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tv   Bloomberg Markets Americas  Bloomberg  March 2, 2017 12:00pm-3:31pm EST

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♪ headquarters in new york, we're going to take you thatwashington to d.c. wasn't in d.c. to london. here are some stories around the world we are following. taking a breather after the biggest one-day gain after the election. financials and technologies shares leading the s&p. the dow is still above that 21,000 mark, though. ipo 2017, well above the proposed range. he will have the latest from the nyse and a2 investors. he has long been one of the most ,ocal analysts on wall street and in an exclusive, mike mayo researchs about the
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departments in the u.s. in his first tv appearance. we are halfway into the trading day. julie hyman joins us. : i'm looking forward to him. he calls himself a free agent. let's take a look at stocks. we are seeing an acceleration of early declines. earlier, they were little changed after the records that yesterday after the big gain yesterday throughout the day we are going to be looking at charts that suggest the reason behind the pullback after that big gain. .ne of them is momentum chart when you look at the relative index for the s&p 500, how overwrought is the s&p 500. g# btv find this on 5969. line, itses above the overbought. when he goes under, it's oversold.
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you can see past occasions when it's been this high. typically, there are something of a old back after it reaches those particular levels, but of north, not always. whether you're looking at things like valuations or momentum indicators, just because they are triggered, doesn't necessarily mean you are going to see substantial pullback. what we are seeing today is modest. turning to the individual snap,, that is of course once it to give you a quick look at the stock which is rising. ipo price which is above the range, before it started trading at $20 million. looking at some other social media stocks and related categories asked, they are actually not doing so hot today. twitter and facebook are off, yahoo! down about .9%. looking at gopro, it is a camera company, it's unchanged at the
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moment. vonnie: all right. thank you very much for that. here is snap opening at $24 at the initial public offering. newstock continues to hit highs. let's get to caroline hyde reporting outside of the new york stock exchange. you got out from the mayhem. things have come out that come down a little bit now. we are still holding onto the gains. still with. goldman sachs is a stabilization agent here. so fariced it seemingly to perfection. they really want to ensure they are lining up supply to make sure will make up to rising, it would hold spending for the rest of the day. there is a 40 to 60% increase on , wherest day of trading
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they wanted it to be. that was near the levels they were expecting. remember though, what happens on the first day of trade that is that doesn't always hold. languages at some 14% lower than if ipo price. facebook have a debacle, and nasdaq doesn't win the big tech ipos anymore. it doesn't always mean it's going to be steady from here on out, but for now the last two -- itof trading, it's a took a while to get that price. there's an uptick when you have added to the money the cofounders now have. it increased $1.5 million. they are now way up higher on the billionaires index. vonnie: you can check us out on go and a little while.
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what was the talk about floor when people are saying that they are looking forward to another ipo, perhaps? that this went well? caroline: this could lead the unicornsuge private who are unknown. they are like dropbox is valued at $10 billion for years now, but resolutely has not come to the public market, because so much cash has been in the private market. they are willing to pour in money on a private basis, and haven't had the need to go to the public market, but now we see ushering in technology ipos like dropbox, airbnb, but they come late, what about it uber? they are having a pr disaster at the moment. ecosystem, they do
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want to see that money sent back into the ecosystem to help glut ofthe new states.s coming to the there is news that i could, and a third of the fourth quarter of 2017. good that they're bored give that much more cause for exuberance? a lot of these companies are having discussions with bankers coming to the ball. vonnie: thank you. turn now to john cecil. you received a little portion of the allocation you're looking for, how much? are small portion, but we looking for shares. vonnie: right.
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you're in the market buying more. long-termave a secular thesis. vonnie: what is it, when you ll screen, some of the weaknesses associated with snap, i want to quote from , it was to buy south of a company with a , a-year contract record valuation higher than just about every other technology company power.d decision-making reviewed the marke -- refute them all. sean: media since the invention of the printing press has been push, push, push.
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slowly getting better at isgeting, but now snapchat having brands be in your photos, take more photos, and snapchat will be the leader in image gathering. andie: it's a grim has that evan spiegel does have that -- instagram has that. sean: snapchat is proven to be in the pole position as the innovator. they are coming out with the newest technology as being copied here in we believe that snapchat will be in the pole position as we go into the next .hase vonnie vonnie: is it still about valuation now? sean: mobile ads are about 60 billion of yearly market that is
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growing exponentially in the near future. going back to the fact that we want to be on the side where you are actually interacting with the brands and interacting with the environment, we think it is a phenomenal investment. i want to bring up a graphic that shows a comparison with. that's if you could just have a look at facebook, google, and other traders. for google it was more than 78%. yelp was 600 and where do you anticipate -- sean: they were addressing secular trends at the end of a shift. the written word is fully being phased out as the way we as a
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society interact. -- at look at the indoor, andora, it is going away. what about gopro, what is different about snapchat? sean: they are bridging the animate world within in animate world. also a bridge that can be monetized. vonnie: where do you see it valued? an: we come out around 40 billion. vonnie: $40 billion? billion in'll be 2 revenue this year. we will obviously have larger -- vonnie: who are the appetizers
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thatyear from print media will move to the likes of snapchat. teenagers and using it.ds does this mean brand loyalty and 10 years for them? sean: absolutely. when you think about prior positions, they are creating an ecosystem where you can put a physical good in your environment. that means, i can buy a chair, at camera at my -- at my living room and see what that looks like. i think as we knew, we're going to see a lot more 3-d and bridging the gap between animate and in animate. what about voting
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rights? you don't get essay. sean: given our size and the country -- in the company, it is not our top concern. what kind of companies do you own in your portfolio? at tech firm. we like technology that is growing. we like software plays like redhead, facebook. vonnie: twitter? own twitter at the moment. vonnie: thank you. you can get all of the charts tlive
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. . julie: initially there was a that caterpillar is confirming that law enforcement is executing a search warrant and is quite rating and a search of its facility. you can do this stock is down biggest dropent, since last june. we are not sure exactly what this search would be regarding. we are trying to get more information from the company here, but obviously we are seeing traders reacted this news thesewith caterpillar, as agents are searching the company does the opposite. the shares are up over the past year by about recent percent as about 36%. we will keep on this.
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we will give you more updates when we do have them here again, caterpillar, it offices and facilities the search i federal authorities. vonnie: thank you. , talking about the ruling on the brexit vote and why they haven't followed through, in his opinion. this is bloomberg. ♪
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♪ vonnie: this is "bloomberg markets."
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i am vonnie quinn. german at goldman sachs, and the issues he feels haven't been seriously considered about the brexit. he spoke to "bloomberg surveillance." a risky thing. like i said before, the reality is the reason why the u.k. has done this is party politics and the fact that the labor party wasn't collected enough or strong enough to oppose it. that's white happened. itody really thought that will result in a decision to leave. there are a lot of people grimly around. scrambling around. i don't think that much thought was given to economics. is there any turning back? to think that if we got to a stage where it
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looked like one of the consequences would be a break with the whole of the u.k., not many people talk about it, but the significant issues of the irish border, then it might make evil think a bit more about of it. this is most of the reasons that i think it is right. the comments have a rush to beat about what is agreed before the final decision to mechanically leave happens. there are all sorts of consequences. in reality, i don't think a lot of people have really thought about it. a lot of it was again. vonnie: does the government have a say? >> the reality of negotiating is about to start at the end of this year. so many areas that one thing i , as much as they trade issue is important, of importance, we have
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so many talented people from all over the world, and colluding -- including the eu, arguably for britain's side, we have the best universities in the world, partly because we have overseas people here. for our size, i said. thoselose a lot of people, then british universities will struggle to be as good as they are. these are huge issues, which the government -- unfortunately some of the people involved, have to goodup with a very strategy for how to cope with that. optimism ofbout the dyson. this guy doesn't agree with the gloom. james says this is going to work out, we are entrepreneurs, on word we go. interpret that for our global audience.
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on one level, i like what james dyson said. one of my own views when i reflect that on one of the few stuff happensed, including things you don't like, and thes big crises mark of -- i used to think the that's how youy deal with things you don't expect. given that it's happening and happened, the u.k. have got to make the best of it. i think the same thing and areas of technical -- technology he able to censorbe things in the world. we've got to make sure we can still access and welcome the world's most talented people despite self-imposed immigration problems we've got. hugely important.
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tim o'neill and former asset manager at goldman sachs, thank you. .uestions about russia continue democrats want jeff sessions to resign after allegedly conversations with russia. more details next. [indiscernible] this is bloomberg. ♪
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♪ vonnie: this is "bloomberg markets." chuck schumer a jeff sessions to resign as the government confirmed sessions met with russia ambassadors to the u.s.. senator schumer spoke this morning. schumer: there cannot be a
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shred of a connection between the attorney general, mr. sessions, and this investigation into the events of 26. vonnie: chief correspondent, kevin cirilli, joins us at the white house. kevin, are republicans as a group standing by sessions? there are no calls yet for sessions to resign from republicans, however, there are calls from several top republicans for him to recuse himself from any investigation. i want to pull up a tweet now jasonason safest -- chaffis, that he believes that sessions should resign. remember this morning, paul
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ryan standing by here. ryan: jeremy recuse himself? you support of investigation, of course, but i don't see any reason now to do this. them: the division between and speaker ryan, is not whether he should resign, but whether he should recuse himself. vonnie: whether he is the subject of the probe, is there any -- sticking around even as the result of a probe like this? be subject tohe any investigation, there are laws that require that you can't investigate yourself, so to speak. sean spicer is sure to face tough questions on this at briefing later today, but there is no question that democrats are counting on this, trying to
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pressure this administration on this point. we heard that from senator schumer, but also from nancy pelosi. getie: we will see if we any more details on the resident involvement. of course, president trump speaking later today as well. from the gerald r ford aircraft carrier, we will bring you that on bloomberg television and bloomberg radio. it scheduled for 2:30 eastern. yearop 50 hedge funds last according to the writing, we will describe -- discuss their strategy. this is bloomberg. ♪
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♪ there's a sunny day in midtown manhattan, live at bloomberg world headquarters.
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i am vonnie quinn. this is "bloomberg markets." mark crumpton is in our newsroom. mark: chuck schumer says jeff sessions must resign. he said he met with ambassador. they say he can't play a role in the investigations until the -- >> the justice department must immediately recruit a special investigator. giving the compromise, that responsibility will fall to the acting deputy attorney general. : the white house is dismissing the controversy as a partisan attack. defense spending
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today for an aircraft carrier being built in virginia. we will speak to sailors and ship builders. the president will make a speech speech on the uss gerald ford. prime minister theresa may will try to overturn the first parliamentary defeat. they voted in favor of the amendment to protect nationals in the u.k.. prime minister may wanted the bill left intact. she tried to get the house of commons to reject the amendment. malaysia will release a man in the killing of a half brother of kim jun-un.-
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two women have been charged in the death. global news 24 hours a day, powered by 2600 journalists and analysts across more than 120 countries. i'm mark crumpton. this is bloomberg. thank you. let's check on u.s. stocks. we've been focused on one or two all day. that's not thinking our minds off the fact that the dow is .3%. we have to see if it finishes down. -- 20, 20 oh let's go to abigail doolittle. abigail: one stock that we do have trading sharply lower if caterpillar. the shares are down 4%. law enforcement is executing a search warrant at a plant. we see the shares down sharply on this. apparently down jones is if the irs, and
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commerce department there. we will be reporting on this. clearly not liking this, caterpillar having its worst day since june 24 of last year. more big stories this week, outside of the snap ipo, of course. we are looking at the fed. this is g# btv 6347, extraordinarily, the fed will raise rates in march, just about -- just about a month ago, the odds were 20%. now closer to 90%. 100%y creeping up to that that we saw for three weeks in december 2016 rate hike. it seems very likely that investors will raise rates. we have had lots of hawkish talk out of the fed heads recently supporting this. what does this mean for stocks?
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we have another good chart. g# btv and blue we have the three year , the ten-year yield tells us that bonds are selling off as riskier stocks are rallying. this relationship works. tohave stocks rallying record highs. one question, a lot of people seem to be in disbelief of this -- cancan it can and you it continue. and white, we see it starting to pop out of a long-term range, but also trending down. the last few times it has happened, it goes back down. they say it might come down to earth. only time will tell. thanks for that. returning to the world of hedge funds, success stories for a
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send us management was one of the best-performing. they started in azerbaijan and that they started a master fund in 1997. --ide me are brian goin joining me now. the proof in the pudding is since inception, the average return is what? >> it's been about 19%. vonnie: not too shabby. years, youe last 20 have had allocations to sell. did.s we i think most people got a modest allocation, the top 20 got good allocations. vonnie: can i ask why? pricedhought it was
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attractively. that is why we did it. vonnie: i think we heard all we need to know, we don't want to break rules. to buy things that are beaten up out of stocks that are trading at their lows, not trading on the first days of their hive. ask you what is the thing that made you so successful last year? >> there are a few areas. one area was oil and gas. we saw the opec deal. there is a trend of stock getting easily 80 to 90% off their highs. we focused on companies where investors had serious liquidity issues, but they felt that they had measure to take to improve liquidity. that really helped drive the performance. primarily long
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positions, so you are betting on these companies turning it around. for the most part, are they? >> absolutely. we think there is more to go. we are excited for the prospects in oil and gas related industries. we are also quite optimistic about our technology holdings. vonnie: that remains sections that you are in. it was you primarily that founded it. >> yes. we started in 1997, grown tremendously since then, most of it through returns. we have very happy investors. it's a little unusual, if long-term. is not short-term. we don't manage monthly returns or try to manage our volatility too much.
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we are big admirers of warren buffett, that said i would rather take a lumbee 15% been a straight line 12%. vonnie: i know pharmaceuticals was another thing that played out very well to you last year. primarily on the short side, we were short on a company that last year.erformer that was a company that was engaged in very aggressive marketing practices, off label marketing practices, had a number of investigations across the country. many employees were arrested. doctors were arrested. so, it had a lot of problems, and for whatever reason, a lot of investors brushed them off. vonnie: you can't tell me what you are sure at the moment, but you have several that are in short positions? >> yet. we do have a couple. vonnie: where are your short
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positions? >> consumer and energy. --ould say more branded outdoor wear, things like that. it's not about the stock going to zero. it's more about trading at rich valuations relative to the prospects. vonnie: and restoration hardware is one of your best? >> absolutely. a lot of what we do is buy the they were out of favored companies. certainly the retail sectors are out of favor right now. hardware has had self-inflicted wounds last year, discounts, loyalty program, clearing inventory and someone. so, we think they have a big comeback ahead of them, particularly with their new store format. vonnie: talk about the macro
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environment. --arly, with thenk in general new administration, animals spirits have been rekindled in the economy, maybe and wall street as well, but we do think we can do the more obvious things like deregulation, potentially repatriation, taxes, we would like to think on lowering corporate taxes, lowering versatile taxes. all of those things stood lowering corporate taxes, -- should boost the economy. trump inherited things that were going well and going in the right direction. if we do see interest rate increases, maybe as many of you turn a little less negative on financials. i know now you're at least
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neutral. real issue is what is priced in. they have had a tremendous run so far. we do think that environment is better for them. i think the stock market is how much good news is priced in. it's interesting. we talk about trade and nafta. canada is one of your big plays in oil and gas, but not for nafta reasons, more for pipeline reasons. >> absolutely. we are excited about canadian oil and gas. irr's are better than the hernia -- than the permian. there are some concerns about what is going to happen with trade nafta, but we deal insulated, but they produce condensate.
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oil condensate is sold to sands company and they will benefits with the pipeline. vonnie: any anthrax into emerging markets at all? focused onrimarily north america. israel is a place where we do a lot of investing. we do have investments in cyprus, smaller economy. vonnie: yes. you've got a relationship with the commerce secretary. we do have to leave it there, but my great thanks to both of you and congratulations for making the list, as they say. >> thank you. vonnie: make sure you catch our new show hosted by jonathan ferro at noon new york time. now, global issues that directly
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affect debt market. aming on, we will have conversation with tom farley and get his take on trading. that's next. this is bloomberg. ♪
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♪ bloomberghis is " markets." time for the biggest stories in the news right now. the biggest one-day low since last june in the construction mining and equipment. they had executed a search warrant on caterpillar. caterpillar says it is quite operating.
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a probe toward rebates for epipen allergy. mylan received a subpoena that you are a sick. investigators say the drug maker misclassified the drug product as a generic resulting in payments for medicaid. that is your bloomberg business flash update. publict has made it trading debut. trading well above the ipo price. -- tomnt tom verily farley was asked if he expands his view. om if you go back, we had zero ipo's the first quarter. we have a whole bunch more full calendar and
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let something changes. if not the big tech names, which is the premise of your weston. those big tech names are watching very closely what happened today. they can pull ipo's forward or backward. benefitsperson who from ipo's, i think comfort that this idea was very smooth and they got what many described as a healthy valuation. you feel that this year is going to be the year of more companies going public? >> absolutely. things didn't change. i'm not record not prognosticating. i'm just saying again, the ,umber of ipos we have planning plus those that are in process are very high. caroline: how many do you -- that list with an ipo? >> we are very large and oil and gas.
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that is our sector. ,f we had ignored that sector lows $30 a barrel, we wouldn't be getting those ideas. that $50, because tech is relatively slow. maybe by the end of this year, tech to be high, and oil and gas could be slow. caroline: how does the market plan to all of this? is that a cause for caution or optimism you're looking at? >> there are three things that matter, the absolute level of you pointes, where as out, the volatility, and the lower the better, and frankly we lows. longtime it doesn't matter if our interest rate is higher low, but are they stable? they are stable. this happens to be the trifecta of an ipo environment. things are good. now it, if any one of those
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folders. caroline: perfect storm? storm,uldn't say perfect but trifecta. things are going well. farley.that was tom caroline hyde will be covering every sector. all episodes of "bloomberg technology," are streaming on twitter. coming up, one of the most vocal analysts on wall street, continuing analyst mike mail joins us for his first tv performance. this is bloomberg. ♪
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vonnie: this is "bloomberg markets." vonnie quinn. on wall street this week, mike mayo is set -- is one of several employees in the research unit. agentlf-described free analyst joins us for his first tv appearance. he is the author of "exile on wall street." he may be ready for part two, right, mike? ofe: that's a nice way saying i was fired. that's not going to stop me holding top bank managers accountable, making sure they do it well. annie: let's get to that in second.
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i'm fascinated by your point of view. there is a rumor circulating accessalysts don't get to management, don't get hired. it comes with positive or at least neutral ratings now. i thought that was done away with. i thought we cleaned up the whole analysis of wall street. mike: i'm proud to say on the only analyst that testified. if you play ball with corporate management and get all sorts of perks. if you're aggressive, you get a stick and get whacked upside the head. 15 years later, things haven't changed too much. so, as a much things change, is as much they stay the same. having said that, i've had enough of aaron that i'm able to experience, that i'm able to still do my job.
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when you don't talk to muchement, you don't do research. it's detailed in my book that the testimony to congress have helped make me a better analyst. fascinating that you don't think anything has changed much. does that mean that regulations don't matter? >> regulation is good. red tape is bad. get out the complexity. at a broker's firm, you have to fill out a paper every three months a your views express what you mean. it's a lot of paperwork. are pullingere we back regulation, it's important to hold top managers accountable. what does that say about
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the environmental -- research units for corporations? >> jake morgan had its annual investor day on tuesday. the fastest region of growth for jpmorgan is asia. they are expanding banking capital markets. so, the large global banks that rollout a full spectrum of products aren't -- and can gain shares. way, there is always a role for what i do and others like me. that is, to the extent that you hold management accountable to be acting in the shareholders' best interests, that is not going away. it's not going away anytime in, investorsis a lot of think you going to meetings. i'm the only investor that does that. there is a disconnect between the managers and the board of directors. vonnie: you own a little bit of
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the bank just to go to the meeting, not for any other reason. how do you think the u.s. will hold on to its dominance. britain may be losing some of that. >> not too sin. that's not too soon. u.s. banks gained market share last year. they have the strongest balance sheet in a generation. they can employ the balance gain investor activity. vonnie: you turned bearish in the 90's. >> yes. let's hear your positive again, but you may think there is over exuberance. i am now saying that perhaps
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too much of the trump bump has been priced in. there is a potential for issues. i think we will hear two words for the next few weeks, "sector rotation." pro gutter earnings should be good for the banks, but at the i think you will see rotation. be aware of the short-term. i'm concerned. which? which outweighs >> higher interest rates are good for the banks. is the lowest level since 1955. if you say i will look out for the lowest impact rate on margin, it has been done. as for the forecast, i think dueork -- you margins increase.
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that headwind has been absorbed. will start paying out again. that's part of the problem, to he the deposits. you are right. at some point over the next few years, you could see competition, but not right now. vonnie: we could see it in the next quarter or so you are saying. we are in the earnings part of the outlook, but we have never before increased rates run such a low level especially from balance sheets this strong. i think we have about three interest rate hikes in the next year here at bank of america benefits the most. you have trillions of dollars in deposits. those are slow to price upward. vonnie: the dodd frank changes,
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repeal/repair, is that a good thing? >> let's take a step back. you have people's bank get rid of dodd frank, and you have other saying keep it all there. say, don't sacrifice one iota of the safety of the bank, but once you sit your the safety, eliminate the red tape. the people say get rid of all dodd frank, well, where were you a year ago. upgraded thee banks, bank of america, upgraded other bank docs, because everyone was scared about the .alance sheet you investors weren't stepping up to the table to buy stock. they were like, oh, what are you doing. we had confidence in the regulation, confidence in the resilient the of the bank, to
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absorb not just one crisis, but two rice these. confidence -- two crises. vonnie: janet yellen is confident people are able to lend and banks are able to land by loaning out money. and people are able to get credit. the banks are little bit annoyed that they're having to be so handcuffed. to place on the banks? >> it is the chicken or the big argument. our banks not lending or borrowers not borrowing? i think it has been a little bit of both. banks are looking over their shoulder. you have to answer a lot more questions from the bank examiners. it makes the banks caused. some positives good. it has been heavy-handed as far as regulation. vonnie: some banks are in dire
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straits. is there hope for resolution soon? >> it is amazing to me. i have been a bank analyst for three decades now. the european banks never raise the equity capital that was raised by the u.s. banks. they are so much stronger than the european banks. they still need to strengthen their balance sheets a bit more. vonnie: can we look forward to another book now that you have free time? >> we will see. vonnie: mike mayo, former clsi analyst. chair janet yellen speaks at an club chicago event at 1 p.m.. tomorrow. we will review the comments right here on bloomberg television. i toss it to my colleague david gura. >> you are looking at live pictures of newport news virginia. the president donald trump
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accompanied by one of his advisors, jared kushner, his son-in-law. .lso secretary matus the president scheduled to speak at 230 eastern time. it is expected he will flesh out some of the themes he outlined in his address on tuesday night. marine one on the uss gerald ford to meet with the vessel -- from aer couple couple years ago. to build more than 200 navy ships. you're watching bloomberg markets, trump's first hundred days. democratic leaders calling for the resignation of attorney general jeff sessions. ♪ democratic leaders calling for the resignation of u.s. attorney
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general jeff sessions that he lied during confirmation hearings about conversations he had with russia's ambassador to the united states. be thee cannot even scintilla of doubt about the impartiality and fairness of the attorney general, the top law enforcement officials of the land. clear attorneyis general sessions does not meet that test. because the department of justice should be on before. david: here now with the latest is our bloomberg chief washington correspondent. i understand the house judiciary committee is calling for a probe.
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>> democrats are unified in terms of their opposition to attorney general sessions, calling on him to resign. i was on capitol hill earlier today. chaffetzl you jason saying, from utah, attorney general sessions should "clarify his testimony and recuse himself from this investigation." the is a divide from democrats and several republicans are calling on sessions to recuse himself. about all of asked this earlier today and see what he had to say. ryan: we have seen no evidence for many of these ongoing investigations that anybody in the trump campaign or trump team was involved in any of this. we have no evidence an american was concluding -- colluding with the russians.
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pressuree increasing on democrats. david: the washington post reporting it, saying that there were two meetings from then senator jeff sessions and the russian ambassador to the u.s.. the justice department has confirmed those interactions? >> the white house says the justice department officials are pushing back saying that he was a member of the senate and was on a committee in which it was an everyday nature for him to be engaging in these types of negotiations in these types of interactions. all of that said, several republicans including representative che fits like pelosichumer and nancy are all saying that it is not necessarily that he had those meetings. it's that he testified before congress saying he did not. that particular point of nuances
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where this storyline is headed. either way, so much pressure and another storyline for russia. gary is meeting with a number of folks to talk about infrastructure issues. what is the subject of that conversation? >> president trump wanted to have the trillion dollar infrastructure plan. representative bill shuster, a republican from pennsylvania proposing that once they lower the corporate tax rate, the repatriated funds in the u.s. be a source of revenue for paying for that trillion dollar infrastructure. david: president trump is remarks ato deliver the gerald ford aircraft carrier. we will bring those comments live at 2:30 p.m. wall street time. more with the trillion dollar infrastructure plan and what it could mean for investors. anything, small and mid-cap portfolio and joins us with the
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perspective. what you heard on tuesday night, what was new about what the president had to say? >> i don't think there is anything new, per se, in terms of the details. that he came across as very presidential, it was an outreach to both sides of the aisle. i think it was also the belief that now he can get the republicans on board to move forward with some of his agenda. i think those were really the drivers of the positive reaction we saw in the market yesterday. what about when you look at the past and may be on the state level? what are your concerns about how effective that will be? >> a lot of it depends on how it is structured. putting people to work and improving infrastructure will be viewed positively.
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obviously the devil will be in the details. what we have seen so far looks very positive. small-cap and mid-cap strategies, what are you looking for? >> anytime you're looking at infrastructure spending, the other plans that the government has at least talked about we will see in terms of lower corporate taxes, lower regulation. those will certainly be beneficial. they are more domestically focused. a lot of it has been priced into this market. we are very cautious in terms of the valuation levels and the fact that the market is depending almost entirely on washington, d.c. to come through with not just the actual details, but the timing of implementation. struck immediately after the election how much enthusiasm there was.
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i know how glacially things can move there. did investors begin to reevaluate when they got a sense of realism? >> it is our sense that they did not yet. if you look at valuations of 2017, the market has ignored any signs of bad news whether it is delays, if none of this gets implemented. we think -- evaluations are not cheap. and warrants a defensively oriented portfolio. .hile everything goes right david: let's gauge your optimism. what can we get done when it comes to infrastructure? >> with the policies laid out,
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we need to see something relatively soon. said, it makes sense to continue to be invested in the market. not knowing the timing, but thinking that some things are going to get accomplished. i will also say that given the fact we haven't seen a pullback in the market, valuations are lofty, and we want to focus on the positive news. it makes sense to be aware that there are risks building in the market. david: think you for coming in. we appreciate it. let's get a check on where markets stand. mark is holding steady amidst this pullback we are seeing after the gains yesterday and after the record closes yesterday. at if theseok valuations are warranted given the outlook for u.s. stocks. there are individual stocks we're following. , east pr he and
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milton, illinois being searched by federal agencies. , it is somedistrict sort of investigation. the shares are down 6%. the other big nonstock story we're watching is this changing perception on the federal reserve. a growing perception based on commentary from fed officials that there will be an increase.
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a 10 year yield at 2.5%. if you look at the dual mandate. we have a measure. we have unemployment, which has fallen into the range that the fed is looking for in the core pce. quite there yet. interesting we are getting this rhetoric from the fed without that particular measure having risen to 2%. david: julie with that market update. coming up, president trump heading to the navy's most sophisticated vessel today. we will talk with mckinsey who has worked on defense budgets and strategies at the pentagon. ♪
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bloombergs is markets, trump's first hundred days focused on politics and policy under the new administration. mark crumpton has more from the newsroom. york chuck schumer of new says attorney general jeff sessions must resign. the justice department confirms sessions met with russia's ambassador to the u.s. while sessions was a surrogate for the trump campaign. in the senate confirmation hearing, sessions denied it occurred. he says sessions can't play a role. department must appoint an immediate prosecutor. responsibility falls to
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active attorney general david going to -- boente. confirmey voted to former presidential hopeful ben carson to head the department of housing and urban development. carson has promised to address homelessness, lead hazards and housing. rick perry to be energy secretary. forces pounded the desert town today known for its agent roman mining and grant stoned theater. global news 24 hours a day powered by more than 2600 journalists.
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david: trump may provide specifics as he speaks on the aircraft carrier. mckinsey is a resident fellow at the american enterprise. it is great to have you with us here. we focused on this $54 billion increase. ,hen you compare this budget how much bigger is it when you look at the contours of the defense budget? >> he was to take credit for a regular like budget increase but it is only about a 3% increase. >> when you hear him speak, what will you be listening for?
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what will he spend that on. the focus on -- it will not differentiate very much. conventionalr military determine -- deterrence. david: the armed services committee and the senate, they want 50 something new ships. it of the threat environment, how useful as a have that many large ships? >> a believe there is a
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sense to grow the navy in particular. what the u.s. navy does including the marine corps and coast guard counterparts is keep the peace. it is really about being there, forward, present. congress is poised to give them the money if it is what they want to do with it. david: the pentagon will be coming up with its strategy this year. it lets look at how the defense department is budgeted here. are we putting the cart ahead of the horse? they don't have a concrete strategy from the defense department.
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-- andas been in praise place and i expect he will keep them on. all of the chiefs including the vice-chairman in the chairman. they are pretty resolute. they have been making this case strategically themselves. i don't think they are going to waiver. you have continuity in the military thinking what we don't know is civilian leadership. there is only one person in a new administration leaving the pentagon. will we seek to put their own stamp on that? will the strategy match what the numbers in the budget want to support what he wants to do? david: how important are the budget caps and the sequester? he wants to get that done away with. it seems like it ties his hands.
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how would he get around that if he wants to? >> ivan washington does not appreciate how higher hurdle it is going to be to get around these caps. only fixing it for defense. to grow defense and to leave all other federal agencies combined to receive cuts while not touching title meant spending is a recipe for a budget that is dead before it even gets here in may. mr. trump will have to watch his budget. they will have the come up with a deal.
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i don't think the white house has thought through these next steps. it they really need to get in front of this. david: mckinsey is with the american enterprise institute in washington, d.c. president trump's remarks when at the uss gerald ford at 2 p.m. washington time. this is bloomberg. ♪
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david: this is bloomberg markets, trumps first hundred days with a focus on politics and policy under the new administration. a look at the uss gerald r ford, the newest navy super carriers. president trump is scheduled to speak there at 2:30 p.m. eastern time. we will bring you those remarks. you can go flying down from
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langley and he will be meeting with the crew on that ship, talking about his plans for the defense budget. he outlines it just a few moments ago. billion in$54 spending year after year. speaks. more when he let's go to julie hyman that has an update on the big mover today. it is a story that we still have questions about. a federal agent in illinois, three different locations. the district of illinois has confirmed these searches. the company has confirmed them and said it is cooperating with investigators. it is unclear. selling the shares down by 5%.
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it is the biggest one-day pullback since last june. the shares have performed quite well over the last year. -- they arearly 40% up by nearly 40%. president trump's infrastructure and tax cut plan as they are yet on outlined. up next, house speaker paul ryan votes to expect new obama legislation very soon. walker in the sixth district is not support the party's replacement strategy. this is bloomberg. ♪
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david: i'm david gura, this is bloomberg markets, trumps first hundred days. nasser the headlines in the first alert news this afternoon.
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mark: paul ryan says there is no smoking gun time members of the .rump team to russian officials no evidence that anybody in the trump campaign or trump team was involved in any of this. with nobeen presented evidence they meddled in the election. mark: and if jeff sessions becomes subject of a justice department investigation into tosia's alleged connection the campaign, he should recuse himself. as al qaedas such and exotic state is expected to grow because of instability in parts of the middle east and asia. speaking at an aviation summit, former deputy director of the cia says the focus on fighting the islamic state has allowed al
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qaeda and its offshoots to rebound in countries including yemen and afghanistan. as the islamic state was his territory in syria, the tens of board and from other countries will leave and some will try to infiltrate the united states. egypt's top appeals court has acquitted mubarak on charges of killing protesters in the uprising that ended the nearly three decades. the court overturned the verdict . investment manager that forced prime minister theresa may to get parliament approval for the brexit trigger plan could go back to court. she may file as
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new case of parliament isn't given a new vote on the final deal to leave the european union. powered by more than 2600 journalists and estimates and over 120 countries. i'm mark crumpton. this is bloomberg. trump willident speak aboard the uss gerald r ford at 2:30 p.m. eastern time. we will bring those comments live right here on bloomberg television. promised toump offer something special in his words on health care. not everyone's party is on board. there are serious problems with what appears to be our current path to repeal and replace obamacare. congressman walker joins us now from capitol hill. let me ask you about the news of the day.
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the chair of the senate intelligence committee saying , whether he can participate in anything to deal and iussian involvement trust jeff sessions to make that decision. do you trust jeff sessions to make that decision? is a journal meant that has worked in washington for many years. his reputation has been impeccable. wherewant to move forward we can leave this country in the right direction. republicans must lead right now. we have both houses and administration. you are not prepared to call for his refusal or resignation? >> not until we see some evidentiary support. i would make a quick point when it comes to the hypocrisy. the same people calling for jeff
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sessions, they were very silent. david: the attorney general met meeting withnton attorney general lynch? >> there was concrete evidence and nobody denied what was going on. there is no evidence to support the russians had any involvement with the past election. it is a big deal being made right now. i think it is jumping the gun ahead of ourselves. >> under guarded the capital.
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did you get a look at it? what are your concerns with what the colleagues are proposing right now? >> we have not read through the most updated. but the first draft came out a few weeks ago. we have some problems in a couple areas. i did hear your lead, we are not pushing back with administration. >> what is the quality of dialogue like between you and a study group.
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>> for people to be able to have full medicaid. the problem with that is, we've got to put a cap on that. some of these things will not be solvent and 10 years. the other component. what is the difference their? before we sign a blank check, i need more information the four get to a yes. david: the president in remarks before the speech this week saying he was to do as much as possible. they are talking to constituents. >> for someone to know those cities. david: i've been there.
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>> a couple of things we get out of it. the other component is, they want to make sure that they are not stuck with the bill when it comes to paying for these additional taxes. separation for what the affordable care act was to what the plan now is. bring upm glad you taxes. i have a couple questions about that as well. we've got to get to the affordable care act. how bigger hurdle is that? focusing on the affordable care act for now. >> there is a lot of energy being put into the affordable care act. we got 155 members. we are putting together our own budget.
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we talk about the tax return part of that budget. i would be remiss if i didn't say that the basic part of this week is a lot of energy trying to get this thing resolved. , it cann get this done be an incredible year for republicans. tax?: what about a border >> we are reviewing the numbers. we don't want to put something on there that impacts a lot of people. we want to make sure. ats is exactly where i'm right now. it will be a little premature. i know manufacturing has been important in that part of north carolina for a long time. the public-private partnerships.
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>> it is something that is huge. mandatory spending has skyrocketed. the high 20% to almost 80% in a few years. things like education, military defense, infrastructure. david: you look at tax reform, you have the right brady proposal. you have the white house, tax reform proposal of his own. is there too much happening at once? would you like to see more cohesion when it comes to tax reform, obamacare, or regulatory reform? >> we need more unity and we need more cohesiveness.
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sometimes with different parts of the country, there is a little bit of a grind that goes through that. i remain hopeful that we can come together and get some of these things done. we cast the diana very positive way. up, has president trump sidelined his secretary of state? how effective can rex tillerson be? this is bloomberg. ♪
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david: this is bloomberg markets, a focus on politics and policy and the new administration. julie: i'm trying to bring up what i'm looking at here. i was looking at ea on the bloomberg terminal, but i have hit something by accident. i apologize. basically we are looking at an earnings season netted almost done with. what are we bring up the other graphic while we wait for this to work and look at a couple of the earnings movers in today's tension. monster moving as well as kroger. sort of the top in the bottom of the s&p 500 having to do with earnings today. as the sales up 17% company continues to see strong demand for its energy drinks. we have kroger suffering from food deflation. we have all this talk about reflation and we see deflation when it comes to food in the
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united states and a lot of price cutting when it comes to food. let's get to the bloomberg terminal, shall we go earnings analysis for the s&p 500. 486 companies. beat in terms of sales. sales growth up 5% or so. busted out ofe that earnings recession that was occurring. that is one of the things that will fuel the stock rally. in addition to economic data and optimism by the trump administration. people are related to earnings. this is just a simple look at the s&p 500 forward price-to-earnings ratio. based on estimated earnings for this year. we are continuing to trade well
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above the average. around 18 .5 times. since 2002.ghest when you get these kinds of you usually tend to get some pauses where investors take a step back and say, here are the valuations. is the rally we have seen justified given the outlook for earnings? this is one of those days we are having such a pause. david: rex tillerson spent the day mostly with praise. let's start with the basics here. did they decide not to go there but go to washington, d.c.? >> he relayed that conversation with state department employee saying that his wife essentially
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told him that your mission is not done yet. you have spent 41 years at exxon trading for this -- training for this job. his wife pushed into taking this. the scale of the challenges he faces are immense. there is no one with much more business experience than rex tillerson. his trump going to let him use this buccaneer, and style of taking it around the globe? >> you have all of these leaders going to washington, d.c. rex tillerson is not in the room when meeting with the leader of japan or canada. where does he fit? butot even not in the room not at some important policy decisions whether it was the immigration order, the decision we are looking at cutting foreign aid, looking at usaid.
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basically, what our foreign-policy strategy is going to be forward. donald trump has kept a very close cabal of advisors around them. we hear from inside the state department that morale there has also sunk. .eople really want him staffers feel like there is a direction. there is no guidance. basically sitting on their hands . someone described it as caring for a terminally ill patient. that is the challenge he faces internally. he's not being looked at as a key advisor. who will be traveling with him. state,ing secretary of he has inherited a lot of staff
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from john kerry. >> when we think of the state department, with a of their outreach in the world of america. outside of america, they look at everything from who they are traveling with and who they meet with. what meetings are called, what sort of procedures and policies are followed. foreigntocol is how leaders and foreign governments look to the state department. no press briefings. foreign reporters stationed in america. outside, they are scrutinized for even the slightest clue. things, theof those press briefing is all getting subtle hints to people. they are struggling to interpret what we should read into this. atrex tillerson is hobbled the knees as head of this department, his ability to lead .nd enforce that level of trust
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silenced by being the administration himself? would he be holding press briefings or is that not in his style? >> know it has had a career like he's had or lead an organization like he's had. what they believe in their own management process. is, -- badges, formerly the boy scouts of america. he has a galvanizing impact on leadership. he will be calling out to what he wants to say to the president. give me a chance to lead. going to pick he a deputy? after he was named, there was
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talk of it being richard haass, john bolton, the former ambassador to the u.n.. and president trump said no. criticized on the campaign. it you can't have them. it's important for someone who knows his way around. >> many people have said this was one of them were crippling actions early on to not even pick your own deputy. staffers are drawn from the trump campaign got to forge his own way. we are winning anxiously to see what that pic will be. libby his own man or a trump man? 's future depends on him being able to carve his own path. megan murphy is the on bloombergef businessweek. rex tillerson, the latest issue of that magazine. more from the writer here every saturday and sunday on bluebird. at thent trump's remarks u.s. estoril ford aircraft carrier in newport news, virginia. we will bring you those commas
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live on bloomberg television and bloomberg radio at 2:30 p.m. eastern time. this is bloomberg. ♪
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david: this is bloomberg markets, trump's first hundred days with a focus on politics and the new administration. here is what's on a radar this afternoon. president trump speaking on the aircraft carrier gerald ford in newport news, virginia. tomorrow, janet yellen delivering comments on the u.s. economy. you can look for those at 1 p.m. eastern time. president trump expected to sign a new executive order on immigration next week. we are joined by bloomberg's chief washington correspondent outside the white house. what is happening in newport news virginia? what do you expect to hear from the president this afternoon?
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kevin: this will be about the budget request to have the $54 billion increase to u.s. military spending for his next fiscal budget. the optics of this is that he will be speaking on the gerald r ford aircraft carrier. that is the most expensive aircraft carrier to ever be of $13 with a total cost billion. on the campaign trail, he frequently said that he wants to boost military spending. he works with companies like boeing, caterpillar, and other major defense contractors. in order to put people back to work. down in norfolk, this is a portion of the state. the southern portion of virginia that helps boost the same type of jobs that he's promising to deliver. david: trump and the tidewater coming up again at 2:30 p.m. wall street time. he had janet yellen the fed chair speaking in chicago tomorrow and comments from the fed governor yesterday. harvard university, talking about her sense of when the fed
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will raise rates. let's ask about immigration from the white house. what are administration officials telling you about the timetable and what might it look like? david: this is going to come sometime in the next several days. they had previously said this was going to come out yesterday, but that timetable has since been delayed as a result of what they view, in part, good positive feedback from president trump's and joint address to congress earlier this week. there is no question that this is become one of the most controversial aspects of this new administration to play because the first round of executive orders were struck down by the ninth district court. of business, editor week just alluded to this. that lack of communication from administration officials with members of congress and their tengionot working and with one another, it has caused some restriction on capitol hill. david: kevin, we appreciate it. a chief washington correspondent outside the white house. take a look at the u.s. senate
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floor, a vote on the nomination of rick perry. the qatari of energy. we will be monitoring that and bring you the results of that when we have them. coming up on bloomberg markets, remarks from aboard the gerald or 40 aircraft carrier by the president of the united states in newport news, virginia. we will bring you those live at 2:30 p.m. eastern time. and a quick programming note. i'm a chin fed chair janet yellen is scheduled to deliver tomorrow at the executives club of chicago. taking place at 12 p.m. local time. 1 p.m. eastern time. we will bring you those comments in full right here on bloomberg television. of coarse, you can watch all are programming and interviews on bloomberg with the function tv . you can find breaking news charts and related functionality. this is bloomberg. ♪
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>> i'm scarlet fu. >> i'm oliver renick. welcome to "bloomberg markets." ♪
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scarlet: we are live in bloomberg world headquarters in new york over the next hour. stories we'reop following from around the world and on the bloomberg. we start with markets, u.s. stocks in retreat. equities coming off record levels. and it is one of the biggest tech ipos in years, snap shares soaring in a public debut. we are asking some of the early howtups and their investors long this positive sentiments will last. in politics, later in the hour, president trump will deliver remarks aboard an aircraft carrier in virginia. he's expected to make remarks on defense spending. we have your full analysis when it starts. on a tearts were yesterday, but they come
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back a little bit here. let's check on where stocks are trading with julie hyman. julie: after the big rally we saw yesterday, the biggest since the election. u.s. stocks pulling back, not a huge pullback, only 1/4 of 1% for the dow. and come back a little bit here. let's check on where stocks are trading with julie hyman. julie: the nasdaq, as we saw the rally yesterday, we saw valuations climb. oliver told me he liked it, so we will bring it back. this is the s&p 500 earnings and the 10-year yield. the earnings yield of the s&p 500 is getting to be less, versus the 10-year yield. the gap is measured here at the bottom and we are seeing it at its narrowest going back to 2010. you are getting less for your money relative to the 10-year treasury at this point in time. periodically when you see these kinds of rallies like we saw yesterday, investors tend to take a step back. that appears to be what is happening today. onp, shares are surging their first day of trading. 53%, and you can see they are
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26 dollars a share. obviously the demand we saw in advance of the ideal appears to be continuing on the first day of trading. to get some context here, we have something of an ipo scoreboard, other hot i feel's within social media -- ipo's within social media. if you look at the one you're following facebook, twitter, you look at a pattern, all of them traded lower in the year following the initial public offering, and then there is a mixed performance if you look at how they have done up until now. facebook has done the best by far, of 250% from its ipo. twitter and fitbit both down, alibaba up 10%. we have a lot of debate today about which category snap might fall into. scarlet: good stuff. oliver: let's get investor's take on that ipo. company become another twitter, struggling to grow
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visitors and advertising revenue? joining us from our san francisco bureau is a managing director and general catalyst and investor in snap. thank you for joining us great a big day for your team there, what do you make of how quickly these prices are moving up on the shares? >> thinks for having me. this is an exciting day for us. snap is an important company for our first ipo since we expanded the firm to the west coast. i think the successful start you are seeing is a reflection of two things, how popular the product is and how low the company has executed over the last few years. the second is there have not been a lot of tech ipo's and there is a lot of demand to invest in companies like snap. scarlet: it's great to see, and you see how the stock is trading right now. $25 in change around 26, and it ipo'd at 17. where do you see at closing and where do you see it trading a quarter fromvisitors and advertg revenue?
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now? hemant: i can't see the future. the things i can comment on, the company has done a good job setting expectations at the right levels. you are seeing strong investor behind a company, and every decision they are making is for the long-term. what happens in the next few days is really hard for me to predict. so far, so good. scarlet: the reason i ask that is because you can go the way a facebook or you do not have a great debut, but the stock has done very well despite our lousy first quarter, or twitter which has done better, but has fallen below its ipo price. thatis their confidence evan spiegel and bobby murphy can guide snapchat to avoid going the way of twitter? hemant: this is the key question everyone talks about in silicon valley. everyone of these companies is very different from each other. twitter is still a hundred 40-character medium for broadcast. what very different from snap does, which is communication and for everyday now? hemant:lives. there are hundreds of millions
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of people who use it, multiple times, from 10 to 20 times a day. i would say i look at how evan and bobby executed over the last six years, and how many interesting products they have launched. that is a testament to how different the company is from twitter, and even facebook when they had gone public, there was really sort of one use case, and snap has launched a great communication app to redefine how to watch television on mobile. they have created interesting branding and content that is interesting to advertisers. a lot of exciting innovations have come out of the company over the last few years. oliver: when people were starting to question the ubiquity and life span of facebook's original basic product, going on the social media networks, the company started to demonstrate that they were going to be able to create m&a, acquire
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growth in many ways, and expanded into different areas. when you look to the future for snap, along the lines of what we are talking about, do you see the product as we know it now changing a group deal, or do you see them tacking on different businesses and different lines of product onto what we know the app is now? hemant: snap is a product first company. they have continued to innovate. i expect them to keep doing that in the m&a, acquire growth in many future. they have described themselves as the camera company and focus on inventing sort of the next camera metaphor. will they do acquisition? hard for me to say. but i can tell you everything evan describes -- half the time he spends it on product. i see that maniacal focus continuing in the future as well. scarlet: joe weisenthal said snap is three times leverage shoretel people etf. when you look at the audience it is focusing on, we are talking about millennials, notoriously
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fickle. the market cap of this company is about deutsche bank, united continental, pbs as well. does a company like snap need to millennials to a bigger audience, too, for instance, their parents? hemant: snap is a company that is capable of building mainstream products. they certainly launched products that have started with the millennials but have been designed to be very mainstream. if you look at the number of times -- have their users are over 25. if you look at the number of times folks over 25 use the product, it's over 10 times a day. that is not a product you would say is a millennial-only product. it's very much mainstream from the way i think about it or it oliver: how long will you hold as it not being a profitable company? hemant: that's a difficult question, because we don't -- we
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have sort of in general millenna had a pretty set methodology for how we exit companies after they go public. we distribute them over a certain amount of time over time, i think we will stick with that strategy. with how theo do company itself is performing up or down, it's very much about what we can get and how we handle them back there. scarlet: you have years of experience in dealing with evan and spiegel. what is your confidence that the two of them controlling more than 90% of snap's voting shares, that won't hurt the company as a public entity? hemant: i admire them for being transparent about their long-term views for the company, and doing this as a priority. we invested in them, we backed them because we think they are brilliant and they have certainly proven to be so. the way they have made decisions, and hope they will
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continue to innovate the way they have in the past. hemant taneja, thank you for your candor on snap. congratulations on the -- that the ipo price is above its range. mark crumpton has more from the newsroom. mark: chuck schumer says attorney general jeff sessions must resign. the justice department confirms sessions met with russia's ambassador to the u.s. while he was a surrogate for the trump campaign. in his senate confirmation hearing, sessions denied any contact that occurred. cannot says sessions play a role in the investigations into russia and the trump campaign. >> the justice department must immediately appoint a special prosecutor, given that attorney imprtiality iss' compromised, that responsibility will fall to the acting deputy attorney general, dana valenti. mark: the white house is
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dismissing the controversy is a partisan attack. president trump wraps up his campaign to boost defense spending today. the old for an aircraft carrier being billed in virginia and will talk to sailors and shipbuilders. the president also will make a speech aboard the uss gerald r. ford. earlier this week white house proposed increasing the pentagon budget by 10%. watch the president possibly beginning at 2:30 new york time right here on bloomberg television. the u.s. senate has the votes to confirm rick perry as the energy secretary. that vote is still ongoing. governorformer texas and republican presidential candidate, is the second trump cabinet pick to be confirmed today. today the senate also confirmed ben carson as secretary of the department of housing and urban development. sweden is bringing back the military draft to counter russia's buildup in the baltic sea. both men and women will have to serve. country and the draft 7
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years ago. hemantglobal news 24 hours a d, powered by more than 2600 journalists and analysts in more than 120 countries. -- over 120 countries. i am mark crumpton. this is bloomberg. scarlet: as mark mentioned, we are waiting president trump this hour. that is the uss gerald r. ford in virginia, were he will begin speaking at approximately 2:30 p.m. another event we will be watching for, tomorrow at 1:00 p.m. eastern, fed chair janet yellen will be speaking at an executive club of chicago event. the chorus for a march rate increase has grown louder. we will be hearing what janet yellen, vice chair stanley fischer have to say about that. this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i'm scarlet fu. in just a few moments, president trump will deliver remarks on board -- important aircraft carrier from newport news, virginia. we had to our chief washington correspondent for bloomberg news. he is at the white house. the president coming off a very polished turn in front of congress on tuesday evening. do we expect that tone to carry through in today's speech? >> we have some breaking news. president trump telling reporters when he touched down that he has quote, unquote, total confidence in his attorney general jeff sessions. facingy general sessions intense scrutiny today from democrats, many of which are calling for him to resign as a result of him having communications during the presidential campaign with russia despite him testifying on capitol hill during his senate confirmation hearing that he did not have such communication.
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a lot of politics going on here in washington about that particular issue. president trump standing by him ahead of his speech. about, giveill talk a little speculation from you if you are so kind. we have a speech coming up here from trump. what is he going to talk about here? it seems it might be defense, infrastructure spending. kevin: this will be all about that $54 billion increase to the u.s. military that president trump is pushing for. of course, this comes as he will be speaking about the most expensive u.s. aircraft carrier ever built, coming in at a total cost of $13 billion. as we all know, president trump saying earlier this week that he wants to have that $1 trillion infrastructure spending. his top aides and washington are meeting to begin kickstarting all of that, and how that policy will play out. on capitol hill there's a lot of talk about how he will pay for that infrastructure plan.
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shuster hasve bill a plan involving lowering the corporate tax rate. scarlet: kevin cirilli, chief washington correspondent, thank you so much. still ahead, augmented reality. oliver: will it be the next big thing for apple? that is next. this is bloomberg. ♪
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slowing iphone sales and pressure mounting. for more, let's head over to caroland kerry mansell -- massar and cory johnson. this is bloomberg radio. our guest is a technology analyst at ups. we are talking about apple. you talk about the importance of
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apple in terms of growth going forward. it's going to be may be due to augmented reality. what is your case? all,r case is at first of the ceo tim cook is talking about augmented reality. apple is famously secretive and really doesn't talk about coming products. but he has suggested that augmented reality will be important to the company, more important than virtual reality could be as important as the iphone. the same time, he cautions there's a lot of discoveries he made and it's not necessarily independent product but perhaps a component. our cases we see augmented reality perhaps starting with the iphone 8, continuing over the next few years, and the financial impact is likely to be more iphone sales. more upgrades. and eventually a separate product, like google glass, for example. cory: what do you imagine the actual use cases will be? someone could look at snapchat as an augmented reality product, the wavy filters mapped to the human face and augment that
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reality, whether it is giving somebody bunny ears or a dog's tongue, but it is that augmented reality. >> right. the example today has been pokemon. using computers to digitally enhance the real world. softwarealking to one developer who said, looking down at our phones as we are walking down the street will seem like the dark ages because we will be potentially having our phones up, the camera on the out facing side will essentially create a plate of glass and you can see things put onto your phone. you can be walking down the street and you can see a national monument or something, information on it, may be a starbucks, they can send you a groupon. maybe you see different people and you can see information about them, rivers facial recognition. who knows what it's going to be. there's a lot of opportunity here. initially what seemed to fit very well tied into the iphone, tied into apple's core competencies. carol: let's talk about applications. do you foresee, there could be a
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retail environment where you walk into a store, you pop it up and it directs you around the store? >> they could very well be. apple already has those ibeacons in stores. there is something called slam which has to do with 3-d mapping. you have to be able to map the environment you are in, whether it is a room or store. and it does that by walking around it, essentially. that cancelerometers get your position by walking around. he figures out what the environment is. it could very much work in a store. a certainbe going way, the store could know where you are. you can go over here. we have this sale 30%. cool, may bemay be annoying. doesn't sound like a lot of revenue for apple. do you imagine a revenue event with these things? >> initially, probably not. it will be enhancing the current franchises.
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you point out the iphone and ipad. pay 30, 40, $60 more for a phone because of the use case ability. someday perhaps they could result in different devices. initially i think it's going to be enhancing the current product, and that is what tim cook has suggested. it's more of a semiconductor than a separate product, in that it goes into a bigger product and enhances the value to the customer. carol: in this call, and you looking at augmented reality and the importance to apple potentially, you raise your price target on the stock to $151 a share, $139 in change. we have seen the stock move up 20% this year. is this valuation, upping of the price target, is it all automated reality or is there something else going on? is partially augmented reality. we don't know with the financial contributions.
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we know he can contribute to maybe 2 to 3 points of higher revenue. it gives you the sense that you could and fact have an elongated cycle here, where 6 to 12 months ago most of us thought the iphone 8 next year would give you great ghost and the next year could be -- growth in the next year could be down. with something is partially augd reality. we don't know with the financial like augmented reality, maybe it is 3 to 4 years of consistent growth. what we have suggested is that the pe of the stock would benefit much more from enhanced growth than a higher return on capital. apple would be doing well. they would probably trade-off margin for faster growth. we think augmented reality could contribute to that. far in theo get too weeds with technology, but the , a screen will allow for a refresh rate that is 4 or 5 times what the current screens are, which means you could watch virtual-reality without getting sick as happens with other screens right now. it could allow for a different experience. is that a clue to you that they may be thinking about augmented reality right now with this next
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phone? >> i would say what you really need most of all are a camera and software. camera on the iphone 7 you.
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scarlet: carol massar and cory johnson. catch more of their radio interviews on sirius xm, on, and tdr go bloomberg. we are awaiting a speech on defense spending from the president. that is a live shot on for the new aircraft carrier, the uss gerald r. ford. he is due to begin start speaking shortly. he's right behind the person ready to introduce him. we will bring you to that event when he begins. going to be talking about where he will get some of the funding for his proposed bumps to defense spending. let's take a look real quickly at some of the news happening today with the bloomberg business flash. the nike president tom farley, we talked about snap. he said he is pleased with the step's firstar in trading day. he spoke earlier to bloomberg's caroline hyde. >> i take great comfort that the stock opened at 24 and it is trading smoothly right around that number. that's exactly what you want on
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the earth day, especially of a large ipo. oliver: the ipo tested investor advertised for an app that is popular among people under 30. falling to shares the biggest one-day drop since last june after the construction mining equipment giant confirmed that law enforcement officials had executed a search warrant. the department of justice says the irs, fdic, and the commerce department, were involved in searches. caterpillar said it is cooperating. in china, alibaba rifle is stepping up the competition. the online retailer selling its billion in for $2.1 cash and will retain a share of future profits. yet another battle with alibaba, which has spun off its own finance unit. is backed by walmart. that is your bloomberg business flash update. willet: as promised, we bring you back to newport news, virginia, where the president is
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getting ready to speak. right now he's being introduced by the late gerald ford's daughter. she is of course making opening remarks there. they are on the airship carrier the uss gerald r. ford in newport news. there lead up to this, are so much controversy regarding jeff sessions, the attorney general and whether he met with russian officials, russian diplomats. asked aboutt was this, about his confidence in the attorney general just now. kevin cirilli telling us that the president said he has total confidence in the attorney general, and when asked if jeff sessions should recuse himself, the president said, i don't think so. he said he quote, wasn't aware about jeff sessions meeting with russia possible acid or pete sessions' defense is that they took place in his capacity as a senator rather than a trump administration official. response top's these types of things where he says, i don't think so, it does feel like he is sort of coming up with that decision on the
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spot. he is now finishing the tour and stepping up to the podium right now. we are going to take a listen. [applause] pres. trump: thank you. think you very much. what an honor. they just gave me this beautiful jacket. they said, here, mr. president, please take this home. i said, let me where it. and then they gave me the beautiful hats and i said, maybe i will do that. we have a great make america great again hat, but this is a special day, we're wearing this, right? i have no idea how it looks, but i think it looks good. it's a great looking hat. just like this is a great looking ship. i'm privileged to stand here today with the incredible men and women of the united states navy. [applause]
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american sailors are the best war fighting sailors anywhere in the world, it's not even close. and susan, i am so glad you could be with us. i know how hard you work, 17 visits, and she wanted things done right, i will tell you. they told me, she wanted this one done right, in honor of both of her parents who were great, great people. and we wanted to introduce this beautiful vessel to the american people, and i wanted to be here. i wanted to be with you. so susan and to your family, unbelievable job. unbelievable. [applause] commissionede gerald r. ford uss, what a place . a place. feels like you stand on that deck and you feel like you are standing on a very big piece of land, but this is better than land. not only a great symbol of american strength, but a great and ouror your father
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former president, gerald ford. president ford was a navy man. he was also a great athlete, for those of you who didn't know. he saw action in the south pacific during world war ii. he served this country with honor, and the military in congress, and in the white house. the proud dignity of this ship is a fitting tribute to gerald ford, the man and the president. congratulations to all of the men and women who helped build it. this is american craftsmanship at its biggest, at its best, at its finest. american workers are the greatest anywhere in the world. this warship, and all who serve on it, should be a source of shared pride for our nation. we are joined today -- better believe it.
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better believe it. [applause] by the way, we're soon going to have more coming. by generald today mattis, now secretary mattis. whoamerican workers are the will be charged with overseeing this great rebuilding of our military might. we will give the men and women of america's armed services the resources you need to keep us safe. finest have the equipment in the world. planes, ships, and everything else. very soonng to have
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the finest equipment in the world. [applause] we will give our military the tools you need to prevent war, and if required, to fight war, and only do one thing. do you know what that is? win. win. we are going to start winning again. admiral john richardson, chief of naval operations, is with us today as well. great gentleman. we are going to ensure our navy , personnelources training, and equipment, the kind of equipment you need. so, congratulations, admiral. a lot more is coming. [applause] let me congratulate captain richard mccormick, commanding officer of the gerald r. ford.
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this ship will make an extraordinary addition to the fleet, like no other. anywhere in the world, there's nothing like this. it represents the future of naval aviation. thane no greater privilege two serve as your commander in chief, and the commander-in-chief of the men of the united states military. people. great, great people. people. great, great people. i salute you, and i salute our sailors. i will always support you and your mission. i will never, ever let you down. and i also have to recognize, mike patters, the resident and ceo of huntington angles, along with the president of newport news shipbuilding.
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they won't let you down either. they are not going to let you down either. to those who serve our nation in uniform, and to those who built the instruments of our defense, i thank you on behalf of of our nation. i agree. i agree. our carriers are the centerpiece of american military might overseas. we are sending today on 4 1/2 acres of combat power and sovereign u.s. territory, the likes of which there is nothing to compete. there is no competition to this ship. it is a monument to american might that will provide the necessary to necessary to ensue
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peace. this ship will carry 4500 future. the great admiral recommended the u.s. pacific fleet through the second world war once said, it is the function of the navy to carry the war to the enemy so
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that will not be fought on u.s. soil. true. and it was under the admiral's years ago this june, that the navy did just that, at the battle of midway. you've all known about the battle of midway. where the sailors of the u.s. navy fought with a bravery that will be remembered throughout bravery, storied throughout the ages. the backbone of the american fleet at midway was 3 beautiful aircraft carriers. the yorktown, the enterprise, and the hornet. all three were built with american hands right here at the newport news shpiyard. -- shipyard.
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at midway, america was greatly outnumbered by -- i mean, a lot. fleet badly damaged. but the heroin deeds changed the course -- heroic deeds changed the course of history. many americans die that day, and through their sacrifice, they turned the tide of the pacific war. it was a tough tide, it was a big tide, it was a vicious tide, and they turned it. countless other americans in that war, some of them parents and grandparents to people in this room today, came home thanks to their very heroic aid es. the sailors at midway are part of a long line of american heroes, an unbroken change from each generation to the next, who to defend our flag and our
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freedom. that legacy continues today as american warriors protect our people from the threat of terrorism. on tuesday, in my address to a joint session of congress, i asked congress to eliminate the defense sequester, and to support my request for a great rebuilding of the united states military and the united states navy. [applause] after years of endless budget cuts that have impaired our defense, i am calling for one of the largest defense spending increases in history. by eliminating the sequester and the uncertainty it creates, we will make it easier for the navy to plan for the future and thus, to control costs and get the
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best deals for the taxpayer, of course is very important. got to get a good deal. we don't make a good deal, we are not doing our job. the same boat for less money. the same ship for less money. the same airplanes for less money, that is what we are doing. we are going to get more of them, and we can use them. our military requires sustained, stable funding to meet the growing needs placed in our defense. right now our aging frontline strike and strike fighters, a whole aircraft, many aircraft, are often more likely to be down for maintenance than they are to be up in the sky. our navy is now the smallest it has been since world war i. don't worry. he will soon be the largest it has been. don't worry. [applause]
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think of that. in these troubled times, our navy is the smallest it has been since world war i. that's a long time. i just spoke with navy and industry leaders and discussed my plans to undertake a major expansion of our entire navy fleet, including having the 12-carrier navy we need. we also need more aircraft to modernize capabilities and greater force levels. additionally, we must vastly improve our cyber capabilities. this great rebuilding effort will create many jobs in virginia, and all across america. it will also spare new technology and new innovation. been theas always
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country that boldly leads the world into the future. will ensure we do so, and continue to do exactly that. american ships will sail the seas. american planes will soar the s kies. workers will build workers wilr fleets. [applause] military will ensure that even though the darkest nights and throughout, a bright and glowing sun will shine on our nation and on our people. our navy is great. our navy is great great our people are great -- great. shine on our nation and on ourour people are great. great. our republic will meet any challenge, defeat any danger, face any threat, and always seek
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true and lasting peace. may god bless our military, may god bless our navy, may god bless the wonderful gerald ford continue tomay god bless the united states of america. thank you very much. [applause] ♪ scarlet: that was president trump and in his remarks aboard the uss gerald r. ford in newport news, virginia. this is one of the most expensive aircraft carriers ever built. he committed the united states to building more of them. he said he wants to get them at a lower price, and we can build more of them. he committed to a 12-carrier navy. the big take away here was his reiteration of asking congress to eliminate the defense sequester and support his requests for a rebuilding of the u.s. military and u.s. navy.
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oliver: he said he wants to talk about a clear path for the future as a way to ensure that we can get the best deals, because of that, of course, is important. so far we think he will be looking at a $54 billion increase to the defense budget. that means he will left to out where those cuts will come elsewhere. he's a big fan of the ship. that was a solid 2 minutes appraising the carrier. he pointed out he does want to buildbuild more, so we will have most planes in the air, the most ships on the water. he also talked about how we will rebuild the navy back to the biggest level since world war i. scarlet: we are past that. it's the smallest. oliver: exactly. let's bring a bloomberg analyst to do covers -- who covers the defense industry. some state off with of defense, because trump mentioned -- that we need to rebuild it back up.
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what data do you think he is looking at their? >> i think he's talking about, if you look purely at the number of ships, i think by one measure, he might be able to say we are smallest since world war i. the ships back in world war i had a less capability. the main ships in those days were battleships straight they could fire a gun about the range of 26 miles. we do not even have aircraft carriers. it's not a perfect comparison. oliver: we can do more with less now, basically. robert: yes. no ships today, there's comparison between what the ships today can do and what they could do in world war i. scarlet: what does it mean when he said he committed to a 12-carrier navy? where are we now and where does that put us? robert: right now we are at 10 carriers. there's always one being sort of refitted because you have to refit the nuclear capability every so often in that. it is a growth, adding the gerald r. ford and adding another one or two carriers. and then we build the fleet
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around those carriers, all the other ships could go with it. oliver: let's talk about the dollar signs here, the numbers. you guys have a really good analysis on the bloomberg right now about where the money is going to come from if he decides to bump up defense budgets. right now he's talking a roughly $15 billion increase, $54 billion, to the defense budget. where will that come from, in terms of having to cut other parts of the budget? robert: he said he will completely offset $54 billion increase to defense with cuts in the other parts of the discretionary budget. he's not touching social security or medicare. he's got to go after those other departments. you figure he will add to homeland security, add to the justice department, and he's at least not going to cut the veterans administration. if you look at everything else, he has to cut about 13% of the budgets, we do the same thing across all the different
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agencies, about 13% of their budgets from where they were going to be. scarlet: but there is a sequestering, and he can't just blow past the budget control act that was set in place, right? robert: right. part of this has to be a repeal of the budget control act, or at least raising of that defense cap. if the defense cap is still in place, they can even appropriate more money, but then it does get sequestered, meaning it gets taken away, which is what happened in 2013. oliver: from your analysis, what companies stand to benefit here? you have an interesting caveat in your analysis, which talks about how these companies that are going to be the ones that build these planes, build these ships, depending on where they cut from the budget, it may net out to not so profitable for them. robert: copies like lockheed martin or general dynamics do a lot for department of defense, and will benefit greatly from increases to that budget. i think is thes
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number three contractor for health and human services. if you cut health and human services, it will hit general dynamics. there's going to be a gain loss equation for companies like that very scarlet: the president wants to increase defense spending by $54 billion you has touted his ability and skills as a dealmaker. where do we think that number is going to end up? robert: i think your term is exactly right. it's a nice navy term too, scarlet. this is the first go into this, already the chairman of the senate armed service committee and chairman house armed services committee, mccain and senate on very and the house have already said the proposed cuts to the state department will not fly with them. already the negotiating process has begun. the democrats have said, we are willing to increase defense, but we are not letting you cut non-defense straight democrats will get on board with more defense, but they want more nondefense, which is the way things have worked since the
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passage of the budget control act. oliver: how does this separate at least the proposal he has right now? how does that compare to his predecessors? 2018, this isscal really only about it 3% increase over what president obama last proposed in his last budget. it is significant, but it's not dramatic as much as like, senator mccain wanted $640 billion in 2018. the numbers they are talking about is a $603 billion. people like -- it's not where people like senator mccain would want. oliver: robert levinson, fantastic conversation there. scarlet: let's return to the markets and get a check on how things are going with julie hyman. of the worstne performing groups in the market overall in the stock market overall, the financials. 1.2% rate its down
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was on of the best performers yesterday, posting its biggest one-day gain since just after the election on november 10. it was up almost 3%. if you look individually, what the worst performers are, it's a mixed bag. a lot of regional banks, citizens financial, regions, e-trade is the exception to those regional banks that are what's down that etf, also interesting today is that we are seeing a climb in treasury yields. usually you see the financials benefit from that. but that is not happening today, as you see the 10-year yield at 2.49%. earlier it touched to buy 5% on these rising perceptions that the fed may raise rates as early as march 15. however, the big gains in stocks yesterday appeared to be having this sort of rebound down. i don't know what the opposite of rebound would be in today's session. those yields higher not helping matters today. scarlet: i guess a dip?
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oliver: reversal, it goes both ways. hyman, thank you some much. coming up, a one-on-one conversation with the new york stock exchange president, tom farley, i get his thoughts on the debut of snap. this is bloomberg. ♪
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scarlet: we just want to show you some video from earlier in the day when president trump was touring the uss gerald r. ford in newport news, virginia. this is prior to his speaking on his plans to increase military spending, not just for the military overall, but the u.s. navy specifically. k made some headlines there, saying that he wants to bring us also12-carrier navy, and that the navy right now, its size makes it the smallest as world war i. oliver: he plans to put more planes in the air, warships in the water, get us better deals. it sounds like maybe he's going to be sort of scaling up in
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terms of trying to get lower prices for the same ships. it sounds like he wants the same ships. he's a big fan of the gerald r. ford carrier. scarlet: it's pretty expensive. oliver: huge, big. scarlet: snap has made its trading debut. the ipo was priced at $17. it opened trading at $24. about $25 right now. theline hyde caught up with new york stock exchange president. she asked him if he expects more --to list on an icy. this is our 13th, this year in the first quarter. we have a whole bunch more coming in march and april. very full calendar, unless something changes. will tell you, i know first hand, those big tech names are watching very closely what happens today, and it can alter plans to move ipo's forward or backward.
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as a person who runs a business that benefits from ipo's, i take comfort that this ipo is very smooth and they have what many described as a healthy evaluation. >> do you feel 2017 will be the year of more companies coming on? >> yes, absolutely. things can change. 2015, it was a volatile day, and the market shut. number of ipo's we have planned a particular day plus those in process is very high. how do you diversify to ensure you have cross-sections? .> it's hugely important we are very large in oil and gas, the global leader in oil and gas. that's now a very hot sector. if we ignore that sector over the last 2 years as oil came from the lows, $30 a barrel, we would not be getting those ipo's coming back.
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now they are coming back, oil is at $50, and that is helping us fill our ipo calendar. be may caroline: how does the market change all of this? we are heading by record highs in many an index. is that a cause for caution or optimism? >> in terms of ipo's, there are three things that matter. the absolute level of asset prices, we are at all-time highs. volatility, the lower the better. we are at all-time lows. and an interest rate. not really matter whether interest rates are high or low, but are they stable. an interest rates happen to be stable. things happen to be quite good. if any one of those alters, that doesn't mean the ipo goes away. it just means not all three factors are hitting on all cylinders. caroline: we are in a perfect storm when it comes to ipo's. >> i would not call it a perfect
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storm, i was just pointing out the trifecta. things are going well. scarlet: that was the new york stock exchange president speaking with our caroline hyde. stax shares trading right now above 25. it opened at around 24. at $17 alast night share. the remarkable story here is that the ceo and cofounder evan's legal and his chief technologist -- complete control. oliver: did not issue voting shares. they are pretty young guys, too. 26 and 28, i think. coming up, he's long been one of the most vocal analysts on wall street. mike mayo is going to talk about the closure of his firm. this is bloomberg. ♪
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oliver: it is 3:00 p.m. in new york, 12:00 p.m. in san francisco, 8:00 p.m. in london. i'm oliver renick. scarlet: i'm scarlet fu. welcome to "bloomberg markets p ."
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♪ we are live from bloomberg world headquarters in new york for the next hour and covering stories in san francisco and paris. top stories on bloomberg and around the world we are following -- equities coming off record levels with financials and industrial stocks the biggest laggards in the s&p 500. in politics, president trump toward the uss gerald ford and vowed to rebuild the military. the president says he has total confidence in embattled attorney general jeff sessions. it is a big day for snap as the company makes its public to view. we will bring you the latest movement on the stock as it wraps up the first day of trading. let's get a check on the markets with julie hyman. julie: we are seeing a little bit of a pullback. it appears to be a reversal, to use the chosen word from earlier. yesterday, the biggest gain since the election, major closes
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for damages yesterday. and as oliver pointed out, the cyclical groups are doing the worst today. financials down 1.25% and the losses have been accelerating as the day has gone on. energy,s, industrial rounding out the worst performers here. it is a bit curious that we are seeing treasury yields higher net utilities are up and financials are down. a little bit of a flipping of the script we have seen recently. something our colleague danny berger pointed out is that yesterday a lot of the buying was happening potentially -- maybe it was retail investors . it yes with the biggest inflow in two years, the big bump we hea have here. bigng on to the 2 individual stop stories, we have
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caterpillar shares heading for a steep incline, 4.4%. that is after the news that the company offices in illinois, three of its different offices, are being searched by investigators from the fdic, irs, and commerce department. i was confirmed by a spokesperson -- that was confirmed by spokesperson from the u.s. attorney's office in illinois good still unclear what they are looking for publishers are being punished as a result of the uncertainty. the other big stock story, snap, of course. shares surging in the first day of trading as the social-media ipo sees high demand. the shares were priced above the range and are being brought up even more. however, we should know that of the analysts who have covered the stock thus far, 2 sell ratings and one cold so not everybody's that bullish. oliver: we will have to check in on snap. julie hyman, thanks so much.
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scarlet: we stay with equities because even though the major indexes are lower, s&p 500 is still up 11% since the election in november. where does that leave the trump rally? joining us is chief equity strategist at ubs. is this still a trump rally or an economic fundamentals-driven rally? argue the economic improvement and the inflection point in corporate earnings growth has been the driver of the gains we have seen the past several months. we were in this so-called earnings recession from the middle of 2015 to the middle of 2016, where the headline s&p 500 earnings were down anywhere from 1% to 6% year on year. the shift in the third quarter of last year when earnings growth resumed and earnings grew 4% in the fourth quarter and 6% all the leading indicators suggest to us that earnings growth will continue to accelerate in the first half of the year. oliver: jeremy, i'm glad you
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brought up -- oliver renick here, good to have you on the show -- you brought up the earnings rebound. it is hard to figure out what the driving force is several months after the election. we did a story back in march that looked at how stocks in the s&p 500 had gone through their own bear market, or close to thereof. you saw the same percentage of companies in the s&p 500 that had gone to a bear market the previous year as they did in 2011. i'm wondering, with that as the basis, is there a possibility that corrections we have had, big one this time last year, sort of hit the reset button and perhaps we are in shift higher here? is the caseink that for a select group of stocks and one of our favorite sectors was the most beaten up in 2014 and 2015, the energy sector. energy stocks rebounded sharply last year, outperforming the s&p by 15 percentage points.
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this year they have mysteriously lacked despite the fact that oil prices have been steady. we definitely think there is catch-up in the energy sector. many multinationals have their earnings heard either strong dollar. on the year on year basis, it is going to be much less of a drag ofn it was during the period broader earnings for the market. there is a good case to be made for the areas previously depressed to perk up. scarlet: speaking of one area that had been depressed since the financial crisis is financials. they got a huge boost on the election on hopes that we will get an interest rate increase. as well, that the trump administration would roll back financial regulations. with that not in the immediate term, because they have to get through a whole bunch of things, whether it is the affordable care act or corporate tax reform, what is the likelihood tot financials continue sustain the advances they have made?
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jeremy: we upgraded financials and are still only two our overweight position. when you look at the sector, yes, they have rallied sharply since the election, but all the earnings drivers for the sector seem to be moving in the right direction. we have higher interest rates than a year ago, steve yield curve, should have some pickup in the upcoming months and quarters as the economy is picking up scene and consumer and business confidence is improving. and then on the cost side, potential for regulatory relief to reduce overall compliance costs. while the sector is no longer inexpensive compared to where it was the past five years in the post-financial crisis period, i would argue that earnings growth will be comfortably in the 12-14% range for the sector. atver: jeremy, when you look where the flows have been coming from, there is a report by jp morgan looking at what they deem as being retail vs.
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institutional flows, and what they saw in the past year, year-to-date so far,, is the net $83 million cash move into strategies and $15 billion out of managed funds, which tells them it is a retail-driven market right now. does it concern you at all, or rather, without spinning your answer here, what do you make of a market in which mom and pop are very active again? jeremy: i think when you look at overall levels of individual investors, cash levels have been very high, and that has been a very persistent characteristic in the post-crisis era. given the fact that we are seeing confidence levels, back to above precrisis levels, i would expect to see some of the cash balances come down, and that would add some benefit to the overall valuation levels. i think we are seeing some of that take place and that is likely to continue as long as the economic data and corporate
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earnings trajectory we have seen the past few months continues the next three months. oliver: pretty big sample size at ubs wealth management. can you give us insight into what you are seeing with cash levels and clients right now? jeremy: we are starting to see investors get more interested in putting that cash to work. this is quite anecdotal, but overall, and the conversations i've had with advisors and clients, it really feels like despite the fact that -- there is some camp with some trepidation of having missed the rally. there is a broader audience that feels like having such high cash balance, particularly when the cash yields remain very low in a nominal terms, negative in real terms, given that inflation is running low, it is time to shift into riskier assets. scarlet: jeremy zir thank you for joining usin,.
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let's get headlines on "first word" news. mark crumpton has more. mark: president trump met with sailors and should builders aboard airport clearly -- aircraft carrier uss ford in newport news, virginia. his visit came days after the white house released a draft budget plan that would add $54 billion to the pentagon's projected budget. that is a 10% increase. before the speech, the president was asked about his confidence in attorney general jeff sessions, despite calls for sessions to resign over revelations involving russia. >> mr. president, do you still have confidence? president trump: total. said hee president also "wasn't aware at all" of sessions' meeting with the russian ambassador during the presidential campaign. democrats like adam schiff of the house intelligence committee
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also spoke about sessions and he sees things differently. ep. schiff: certainly if willfully misled the senate in his confirmation hearings he should step down. i want to look into whether that was a willful misrepresentation. also congressman schiff raised the possibility of subpoenaing the fbi to get more information about what the agency knows about the alleged connection between russia and the trump campaign. former texas governor rick perry has been confirmed as energy secretary. the senate voted 62-37 to confirm perry. cabinete second trump picked to be confirmed today. earlier the senate confirmed ben carson as the secretary of housing and urban development good british prime minister theresa may will try to overturn the first parliamentary defeat of her bill on brexit. it protects the rights of eu nationals to keep living in the u k may wanted the bill left intact.
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later this month she will try to get the house of commons rejected the amendment. -- to reject the amendment. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. oliver: mark, thank you very much. coming up next, a bloomberg exclusive. mike mayo sat down with bloomberg for his first tv interview since leaving the sla. this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i am scarlet fu. oliver: i am oliver renick.
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psa is said to be closing in on a deal to require general motors mobile unit, recordings of people familiar with the matter who say an agreement could be on the table as early as next week. it would create europe's second-largest automaker. both companies are said to be planning on continuing intense negotiations through the weekend with the aim of announcing the deal on monday. what's corp. is drawing bids from apollo global management and kkr, according to people with the knowledge of the manner, who also say that a decision could be made as early as next month. the telecom company said in november it was exploring strategic options. the company has a market value of about $2 billion. amazon says human error at its sweepinginess led to outages on wednesday. it actually switched off more
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servers than intended, causing errors that cascaded throughout its service, which is used to house data and manage apps and software downloads by nearly 150,000 websites. that is your "bloomberg business flash" update. scarlet: mike mayo has been one of the most vocal critics on wall street. he lost his job when clsa shut down its equity research unit. in his first television interview since then, he sat down with "bloomberg markets" for an interview. : i am proud for having been the only analyst testified to the u.s. congress for sarbanes-oxley in 2002, and i have a whole testimony saying that if you play ball with corporate management and you get all sorts of perks and you are aggressive against corporate management, you get a stick and laughed upside the head. for the most part since 2002, 15 years later, things haven't changed too much. as much as things change, they
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stay the same. that, i have had enough experience that i am able to be a bit more aggressive and still be able to do my job. you talk toes when management you do better research. i've done my best research when i don't talk to management at all. it is detail in my book and the testimony to congress. it's helped make me a better analyst. vonnie: when you say you don't think anything is changed much, does that mean regulations matter like we are promised now? regulations are good, red tape is bad. keep the safety of the system, get out the complexity. as an analyst at a brokerage firm, you have to fill out a paper once every three months saying your views express what you really mean. it is just a lot of paperwork.
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the reality is in an era when we are pulling back regulation, it is more important for investors to hold cap corporate management accountable. vonnie: clsa winding down the equity unit, what does that say for corporations? mike: jpmorgan had its annual investor day on tuesday. the fastest region of growth for jpmorgan is asia, and they are expanding with equities, fixed income investment banking, capital markets. the large global banks that roll out a full spectrum of products are and can gain shares. there is always a role for what i do and others like me. extent that you hold management accountable, to be acting in the shareholders' best interest, that is not going away anytime soon. encouragement from
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investors, mike, keep doing what you are doing. they're like, yeah, there is a disconnect between the management and board of directors -- vonnie: and you own a little bit of each bank just to be able to go to the meeting, not for any other reasons. explain to me how much the u.s. will hold on to its dominance as the banking center. we are seeing signs post-brexit that britain might be losing some of that. how long before asia has predominance again? mike: not too soon. the u.s. banks, investment banks -- goldman sachs, morgan stanley, jpmorgan, bank of america -- they gained market share last year. the u.s. banks have the strongest balance sheet in a generation. u.s. banks can deploy those balance sheets to facilitate more investor activity. are in as right now position of relative strength. vonnie: you were super bullish on banks in the 1980's and then turned bearish team in
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1990's, turned bearish, and that you change your outlook for the banks, very positive again, and now you think there might be over exuberance. mike: i would say for the first time last year i'm now saying that perhaps too much of the in.p bump has been priced there is short-term potential issues. i think we will hear 2 words over the next seven weeks, those are sector rotation. first-quarter earnings should be pretty good for the banks, but either at the time or before that, you will see a rotation out of bank stocks. be aware in the short term them even though i'm constructive over the several-year horizon. vonnie: net interest margins appear to be rising. which outweighs which? mike: higher interest rates are very good for the banks. the net interest margin for u.s. this decade, 1/5 the lowest level since 1955. if you say look out for the
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effective interest rate on the market, it has been done. in our earnings forecast, i the interest margins do increase. you don't recapture all of what you have lost. but that had been absorbed. vonnie: you have to start paying out again. mike: not yet come but industry has record n record the quiddity. -- record n record liquidity. the next two years you could have more, just not right now. scarlet: it was mike mayo speaking earlier today on "bloomberg markets." breaking news here -- we learned that attorney general jeff sessions will be speaking to the media 4:00 p.m. eastern time, just about 40 minutes. he is under fire for speaking with the russian ambassador during president trump's campaign, this is before the inauguration. the president earlier today said he has total confidence in jeff sessions. mr. sessions ready to speak to the media at 4:00 p.m. today.
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we will bring you that coverage when it happens. from new york, this is bloomberg. ♪
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oliver: this is "bloomberg markets." i'm oliver renick. scarlet: i'm scarlet fu. time for " options inside" with julie hyman. julie: joining us is the equity strategist with macro risk advisors. he has been a really interesting few weeks in stock markets in particular. stocks coming down a little bit today, but having the big rally yesterday. one of the things you pointed out to me is at the same time we have seen stocks rally, we have been seeing volatility kind of balance -- trend upward. that is unusual. what accounts for that? >> it is very unusual. typically equities and volatility show an inverse relationship. over the past couple of weeks you are seeing growth equities as well. volatility
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i think there are a couple of reasons for this. people who are short would say people override, they sell call options to generate yields come that is fine and any when the market is going sideways, but when you start rallying higher, very violently as we have the past couple days, that is when you have a problem and people start buying back-to-school options and basically chasing buyingrket upwards -- those call options and basically chasing the market upwards. julie: that feeds into the stock rally as well. what is another factor -- those are essentially the 2 factors? pravit: yeah, another thing you realize this volatility counts with up moves -- take an extreme example like the 1999 dot-com bubble, that was extreme volatility to the upside and you saw the same phenomenon play out. julie: gotcha.
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i know your traded today deals with volatility. if you look around this and analyze it and make a bet based on it? pravit: well, what we're looking at is skewed. this is like a practitioner's turn to talk about how expensive put options are and how expensive protection is relative to upside cost. we have seen call options get more expensive relative to puts. you are seeing puts get cheaper relative to calls. when we're looking at today is selling call options to get put options. and we are not bearish in the market, per se. we could see a little breather in equities and participate little to the upside. julie: going to leave it there.
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talking to us about what is going on with volatility in the stock market might have it scarlet: thank you so much, heads-up that attorney general jeff sessions will be speaking to the media at 4:00 p.m. jeff sessions under pressure after saying he did not have contact with the russians during the presidential campaign. jeff sessions to speak to the media 4:00 p.m. eastern time. from new york, this is bloomberg. ♪
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mark: i'm mark crumpton. time for "first work" news. totalent from says he has confidence in attorney general jeff sessions as calls mount for
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him to resign or recuse himself over conversations with the russian envoy. seems to contradict his sworn statements to congress during his confirmation hearings. reporters asked the president during his tour of the u.s. is gerald ford. >> [indiscernible] president trump: i don't think so at all. >> when did you learn he spoke to the russian ambassador? president trump: i wasn't aware at all. >> do you think he should of spoken truthfully? president trump: he probably did. democrats are demanding the attorney general resign over the contact while some republicans say sessions should step aside from a federal investigation into russian interference in the election. coming up in about 30 minutes, attorney general jeff sessions will be making a statement from the justice department. we will bring you his


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