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tv   Bloomberg Daybreak Americas  Bloomberg  October 17, 2017 7:00am-10:00am EDT

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alix: u.k. inflation climbs to a five-year high and governor carney says a rate hike in the coming months may be appropriate. gilt yields falling by three basis points. the euro is set for its worst run since may after the crisis in catalonia forces spain to cut its growth forecast. rallies after an activist investor calls to break up the banks. morgan stanley beats estimates. goldman sachs is on deck. welcome to bloomberg daybreak: americas. is with me. jonathan ferro is off. alix: futures relatively flat. nowhere aftergoes potentially john taylor catching president trump saw it. check out what's happening with the bank stocks. morgan stanley getting a nice call. i fail to see what was wrong with this report.
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at 1.9s coming in billion. investment banking revenue at 1.3 8 billion. we will discuss later in the hour. we'll get goldman sachs. david: time for the morning brief. we will give you you as production data. the greek prime minister will be visiting the white house today. there will be a joint news conference at 1:30 this afternoon. at 3:00 we will get an idea of how the fourth round of nafta investigations have gone on. president trump will deliver a major policy speech on tax reform tonight in washington. that's coming up at 7:30 this evening eastern time. in the u.k. data came out showing the highest inflation right in more than five years in september. increasing the odds for boe policymakers to raise rates for the first time in a decade. earlier this morning mark carney
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reiterated the bank expects inflation to peak above 3% around october. after the data came out the pound raced in advance. hsbcrevised forecast expects the pound to reach 135 of from the initial call of 120. now we are joined by david bloom , hsbc head of current strategy and his colleague steven major. what talk about exactly mr. carney said. was there anything surprising in this? not really. thanks for reminding the viewers we got it horribly wrong this year. david: i was subtle about it. alix: steve major has gotten it really right. >> we made the mistakes that we underestimated the power of the
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idea that the bank of england would raise rates. we weren't expecting sterling to trade on interest rates. huge political problem with brexit and sterling has gone, let's ignore that. we will concentrate on the bank. that has propelled sterling to the one 30's. it looks largely priced in now that there is a november rate hike. next year back to politics and structure and sterling back down to 126. david: your pricing in one rise after a 10 year period of no rise. might there be more coming next year? >> i think the expression is two and through. we have another one next year as well. the bank of england seems obsessed with the phillips curve that the low unemployment rate is going to cause wages to rise and they want to raise rates. in my eyes not the best thing in the world. it's propelling sterling
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upwards. it's really about the exit and politics.- brexit and alix: you can see how economists have related what they are expecting from the bank of england. the white line is where we are right now. the green line is where the market expects a rate hike to come in in november. not another one until march of 2019. the blue line is where we were in september. it shows the flippin market expectations. if you have a one and done and carney says it's one and done ?hat does it actually do >> they have to engineer the expectation of at least one. maybe several. it's about trying to influence expectations. impact of a the potential hike through sterling. if they can get sterling go up they can put a floor under sterling. most of the inflation we are seeing you probably have noticed
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the 3% print. most of that is what economists would call transitory. it's to do with the currency. if they can eliminate that without hiking rates that sounds quite clever. they are on dodgy ground because they are trying to make the markets think they are going to hike. to follow through with two or three hikes. it could be one and done or two and through. it's the expectation that matters. david: don't they need to actually keep the pound down because of their accounts deficit? >> our argument has been when the currency falls inflation rises, squeezes real income. consumption goes down. they are more concerned about unemployment rate. they were basically saying below 7% we want to raise rates. now it's below 4.5%. toy are saying, we need
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tighten rates. we are worried about wage pressure. that's were the debate has gone in the united kingdom. david:'s wage pressure really showing up? >> no. if you look at the phillips curve, the crazy idea that you fall below some magical unemployment curve and wages start to rise without limit that's what they basically think and that's where they are. there's no sense we can talk. alix: mark carney says the bank of england is working on contingency for a hard brexit for the u.k.. i'm still trying to get my mind around where we are in the heart exit conversation. gett's going to complicated. over the weekend there was another scenario introduced. i can only speculate that maybe the possibility of soft brexit
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or no brexit is building up. the probability is very small that it's building up from a very low number that maybe there won't be a brexit. the bank of england needs to buy some time while the negotiations get going. months might be enough for us to have a clearer picture. i don't know what david thinks on this. to me it's a very dangerous game. a blend ofgot to be all these different probabilities. the problem is there will be one answer. alix: if we have a transition deal what does that do? >> if you know the political outcome you know what the currency is going to do. you don't know the political outcome. will say, what the probability of no brexit, hard brexit, soft brexit. what would sterling do. you multiply them together and you think that's the right. that can't be the right in march 2019. this is the problem we face.
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there's an option with expir y. david: what about the track? what have the probabilities been doing since then? now of no the chances brexit and hard brexit both can't have risen and the middle has flattened out. both extremes have risen. one extreme is 110 and the other is 145. how do you work that out? david: it sounds like a compromise. >> i just want your viewers to know we are not the only ones with political problems. alix: what about 10-year gilt yields? >> they haven't done very much in the context of all of this noise that has been going on. is looking gilts through. imagine we have inflation peeking around 3% or just above.
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for 10lt is yielding 1.3 years. clearly the bond market is telling you that 3% inflation is not going to endure. 2% orld be down to 1% or even down to zero. only a few years ago the u.k. was getting inflation close to 5%. we had it close to five for three years and the bank yield market looks through the noise. it's a 10 year piece of paper. it's got 20 coupons and of redemption. the looking right through next few months. it's probably about right. somewhere below 1.5 doesn't seem unreasonable for the 10-year. alix: if you talk to someone who is bullish about sterling they say we have better global growth. better global growth is going to be positive for sterling irrespective of what happens with the boe and brexit. that doesn't seem to be what the
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gilt market is telling us. i don't know who these people are that think growth is going to be fantastic. they were upgrading global growth and downgrading the u.k. i'm setting the political and current account issue is overriding. focusing on the cyclicality. be 126.r i'm going to david: with respect to growth is it possible for the u.k. to be left behind? end up withle to stagflation when the rest of the world was moving forward? .> this is quite possible uncertainty doesn't help you plan for the next few years. it's quite reasonable, yes. will bevid bloom sticking with us. to recap what happened with
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morgan stanley earnings. at onein above estimates point one $7 billion. equity sales at almost 1.9 billion. morgan stanley debt underwriting was a. on deck in the next 20 minutes. david: coming up, deborah lehr. she will be joining us to talk about the people's congress in china. she is the point person for the went chinaations first came into the wto. this is bloomberg. ♪
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alix: kevin warsh maybe out. a stanford professor reportedly
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made a favorable impression on donald trump hour-long interview at the white house last week for fed chair. gaining the dollar especially yesterday. treasuries were flat. we are flat on the day. steven major is calling for the yield on the 10 year to fall by the end of the year. in january we thought he was crazy. now he might make a lot of sense. it won't return to today's level until the third quarter of 2018. let's just pretend we are in a tailor environment. how can yields not go persistently higher? >> the go higher yields will as they have been for the last couple of years. the two-year yield has been a bear market. the bears have had their day at the front end of the curve. the two-year yield has been rising if you had this kind of fed chair with a rules-based
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that you can imagine two-year yields might be nearer to 2% and quite quickly. during the speculation there was some movement at the front end. not so much at the 10-year point. clearly the market is adjusting the probabilities. i can show you put them examples of where it works, but you have to go to eastern europe or to one part of the world where it actually applies. it's not obvious to me that it's working particularly well for some of the big developed economies. so many different ones i don't even know what we are talking about. alix: fairpoint. i want to show you a chart that adjusts the taylor rule for the terminal rate. blue line is the current fed rate. -- the yellow one is if you price in a neutral rate that .75% you would still be at 2.5%.
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that's what the market is going to focus on. two .75.dian. is alix: you are saying it's not even that big of a deal. on the 10-year is 2.55. that's a function of the discounting through time. 2.7 5, 2 point 55 is your fair value. that assumes a zero term premium which is what you will get with a flat curve. i don't think it changes much really. david: what does it do to the dollar? >> if you look at the long. and was priced in, the fed is an esteemed institution. it's not some regime where some bloke comes in and changes everything. fed will mold the men as much as the metal mold the fed. let's get that right. it's no different could this is an esteemed institution that no human being is going to go in
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and change everything. david: what about five human beings? it's not just one person being replaced and >> there's an institution. there's hundreds of thousands of people who work for the fed. the people at the top have a lot of influence but the people underneath have a culture. and it's not going to change. the idea that you put in the taylor rule and suddenly get an answer, no chance. missing the point. got, sevenoomberg taylor rolls? i can get you any number you want from the taylor rule. what's the difference? alix: 1.9 on the 10-year. what do you need to see to reverse that called? >> we have been moving in the right direction all through the year. our forecast for the end of next year is 2.3. it has become a two month forecast. we are still hitting in the right direction as far as i'm concerned. to change my mind something dramatic has to happen. it might be a personality
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change. it could be some kind of data shock. >> to change her mind lower? >> we could do that. i couldn't possibly say on air. >> your forecast is not going higher or lower. >> i'm struggling with the idea why yields go up. people seem to be convinced that's what's going to happen. the burden of proof goes with that camp. the yields have been sliding down in the 10-year. they have been right at the front end. the reality is the 10-year has fallen this year. alix: david bloom will be back with us as a coanchor later on in the show. mean co?o you where's ferro? he is on a jolly. alix: in know is he covering the
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news. >> he goes on a jolly. he's not actually in barcelona covering any important news. david: i think he knew you were coming and he wouldn't be able to get a word in edgewise. david bloom and steven major, joined at the hip. hsbc. it's great to have them with us. coming up, dominic caruso. johnson & johnson chief officer with those earnings as well as what the president had to say and truck prices. live from new york, this is bloomberg. ♪
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david: johnson & johnson announced third-quarter earnings less than an hour ago and it beat estimates on earnings per share and revenue for the quarter. it took up estimates going forward. joining us now is dominic caruso. he is johnson & johnson chief financial officer. welcome to the program. tell us what the headlines were from your point of view?
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you beat the estimates in the street. >> good morning. we had a great quarter. sales were up 10%. earnings were up 13% ahead of the street. we have raised guidance for the of both top and bottom line. that was driven by great acquisitions we just recently did. in ourrall strength pharmaceutical business. particularly immunology and oncology projects -- products are doing great. it was a $30 billion acquisition. this quarter it added a significant amount of growth to our quarterly earnings. it's about $2.6 billion business overall. it contributed greatly to our growth this quarter. david: pharmaceuticals have been driving revenue and profit. what's going on with medical devices? is it growing? >> medical devices has the
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of the avid medical optics business we acquired. without that growth was about 1.2%. the second quarter. some disruption in sales due to recent weather related matters that we have all seen. other than that stable and growing going forward with new product launches on the horizon. where are you in the review. where do you have an answer about what you are going to do with it? >> we have done strategic reviews across all three elements. wee of the diabetes business decided to discontinue. we are looking to see if the asset may be better off in the hands of another owner and that is ongoing. david: the tragedy in puerto rico. has it affected your business?
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you do a fair amount of production in puerto rico. >> we have seven plants in puerto rico. our primary concern was the safety and well-being of our employees. we are helping them. the plants are back up and running under generator power. we have had no supply disruption to speak of of any material impact and we don't expect that we will going forward. forlso have a backup supply essential medicines. we are confident we won't have any major issues coming out of that tragedy. we heard from the president about how he wants to really reform health care. washington are you building into your forecast any effects from washington on your business? the overall discussion about overall health care cost is a good discussion to have. the focus on drug prices is a little bit narrow.
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overall impact on drugs. drugs are about 14% of the overall health care budget was lost in discussion is the benefit to society and patients and to the overall health care system of being on a drug that can cure a disease. the broader discussion should be about the overall health care costs. i'm sure that you are right in this is going to be a difficult discussion. the president has focused on this more than once. that is a popular thing to say in the united states of america but drugs caused too much money. are you particularly vulnerable since you have half your revenue coming out of pharmaceuticals? >> we price our drugs responsibly. we have taken a very transparent approach. we issued a transparency report earlier this year where we described how we price our drugs and what our average price increases have been very low single digit.
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david: curtailing the stopping of subsidies. could that affect you? >> we think overall the health care system needs to provide affordable access to health care. the stopping of the subsidies could negatively impact that. congress can get to a place where we can improve access and affordable way for all americans. dominic caruso, thank you for joining us. alix: coming up paul richards will be joining us. we will be breaking goldman sachs earnings after morgan stanley is really blowout its wealth management division revenue came in at $4.22 billion. the pressure now on goldman. this is bloomberg. ♪
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>> this is bloomberg daybreak: europe i'm taylor riggs. north korea is threatening that nuclear war may break out at any moment. kim jong-un's regime issued a warning as u.s. and south korea begin one of their largest naval drills off of both coasts of the korean peninsula. a north korean diplomat claims the entire u.s. mainland is within reach of its missiles. theresa may's attempt to get brexit talks back on track yielded little. she flew to brussels for dinner with jean-claude anger. the u.k. wants negotiations to move on to trade and transition arrangements. from president trump former white house strategist steve bannon won't abandon his war against republican congressional incumbents. been and keep backing insurgent candidates who pledged to oust mitch mcconnell. truceesident's seeking a that could salvage plans to overhaul the tax system. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. trump andsident
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senator mitch mcconnell had an impromptu news conference at the white house. it lasted 40 minutes and focused emphatically on tax reform and the need to get that done this year. joining us now is paul richards. that newsyou watch conference. the president really double down on moving tax reform. how important is that to investors? >> it's critical to the trump trade. if the gop cannot get the tax deal done this is crunch time. tough agenda very to get this through. the tax is probably going to be pushed into january february. if it is not done by mid february i would say the trump trade is over. the one thing the gop can do is cut taxes. i think it will happen. david: investors don't like to get into politics much. is this a bilateral tax plan or republicans only?
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>> i think it's republicans only. what we will see with the budget resolution debate in the senate this week, we will know whether they can get this done and it's going to be tight. happen this week that's when i think the market would react. i think the current thinking is the senate will approve this this week. alix: what is the endgame? >> mid february. i think given the fact that you got the budget resolution continuing resolutions are going to be a good fight in december to have. i think they will give it to early january, maybe early february. and then say, are you getting this thing done or not. lot on the equation after that that can really shake markets. alix: how do you play that? that trade didn't work out over the last few months. is that the right trade to take on?
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>> the trade we have been talking about all year was staying low risk with minimal volatility. we were not drawn into the long dollar trade at all. you've got to believe something is going to happen and we are nearly 12 months into this since he was elected. expectations keep coming lower. in the meantime your expectations are low. that's a good ring. david: does it matter what the something is? there's a long list of things in this tax plan. some will make it, some will not. .educing the corporate rate repatriation. what does the market care most about? -- give us will make a low corporate tax rate. focused on the middle income earners and that will absolutely do. the market will say thank you, we will take that.
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we will move on. then we will look at what can move markets next year. if you don't get that the markets got a problem. david: those will affect different sectors quite differently. if you eliminate the business interest reduction how does that ?ffect the market >> it is such a complicated answer that we will have to get there in steps. the market is looking at it from an overview it. from an overall index perspective of risk perspective it's risk on if they can get something done. alix: especially if they can get deregulation when it comes to the banks in particular. morgan stanley killer quarter this morning. at $4.2anagement billion. equities came in better than estimates. all across the board a nice move
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for morgan stanley. joining us now is allison williams. is this a story of morgan stanley eating goldman lunch or a different story? >> we talk about revenue share in the quarter. a lot of times it is what business are you in, where are you focused and how is the business doing. it is a very solid quarter for morgan stanley. we wind up having goldman sachs coming out as well. we will have to see if it's comparable. banking revenue coming in at 1.8. that also saw a nice estimate. the stock of 5.2%. it looks like a really big lead on earnings. we don't know if it's comparable.
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we did see a beat versus estimates coming in at 1.4 5 billion. at 1.6 7a little light billion. i know we are still going through this. at first blush it seems a little bit encouraging. it is worst performance since 2006 for the first half of the year. >> it does look encouraging. my guess is whenever we get a big beat that goldman that tends to be a little bit more volatile. the line probably benefited from asset price movement in the quarter. i think we are going to have to dig into the result. very encouraging. handily beat estimates. bank that really beat by that type margin. a couple things we will want to look into. one of the things we were talking about this morning was the recent moves we have had in commodity prices.
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the commodity strategist has doingooking at that and some good work which seems to be encouraging for goldman. relatively more exposure to commodities. something that hurt them in the second half was some improvement late in september. question.ey hedge funds is another area that has hurt goldman sachs. they are more exposed to the active client. we saw hedge fund flows basically turned to inflows. we don't have the numbers yet for three q. was that able to help the bank. alix: the idea in other banks is that the shift in commodities has been structural and goldman sachs has really stood by the cyclical issue. we will stick by it because when the turn comes we will be ready.
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that could do well. they are going to tell you, don't look at that. a lot of that coming from lending. youd: that's what they told specifically. they are going to make a payment. alix: what about wealth management. i don't see the numbers yet. if morgan stanley did that well and goldman sachs and morgan are both more exposed, what are we looking at? >> a lot of that relates to rates. we will be looking at what the flows were. they tend to be the more important thing that investors focus on. haven't seen those numbers yet. across the board we are seeing help from rates. the other is what's happening in terms of deposits. there has been a lot of talk about some of the outflow as
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investors are putting that money to work. i would say the banks probably want them to put that money to work. david: even as i look at it right now if the five dollars and two cents holds up we are not sure if it compares. a year ago they were doing for 95. the estimates were way off at 423. forward is not moving that much. they are taking estimates down. >> trading can be very volatile. that was a great story last year. we had several quarters coming in better than estimates. this year not so much. we have had a few quarters. this quarter is one of the tougher comparisons for that business. investors are going to focus on the run rate going forward. what's happening with volatility. thing thaten a key has hampered the business. the other things we're going to be listening for is in terms of
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the equity business. january 3. there's going to be a big change in terms of how that research is paid for. there is a sense this is going to be implemented globally based on our work. a lot of the global managers are going to implement this on a global basis. what does that mean. for both sides of the house. from an equity trading standpoint these are the biggest firms in global equity. they also have asset management businesses, so what's happening on that side of things. alix: we are getting the numbers from markets. 19% higher sequentially. that is a solid increase for them. >> it will be interesting especially as a lot of the concerns are rising around consumer credit. that was one of the stories of
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focus last week. citigroup which has been more aggressively pushing that business were looking for organic growth and improvement in revenue which disappointed little bit for them. also credit costs rising. part of that is growth. one of the questions for goldman in terms of timing of the pivot i guess the one key thing is if you know the risks are your pricing for those risks. certainly getting some good growth on that. alix: paul, which big banks do you like? bank. for a big remember september was a really .olatile month in fx we used to compete against goldman all the time. their clients would have been more active. do with well management -- wealth management.
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banks as long as you like wealth management business. david: thank you for being with us. paul richards is going to be sticking with us. as you commute in today you can always tune in to our colleagues tom keene and david gura because they are on the radio. live from new york, this is bloomberg. ♪
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alix: this is bloomberg daybreak. i'm taylor riggs. coming up later today on bloomberg technology, chuck robbins cisco ceo. this is bloomberg. now to your bloomberg business flash. the u.s. department of justice is now looking into the data scandal at kobe steel. it says it will cooperate after prosecutors asked for documents. it says its own investigations show that faking data has gone for more than a decade. snapchat has formed a joint venture with nbc universal to create short videos. it's a deal designed to reach young people who turn to their mobile phones for entertainment. snapchat has changed from a disappearing message service into an advertising platform or media outlets. controls north
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stocks couldn't take the refill -- retailer private. according to people familiar with the matter lenders asked for 13% rate. that's roughly twice the average borrowing costs for typical retailers. that's your bloomberg business flash. david: tomorrow china is going to be beginning its 19th party in beijing on which the president is expected to consolidate his power halfway through his 10 year term. we have a chart tracking stock valuations. is the stock valuation goes right up to 2015 and comes down during the crash of the summer. it's only at two thirds of the peak. the blue line below is the foreign-exchange coming down from 4 trillion to 3.1 trillion through the yellow is the rate of gdp growth which has trailed off. still with us is called richards
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-- paul richards. aboutoes this tell us what he's likely to do as he is expected to consolidate his power in the next few days? >> the market has missed that last year they wanted to focus on the smes and trying to clean up the system. they are way more patients than anybody else. january 2016 the market for gets what happened. i think they consolidated, kept everything going but kept the same game plan into action. i think the thing is even though you look at equity returns they are not doing as well. they are still doing very well considering the cleanup job and they are so much more patient than anyone else in the world. they are not worried about quarterly earnings. they're are focused on the next 100 years. plan poste same game
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the people's congress will be put in place for next year. beginning he has said he wants to reform the state owned enterprises. people.loy a lot of the other is dead. they have an awful lot of debt on their balance sheet. can he really reform that without rocking the boat? >> there's thousands of them. to start somewhere and i think the market is going to give him credit for that. think the problem is so large it takes time and that's the thing that no one ever understands about china. they have time. they know how to in terms of playing their money markets help to keep the right level of liquidity. a are extremely clever at what they do. i think people underestimate how good china is and what a great long-term growth story this is. look at the fact that everybody who has been doubting 6.8 to 6.1% growth is now turning that way and getting quite optimistic
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for next year. the market is buying into china in a way that they haven't in the last couple of years. alix: and they don't tweet so it's a little bit different. we will bring you special coverage of china's most important political event live from beijing. that all starts tomorrow. this is bloomberg. ♪
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alix: industrial commodities seeing a pretty big run over the last month. a lot of money isn't pouring into commodity etf's. this terminal shows how much assets of the top 20 commodity etf's have risen. they account for over 90% of assets in all u.s. traded commodity etf's. most of that money is going into gold etf's. one guy wants to change that. he has a ton of experience.
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he was head of etf securities in the u.s. his venture caught the eye of bain capital's matt harris. 3.5 million dollars in seed funding. his first funding for an etf ever and they both join me now. good to see you. you want to go broad-based commodity etf's in a world dominated by gold etf's? >> we spotted a big opportunity in commodities because of two main reasons. been paying too much for commodity etf's. very high management fees. the products were suboptimal in terms of structure. you had partnerships that generated k ones which can cause investment issues around tax time. we thought here's an opportunity to radically reinvent the space and bring a product that is 40
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acts on the same wrapper as what you have in equities and bonds priced in a competitive level to the rest of the market and lowers cost in the industry. alix: they are low. 25 basis points. the other i found was 48 basis points. commodity total return. that's a whopping 125 basis points. we have a chart that shows the differentiation. you have to make up for a lot involving them to make up for your loss in fees. >> of course. my experience in the commodities sector running large commodity funds i know the market very well and understand how investors think about that. there is now a huge amount of money in the market driven by machine allocations and through the department of labor's fiduciary rules coming in a lot of registered investment advisors are coming out in front of that and saying my fiduciary
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responsibility is to buy the lowest cost etf. you throw on top of the algorithms that a lot of the other wealth advisors use such thate morph in tech firms will allocate to lowest cost product. alix: why did you invest? >> part of it is i am kind of a contrarian. where people are cheering i tend to go the other way. trillion plus asset category with three companies dominating 90% of it. incumbents are always vulnerable. we like to go after the fat and happy incumbents when we can. expect it too you expand and grow? >> the idea is to fight on all fronts overtime. europe presents itself as an obvious opportunity. commodities are where the big guys are most vulnerable. i think we will be doing more in the u.s. as well. ?lix: where else
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>> asia beckons. the complexities are daunting. i think it would be inevitable in thehave a lot to do u.s. before that becomes a high priority. alix: is this a special specific investment? >> we were looking for somebody in etf's. it's all about the entrepreneur. company that is a can be important enough to take all of our attention in the space. alix: how much money will you need to raise? >> it depends on the product. we are focused on building out our offering. we have a lot to do in terms of building the core offering for investors. things are going well. we are ready have the key benchmark commodities. we have the broad commodities. we have probably another five or
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six to do by the end of the year. alix: how do you combat commodities not rebounding for real and roll costs? it doesn't matter how low your fees are if commodities don't rally and roll costs continue to rise. launched awe have commodity business of what we believed to be close to the bottom of the market. decisionstrategic because we think now is the time for commodities. if you look at the spread between the s&p 500 and any it's justodity index gotten out of historic proportions. i think now is a good time. alix: thank you. great to see you. we will be right back. this is bloomberg. ♪
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♪ alix: banking on financials,
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morgan stanley jumps after its wealth unit cushions the blow from a declined in bond trading revenue. taylor made, the race for the next fed chair turn after it was reported president trump has taken a liking to john taylor. the pound and gilt yields tumble after mark carney says he is working on a contingency plan for a hard brexit. david: welcome to bloomberg daybreak. steel,re with alix jonathan ferro is off. alix: i am so excited we have bank earnings. s&p futures are a little bit lower on the margin, off by not even one point. euro-dollar weaker by 2/10 of a point. of buying, into the 10-year on the margin and yields moving down about one basis point. crude relatively flat on the day. you have cable now down by 5/10 of 1%.
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it was up earlier but now you have mark carney speaking so it has been a whipsaw on the session. a lot of buying coming into the 10-year. the dollar spot flat on the day. david: let's get an update on what is making headlines from outside the business world. taylor: north korea is threatening nuclear war may break out at any moment. the regime issued a warning as the u.s. and south korea began one of the largest naval drills ever. a north korean diplomat claims the entire u.s. mainland is within reach of its missiles. president trump says he undermined obamacare in order to .elp health insurance problems his move is forcing republicans and democrats in congress to work together. he said he still wants a full repeal. attempt to get brexit talks back on track
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yielded little. juncker,th jean claude both sides issued a statement. the u.k. wants the negotiation to move on to trade and transition arrangements. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. david: it looks like a pretty good day for goldman sachs and morgan stanley, both climbing in premarket trading after third-quarter results beat estimates. joining us now is allison williams, bloomberg intelligence senior bank reporter and ed perks. is it just all blue skies? allison: we are ending the quarter on a good note but it is all about the expectations. goldman sachs revenue is down quite a bit.
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sort of the only meaningful beat we got across trading for all of the banks and most of the banks coming in almost spot on. earns the most from this business, about a quarter of their revenue. they have trailed the last quarters and there will be questions on the call. they said the environment is a little bit better, but are they seeing improvement? that is an area where they are over indexed versus their peers. has activities gotten better with the hedge funds? we do not have the three q numbers yet, but some positive signals, is that helping them? david: a broader issue, people tradingsed on their fic . if they are improving is it because the overall tied has gone up or are they making changes such as moving away from hedge: -- hedge fund clients? allison: do your point, the
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shift in climate is something they have been focusing on. it is something they emphasized at a recent investor presentation just because that business has been under such scrutiny to say, we know we are a little over focused on this particular area, we want to make progress on the corporate's, that is the side that has been doing well. to some degree, what happens quarter to quarter with trading tends to be where is the strength, who is strong? we talk about share gains and underperforming, and some of that is what jamie dimon would call the weather. some of it is also to teach it. .- is also strategic goldman said they did not advocate markets well so that signals there were maybe things going on at the surface. they did not make a change in their commodities management, so as we discussed earlier, they are sticking with that business but at the same time focused on
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the performance. alix: which u.s. banks do you like? ed: we hold a number of different banks, jpmorgan, bank of america, wells fargo has been an underperformer as of late. given some of the issues around the account scandal, but generally pretty constructive on the broad landscape. i think it is a combination of cyclical elements and a good secular backdrop for banks in general, improving returns. while r.o.e.'s may not get to levels we have seen in prior cycles, there is generally less risk. banks youof those mentioned increased their loan-loss reserves, so raising questions about the credit of the consumer. bank is somewhat unique and we did see with the credit card issuers previously, so we think some of this is the strong growth in lending over the last several years.
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we just started to see some of the seasoning, particularly in credit card portfolios. we are not that concerned about it right now, given our expectations for pretty healthy economic growth and continued employment gains. david: we always focus on the banks, probably because they tell us something about the economy and business more broadly. goldman will tell you more about global growth, international trade, things like that? allison: goldman is also to some views, sentiment client what is happening in the markets. if there is a lot of uncertainty around interest rates you will see a lot of activity and much more business with some of my goldman. we look at bank of america, wells fargo, jpmorgan and city, spending,he consumers
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what are they borrowing? the more general sense of their health. , goldmanthe outlook sachs said there investment backlog decreased. what do you make of that? allison: the other positive surprise we did not talk about it goldman was the m&a fees, which were extremely strong. holding up despite a lot of the uncertainty in the market. they are a leader in that gets a lot oficc attention, but m&a is a very profitable business they are doing well in. we saw it at banks where you see the loans flowing. part of that is the bank tapping the capital markets. in terms of the investment it isg type -- pipeline, not surprising we would see a decline into the fourth quarter. that tends to be a seasonally weaker quarter.
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versus a year ago, keep in mind what was happening, there was a huge change in terms of what was happening with interest rates. i do not think that is overly ,urprising and really just second quarter was such a good quarter for fees to be holding up as well as they did, pretty good results. to thosehing to add comments, two things that could be deferring. we have seen tremendous performance in equity markets in the u.s. and globally. valuation concern around the potential buyers, particularly in private equity where we know there is a lot of fun deployed capital. deployed -- undeployed capital. also, repatriation. david: one of the things that strikes me about goldman is their operating expenses are basically flat and their employees are up 5%.
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are they backing off the cost control? allison: i do not think so. one of the things they have talked about is the junior ization of their workforce and moving employees to lower-cost workplaces. they have made a lot of progress with that over the last few years. that is one of the ways they have cut costs coming into 2017, and that has been a good story all year long in terms of controlling costs. i did not see this specific comp ratio for year to date that as of last quarter it was the lowest in their public history. continuing to do well on costs in a tough revenue environment. alix: it was 40% for the first nine months of the year, their comp ratio. for deregulation, what is your base case in which banks could benefit the most? ed: i think all banks can
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benefit, but certainly the bigger banks, those that have been deemed too big to fail and have systemic risk implications, we think over time and obviously that is something we can see play out in markets. report in junea laying out a bit of that landscape. i think more importantly, these are benefits that accrue to banks broadly but do not need congressional actions, and that is something that we clearly think is important. allison williams, always a big pleasure, and ed perks be staying with us. bloomberg's jason kelly will be sitting down with an interview with david calhoun of blackstone. you have europe, d.c., tons of topics to discuss. this is bloomberg. ♪
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♪ david: this is bloomberg, i am david westin. oddsmakers are cooling on kevin warsh as the next fed chair as they warm up to david taylor. he made a positive impression on president trump. he is known for a policy role that indicates interest rates should be higher than they are. the 10 year edged lower on speculation the next fed chair could be more hawkish. as david riley and still with us is ed perks. something you have been thinking about, what do you anticipate the significant of a taylor as fed chair would be? beid r.: i think it would
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significant because he is we think the most disruptive potential candidate. regardediously a well monetary economist which means he would be able and willing to take on the fed staff and their thinking around policy. we do think he is going to be more challenging for the fed, more challenging for investors to work out what that means for fed policy. i think we would get some repricing particularly at the short end of the curve, but as the marketerday, starts flattening the yield curve. there is a limit to however be,ish the fed chair might they could be pushing the rates higher without the market pushing back and saying, we are not quite sure we are ready for this. and then we have some flattening in the curve. david: it is obviously hard to know until a man or woman has the job and often the job changes them.
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it might be one thing to be a professor at stanford and have an interesting theory that people respect and on the other hand being in the job and thinking about the markets and how they react. we should be like 2.5% higher than where we are, a large number. and the: absolutely, other aspect to bear in mind is the institution strength of the fomc. it has been a difficult situation because right now the center of gravity within the fomc is not for moving to a more accelerated path for rates. if you think back to the volcker , they had to take a second vote because he was going to be outvoted its would have been embarrassing for him, maybe a potential resignation. it will bring the rest of the fed and fomc with him. potentially a significant shift. alix: the difference between the short end and the long end, we
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have steven major of hsbc as one of the lowest calls on the street. here's what he had to say. >> i am struggling with the idea as to why yields go up and 99 out of 100 people we meet seem to be convinced that is going to happen. to me, the burden of proof goes with that camp who have been saying it all year and in fact the yields have been sliding down. they have been right at the front end, but the reality is the 10 year has fallen. alix: he sees like 2.3% next year. what do you see? david r.: we are looking for rates to be a bit higher. we do think over the longer-term, inflation is what will drive the longer end, and it is certainly worth discussing and thinking about the in full in its that the fed's path online will have to the longer end of the yield curve. this is in the backdrop of still expecting reasonably strong economic conditions, not just in
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the u.s. but globally. alix: 30 billion, will you be buying that? ed: maybe. alix: when do you see inflation turning? ed: that has been a key focal point for markets to focus on. we do think there was some anomalies potentially in the summer that caused a bit of downdraft -- down drift. over the next three to six months we think we are likely to see stronger momentum. david: how much is in the guidance the fed gives? what guidance they give forward. david r.: i think you are highlighting a key aspect, because the fed under janet yellen has been very transparent in terms of the guidance they provided. as a result of that we are .eeing a squeeze on volatility i think the guidance that potentially comes to the new fed him at that is when they get
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tested and that is when the market will test them. one other thing in terms of the long end, one reason why we share the view that the economy supports higher rates in the united states, but you have also got the ecb at the moment to pull down this sort of blackhole in the bond market and european yields just dragging. ecb starts to taper, which is expected at the beginning of next year, then we will see spillover in terms of the treasury market. perks david riley and ed both be staying with us. coming up, deborah lehr, paulson institute vice-chairman. she will be here to talk about the 19th chief of people's congress in china. .eborah lehr knows china live in new york, this is bloomberg. ♪
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♪ taylor: this is bloomberg
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daybreak, i am taylor riggs. johnson & johnson reported third-quarter earnings that beat estimates. they raised their outlook for the full year. their top-selling by ok -- biotech drug -- the spite losing patent production. health -- united health reported third-quarter earnings that beat estimates. the report was not expected this -- until this morning but the results were posted last night. european car sales fell in september for only the second time this year. registrations declined 2% from a year ago. brexit concerns among british demands offset more than car sales in france, italy, and spain. that is your bloomberg business flash. gives the catalog government until thursday to clarify its position on
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independence and a spokesperson says they will not stand down. spain had to lower its growth forecast due to the unrest. joining us is maria tadeo. what happened and what is next? maria: we are getting comments government.alan they believe they have the mandate against the illegal referendum that took place and will want to continue, but if madrid wants to talk they would be happy to talk. that sets the region on a collision course with madrid which has a deadline to drop the referendum altogether or the region's autonomy will be suspended. madridad warning this -- warning this tension could have an effect on the economy. this is a big region that accounts for 1/5 of seel output and they could
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real tension that could take a hit on the economy overall. catalansalon -- government saying they are not going to backdrop -- backtrack. alix: looking forward to how this unfolds over the next few days. the markets not really taking a hit. spanish equities up by five tens of 1% and jeffries downgrading it ish stocks, saying taking away uncertainty related to the crisis and they do not see a positive catalyst. joining us are david riley and ed perks. do you like spanish equities? ed: we are positive broadly across europe, not as close to spanish equities. we are pretty constructive on the economic effort -- outlook and think that is growing profitability. we are going to remain pretty
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constructive and look for opportunities. alix: is it a sector opportunity or regional opportunity? ed: i think it is marva regional opportunity. is a regional opportunity. i think there are pockets to find opportunities. alix: in terms of the fixed income market, underperformance in portugal and italy. spanish debt seems to be ok. is this the right response? david r.: quite an interesting response. we would be looking to take on spanish sovereign risk if we had seen more weakness then we have seen. we do quite like the periphery as a whole, and in terms of things like italy btp's, we would be looking to potentially add exposure because the fundamental story including for spain is the headwind coming from catalonia, an economy that
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continues to surpass expectations. at the beginning of the year the expectations were low that even now that the european economy will be growing at two plus percent, which is actually very strong by european standards. we have gotten past some of the key political headwinds, in our view. we like european assets, the periphery, european investment grade. we certainly like the banks. that is a good story. we like financial bank debt in europe in particular. david: does that mean in your opinion the market is overpricing the risk? david r.: what happens is each time you get a political development or shock within europe, people very quickly draw the line to this is the beginning of the end of the euro project.
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, oro not see with catalonia the italian election as systemic risk for the euro area. the french presidential election potentially was so i think investors were right to be concerned about the outcome of throught we have got that and people are overpricing still some of that euro risk. david: ed perks of franklin templeton, thank you for being with us. david riley will stay with us. coming up, jason kelly sits down for an interview with david calhoun. live from new york, this is bloomberg. ♪ who knew that phones would start doing everything?
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see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. ♪ alix: this is bloomberg daybreak, i am alix steel. we are about an hour away from the cash open. s&p 500 futures flat, dow futures flat.
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spanish equities up 5/10 of 1% despite the fact that they downgraded their forecast due to unrest in catalonia. in the fx market, i am watching cable thomas sterling down 5/10 of 1%. higher inflation, or talk for mr. carney about a rate hike but he is preparing for the eventuality of a hard brexit. yields in the u.s. go nowhere, 2.31 percent on the 10 year and crude getting a little bit of a bid. david: let's go now to jason kelly, bloomberg's new york bureau chief with a special guest. jason: i am here with david calhoun. you oversee private equity operations at blackstone. you have a really interesting look inside the board room, and i want to get to consumers in a minute, but take us inside the board room. how are ceos feeling? david c.: we do a survey every
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quarter. we are pretty disciplined about it, as well as the anecdote about -- anecdotal things we find out in conducting our work. it is a lot of optimism, more optimistic than i have seen it. i have been here three years, for lots of reasons. the economy is bouncing along at a faster pace than it has been. we have seen it in pretty much all facets of our public portfolio. people are feeling pretty good. this is investments picking up. butll not collect euphoria, this sense of optimism i think israel. -- is real. jason: are they feeling inquisitive? how do they put this to work? david c.: we are always feeling inquisitive. we are investors. we are not trying to take money out but put money in and get big returns.
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we are inquisitive and secondly, business investment, there is no doubt you have to believe in the economy, believe in some growth dimensions and the economy to want to make those investments. you see more and more of that as we move forward. much does geopolitical concern enter into the conversation? when you survey the ceos are they worried about the world at large, are they worried about politics in the united states or overseas? david c.: honestly, no. day today, they are going all out now. will you look at your supply chain and make sure you do not have a snag on the korean peninsula that could snag your business? you prepare for those kind of things. as a portfolio management job for us, we have to make sure we are on top of subjects like that. does not mean it will happen or we worry about it or it constricts us, but we plan for outcomes in case things happen. jason: one thing that has drawn
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a lot of attention in the business sphere and investments fear is infrastructure, something you are intimately familiar with. you are on the board of knowing and caterpillar. what does infrastructure investment look like in the short and midterm? david c.: the opportunity, which is what i have always been focused on and the reason i gravitate toward infrastructure, it is a business interest and something i like to dedicate my career to, because the need is so great. anyone who has traveled across the world for 30 years, they know our country is falling short on that front. assets are beginning to decay and they need to be reinvested in. i believe the capital formation , andcome, will accelerate i hope we can play a role in accelerated development of it. it is across the board, from water and airports to rail to roads, all of the above. have to learn as a country to
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reinvest. jason: what is the balance between what the public sector needs to do, especially the government, versus what the private sector will pick up? david c.: the public interests are twofold and pretty for -- profound. theyve to simplify regulations so plans can get executed in a reasonable timeframe. we will compete for capital all of the world and most noticeable havetably, the chinese manufacturers of infrastructure that are very fast. we have to have a regulatory process that works for us. jason: how optimistic are you that that will happen? david c.: i am optimistic. the timeframe has always struggled, to say the least. the need is so profound that it eventually you have to get to it . in order to free up money, we are going to have to learn how to have confidence in privatizing public interests
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today so we free up the capital to invest. jason: are you hearing what you need to hear from the state and local level to make that happen? david c.: i think everybody wants this to happen. you rarely run into a leader in the political front that does not say, i love infrastructure. it is when you divvy up the responsibilities on who gets to approve, and you get this a group of interests who are looking out for one aspect of that infrastructure development and nobody coordinating to get it all decided and moved along quickly, we need to figure that one out. jason: take us inside what you are doing with some of the equity over private time has been known more for cutting at times been building and expanding. what are you doing specifically to fix the companies that blackstone owns? david c.: we are investors, so i never think about we cut to cut.
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everybody wants to be cost-efficient, but today, the technology that we have available to reengineer every dimension of our business from the customer interaction, where you can put ai to work overnight, to the distribution of products where you have all forms of new distribution to cultivate, to the design of a product and/or service. you can model it and do it all mine without having to use a drafting table. the whole value chain can be rebuilt using today's technology, and the productivity opportunity inherent in that and the growth opportunity inherent in that are big. we pressure all our companies to think big and move forward here at it is ironic that our country struggles for productivity when it the micro level, each company on its own bringing technology to bear, i do not think the outline -- outlook has ever been brighter. jason: what is the one single thing that you find you can do
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at almost every company you own, one place you can go in and say this is a quick fix that will instantly make you better? david c.: i am not sure there is one, but i will say the first thing we do is make sure we have a leadership team that wants to play offense, not defense. it is an interesting thing, the development of leaders overtime. some get more risk tolerant, in other words they want to take those bets. others become risk intolerant. they start to protect and protect. i think the public model, because of the quarterly one penny at a time sort of metric, i think that has become risk-averse in lots of ways. we will not allow that in our companies. jason: do you see more companies going private? is private equity taking over that long-term view? you have managed both public and private companies, and clearly
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you are a fan of the private model. will we see a shift? david c.: i would suggest the numbers say we already are. the private environment is growing much quicker than the public equity market. the irony is as you suggest, i grow up believing that private equity was shorter money and public equity was long-term money. i have a complete opposite view today, and i think most people who have grown up as operators believe that. the ability to attract the best and brightest to the public governance model is getting better. whon: you were among those came up through the ge system. it is a company that has been in the headlines a lot of late, with the new ceo. what is your best advice? it happens with ge next? david c.: i love the company and everything it does for its people. play offense. they have one of the greatest
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install bases of equipment in a variety of industries, all of which can achieve higher levels of productivity and asset utilization. all the things you can bring to bear on that and get your work they focused, i am sure have better ideas but there is ample opportunity to playoff of that. +++ going to leave you with that. you are a busy guy. inc. you for spending time with
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us. -- thank you for spending time with us. david: we want to check on news from outside the business world with taylor riggs. taylor: despite a plea from president trump, steve bannon and will not abandon his war against republican congressional incumbents. according to a person familiar with the plan, dan and will back in surgeon candidates. -- insurgent candidates. wrapped up the latest rounds of nafta talks with a bombshell proposal. the trump administration wants to dismantle canada's dairy sector by eliminating tariffs. candidate uses a system of tariffs and quotas that officials say guarantees stable prices and production. the canadian government has dismissed the u.s. proposal. in spain, there is evidence the catalonian's -- a judge said the catalog police may have c --atalan -- global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. you can listen to our colleagues tom keene and david gura over the radio. surveillance can be heard in york, washington, the bay area,
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and all across the world on sirius xm radio. this is bloomberg. ♪
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♪ alix: this is bloomberg -- taylor: this is bloomberg daybreak. ,oming up, arrieta huffington that arianna huffington. -- arianna huffington. this is bloomberg. david: breaking news right now, president trump has just tweeted representative tom marino has informed me he is withdrawing his name from consideration as drug czar. marino had come
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under controversy because as he interceded in an issue with the dea about opioids, and we had senator mansion from west virginia who would object to him inc. appointed on that basis. , president donald trump has just announced that congressman marino has withdrawn his name as possible drug czar. tonight, china's president will speak in beijing, marking the start of the 19th party congress . the president is expected to consolidate his power halfway into his 10 year term. joining us now is deborah lehr, vice chair of the paulson institute an assistant trade representative for china. is david riley of bluebay asset management. it is great to have you in person. i want to put up a chart that would indicate exactly what the
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experience has been in the chinese economy during the 2012.ent's regime since the topline is the stock value that peaked in 2015 and then we had that unfortunate incident over the summer. it is stalling two thirds of where was and we have seen the reserves from $4 trillion to $3.1 trillion. gdp growth has been slowing somewhat. from the chinese point of view, how successful has this 10 year been? deborah: when the president took over he was facing a slowing economy and a desperate need for transformation of their economic growth model. this was not something that would happen overnight. it would take a long time to move away from chief exports. what it really was was government export. any to increase consumption and demand domestically. while the transition has been slow and xi jinping talked about the new normal of economic growth, we see it starting to
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come back. he really has started to put into place important restructuring of the government, of the economic system. they had a really bad mishandling of the stock market crisis, but even there they have been able to put some professionals in place to crackdown on enforcement and establish a new regulatory structure. we are starting to see growth comeback. david: some of the priorities you referred to, one of the question -- one question at the stage --age -- initial how much is personnel and how much is policy? deborah: going into this, what xi did when he took over is he inherited some of the previous people. this is xi jinping's chance to put his own people in place. the big question is how does he move forward with reform? he has been a real disruptor and
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reformer in a chinese context, not a western context here it as we look to the next five years a big question will be this he open up further to western firms ? do we see transformation of the bureaucracy even though already he has transformed the military, the party, and the legal structure? we aren the bond market seeing bond yields at their 2015 hi. .e -- high what are you expecting in relation to the backdrop deborah just laid out? david r.: expecting they are going to be beating investors off with a stick. it has been a very long time since china issued an international bond and it will be a huge demand coming from asia. it will be a very small issue, a couple billion. what is it really about as deborah alluded to, it is about
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china -- trying to reprice chinese corporate debt and playing that in terms of the holdings. demand that will get priced high, and that will bring in the chinese corporate cost of funding in dollar terms. that strategy of the transformation of the chinese economy. corporatek about the cost of funding, because we just had the head of the pboc in washington say he is concerned. they have to rein in some of that corporate debt. is that part of the president's priorities? deborah: definitely. in the last few months they have put out a mandate that there could be no irrational investment, and they have cracked down -- which has a very broad definition. they have really cracked down on some of the private enterprises and from everything we understand, there was good reason to. they were borrowing from one pot
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and investing in another and it was not matching up. is concerned about with another crash of the stock market, potential pyramid schemes and unrest. this has been a very important issue. even in the lead up to the congress, they have started to loosen those controls over private industry. private industry leaders have been able to travel again, there was a restriction, so we hope to see more overseas investment. david: how difficult is it for the president to curtail some of the debt and reform the state of enterprises? hand,d earlier on the one and keep the economy growing at the pace he needs because there is some tension. deborah: i think president xi's biggest challenge is he has not had the levers of governance to rule his country. it is important that a look at the transformation of the party first in solidifying his leadership.
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through that, he is able to start to address some of these more difficult structural reforms like state owned enterprise. there will be reforms of state own enterprise but not in the western context. alix: how are you playing corporate debt in china? david r.: we like chinese investment-grade corporate debt. , take your spot and do your credit homework for some of the challenges around governance that you can get. certainly on the investment grade space, part of that also, there is this very strong bid from the rest of asia, from asian banks as well. nonetheless, we think there are some pockets of value each we have been looking to exploit. the other thing which is important to recognize, the debt problem in the corporate sector, there is a debt problem but primarily in the state owned
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enterprises. you have a lot of good businesses, new businesses developing within china. david: to come back to a topic we have talked about before, what about u.s.-chinese relations as it affects trade and financial services? is that stalled, is that going forward? deborah: we have been very helpful. the next event is president trump's visit to china. or is a lot of hope that coming out of that there will not only be deals, which is what the administration is focused on, getting transactional deals, and significant market on -- access. financial services is on the agenda. david: many thanks to deborah lehr of the paulson institute and david riley of bluebay asset management. tv ,you have interact with us on your terminal. to ask the guest a
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question we will try to do so in the segment. this is bloomberg. ♪
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♪ it was a blowout quarter for the world's largest online tv service, netflix reporting an increase in the third quarter and a beat on the top line. the company saying it will ramp up spending, and will spend as much as $8 billion on programming next year. joining us is paul sweeney. the stock premarket is down 2/10 of 1% but seriously, $8 billion? paul: that is a billion dollars higher than the market was looking for, so they keep adding a billion dollars to $2 billion to their programming. they are producing more and more original programming and relying .ess on traditional hollywood they are recognizing that the
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frenemy issue may be tilting the other way so netflix is staking on original programming and they believe that drives subscriber growth and cash revenue to pay for these incredibly programming -- incredible program obligations. they are raising their prices in the u.s. has that been fully appreciated by the market? i think the company this time around has done a better job of signaling to it survivor based that as they invest more they will raise prices on a relatively small basis. there is a lot of other services in the markup whether it is a hulu or amazon prime and some of the disney products, that are at price points that are pretty compelling. david: how much are they amortizing? paul: the number, it is kind of
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off-balance-sheet. these are commitments they have committed to but the programming has not been committed to, $7 billion. they are amortizing $7 billion a year. alix: over how many years? paul: this is over many years. david: sooner or later they have to express that in their income. -- and theyave this are free cash flow negative. alix: and the market does not really care. paul sweeney of bloomberg intelligence. coming up, chad morganlander will be joining us. the banks front and center. this is bloomberg. ♪ is this a phone?
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--dman follows as it spen goldman follows as its but pays off. a stronger impression made on president trump. and the real yield tumble as investors questioned the boe's commitment to raising rates. david: welcome to bloomberg on this tuesday. withdavid westin alix steel. alix has a look at the markets. futures relatively down and flat on the day. euro-dollar down by about .4, and drama in spain as they lowered their growth forecast, for the euro. you have stalling in the tenure market with yields higher by two basis points. 2.32 on the 10 year and crude up .4. let's get an individual movers
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with abigail doolittle. abigail: let's look at goldman sachs, trading higher by 1.4% in the premarket, a big beat on the third quarter, by about 10%. more than 10%, and not small numbers. billion. it looks like what is helping them is gains on their equity business, left over from their yesteryear days of wall street, offsetting trading declines. the trading revenue declined by 26%. it looks like their investment banking pipeline going forward, backlog down a little bit, and even so, they beat investors do not care. let's look at johnson & johnson, up more than 1% earlier and now more than 1.33%. they raised the full gear for 2017 and looks like their biotech drugs are helping out. the shares are already up a 2%
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year to date and looks like gains -- already up 18% year to date. beat third-quarter estimates and they said they will impact meet the shipment numbers for the fourth quarter and that showed 10% growth. what investors may not like with the number is harley davidson numbers estimates in declining thath in that suggest totaled for the your shipments will be down 6%. there is a 14% their shortage on this stock, so it suggests that not everybody is surprised or unhappy about the decline. leslie: thank you. morgan stanleynd both climbed in premarket trading after they beat estimates in earnings-per-share. joining us on the phone is jeff harte. he is a research principle. welcome. let's start with goldman sachs
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because the story was, what is going to go on with their trading? does this put this behind them or tell us about what they are in that operation? ckff: trading on a thi side came in better than we were expecting. we were looking for a down 33%. it is nice to see them put up trading revenues that are better we have notd, which seen in the couple of quarters. it reflects a more favorable environment in business as they are in. it is early to be thinking the expansion to cover more corporate clients are at a cash product and some of the things they outlined at an investor conference four weeks ago have taken root. i think this is an indication of how much the market making environment is difficult in the first half of this year that actually got a little bit better this quarter.
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to tello it is too soon on restructuring their business side but what about the banking side? do we have any indication on whether that is working? this it is hard to tell at point. they became a bank holding company after the crisis and all of a sudden they had deposits to put to use and landings to do it . we are seeing progress in some commercial lending step but it is tough to tell how much and how quickly it is going to be there. it is a higher area they have the capability to grow in. the: goldman flagged investment banking backlog decrease for them. is that going to foreshadow what investment banking look second the fourth quarter for all the banks or goldman specific? jeff: i would probably look at it as being more goldman specific that they had a good quarter and investment banking.
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after you have a strong quarter, it isn't unusual to see the backlog decline some. the real key outlook wise is how quickly does the pipeline refill for them in the industry? our corporations still looking to make money and acquisitions? that is kind of the corporate client tone they will be asking them about on the conference call. alix: i was going to say, what is your number one question on the call? the toughest thing i want to ask is what are you hearing from clients as far as investment banking and are they still interested? i think what we see the trading environment will be interesting because there are more investment centered been corporate center and they stated things like commodities more than others. a better market making environment is better for them, so it will be interesting to see if they see that turning around or they see the potential for it to turn around. david: what is the story with
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morgan stanley? it seems like they are putting out good numbers quarter after quarter and does not get potential michael flynn. what is going on, isn't managing it really well -- is it just managing it really well? jeff: they don't get the headline but they outperform goldman, so it seems quarter in and quarter out, they come in better than expected. this one specifically wealth management helped quite a bit with the net interest income growth. morgan stanley had investment gains which helped with the lower tax rates, but they are roene and they are 10% plus target, which when year ago, it seemed like a stretch but not now. alix: thanks, jeff harte, good to see you. let's bring in chad morganlander. your favorite bank? child: jpmorgan -- jpmorgan.
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i think that interest margins will slowly improve. they had the wind at their back. financial conditions are quite liked. you also have volatility low. so there investment banking unit management, in what as well as general banking and lending components. alix: does it worry you? chad: not at this point. u.s. economyverall is doing well, still growing at we do not seebut a credit issue with the banking industry in the united states over the course of the next two years. alix: the big news also came from european banks, investors taking a small stake in companies and looking to break it up. we will hear more on thursday. what are your thoughts on breaking up european banks?
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chad: many are undercapitalized still, i believe. the ecb has extended their balance sheet to save the banking sector over the last years, but as you start to see a readjustment of their interest rates on the sovereign side, i think you will see they will have a potential issue. the economy is doing well but you have a lot of lost issues. look at the italian banks as an example. david: as a small percentage, and a big investor talked her surveillance earlier about his thoughts. listen to what he had to say. >> over the last two years, it has taken this long. progress has been pretty good. it has been and a good pace. if you go too fast winding down the sru, you take losses. i think the bank has been responsible. i do not think it is too late to do that plan. david: he said, they are on the right track and it will take time.
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in the same interview, he said it is undervalued and he agrees with activists in that way and thing it is a bad plan. our other european banks undervalued? chad: i do not think they are undervalued. activist investors are looking at them to make money out of this and have to believe the european economy, as well as the overall credit system, is quite secure, so they are taking on an excessive amount of risk in order to pick up a modest return or have a tremendous amount of liability. can you break off some asset management pieces of the bank and make money there? yes, but the fundamental is still that the loans that they have lent to many institutions over the course of the globe -- ok, they are quite high, low and loss issues they have, so there will be perhaps this rush to
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continue to raise capital but i think these activist investors are swimming in the wrong water here. alix: what is the next catalyst for banks you see? chad: overall, you will see the federal reserve raise interest rates and that perhaps will be the case. i have to tell you there is a general concern that overall global growth that has synchronized the story, perhaps you can get pushback and 2018 with a slowdown from within china and that could perhaps deflationary, disinflationary signals to the market, which would then flatten the yield curve and that would be quite negative for the overall banking industry, not only in the united states but within the european market. remember, it china catches a cold in their economy, the europeans catch it, as well. hence the reason i would stay way from the banking industry altogether. alix: he is a happy guy and then dumped me out.
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chad: sorry, i am a realist. alix: chad morganlander will stick with us. up, we will talk about netflix earnings. $8 billion in programming costs. this is bloomberg. ♪
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♪ alix: the move in the treasury market comes in the two-year in the short end of the curve. in the last 24 hours, you saw this yesterday when we heard perhaps president trump really likes john taylor. and this spike comes from eco-data that says the import crisis were up almost 3% in september and export were up as well, so producer prices at
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inflation pipelines starting to build. a double whammy when it comes to yield. joining us now is matthew basel are an chad morganlander -- matthew basel are -- matthew boe sler and still with this is chad morganlander. the 10: if you look at year yields, a got a bigger boost then yesterday on the news that donald trump really likes john taylor, so that shows you how much economic reality is driving the situation and outlook going forward, despite drama on who the next venture could be an different policy references that person might bring to the table. alix: do you get a feeling that donald trump is throwing out names to see how they react? i have to imagine that the trial balloon saying it is probably not driving things that much because you're not getting
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that much of a reaction to the point where you could make a decision on such a thing, so hopefully, it is more about preferences. it seems to repeat the pattern we have seen the trump presidency that whoever he meets with lastti seems to be the name on thep -- whoever he meets with last seems to be the name on the tip of his tongue. alix: what does this do to the curve if you have more uncertainty over the short term? i went to point out we got more economic data to frame the conversation. industrial production in line, although it was revised down a touch. nonetheless, it stayed steady. chad: your assumption is inflation is building and everyone wants to find inflation. we believe it will continue to be below 2%. has the economy in the united states, the global economy, and who do they appoint or stay with
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janet yellen? regardless of who they appoint, we believe interest rates will continue to go higher and the balance sheet will continue to be reduced. it is a matter of this will john taylor get it, will the fed raise rates four times in the next year or if it is yellen, our base case is three times over the next 18 months. we think the yield curve overall is going to find over the next -- going to flatten over the next 12 months and this will be somewhat negative to neutral for banks and financial industry. and the overall markets will continue to see it a dependent. the equity markets on earnings per as well as u.s. economy. david: people will speculate a lot in the next fed chair until president trump makes the next announcement. how much doing know about what he is looking at and what he will do? and how much difference does it make? among the candidates, given the
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fact it is one person in the fed -- matthew: i think that is right. we know a fair amount about what is going into the conversation. we reported the checklist of what they are looking for, someone who was on board with the de-regulatory agenda and someone with experience in monetary policy, banking and they're trying to put together a team. your second question gets to the heart of it, it isn't clear how much differentiation there is between the candidates he is looking that on that front, so it could come down to what are his people telling him, who does he like, and we will have to see how it goes. david: whoever goes in there, they will have to pay attention to what is surrounding them on the markets, so even if they go in, john taylor goes in and has the inclination to move faster, it could be constrained. matthew: absolutely. the: this is what i believe
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fed's third mandate is but also global financial conditions. yes, he could be more formulaic about his approach, but he cannot just press the button and go with the taylor role and check rates up to 3% in the next 12 months. alix: this is a chart making the rounds. in the bloomberg, the blue line is what the fed rate is now and the white is on the "taylor and the yellow is adjusted for the neutral rate. is this chart focus? -- is this chart bogus? matthew: i would add a modification, if you dropped the neutral unemployment rate for the fed takes it is, as opposed to the original model, you will get a break prescription lower. that is getting us closer to where we are assuming a hike in december. that gets back to, how much do
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you think has really changed? the neutral rate is the big discussion in part is what is neutral for the markets? we are seeing real rates backup the news. we can safely assume whoever is picked for fed chair, stock market stability will be near the top of what is on his plate and something we will have to keep an eye on. david: there is no taylor rule, there is a formula and the us to put numbers in and you can get different results. matthew boesler, thank you. chad morganlander will stay with us. later today on bloomberg technology, there will be an interview with chuck robbins. live from new york, this is bloomberg. ♪
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david: this is bloomberg. i am david westin. quarterannounced third earnings. they added 4.5 million new
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international subscribers and 850,000 domestic, at the cost of new programming that may rise $8 billion. joining us now is tuna amobi. the announced a price target of $235. chad morganlander is still with us. tuna, take us to the numbers because by and large, they seem to like them. tuna: absolutely. they certainly hit the ball out of the park once again. netflix is on a momentum unquestionably. what is getting a lot of question is the content spending, eight ilion dollars for next year, i -- $8 billion next year, an outstanding number. i believe we are early in an arms race for content away from traditional content writers, as well as big technology companies. i think netflix wants to push itself in this arms race.
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the international is this is right now over a tipping point, so you can justify the upside from that international and now the stock is trading at a tremendous premium. the questions we get from investors is how much is justifiable? re-think international business is just -- we think international business is just getting scratched. the guy provided for q4 -- the guide for q4 shows the trend continuing, so i think netflix has not been better positioned at this point in time. david: as you said, the early innings of the arms race, and if anything, it is the reverse of trailing off as providers develop their own services. they will have to wean themselves off of content providers to have had an increasingly produce their own. our buyers going to stay patient for that long?
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tuna: that is a good point but i believe netflix is making a strong case that when the disney content partnership ends, it will end soon, and they can go it alone. think of any feature film plan for next year. that is incredible. i think netflix understands the model depends on providing all kinds of content for various genres and they are anticipating this shift in the landscapes. that is why you see them moving to exclusive original shows, which provides superior ownership economics and they're looking to own more and more of the shows. that is only going to be good ultimately for the profit margins and help mitigate these escalating content spendings. david: tuna amobi, thank you. alix: and chad morganlander still with us, netflix, do you like it?
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, we thinko not own it it is overvalued but it is a viral company that could sit on canplatform and you subscribe to it. as they reinvest into their business by original programming, it becomes more attractive to the viewer. this has deflationary pressures on disney, as well as viacom and the cable industry. nonetheless, overvalued was the way we value it. alix: where is the value in tech? chad: we like old, boring tech, microsoft, oracle, cisco am of those could be winners, and when it comes to the stocks, there will be companies in their group that we think have about you, but like google, for example, apple, their valuations to make sense based off of their revenue going totes, which is be robust over the next 12 months, as well as their earnings. again, there are companies
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within the market similar and reminiscent of 2000 bubble. alix: when this value tech outperform? chad: you have to have global growth that is quite robust, as well as business spending quite robust for value tax outperform. we believe over the next 12 months or 18 months, that will happen. alix: chad morganlander will be sticking with us. the opening bell is up next. s&p hundred futures down -- s&p futures down. watch banks into the open and the 10 year yield. yields moving higher. you have powerful inflation data from import and export. the opening bell is next. this is bloomberg. ♪
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♪ is bloomberg daybreak. i am alix steel. we are seconds way from the opening bell. s&p futures flat on the day, dow futures up a 23 points.
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we have solid data today. import and export prices seeing a monster run at the highest level since july 2015. that having a big effect on other asset classes bp take a look at the 10 year yield moving higher by two basis points. 2.32 is where we print dollar index, also getting a boost. i .3. crude eating its own drum with its own -- beating drum with $50 a barrel. abigail: we are looking at next trading action for major averages this tuesday. nonetheless, another record high for the dow. the conviction may not be high but another record high despite the ramped up rhetoric out of north korea. investors looking to earnings season for guidance around a profit outlook, some thinking it could be a beautiful earnings tablen -- a beautif
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earnings season. let's take a look at netflix, trading down about .8, reversing premarket gains earlier. they put up a next quarter relative to revenue and earnings. investors are looking at the subscriber growth, off the charts, but shares seem to be cooling-off. us, analysts are very bullish and investors seem to look at the fact it is up more than 60% year to date. 2%gan stanley up nearly after they beat earnings and revenue in a big way. look sector brokerage is this offset trading declines. and universal health services up about .5. looks like move from obamacare toward medicaid is helping their results and smoothing things out. of course, we have record highs for stocks and the dow today and
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investors are wondering if it continues. this is g #btv 5808 and we are looking at the 120 date moving averages for the vix and that your gauge. -- and that fear gauge. it is one way that investors offect against truly risk shock tough events and it is trading near record highs. it is interesting to see the divergence with the vix at record lows but there is a to correction a record highs. time will tell. alix: joining us is tina martin adams and still with this is chad morganlander of washington crossing advisers. tina, what are investors protecting themselves against? tina: good question. there are a lot of worries, a lot geopolitical, certainly north korea is top of most investor's lists.
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what will that mean for oil prices? some of it is in respect of the fed. i think there is a lot of on what balance sheet contraction will mean and some of it is high valuation. the number of investors that thet to high pe levels in vacuum that stocks are too expensive is a big reason for investors to protect themselves against potential corrections now. alix: what do you see as the highest ability of happening? policy andnk it is a monetary policy misstep in the united states and within the causean ecb that could disruption within the financial market. long-term forecast return on equity is low from a historical perspective. way they are validating been part of the market dissipating is they are looking at the yield
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curve, the short end, and saying i can get an earnings yield of x percent relative to the two-year and this makes sense. as the federal reserve raises rates three more times in the next 18 months, you are looking at a to handle on fed funds rates and a long-term forecast return a 4% to 5% and it doesn't look as attractive. that is the real issue you have down the road. say, also global growth concerns in 2018 in part because of china. david: why is it the main concern what we do from qe to qt? we have never been in the world would we have trillions of dollars of again on balance sheets of central banks. we are turning around the fed and the ecb, and we do not know what that world is like.
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tina: it is one of the bigger concerns. there are a lot. there is a lot of fiscal policy and uncertainty. i think with respect to monetary policy, the fed starts to take away the punch bowl and it is key, as mentioned. real yields have remained negative across the last years and we just moved into positive territory in terms of real yield last year. if the fed is correct with their forecast, we will move into positive territory for short real yield for the first time next year. that has compressing effect on violations. we have got to see a big expansion and earnings growth to make up for that likely valuation compression. david: to some extent, the ecb and what they are doing has kept that down. gina: that is true. i think we started to see that play out.
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there has been this magnificent outperformance in the s&p 500 domestic securities and much can be attributed to the dollar declined, especially relative to the euro. is that because we are pricing in the ecb shifting policy? i think that is part of the reason. the ecb direction probably does largely determined the currency value, in addition to some movement at the fed, but i think the ecb is an important component of the calculation the currency. said it perfectly. that was absolutely perfect. alix: that is how we normally feel when she is around. chad: i agree, you keep one eye on the federal reserve and want on the ecb and it will be about the currency market and the direction to go in. alix: when we talk about s&p, they say earnings is solid. my question was going to become what this earnings growth have to look like in 2018 to offset that rise in real yield the short end?
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gina: the expectation is double-digit earnings growth. it is early to attribute second half to s&p 500 to anything be more than guesswork at this point. nonetheless, the components we you atworried suggest least get high single-digit growth in 2018, probably enough to keep prices higher. if you get anything less, if you see big disruptions in the yield curve or currency, or commodity prices change over the 12 month time horizon, this factors can change the earnings landscape. right now it looks ok and that think it is a net to support and underlying a general uptrend but there are possibilities for disruption. with the fed moving away from support, it increases the potential for disruptions to occur. alix: what sectors? where? gina: the consensus is for every political sector to produce
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double-digit earnings. that seems unlikely. the defense sector likes. in the early part of 2018, i now, it is the story of which is consumer sector lagging, industrial, tech and financial sectors leading the earnings outlook. alix: thank you. it was a pleasure to have you both here. tina martin items and chad morganlander. we are about eight minutes into the session and we look to be printing right around record highs. not quite there when it comes to dowbut one point away under is that a record high, another, i about two points. the record high for the dow and nasdaq falling a little short but around the levels. the outperforming sectors in the s&p, health care, and commodities in the green. this is bloomberg. ♪
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♪ alix: this is bloomberg daybreak. in the i am taylor riggs hewlett-packard going on. coming up, a sitdown with erik schatzker. this is bloomberg. there has been a shakeup in the aerospace industry. arab us has agreed to buy -- airbus has agreed to buy a stake in canadian air. they will assemble it in the united states in mobile, alabama. shares are searching, the most in 18 months. airbus us from france is
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executive vice president of strategy, so thank you for joining us. explain how this deal came about. this thisproach goodr, and when we had a look at it in the past, we revealed that it would start another line and we thought this time was different for many reasons. possibly the fact that the certified, anden good feedback from customers, so on our side and their side and many of the hurdles existing two years ago to not need justification, and now are passing behind us, so we thought it was the right time to do this deal. airbus or not add cache
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to this, but it will be -- cash to this, but the barnier spent bardier invested a lot, is there a limit on how much airbus will invest? patrick: there is no limit, but they are closing the deal in a two years where they are closing bombardier and they will invest every year $350 million in cash. put forth and should be limited. forward, they would contribute more cash in the future than airbus? patrick: so for the first years think we aree, i still managing the concentration. yes, and then i think moving forward again, we will little by
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little get full control of the joint venture and start with a and1 control share majority once it is done, roughly 30% and there will be a call on shares and after more years, a colander -- a call to go up to 70% to 100%. david: so you have an option and out years to go up to 70% and not more? patrick: 70% as a first step, with 20% shares, and then we will have some years later ere call on the 30% bombardi share to 100%. david: one of the issues with the c-series has been a trade dispute with the u.s. and position of tariffs until these now canadian plains.
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i understand final assembly will be done in alabama. do you know that will take care of the u.s. trade sanction? patrick: we believe it will because there will be no imports of aircrafts into the u.s. soil since it would be manufactured in u.s. soil, so the idea is to and build new ones in a facility that is performing well for airbus, which we are happy with the quality of the aircraft coming out of these and our customers are, as well. we could also take advantage of the people there and their competence, and build up in the u.s. market. david: have you or representatives have discussions with the u.s. government to confirm that and so you are confident it will take care of the tariffs? whichk: we did not
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represented u.s. government at that stage. however, what we have done and have done, is we have talked with u.s. firms and get their legal opinion to the fact us to believe and be confident in the fact that islding them in the u.s. indeed a solid solution. david: how much of this was an offensive move in sense of moving forward with your business and expanding it? and how much was defensive in the sense there were rumors the chinese might step in and acquired this c-series aircraft? was this is partly to keep china from acquiring it? patrick: no. it is a long story. we have been trying to get the c-series a long time. the first time in trying, with or without the chinese, and what we see for ourselves is an opportunity to extend our footprint and get access to the
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market which we had no access today. we have not sought in the aircraft in the past five years and we see the market as a significant one. we are talking 6000 aircraft and this market is less crowded than the other segment of the markets, so we believe it is important for us to have access to the market. with what we believe is the best product in the market. alix: should we expect it to be more inquisitive in the future? patrick: not necessarily. again, it is an old story that finally came to fruition. i think we will be looking in other fields and possibly find a position in different domains. there is no rush. again, -- alix: what other domains? patrick: again, i think today we are looking at any additional company today that is looking at
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how can we improve the means of revitalization, and as you know, we do have a solid partnership and they are helping us in the airlinesylewise and in to help us make the best possible use with our customers and i think it is in an area where we want to grow. david: as we know, there has been an ongoing trade dispute between boeing and airbus. though we came out with a statement this more -- they came out with a statement saying, this is basically two state subsidized aircrafts getting together. how does this position you with respect to boeing? patrick: again, there has been ongoing discussions with boeing for many years and there are ongoing debates. i think in front between the eu and the u.s. on that matter.
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our competition is in our product. one of the reasons we stepped into that deal with bombard ea rdier is because we had many customers asking us to, as well. clearly, we had many u.s. customers that were very concerned about being faced with a monopoly for aircraft between 100 and 150 cedars -- seaters. alix: thank you patrick de castelbajac, joining us. check out tv , watch us online, interact with us directly, go to tv on your terminal. this is bloomberg. ♪
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♪ david: this is bloomberg. president donald trump and mitch
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mcconnell presented a united front yesterday, saying they are fighting for lower taxes and tax reform. they insisted they are "closer than ever before," despite having publicly attacked each other in recent months. kevin cirilli joins us with the latest. if love is blooming all over and washington, d.c., between which mcconnell and donald trump, who would have thought? kevin: their political romance is back on. that is a sigh of relief from some sources i speak with in terms of the president's ability to work with the majority leader to get tax reform done by the end of the year. they have a big vote as early as this week on the budget and they have to clear that in order to address tax reform. there is a host of other concerns that are going behind the scenes. i would how you this, i spoke with a senior source who works closely with steve bannon, when he was out of the white house
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and in the white house who said essentially, remember what president trump said in the way to that meeting? takenised it and that was us a sign that this president understands he has to work with the republican movement and with the republican establishment. steve bannon has said he will not endorse anyone in 2018 unless they vote against the majority leader for majority leader. david: thank you, kevin cirilli, washington. alix: the first etf created a policyf specific initiative launches today. joining us is eric balchunas. with us is chad morganlander still up morgan crossing -- washington crossing investments. what is different to what we have seen before? so narrow., it is you are tracking a mostly single piece of legislation. that has never happened before. it shows have narrow and tied to
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the new cycle etf launches are getting. this essentially will go out to companies that are taxed, have high tax rates, exporters, it will equal weight to them and that sounds like a lot of normal somatic etf, but this is not your average one because it is run by x goldman sachs guys, so they thought this out and they think it is probably to keep up with trump and make sure you hold the -- change the holdings on a dime depending on how the situation breaks out in what is said about the losers and winners. you see some stocks in there, and i expect you would see more etf's like this because the new head of the division of investment management has said she wants to speed up the time that filings hit to when they get approved, so you could see more etf's tied to basically new cycles. alix: what are some other trump-inspired etf's so far? eric: their two others, a
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democratic and republican policy, both tracking stocks that would benefit. the inspiration behind them would be that they found that depending on who was and down in the polls, a group of stocks would go up and down. the gop is typically financials and aerospace defense type stocks, with the crowd with tech and health care. national democrats in tech and health care. ago, one launched, tracking stocks that are big gop donors, so this is the most conservative version of the etf fund. these new ones today are more just to make money. alix: percentagewise are tax reform, go? chad: i think there will be tax reform going into 2018. it will be watered down and not have as great covenant.
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in. the u.s. economy as anyone imagined, but we are in october -- not as great as an impact on the u.s. economy as anyone imagined, but we are in october. alix: great points. great to have you at this for the hour. as we close out daybreak, you are looking at banks with an interesting reversal. morgan stanley up by about two 2%, pretty-- about solid. different 20 comes to goldman sachs. they were up when they were in premarket but now weaker. it is -- it's lending environment picked up a little bit. watch those into the day. this is bloomberg. ♪
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vonnie: it is 10:00 a.m. in new york, 3:00 p.m. in london, 10:00 p.m. in hong kong. from new york, i am vonnie quinn. mark: from london, i am mark barton. welcome to "bloomberg markets."
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top stories are the we are covering from the bloomberg and around the world. banks are in focus as goldman sachs and morgan stanley report earnings. morgan gaining, goldman falling. we will explore why the shares are heading in opposite directions but in politics, tensions heating up between the u.s., canada, and mexico come as the fourth round of nafta renegotiations draws to a close. the u.s. is said to be getting more extreme in its demands. and what economic goals might china set as it is getting ready to hold at twice-a-decade party congress? we will discuss the issues in beijing. we are about 30 minutes into the trading day and a julie hyman is here. julie:

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