tv Bloomberg Markets Americas Bloomberg January 4, 2017 12:00pm-3:31pm EST
we are covering stories from washington to new york and paris this hour. vice president-elect mike pence calling for an orderly transition to repeal and replace obamacare. bloomberg pursuits compiled a list of the 20 hottest travel destinations for 2017. julie hyman joins us with the latest, a look at the markets. littlewe are seeing a bit of a gain building on yesterday's momentum and recovering from the declines we saw the last week of 2016. the dow holding onto a gain of 43 points as it continues to make steady progress towards 20,000. the nasdaq doing the best of the
three major averages today. by the other phenomenon we are watching in the market, even as we see divergence within particular sectors, we are seeing more convergence between european and u.s. stocks. this looks at the stoxx 600 and s&p five -- s&p 500. here has hadon some ups and downs over the past year or so. right now it's about 7/10 of 1%. relatively high correlation here, and it's been on an uptrend for the last couple of months. as we get more positive economic data out of europe trade in the u.s., looking at the individual movers. one of them is gilead, those shares going up after the open, up by about 4%, as we got a note from jeffrey's talking about gilead will pursue more business development, potentially more
merger and acquisition activity, and we could see more potential targets of gilead, perhaps also trade higher as that speculation goes further. today we are taking a look at weight watchers. it looks like it's launching a new opera ad campaign, every time we see a new involvement by oprah winfrey, shares tend to go higher. they are up by 24%. we also tend to see them perform well at the beginning of the year as the dieting season begins. another under the radar mover today, gamco investors increases its stake in the car rental company. i wanted to look at that seasonal affect. this is saeg on the bloomberg, this looks of the past several years and what tends to happen over the trajectory of the year. we see this strong start for weight watchers, then it sort of fades as the year goes on, much like perhaps many of its clients' diets, or many people's
diets who make resolutions at the beginning of the year. rounding out a random collection of what's on the move today, natural gas fell sharply yesterday as well and the prospects for warmer weather which has arrived, at least here in the northeast today, crude oil on the flipside has been quite volatile over the past couple of sessions. expectations for opec nations to start cutting their productions. also, reacting to anticipation for the weekly inventories in the u.s. which are tomorrow this week because of the holiday shortened week. vonnie: thank you for that. emma chandra is in the newsroom. emma: president-elect donald wikileaksuoting founder and fugitive julian assange in questioning russia's role in hacking democrats emails. in a tweet, trump says julian assange said a 14-year-old could have packed a desta.
he also said russians did not give him the info. meanwhile, french presidential candidate marine le pen says a protectionist economic policy would be good for employment in france. la pen pointed to trump's success in pushing to get jobs in the u.s.. turkey says it is identified the gunman who shot of an istanbul club on new year's eve, leaving 39 people dead, but not releasing his name. state owned media has shown video of the prime suspect in the killing. he is seen walking around istanbul. police have reportedly detained 20 people they describe as islamic state militants. the former british ambassador to
the european union has a warning for prime minister theresa may, saying may needs to be told what he calls the uncomfortable truth about brexit. urging her to challenge muddled thinking. his resignation is seen as increasing the chances of a disrupted brexit for the eu. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. thanks for the battle over the phase of the affordable care act -- thanks. the battle over the affordable care act continues today. vice president elect mike pence promised an orderly transition away from the affordable care act. >> obamacare has worked a hardship on american families, in acan businesses, and very simple conclusion, the american people have sent new leadership here because
obamacare has failed and has been rejected by the american people. the mike ross fireback, meetingic lawmakers with president obama today. they are saying the gop doesn't know how to replace obamacare. what is the purpose of these two meetings, both sides squaring out their positions? republican senator's releasing language to repeal the law. what was the point of these meetings today? >> the point of the vice president coming to capitol hill was to make a pep rally for republicans to invigorate their spirits and kind of unite the republican conference in the house behind the goal of repealing obama care. they are already somewhat united there. pence brought a little bit of news today in the realm that he said president-elect trump intends to use executive actions as part of the repeal and replace process.
there is a lot the president can do by way of a second of action -- executive action. we learned that trump intends to use that power to weaken the law. republicans in congress are planning, have started to move forward on a process of appealing the aca. it's going to complicated and tricky because they have the is a budget procedure known as reconciliation, meaning they can't repeal all the law. vonnie: yes, and you mentioned there would be a lot of executive action from day one, some to undo things that have been done by executive action, and some to do things themselves. be a tussleng to between the administration and the republicans over who has control over this process? i don't know about a tussle some much over control, it will be a tussle over ideas.
there are many divisions within the republican conference, there have been obamacare alternatives proposed within the last few years, none of them with a significant consensus among the senate or house among republicans. whathis law gets replaced, a 20 million people who would be left out in the cold without a replacement, that is a big internal struggle we are going to see. they have had about six or seven years to figure this out without achieving very much success. david: democrat chuck schumer weighed in today. >> we have a great deal of optimism that the good things that have happened in aca are going to stay, and our republican colleagues don't quite know what to do. they are likely dog who caught the bus. they can repeal, but they have nothing to put in its place, and that means so many good things
go away. david: what do we know of the democrats' strategy here? democrats are pretty unified against the idea of repealing obamacare, even the very conservative members, someone like joe manchin says we should not repeal the law without a replacement on the table. he's willing to hear what the replacement should be, the democrats are least united on thatge and in principle there should be something in place before moving to repeal the law. best democrats can do given they don't have the votes to stop a repeal measure ism passing both chambers, make politics untenable for republicans. highlight the facts as they intend to do. so, i will be hearing a lot about that from democrats in the coming weeks and months. senator schumer coined a new
, makeon aca repeal america sick again. vonnie: that was the line he continued to use. we have some live pictures of mitch mcconnell there speaking on the senate floor and saying the senate will seek lasting reform of obamacare. this line about looking for reform, they have reform. paul ryan saying in response to a question, a little irritably, that they are not going to pull the rug out from anybody. he says, we have plenty of ideas to replace it. they talked about better choices at lower prices. but they really don't have a single plan, do they? they have to get one pretty fast, though. sahil: they have a lot of ideas, but they have no legislative text and no sense of unity on what to do. the problem speaker ryan will have is that once you translate these ideas into legislation,
you have to accept a difficult trade-off in health care, if you want to do these things they want to do to ease regulations. you can get a certain way in terms of reducing cost and increasing choice in terms of upns, but you will also end stripping coverage from a lot people who have it as a result of these tax credits in ob amacare. all of thosee things, you have to make tough decisions, and that is what republicans have not done yet. they have not accepted the difficult trade-offs they will have to make. talk with the ranking democrat on the senate foreign relations committee. we will also talk about obama's meetings with lawmakers today. vonnie: auto sales in december were up six point 4%. estimates call for a decrease of 1%.
vonnie: this is "bloomberg markets." while sentiment remains positive buying into the new year, larry summers warns investors shouldn't be so optimistic. its moments of extraordinary uncertainty to the extent that markets seem to not appreciate. there are prospects that things could work out well, at least for some, but there are enormous
risks to the global economy. give hisour to perspective on where markets going is an equity and derivatives strategist at bnp paribas. theeems to me -- preponderance of people we have spoken to over the last few days have been quite optimistic on the equity markets in particular. i think we are at the lower end of the range as far as the 2017 target. with thehat has to do ending level of the s&p and the path to get there. what we have seen is this degree of optimism, with around the ability for companies to with stand the stronger dollar, the ability of companies to withstand any emerging market complex that is weak, and the ability of multiples to perpetuate themselves over the course of this year. built into this forecast is the expectation of 5% to 10% earnings growth. how big of a driving
that? is i'm curious whether people think central banks continue to drive markets in 2017. what's interesting about this year, especially relative to last year, is we have this asset allocation, this shift from bonds to equities, from growth to value. right now they are already just above 2 fed hikes priced into 2017. we got the fomc meeting in december which show they were going to likely hike 3 times. we as a bank think they will hike twice. if that's already priced in, then what is the real risk? the real risk is potentially that infrastructure spending doesn't happen in 2017. the real riskit happens later, r degree, and those earnings expectations are too high. vonnie: what happens in a case like that? conditions, or do things smooth out slowly?
>> what we are likely to see is a shift back from value to growth, and a shift back to essentially some of those sectors such as utility, staples, and telecoms. the path to get there is likely higher and then lower. for anybody who is invested in the short-term, financials and some of the more value centric sectors look attractive. david: when you look at financials, the s&p 500 benchmarks and the flows area, what does that tell you about the financial sector at this point? >> flows right after the election were extremely strong in financials. havemarket observers attributed this entire rally to the trump election. if you would look at value versus growth, some of these traditional inter-index relationships, economic surprise is probably the key factor that drives that. economic surprise turned higher at the same time trump was
elected. it's hard to break out what was the real driver trade when you look at it from that perspective, the election almost could have not happened. considerablel upside, both from deregulation and the general sentiment shift. some within the sector are already trading slightly rich. vonnie: at what point do the plates shift? we will get federal reserve observation at least, if not action. we will get executive orders from day one. when do markets start pricing and other things? >> there are two things we are looking for as far as risks in 2017. when does the stronger dollar become risk off? if you look at dxy, and the s&p is positive, when does the dollar become strong enough that it becomes a risk to earnings in the market overall, and at what point does this trade weather become negative? we have looked to companies that
regardless of whether you are an importer or exporter, the market is discounting those names. depending on how this trade weather plays out, it is likely to be a 100 days. banking on discounting those names? >> we have seen exporters and importers appreciating less than the overall index. vonnie: it should be potentially good for them, this is what trump is saying, right? >> it's really a matter of whether his tax reform or this central border adjustment tax n't necessarily have negative implications for importers. the differential in the dollar exchange rate could help at the same time. david: how is this potential for repatriation? >> there are about one trillion worth of overseas earnings held
in the form of cash. if you look at the tax plan, that cash could be repatriated with other earnings at 3.5%. if you look in 2004 when this happened, about $.60 on the dollar of all the repatriated cash was returned to shareholders, either through dividends or buybacks. on that basis, it is very bullish for tech and health care, the sectors with potentially the largest offshore cash. david: still ahead, president-elect donald trump threatened to punish gm with a tariff on its cars made in mexico. we will analyze the implications of that. this is bloomberg. ♪
threatening gm with a tariff on its mexico made cars, a move which would filing nafta but may stop -- may not stop them from taking the unprecedented step. fromeporter joins us live 5th avenue outside trump tower in manhattan. walk us through what could happen here is donald trump follows through on what he has laid out in 140 characters or less. what did mexico due to retaliate? >> -- could mexico due to retaliate? >> if the president-elect imposes a terrorist on companies bringing goods into the u.s. from mexico, that would be a that wouldf nafta likely then go to courts, tribunals. but if he held firm and imposed tariffs on any imports, whether companies,or other that would be a violation of nafta. we haven't had a president violated trade treaties since the 1800s. what happens after that is
anybody's guess. the likely scenario would be that mexico would then retaliate with its own tariff on items coming from the u.s. into mexico, and that's how you then launch into a trade war where we could see the costs of goods uping into the u.s. going and u.s. manufacturers exporting to mexico raising tariffs as well. vonnie: mexican imports already hurting with the peso at 2135. weakening up and u.s. manufacturers exporting to mexico raising there for the. if they were to do that, it positiona change in for mexico. so far they haven't really responded to donald trump's tweets. they did release a proper statement yesterday following some of the tweets. there hasn't been any sort of tit for tat reactions, have their? >> no, there haven't. at this point we just really eo's whohave nervous c are concerned about what is going to happen here, anything
from a manufacturing company who imports or exports to mexico, and retailers who sell products that come from mexico, concerned about the prices of those items could go up. there's a lot that still could happen here before there's an actual withdrawal of the u.s. rump has said he wants to renegotiate the agreement, he thinks it's a bad deal, he would like to renegotiate it. -- if those negotiations don't go well and mexico and canada don't agree to terms he would like, he has said he could withdraw the united states from the agreement altogether. heer an article in nafta, would have the power as president to withdraw the u.s. from that agreement. david: a silver lining to all of this, this is good news for lawyers in washington, d.c. yes. well, what isn't? david: thank you very much.
let's get to the first word news desk. emma: the gop is devising a strategy to reverse some of the obama administration signature achievements. hill, it is said that the administration will be held accountable on their first day in office. >> we are going to be in the promise keeping business. one.ll begin on day before the end of the day, we anticipate that the president-elect will be in the tol office taking action both repeal executive orders and -- andicies into order set policies by executive action. congressional democrats are going to meet to defend -- to discuss how to defend obama's signature health care law. j clayton is a partner at sullivan and cromwell.
he has deep ties to wall street, and has represented goldman sachs and barclays. much of his world has involved mergers and acquisitions. churched trust in shooter dylan roof did not ask jurors to spare his life. he gave a brief opening statement in his sentencing trial today. he said that nothing was wrong with him psychologically, and that his lawyers forced them to go through to competency hearings. in tel aviv, a soldier has been found guilty in the killing of a wounded attacker. a judge said the shoulder -- soldier shop the palestinian because he felt he should die after attacking other soldiers. russia and the philippines are in discussions about increasing military presence in the region. for the first time since his regime, ships entered manila on a goodwill visit.
news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. vonnie:,, thank you for that. emma,take a look at -- thank you for that. let's take a look at the stocks. the s&p 500 up 0.5%. the nasdaq up 0.75%. for more detail, let's go to the market wall and abigail doolittle. abigail: we do have stocks trading higher in the u.s. today. one of the top performing sectors is health care. it is up about 7/10 of 1%. it is the best tuesday -- today rally after the election. rally since the
election. this follows the news yesterday that republicans did take first measures to start to repeal obamacare. one thing that is becoming increasingly clear is that it is unclear just how much of obamacare will be repealed, and what the timeline is in terms of a formal vote. with am it did speak bloomberg intelligence analyst, and he said there are three scenarios about the potential repeal of obamacare. worst case is 20 million people lose their health insurance. the optimistic case, in line with paul ryan's proposal, 4 million americans would lose insurance. the reason this is helping health care and hospitals today -- we take a look at another chart we have here. thatshows the percentage hospitals have gained from
obamacare over the past three years. we see it is significant. especially for community health systems. if it is not a full repeal, it would be more beneficial for these stocks. they are rallying in a big way today on the possibility it will not be a full repeal of perhaps a middle case scenario. as for winners and losers, jason outlined two ideas for us. 17 -- centine. in orange, we have humana. the possibility of obamacare being repealed and another deal that could be falling apart. it could fall a little bit. jason is saying that the real diamond in the rough is possibly centene who focuses on medicaid.
thatcenario out of this is it is a boost for private medicaid, and that could really not just this year but also the years ahead. vonnie: abigail doolittle at the markets board, thank you. david: a $3.4 billion deal came after pressure from elite management taking a stake in the company. earlier today, erik schatzker sat down with the ceo. he asked if they want more consolidation? -- consolidation. >> that have really only been to we have -- two we have accomplished. you have to have a real underperformance for an acquisition to come forward. been there has underperformance to your point. you suggest we are going to see more of that? >> not sure. i think most of the business
element companies have actually performed well. it is that in emergency -- in emerging industries right now, they have a wide diversity in investment strategies and sizes. we have to roughly five and a half million dollar market cap. on the other hand, there are some small companies in the space that i would not expect to be part of the needful consolidation trend. erik: in this case, you offered a sweetener. you offered performance fees over 2.5 years. to the delay that you are willing and interested in exploring more consolidation, to that become a template? >> i think it does. we bought a company back in 2010 called allied capital. people might be familiar with that. it was a different situation. they were under significant pressure from their lenders. they were selling assets for the benefit of lenders.
we were able to step in and do something with a negotiated transaction with they had bankers, but it really was a proprietary transaction. for better or for worse, i think there was a frustrated institutional shareholder group there that's all what they thought was use of underperformance. this was a competitive process. as i said yesterday to someone, the hardest part of getting this deal done was getting the merger agreement side. having since then has been easier than that. erik: i want to talk about the credit environment, and pricing. millions of dollars in fixed income credits. >> fixed and variable rates. we have about 250 investment professionals. it encompasses everything from leverage loans to high-yield both in the u.s. and europe. erik: how are those credit
affected by what we have seen? small future increases in the benchmark interest rates. more important, the dramatic steepening of the yield curve over the past few months. >> most of what we do is sub investment grade credit. we are less yield curve sensitive than some other guys. about 80% of our assets in come from bank loans and generally private credit. increasehe short-term or ongoing increase in short-term rates is a benefit to us. our assets pay us more, and our returns go up. the only thing that should make you worried with rising rates is high-yield in how you respond to that. we have been defensively efficient on the high-yield side for a while now. we've been trying to be -- we're double be inin the
single be names rather than triple b. spreads depends on your basis points. you are asking a non-high-heeled got a high-yield question. when we have spoken to our high-yield pms, they have expect a lot of skittishness in the market. they've been trading their portfolio rather actively. erik: how about the pricing on variable rate interest? better or worse, in a low rate environment which we had been hitting incense the crisis -- been living in sense the crisis. all of the assets we have seen have become expensive. whether it is credit or private equity elsewhere, we are
definitely opportunistic sellers of things where we see quality. that back to this deal, we think it is one of the most -- back to this deal, we think it is one of the most interesting things. it is just not something you see in this market. not owing to are really be able to do it by buying credit after credit on an individual basis. >> would think about it in our direct lending business, we employ many for the benefit of our investors. the of another 30 or 40 in europe. assetsinate those because of this big machine we have built. we are originating at 96 or 97. typically, with fees it is what available in portfolio sales. erik: what could the trump administration due to hurt your business? that's the question we get a lot is -- you are an alternative --
isthe question we get a lot -- you are an alternative lender. it is our view that even if there is a rollback on regulation -- even if there is easier life for the banks out there, they are unlikely to come back into our core middle-market. their business has changed a lot. part of what has impacted their business -- their desire to be in the market is this cost of compliance with what the fed and others are trying to do. also, their business has changed. if you think about what jp morgan and bank of america want to do, they want to be made market lenders but not in the markets we are working in. -- >> that is a great question. to try toing hypothesize about things to have not happened yet. i think donald trump coming in as the new president means a lot of new ideas. we will have to be flexible.
erik: it would certainly change the capitalist for financial sponsors. you've been doing more business with them. >> it could change private equity completely. david: coming up, it is never too early to start planning your next location -- vacation. we will give you the 2017 travel guide. that is coming up next. this is bloomberg. ♪
plans for a plant in mexico. david: a storm in the town is u.k. realtors.n a difficult year ahead. the debate over minimum wage -- does it lead to more or less prosperity? ford had planned to build a plant in mexico, but has since abandoned it after coming under criticism by donald trump. >> all of these factors coupled with segmentation shifts we are seeing in the marketplace and our effort to fully utilize the capacity in existing facilities has profited us to invest in wet rock's expansion, and want to cancel building a new plant in mexico. vonnie: donald trump said out a tweet yesterday saying, "this is only the beginning."
david: shares in a u.k. realtor company plunged. they are being heard by weaker growth online. overseas production is more expensive. a new smartphone part has been unveiled from qualcomm. the chip willthat lead to dinner phones with larger batteries. ner phones with larger batteries. elon musk and tesla fell short of delivery expectations. he has a history of setting lofty goals for tesla and then missing them. vonnie: there's no such thing as a free lunch. or is there? for more than a century, politicians have been passing minimum wage laws.
protested outside fast increasedurants for minimal weight. does it lead to more austerity unless -- prosperity or less? some states voted to increase their middleweight that was already over the federal minimum. the u.s. ranks 12 highest in real dollars behind the u.k. and australia. here is the background. the u.s. federal rate has been raised several times since congress graded in 1938. it in 1938. it a night -- in february 1968. it is about $11 in current dollars. some studies conclude that higher wages lead to fewer jobs. there was a mixed bag analysis in 2014.
they found that a $10.10 minimum wage would let 9000 people -- lift 9000 people out of poverty but it would eliminate 5000 low-wage paying jobs. ony say that companies rely low skilled labor such as walmart and joint over turnover and increased consumer spending. on the other hand, someone has to bear the cost of higher wages. working poorthe the hardest with fewer jobs available to them. the debate is becoming more and more academic. not many americans work for $7.25 an hour in 2015. only about 3% of the country earned that amount. about thead more minimum wage and all of our quick takes on the bloomberg. that is your total business report. head to bloomberg.com for more stories. ♪
david: this is "bloomberg markets." i am david gura. you then back to work likely for today's, and yet means you are already looking for your next escape. we have compiled a list of 20 travel destinations that will be especially popular this year. how did you come up with these destinations? 20 is a long list. whether i could hope to accomplish in one year. how did you come up with a list -- more than i could hope to accomplish in one year. how did you come up with a list? >> we look at places that have exciting new hotel development, easy ways to get to places that might otherwise be difficult to get to, cultural attractive -- attractions in such stuff like
that -- and it's like that. -- things like that. david: you mentioned --rastructure one of infrastructure. one place that comes to mind is machu picchu. train with ahis very sort of old world bartender in the middle of it. that company is known for bringing luxury to her room. -- peru. they are bringing a luxury sleeper train for the first time to south america. that will come online this may. david: let's stick in the region and talk about columbia. the biodiversity of that country is amazing. i was surprised at how much good food there is there. >> it is become a very vibrant finance hub. people should extend their trip and they should either way
through the culinary capital that is really burgeoning. i think you see a lot of chefs that are embracing heirloom and underrecognized ingredients like places in brazil and scandinavia. you really just do not recognize how biodiversity country is, but when you eat at some of these restaurants it really comes to life. there's so much countryside to explore. i would recommend hacking on a couple of extra days. david: shanghai now has its own michelin guide. there is good food and places to stay there, as well. >> amazing new chefs are coming in. name chefs that have global clout. they are opening up in shanghai. opening upthat are is -- are really fantastic. there is one of the is opening up in a role village of shanghai. i've never seen anything like it before. david: when is the ideal time to go to places like this?
i to go about determining this? >> it is a highly individual thing. with numbered being so focused on data and analytics, we wanted to apply that to this travel package. our version of doing this was to partner with google who gave us luxury hotel prices for each month of the year. we thought that was the fairest way to go about it as people might be flying from different destinations. flying from new york to shanghai is a big ticket price. for someone already in that hemisphere and part of the world, it is a lot shorter. we felt that hotel prices was the first way to look at this on a scale that made sense to everybody. we also spoke to destination experts who could tell us when was the best time of you to go and win was the worst. what seasons you want to avoid and such. we wanted to layer these things together to give you the best and worst time to plan these trips. david: since we are raving about portugal -- what is it about portugal right now?
>> it is like iceland a couple of years ago. everyone started to going to iceland a couple of years ago, and now it is portland. i think he's of access is future. flights are affordable, and it can connect to almost anywhere in europe. also, portugal has really stepped up. they have a beautiful new museum of art and architecture that has opened up in lisbon. it is totally changing the skyline. the food is amazing. quickly, do you have a favorite place to a looking forward to going to in the new year? >> the first place i will be going to is myanmar. i am excited about that, because it is a destination that has been in flux kind of like cuba. its -- has kind of found luxury has kind of found its footing in the country. however, the scene has yet to be commercialized come as i think
it is a very special time right now. david: for more, you can check out pursuits. pursuits go oni the bloomberg. vonnie: let's see how markets are performing. you can see the dow is up 0.25%. the s&p is being taken higher by the gap of all companies. up 0.8%.q is the euro is trading higher versus the u.s. dollar. crude is -- this is bloomberg. ♪
vonnie: from bloomberg world headquarters in new york, we are covering stories at the toronto, is simple, and moscow. first, we will speak with a former cia director about the state of u.s. and russia relations. also, president-elect donald trump's criticism of the intelligence community. tesla four quarter deliveries fall short of their own forecast due to production delays. that is sending shares lower. today's fomc minutes, we will give you a preview coming up at 2:00 p.m. eastern we are halfway through the trading day. julie hyman is your with your latest market news. up 0.25%. dow is the s&p is up --.
-- is up --. the nasdaq up 0.2 5 -- 0.75%. we are seeing a performance today among the mid-and small caps. of 1.3%.mall-cap this is a continuation of the trends we have seen. a resumption of them, because we did see a bit of a pause. one of my favorite charts has been this one relative to the s&p 500. it is a ratio of the two. surge in ourig performance came in the days following the election. it held very steady with that outperformance seeing a little ticked up here in the first few days of the new year. that is a trend we should continue to watch. a lot of money managers say they
continue to like small-cap and domestically managed companies. what are some performers in the small-cap today? weight watchers is surging 20%. a new advertising campaign is out featuring oprah winfrey. prickly, which he tends to get rid involved with the company's marketing measures -- the stock tends to go higher. also, health care is rising broadly along with hospital and health care stocks. there is this debate over the -- this is due to the debate over the affordable care act. interesting movement we are seeing today. automakers as well on the large cap side are not really moving. all of them are beating estimates for their december sales. general motors is the upper former. the shares rising by 10%. ford is rising but only by about 0.1%. fiat chrysler is falling. david: julie, thank you.
let's get over to her word news now with emma chandra. emma: chuck schumer says the republican plan to dismantle the affordable care act would make america sick again. schumer spoke today after a -- atg with the capital the capitol with president obama and other congressional democrats. >> we have a great deal of optimism that the good things that have happened in aca are going to stay. --t our republicans republican colleagues do not know what to do. they are the dog that caught the bus. they can regulate, but they have nothing to put in its place. that would mean so many good things go away. republic -- it is said that republicans have no idea how to repeal the system, and if they were to do it in its entirety it would further system into chaos. officials and mounted patrols
are reviewing the patrol line of the air force. they were not allowing them back onto the water. the plane was how to buy a beverage distribution company executive. turkey says they have identified the gunman who shot of the -- whonightclub -- and shot up in istanbul nightclub on new year's eve. in the video, is seen walking around istanbul. please reported that the was the by at least that's police report that many have described them as a islamic state militant. investigators searched a refugee for men who are believed to be equated with the suspect who drive a truck into a german christmas village. police believe one they may have known about the attack. dozens were killed and many more were wounded. global news 24 hours a day,
powered by 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: president elect donald trump took to twitter to cast doubt on the u.s. intelligence community about the role that russia played in the u.s. election. he wrote that the intelligence briefing was delayed until friday perhaps more time was needed to build a case. it was reportedly not delayed. earlier today, mike pence responded to questions about donald trump's missive and other comments he has made recently about u.s. intelligence. thernor pence: i think president-elect has expressed his very sincere and healthy american skepticism. there is a hearing on the russian hacks tomorrow on capitol hill. donald trump is scheduled to be briefed on them on friday. joining us now is a former director of the central intelligence agency. great to have you with us. i do not let you to speculate on
the motivation here. i would like your thoughts on the appropriateness about taking to task the intelligence community in the way that donald trump did on twitter yesterday. >> this is the biggest problem they have with appropriateness in the upcoming four or eight years of this administration, then they will be happy campers indeed. this is a minor blip. the intelligence business is full of controversy and arguments about assumptions -- why did you do this, why did you issue that 10, what did you mean by weapons of mass destruction, and on and on. david: respectively, it does seem like the president-elect has been taking a different tone with the intelligence community than the acting president. what is the relationship like historically between the president and the intelligence community? to, by aesident ought few months into his administration, have been taught
a good deal by the intelligence community about how things work. how reconnaissance satellites work. how signal interceptions work. what limitations those put on what you can learn and what you can know. it does take a bit of time. fairly these areas are ethically complex. as you learn about them -- fairly technically complex. as you learn about them, you get a better understanding of what we can draw conclusions from. teacher kind of older -student relationship -- the president holds a position that some would say is the most important and powerful in the world. it is a different kind of licensure. i have worked with for presidents -- to democrats and two republicans. the have all been willing to hear out a different take on things. i have no reason to believe that
donald trump will not do the same. importantat it is that the intelligence community help the new president, and not just sit back there in criticized -- there and criticize. david: i have heard president say how much reverence they have for that daily briefing they receive from the intelligence community. his donald trump spending enough time in class do you think? >> there is more than one way to run a class. in the two years that i was director of central intelligence for president bill clinton, he never had a morning briefing. he did not like to be briefed. he did not like to have stuffed read to him. he was a speed reader. i suppose he still is. he liked to go through things quickly and then ask questions
on the side. book orite a note in a a book of briefings. seems toh point -- bill clinton would do those kind of things all the time which was different from the morning briefings. that was how he wanted to work. however the president of the to havetates to be want information presented to him, people need to accommodate him and not just sit back there and grumble about it to the press. david: let me return to the previous tweet. let's give him the benefit of the doubt and say he was joking about the manner. i wouldn't you would say about -- to someone in the intelligence community who does not appreciate this level of doubt from the resident elect. someone who questions his commitment to the intelligence community and the job it does. "yourself say,
together and get back to work or find a different job." intelligence is important enough, tough enough, and at times angry enough -- it is important not to be distracted by small matters. you have to call it straight. if someone comes at you, whether it is the secretary of a cabinet or the vice president or even the president, and tries to push you off of a point and you think you are right then you address it clearly. "here is why i think this is right --" i believe, based on the meetings i have had with him, he is a fair-minded individual. he speaks rationally about matters in small groups. the only time i have seen him in a big group, like in front of thousands of people, is in in auditorium, and in that context
he is very own basket and a different -- very bombastic and a different kind of approach. a lot of people that that was worthless and that it was not going to go anywhere, but it got him elected to the presidency. david: i wonder what was so compelling about the case that the president-elect makes you to join his campaign and advise him on intelligence matters. what did he say to you to make you think he was the man to advise? >> he did not approach me. i went that summer -- last summer and read a lot of the materials that had been presented in connection with hillary clinton's pay to play and so forth. i decided i could not support her under any circumstances. i decided to look at some of the material from donald trump. i liked what i saw on the whole. i volunteered.
he had a meeting with me and my and one staffer. it was a good discussion. he did not seek me out. i volunteered. last question. i wonder where you see things going from this point? did the president-elect talk about a desire to reform the intelligence apparatus? what you think is going to happen here? do you think the relationship needs to be amended in any sort of way? >> it is hard to tell. there has been a lot of reorganization as far as the cia itself in the past two or three years. many people are high on it, and others do not like it at all. there has been a lot of reorganization in the last 15 post-9/11. the reforms setting up the
director of national intelligence and so forth. those are also controversial. something it was a good idea, and others think it was crazy. you have a couple sets of disagreements boiling within the intelligence community. you could see some important changes. get allimportant is to the issues laid out, and to have an objective assessment of them. let the president decide how he wants to organize his intelligence community. david: they do so much for joining us. funny -- vonnie? vonnie: coming up, teslas four projectionsvery were not met. we will talk about what it means for the company. this is bloomberg. ♪
♪ david: this is "bloomberg markets." i am david gura. vonnie: i am vonnie quinn. time for your bloomberg business flash. having someones step down. eater hazelwood is leaving after the bank cut back in hiring targets for his unit. this follows the problems at deutsche bank ceos face. financeelectric will the purchase of 3-d printers as it waits deeper into the emerging market for advanced manufacturing companies. they have invested millions of dollars so far to enhance operations in the 3-d printing business. ge already has major stakes in european 3-d printing companies. they plan to sell 3-d machines
to outside users. that is your latest bloomberg business flash. david: tesla is getting some speed bumps. the electric carmaker is reporting that its fourth-quarter deliveries missed estimates. they have been counting on keeping as a sting sales of cars strong. -- existing sales of cars strong. cory johnson joins us now from san francisco with more. though ahead. cory: here is what is important about tesla missing these numbers -- these were analyst numbers. these were elon musk's targets. he said they would deliver this number of cars by the end of the year, trust us. will hit this number. and they missed the mark. david: why is he persisted in this? ycc continuing to set such ambitious targets -- why is he continuing to set such ambitious
targets? >> i think he fully expects them to sell more cars than they sold. i think these numbers should be disconcerting to tesla shareholders. vonnie: yet the stock is up 4%. -- one the shareholders of them told me yesterday that this is not a stock it is a cold. the cold believes in -- cult believes in things even if the data proves it not true. if you look at the numbers, the is one ofles, which the two most successful products they have, are coming down. they are not only down sequentially a quarter of a sequentially quarter after quarter, but they continue to be down. it is a year-over-year change of decline, and that is bad news. on a sequential basis, you can
see a more clear trend. more often than not, sales are declining despite the massive push they put on in the third quarter two push vehicles out the door. to pay their vendors less -- the numbers look a little bit better. however, the delivery numbers from last night show the model s is in less demand than ever before. look at those figures, and there has to be a group of people thinking -- i could spend however much money i want on it model s, or i could wait for the model three. how sound is my theory? fair to say it is less successful than ever before, but the sales growth figures are getting worse with the model s. the numbers are getting worse year after year for the model s. furthermore, the promise is always in the future. the benefit is was going to come for this company as a does for
many growth companies. companies were the dreams are more inspiring than the actual numbers. what we see from this is that part of the hope is that this car will ship in 2017 -- this model three-car. that it will also be $35,000 or less. they have already put this back into the second half, and now some analysts are saying they may not be any cars in 2017 as far as the model three. customer deposits are there in size. it is one of the most important ways of funding the company. whatever the cart fundamentally looks like when it is done on how much it is going to cost, and how much of those deposits are going to be pulled back, we do not know what those numbers are going to be like. the capacity it would take for tesla to develop these cars -- the excuses they gave last night with the same they give in the first quarter. they claimed they had production problems. three could be
we are joined now by michael mckee. will we? michael: clarity might be too strong of a word. the markets expect the fed to take a pause. willuestion is how long that cause be. the focus will be on what they say about how much donald trump's election and the uncertainty about his fiscal policy is going to delay any action. if there are specific comments about if they might want to wait before they consider another increase. it is hard to know based on the economy we see now how long they would wait, because ends are coming in stronger than we had expected. we got some data yesterday that raised a few eyebrows. we saw a big jump in inflation. the fed goal in 2017 will be to watch inflation. you can see the chart on the bloomberg of the pce. 1.65% -- core rate at
the headline rate at 1.37% and moving up. the headline rate is what they base their target on of 2%. that continues to move higher, and mathematically it could because oil prices are higher, and we may see some pressure on the fed to move. david: there was a news conference to follow. what are you going to be looking from thewas missing commentary that could be in the minutes today? >> there was a reference she made about some members of the committee incorporating views into their economic forecast. we assume that the will be an additional explanation for that. everyone wants to know what individual members think of inflation. the mantra for the past three years is that they expect inflation to gradually move up to 2%. oil prices have moved up after that opec deal. we also have the trump-anomic idea that we should seek more
market growth that should be inflationary. are we going to see that? vonnie: janet yellen does not seem to know. at least according to our press conference, she does not know any more than the rest of us. >> her suggestion is that we might not need many -- much more stimulus. it will be interesting to see how much it relates back to that debate. vonnie: that >> three of them have not voted, so we do not know. vonnie: michael mckee, they do for joining us. david: up next, 2016 was a good year for the big banks. will the rally continue? this is bloomberg. ♪
chandra has the let's get you first word news. emma chandra has that. vice president elect mike pence says that president obama's signature health care law has taken a toll on the american people. hasrnor pence: obamacare worked hardship on american families and businesses in a very simple conclusion, the american people have sent new leadership here because obamacare has failed and has been rejected by the american people. emma: president obama was also on capitol hill today discussing the congressional democrats ways to defend the aca. according to press secretary josh earnest, president obama said he is envious of their fight ahead. president-elect donald trump has ed run the securities and exchange commission. he is a partner at sullivan and cromwell. with the latest trump pick
deep ties to wall street. much of his work involves mergers and acquisitions. found aviv, a court has man guilty of manslaughter. the trial lasted several months and divided the country. and russia and the philippines are in discussions about increasing military cooperation. that is after repeated threats erte to scaledut back the u.s. troop presence in the region. for the first time during his docme, 2 russian navy ships ked on a goodwill visit. russia says it is ready to supply planes and artillery . global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am emma chandra. mrs. bloomberg. vonnie -- this is bloomberg. vonnie: thank you for that.
a rally occurred despite 2017 estimate expectations declining during the year. our next guest says large-cap bank stocks will continue to outperform the market in the new year. joining us is the equity research analyst for barclays. pretty impressive streak, jason. you say things will improve again further in the new year. what is that based upon, regulatory reform or bank reform? jason: several factors. loans continue to grow and margins which have been under pressure for many years now are by both theexpand head resumes and the yield curve on the back part of last year. you are starting to see improved operating leverage as banks work through all the new rules and regulations over the last several years. the banks continue to buy back their stocks. i think looking out, further
upside to be possible to the new factorsof these postelection like the potential for lower corporate tax rates or more relaxed financial regulations work their way through the system. david: you bring up financial regulation. we had the announcement that donald trump has chosen jay clayton for the sec. a partner at a firm in new york. what we know about him, what are your thoughts on him, what that might mean for the banking sector? jason: in general, if you look at a lot of the appointments to date, several have worked at banks or have banking experience. here is yet another appointment with the knowledge of the financial services industry. with respect to the banks in general on the markets, we think that is quite positive. vonnie: we were talking earlier rallying.s doesif the uncertainty
what is the answer to these running dodd-frank or the -- what is the uncertainty surrounding dodd-frank and the other regulatory reforms? what if we are not sure what will happen in 2017? jason: that is a piece of it, but interest-rate are higher. the fed hike in december. loans are expanding. a lot of the policies out there are programs -- pro growth. least therehe very is no new regulation. we are now owns 90% of the way through -- almost 90% of the way through implement dodd-frank. he will have the heads of the headal reserve, sec, cftc resigned yesterday. after many years of getting harder for the industry, it will get a little more relaxed.
david: how hard is it to be in the moment right now? when you are looking at what is possible and what could change in 2017, later in the month, perhaps, when congress gets to work on all of these things that donald trump has talked about, do fourth-quarter earnings matter, for instance? jason: you know, certainly it matters. fourth quarter for the banks tends to be a cleanup quarter. more importantly, january earnings calls, the outlook for 2017, the difference going into 2017 that you haven't had the last several years is the improved interest-rate backdrop. i think bunnies -- companies will be shy talking about lower corporate tax rates. until we get increased clarity on how those will play out. vonnie: what do you like in terms of the big eight? jason: we're generally
constructed on the group in general. the stocks tend to move in tandem print when things get dicey, you see more differentiation. the money center banks in general should do well against the current backup. if we look at regulatory reform -- sorry to keep harping on it here -- do the banks have reason to complain about regulations or have they on a more outside basis smaller and medium-sized banks? have been clearly all impacted by regulation. they have been more regulated in terms of stricter capital requirements. initially the chances of some of these thresholds getting increased and providing some relief for the midsized banks, and some of what usc already with the fed does what you have seen on -- some of what you have seen already with the fed relaxing stress test requirements.
having a bigger impact on the bigger banks, it is not so much getting relaxed. somethingregulation, the industry has been battling wit. vonnie: if you were to buy an index in banks, what would it be? jason: citigroup, jpmorgan, goldman sachs, etc. vonnie: what about the regionals? any particular you like? do you see any mergers or consolidations this year? inon: the number of banks u.s. has the last 15 or 20 years will halve again. you don't need 6000 banks in the u.s. the recent backup in stock prices could actually pushed some of these sellers somewhat reluctant to examine opportunities to look to do that. out, youooking certainly see the secular trend.
be weekly sales data from redbook. the year-over-year change on a weekly basis. here is what it looks like throughout the past year. surge at the end of the year in gains. last week's gains, 2.2% over the prior year. earlier the number was 2.4%. redbook came out and corrected it. it looks like the market is treating this is pretty good news. look at specialty retailers, for example. this index of 1.5% on the day. you have the broad data and then the specific retailers with specialties that are doing well. we have abercrombie & fitch being upgraded. marking it up from underperform, where it was previously. the company's estimates have come in a little bit. casino retail outperforming, as
gap. as watching these three retailers pretty closely. looker chart i'm taking a at, one i have consistently looked at, fascinating one, this has to do with where the retail traffic is going. the white line is retail traffic in malls. as we know, bricks and mortar has been on the decline. this line is what the government refers to as direct sales. this includes online and mail orders, a much smaller portion. a lot of the gain has to do with amazon, online retailers. that is way up as we see traditional traffic declining. overall there were enough sales to lift numbers for the holiday season. vonnie: truly, that is fascinating, and a fascinating reaction in the market. presidentican
confirms the nation's top diplomat and foreign minister, a move designed to help the government do with incoming u.s. president donald trump. he says the nation will work with the trump administration from day one and that mexico will protect the rights of people in the u.s. is the bloomberg economy and government reported. let's start by talking about the role he is going to have here. pena nieto announced minutes ago, he will work from day one with the donald trump administration and speed up the negotiations. 20,e get closer to january the minister, who has a whole history of dealing with the is being put team, forth as the person who will deal directly and publicly with trump to create better understanding between the
countries than what we have seen so far. vonnie: i'm sure there has been a lot of conversation in the press in mexico pena nieto should deal with donald trump it dealingthe best way of with him in the conciliatory tone? a: the logic here, he was the finance minister but resigned precisely because of his help in fighting trump -- inviting trump to come to mexico, yes the best sources within the -- he has the best sources within the trump administration come he is best positioned to negotiate well with the administration. on the public side, that logic: deaf ears because there is a lot of anger about certain actions that he has taken, including his 's visit to mexico.
he is seen as having risen public debt in mexico. recently there was a 20% increase in gasoline prices that the public, again, is blaming on energy reform, which is his baby. vonnie: wheelhouse. david: the prism through which we've been looking at this relationship is the automakers. the information about ford and gm could what has the responsibility to that, the news that ford is going to scale back and not go with a factory in mexico? power of mexicans reacted to the news -- how have mexicans reacted to the news? nacha: there is a sense of panic. the peso plunged to a new low. the sense is what will happen next when gm is also being
threatened by trump on twitter? which auto company will come next in announcing the cancellation of investment? david: thank you very much. bloomberg news economy and government reporter based in mexico city. vonnie: let's go to toronto, where mark bunting has the latest economic data. overall, how do home prices fair? vancouver has been a hot market the past several years. some say too hot. on the surface of the numbers, still very strong year-over-year. of are looking at prices over 18% from the previous year .o the average price of $9,000 that was the third highest price levels on record. the other 2 years were 2015 and 2005. demand outstripping supply.
there were a few new listings. there was lack of supply. , you are looking at on the service pretty strong in 2016. david: first half strong, second-half kind of week. would you characterize this as a tale of two markets? mark: exactly. the market was frontloaded last year. it still only fell by 5.6%. first six months of the year, red hot market. then the foreign homebuyers tax was brought in just as the market seemed to be rolling over. in december, the most recent by 20% monthsales over month and then year-over-year they were down by 39%. the real estate board of vancouver says the homebuyers tax is not fully understood in the marketplace. vonnie: we were just thinking about mexico to our reporter in
mexico. canada is another trade partner. the prime minister had a message for the 115th congress today. what did he said? mark: he stood side-by-side with the canadian ambassador to the united states. they put this on youtube on december 20 and it got tweeted by the embassy. they are playing nice and saying the right things, that they are looking forward to working with the new administration, that we remain her largest. partner. we grew up together, we have shared challenges. they are saying nice things but one wonders how long this can last. a lot of canadians are wondering when does president-elect trump turned his attention to us and nafta and with the u.s. to reopen that. prime minister trudeau says he is open to talks so we will see. vonnie: well, he will definitely
be diplomatic, let's put it that way. our thanks to mark bunting in the bloomberg canada bureau. david: time for the biggest business stories in the news right now. a start with cbs having inked deal to be on the roster when the hulu live tv service launches this year. it will have all coverage of sporting events like nfl games. cbs has yet to join at&t and dish streaming services but has signed on for unreleased bundles for hulu and you too. for drug has been -- volkswagen has been ordered to recall vehicle following outrage from consumer groups in europe because it is not offered to replace affected cars the weight has been the united states. the company says it will appeal to our whole ocean liners are offered -- carnival ocean liners are adding a personalized touch.
technologyg wearable that gives staff detailed information about passengers, like their favorite drinks or birthdays. carnival says it will spend hundreds of millions of dollars developing the technology and they hope it results in more returning customers and higher ticket prices. that is your business flash update. vonnie: coming up, why donald trump needs the establishment before draining the swamp, and how he made balance the potential conflict. this is bloomberg. ♪
peter quite. like one of the big contest will be between the budget hawks who put high priority on tricking the budget deficit and balancing the budget and paying down the national debt. we have heard that from trump and his followers. we also have people who say that we have to make america great again and that requires spending and tax cuts. very different message. some of the independent budget analysts who have looked at this 's plans, ifat trump you take them at their word, will create the biggest budget deficits as a share of gdp in history adjusted for where we are in the business cycle. ash coming in the first 100 days on the issue. oliver: who is on the other side? ryan?paul
we know he has been an important part of the budget plan. who are the new players who might rear their heads? in early 2015 the new caucus is formed in the house, the freedom caucus. that is on the right end of the spectrum in the house. it's singular purpose is to crack down on deficit spending. carol: extreme deficit hawks. peter: these are people willing to go to the mat and shut down the government necessary to prevent overspending. what is so ironic is in the last mulvaney, founder of that caucus, has been nominated as president-elect trump's office of management and budget chief. he is the guy who, you want to do this policy, here is what it means. and maybe you shouldn't do this. whor: cap alice rivlin, started the congressional budget
ago,e decades sees the job is not being the mechanical balancer, but policy. lvaney going to stick to agenda?dom caucus which, if so, would put him in conflict with people in the pentagon and other parts of the administration, or the tax e moves would raise budget deficits. or will he go along with that agenda and abandon the freedom caucus? 'siver: it seems like trump liaison is somebody who potentially leaking from the other side, maybe there is a bridge to be built. peter: we don't know. you can imagine a positive outcome for this, but stepping high trump seems to have a tolerance for conflict. not just with outsiders -- oliver: delicate way to put it.
peter: welcoming it into the white house almost. david: you can read the story in the latest issue of "bloomberg businessweek was quote and hear from the reporters and editors every saturday and sunday. vonnie: we will check the markets before we move it onto the next show. dow jones industrial average up to 19,925. s&p is 2,269 now. coming up, republican commerce and jim jordan of ohio will tell us about the republican plan to repeal obama care. this is bloomberg. ♪
of the minutes, some pretty good news on the day here. thet of green across screen, everything from small caps to the s&p 500 to the dow. still not at that 20,000. gina -- down to it all boils down to two ideas. upside risk and uncertainty. donald has promised tax cuts and infrastructure spending. the fed participants said expansionary fiscal policies could risk growth got their current estimate. a risk ofthere is sizable undershooting of the longer run unemployment rate. pacewould force a faster of rate hikes to keep inflation in check. his upside risks are limited by huge uncertainty over when
-- officials continue to say that a gradual pace of rate increases will likely be appropriate. participants emphasized that there was a need to fit the adjustment path as economic conditions evolve. the fed policymakers cited a few downside risks in the minutes. recent appreciation of the dollar and financial vulnerabilities in foreign economies -- they talk about and improving business outlook from a backdrop of a stronger labor market and rising inflation. jeanna smialek mistake with us. we want to get a check on how markets are reacting to this did -- jeanna smialek, stay with us. we want to get a check on how markets are reacting to this.
the dollar is one area on focused on because it had been weaker. let's check in with julie hyman. julie: if you look at overall averages, we are holding steady where we were before the minutes came out. if you look at stocks throughout the day, they've been holding steady with these gains. half a percent for the s&p and .8% for the nasdaq. not a lot of movement around that. let's look at the bond market as well. muted, steady from where we have been throughout the day. the 30 year yield is unchanged. the 10 year yield had been up by two basis point earlier in the day. still selling in the bond market. the dollar bears watching as well. dollar is showing some weakness today.
it is down .5%. gold futures have been strengthening, up another .4%. this is what we are seeing thus far if you look across assets. not a huge reaction here. pretty much in line with what we've been seeing. in terms of dollar strength, that is something that that may -- the fed may be paying more attention to. there is a measure the fed uses, the u.s. trade weighted broad dollar index. it had been trading in a range, but we've come out of that range here as it peaked up there. even if we don't get a lot of commentary about the dollar in these minutes, that is something to watch up or. -- watch out for in 2017. reaction, let's mckee and still
with us from the federal reserve is jeanna smialek. i see you reading through the minutes here. markets don't seem to have a big reaction. what about for the fed? mike: the discussion -- it was a lengthy discussion about what might happen under the fiscal policies of donald trump. there's a lot of uncertainty. my eye is their discussion of labor markets and the fact that a number of people think they could undershoot the fed target of full implement. there is a line in here that says if that were to happen, many participants have emphasized that timely adjustments to monetary policy could be required to achieve and maintain the committee's maximum employment and inflation objectives. we are forecasting three rate increases spread out over the are. if the economy continues to run hot or get stronger and labor markets get even stronger, we
might be forced to move sooner and faster than the markets anticipate. scarlet: that is the labor market angle. that has two mandates. keeping that under control and you've also got unemployment -- full employment. inflationeds to get to that 2% target. and keep it there. core cpi at 2.1%. pc not at that 2% level. above that 2% level at one time. what happened back then and how do we get back to that level? mike: oil prices collapsed and dragged down the major indicators. if you look at the chart, you can see that we had a drop in oil prices and therefore inflation about a year ago. it bottomed out and is now going up. we will see inflation rise.
inflationadditional as companies start to raise prices to maybe get workers raises because the labor market is getting tighter? we saw that yesterday in the isn .anufacturing report oliver: i want to show the dots here. this is what we are looking at for 2017. 2.25,rget rate is about as low as about one. ,hen you look at the minutes they did not mention donald trump by name, but they are clearly watching expansionary policy. att do we need to be gauging the start of next year to figure out whether or not these will move up or stay where they are? jeanna: this will be a game of
watching what fed officials are actually saying when they are on the speaking trail. they did not give us a lot of detail about what kind of policies they would you as expansionary or contractionary. the they did tell us policies could check out either way. on net, they think they see upside risk. from janet yellen and john williams and stanley fischer, a real clear signal of what policies you guys view as potentially good for the economy and easy the chances that those policies are coming down the pipeline? when will we see these effects? it will be a wait and see for a while here. scarlet: would you say this is more hawkish, less hawkish than what we were expecting? mike: it depends on what your expectations were, but it leans to the hawkish side. conference --s janet yellen's news conference
sounded a bit hawkish. they cannot say what is going to happen. they are extrapolating and saying if we get the kind of fiscal stimulus they are talking about, we might have to be more aggressive in raising rates and lean against that. inflation discussion is an interesting one. talk aboutlot of inflation rising quickly but also the impact of the strong dollar. that might hold down inflation. there's a lot of concern about where we go from here. a lot of uncertainty in these minutes. oliver: it seems like the tools at the end of the day stayed the same. they might be watching for upside risk rather than downside risk. ultimately come a getting to the level they want, they will be using the same mechanisms. as we are at this low level of interest rates, they need a way to force interest rates higher because there are ways they can go below the federal funds target rate. they've been using this system
of the repo rate at the bottom and the interest on's reserves at the top and that is likely to continue. does the economy get to the point where it start selling off any of their portfolio? they say they will wait and let it mature. if they need to adjust monetary policy, that is one reason they don't want to sell it off right away. that is another tool they have. oliver: jeanna smialek and mike mckee. great analysis on those minutes. scarlet: on friday, don't miss mike's interview with robert kaplan. let's get you to the first word news. courtney: president-elect donald trump is quoting julianna ange.ez -- julian ass
--tweeted the tweet came after he cast doubt on u.s. intelligence re-think on russian hacking. he is expected to receive it this week. the french president will candidates as the protectionist economic policy would be good for employment in france. trump's success in pushing forward to keep jobs in the u.s. she is looking to use trump's as a sign that her platform can deliver benefits. turkey is not releasing the name and videosen -- healthy of the prime suspect in the killing. in the video, he is seen walking around istanbul. police have detained 20 people. they are described as islamic state militants.
britain's former ambassador to brussels has been appointed the u.k.'s new ambassador to the european union. for ivan rodriguez who unexpectedly resigned yesterday. aying he is leaving so successor can be appointed before the u.k. invokes article 50. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: coming up, the fight over obamacare's future take center stage on capitol hill. president obama tries to save his signature law while republicans promise a quick repeal. it will speak with jim jordan of ohio. this is bloomberg. ♪
>> there will be a focus on military spending, rebuilding our military. the president-elect will be naming his choice for the supreme court of the united states. today to members of the senate, the first order of business is to repeal and replace obamacare. obamacare has failed. ae american people have sent decisive message to washington, d.c. that they want obamacare to withpealed and replaced health care reform that will lower the cost of health insurance without growing the size of government. we're working closely with the senate leadership on a budget resolution that will begin the process of appealing obamacare and also create a framework for replacement going forward. we are also working on a series of executive orders that the president elect will put into
effect to ensure that there is an orderly transition during the period after we repeal obamacare to a market-based health care economy in america. obamacare has failed. haveromises of obamacare all been proven to be false. i was here in a different capacity in march of 2010 and we were told if you like your doctor, you can keep them. not true. if you like your health insurance, you can keep it. not true. we were told the health insurance costs would go down. not true. now, the american people are laboring under extraordinary .ncreases in premiums the average deductible or a bronze policy today is $12,000. american families have seen an increase in premium of $5,000 in this year, the average premium
increase on families has been 25%. over 100% in some american states. that all comes to an end when we sent into motion an effort to repeal and replace obamacare. can assure you and the american people is the president-elect is a man of his word. he campaigned on a broad range of policies to make america great again. to have america prospering again, standing tall in the world again, honoring our most cherished constitutional principles. the first order of business -- i'm grateful for the leaders of the house in the senate, to keep our word to the american people. to repeal and replace obamacare. with health care reforms that will focus on lowering the cost of health insurance without growing the size of government. the policies we will be developing in the months ahead. the president-elect has supported efforts, popularly
advancing the congress in years past to health savings accounts, allowing americans to purchase insurance across state lines -- the architecture of the replacement of obamacare will come together as it should through the legislative process in the weeks and months ahead. voted foran people change in november. the president-elect and i working with the leaders of the house and senate are determined to keep our promise to the american people. but all begins with repealing and replacing the failed policy of obamacare. that was vice president elect mike pence speaking after meeting with republican senators on the repeal of obamacare. earlier, he met with house republicans. jordan of ohio joins us now from capitol hill. he is the chairman of the subcommittee on health care, benefits and administrative
that's good to speak with you. vice president elect to sing repealing and replacing obamacare is the goal here. can you give us the timeline for doing so? rep. jordan: as quick as possible. that's what the american people want. everything we were told about the legislation when it passed false. i believe and the american people strongly believe health care will be better and less expensive when obamacare is gone. that is what we have to focus on, getting rid of this law and then putting in place a model and a concept and principles that are patient and doctor centered. scarlet: what is the timeline for that replacement plan? rep. jordan: as quickly as possible. you will see the repeal done within the next month.
early in theg trump administration. repeal it, get rid of it, every single bit of it and then put in place those concepts that vice .resident pence spoke about a focus on patients and doctors and families, not a focus on washington. about: will you go repealing obamacare before you have something specific lined up to replace it? rep. jordan: we just had an election. this was a huge issue. when have you ever seen a law with supposedly so many benefits to americans after six years still this widely unpopular? now and then put in
place those principles that will empower people and families and place soput those in we can have a market oriented, consumer-oriented, dr. oriented health care system. -- doctor oriented health care system. that is what you will see get accomplished because that is what we told the voters we are going to do. he said the original obamacare passed without a single republican vote -- how many votes do you want from democrats to pass this new legislation? rep. jordan: that is up to them. i want to do the right thing. re: looking for bipartisan support? rep. jordan: hopefully they will see the light and do what needs to be done to help the families across this country. what weis to do
told voters we were going to do. we are going to do the right thing regardless. we will focus on that regardless. that is our job because that is what we told the voters we were going to do. scarlet: donald trump had mentioned early on that he did want to keep certain parts of the affordable care act. he mentioned the idea of children staying under the parents' insurance plan until 26 and keeping the coverage for pre-existing conditions. why are these parts worth preserving? the one big concern families have is if you have something catastrophic happened to your family and then you have a change in employment or circumstances, you need coverage. that is what concerns families the most. you want to know that you have coverage. that's why this pre-existing condition issue is so important. i also think the marketplace will deal with it.
the marketplace will adjust to that. if the families want to keep their plans longer, there will be a product in the marketplace. let's focus on a market, patient centered medical banks entered, family centered, consumer focused model. doctor centered, family centered, consumer focused model. now, we have all these mandates from washington, d.c. oliver: what about the possibility of having a modified version of obamacare? it seems like it could be a fairly receptive sort of thing to do across the aisle. i think a couple things conservatives are focused obamacare,ng rid of every single bit of it. and doing it sooner than later.
it done this congress, let's get it done as soon as possible and let's make sure we repeal the entirety of the law. as i said from the start, i think health care will be better. i think health care will cost less when obamacare is gone. scarlet: some observers have said it would be an easy political victory for the republicans to make modest tweaks to the existing health care law will that premiums stabilize over time and then take credit for fixing it. what would you think of that kind of approach? rep. jordan: we have to do what we told the voters we were going to do. we told him we were going to repeal all of obamacare. that is why they elected us. job in congress way to complicated. our job is simple. do what you told the voters you were going to do. we have to focus on repealing it
all and then putting in place those principles i describe several times. oliver: you mentioned you want to get this done as soon as possible. is there any concern that people will be stuck in a limbo if there is not a complete cumbrian to plan from the republicans available at the point of removal of obamacare? rep. jordan: you heard the speaker earlier today. you heard vice president elect pence. sure people don't get the rug pulled out from under them. what i don't want up to turn into is some three-for your face. -- 3-4 year phase. law wass passed this not one single republican vote, they screwed up the health care market. it is a mess, it has driven premiums and adoptable's up. --s the dockable's up
premiums and deductibles up. dorlet: a pretty long to list, repeal it and fix it and do it as quickly as possible. clearly, there will be a lot of debate within the republican party about the details. of the give us a sense principal debate within the republican party right now and it comes to dismantling and replacing obamacare? rep. jordan: the main debate could be on how quickly we get it done. debate thee a big focus is make it patient centered. right now, it is washington centered. it is bureaucrats at hhs dictating from on high with false promises given six years ago when this thing past about how you can keep her doctor in your plan -- your doctor and
your plan. created have already gone bankrupt. everything we were told about this law turned out to be a disaster. now, democrats say you republicans will screw things up when you change it. it's already been a complete mess. we have to fix it as soon as we can. scarlet: what is the number one thing you will be doing next when it comes to repealing obamacare? give us the next tactical step rep. jordan: the first step is what happened today in the senate. we will pass the reconciliation package and then get the instructions from the committees , coming together with the repeal package itself, similar to what was passed a year ago when we did this and president obama be towed it. -- president obama
complex today. we are seeing a divergence in crude oil and natural gas. crude has been moving higher as opec nations start to cut production as per their plan from late last year. natural gas going lower because of warmer weather in the northeast. we see the split between the two. weekly inventories on oil coming out tomorrow because of the holiday shortened week. 10% -- a lot of volatility over that period. it has been coming down because of this unseasonably warm weather that we've been watching. when you look at energy stocks and oil prices, you've seen a falling correlation here. the one-day change in energy stocks, the s&p energy index in blue and oil prices in yellow. down here, you can see the
correlation has been declining, especially as you look over the past week. this is as we've seen this natural gas prices fall within the energy index. a quick look at gasoline as well , gasoline prices at the pump here past the holiday season as oil prices go higher, we've got gasoline prices trending a bit higher as well. as this peak driving season of the winter starts to calm down. oliver: the new york investment committee was rocked just before christmas when prosecutors withted mark northlake securities fraud -- and charged him with securities fraud. investors of $1 billion -- how did the government miss it?
we talked about this the other day. how come the sec did not catch on before? we have been on it before because you've been reporting about it. >> i've been investigating payday lenders and some 50 penny stocks. bond was a loan from this called platinum partners -- i got a copy of its returns and told that they had the best returns of any hedge funds. no down years for 12 years in a row and i thought, what is up with that? scarlet: shades of bernie madoff. nordlihe manager, mark cht said i may go into some gray areas but it's always to get the best risk-adjusted returns for my investors. he defended his returns were as good as he said. scarlet: what is the founder's
back story? he is not your typical wall street guy come is he? zeke: he is the son of a nymex commodities trader. he went on to trade on the commodities exchange himself. i've spoken to people who traded in the pit with him. he is a pretty respected trader. in 2003, he started this hedge fund with money from another man hooverfeld --ove they raised a lot of money from prominent jewish families in york. they got involved with worthy philanthropies and met people that way. ended up paying someone off and that's how investigator started getting wind of what was going on. zeke: the first sign that something was wrong was hooverfeld got arrested in this
probe into new york city .orruption this was not a probe into platinum. lookinghad a cooperator ,nto the blah zero -- deblasio he was wearing a wire. he agreed to pay off a union pension moneyt put into platinum. white is a need to bribe people to get them to invest that's why that's why do they need to bribe people to get them to invest? scarlet: it took a while for any regulator to catch up with this. why? zeke: it was not just a great return -- their name kept coming up in these really sketchy situations. inre was a rogue trader montreal they were involved with. a big ponzi scheme in florida. did not conduct
a thorough on-site exam until 2015. post-madoff't this era going to be marked by new tripwires -- is this another blunder on their part? zeke: they said after bernie madoff that they would look at if anyone firms -- met that definition, it was these guys. to make him i'm surprised they had not looked into it earlier. scarlet: a lot of sketchy details here. yet, i wonder if there's anything in the way to fund operated that went exactly the way it should. book?ere anything by the zeke: this definitely was not a bernie madoff type of ponzi scheme. they were making all kinds of investments. some of them worked out well.
they invested in an electricity retailer, a company that sells electricity to individuals. they were able to resell that at a profit. scarlet: that was legit? zeke: as far as i can tell. oliver: great reporting, zeke faux. oliver: president-elect donald trump picking a long-term partner to head the fec. he said jay clayton is a highly talented expert and will ensure that our financial institutions can thrive and create jobs while playing by the rules. joining us with more is ben bain . that is a big wall street law firm.
it sounds like donald trump picked the ultimate wall street insider. ben: there's no doubt he thrownly has wall street his career, representing the biggest players, goldman sachs, private equity firms. -- throughout his career. this pick is already drawing some criticism from the left. democratic lawmakers have come out foreshadowing what could be a bit of a contentious confirmation process. republicans have the majority in the senate. is someonethis pick who knows the industry very well and has represented some of the biggest players in the industry, had done some ipo work for the biggest deals ever. alibaba, for example. you are talking about someone decade spent well over a
representing the firms that ultimately are under the regulatory oversight of the sec. give us some background on what type of people typically have this role. we were familiar with mary jo is it standard to find somebody this embedded in wall street? it is not completely unusual. mary jo white also had a career as a corporate lawyer. in addition to being a prosecutor. have oftenhe left criticized the sec for that. they said the financial regulators in general needs to be tougher on wall street firms. donald trump even during the campaign made several comments critical of wall street.
where it's notn completely unusual to see someone who is an industry insider and so to speak, but andn the political climate the rhetoric we heard from both hillary clinton and donald trump during the campaign, the pic is someone a lot of people are trying to figure out what it means for the bigger promises the trump transition team has made. be at dismantling the dodd-frank 2010 response to the financial crisis, changing roles -- it will be an interesting couple of months as we move our way towards a confirmation process. senate democratic leader chuck schumer is speaking to reporters on capitol hill, saying the repeal of the affordable care act will lead to chaos. republicans are planning a full-scale assault on health care. pick for aout a this iscourt justice --
oliver: this is "bloomberg markets." scarlet: time for the bloomberg business flash. seeking $5.5 billion to complete its potential deal for yahoo! the loan is being arranged by bank of america merrill lynch. last month, verizon one european that approval for purchase. credit suisse trying to block an attempt by jeffries to lure away bankers. five of the bankers have agreed to stay on.
it is the second time in less than a year that jeffries has tried to approach senior managers from the swiss bank. shares of weight watchers rising the most in more than the year. that is thanks to a new ad campaign featuring oprah winfrey. oprah winfrey announced plans to join the board back in 2015. is your business flash update. oliver: chinese box office sales slowed last year to the weakest pace since 2008. imax is still think opportunities after signing a 150 theater deal last summer. if china ishe ceo imax's biggest market. -- in termse soon of the number of screens, china just past north america for us. >> box office sales did slow
last year. chinese consumers are becoming more and more picky about their movies. does that were you? >> in u.s. dollars, it looks like china -- the chinese box office was up a little bit last year. -- 8% was was lost lost in the exchange rate, another 5% or 6% was lost to ticket prices. but partrt picky, currency, things that did not have to do with the movie business. aching movies is like picking stocks. good luck. -- picking movies is like picking stocks. as china matures, it becomes more of a real film consumer market. >> like us. >> you cannot just put anything
on the screen and see how it does. as you look into 2017, the film slate looks really good, especially for us. we are in the blockbuster business. next year mother's a lot of blockbusters coming up. guardians of the galaxy, fast and furious eight, beauty and the beast from disney, transformers, the next star wars , episode eight. how do you think wrote one is going to do for imax in china -- e one is going to do for imax in china? >> we've done something around 11% in the u.s. and equally well in a lot of other countries. we will index well in china. how the movie doesn't china will be interesting to see. the last star wars didn't do as well as the u.s. because people
in china were not as aware of the property. rogue one has done an exceptional job investing in marketing. on a relative basis, it will do well. overeal question is tiome, as disney keeps educating people -- >> do you get concerned that you had rapid growth in china, a lot musso low hanging fruit so to speak, where the novelty fans of youral experience have already been taken and it will be harder to get new people into your theaters? >> i don't think so. a lot of the films at the end of the year this year -- dr. strange and fantastic beasts did
really well from an indexing point of view. earlier in the air come indexing was down. year, indexinghe was down. >> what about more deals between you and other chinese companies? >> we are in business with wanda and 31 exhibitors in china. we certainly have a wide scope. we are in a joint venture with ecl for imax at home. was an investor in imax china, he still owns a small part of it. on the film side, we are in group.s with china film i think there will be more, but we are in a good position. we also just launched a china
film fund. our partners are many of the companies i just mentioned. there are other chinese companies in it as well. we launched a venture capital fund in china. we have other partners. we are pretty ubiquitous in the entertainment space. >> stepping away from china, if you take a look at this chart on the bloomberg, you see that imax's revenue from asia surpassed that of the u.s. for what otherime -- asian movie market stand out to you and why? >> japan has been very strong for us. our brand has gotten recognition as we've grown up base -- our theater base. in 2016.record year malaysia is a very good market for us. in singapore, we're adding theaters. taiwan, the philippines, korea,
we have 20 theaters. it is a very robust market that is growing nicely. india historically has been a little slow because real estate development has been a little slow and there's been concerned about consumer uptake. we have a lot of things and discussion. in 2017, we may see more progress in india than we had before. oliver: that was imax's ceo speaking on "daybreak asia." scarlet: take a look at how the 10 year treasury reacted you are looking at the yield. we saw a big leg down and then another right back up. on the day, little changed. this is bloomberg. ♪
oliver: this is "bloomberg markets." scarlet: earlier this hour, the fomc released the minutes from its december meeting. officials endorsed a gradual rate increase as upside risks are considered. fed officials also concerned they may have to quicken the pace of rate hikes to head off higher inflation. here to discuss this further is joe weisenthal. you had a chance to look through the minutes. they were widely anticipated, mainly because they documented the second rate increase inside of a decade. there is so much uncertainty that that supersedes everything else. thatmatt has a chart tracks the number of times the word "uncertainty" is used in the minutes. there was a spike this time i'm in the wake of that election.
this time, in the wake of the election. a lot of uncertainty, a lot of mention of fiscal stuff. death in herand press conference was disinclined to talk about the impact of fiscal policy. yellen in her press conference was disinclined to talk about the impact of fiscal policy. that came up in conversation, but how that ultimately plays out the we will see. interesting to note that fed officials do see a reasonable chance of unemployment undershoot. a tightening of the labor market . oliver: wage inflation will pick up faster than they anticipated? there isn't much reaction at all to this. where you do see a bit is the short end of the curve remaining
firm while long and yields are falling. nd yields are falling. the story has been the pre-and post trump era. is that the big change here? joe: for so long, most of the concern was about inflation falling to the downside, a lot more concerned about disinflation. it feels like we are in a new era in terms of the risks being focused on the upside -- i characterize it as the post post financial crisis here. oliver: is it easier for them to pump the brakes on -- joe: the view is it is well
understood how you fight inflation. though it is painful, you have to much inflation, you raise rates, you have two little inflation, you can cut rates -- if you are at the zero lower bound, difficult where they are. they would much rather deal with inflation. nobody really knows how to stimulate policy at the zero lower bound. forward guidance very much in doubt. they are very relieved to be thinking about the problem. scarlet: the stronger dollar has to be on their minds as well. as a headwind for the economy going forward. i'm surprised that it was not talked about further. depends on why the dollar is getting stronger. the dollar in isolation could be tightening. beancial conditions could
slowing the economy. if the stronger dollar is a result of better business conditions and a booming economy and higher yields, it more represents the kind of stuff they want to see and is not as much of a threat. back in 30e will be minutes. thank you somewhat. on friday, don't miss bloomberg's mike mckee speaking with dallas fed president robert kaplan. he is a voting member of the fed and will be joining us from the american economic association's annual meeting in chicago. this is bloomberg. ♪
oliver: we are alive from bloomberg world headquarters in new york for the next hour. less covering stories in chicago and jim -- officials were focused on the impact of fiscal stimulus during the december meeting when many started to worry the central bank might be forced to pick up the pace for rate hikes in 2017. erasing an earlier drop an airline stocks are still flying high what are they about to see some turbulence? a slew of airline companies just downgraded including united continental. how long will bank stocks continue to thrive? we will hear from thomas, who sees more room to run for the u.s. midsize firms. we are hour from the close of trading.
let's get a check on what is going on after the fed minutes. scarlet: really not much change here. we do not tend to see a lot of market reaction particularly in somethingess particularly dramatic comes out of them. all three major averages are trading higher for the second straight session, continuing to bounce back from the last trading week of the year in which we saw declines. still creeping ever closer to 20,000, but not quite there. nearing like we are records for major averages. in terms of what is leading, interesting in material shares, which are seeing big gains. are individual members minors within the material index higher today. consumer discretionary stocks are doing quite well on the back positive retail numbers. real estate shares also doing well, interestingly, today. energy and telecom shares are down.
automakers are within the consumer discretionary group and are trading higher today as well salesgot the december numbers, leading auto sales in the u.s. to be on pace to be at a record for 2000 13, just about 17.5 plan, or perhaps a little bit higher, number of vehicles sold in the u.s. this year. gm coming in with the biggest 10%.ase of 10 p.m. -- i mentioned retail as well as the rally in consumer discretionary. abercrombie & fitch leading the pack after the stock was upgraded to market perform from underperform. supporting the december same-store sales tomorrow. these companies are likely benefiting as well after the report the weekly sales in the u.s. up 2.2% in the last week of the year-over-year earlier.
i mentioned, if we will see a reaction to the fed minutes, it will perhaps be in the bond market. we did see a decrease in the yield and then bouncing around a little bit. the yield right now is unchanged although earlier we were seeing an increase of a basis point or two. that is the only real reaction at this point that we have seen. >> julie hyman doing a great job . thank you so much. is int: courtney collins the newsroom. courtney: vice president-elect mike dance meeting with congressional republicans today on capitol hill. on the agenda, a strategy to repeal the affordable care act. pence says president obama's signature health care law has taken a toll on the american people. has taken abamacare hard toll on american families and businesses and the american have sent new leadership. because obamacare has hailed.
it has been rejected by the american people. president obama was on capitol hill today discussing with democrats ways to defend the affordable care act. mr. obamah earnest, told democrats he is envious of the fight ahead. the top democrat on the senate foreign relations committee says rex tillerson told him he supports the paris climate agreement to reduce carbon emissions. the exxon mobil ceo nominated for secretary of state stresses a background in science and told card and he is a believer in science. tillerson's hearing is tentatively scheduled for next week. turkey says it identified the gunman who shot of a nightclub on new year's eve. leaving 30 people dead. he is not releasing his name. a video selfie of the prime suspect in the killing was seen walking around istanbul. detainedportedly had
20 people, described as islamic state militants. and, mesko's foreign minister was named, he resigned as finance minister in september after a visit i then presidential candidate donald trump. on twitter, trump called him a brilliant finance minister and a wonderful man. global news 24 hours a day power by 2600 journalists than analyst -- and analysts in with 120 countries. scarlet: we are looking at airline stocks. they have been flying pretty high as a group here the s&p 500 airlines index has scanned almost 50%, beating out the s&p 500 by huge margin. our next guest sees potential headlands. joining us now is a senior analyst covering -- you have downgraded your rating on six airline companies from outperform to market form.
talk about the nature of the downgrades. is it a tactical downgraded which you could reverse or adjust your rating a couple of months? >> exactly. thank you for the question. the view is the stocks have had an amazing run, especially since the election. we do look at margins, think they will come down in 2017. the forecast is 7.5 percent versus 9.5% last year and almost 12% two years ago. the reason for that is higher fuel and labor costs. fuel costs are up about 90% off the bottom. the first quarter will be the toughest year-over-year, we have 25%. we know unit revenue bottomed and error has trended higher over the last couple of months what will, we think happen over the next couple of months is investors will start to focus on the cost side of the
equation. it will be hard for the stocks to outperform in an environment where margins are coming down and earnings are coming down for almost every airline, earnings are coming down for a year-over-year basis. 2016, they dosus not benefit as much from tax change, for many changes in the tax code, other than on the depreciation line, which can be huge. to your other question about reversing the call, of course, if for some reason that -- there were an event would causing it to come down 50% in the short-term, we would consider something an adjustment in ratings. we want to be responsive to changes in the prices. a trick ofways raising your price targets, or race or price target and watch
the stocks -- we are definitely mindful. >> i look at oil and airline rally started about the end of 2012 or so. was still trading pretty high, significantly higher than now. seeing it from a macro perspective, were there not still serious structural changes that provided support? the margins may come down but they are still pretty healthy. >> a great question and i'm glad you asked it. if you think about the savings you just talked about, the airlines kept one third. they gave one third to customers in the form of lower ticket prices. and they gave one third of it to employees. the third they give away in the form of higher wages, it is not coming back here to the third they give the customer in the form of lower ticket prices, they have to get that back. we definitely think unit
revenues have bottomed and will trend higher and that is with the market has been looking for. it is why the stocks have been up. we think stocks moved higher in of being up year-over-year and the margin compression is what is not in the price of the stocks at this point. we think that is what investors are missing in now. scarlet: for the u.s. airline industry at large adding steadily, when will it return to domestic pricing power? how far away do you think we are? >> i am not sure. i do not know specifically. we are looking at lower capacity growth in 2017 versus 2016. should get some pricing power back with higher fuel costs and higher labor costs, we're thinking maybe
midyear comes back. >> the topic here about the actual flying experience, it is about budget airlines. a lot of these airlines are offering lower ticket prices. when you're a larger airline, you have to figure out how to eat with that. is it possible for those bigger companies to rethink what kind of tickets they offer? >> the basically economy that they are all offering, that product competes with the ultra low cost. but you are a family traveling with two or three whatever young kids, do you want your kids split up from you? that is happening with those guys. are a family, you buy up to a higher air >>. if you are also low cost airlines, you count on the family be more price conscious and saying, look, we can fly on an ultra low-cost care to --
carrier for the same price as togetherut also, without having to pay a premium for that. i think that is what they are counting on, the fact that and theill buy up people who wind up in the middle seats on the back in the lowest ticket will be the ones who are maybe college students going home who do not need the overhead bin or for home price is really the ultimate deterrent of getting wherever they are going. >> on genuine 20th, we will have a new president sworn in. what are the prospects under a new trump administration? than necessarily brighter under obama's tenure? >> it is a great question as well. president, under taxed, if we go to accelerated rather than, 100%,
over 25 years, which airlines do now. we deftly get an early -- earnings benefit. airlines do not benefit as much, they will just utilize at a slower rate and probably expire before they use them. on an earnings basis, that would help. elaine.hanks to she downgraded six carriers to market perform. >> southwest, still a buy from the target. coming up, the index surged since donald trump's victory. executive tells us why he thinks this will continue. this is bloomberg. ♪
oliver: the kbw bank index is up more than 20% since the victory of president-elect donald trump here will trump continue to have positive impact on the financial sector if he follows through on his promises to reform the tax code, trade policy, and pull back the dodd-frank financial regulations? to thed that question president and ceo. the outlook has changed with the election. i think wes the with the horizon now are as favorable and powerful as i have seen with -- since the crisis. a toy percent move since the large banks in the financial sense election. it is hard for stocks to go up 20% every year. do i think they can still outperform, i believe they will and that is because banks have better earnings per share momentum than the overall market and they have got big macro
forces now moving in their favor. so i think it is both. there will still be a macro move. when it comes to regulation? you expect some relaxation in regulation to what about reforms that require congressional approval? >> i think it will happen. i do not think i have seen as broad a call for amending seen now. as i have there are proposals from the federal reserve in favor of amendments and a couple of those that have been in the republican congress previous to this new congress that have talked about reforming it. i do not think there will be a wholesale repeal of it. i think there will be amending accident -- actions taken that will be favorable for the economy in the banking industry. >> where would you put your money? we have seen a massive runoff since february. , is there more
room to run for the midsized bank? absolutely. there is more room to run their there could be a dramatic change in earnings estimates. abovem is about 3% to 5% investments for bank or banks and we do not include corporate tax reform in our investments. if you get a higher interest rate environment with a steeper yield curve, corporate tax reform, a rollback on amending the rule or eliminating summer's visions on smaller banks, i think you will see powerful earningsat will cause estimates to go up, which are traditionally very good for stocks. do not forget tenderly dollars has flowed into financial etf'since the election. a week after the election, financial stocks boosted the number two sector of the overall market. piece of theg market and quite important. chart right here,
the inflows into the spider etf. theast few days alone, inflows have really spiked. will this be a new nominee? does richard step out and somebody else gets put in? >> i think it is traditional to have a change in the leadership of an agency such as that. there have been court ruling that suggest the president-elect, when he becomes president, can do that. i think there will be a change in terms of the operation can i've seen a menu of choices. one is just to change the government structure to radical or bigger ideas that are not that radical, bigger ideas of incorporating what they do with other agencies to make the government more efficient. >> how uncertain is the future of the u.s. mortgage finance system? quite the most powerful force right now is higher interest rates, including the lower
originations, because boom could be over, i think the mortgage industry will have to adjust. i think there are real reforms coming and i think the biggest issue is the role of government in the mortgage business. do not forget the fed's doll she was a hundred billion dollars before the crisis and it is now 4.5 trillion and the fed continues to keep reloading on mortgage-backed securities approaches. i think there needs to be a return back to the private sector. it does not mean it is that for homeowners looking to buy a home . i think we will see the dynamics change. mark: you talk about technology innovation. how will this affect the potential return on equity to the biggest banks there? needs to beontact regulated because it could take the industry in a broad range of directions. if not, there should be a link field across the financial service is in that regard.
it should make the industry better able to serve clients, smarter, faster, and hopefully cheaper. you need to focus on cost mystery. if done right, it could be a favorable for the mark. that was the kbw president and ceo on bloomberg markets earlier today. scarlet: still ahead, we have a trade for the russell 2000, the small-cap index hovering around its record high of 25 -- up 25% in the past month. this is bloomberg. ♪
what a bullish bang we are starting off with. i know you think we could be .etting up a pullback why? the sentiment shift in the marketplace and last month, the dow up better we're seeing bullish sentiment and significant pressure even though the vix is under significant pressure here. you are just seeing a lot of sentiment shift in the market looks vulnerable to the market strategists. what would be the tell on that reversal? what are the few things you are --ching that with single
would signal a reversals imminent? heretimately some weakness when you look at leadership, it is foldable and could feed on other parts of the market. transportation averages is another area leading the market. undercurrents within the marketplace that is not necessarily support the massive runoff we have seen like financials and industrials. >> we have a chart made of the which is 40 trade, 83, which shows basic the if the iw am goes below certain level, you think it will hit another level. can you talk us through that? look through december, you can see the russell has some support there on the 134 and 135 level. it is pushing at a december high if we do see at,
sentiment shift in the next month or so, we break 135, it looks to me like it is poised to go back to the 130 level. >> how do you play this from an option standpoint? right. i'm giving myself a little time 135,e trade and looking at it has a nice risk reward, less than a dollar right now, 321 risk reward -- 3-1 risk reward. break the idea that if we through there, we could see it is a pretty volatile index or etf, that we can see the iw embree back down before fort finds further support. >> great stuff. thank you for taking the time to join us. happy new year scarlet, back to you. scarlet: coming up, more on the fed minutes with the head of
global interest reggie, saying that it may have to raise rates at a quick pace. it's inflation starts to heat up. a quick check of u.s. equities. the dow is up 59 points. the s&p 500 gaining 13 points. looking at the different sector roots, consumer discretionary leading the way thanks to gains in car makers and retailers. u.s.dication sales in the for the final legal december rose 2.2%. from new york, this is bloomberg. ♪
on capitol hill of president obama and other congressional democrats. >> we have a great deal of optimism that the good things that happened with aca are going to stay and our republican colleagues do not know quite what to do. they are like the dog that caught the bus. they can repeal but have nothing to put in its place. it means something good things go away. >> he says rebel content no idea how to replace the legislation and their strategy will throw the income -- the entire health care system into chaos. president-elect donald trump has tapped a top deals lawyer to run a securities and exchange commission. a partner at sullivan and cromwell is the latest trump pick with deep ties to wall street, having rep is in a goldman sachs embarq these, much of his work has involved mergers and acquisitions. rush in the philippines are in discussions about increasing military operation after repeated threats