Transcripts For BLOOMBERG Whatd You Miss 20170426

Generation opportunity to do something really big. President trump has made tax and we have aity republican congressman wants to get it done. This is something that honestly i hope the democrats would support too because it is good for the american people. Would be new tax rates 10 , 25 and 35 . The conservative House Freedom caucus is backing the latest Health Care Proposal as the white house tries to revive efforts to repeal the Affordable Care law. In a statement, the 40 or so howd lot hardline members to hold the blocks the earlier bill announced their support for by w plan crafted the group said that while the new proposal is not a full repeal of the 2010 Affordable Care law, they are prepared to support it. Saudi arabia and russia will meet within the next two weeks to discuss extending those Oil Production cuts designed to firm up prices. The current cutbacks by opec and russia and in june. So far they have not achieved the target of reducing stockpiles below the five year historical average. Global news 24 hours a day powered my more than 2600 journalists and analysts in over 120 cap countries. I am mark crumpton. This is bloomberg. Joe bloombergse from world headquarters. Joe we are 30 minutes from closing trading. Scarlet the nasdaq is that another record high. S p 500 edges towards his own record. Joe whatd you miss . Scarlet a busy day in washington. We will speak with washingtons main man in focus. Ngs are twitter shares are rally with the world of legislation this week would rip up much of doddfrank marks a Pivotal Moment for republican efforts to overhaul post crisis financial worlds. The bill was drafted by Jeb Hensarling. On capitol hill. Take it away. Kevin were here with german Jeb Hensarling. You had a hearing this morning on doddfrank. What would choice act 2. 0 do . The most important thing is were going to promote Economic Growth. I think there will be greater financial stability. Were basically going to replace bill house with bankruptcy. Replace complexity with stability with simplicity. Of all the obama era regulations that have been opposed on our economy none are worse than doddfrank. Doddfrank imposes greater regulations than all the other obama era regulations combined. This is an economy under the Trump Administration that is poised to take off after all years of obamanomics. We have to repeal and replace doddfrank. The way to die do the way to do it is with private capital and let freedom ring. Kevin lets talk love the ending of private bailouts. Leslie President Trump signed memorandums that would review liquidation authority. That came up several times. What would your bill due to address orderly liquidation . Replacet we do is we the Orderly Liquidation Authority and the ability to important Financial Institutions. What happens is it becomes a selfperpetuating phenomenon. The big banks bigger. The big banks have gotten bigger. That does not create more financial stability. We have replaced this bailout authority that doddfrank instituted and replaced it with a new subchapter of our bankruptcy code. The truth is there is no reason why large, complex Financial Institutions cannot be resolved in a bankruptcy setting. But there are improvements that can be made with respect to expertise, with respect to rapid response, with respect to certain stays on derivative positions. We have improved that and that is the way to go because ultimately we want shareholders in counterparties to have the right risk tolerance and not impose that upon the taxpayers. We believe that will help create the balance which will promote more Economic Growth and still make our economy more stable. Kevin lets talk about the politics of this. This is being interpreted by people on capitol hill as more of a conservative piece of legislation than the first go around. Received a timetable for when this legislation will get a vote on the floor . Then what happens in terms of when it heads to the senate . Jeb i would refer you to the speakers comments this morning. I think he said soon. Soon is soon. Kevin but what about in terms of as you negotiate with the what is the guess, timetable in terms of passing this legislation . Jeb i expect we will bring it to the house floor in short order. The senate will do with the senate is going to do. As 101 teaches us bsolutely. ,very conversation i have had this is a this year priority. That is what we are driving four. We have too much capital locked up sitting on the sidelines. Entrepreneurship is at a generational low. I want to get into about the Consumer Financial protection bureau. You have called for the director to be fired. Your committee has taken issue with how what would your legislation do anderms of addressing it what tools and message do you have for the white house . Cfpb is the most powerful and unaccountable federal agency in the history of the republic. Its one of two new federal agencies since the new deal where it has been ruled unconstitutional. We have completely lost checks and balances and due process. Anyone who agrees in the democratic process cannot believe in this particular institution because one unaccountable official can decide what mortgages we have on our home, what credit cards go into our wallet. What we would do is create an institution not unlike the federal trade commission, which is a pure Law Enforcement agency. The most important way to protect consumers is through competitive, innovative transparent markets. He should have been fired yesterday, the day before, the day before that. I dont have the ability to fire him. I certainly encouraged the president to do that. Ability to do it. Unfortunately consumers are in many ways were soft. Bank fees have gone up. The ranks of the unbacked have gone up. Kevin another thing that your committee is looking at is investigating what went wrong with wells fargo. Democrats have made the case that the reason you need doddfrank is to prevent issues like what happened at wells fargo from happening again. But you make the case that doddfrank and regulators andaps dropped the ball that this is perhaps a system that should not have been made. How would your legislation prevent wells fargo from repeating, and what is the status of your investigation . Jeb number one, it is the work of congress to make the law. These negative branch is supposed to enforce the law. I think it is fairly clear that the cfpb was asleep at the switch. We produced documents that showed they didnt even lost their investigation until after wells fargo selfreported. This really had to do with an investigation by the l. A. Times, the Los Angeles City attorneys office. All cfpd majorare two dozen consumer laws on the books. We would have an agency totally devoted to enforcing the law, to really be a cop on the beat. Unfortunately what happened at wells fargo is basic fraud and theft. It has been around since the dawn of man. Occ had regulators. I dont know why they did not do the job. Maybe it was because they were too busy making the law. Maybe it was because they were theirsy renovating Luxurious Office space, which is going to cost us 200 million. Maybe they were too busy fighting off the charges of Racial Discrimination within their own agencies. Question, last question. Announcedeform just regarding copperheads of tax reform. Do you have any concerns about how to pay for this in what you make of the tax proposal . Jeb unfortunately it was just released and it literally came from committee and literally came from the house floor so have not been able to see the plan. But i heard it contains things system. S and a flatter im probably already there but i need an opportunity to study it. Nothing says Economic Growth quite like fundamental tax reform. Have the highest Corporate Tax rate in the industrialized world. If we want to bring jobs from overseas and bring them back here were going to have to dramatically cut the corporate rate, business rate, and middleincome workers need a fairer, flatter system. I havent been able to study the plan as of yet but from what i know about it, i am intrigued and im glad the president is offering it. About yourme ask you recent trip overseas with House Speaker paul ryan. You visited several countries including the united kingdom. Talking about the importance of nato. Tell me about your trip. What did you learn, what did you make, and how important is nato in this commitment to nato as we move forward . Jeb number one i think nato is incredibly important. Clearly the russian bear is on the move. Kevin how so . Jeb lets look at crimea and ukraine. Lets look at the history. We came from estonia, a place that was occupied by the soviets for roughly four decades. Every Single Family has some story about some relative being shipped to the gulags. It is tragic what happened in eastern europe. We ultimately see from mr. Putin is a desire to recreate the soviet union empire. And it is nato that is standing between him and that particular goal. I what to give our president Great Britain great credit for challenging other nations to commit to 2 gdp. And frankly, a lot of them are getting there. Others are on their way. I dont think if our challenge from the president wasnt there they would do it. I think were going to see a better defense to nato and hopefully be able to keep russia in check because they are not doing anything that is going to be helpful to u. S. Interests, much less the global cause of freedom and prosperity. Jeb, we could talk forever but we appreciate your time. I will toss it back to my esteemed colleagues in new york. Joe that was congressman Jeb Hensarling with kevin. Scarlet 15 minutes to go before the close. U. S. Stocks have given up a lot of their game. We are still positive but as you can see, a gain of only eight points for the dow. S p 500 clinging on. Nasdaq at a record high. From new york, this is bloomberg. Letswhatd you miss . How will the taxcut proposals impact to individual filings . Lets ask a partner at ernst young. Thank you very much for joining us. Not a ton of details. We dont even know the exact income ranges of these three new tax brackets. From your perspective, what are the key principles that you are taking away from this that will affect individual filers . Top tax bracket of 35 of ordinary income, right now it is 39. 6 . Rates ofs it back to 2012. It has repeal of the 3. 18 Investment Income tax on Investment Income on people who make more than 200 and that incremental tax included in medicare just. 9 on high income individuals. Those are key on the income side for individuals. Deductionstemized except for Home Mortgage interest and share contributions. What does that mean . No more deduction for real estate taxes. No more deduction for state and local taxes. Scarlet that will hurt for a lot of people. Potentially a higher standard induction. That means for middle to lower income people perhaps the losses made up for with a standard induction. But for higher income individuals, could be more costly. Scarlet for higher income individuals they can also perhaps rework things so that they can create a pass through and get that lower Corporate Tax rate. What is to stop Joe Weisenthal from forming Joe Weisenthal . Elda he needs to have a business and get paid. We dont have any details on whether all the income through that pass through would be subject to the 15 . Or with some of it be deemed earned, like compensation and tax at your highest and the ballots what we saw in the house gop proposed 25 had on passthroughs after a certain amount was deemed as reasonable compensation. What we heard during the campaign from the president was a 15 rate only if profits were kept in that pass through business and not take a nap. We dont have any of those details right now. Joe i want to go back to the elimination of state and local tax deduction. This is an issue for a lot of viewers. Many of whom in new york or new jersey or high tax states, california. High tax states where this is a significant deduction on their taxes. For ag of a deal is this lot of high earners . You would think it impacts all hiner is living in those states. But some of those high earners are already caught in the alternative minimum tax net which means they already lost part or all of the benefits of deducting those taxes. Someone out there who says i am reading there is a repeal in this proposal, that maybe sounds ns is you all that mea were not allowed these deductions anyway. For those individuals it might not have any impact. For those who pay a significant this is ahigh income, huge number if they were in a high tax state. Scarlet what are you hearing from clients . Wants to someone who form their own company and is looking to do so but is hesitant to pull the trigger because they dont know what policy is going to be in place. What would you say to them in terms of go ahead and do it or wait a couple years . Elda there is a lot that currently has a flexibility to change the former business. You dont have to necessarily feel locked into the form you start your business. There is opportunity to change. It is hard to imagine at small pastors, would be taxed any worse than corporations at the end of the day. Corporations might have a 15 tax but when it needed and that is already 35 . Much,lda, thank you very helping us break down the ramifications of the announcement today. Scarlet coming up, the gops effort to repeal obamacare might have new legs. We will have the latest on what is to come to replace obamacare. This is bloomberg. Scarlet the conservative house of Freedom Caucus which derailed has formally redo what changed . Lets ask our reporter on capitol hill. This is been a day of big announcements but not much detail. What details do we have on what changed to convince the Freedom Caucus to sign on this time . The Freedom Caucus endorsed the ahca after what is known as the macarthur amendment which allows regulation that insurers have to provide a package of potential Health Benefits and every plant in the other insurers are not allowed to charge sick people or people with preexisting conditions higher premiums on the basis of their status. The Freedom Caucus want to these waivers because they believe it will help lower costs. Senior republican aides in the house are telling me this helps in the sense of brings a block of conservatives on board but they caution it is not a slamdunk to pass the bill endorsement. E hfc a lot of moderates are still concerned about cost to subsidies, medicaid. To subsidies and medicaid. Joe heres a question i have, and maybe i havent seen an answer. What is the incentive for states if this bill goes through to weaken the projections of their own citizens when it comes to people with preexisting conditions . The short answer is cost. What would happen here according to Health Economists is that Insurance Companies would be able to charge people lower premiums, lower prices for insurance policies because they would have to cover less and because they would be able to price out sick people from the market and not necessarily have to cover them as well. It improves their risk for in terms of how i having fewer sick basins and more healthy patients they can now charges skimpier plans at lower costs. I think that is the incentive. The incentive not to do it is that it would harm the people, the sickest and poorest who need these protections the most. President e know the wants to get something moving on a Replacement Health care bill. Where does this put up in terms of the timeline the white house projected and what is plausible . Sahil no timeline yet. He white house has been saying for a long time and wants a vote. But they dont control the floor schedule. House Republican Leaders have not made any announcements on floor timing. The Leadership Team are talking to members now i am told, especially the moderates. One source telling with the focus is all on the moderates. The conservatives are mostly on board. , theke to a few of them new changes dont convince them. Tom reed of new york told me just moments ago right off the house floor that he was in favor before the changes, now he is undecided. This is a big danger for republicans. They gain some people and lose some moderates. Ahil, we will have a lot more on this topic tomorrow at 10 00 a. M. Will carolina congressman be on talking about this theoretical bill coming through. Scarlet the market closes next. Take a look at how stock indexes have given up their gains. Modestly lower now. Dow losing 17. S p off by one. This is bloomberg. Scarlet we are moments away from the closing bell. Whatd you miss . U. S. Stocks giving up gains peerages closing short of a record high. Im scarlet fu. Joe im Joe Weisenthal. If youre tuning in life on twitter, we want to welcome you to our closing bell coverage every weekday from 4 00 to 5 00 eastern. Scarlet im just looking at the screen for the nasdaq, closing just negative. No record high. Unchanged when it comes to the present mark. The Dow Jones Industrial average losing, and the s p 500, little change on the day. A lot of headlines, starting with attacks headline. Joe you cant read too much into this, but the news of the. Ax cut torlet you have telecom up present, all of the on the strength of verizon and at t. Pulling back that neutrality, taking a second look at that, as well as some other sectors like real estate off. On the other hand, utilities lowered. Besides health care and telecom being higher, Everything Else kind of joe not a whole lot of definitive miss. Scarlet because it was tax plan day we have to look at how each finished out. The reform includes simplifying. He burden for tax code twitter had the best day since september 23 after the highest level in late february. Users raisingy 6 . Politico reported that the Trump Administration is considering ordering enough to enough to a nafta withdrawal. Up 1. 2 . Luminum lets take a quick look at the Government Bond market. Not a whole lot of action here. Lower,ed, 10year gilts, keeping with the red on the board here. Interesting. Planeory, this tax spurring growth. Interesting that we are lower on the day in all of this. Scarlet we are still so far away from pricing in all of this. In terms of currency, lets start with the dollar here. It closed off the highs. For the most part, higher to date. Certainly over the last two days. Peso weakening of the report that the white house is drafting a move to with draw from the pestle from nafta. The ruble low. What iteally knows means, italys a lot of two expectations. I included this because we had Manufacturing Confidence in sweden sewing to a record high. It gives the sweeter centralbank some room to reduce the accommodative monetary policy. Joe finally on the commodities front, a quiet day here. Gold up a little bit in keeping with the risk off five. Overall, a quiet day. Scarlet those are todays market minutes. Be the u. S. Economy may better than indicated. Is the growth goal getting tougher to reach. Michelle, great to have a back on the show. Probably going to get a mediocre gdp report on friday, maybe around 1 depending on the estimates. Does that tell us the true state of the economy or the seasonal factors depressing this. One is the idea of the seasonal residual audi. Additional seasonality. We have seen that for the last several years. If you see for Consumer Spending, that was probably depressed a bit because there was not as much activity in terms of going out to buy cold weather gear. I think the risk is it comes in week but you have to assume two and a payback and q q3. Scarlet a lot of changes to come. And what your thoughts on the news we got to date which is the one page tax policy plan. We know the white house says it is progrowth, it has a progrowth agenda. I want to get your take on whether the white house is so progrowth. Fit or good question. Im not sure we know yet because we dont have much details. Generally they want to spur stronger Economic Growth. I think the mentality in that respect is to lower Corporate Tax rates, make it more efficient for companies to expand, to an best in capital and labor, but you get more broadbased Consumer Spending in overall demand. I think it is to make it a more business friendly environment. The question is whether or not we will be able to see these policies the implemented. Joe the phenomenon that businesses have lots of cash. How much can you reduce growth . Investment have been so far. Incremental investment to do. That is not my bayside forecast. I think it is a very high hurled hurdle to achieve it. When it comes to Corporate Tax reform, you get this generation of new businesses in the level of Economic Growth. Company we have some earnings i have to break in with. Amgen, higher than what analysts were looking for. Revenue missing consensus estimate. Full year, for the adjusting the bottom part of the outlook. Lets talk about the individual side of tax reform. We dont really know the brackets or the associated with these rates. How much in your research and work with that translate into new spending or does it end up just getting saved . Lets go on the assumption that the effective tax rate goes down. That means the consumer is getting a tax break. I do think that should help to generate stronger spending. Savings rates are high and Household Wealth is high. If we have a decline in taxes and disposable income is picking strongeres generate spending. Potential. Again, we dont have details. Onrlet some details for you paypals results. Pboc coming out with the First Quarter revenue beating the highest estimates. Shooting up. They have also started a buy back program. They see revenue for this quarter, the Second Quarter pretty much the midpoint matching the consensus estimate. Again, the midpoint of the range matches the consensus estimates. Shares up nearly 6 . Joe we are pretty much at a brandnew high on paypal. Scarlet i want to pivot now to the fed. We talk a lot about where the fed goes with the rates. Two more hikes this year, three hikes this year . What about the Balance Sheet . Will they discuss it with normalizing policies and rate want aes . They dont repeat of a temper tap jim. What they are testing to do is give small details of the strategies and test the Market Reaction and continue on the path of implement the strategy. My view is that it is still tool ofed the active investors. They want an Interest Rate directory but at the same time begin the process so that when it comes to the point where they , theyit is sufficient will be able to do that. You can see the unwinding of the feds ballooned acid sheet. In the chart that is an interesting question, is it the itivalent of rate hikes . Is a form of tightening . There some debate on these two things. What is the extent that it is a form of tightening . That is a really important question to ask. Impactyou measure the into the economy in terms of rate hikes. The map that we have done is the passive shrinking, ending we investments which would be equivalent to a basis point hike. It would spread out over one year or however much time it takes them to do the Balance Sheet. That is a huge question. I think fed officials themselves are not sure how conditions will respond to the Balance Sheet which is how they why they are being so cautious. Wrap everything up. When we talk to investors they say that when you tune out the political and policy noise, things actually look ok. What is the Federal Reserve likely course of action among all of the dealmaking noise and fiscal policy noise . I think what the fed is trying to do is kind of look past all of the noise. They think it makes sense to do that. Theres too much uncertainty. What we heard from officials is while some are starting to include risk and policy, the majority have not put down the risk and policy. That makes sense. Muchre not incorporating in terms of fiscal policy. That said, i do think i they are thinking about fiscal policy in terms of risk. There is this belief that there is at least some additional backstop backstop if the economy were to weaken. Joe michelle meyer, thank you very much. Scarlet another company reporting that gets the bulk of its robots its products from asia. Reporting firstquarter adjusted earnings, beating the contestants consensus estimates. Macau, continuing to rebound. That is showing up in the First Quarter number. When it comes to the share price, down. Nafta up, a tough talk on. Is the white house ready to withdraw from the north American Free trade agreement . We have the latest from new york. This is bloomberg. Mark it is time now for first word news. The white house today introduced the opening bid of President Trumps tax proposal tax reform proposal. Gary cohn speaking at a white house meeting with steven mnuchin, offering this summary. Packagetax report is about growing the economy, and growing jobs. I started, President Trump comes in every day and talks about Economic Growth, prosperity, and jobs and what we are doing to stimulate Economic Growth. Mark secretary mnuchin says the stimulate growth. The administration appears to be slowing efforts to Push Congress for funding on the border wall. Mexicos foreign minister slammed the proposal, calling get unfriendly and a hostile as he says mexico will not totribute a peso construction and will proceed it is precededf upon. Of israelitical military actions in the west bank. That after Benjamin Netanyahu abruptly canceled plans on tuesday. Germany says it must be possible to meet critical organizations in a democracy. Netanyahu says he will not see diplomats who see groups who seek to try them as war criminals. The u. S. Navy guided missile destroyer flight toward an vessel. The latest encounter happened monday as the iranian vessel came with an 1100 yards of the navy ship. Global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. I am mark crumpton. This is bloomberg. Joe whatd you miss . It was a busy day in washington as the white house unveiled its tax reform parties. Also reports that the white house is considering with drawl from nafta. The mexican peso, Canadian Dollars and shared companies that rely on crossborder trade all weekend on the speculation that the white house in. Could scrap the trade agreement. You can see the moves here, the dollar up nearly 2 on the news against the peso. Lets get more insight from bloombergs International Politics correspondent, mike mckee. These reports, talking about this possibility, first of all is this something that the president could do unilaterally . The nafta treaty provides a sixmonth window. If you notify your other two partners that you are drawing, you have six wants to do that. Theyve not started negotiations yet. The president want to be negotiate the treaty. He has to also notify congress that he is doing it. We dissipate that announcement any day now. The two things could come out almost simultaneously. The president has this hammer of, we can leave nafta, that he can hold over canadians and mexicans. Great strategy, for sure. Have you forgotten close to someone triggering that . It has not come up before there have been some renegotiations of some various parts of treaties. This is a unique situation. We do not know exactly what the administration endgame is here. Chum has, at times, talked about wanting to renegotiate, wanted to scrap the treaty, wanting to do bilateral treaties with both countries. Most people would agree, it is an old treaty, it could be updated. A lot has happened since then. We are not sure where this goes from here. Joe i think it is safe to say that theres a certain zerosumness the way this demonstration uses trade. Some say, traders work that way, theyre all kinds of crossborder things, Multinational Companies with value chains that are obligated. Is it a plausible threat to withdraw from nafta or would it be harming the u. S. As much as potentially the trading partners . It would not harm the u. S. As much as the trading partners because we are such a bigger market but it would not do any good longerterm. It would raise harm because it would raise questions about our ability to be a good partner anywhere. The wto tariffs would take over if there were no agreement on among the three countries. Mexico and canada can raise their tariffs higher than we can on their products. We are worse off in that sense, which raises the question of, does trump just ignore the wto, which could hurt the Global Trading system. Joe other than the fact that we rate a trade deficit with mexico and canada, we know specifically what they missed ration feels is unfair about the Current Trading regime . Know because they have never really said. The present argues that lots of jobs have gone to the u. S. And mexico. Some have, but most have been hit by automation or by china. A lot of research on that showing that many more jobs moved to china than to mexico. Joe mike mckee, bloombergs International Politics correspondent. Scarlet lets get a look at some great trading. Biotech have, in the red. The new cholesterol drug, failing to gain traction. Paypal up nearly 7 after sales beat analyst estimates. From new york, this is bloomberg. Scarlet im scarlet fu whatd you miss . Many fractures in sweden feeling a little more optimistic hearing lets take a deep dive into the bloomberg. This is the swedish Manufacturing Confidence going back some 20 years. In april, you can see the yellow circle, confidence assertion, the highest ever since surveys began in 1990 six. The strong reading points to a possible revision in gdp forecasts, and that could pave the way for a reversal of a very accommodative policy. It makes them meeting tomorrow much more interesting. What does sweden make . In addition to pop music, and really good hockey players, it and lumber. Joe we have another round of the French Election coming up. It has not gotten as much attention as the first run. Perhaps this chart gives an indication of why. A couple of different polling firms with the top polling and the for macron bottom two, the pen. Le pen pen has never gotten narrower,points, or in the second round, basically in every poll. Some have been significantly wider. Sometimes the lead have been closer to 25 points. Basically there has never been an indication that that is even close. The nice thing is, on the bloomberg, we can track this. If it starts to narrow, we will know. In the meantime, no particular indication that it will be close. We have to pay attention. Scarlet her polling has been super consistent. She has a core base, but it is interesting because people say, the polls are not accurate, but in the first round, the polls were spot on. With the u. S. And brexit, they were not that far off. Scarlet we are still tried to figure out if people will go over to her or swing their support behind macron. Joe there is some and be ready ambiguity as to how they will break out. At this point, no indication get of a close race. Scarlet coming up next, we discussed tax reform implications with rick glasgow. This comes on the heels of Steve Mnuchin and gary cohn speaking, unveiling the onepage tax policy plan of the trump and mistreated. Joe not really a plan, a set of parties. Scarlet a philosophy, maybe. From your, this is bloomberg. Mark he stopped short of promising the vote anytime soon. Speaker ryan told reporters today, we will vote on it when we get the vote. All of this comes as lawmakers from both parties are trying to agree on a separate 1 trillion spending bill that would prevent a partial Government Shutdown the saturday. In paris, prosecutors say they have arrested three people related to the 2015 attack at bdo charlie he headquarters and kosher moshe store. Jonathan demme, director of silence of the lambs, and the manchurian candidate, died at the age of 73. He died of cancer and publications with heart disease. Silence of the lambs became win five film to oscars. Dead at the age of 73. Global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. I am mark crumpton. This is bloomberg. Joe thank you. Lets get a recap of todays market action. Minor selloff. A minor decline in the major indices. We had been in the green earlier today. We got a lot of news, the tech stuff, the obamacare repealed, reports of appendages potentially that the white house make withdraw from nafta. Who knows if all of that had an effect but we did have a modest decline for the day. Scarlet it is notable because it was just in the last 30 minutes that indexes took the legs lower. Some afterhours movers. Paypal up nearly 70 . Its firstquarter net revenue beat the highest estimates. The network theyre getting a boost of 7 now. Lets take a deeper look at the implications of the tax reform proposal. Elliott is a former new york congressman or he joins us now. Great to have you. Just from your playing the odds, can something this big get past in this environment . It is the First Time Since 1986 that you have an opportunity for tax reform. You have the republicans in the house and senates roughly aligned. There is a strong push to rearrange the tax code so it into devices more incentivizes more is this investment, investment generally, higher savings and growth in the economy. This is a big if. Had 300 Ronald Reagan people on board. It takes a president really ofking not just his own side the aisle, the republicans, but persuading some democrats. That is where the big challenge will be. Scarlet absolutely. That is the difference between making this a temper a taxcut and make it permanent. Moderates in of. Lay would be part of a deal they have been wiped out as we have become more polarized. It makes the job harder. The main goal is to make sure the businesses that have the greatest possibility to grow the economy, and theyre mostly smaller businesses, quiet frankly. The net new jobs are mostly created by businesses that are newer and under 100 employees. In this case, the trump plan would provide a dramatic taxcut for not just corporations but also for passthrough entities. Scarlet they of course lead the way in terms of making jobs. Do you see anything in the proposal that would be appealing to democrats to bring them over . There is standard deduction that helps all taxpayers. 24,000payer naked under or 26,000 would pay no tax cuts. There are some cuts in childcare that are appealing to democrats. It seems to me this will be a more difficult sell. I soon the president is making this as an opening bid. That actual drafting of the link which will be done on the hill. One thing in the proposal that a lot of immigrants will not like is the state and local couldd actions that affect the budgets of california, illinois, where there are a lot of democrats and high taxes. As Steve Mnuchin put it, it is not the federal governments job to subsidize those states. Im curious of your perspective or the perspective of a republican who might be represented part of new york. How do you wait those things and this idea that we would potentially put a lot of pressure on the new york state budget where to go through looking that way . That is where the politics of these things come over. It is not just if you are a republican or democrat, but the areas that you represent. You will find republicans in coastal areas that will have some reservations with this. It is going to have an impact on those states at taxpayers. We will maked be. P for it if you are an upper income family, not so much so. The only way to pay for lower deductionsliminate both on the corporate side and the deduction side. You have to eliminate the deductions and to some extent, the credits. Mostly on the deduction side to be able to get the money out. As is currently propose, it is not revenue neutral, this plan. Had you how big of a problem to see that being . It is not a significant problem. We are at the highest point for national debt, about 20 trillion over all. It is projected to go out. Interest on the debt is projected to go up. It would be the largest single item in the budget. There will be a real balanced attention tried to keep that in check and to promote growth. When i left congress, we were still in surplus. The way we cut the surplus was with higher growth. If you really want to do that we have been investing about one third of the traditional level in the capital stocks. We were way off on that. If you look at gdp growth, Business Investment is laggard. We have to target some of that growth to businesses who are innovators and growers. Lazio,t rick think is a much. Joe we have some breaking headlines with President Trump meeting with top senators on north korea. Urgentrea poses an security threat, tillerson and released this statement. Once again, officials saying that north korea does pose a threat. From new york, this is bloomberg. Scarlet i am scarlet fu. Whatd you miss . Google is that also that closing at a high today, one day before posting earnings. They were hit by a youtube controversy as some companies at withoint halted spending the concerned that their ads offensiveagainst videos. Advertising any change to advertising poses a threat to alphabet. Google owns about 40 of the market but together the two own about 60 . A lot of people called him a duopoly. Google advertising makes up about 80 of alphabet revenue, a big chunk. You see, above and beyond the other business lines. Licensing, the orange line. Google purposely Properties Like youtube and search have played a major role in advertising. When combining the orange bar and blue bar, they are set to surpass tv advertising there. Going forward. Including, now. The spread gets wider. Outside of this category, an increasing country sure from Cloud Services should continue to support alphabets Revenue Growth in the First Quarter. He other Revenue Growth dont be surprised by the earnings. Each year, alphabet has missed sales consensus estimates in the First Quarter. Whitey do not expect the recent you to contradict to affect results, they do want to watch for comments on how they deal with that issue. Joe whatd you miss . Tomorrow is a big day for tech earnings with microsoft and amazon all reported tomorrow. Lets bring in a Senior Analyst for bloomberg intelligent focusing on internet and consumer electronics. Something i was looking at this morning, tech stocks have had an incredible start of the year. The gains, the nasdaq double that of the s p 500. High is the bar getting for these companies to continue to deliver on Investor Expectations . Pretty high. It is a casebycase basis, really. If you look at amazon, the and Market Growth is great. Fire,program is on growing at more than 70 growth in the sellers. It is really driving the strategy towards penetrating other areas and growing cells. All of these investments that are going to support the induce a lot of volatility in terms of what to expect from the profit line. That is where the bigger worry would be. For amazon, it seems that one quarter investors are set with whether the company is profitable. The next quarter, they are less worried about it, based on how amazon is spending, whether it is reducing some of the spending. Where are we in that cycle right now . I think right now, this earnings season should ask a give you a sense of how aggressive the investments are theing to go throughout year. If you look at the estimates for 2017, it is pretty strong. The Revenue Growth line is not the bigger concern here. The real concern here is with aws Profit Margins expanding, and trying to sustain those margins throughout the year. The retail division, although these investments would cut into profits and really come short of expectations. Joe we have been talking of amazon and the Cloud Services which is such a huge story. Microsoft also coming out. Also becoming a significant player in cloud. What are going to be the key numbers that investors key in on with microsoft to determine whether they are satisfied with how the business is going . It is all about the cloud in the growth story on micas up well. You look at margins, they are expanding. At six nations will with the business scaling up expectations are they will with the business scaling up. Amazons Cloud Business inside, if you look at microsoft microsoftsness Cloud Business, most of it is applications. They do have this opportunity to get into this hiebert cloud hybrid cloud model. With your track current expectations, and what about expanding into this hybrid cloud model . Joe thank you very much. Next,t coming up encounter ceo finding money that they owed to pensioners. This is bloomberg. Scarlet whatd you miss . Trs, the number two pension fund, says he is changing his strategy. They are finding money at a time when it is difficult to find. It is diversification. It is focused in on the cost, increasing the amount of internal management we do. We have an awesome equity trade desk. In the coming year, our board will look at ways to bring in private assets. We will meet next week with ontario teachers pension plan to talk about ways to joint venture and work together. When you talk about fees, joseph into the passive versus active function. How much are you in passive . We are heavily tilted towards passive. Our active management has absolute struggled over the last year. Gross fees have outperformed the market, but when you net the they underperform. They really are in a struggle right now. International, or not u. S. , we are 50 passive. In emerging markets, we are 100 active because we are really worried about the risks. As we hear about Pension Plans across the u. S. , we hear about challenges. That . Is your business on i saw there was a net outflow of 97 billion last year. A struggling to try to meet those obligations for pensioners . Not at all. Were 63 funded. Think about your mortgage. You will pay that over 30 years. If you measure way your mortgage is 10 years in coming you have a big unfunded liability. We are a 30 year horizon pension plan. We will be funded through the 20 40s 2040s. We do have a negative cash flow. We pay out more to pensioners than we get in. When you make projections to 2040, what do you predict . Only 7 . A low number. 90s,ack at the 80s, the 7 was way too low. In 2000, 7 was too high. When we look back at this decade s, it is a percent. We are averaging more than that. Why can you make that comparison . Im looking out 30 . I actually look out 160 years and look at the equity market and usa in tranches of decades. That is our forecast. The structure and governance of america, we will see decent returns over the next 20 years. The 1950s was the best decade ever. Im giving you a History Lesson here. I think if you see Something Like the 1960s, the 1970s, the 1940s, you will have basically a high singledigit return on equities which is all we need to make the 7 . What you say to the crowd that says, low rates, lower transfer a whole lot longer, that is permanent somehow. What you say to those people . I say you have been telling me that for the last decade and i have been averaging over 10 . You were not right then. Yes, rates are low. We only have about 15 on fixed income. We are finding other ways to diversify our way away from equity. About low yields say there are some major structural factors. Demographics, which are different from the 1980s and 1990s. Productivity increases which have seemed to level off. What is your response to that that it may be different Going Forward . Productivity is challenge. That is because you are seeing innovation, obviously, robots, replacing a lot of machine work. You are also seeing innovation in terms of improvement and technology, i. T. The other thing, i think the baby boom is retiring and they will have a lot of assets. The millennial generation is bigger. They will have a wave through the economy the way the baby boom did. Lets talk about Something Else that is bigger. To 200 billion make things difficult . It is difficult to be a 200 billion. We cannot be yale and allocate money to one area. Weis the economy of scale, have size, the ability to talk topeople directly, try minimize weaknesses. I struggle to see how the size generates more returns. You have to exit bring down your basic ascension of returns when you have an aum that big. We dont have to take down returns a some since because we are assuming more beta and less active management to get technical. For us, we cannot be nimble. Own rods loss broad swaths of the market. As challenging as it is at two under billion dollars, i will meet my friend from japan, 1. 4 trillion. Scarlet that was Robert Ellman ailman speaking this morning. Joe coming up, what you need to know for the trading day. This is bloomberg. Scarlet whatd you miss . Stocks leftfor u. S. Us with little changed on the day. Nasdaq not quite repeating the record high. Joe a lot of news today, but not much reaction from the markets. Draghis News Conference tomorrow. Joe i will be watching argentinasump host president macri tomorrow. Alisa im alisa parenti, and you are watching bloomberg technology. The Trump Administration has announced what it is calling the biggest tax cut in u. S. History. The plan cuts to talk income rate from 35 and reduces the number of personal income tax rockets. The new tax rates would be 10 , 25 percent, and 35 . The white house is weighing whether to pull out of nafta in coming days. The draft order is under review. It could change as talks evolve and other officials weigh in. The House Speaker says the republican effort to revamp obamacare is winning support, but did not promise about anytime soon. Lawmakers are trying to agree on a separate one dollar trillion spending bill 1 trillion spending bill. The House Freedom caucus is backing the latest Health Care Proposal to repeal obamacare. The hardline members who helped scuttle the earlier bill announced their support. The top ranking democrat on the Senate Foreign Relations Committee says President Trumps deployment of military assets to north korea, quote, just heightens the temperature