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tv   Bloomberg Markets Americas  Bloomberg  December 23, 2016 12:00pm-3:31pm EST

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from bloomberg world headquarters in new york we cover stories from new york, london, and milan. deutsche bank and credit suisse agree to pay and agreed $13.5 billion. we speak to the governor of the great state of colorado, john hickenlooper. danny meyer gave us a tour of his new restaurant. abigail doolittle joins us with a look at the markets. abigail: there is not a lot of action for u.s. stocks. s&p, and nasdaq flipping between very small gains and losses today. we are looking at the smallest trading range this year for the s&p 500. trading so far in a range of less than four s&p 500 points. retail, have red is
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some retailers down for the second day in a row. this may follow a report saying that the most recent week of holiday sales were especially bad for some brick-and-mortar stores, sales plunged 16.4%. as more investors or consumers -- consumers went toward e-commerce, we also have amazon down. there is reason to believe there could be weakness ahead for amazon, down more than 2% since black friday. 4227.ke a look at g #btv there was an uptrend and then it snapped, uncertainty on the part of the bears and we see something similar this year. this congestion is a little bit less bearish than that congestion, but it could still suggest more weakness is ahead
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for the shares of amazon. finally, when we take a look at some of the banking stocks, we have deutsche bank, credit barclays trading in mixed fashion. deutsche bank agreed to settle overthe doj mortgage-backed securities that were put together. credit suisse also settled, they will have a charge of about $2 billion. the -- barclays is rolling dice and have not agreed to settle. the settlement on the part of deutsche bank may be positive for those shares. we take a look at another chart #btv1252.omberg g deutsche bank put in what is called a golden cross and it signals lots of eyeing interest and if it continues it could signal lots of buying momentum. david: abigail doolittle with
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the market update. let's check in on bloomberg first word news. erik johnson has more. >> thank you. does libyans who hijacked a plane and dive out -- diverted had a hand grenade and a pistol. a second this the was found on the plane. the 111 plane passengers will be returned to libya in the coming hours after they are questioned by police. the hijackers eventually surrendered peacefully without making any conditions of the maltesed the government insisted the hijackers had to be released. angela merkel ordered the review of german anti-terror measures. conference hours after italian police reported
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killing the man responsible -- german media reported security officials had him under observation for months and authorities could not send him back to his native tunisia because he did not have identity papers. russian president vladimir putin insists russia had nothing to do with cyber attacks on the democrats during the presidential election. in answered questions from reporters at his annual news conference in moscow, but was a vague about whether or not to move up russia's 2018 election. show, i am going to look at what is happening in the country in the world at large and resulting from what we have done what we can do, how should we do it, the decision will be taken. speculation, the leader
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may want to hold elections earlier while his popularity is above 80%. he also accused hillary clinton of being a sore loser. donald trump's national security partners ahael flynn controversial technology company, co-run of a man accused of -- to an fbi material agent posing as a russian spy. one of two directors that -- and denies being part of a spy ring. collaboratedroup with brainwave science last spring. the trump transition team says flynn has never met or spoke with -- and ended association with brainwave science. global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries.
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i am erik johnson and this is bloomberg. david: we have heard president-elect donald trump promised he will ease regulations and part of his rationale is that it will help small businesses. we have seen optimism in small cap stocks. someone whose background is in small business is john hickenlooper and now he runs the centennial state. it is great to speak with you again. thank you for joining us. when last we spoke you have had a conversation with hillary clinton the democratic nominee for president. if you talk to donald trump what would you say about what you have been able to do in colorado and how that may be replicated at the national level? i have not hadr: a chance to talk to mr. trump, but we have been cutting red tape and increase access to capital and make it easier for people to start small businesses, that could be replicated on a national level and i think if done properly it
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could really help take the recovery that president obama started and help it grow. david: how silly it is the argument that president-elect salientkes here -- how is the argument that president-elect crump makes here? >> if you look at a lot of the small businesses like commercial -- someone trying to put together something in construction, sometimes they feel like there is so much regulation about what you have to do with an empty can of paint and the controls over going into and out of a business. most of these guys are already the best employees of their company and they say it is not worth starting a new business. if you look at -- #--d: look at this chart b , for a long time
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there was the perception that denver, colorado as a whole was a state that had energy highs and lows. how did that come about? was that pioneered four at the state level or came about because of larger -- larger federal occurrence? gov. hickenlooper: we pushed that probably starting 20 years ago and also at the local and city levels. denver, boulder, colorado springs, fort collins, they all work very hard to find ways to extend aerospace and other technology jobs to look at opportunities for new industries, agricultural technology, how do we expand tech into farm products? all of that stuff, we put a lot of tax incentives and effort to make sure we went beyond just
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oil and gas. solar and wind are very big in colorado. ask you about proposals for tax reform. if the john hickenlooper of today would ever be equivalent -- our taxes a big issue? what could you see happening through the tax reform that would benefit small business owners like you when you were younger? gov. hickenlooper: sorely, i have never met a small businessperson that doesn't hate taxes. taxes are necessary to have the framework that society gives us, the roads, institutions, public safety. the real key with cutting taxes and simplifying taxes would be a huge benefit. i am not sure that at this moment we are going to be too successful at dramatically cutting taxes unless you are willing to increase the national debt and i think there will be national can't -- natural
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conflict between the president-elect own party and congress and his desires to beef up the fence and increase spending in many ways and cut taxes at the same time. david: i want to ask you how the public sector interfaces with the private sector. you watched donald trump flying influence here to carrier to keep jobs in the u.s. i want to know what the proper role is as you see it as an , like donald trump will be in businesses. how important is that balance? gov. hickenlooper: at the presidential level i am not sure he will have enough time to really deal with each individual , a companyat kind that is going to outsource some function or another. certainly in colorado, i try to make sure i am aware of all of the larger companies, the larger employers and if they have an
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issue or challenge, they have my cell phone number and they will call me and i try to work it out. in most cases, those companies are trying to get what is fair. they are not trying to hoodwink anyone. they sometimes feel -- that is why civil fine taxes would be a great step forward. -- that is whys simplifying taxes would be a great step forward. david: we were come back and talk about the marijuana policy. let me ask about the future of the democratic party. you have endorsed the current secretary of labor to be the head of the dnc. what is at the top of the list to you? what needs to change about the democratic party as we head to the next election? gov. hickenlooper: the democratic party for generations has been the party that stands for making sure that we stand strong on civil rights and civil justice, that we stand strong on
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protecting the planet and making sure each year we try to make the environment a little cleaner, but i think we get also benefit from being stronger about helping small businesses and being pro-jobs in looking at what is life like for those people who are trying to move and gethe working poor a middle-class life where they can earn a home and begin to acquire the assets that would be necessary for a dignified retirement. governorat is colorado john hickenlooper. he will join us again to talk about how the state benefited from the legalization about -- of marijuana. this is bloomberg. ♪ ♪
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david: this is "bloomberg markets." we are back with the governor of colorado, john hickenlooper. colorado was one of the first states to experiment with the legalese -- legalization of marijuana. you were not solidly behind it. what was the turning point for you when you recognize or realized it could be something to benefit the state and economy? gov. hickenlooper: i think it was really over the past year. almost every elected official and i was at the top of the list, opposed it three and a half or four years ago when it was voted on because you do not want to be in conflict with federal law. we began to see the problems as they came up, they were not as bad as we thought. they were not giant spikes in teenage use, we did not see dramatic increase in driving while high. the place where we did see problems like with edibles or illegal grows, we could get
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around those. i would tell other governors to wait. i think it is too early to tell. i would not give up on it now. david: how big of an issue is the conflict with federal regulators and the federal government? banking is an issue and moving between states is an issue, some people are worried about it. do you -- the u.s. it -- do you expect we will see more reforms? jeffhickenlooper: with sessions coming in as attorney general, if he is confirmed things will get more difficult, but it is hard to say how much. the attorney general has said he up this would a place for states to show that they are laboratories of democracy. it is too early to say. hopefully we can continue this experiment and see if we can resolve problems and see if it is something we might be able to make work on a national governor. david: when you talk to other governors do you make the modelnt that the colorado
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could be replicated in other states or have you done it in a way that is specific to the state of colorado? gov. hickenlooper: i have talked to a number of other governors. i saw governor brown in governor brown already knew everything we had done and was aware of everything and i think those other states are going to benefit from the mistakes we made in the very beginning and they will start out -- like edibles, they will start out with much stricter regulation and that is the way it should work. the lessons learned should become best practices for the state just beginning. david: i have watched how this policy has progressed state-by-state level and some municipalities and i think about how that was the case with minimum wage laws. there was talk of changing that at the national level. are we through marijuana reform, through minimum wage reform
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seeing a new way of enacting policy? gov. hickenlooper: i think that has been the case for the last 20 years, that if you want to do kind of larger scale minimum wage type efforts that are more successful at the state and if you do it state-by-state it is easier to get it done at the national level. , you go toge cities seattle and san francisco and their minimum wages are much higher. we just raised our minimum wage, but still not as high as those large cities. david: a little over a year left in your term. leave office.ou have you given thought to what is next and if you will be coy about seeing what will happen afterwards? what would you like to accomplish? gov. hickenlooper: we are focused on innovations in workforce training. we have a statewide
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apprenticeship program. kids instead of going to junior high or high school -- not just for trade, they can go to an insurance company, banker, aerospace company, they can work two days and get two weeks of training. we will also move to more of a skills-based discussion of how kids think about their life and work. we are partnered with linkedin to look at how you create a platform by which everything is skills-based. 65% or 70% of kids will never get a four year college degree. we have been trying to change that for 30 years. they be now it is time to go back and say what are the skills that kids need to be successful in technology. ? how do we get them the tools they need so they can be in technology. you just need some training, you do not need a 4-year degree.
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david: it is time for the bloomberg business flash. consumer confidence jumped to the highest level since 2004 extending a search for finances in the u.s. economy following donald trump's election victory. to 98.2 in november. inflation expectation for the next 5-10 years at a record low. china slept a fine on general motors. they will have to pay $29 million. they were accused of setting their own prices for dealers that sold some models, monitoring them, and punishing those who sold for cheaper than a limited set. unites after a revised offer from the airline and the proposal will go to its members. that is your business flash update. here is hoping to a fresh start
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for the new year, deutsche bank and credit suisse will pay a combined $12.5 billion. we will have the latest on that. this is bloomberg. ♪ ♪
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david: this is "bloomberg markets." some holiday reprieve for financials. deutsche bank and credit suisse agreed to pay a total of $12.5 billion to end investigations into the mortgage best -- mortgage-backed let's start with deutsche bank. what the you make of the terms? what should we make of the terms of how they were able to reduce it? >> i think people looked initially at the $14 billion and now saw this new number of $7.2
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billion. the $7.2 is -- of billion, only about $3.1 billion is cash that they will pay out. the rest is money to consumers as relief over the next two years. all of this has to be worked out. 3.1 billion dollar penalty, they had not prepared for that completely. $14ave all been waiting for billion, they had not set aside enough money and reserves to cover that. they are taking a church in the fourth quarter. that is interesting and that ares hit to capital -- they actually going to get capital from the sale of the chinese bank. they should be ok, but now one of the big questions is whether they will go out into the market and raise capital maybe early in the new year. david: credit suisse is something we did not hear as much about. it was not out there to the degree the deutsche bank was. how similar all the -- are the
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settlements? what matters is not the headline number, but how much of the bank was prepared. how much money they put in a spot to cover. credit suisse as well as deutsche bank, they had not covered it. , so theybillion more have to take a charge in the fourth quarter. if you look at stocks today, credit suisse was down a little and deutsche bank was up a little. .obody wants to commit this is not finalized. it seems like good news in that there is more certainty and people know how to measure what is coming and in the case of deutsche bank there is a lot more coming. david: barclays did not settle. they are taking a bet. why would the bank have gone that route? christine: there is a couple of theories. we had a great story about how barclays really wanted to cap
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the amount they paid at $2 billion. we knew that they were trying to be aggressive in negotiating this and whether they were too aggressive or the doj did not give them a chance to a negotiate is unclear. we are working on that. the point is, this could still end up in a negotiation. just because they were sued does not mean they will go to case. one of the last cases fought, won that.tually when you think about the new administration, there may be a different attitude. david: thank you so much. this is bloomberg. ♪
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david: this is "bloomberg markets." let's start with the first word
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news this afternoon. germany's top prosecutor says investigators are trying to determine whether the suspect in attacks hadruck help from a network of supporters. tunisian was shot and killed by police in malan. best . milan.olice in authorities there were able to fingerprintswith provided by german authorities. australia's prime ministers says five suspects had been inspired areslamic state and now in custody after planning a series of christmas attack bombs. the men will be charged with preparing a terrorist attack. there are no longer a threat to the nation's security. >> i can assure all australians
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that our police officers and intelligence agencies are at the , learningate of alert from every incident, whether it occurs here or abroad, including putting in place the measures to keep australian safety. two brothers have been detained in germany on suspicion they were planning an attack on a shopping mall. donald's pick for health secretary r tom price has traded $300,000 in shares of health industry companies insist 2012. stocks and 40ed companies, mainly in health care and pharmaceuticals. he traded stocks in 12 companies while cosponsoring health-care legislation. 103 millions
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americans will take a trip over the next week and a half. that is the most on record. storms in the northwest could delay those plans. aaa predicts their travel this -- a 2.5%see a more increase. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm erik johnson. this is bloomberg. david: a quick check of the .ajor u.s. indexes the dow pretty much flat. s&p 500 flat. at nasdaq of just slightly 5451. it's good to abigail doolittle now. thatil: we have to stocks are receiving quite a bit of attention today.
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this after president-elect donald trump yesterday did tweet something to the extent saying boeing should come up with an alternative to lockheed martin's f35. initially, lockheed martin dropped and boeing popped. boeing is reversing earlier losses. this could reflect some analysts weighing in, one saying this is "bizarre, late to the game and completely irrelevant." a j.p. morgan analyst saying the lockheed martin f-35 is here to stay. as interesting, we go into the 1318, a chart of lockheed martin in blue, boeing and white since the election. lockheed martin received a huge boost after donald trump was elected president. investors thinking defense spending would be boosted. now, starting to fall off as donald trump is talking tough in costs while boeing
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continues to trade higher. as for defense spending overall, athave a great overall look u.s. spending -- when president obama was elected, we saw a dip down. that peak from 2014, down $200 billion -- we have an uptrend here. often, you will see the marketplace or the segment being targeted in this case returned to the mean. this chart mesa just that the spate -- despite expectations for a rise in spending come it may drop in the years ahead. tin shkrelih gained notoriety by purchasing a raising the
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hise -- he talked about how controversial price hike played a role in this year's presidential election. a when you are caught in perfect storm of political season, it is easy to become a target for unwarranted aggression. president obama and his administration said absolutely nothing about drug prices. why is he staying silent on this? he said they are not running. it's really a populist issue. it was blown out of proportion. acutelyt seeing that as -- because of the price increase , that was the main mission to have it generate increased revenue and that happened. david: you can never put it entirely apart from politics.
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in the end, did it benefit the investors in your company the way that you handle this? would you have made more money if you had not raised it as fast? >> it was difficult to do anything. in terms of the investors from a cash flow perspective, it makes no difference. in fact, you are better off raising it faster. in terms of brand name, there was some damage done. price of a drug 20 full there weren't any stories about it. jon: having to go against d .c., can you be both? be a ceo and be the poster boy of capitalism? >> we were talking about the
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criminal charges against banks. we have ended ministration that is very bully is when it comes to companies. -- we had an administration that when itbullyish comes to companies. their goal is to make names for themselves extracting these billion dollars settlements. that is why the greatest people have kept the lowest profiles. in theparticularly pharmaceutical area. people feel very strongly about their prescription drugs. government gets involved. ng atou actually put teuri risk of the government coming in? martin: absolutely. the government in many ways is an apparatus of vengeance. it is frustrating. at the same time, no one talks about the drug i licensed, he
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trial -- nobody talks about that. we talk about one insignificant drug. up the issue of populism and how drug prices became a populist issue. the you think donald trump makes it a populist issue as well? martin: the media made it a populist issue. you look at the proposition in california that people wanted to pass, they ran an ad with my face on it during the world series. the proposition failed. this is one of the most liberal states in the country. the proposition failed. jon: hillary clinton was running and she tweeted about it -- martin: she is an apparatus of the media. jon: using the media to get their message across.
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it is an ideas exchange. do you have it the right way around? media and politicians follow where the people are. if you have people out there who don't have a lot of money and they need to take a drug like this, there will be consequences. martin: they have insurance. 90% of americans have it. our president forced us to get it. to pay a fine because i do not have health insurance. everyim is covered by major insurer. i ultimately think trump will be a fantastic president. he will bring more competition for drug prices. right now, getting a generic drug approved takes five years. jon: for the health care
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hard to get is so drugs through the fda. the pricing issue, it will get a hole at harder to lift prices. martin: drug pricing is a small part of health care senators. we are not talking about care -- we- health are not talking about physicians. david: that is fair. we should have some health care providers come in and defend themselves. the price of drugs is going up faster than the cost of living. as a percentage of gdp in this country, health care costs are 18%. much higher than any other developed country. when you have the health
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insurers pay really high prices, that gets expressed through premiums sooner or later. grow -- gdp's grow, we learn as a society that what we prize in life is our health we will spend more and more on our help and never before. that is a good thing. david: you would do it again? martin: of course. eant raised prices after the senate committee. viagraraised prices of 50%. installing i'm surprising -- everybody is doing it. david: the founder and former ceo of touring pharmaceuticals. , shake shack.
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union square cafe, his first restaurant. that is next. this is bloomberg. ♪
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julie: you are watching bloomberg. mark: this is your global business report.
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chinese president jinping -- julie: alibaba close to securing funding for expanding its on-demand service. the paris climate change accord is expected to increase pressure for cleaner vehicles. how clean are clean cars? julie: president using ping is opening china's economic growth slowing below the 6% target. it is due to rising debt and concern about an uncertain global environment. after president-elect donald trump victory. securingbaba close to funding for expansion -- it's getting backing from first-time investors, including silver lake management and china's sovereign wealth fund. and in group buying that tribal
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-- nn wants to boost its scale. the former imf deputy managing directors has banks are to blame slower growth -- jonathan ferro asked him what he thinks are the greatest risks to europe and the economy going forward. >> europe has to get its act together. china has to make a success of its reports and it's important that u.s. growth takes an upward turn in acceleration in the year to come. julie: time for our bloomberg quick take. slowing down climate change means cars and trucks that
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pollute less. how clean is that car? millions of volkswagen diesel owners were shocked to learn that their vehicles passed u.s. emissions test by cheating. the paris climate change accord is expected to increase pressure for cleaner vehicles. which produce about 1/6 of global carbon emissions and a quarter of the u.s. total. the pact came at the european union was rethinking the tax incentives that helped diesel claim a market share of 50% there. in the u.s., the federal standard called for new cars to death much tougher goals have been adopted by california whose rules were followed by 10 other states. the push for cleaner cars originally had nothing to do with climate change. in the next six east, california's target was air pollution. the 1960's. in the 1990's, the government invested in clean technology to help detroit develop a supercar.
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prius -- skeptics said they were no cleaner than the fuel burns that generate their power. grid getsctric greener, it increases the advantage of battery-powered cars. supercaray the u.s. and europe's diesel push show the dangers of governments picking winners among competing technologies. rising demand for cars in china and india could swamp the benefit of lowering emissions for cars in the u.s. and europe. that is your global business report. head to bloomberg.com for more stories. ♪
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david: this is "bloomberg markets." we moved to bloomberg pursuits now. coming up, danny meyer. he started things out at union square cap and then opened a slew of hits, including shake -- he started things out with union square cafe. atsat down with danny meyer
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the new union square cafe just as he was putting on the finishing touches before opening night. >> there was no way in the world i was ready to close the door on this story. >> this is danny meyer's union square cafe. >> we had the toughest time finding the space that fit the bill being that close to a farmers market. it would feel like a union square cafe. >> the legendary restaurant landed here, blocks away from its original location. >> we went to hotels and said, would you like a restaurant? we went to barnes & noble and said would you like to annex that space that used to be for dvds? this was a was not even on the market. we just got really lucky. >> the original union square cafe opened 30 years ago when
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union square wasn't the multimillion dollar neighborhood it is today. to not came back necessarily being an asset because when we look for a new space, the name itself almost ended up imposing a tax on us. are still playing apples to apples with every other restaurant in new york. rent andto pay more has to pay more labor. we are already paying way above minimum wage. other restaurants will have to raise their prices to compete. >> the new union square cafe has a bigger footprint than its previous rendition. 10,000 square feet versus just 6300. >> it's just a bunch of different neighborhoods. each one has its own personality. was one of the
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first new york restaurants to capitalize on our dining. -- bar dining. >> the one thing that is not profitable is empty seats. this is about half of the original bar. >> with the menu, danny meyer played a delicate balance of new and old. >> we have the tuna burger. what do you not want to tweak? the notion of this being a concert. the tuna burger, we did a real riff on it. the flavor is different, the texture is different. and yet come i think it tastes even better. hopes theeyer restaurant will continue to bring in droves of manhattanites. >> i'm pretty confident this will continue to be a power lunch place. the distinction we always wanted to make, could union square cafe
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be the most inclusive club in the world? venture as sees the a 30 year startup. >> i think this will be a fantastic wine. but right now, it is in the barrel. give it some time. this place will be amazing. .avid: that was danny meyer for more, check out pursuits. your destination for the finest things in life. pursuits . the dow barely moving. the s&p 500 barely moving as well. the nasdaq up slightly, two points. oil was moving this morning. if you weeks after that deal with non-opec producers, another week after the deal with opec
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producers. at 52 .83. we were talking about the settlement earlier with credit suisse. that providing some boost to markets at the end. this is bloomberg. ♪
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david: it is 1:00 p.m. in new york. welcome to "bloomberg markets."
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we are covering stories from san francisco to new york and beijing this hour. first up, we hear from tobias levkovich on today's market action and his 2017 outlook. xisident she jinping says -- jinping -- silicon valley in the tech industry had a monumental 2016. but now, looks ahead to next year and the inauguration of .onald trump i abigail a lack of movement. it is almost stunning. the dow and s&p 500 all trading within a range of .1%. downan see just the 500 is -- down .03%.
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this is a year-to-date chart of the daily trading ranges for the s&p 500. back in the beginning of the year when there was lots of volatility, lots of big trading -- around the election, the same thing. right now, being dwarfed on this lack of movement for u.s. stocks. let's take a look at a few of the stocks that are moving the least on the day. this includes some of the well-known big cap names like apple, bank of america and news corp. bank of america is up two cents. earlier, apple was trading by one penny. bloomberglook at the and see where there is some movement on the week -- this is
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the 10 year yield. we are looking at the 10 year yield come on pace for its first decline since the election. ,he reason this could stand out this is a foundational asset class, bonds and currencies. if you use the analogy of a pond and a pebble is thrown into a still pond, it may not seem like a big but the ripple effects could be significant. couldld be something that put a ripple into stocks. there could be more movement ahead. david: abigail doolittle with that market update. let's check in on the first word news this afternoon. minister ofime malta says the hijackers every libyan plane surrendered and was taken into custody. the two men had a handgun and a hand grenade. plane --orced the
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tense negotiations ensued. within a few hours, the passengers and the crew were allowed to leave the plane. all flights from malta international airport were immediately diverted. french authorities are refusing to comment on how the berlin attack suspect apparently crossed into france and left again in the face of an international manhunt. amri opened fire on police in milan. the police chief says he had shortly passed through france, a country that has been living in urgency for more than a year. presidentide to george w. bush is a paper to become donald trump's counterterrorism advisor.
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they reportedly had a long meeting in florida on thursday. an israeli official is accusing president obama of a shameful move against israel at the u.n. after learning the white house does not intend to veto a --urity council resolution after being delayed them of the vote is expected to take place today. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm erik johnson. this is bloomberg. david: citigroup's chief u.s. equity strategist tobias levkovich just boosted his target for 2017. his new target is 2425. earlier today, he discussed what is driving his outlook. tobias: let's start with the numbers.
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we are looking for $131 next year. up from $120 this year. increase, youf 9% are getting three percentage points coming from the energy sector. in terms of the tax cut benefit, the stimulus program, a 20% tax add only in the fourth quarter. another couple percentage points. you are only looking for another 4% or so coming from the rest of the market. which is pretty modest. we interest a pulmonary number 42018. we are at $146.
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-- weate limitary number expect a preliminary number for 2018. just simply on the lower tax rate, you get that bump in earnings. we don't think you get quite the same bump to the market as you do on the earnings front. we don't value tax related earnings the same way we would value an improvement in underlying operational leverage. aite honestly, you could have future administration take away that tax cut. julie: it could be temporary and theory. -- in theory. i have a chart on bloomberg that forward the price-to-earnings ratio of the s&p 500, up around 19 right now. this is a five-year chart.
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we are more than one standard deviation away from the five-year average of the forward pe. we've had this run since the election. where is fair value at this point given that outlook for earnings and given the run that we've seen and given that we are above the near-term historical norms? even if i have valuation metrics, that notion of fair value doesn't really matter when you have millions of investors determining where they think the fair value is. people who slap on their own pe expected level, they are somewhat arrogant that everyone will listen to them. the five-year timeframe you're talking about, if you put up the yield, you see a crazy multiple on them and nobody talks about bond markets being overvalued.
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if you look at a 20 or 30 year history compare the two, we've had massive the virgins twin the two. -- massive divergence between the two. the five-year history distorts perspective. the third piece is when we do think about valuation, we do this on a normalized earnings basis and a normalized bond yield basis. we have an 87 percent probability that markets will be higher in the next 12 months. you graded yourself b plus for 2016. where did you fall short? the a gradeve you in 2017? tobias: i did not get that many a's in school.
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i'm a tough grader on myself. the two areas we missed this year, the extent to which the rally would occur. we had a target of 2150. we are close to 2250 for this year. de.t is part of the gra the second part is all caps have -- tied to a stronger dollar, which we hadn't anticipated. we got a number of other things right. in terms of the coming year, i suspect the continuation of a performance in financials and energy, there's a fair amount of pushback and we think there is opportunity therefore to go further. there for it to go further. david: can you explain something
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-- like a volatility. , youyou look at futures see a gap between now and three or four months. the large gap, multi-your gap, does that tell us where the volatility will come in the months to come? tobias: most people focus on the political issues. we look at the shape of the yield curve. it has historically been a two-year lead indicator. it is indicating a pickup in 2017 into 2018. with regards to the political dynamics, people will be focused on the new administration, going to congress the bills they want to pass, the means by which they pass those bills. there will be issues around what the tax cuts look like.
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there will be a lot of fighting around that. it will not be just smooth sailing. david: that was tobias levkovich earlier today on "bloomberg markets." bitcoin trading at its highest levels since early 2014. this is bloomberg. ♪
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david: this is "bloomberg markets." time for the bloomberg business flash. donald trump may have restarted the boeing-lockheed rivalry with a tweet.
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tosaid he asked boeing reprice an upgrade that would replace the lockheed f-35. it is intended to be the mainstay of the u.s. air force. that -- a group theondholders rejecting latest effort to push out securities. it is a setback for the biggest u.s. radio operator. global -- the unanimous vote came after a four-year campaign use frequencies for services that attract more than just customers with satellite phones.
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goldstar can now make more broadband spectrum available for the u.s. consumers. that is your business flash update. restin is rising above the come extending a rally that has put it ahead of gold, major currencies and the s&p 500 this year. cory johnson joins us from san francisco with more. what explains the rise here? cory: it's been attributed to destabilization of global economy. this is seen as a safe store money. most of the trading of bitcoin takes place in china. as the chinese authorities have cracked down on the movement of capital overseas and other ways to move capital out of china versus gold and so on, bitcoin is increasingly seen as a way to store money and move money. the acquisition of bitcoin in china, we have seen a tremendous
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spike in that price all year long. it's been a move up. dissipating?gns of is lookinghilippines at this because there's been so much trading of bitcoin in the philippines. they are looking this out of concern for money laundering. that is something they're looking at in the philippines, which could have a significant effect on the price because there's limited bitcoin. the weight the bitcoin is created is the mining of bitcoin's through the writing of code. that is created is more and more difficult than the last one. this currency cannot be created wherever. the power to make bitcoin is ,ubstantial that as a result
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you see that bitcoin itself is because it isply so expensive to make. the scarcity value increases even as consumption and use of bitcoin increases concurrently. david: how much of the rise has to do with what we've seen in the u.s.? qualitybeen a havenness for a long time now are we seeing that again? cory: it is open to speculation. when i look at the value of gold come i see it is not seen just as a reserve currency. that.s more to it than it's also being used a little bit more -- more merchants accepting it, more usage of it across different industries. was shocked -- i got any email from fidelity saying if you want to transact in bitcoin, they must be completed by the state.
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the fact that bitcoin made their list of the five significant dates at the end of the year you want to consider suggests this is being used more and more in u.s. the popular appetite for bitcoin, where is it in its development? you have exchanges dealing with bitcoin. in terms of its appeal, its popular appeal, where does it stand? cory: the ultimate use] quite -- thee the themate use for bitcoin, anonymity raises a fundamental problem. it is a block chain technology. might be the ultimate solution for securities industry. even as they try to find the right way to use a block chain t popularize is
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the notion of bitcoin, other industry start to use it. david: you can hear more and 40 minutes. cory johnson will be joined by carol massar on bloomberg radio. china's president is said to be open to economic growth -- more on this bloomberg scoop, next. this is bloomberg. ♪
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david: this is "bloomberg markets." the president of china is said to have signaled that he is open to economic growth slowing below the government's 6.5% target. in a former editor who oversaw our chinese coverage
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-- scott, thank you for joining us today. let's start with a momentous ness of this move. scott: you can call it a big deal. it's really just acknowledging reality. most people will say that the chinese economy is going to slow in the next few years. you have a record pace of 6.7% so far for 2016. a lot of people see that going down to 6% in the next couple of years. even further after that. the government has previously said that they want to keep a piece of 6.5% through 2020. everywhere you look, there are concerns about the debt buildup in china comparing that with what happened in japan in the 1980's and 1990's. they don't want that to happen. president xi jinping doesn't want that. he's just coming to terms with that. that theyignaling
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don't need to keep up such a growth pace with these kinds of risks out there. david: there could be risk here around the economy trying to infer that 6.5% target. what are the biggest risks? is the chinese government technology and the fact that it has such large debt right now? scott: in some ways, they have. in other ways, the markets had these acknowledgments -- this is a communist party that has been in power for a long time and they tend to move very politically and deliberately when making these kinds of moves. you don't see a lot of rash decisions. you have that kind of debt buildup. you also have real estate bubbles come and go over the years. the currency has been in a pretty steep decline over the past year. there's a lot of risk in the
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chinese economy. reporting athey are gdp growth rate of well over 6%. there are a lot of sectors that are showing strength. david: help us understand how this was signaled. huge public pronouncement. what else do they have to say about the state of the chinese economy? scott: and there were some concerns about that. .hat's about debt what is really interesting, discussed the need to avoid what is called be rescinded his trap -- when a rising power comes into conflict with an established power. some people have talked about the u.s.-china relationship in that way. has talked about the need to maintain a good
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relationship between the two powers. clearly, maybe he has read some of the articles about this and wants to call attention to this. david: i wonder what the strength --itical got away from an export driven economy to domestic consumption. hearing from the president-elect -- what is the status of that transition in china? scott: the chinese economy has in moving in that direction toward a consumption led pastmy, services, manufacturing has been more than half of chinese gdp. consumption has become such a big part of chinese society. we hear all the time about
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alibaba, about their online sales and other companies that are doing these kinds of things. it is moving in that direction. china does maintain a degree of state control. they control the lending speak its in the economy. they can turn on or off lending to some extent. maybe not as much as they used to. they can do that to spur or restrain growth. david: think you for joining us -- thank you for joining us. john d, we will talk to -- this is bloomberg. ♪
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david: live from bloomberg's world headquarters in new york, i'm david gura. this is "bloomberg markets." let's start with the headlines. erik johnson has more.
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merkel hasor angela ordered a review of german anti-terror measures after this week's attack on a christmas market. the italian police killed a man suspected of driving the truck. angela merkel said the suspect came to germany in july 2015. german media reported that security officials had him under observation for months, at authorities could not send it back to his native tunisia because he didn't have identification. president-elect donald trump is praising a letter he received from russian president vladimir putin earlier this month. putin asked from to restore the damage -- trump to restore the damaged relationship. trump called it a very nice letter from vladimir putin, he continues, his thoughts are so correct. are able tosides
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live up to these thoughts and we not have to travel down alternate path. fbi is investigating how computers of the fdic were hacked, beginning in 2010. that's according to reuters, citing people familiar with the matter. reuters said fdic officials believe a hacking was sponsored by china's military. and there is a major breakthrough in the battle against ebola, with an expandable of vaccine that provides 100% protection. it could help protect from the spread of outbreaks like the one that killed thousands in west africa. scientists have struggled to develop an ebola vaccine over the years, and this could be the first one proven to work. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm erik johnson, and this is bloomberg. david: thank you.
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more than eight years after the global financial system collapsed, europe's banks continue to struggle. monte paschi is running out of cash. but strengthening the eurozone -- john lipsky from the school of international studies at johns hopkins university discuss the plight of european banks and what it would take to spur more economic growth. mr. lipsky: this has been one of the key reasons why growth in the european economy has been slow sluggish since the recession. , thanks balance sheet account for 80% of credit flows in the eurozone, as opposed to 20% in the united states -- when banks balance sheets are clogged, you have overhang of large fines like the one we were just talking about, that doesn't leave banks in a position to be aggressive about lending and helping to spur growth. thing,cy issues are one
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and outside of your jurisdiction. for the european monetary policy makers and regulators, are the levers they can pull? mr. lipsky: the ecb has been pulling every lever they can think of, to some effect, presumably. but not total success. what is necessary is for example, with the italian banks. recapitalization, claiming bad assets off the balance sheet. that has to happen. it happened much more quickly in the u.s., which is a reason why the u.s. has been growing more rapidly. >> we caught up with mohamed el-erian, this is his situation -- the view one the situation. el-erian: the board to the right thing and repainting her as the leader of the imf. but had that happened, the board would have found itself once andn stuck with a futile antiquated selection process, one that is not transparent, not
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merit-based, and includes backdoor deals and elements of natural prestige. that undermines the credit ability of the institution. all i am saying is yes, absolutely right in keeping christine lagarde, that is the right thing to do. but let's move forward in modernizing the selection process. >> you know the imf inside and out, i don't. my perception of the imf is as follows -- someone from united states runs the world bank and someone from europe runs the imf. is that going to change anytime soon? the questionhat is that he is raising implicitly in this process. i think there is general agreement over time that probably going to loosen up. you have to remember why these choices were made. initially, the idea was to make sure that the principal countries took these institutions seriously. and did not view them as decoration, to be able to say we have a nice cooperative organization.
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if you moved away from that, you just have to be careful to make sure that everybody remains engaged. and that can be a problem. if they weren't engaged, they wouldn't be effective. david: is that long-overdue? when those concerns were relevant, it was in the aftermath of world war ii. got enough of a track record that people would take them seriously, even if it was a mexican or korean? mr. lipsky: i think so. the rebalancing of the quota shares within the fund of the world bank, the shift in the world economy, means there are a lot of big economies. we should be able to produce that kind of shift. but christine lagarde has done an extremely good job, as the managing director of imf. i think there is very strong support for continue through the end of her second term. >> you bring up imf credibility. let's talk about the increase in populism. is the credibility of these huge
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financial institutions like the imf and the world bank -- is the credibility of those damaged? mr. lipsky: it hasn't been great. remember, in november 2010, there was a general ,greement to rebalance the imf and implicitly, the world bank, to take account of the changes in the world economy. and make sure everybody felt they were getting a fair shake and fair representation in these institutions. the u.s., like everyone else, was supposed to ratify that by october 2012. the u.s. was the last of all the members to ratify, three years late. financing been two rounds for the imf since that time, and the u.s., for the first time, has failed to participate. for sure, there is some question about the biggest country in the biggest country's commitment to
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make these institutions work, not to mention the g-20 process. it is an important question. david: that was under president obama. we now have a new president coming in, and unaware that he has spoken on this particular subject. on theral, when you set campaign trail that not give you a lot of encouragement for the future of united states participation. mr. lipsky: i'm recent -- i am decently confident that when closely, weined realize that these treaty-based, multilateral institutions are critical to the continued progress in the world economy. in a constructive and not a conflictive process. >> should the imf stop making forecasts? mr. lipsky: no, this is important. you need to have a context in which you are looking at policy. it's important, because -- not because of just the staff and the workings of the imf, but for understanding with the imf is
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doing. you have to explain it in a global context. if you don't have a basis of forecasts, what are you doing? >> in 2017, was the biggest risk for the economy currently? mr. lipsky: there are number, but the obvious ones -- europe has to get its act together, institutionally and economically. china has got to make a success of its reforms. i think it is important to u.s. growth takes an upward turn in acceleration in the year to come. lipsky who was john heads of the kissinger center for global affairs at johns hopkins university. it's one of the last unfilled cabinet nomination. secretary of agriculture. why is it taking so long to choose a candidate? we explore. this is bloomberg. ♪
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david: this is "bloomberg markets," i'm david gura. let's head over to abigail doolittle for her chart of the day. abigail: one of the big story is the fact that new home sales surged at the biggest pace since 2008, some real strength of their for new home sales. that could affect americans rates arees at rising, to get ahead of a real spike in mortgages. the chart of the day suggest this may already be happening. g #btv 1369. nationale two-year thirty-year mortgage went up and at that time, home sales were depressed. now we see the 30 year mortgage rising to similar levels and we have new home sales rising. this may suggest we could see in
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december and perhaps into the new year a bit of a drop in new home sales. the last five years, something that is interesting is the fact that new home sales have actually like the price. -- lagged price. we have home prices the other case-shiller index in orange, but the new home sales. if mortgage rates do cramp the --sing market, move may see we may see prices drop down below home sales. , updie mac and fannie mae in a huge way year today. gain does come by the election, fannie mae is owned by the government, all of this is rates have moved up so much over the last quarter. 95 10 year yield is up about basis points, the biggest move up ever in the 10 year yield on
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a quarterly basis. david: abigail doolittle, thank you. time now for the bloomberg business flash. a look at the biggest business stories in the news right now. wells fargo reached a settlement , tied to bad real estate loans. officials say residential capital claim pushed red cap into bankruptcy. wells fargo reached the settlement with the trust overseeing the liquidation, terms of the deal were not made public. temer hasmichel plummeting approval rates. the rigido deregulate labor market with a $9.1 billion cash injection. he announced a package of christmas gifts, including strengthening collective bargaining laws, allowing workers early average -- early access to severed funds, and a new credit are great. next year, the chinese internet
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giant was responding to a report. baidu says there is no time in place for the ipo. independent growth is going well. that is your business flash update. president-elect donald trump is looking to fill one of the last major cabinet positions before his inauguration next month. they are junior names under consideration for u.s. agriculture secretary. elsa murano and susan combs. they join the running with senator heidi heitkamp. here to talk about why it's been taking so long to find the right candidate for the post is casey wouldn't -- casey wilson. any sense of why this has taken so long? wise agriculture requiring so much to liberation? -- why is agriculture requiring so much deliberation? casey: the trumpet administration has focused on
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national security and foreign policy. there are a lot of clear candidates for the job, some favorites. since the republican convention, there has been a string of potential candidates for agriculture secretary. none have really caught fire. we haven't seen a clear stand out. now we have about half a dozen potential agricultural secretary's under consideration. david: let's talk about heidi heitkamp, a democrat. there are not any democrats on the cabinet thus far. how important is that for the trump administration? and what has the reaction been to the proposal she could be the agricultural secretary? casey: senator heitkamp would be an interesting choice. she is a democrat. her vacated north dakota senate seat will likely go to a republican. that would increase the republican majority in the senate. but since word got out that she was being considered, the trump
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has gotten a lot of pushback in the agriculture community that are tied to the trump team. they prefer one of their own, or at least, a republican. lately, the buzz around her has cooled off and she has said recently that she is likely to say -- to stay in the senate. we move on to get another potential pick. david: there is no shortage of texans in this cabinet. murano,lk about elsa who used to head up texas a&m. what is your background or what would she bring to this job? background and what would she bring to this job? casey: she's a longtime professor at texas a&m. she worked with the fda on food safety, and that is where most of her background through her career comes. as agriculture secretary, that would be one of her priorities. david: she also is on the horn billboard.
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casey: -- the hornell board. casey: yes. david: how about susan combs, former texas agriculture commissioner? what attracted her to donald trump? casey: she has a long-standing relationship in texas politics. former texas agriculture commissioner, she also served as texas comptroller. she has the support of an influential member of congress in house agriculture committee chairman mike conaway. that is definitely going to propel her to the top of the list. david: what other name is bruce rossiter, longtime supporter of donald trump. a dark horse in the running frag secretary? -- in the running for bag secretary -- ag secretary? casey: he has a preference for businessman.
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he fits in that mold. you can't count him out. i wouldn't call him a dark horse candidate, he is definitely in the running. when donald trump picks someone to fill this job, what are the top priorities going to be for the next secretary of agriculture? casey: as we heard in the trump campaign and following the election, trade is going to be a huge issue in 2017. the next agricultural secretary is going to definitely need to deal with that. agriculture trade is one of the bright spots of american exports. when we go forward in renegotiating nafta or reworking any of these trade deals, that is going to need to be preserved. our positive agricultural exports. david: casey wooten, agriculture reporter for bloomberg. he will be talking to us when we get that pic. we talk about the
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prospects for german chancellor angela merkel's reelection bid at 4:00 eastern on "what did you miss?" we talked to redstone in a moment. this is bloomberg. ♪
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david: this is "bloomberg markets," i'm david gura. advances in tech dominated everything from main street wall street. this fore writes about bloomberg businessweek and joins me now from san francisco. about a momentary realignment in the constellation of business. the largest companies were tech companies. what does the future look like? brad: that lasted seven weeks
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and the next on and berkshire hathaway surpassed amazon, and facebook. it did seem like a window into the future, and with silicon valley dominates. it wasn't just the financial story this year, it was an incredible year for artificial intelligence. selfow about the uber driving cars in pittsburgh, the that you go -- echo can talk to. other things i don't think we appreciate it. they talked about how google translate got so immeasurably better in 2016. a year of breakthroughs and advancements for silicon valley, and yet, as i write in my story, we have to grapple with a secondary impact. what happens to jobs when every company is a software company and gets more productive? david: how equipped it is company to deal with what you just mentioned? the social ramifications of what they are doing? ai, more people
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losing jobs because technology is more efficient and faster and more intelligence, are the people running this company is prepared to grapple with those issues? doug: -- brad: no, and that's what i write about. the valley has had very poor instincts when it comes to delivering that message and defining the new ones, to dealing with the secondary impacts. let's take the fake news debacle from facebook during the elections. the first thing that mark zuckerberg did was deny that it had an impact. you look at some of these stories, that really resonated during the campaign. they got tens or hundreds of thousands of views. there is a colt of neutrality in silicon valley that these companies can be platforms and that they have to treat all ads and contents and politics equally. i think now that these are the largest companies in the land, now that they are exerting such an enormous impact over our lives and the economy, i think they do have to take a little more of a stand.
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particularly come a we will see where donald trump and his at administration comes down on tech. they are being called right now to do things like decline in advance to build a muslim registry. we are to call on his company's to be more involved. david: how much determinism to they have on whether or not they want to reckon with these things? is there much pressure to leave them to have to deal with the stuff, or other guys that want to wrestle with these big issues? they have to wrestle with the structure of their companies in advance. right now, a company like google or facebook is structured to amass as much data as possible so they can better serve us ads and content. and yet donald trump, certainly during the campaign, showed really a willingness to look past things like liberty and privacy to use that data, to fight on behalf of national security. we saw that with the iphone and
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the terrorism case in san bernardino last year. i think if you are google or facebook, you think now about the kind of data that you are collecting and is it obtainable by government fiat, and if it is, what can you do to prevent that? there's very little they could do after incident, after a rushrist attack when the of the government and the public is to find the culprit. we have to start thinking about it in advance. david: what is peter thiel's role in all of this? meeting of summer 13, 14 executives at from tower meeting with donald trump on the 25th floor couple of weeks ago. what is his role going to be? a tremendous role in the transition, he's been responsible for the appointment of your mr. to that meeting. in that meeting, trump seems to listen very carefully to those tech executives and maybe that as well.thiel's impact
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he knows these are people playing an outsized role in our culture and economy and trump needs to be friendlier towards tech that he was in the campaign. david: brad stone, thank you for joining us. you can read more and hear more from reporters every saturday and sunday on bloomberg television and bloomberg radio. coming up, we talked to general selznick -- jim o selznick with his forecast for the new year. this is bloomberg. ♪
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scarlet: welcome to "bloomberg markets."
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we are alive in bloomberg world headquarters in new york go the next hour, covering stories out of san francisco, washington, and russia. shares of twitter have tumbled almost 30% this year, and this week saw the exodus of more top executives. we discuss if the company can changes look in 2017. dealmaking in the permian basin is white-hot, and closing the spending and all other oil places combined. we explore if there is a bubble going in today's commodity close. and the bad boy of pharma, martin squarely -- martin iquarely -- martin skrel appears on bloomberg told us. abigail: the tao s&p 500 and nasdaq sitting around even.
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flipping between small gains and losses. the s&p 500 and the tao are down .01%. it's a stunning day the lack of movement from the smallest trading range for the s&p 500 in about four years. not surprisingly, not a lot of movement in the sectors. when you going to the bloomberg we use a great function, we see that there's more red than green. this may look like big movement on top, that they .7% for the health-care index. while the consumer discretionary index is the worst sector for the s&p 500 today, down less than .3%. not a lot of action for u.s. stocks. few movers.
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my consultant amazon, amazon is down for the second day in a row. down more than 2% since black friday. some investors may think the e-commerce giant is not faring this well this holiday season. allergan and procter & gamble something they have potential ahead. and one reason to think that all of the lack of movement could come to an end will come to an end at some point in 2017. this is g #btv 5474. if the year-to-date chart of the vix. the fear gauge is trading near all-time lows, but it also has been a volatile year, spiking up and down. the last couple of times we have seen this bottoming process, it has moved higher is volatility has moved up and stocks have dropped. scarlet: thank you, abigail doolittle. let's get a check of the bloomberg first word news. courtney collins has more from the newsroom. saysney: after kia airways the men who hijacked a plane
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ended up in multiple because of fuel limitations. pastorsiverted with 111 -- passengers and six crew members on board. when the airplane reached 36,000 feet, the pilot received a wasnd to land in rome and told by another crew member the hijackers were armed. the pilot proposed leading in tripoli, but the hijackers decided malta was the next best option. the hijackers surrendered to malta authorities. meanwhile, germany's top prosecutor says investigators are trying to determine whether the suspect in the deadly truck attack on a berlin christmas market had help from a network of supporters. the 24-year-old tunisian was shot and killed by police conducting a routine stop in milan after he opened fire on them. the prosecutor says his office is working with italian authorities to reconstruct the to get there from
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berlin. he says authorities in milan bye able to identify him cigarettes provided by german authorities. russian president vladimir putin says the parties responsible for meddling middling -- in the u.s. election to their hacking from another country, not russia. here is president putin in his conference from moscow. president putin: nobody knows who these hackers were. maybe they were in another country, not in russia. maybe somebody on the sofa or in bed hacked into their you know. show where the attack comes from, but the most important thing is the essence of the information that the hackers brought to light. courtney: president putin said russia was the only country that
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expected donald trump to win the u.s. presidential election. an accused hillary clinton of being a bad loser. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney collins. this is bloomberg. scarlet: thank you, courtney. donald trump the vision for making america great again sounds promising. when you break down the numbers, economists are saying not so fast. jim o'sullivan is one of the most accurate economists ranked by bloomberg and he joins us now. my 5 million jobs on at what needs to happen annually for the u.s. to create that kind of job number? mr. o'sullivan: the last couple of years, it's been that rate. doable, but in's
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the last couple of years, we've been seeing the unemployment rate falling rapidly. the demographics are very different than they were, 10, 20, 30 years ago. the secular trend in labor force growth is no more than .5% per year. that's what we've been seeing a clear downturn in the out of plumb the rate was 1.5% plus unemployment growth. -- the unemployment rate with 1.5% plus unemployment growth. there has to be a surgeon labor force growth, and we probably need a bunch of new immigrants, which would be a against another part of the policy. scarlet: he also projects 3% to 4% gdp. you need productivity to rise. what is going to change that trajectory? mr. o'sullivan: productivity is harder to forecast. thathard to be definitive we can't get the numbers that he is saying without a major change. if you look from 3.5% gdp growth and you have 1.5% employment growth, if you assume that, it's all economy productivity of 2%
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per year. historically, is not not erratic. -- not that dramatic. point five years into this expansion and official productivity numbers have been averaging 1% per year. it's not inconceivable that we could do better than that. some of what we have seen is the legacy of crisis as we move on. with better business investments, that could help productivity. better education, potentially better infrastructure. it's not impossible to get 2% productivity growth. i would say of the numbers that are outlined, it's the employment part that is more unfeasible without a major change, particularly on immigration side. scarlet: people wonder whether donald trump's policy will be growth boosting or growth stopping. could it be both or neither? mr. o'sullivan: the growth boosting part, really to fiscal policy, and certainly in the short run, if you get a tax cut, that gives the economy lifts.
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how much does that due to potential growth and what is the fed reaction in terms of how much fiscal stimulus involves monetary tightening, that remains to be seen. but there's no question that the tax cut has the potential to boost growth. most people would agree that there probably is going to be some kind of a tax cut with republicans in congress as well as trump in the white house. i think is a fairly clear path to some kind of tax change, not just reform, but also tax cut as well. that's quite likely and that is what markets are trading on, as they are focusing on the positive. there's a lot of uncertainty with the new administration, to what extent is there followthrough on the anti-free-trade rhetoric. that has the potential to undermine confidence in markets. , onhe immigration side geopolitical issues we're talking about everyday right now. so far, the markets have focused on the positive and hopefully, that will continue. we have to recognize there are potential negative side risks there as well. scarlet: when you look at the
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data, the economic fundamentals have been getting better. we have been moving to the upside consistently for the last half year or so. the latest regional fed surveys on manufacturing shows that sentiment is more positive. if you come inside the bloomberg, g #btv 277, the capex outlook is now at a 17 year high. there is that uptick most recently. the new orders outlook is that to look -- a two year's high. the fly and the women is we have a stronger u.s. dollar as well. isthe fly in the ointment that we have a stronger u.s. dollar as well. will that show up in the manufacturing data? mr. o'sullivan: if those increases are sustained, absolutely. yesterday, even though the headline was down over 5%, the details were strong, including the core numbers of almost 1% on the month. it's not just the philadelphia fed survey, even the kansas city
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fed survey that came out this week for december, the part was capex part was down . if those increases are sustained, that's a very pex.tive sign for ca the key word is, is it sustained? if you look at consumer confidence numbers or business confidence numbers, even things like the nfib survey, the stock market, all of these things have clearly gotten a lift since the election. the hope is that the growth boosting part of the new administration in combination with a republican congress will be the dominant drivers over the next year. and so far, it's fingers crossed to some extent of the threats on free-trade are not followed
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through on, the immigration threat is not followed through on. right now, all of these confidence surveys are clearly emphasizing the positive. the numbers on the economy are generally improving. we were seeing that even before the election. scarlet: putting aside the survey-based reports, in terms of the hard data, our bond yields rising for justifiable reasons based on the data? mr. o'sullivan: i would say it was justified. admittedly, i was looking for bond yields to rise too soon. but clearly, the economy, from the fed perspective, justified the rate hike in december. that was out assuming any fiscal stimulus. the trend in unemployment remains down, we are starting to get some bubbling in wage numbers. i think even without fiscal stimulus, the fed would be tightening a lot more in the next year than they did in the last year, which in retrospect, i think they probably were wrong to wait as much as they did through the year. it is what it is. at this point, the unappointed
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rate is down to 4.6% and probably still falling. that, itsed on reinforces the case for fed tightening and bond yields in the process being hired. , chief: jim o'sullivan economist at high frequency economics. ,oming up, martin shkreli discussing what it means for health care regulation under a trump administration. from new york, this is bloomberg. ♪
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scarlet: this is "bloomberg
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markets," i'm scarlet fu. martin shkreli, from touring pharmaceuticals and buying a drug and raising the price by 56 before- when call congress, he declined to answer questions about his pricing policies. he did tweet that members of congress were imbeciles. this morning, he joined bloomberg daybreak americas, and they asked about the issue. mr. shkreli: the media made a populist issue. if you look at the population of california that people want to pass lower drug prices, they ran an ad with my face on it, during the world series. my family was shocked to see. proposition failed. and this is one of the most liberal states in the country. it11 when people, -- i love when people come on the program and say. hillary clinton said it. mr. shkreli: she is an asset of
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the media. >> it -- mr. shkreli: whatever. scarlet: do we have the right way around? politicians follow where the people are. it was important to the people needed to take it. if you have people who don't have a lot of money and the need to take a drug like this, they're going to be confidences. mr. shkreli: there is and consequent is, they have insurance. i don't know if you're familiar with health care insurance. our presidents forced us to get it. i paid a fine, because it on have health care insurance. -- i don't have health care insurance. scarlet: your insurance must -- david: your insurance must be great. it's covered by every insurer. i think trump is going to be fantastic and is going to bring more common vision for drug
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prices. right now, getting a generic drug approved takes five years. >> let's go back to capitalism. bylsma problem is that the health care industry, it's seen as monopolistic because it is so hard to get drugs through the fda. mr. shkreli: -- >> the pricing issue is going to get a whole lot harder if they address that. is shkreli: drug pricing only a small part of health care expenditures. physicians of the biggest part. we don't talk about physicians. you want to become drug companies, the drugs are the best cost-effective solution for health care. they are algorithmic and modular. where is things like how do you do a surgery, it's much more complex and harder to control. david: we should have health care providers come defend themselves. we're talking about drugs. there's no question that the price of drugs is going up faster than the cost of living. yes it is. and percentage of gdp, health care costs are 18%, moving to
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20%. when you have health insurers pay really high prices, they get expressed through premiums sooner or later. it doesn't just go away. mr. shkreli: of course it does. grow,estion is, as gdp's and we are at the top of the pack, we learn as a society that we prize in life is our health. we are going to spend more on our health. that's the market was civilized country. david: you would do it again. doug: --mr. shkreli: of course. they raised prices after the senate committee. pfizer raised prices 30%. i don't know anywhere the needs to keep up with that kind of inflation. it's not surprising i would do it again, everyone is doing it. in capitalism, you try to get the highest price you can for a product. >> to this damage your ability to run a company again?
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mr. shkreli: depends on how much money you have. you look at trump or icon, they have done things that were unpopular. he was a child -- when i was a child, he bought an airline and tried to fire everyone. short run, there are some dislocations, but i have made a lot of fans in the free market world. david: you didn't make too many fans among prosecutors. it's a different set of circumstances. where is that case stand at this point? mr. shkreli: the trial starts in june and i'm looking forward to it. is going to be an exciting circus. we are going to win by a landslide. david: the jury trial. mr. shkreli: yes. the evidence is clear i did nothing wrong. there were no victims in my unlike the allegations against platinum partner, where missinge 600 investors $1 billion.
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my investors send me christmas cards. was martin shkreli speaking on bloomberg "daybreak america's." michael flynn facing criticism for his russian relationships that are putting him in the spotlight. this is bloomberg. ♪
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scarlet: this is "bloomberg markets," i'm scarlet fu. nationalump's security advisor and michael flynn's relationship with russia is in question. with abusiness dealings man who has ties with the kgb. it's not the first time he has been questioned on his relationship with russia. peter robeson is halloween the story and he joins us -- is
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following the story, and he joins us now by skype. of hishael flynn aware business partners alleged ties to the kgb going in? never met thishe person and says he is no longer involved with the board. this man's name was readily available in google searches and did appear in 2009 in a defense department publication called espionage and other compromises of national security. scarlet: the name of the company is called brainwave. do we know how much he was really setting this company -- vetting this company? or maybe he wasn't so vigilant about that? at brainwaveked science, a company in boston that uses a technique called brain fingerprinting that's been around since the 1990's.
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it got a lot of media attention to the 90's, to the point that the general accounting office study to see how effective it is. they identify the technology could not be validated and wasn't worth trying. we looked at academic journals and there were strong academicions in journals, with some academics suggesting this is junk science. one prosecutor has been quoted as saying it is not even junk, it is junk. scarlet: what was michael flynn going to do for this company? or his company and its involvement with brainwave? the defense he left intelligence agency in 2014, he started a private consulting company called flynn intel group. that company was working to find business in the cyber security and defense area. group had signed a collaboration agreement with brainwave science to drum up business with u.s. agencies.
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flynn intel group, according to the country's president, was going to provide training for intelligence officers and its own headquarters. scarlet: this certainly calls into question the judgment, perhaps. that's been questioned in the past. his close association with russia and spreading internet conspiracy theories. when you talk to different people's, what did they say that this suggests about his judgment and exercising that judgment? peter: they say this fits squarely in line with those other examples. it's an example of serious concern people should have about his judgment. scarlet: thank you, the robinson -- peter robeson joining us. you can find this on bloomberg.com. the commodities closed early today, gold on track to close down this week, even with a rebound.
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there is still a chance of precious metal could be positive for the year. thanks mainly to the gains at the start of 2016. from new york, this is bloomberg. ♪
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from bloomberg world headquarters in midtown manhattan, this is "bloomberg markets." i am scarlet fu. commodity markets closed ahead
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of the holiday weekend, let's give you a snapshot of how gold ended. slight rebound today, and it marks the longest losing streak and more than a decade. it comes as reports that investors are seeking risky assets at the expense of havens like gold. gold could end the year higher and it would see its first positive annual increase since 2012, largely from the gains of the start of the year. copper futures, no shortage of supplies. hedge funds with increasing supply from central america and peru. barrel,rading $53 a this as stockpiles remain at historical highs. libya's have olivia'-- biggest oil terminal with its first cargo in years. now we are going to stay with oil because the permian basin in
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west texas is 75,000 square miles of some of the best oil in the u.s. private equity and energy companies are priming to enter the basin and that is driving up land values and could send it service costs soaring. pioneer natural resources is the biggest player, and alix steel recently went to midland, texas, to see if they see signs of a bubble. alix: this is the permian, some of the best oil in the u.s. i'm standing on top of 75 billion barrels of oil in the permian in midland, texas, where land acres can go for $58,000 a pop. >> it is shocking, to tell you the truth. emblematic of how these zones are. less costs have risen from
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than $1000 an acre in 2011 to $50,000 this year. >> you will not see us paying those exorbitant prices. recently don't have to. alix: pioneer has been in the permian since the 1970's and holds 11 billion barrels of oil equivalent. >> we have been working out of the permian basin for decades. we faced little to nothing for the land we are standing on. for other people, they are spending indexes of $40,000, $50,000 an acre for the opportunity to do what we are doing every day. will pricete uncertainty, pioneer is ramping up activity next year.the expected return on each well is between 50% and 60%. money onl make anything over $20. we will not make much return, but $45, $50, pretty excellent return. alix: and that is what is
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attracting big money. >> we are starting to see record prices achieved in the basin. what has driven the change in the acid value -- asset value is not a flood of capital. it is improvements in the resource. many catchy of $60, $70 an acre. $70 an acre.e $60, alix: it is still well below the bubble levels of 2014. the increase in activity causes other concerns -- cost inflation. >> there will be a fourfold increase in demand by 2018 and that may drive significant logistics and increases in costs. our biggest concern into next year is not going to be the production output look for these companies. it is the service cost inflation that may hit the bottom line. alix: but pioneer isn't concerned. >> we own that equipment. all the guys out here working work for pioneer with the
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exception of a few contractors. we are insulated from all the cost increases that are expected to happen as the activity starts to increase. alix: where pioneer could have a problem is moving massive amounts of oil out of the region. >> by 2019, 2020, we see the need for companies to start building new types. -- pipes. that will create a long-term solution for the crude out of the basin. alix: the risks are not deterring pioneer. >> this is texas. we will build pipelines. when you look at the breadth of opportunities come here we are at 2 million barrels a day. we could see 5 million barrels a day the next 10 years and perhaps more than that. this will be the big swing producing area of the united states for decades to come. that is clear. that was bloombergs the pioneerith natural resources incoming ceo in midland, texas, incidentally,
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the hometown of laura bush. let's get "first word" news at this hour. courtney collins has more from the newsroom. french authorities are refusing to comment on the international manhunt. was fatally shot when he opened fire on police in malan, italy. milan's police chief says amri passed through france, a country living in a state of emergency for more than year after deadly extremist attacks. china plans to set up 126 monitoring sites to collect information and check the impact of air pollution on people's health, according to the deputy head of the national health and family planning commission. china endured more than five days of heavy smog in the northern part of the country and the spurred the years highest alert. levels are 16 times the
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levels the world health organization considers dangerous. aaa estimates more than one in 3 million -- more than 3 million markets will take a trip next week and a half to wieters once in the north west and midwest could delay the plans. aaa projects air travel this year will see a 2.5% increase, but most travelers, nearly 94 million, will be hitting the roads, including stranded flyers. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am courtney collins. this is bloomberg. scarlet: thank you so much, courtney. from twitter's executive brain drain to uber ending a standoff, no shortage of tech news this week. we turn to caroline hyde in san francisco, joined by brad stone and sarah frier to break down all the news. caroline: great to see you.
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it was a busy week in tech indeed. first, twitter. we saw the cto out the door. the vice vp of product heading for the exit as well from adding to an exit this of executive departures for the social media giant in 2016. for more than half of its leadership team is the part. sarah frier is the first to kick off on the brain drain. what is behind it? sarah: this is a company that has been in executive turmoil as long as it has been a company. any time they mention executive leadership in the presentation, you can cross off most of the names since they started in 2013 going public. this is a company where they have had a lot of trouble deciding on their vision and moving forward in a direction that contributes to growth. the brain drain really thatibutes to instability
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twitter doesn't need when the stock is so under pressure. caroline: $1 billion wiped out in market value this week and they couldn't find a buyer. brad: sarah and i have joked that it is dangerous to profile a twitter executive these days because they might be gone by the time the story comes out. cfo, now thecoo, has a vision of reorienting around video. this is a company, even though they failed to find a buyer, with a little runway. they have got to do something dramatic to is the price falls, the process might start up again in 2017. caroline: perhaps some of the advertising this -- ms. measurements that came out last night. timing for is bad twitter after they went to this turmoil the last week. they noted they overcharged some advertisers for video ads on
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android phones. video ads are what they want to focus the company around. the fact that they were overstating how money people now,d those videos -- they issued refunds, but that is still not a good place to be. to their credit, they are not the only company that has had that problem. we were talking earlier about facebook. facebook has several metrics that have overstated the amount of digital engagement that they numbers, that these are that advertisers followed to figure out if the digital advertising spending is doing well. is the great irony, that an industry that offer precision around advertising is now enmeshed in all of this scandal over what they are telling advertisers. gears-e: shifting hardened the -- shifting gears, pardon the pun, we look at uber now.
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the uberis out of playbook -- don't ask for permission, begged for forgiveness. people are not sure what to think around driverless cars, and the rows are public property and shared by drivers and bikers and pedestrians and we kind of depend on government to keep it orderly. this was also a step too far and uber is moving to arizona. and will march on. it is a company that doesn't surrender. fascinating,is whether they would act like this if they were a public company. many were hoping they would go to the public market in 2017 if not 2018. how people here in san francisco digested that? differents is a much regulatory battle than the first regulatory battle, which was to allow people to order a car from anywhere. that is a great thing, i think we all want, right? this is different.
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this is a technology that could kill people if it doesn't work. self driving -- they were not totally self driving. they had a driver in know that would've take hold of the wheel if anything went wrong. they had another guy taking notes on what was going on. it was baby steps for uber. right, the city where it would be embraced, you would think. i think you got a be -- brad: no one wants to see our streets turned into a great science experiment. sarah: tesla? caroline: arizona maybe does. they invited them in. let's stick with ai and computer learning. one has flown off the shelves -- the amazon echo has sold out. brad: it is a great product. that is the bottom line. you got to give amazon credit 8cause they have labored for
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years, experimenting and trying new hardware strategies. a lot has not worked. the fire phone was a failure. the fire tablet is cheap but i don't know many people singing praises. marketdle has a niche but has not expanded much since the early days. they are in google's turf, ai, and deserve all the credit. caroline: google playing catch-up. sarah, you are the social media group at bloomberg. it is painful watching mark zuckerberg design his own jarvbiis. it up on hiss facebook page with the videos. certainly not something he will sell on the market. it is a personal challenge. he has won every year. only ate meat he kills himself.
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caroline: learning chinese. sarah: learning mandarin, yes. hasuilt that and he used it in his phone with the voice of morgan freeman. caroline: i would not mind morgan freeman's voice helping me in my home as well. staying with me a little later, with me on the show in full here at 2:00 p.m. san francisco time. scarlet, back to you. scarlet: we are on track for a classic santa claus rally, or perhaps it should be called a t rump rally. as we approach the final day of trading in 2017, we will look back at performance versus previous years. this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i am scarlet fu. time for the biggest business stories right now. price tag of $2.6 billion, a deal comes after an earlier offer was rejected. scale into boost its the pension insurance sectors. delta lloyd returned to profit after cutting costs. it may not heal white christmas, but all signs are pointing to a green one from tree growers. treat, it marks a jump over the previous years and the highest in data going back to 2008 collected by the national christmas tree association. it is still too early to know the average price, all signs are pointing to a mary season for the tree growers.
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that is your business flash update. let's get a check on markets. sleepy friday before the holiday weekend. abigail do the little -- abigail doolittle is looking at the performance in context. sleepy: it certainly is friday. there isn't much trading action to report on. we look at the s&p 500, this looks like there is a lot going on, but we have the s&p 500 up .01%. really a very small trading range david in fact, we have data to back that up. #btv 2839. range on the day, we are within a four-point range. simply amazing, very small range. passive range back on black monday ine black
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august 2015. also the brexit. sinces the smallest range december 2013. not a lot happening. today is the official start of the technical santa claus rally. the santa claus rally is defined by the last five trading days in the first 2 of the next year. the gains over the last two years have really not been that great. outside of 2008, within all the volatility. those seven days, it is actually about .6%. not a huge rally there. lastly, if you take a look at the s&p 500 movers, just to hammer home the point that there is not a lot happening here, of the 500 members of the s&p 500, there are some stocks with more than one. the other 90% of those s&p 500 members are trading less than 1%.
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not a lot happening today on this friday before christmas event hanukkah. -- christmas eve and hanukkah. scarlet: thanks for the setup it coming up, donald trump releases what he says is a nice letter from vladimir putin. what could it mean for relations between the u.s. and russia? this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i am scarlet fu. the u.n. security council voting in the last hour that israel must stop building settlements in occupied palestinian territory. the u.s. abstained from the vote. joining us is margaret talev. the vote is significant in that donald trump, president-elect, jumped in with advice for president obama, saying that the u.s. should veto the vote.
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wasn't just advice for obama it was advice for anyone who would listen. donald trump weighing in with tweets and public statements and our conversations with the israelis,eader and and this did not sit well with the obama administration. scarlet: he did not command the u.s. ended up abstaining from the vote. -- it did not, and the u.s. ended up extending from the vote. towe expect donald trump weigh in? margaret: we have been glued to our smartphones the last several minutes. this resolution has been coming down the pipeline for some time that it has to do with the obama with the end of the administration and people hope for that the u.s. would take this stance. people being palestinians and nations favorable to their cause. but also concerns because internally inside israeli politics, some are hoping for a
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more aggressive stance toward settlements. the obama administration weighing its options carefully. they theoretically have the option of voting yes. that wasn't going to happen. that would have been deaf con. -- defcon. or to veto or block it. there was thought that donald trump's actions would prompt president obama to take the stance. the problem is, for president obama, if you want this to be a legacy issue, he could take the stand on principle, but he will be out in a few weeks and this would give cover to the israeli government under bb netanyahu and donald trump and his incoming administration to take a more aggressive stance on settlements. scarlet: delicate dance here. to what extent can we expect this to be a priority for the top administration starting january 20? margaret: politically it may be one although there are other issues, including the nuclear issue and domestic issues, infrastructure, and doing a lot of obama executive -- undoing a
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lot of obama executive orders. with david friedman, donald trump intends to nominate as ambassador to israel, he has signaled an intent to take a ath that-israeli p the traditional balancing for a two state solution. scarlet: speaking of nuclear armament, donald trump tweeted about it. breezy on the prospect of triggering an arms race with russia. his press secretary seemed to walk it back a little. is there mixed messaging between donald trump and is an administration? -- is an administration? margaret: fairly extraordinary date with these parallels opponents. when is this valentine, this christmas letter from vladimir putin command donald trump saying thank you very much and praising it. on the other hand, donald trump tweeting yesterday to suggest he would be willing to expand the
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u.s. nuclear weapons capabilities. the spokesman walking it back and saying he is talking about nonproliferation. spicerawn -- sean going on morning shows to continue that theme, and then donald trump during an interview with msnbc saying "let there be an arms race if that is what it takes. we will win." scarlet: breezy, to say the least. i'm glad you brought up that letter from of vladimir putin. donald trump is in these yesterday about showing how he would get along -- enthusiastic about showing how he would get along. margaret: the russian leader said in his very long news conference today in russia that russia is the only country that saw donald trump's election, and that hillary clinton is a sore it is and three, interest in vladimir putin's mind to reset the bilateral relationship.
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the devil is entirely in the details he is a feat -- vis-a-vis syria and the baltic states. wow. quite a letter. scarlet: it was quite a letter. thank you, margaret talev, for putting those into context. coming up in the next hour, we are watching the bond market. treasury yields continue to climb. you can see it has been a pretty steady movement there for prices falling and yields rising. we will discuss the outlook for treasures. this is bloomberg. ♪ all
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scarlet: it is 3:00 p.m. in new york, :00 p.m. in london. i am scarlet fu. welcome to "bloomberg markets."
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are lightbank from bloomberg world headquarters in new york over the next hour and covering stories in denver, washington, and moscow. in the plus right now, little changed before the holiday break. treasuries getting a lot of attention. plus we will hear from the governor of colorado, john hickenlooper, about energy policy and small business growth. new comments from president-elect donald trump causing some concerns about the potential for a nuclear arms race. how his rhetoric is impacting national security and global geopolitics. let's get you a check of the headlines. courtney collins has more from the newsroom. courtney: the united states has given its biggest rebuke in recent history to long-standing ally israel, allowing the un security council to condemn its settlements in continuing
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construction in palestinian territory as "flagrant violation of international law." instead of casting a veto to support israel, is it almost u.s. abstained, giving a green light to the council to approve resolution by a 14-0 vote, a move greeted with loud applause in the security council chamber. chancellor angela merkel has ordered a review of german anti-terror measures after this week's truck attack on a berlin christmas market. in a news conference hours after italian police killed a man suspected of driving the truck, merkel said the suspect came to germany in july 2015. german media reported that security officials had him under observation for months and authorities couldn't send him back to his native tunisia because he didn't have identity papers. with the presidential inauguration less than a month away, jimmy carter is the only former president to rsvp.
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carter says he will attend. bill clinton is likely a no-sho w. confined to ash, wheelchair, is likely to skip as well. formerng to politico, president george w. bush hasn't decided yet. and donald trump's pick for health secretary, representative tom price from has treated more than $300,000 in shares of health industry companies since 12, according to a report in "the wall street journal." he had stocks in 40 companies really with health care and pharmaceuticals. during the most recent session, he traded stocks in 12 companies while sponsoring and cosponsoring health care legislation. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am courtney collins. this is bloomberg. scarlet: thank you so much. let's get to the markets right now.
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mixed today as we headed to the long holiday weekend. in the bond market we are seeing a little bit of a reversal from the last couple weeks. the yield on the 10-year note declining, treasuries heading for the first weekly gain since the presidential election. fancy that. joining me is michael reagan and lisa abramowicz. equities is kind of a snoozer right now. we have to start with lisa. michael: make lisa do the talking. scarlet: this is a situation where treasuries have stalled out and the selloff has dissipated and we are starting to see a little bit of a reversal lisa:. lisa: first of all, we have people saying they got ahead of themselves. scarlet: oh, really? lisa: people on your show talking about that, saying donald trump as the next president of the united states will probably eliminate regulatory rollbacks and things that will be stimulative to businesses and that will be inflationary and cause yields to rise. a lot of people are now
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questioning, first of all, how quickly president-elect trump can implement those policies. we saw this week that wages are still not climbing to the amount that economists want to see. also, there is this other really important factor to look at. if you look at my terminal and look at the gap in yields between u.s. 10-year treasuries that myan bunds, version has whited out to the most on record. a gap of 2.3 percentage points. if you look at my terminal you will be able to see a great if you can't, that is fine. there is. -- there it is. you can see the lower part of the screen, that is the divergence. it claims, claims, climbs. the extra yields people are earning on treasuries is a record amount versus other comparable bonds. you would think that some people come to the u.s. and by some
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treasuries and look pretty good. scarlet: this is drawing buyers back to treasuries. given trump and what expectations for what he will do our driving the market can we are looking for a league and some kind of sense of where we go next. michael: you also have to consider it is the end of the quarter command of the year -- scarlet: people are looking for catalysts. michael: we will no longer term trends better in january. you have a strong equity market and weak bond market. i read one estimate from credit suisse. sort of an equal amount of treasuries to buy. with volume this low, volume is 50% of the average right now. it might be an exaggerated effect from that. scarlet: i wanted to bring you in on this function on bloomberg. this is the location of the different sectors -- rotation of
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the different sectors. a lot of money is moving into financials, industrials. coming out of the defense sectors, bond proxies. financials is literally off the charts here because the rallies so powerful. yet you are seeing a reversal as well. it is not a full rotation back into what it was previously about a little bit of steam coming off of that trumpet rally. the bond proxies, utilities, cell phone stocks doing better. andncials are in the middle commodity and energy stocks are performing poorly. butttle bit of an unwind nothing too dramatic. lisa: the big thing i'm looking at heading into next year -- a couple of factors are important we have not talked enough about how much foreign selling there has been of treasuries hit the biggest monthly sale of treasuries by china and japan and the other
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major foreign holders since 2000 . in october, a lot of it has been developing over time. scarlet: not election-specific. lisa: this has been happening a couple quarters and since july, market value has been taken off the treasury index as reported by bank of america and merrill lynch. this pause we are seeing comes after a big reassessment of how low the treasury yields will go. next year the treasury that will be between yields and whether we see some policies, real policies from president-elect trump. scarlet: when you look at treasuries, the year-to-date chart of the 10-year, the movement really began in early july and late june. it certainly took off and moved in a different direction and the trajectory change quickly in november, but the bottom for yields was in late june from
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early july. take us back to what was happening that caused the treasuries to begin selling off? lisa: that was one jeffrey garlock said this was crazy. scarlet: people have said that for a while, though. lisa: but it reached a point where it was a hard time justifying yields of 1.35%, july 5 or july 6. after brexit, too. lisa: right, but unless we were heading towards deflation in the u.s., these yields did not make sense. ,e started to get better data people recognizing the selling we were seeing from foreign buyers of treasuries and china has been selling a lot of treasuries as result of trying to support the u.n. that is part of what was going on. of course, donald trump was elected president and you saw those yields take off. scarlet: one story i want to bring you in on is weight
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watchers. mike: did my wife put you up to this? scarlet: no. [laughter] scarlet: not at all. this has to do with oprah winfrey and the oprah effect. this is weight watchers stock. oprah-relateds on news. the ad campaign to be his december 30, 2015-- debuts december 30, 2015. and then we heard that she lost 40 pounds. the stock went up quite a bit. it goes to show how this is very much based on the movement of one person. mike: it is an amazing story, especially when you think that oprah owns about 10% of weight watchers stock. and here she comes on saying, hey, i lost 40 pounds. dollars --llions of if i had a diet plan
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like that i would stick with it. it is interesting, without a doubt. this is mike's point, the institutional shareholders of weight watchers and oprah winfrey is the third biggest shareholder of the company, with 9.97% stake outstanding. pretty credible. lisa come when you look at -- don't talk about weight watchers bonds -- [laughter] lisa: i could go there. mike: overweight bonds. .carlet: oh she has been waiting to throw that one out there. what are you hearing from people in terms of this is a good time for treasuries? are they going that far yet? lisa: some people are starting to talk about it but when they talk about going into treasuries, they are talking about the front and could they don't want to go long-duration because if there is a surprise in the first quarter where president-elect trump does implement these policies or rolls back the tax code as promised, you will start to see
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yields climb aboard. people are not really doing that but you are seeing pimco and mohamed el-erian saying that they are building cash because they are not sure what next year really will hold. scarlet: that part we are certain of, there is still a lot of cash on the sidelines. mike regan, thank you so much, and of course, lisa abramowicz. you can see mike's work on the bloomberg. coming up next, we will hear , johnolorado's governor hickenlooper, on the issues he says could help democrats in the next round of elections. from new york, this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i am scarlet fu.
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time for the biggest business stories in the news right now. wells fargo has reached a settlement tied to real estate loans. that is according to "the wall street journal," which sites people familiar with the matter. wells fargo reached the settlement with the trust overseeing the liquidation. terms were not made public. shares rose the most since august after the company agreed to buy a company for $20 million. it is a maker of over-the-counter health care products. the transaction is expected to close by the end of prestige's fiscal year in march. it will add to cash flow. that is your "business flash" update. president-elect donald trump has been promising to ease regulations to help small businesses, and colorado governor john hickenlooper, who is a democrat, says his party could benefit from helping business owners.
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he spoke to david gura today. gov. hickenlooper: i've not had a chance to talk to mr. trump, but a lot of what we have done, cutting rates and increasing access to capital and making it easier for people to start small businesses come back to be replicated on a national level and i think, done properly, could help take the recovery that president obama started and help it grow. david: look at colorado -- i want to pull up a chart on the bloomberg. i will describe it to you if you cannot see it. colorado'sat the -- percentage of oil production. how much is being produced in the united states overall pick for allow there was a perception that denver and colorado as a rode energy's highs and lows, and it has become more diversified. how did that come about? havehickenlooper: we pushed for that at the state
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level starting probably 20 years ago, but also at the local city levels. denver, boulder, fort collins, colorado springs, they all worked very hard, all the cities along the front range, to really find ways to expand the aerospace, other technology jobs , to look at opportunities for new industries. agricultural technology, how we expand some of the tech to the farm products industry. all that stuff we put a lot of tax incentives and effort to make sure we work beyond just oil and gas. solar and wind are huge industries. david: you bring up taxes. let me ask about proposals for tax reform. today,n hickenlooper of whatever the equivalent of the brewing company would be today, wanted to do that, our taxes a big issue? what do you see in terms of small business owners like you when you were younger?
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gov. hickenlooper: i've never met a small business person who doesn't hate paying taxes. but most of us recognize that taxes are necessary to have the framework that society gives us -- the roads, institutions and public safety. the real key with cutting taxes, simplifying taxes would be a huge benefit. i'm not sure that at this moment we are going to be too successful at dramatically cutting taxes unless you are willing to increase the national debt, and there is going to be natural conflict between the president-elect's own party in congress and his desires to beef up defense and in many ways increase spending and cut taxes at the same time. ask you aboutto how the public sector interfaces with the private sector. i'm sure you have watched donald trump flying to indiana to wield some influence against carrier, keeping jobs in the u.s. we have seen him in folk lockheed martin and -- invoke
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lockheed martin and boeing i wonder what the proper role is as an executive, you as a .overnor, and businesses how difficult is it to get the relationship in balance? gov. hickenlooper: it's interesting, at the presidential level i don't think he will have enough time to deal with each kind -- a issue, that company that will outsource some function or another. certainly in colorado i tried to make sure i am aware of all the larger companies, large anloyers, and if there is issue or challenge come they have my cell phone number, they call me, we try to work it out. in most cases those companies are trying to get what is fair. nkey are not trying to hoodwi anyone or get out of paying fair taxes. amplifying taxes would be great step forward. in so many cases, these unintended consequences that the tax court has created for all kinds of different industries. back and will come
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talk about the marijuana policy and what that has been for the colorado economy. let's talk about the future of the democratic party. you have endorsed the current secretary of labor to be head of the dnc. there will be introspection and changes to the democratic party. what needs to change about the democratic party as we head into the next election in four years? gov. hickenlooper: the democratic party for generations has been the party that stands for making sure that we stand strong on civil rights and civil stande, that we strong on protecting the planet and making sure each year we make the environment a little cleaner. we also could benefit from being a little stronger about hoping small businesses and being pro-jobs and really looking at what is life like for those people trying to move out of the working poor and get a middle-class life where they can own a home and begin to acquire the assets that would be necessary for a dignified
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retirement. scarlet: and that was colorado governor john hickenlooper speaking earlier on "bloomberg markets." we wanted to update you because donald trump, the president-elect, has responded on twitter to the u.s. abstaining from the vote declaring israel he settlements are illegal. this is the tweet he sent out. ,e basically makes a reference "as to the united nations, things will be different after january 20." you will recall that he tweeted out he thought the u.s. should veto the vote to declare israeli settlements illegal. the obama administration abstained from the vote and donald trump saying things will be different after january 20, the date of the inauguration. we will keep you posted on further tweets from the president-elect. a stock has gotten hammered along with other retailers. our next guest it is an excellent opportunity for an
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upside. this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i am scarlet fu. time for "options insight" with abigail doolittle. abigail: joining me is the senior market strategist at trading advantage. he joins me from chicago. , the holidays bit today official start of the santa claus rally, not much to write home about. do you think this changes next week? >> i really do. you look at the activity and the volume and we drifted this week. the sellers did not come in. the buyers have to wait for a little bit. this week could be the start of a nice base for the next propelled move up. you will see that next week.
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the 20,000 number will be behind us next week. i think the fact that the volume was light but we didn't see sellers coming in, the buyers stepped away from the holiday -- for the holidays. abigail: you called and out 20,000 next week. we will have to see how that works out. does there have to be a catalyst or is this just end of the year trading in the vix trading at all-time lows? abigail: i think you will see end of the year trading. there is a note that came out that less than 50% of all retail investors actually bought into this market and are invested in the market. i think you will see some of those try to catch up and catch the ride before the end of the year. thatill see some shorts got caught on the sidelines propel the market again next week and help everything else -- everyone else tried to get in before the end of the year to benefit from selling in 2017. abigail: speaking of catch-up
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potential, your trade is kohl's. walk us through that. scott: absolutely. kohl's last month had a phenomenal earnings report. they reaffirmed their guidance. kohl's, along with the rest of the retail space, has gotten beaten over the last four to six weeks. there are opportunities. is reason i like kohl's technically it is that the 50-day moving average and at a point where this area was resistant going back almost a year ago. we are also at this point, what ill, where if you look back to earnings in november, the stock had a gap open to this area. technically this is setting up for a nice upside potential, even in the midst of the retailers getting burned. i also think something people are not really talking about is last week of the year is hanukkah as well, which falls really late this year.
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some retailng to be buying we don't normally see this time of year after christmas, which is going to help fuel some of these retailers. in kohl's, i will go out to february options, and what i'm looking to do is to buy the february 55 call and selby 57.5 call -- not abigail: got to leave it there. great stuff. happy holidays. scarlet, back to you. scarlet: still ahead, donald trump has been outspoken in seemingly inconsistent on matters of national defense, from stressing the need for military strength to defense contractors against each other. this is bloomberg. ♪
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handgun and hand grenade was found in their possession. it forced the plane to land with 118 people in malta. tense negotiations and soon, and within a few hours the passengers and the crew were allowed to leave the plane. all flights to malta international airport were immediately diverted an emergency teams sent to the tarmac. germany's top prosecutor says investigators are trying to determine whether the suspect in the deadly truck attack on a berlin christmas market had help from a network of supporters. ri, a 24-year-old tunisian, was shot and killed by police conducting a routine stop in milan, italy. the prosecutor says his office is working with italian authorities to reconstruct the route you took to get there from berlin. he says authorities in milan were able to identify amri with finger prints provided by german authorities. islamic state has released unverified

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