until the cash open here's what we're looking at. dow jones down by two points for the futures. s&p futures trying to take out again. low volume was not a lot of market participation on the short holiday trading week. european stocks are flat. but metal and mining stocks get one .5%.lly over other asset classes, broadly speaking, it is a weaker dollar story. up 11% so far this year with strategists not being optimistic about any kind of dollar rally for 2018. i put of the yield because it is around the highs that we have seen since 2007 and we have a selling in the front end with buying in the backend? how that winds up shaking out, we will watch that through the session. crude is a little bit on the back. lower but the cme are the lme, higher. for the copperr futures. the longest run since 2004. take a look at the synchronized global growth. david: we want to get to headlines outside the business world. u.s. wintry weather in the . the great lakes region is dealing with record breaking snowfall. pennsylvania, was hit particularly hard. the national weather service in cleveland says another 5-10 inches are expected today. angela merkel is under fire from the former head of the social democratic party. minister --oreign opposes the bid to form a coalition government unless she backs reform in the european union. gabriel also pointed to health care as a key issue saying that angela merkel cannot allow people to receive worse treatment than those with private insurance. plan toing policymakers discuss amending the constitution since 2004. in a report from china's official news agency, that decision was made today. the party will convene in january but there are no details on what the possible changes will be. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. i am emma chandra. this is bloomberg. alix: thank you. turning now to the fed. reports suggest that richer claret has been interviewed for the position. larry lindsey is also being considered for vice chair and we jay powell needs to be confirmed by the full senate. inalso has to be renominated 2018. what this highlights is what the fed board will look like in 2018 and questions surrounding that. .ith us to discuss is peter coy what do you make of the rolling out reports about who it is going to be with the fed chair and who he is talking to. peter: trump is going very mainstream on the federal reserve. the cabinet took real redmeat conservatives with people who would appeal to his base and people who had ideas about overturning institutions they were running but the fed is the exact opposite. everybody is taking right down the middle, the sort of person who is going to have experience with the institution and are steady hands. and i think it is reassuring to wall street. what does that mean in 2018? when it comes to inflation? three hikes? for hikes? at an articleng in a bloomberg businessweek will be the year of the curves. yield curves. oath of these curves are flattening. tends to berve sloping upward. the fact that it has come down alarms people. they say it could be a creek -- it could be a precursor of a recession but i argue that it is not the case. on's are actually yielding less in the short term. and that is an indicator of a recession but we are not there yet. it is still sloping upward. on the phillips curve, measuring the trade-off between inflation and unemployment, we typically look for inverse curve or high-end employment associated with low inflation and vice versa. greattening of that is a method where there is really no we to worry -- no need to worry. the phillips curve is dead, you have probably heard that talk? i disagree with that. the phillips curve is alive and well if you know where to look for it. these to send different messages. one says, hey. be careful about raising rates. but the other is saying, maybe we do need to raise rates? so it is a complicated environment for jay powell and the rest of the crew. bring backu traditionalists to the fed, we are not in a traditional economy. so there is a lot of conversation about how old models are not working. so is this, in essence, a good thing? don't we need new voices to reset where we are? peter: we'll cut atari, for example? he is out there quite strongly that inflation is below target and there is more slack in the labor market. and i think it is good to have voices like that in the mix. streetuld concern wall is if they brought in somebody who had a kill the fed kind of person. someone from the ron paul school of thought. alix: let's talk about this. bloomberg sat down with a lot of fed officials last week. recently it was robert kaplan. michael mckee asked him about his thoughts on the job market. >> my own unemployment forecast is more aggressive than the median of the sep. what people should expect will happen, even though we have in 2018-2019, as we approach full employment and -- unemployed and discouraged workers and the problem is that is at the pre-recession of low. and i think you will find that what people should expect as we get at or near full employment, job growth will slow somewhat and the degree of reduction in unemployment rates may also slow somewhat. that may explain why you are seeing a slower rate of reduction in the unemployment rate. michael cole and the other question is, growth goes down. nothing happens with inflation. why not? have two competing forces. one is cyclical pressures. there were more wage shortages for skilled workers and at the low end there is wage pressure. if you make $20 more, i'm not sure, based on my discussion. but cyclical forces are building. and as we take more slack out of the market, we will build more. technologyogical -- enabled disruption. people being replaced by technology. the pricing power of businesses is limited and new business models for selling extra shipping goods. that is causing businesses to be very challenged in passing on wage increases center prices. and i think that structural force is intensified. so you have the cyclical, the structure goal -- the structural and i think it is creating an toect and we are doing a lot try to study this phenomenon and we are holding a conference in the spring to try to encourage the system in academia with businesses doing much more to study this. david: that was robert kaplan. we also spoke with neel kashkari . he said there was restraint in part because of syed was that cut inflation expectations down. of fed expectations flation expectations down. >> we have been sending hawkish signals by raising it into a lower environment. and the markets are pricing in a neutral interest rates. is set byst rate broader macroeconomic forces. it has been trending down over the last few decades. i think markets are embracing this concept and dicing in a which caps where bond yields are and could explain some of the appreciation of the equity market if they are discounting cash flows at a lower rate. so those are the signals i take away from the market now. david: at the long end of the yield curve -- eight to 10 yield curve, whitest coming down. talk about the long end. if you had your way and went from what the fed is predicting with three increases next year to one, but what happened at the long end of the yield curve? >> it might take off some of the downward disinflationary pressure that the committee is putting on the long end of the curve. weause by raising my view are sending a signal that the 2% inflation target is not a target. we are sending a signal that it is the ceiling. that we will not allow it to go above 2% which puts pressure on the long end of the curve. if you look at how we have saided and not at will be -- it is a target, not a feeling. we have been using to present as a ceiling and markets have figured that out and they are pricing that in. so the fed is pushing up the front-end without rate increases and pushing down the long and by sending a hawkish signal. david: that is part of the conversation with neel kashkari. still with us is peter coy. will it be necessary for this fed over the next year to rethink the paradigm, rethink the theory? because the economy is changing with globalization and technology. is the driving force without stanley fischer or janet yellen? peter: it is always good to be rethinking your paradigm. on the other hand, it is also what do you -- think? we have supply and demand. both are not going away. if you have a tightening labor market, it stands to reason there would be inflationary pressure. the paradigm makeshift because of what kaplan mentioned. globalization. but doesn't change the fundamental fact that when supply is tight and demand remains, prices tend to go up. to be thegoing thought leader of the fed? is not phd but that does not mean he will not contribute to the discussion. i think it is a good thing that the fed has a mix of phd's and non-phd's. each one brings a different voice and wealth of knowledge. you want to go to all business people -- you wouldn't want to go to all business people. alix: to wrap this up, what is the contrarian fed unit in 2018? peter: there are two contrarian views. 4 hikes or they go even more. theother is that sluggishness goes on and on and the fed has to say, look. we told the markets we were going to go with two or three hikes but we are not going to do it. so either extreme is imaginable. david: is there a bigger risk from one of those or the other? peter: a good question. i would say it is roughly symmetric. david: peter coy, thank you so much for being here. coming up, bloomberg's outlook. you can tune into our colleagues carol massar from 10:00 a.m. -- in four tom keene and jon ferro. 7:00 a.m.-10:00 a.m. new york, boston, the bay area. this is bloomberg. ♪ emma: this is "bloomberg daybreak." up, michael carey, the head of multi-assets at highbridge investments. this is bloomberg. ♪ now to the bloomberg business flash. spent an additional seven years in jail. he is already appealing the five-year sentence of arriving at the country's biggest company. a panel of judges will decide the matter in january. technology said the head of sales for the consumer business has been contained in a corruption investment. they will take an immediate action over "suspicion of taking bribes." chinese consumer sales of the company rose. as a major rival to apple and samsung. china ordered its top producer to hold output to combat winter to combat winter pollution. this has been driven by an optimism about demand. copper is on the longest streak of gains since 2004. this is your bloomberg business flash. alix: thank you. republicans finally accomplish the tax overhaul this year. a looming concern on the market. paschi.us now is eric walk us through what we saw a leading up to tax reform and what is happening in the market? we have seen a rush to market by a host of market participants. at risk were even announced -- were advanced refunding. private activity bonds. which were basically aimed at stadium financing but it became so it really was a fear factor that's got into the marketplace which caused a host of issuance to come to market. we saw double the amount in december than we normally do. 25 billion got pulled into december from next year. alix: and then what happened? it looks like state and localities will issue $5.21 billion of bonds. the estimate a week ago was 2 billion. eric: in a normal year we would expect $340 billion. didmarketing totals show we lose advanced refunding as part of tax or form. that will make up 10% of the marketplace. on an average year, we were said to go down, anyway. governments got tapped out as far as what they could do from a debt standpoint. of federal and for structure programs, we projected it to be a pretty average year, in general. david: what happens if there is an infrastructure program? gerry cohen said that is next up on the agenda? you could have a push and pull a fact. on one hand, it could get issued on a local level because part of the plan is pushing infrastructure back to local levels and looking for that to drive funding. so they leverage to injure billion dollars of federal money into a trillion dollar infrastructure plan. , they the flipside reintroduce legislation. so threats to the municipal market are not off the table. david: what could the markets do? if they have a substantial package that gets driven down to a local level? it comes down to what they can do as far as incentives. out with similar programs. the rebuild america program. we will be looking in the next week or so when the white house releases the framework for that plan. to see what they are thinking. the good news for the media weket is that, at least, have been called into this part of the meeting to be a part of the solution they come up with. alix: the question is also the curve. is sitting at 56 basis points. is that mean the high-yielding market will look attractive, comparatively? been ane sector has attractive bright spot for the marketplace. but if you look at where returns have been driven from the marketplace, we don't seek excess return going into 2018. the first half of 2017 was driven by the tobacco bond sector. it teetered out in the summer. and that it was a high-yield general obligation sector. that was driven by illinois passing the budget later in the year. so as far as where returns will come with high yields, we think it will be pretty average. david: finally, what are the risks of default? you said earlier that a lot of these state municipal's are -- at this point. don't think it is risk of default. anytime you're managing a portfolio, you have the risk of a credit spread. on isat we keep an eye the ratio, the leverage ratio looking at the total liabilities for debt service and pensions. a very big deal for municipalities. eric kazatsky, thank you so much. he just made bonds really interesting. signalup, one commodity says it is time to buy. if you have the bloomberg terminal, check out tv . look at the chart and graphics and indirect with us directly. this is bloomberg. ♪ this is bloomberg. ♪ alix: here is what caught my eye this morning. no surprise. commodities. take a look at this chart. it compares the s&p total returns commodity index versus the s&p and it shows commodity prices are at an all-time low. they hit the all-time high back with the oil crisis, that is the blue. the yellow is the gulf crisis and then you wound up having the purple as the financial crisis. that is when commodities were outperforming and now they are underperforming so drastically which is counterintuitive because you blame it on the global rate so they should be outperforming. david: why is that a league -- why is that a big flashing by sign? alix: you see that with energy shares. will that wind up playing catch-up? or is this just too risky? a lot of you do have leverage and wire you buying stocks? you want to work with the dividend? but people will need the commodities for various things. cobalt about lithium and for electric vehicles. we will need these. alix: the world is about commodities. managerp, a portfolio will be joining us with his take on stocks and commodities. this is bloomberg. ♪ this is bloomberg. ♪ . .