tv Bloomberg Markets Americas Bloomberg October 18, 2017 12:00pm-1:00pm EDT
shery: here are the top stories on the bloomberg and from around the world we are following. the stock market slowly grind out record after record with the dow reaching 23000 and the s&p 500 is an all-time high, we will speak with the deutsche bank chief global strategist. sources say the securities and exchange commission is preparing to give wall street a big reprieve concerning new mifid set to take effect, the plan and what it means for brokered read -- broker research costs. automation coming to wall street in a big way, bloomberg is taking a look at the critical issue in a series of reports. they focus on the coming revolutions and what it means for workers across the industry. here.hyman is halfway into the trading day already. 23,000.ow today, about
yesterday it closed at a record, just shy of 23 k, we hit 1000 point milestone's five times since the u.s. election. the s&p 500 trading at a record today, although backing off its highs of the session. nasdaq slightly lower. trading ranges remain relatively small. unusual today, a big move in ibm and, of course. board --arnings, a while -- upwards. we have not seen a positive stock reaction, even when the numbers beat estimates and again we see today is the biggest one-day gain post earnings for ibm since a report of the fourth quarter of 2008 and january of 2009. this after the tech giant predicted a gain in sales for the first time in quite a wild.
-- while. use to slowing growth but now a 1.5% increase year-over-year in this quarter's revenue. elsewhere, we are looking at banks, they are the best performing groups with financials more broadly and the best performing group in the s&p 500, big banks like wells fargo and citigroup and bank of america doing well as we see the 10 year yield balance, up four basis points. another type of rate or currency is bitcoin which is tumbling for the second straight day, down 6% . there may be increased regulatory scrutiny of the currency. the cftc published a primer on bitcoin and said the virtual tokens used in coin offerings initially can come under oversight from them. there have been comments like this from other regulatory
agencies like the sec and the currency has rebounded. this may prove short-lived. someing a stock that has link to cryptocurrency, overstock.com which i did not realize, they have a block chain investment and talking about starting its own cryptocurrency exchange. we have seen it track cryptocurrencies recently with bitcoin in particular, it is trading down but a bump up it had along with bitcoin over the past month. mark: at -- shery: the prospect for tax reform is in the spotlight with the trumpet ministries and linking it success to that of the market. even steven mnuchin is now attributing the market rally to tax reform. no question the rally is into reasonably highest fixations about getting tax cuts and tax reform done to the extent we get
the tax deal done, the stock market will go up higher but no question in my mind that, if we do not get it done, you will see a reversal of a significant amount of these gains. chiefoit -- deutsche bank strategist joins us. let's look at this, you are these high tax companies are in fact underperforming the low tax companies, the s&p 500, the most taxed companies fading and we saw the rally after the november election and saw a bit of a pickup late last month. not anymore. how true and accurate are those remarks from steven mnuchin? >> two ways to think about whether or not tax reform is in market prices. is it just think about the aggregate level of the market? one of the things to keep in
mind, when there is a close presidential election, you get a strong rally afterwards, as long as there was a clear winner. the rally in the equity market, i would say barely even caused what -- paused when we had disappointment early this year for policy reform. the aggregate level, nothing has been in the market for tax reform. the other way is the chart you just put up, looking at a long short basket of high tax companies relative to low tax companies. it has moved around and it is very responsive to announcements about its specific announcements about corporate tax reform. if you look at the level today, below where we were prior to the election. to arguey difficult that tax reform is priced in. vonnie: even if we accept that premise, does that mean, if
there is no tax reform this year or that something happens, but it stalls or takes a lot longer than we expect, we will not get a selloff? approaching on november 7, 8, it will be the longest rally since world war ii without a 3% pullback. i expect that, at some point, we will get a pullback. away toree weeks becoming the longest rally. we are long overdue for a pullback. in terms of the catalyst, i do not think that will be one of them. i would argue, very little priced in. 51 is: the chart 28 showing days without a 5% drawdown and we continue to see that. the s&p 500 continuing to gain ground. seven that we have seen these s&p 500 incentives downgraded
since august, given the hurricane, why do we continue to see stocks go up and are investors looking past this quarter? >> absolutely. we have a hurricane season every year. some years are worse than others. some years are better than others. it away, you expect the equity market to look through them. i would emphasize about earnings, this fight the impact of the storms -- despite the impacts of the storm, we expect earnings in the third quarter and 9%. if you put in a round number for the storms like to present, still talking about that 2%, still talking about third-quarter -- 2%, still talking about two shery: -- belong -- beest to long? >> depends on the risk-reward you are willing to tolerate.
it is pretty volatile. the reward will be highest but the risk also the highest. i would argue the risk is limited, given where we are today. there are other ways to play at the index level and the simplest and easiest way is being long the small and more domestic oriented companies. the russell 2000 as an effective tax rate that is significantly higher than the s&p 500. vonnie: thank you. we really appreciate your input. shery: we have some breaking news. leadership from danone. faber will be the incoming chairman and ceo. we will have more details as we
get them. vonnie: let's check in on the first word news with mark crumpton. maryland, baltimore, authorities say at least three people killed in a shooting at a business park. two wounded. authorities searching for a suspect and officials say the suspect and the victims were all associated with a company in nearby edgewood. the u.s. attorney general, jeff sessions, defending the trump administration's travel ban as an important tool in fighting terrorism. he testified before the senate judiciary committee. >> a president's executive order is an important step to make sure that we know who is coming into our country. it is a lawful and necessary, and order -- in order we are proud to defend. confident theis justice department will prevail in its effort to defend and enforce the ban. angela merkel begin talks on uniting parties into a coalition
. she will meet separately with the green, pro-market, about an agreement on cabinet posts and policy. the combination that has not been tested at the national level in germany. there will be an early test of president trump's decision to take a tougher stand on the iran . -- iran nuclear agreement as he wants nikki haley at the security council, she will gage international support for american criticism of the deal. u.s. allies have said they still back the accord. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. shery: thank you. on wall street, the sec will offer u.s. banks a key retrieve on new legislation and we get the wider impact. this is bloomberg. ♪
♪ shery: this is bloomberg markets, i am shery ahn. vonnie: i am vonnie quinn. wall street firms getting an sec fromee from debt reprieve mark barton -- mifid 2. a bunch of charges. barclays is $450,000 for this gold package research. let's get to the person who knows about it, jesse is our reporter in washington, d.c. and follows regulators. where is pricing? it seems like we are all over the map with pricing. >> it is all over the map.
this is the first time wall street has had to do this. they are seeing what the market will bear. it will be interesting, we will find out whose research clients are willing to pay for. under the status quo, this is rolled into a bunch of services banks have provided investors. now, they will listing was themselves and proving whether one firm has better research than others. shery: are these banks going to get the data out of jail free card from the sec? ita big dilemma with mifid, is a european role and has caused ripple effects in the u.s. because there is a major conflict between mifid and u.s. rules. there is a situation where, if u.s. banks comply with mifid, they will violate american roles. they have been lobbying the sec to say, tell us it is ok to
comply with mifid without getting sued by the sec. it looks like the sec will grant them their wishes. vonnie: what are banks counting on in terms of revenue for research, will it make a significant component of their bottom line? >> it is hard to know how much banks can make from research, because trading has always been the most lucrative service for banks. they have rolled the research, not just analyst reports, it is giving big hedge funds assess -- access to -- setting up conferences and setting up meetings with ceos of companies. wall street has offered to big investors for a long time. if you have to pay for them now, it is quite unclear what hedge funds and other investors will pay for and what they are not willing to pay for. shery: you mentioned the sec was being harassed by the lobbies, what happens on the other side
of the issue, investor -- >> that is an interesting point. europe is kind of broken everything up. where we situation now will have investors who can say, maybe goldman is the best at executing trades. but maybe ubs has the best research, that is just in europe for now but as american investors get wind of that and see how it works in europe, they may want the same thing in the u.s. that is not necessarily good for wall street, the status quo has been good for wall street. if u.s. clients are clamoring for the same thing europe is getting, that could be an issue. vonnie: what about boutique firms, ones already there, do they have to comply with these rules and relations? and once that may spring up if banks decide this is too expensive and not working for us? >> that has been an issue, a
thought that a lot of the boutiques can distinguish themselves with research. they can never get into the wall street circle of trading. that is dominating by the giant firms. investors routinely will tell you that some of the small firms do pretty good research. now, they make it pay for it, anyway they have not before because so much of the money will flow to the banks that were providing the trade execution. shery: when can we expect a definitive announcement on this issue from the sec? >> i think the sec will tell banks by the end of the month, from the bank perspective, it cannot come soon enough as they have to comply with mifid in january, it sounds like a couple of months away but it is a tight timeframe for banks to set up all the compliance programs, and all the client things they have to do in order to comply with mifid. shery: thank you for joining us,
jesse westbrook, our financial relations -- regulations reporter in washington. general electric is teaming up with apple to make an industrial apps for mobile devices, they are designed to manage machinery , factories, power plants as part of the ge efforts to ramp up sales of software and services. the world's largest hedge fund is adding to its billion dollars short against italy's economy, bridgewater associates has disclosed $300 million that company.he oil and gas earlier, bloomberg reported the firm had shorted six i tie in financial institutions and two other companies. financial institutions and to other companies. fuel-celll unveil a concept car next week that it says offers 60% more driving range than his predecessors. the japanese biggest auto
manufacturer continues to champion fuel-cell vehicles as the ultimate zero emissions cars , even as other manufacturers gravitate to plug in technology. tokyo wants to increase the number of vehicles on japanese roads to 40,000 from 2200 and three years. desk in three years. -- in three years. vonnie: president trump says yes -- says he has support from both sides of the aisle on tax reform. this is bloomberg. ♪
committee and says he want the largest tax cuts in history and he has support from both sides of the aisle. he did not name names. kevin cirilli is our chief washington correspondent and joins us live from the white house. what are we expecting from this senate finance committee meeting? the vice president, john kelly, mick mulvaney, the big names are there. kevin: including steven mnuchin. the president likes to meet with democrats, he likes the bipartisan feel and they're are hoping to get a couple of democratic supporters in order to offset what could be conservatives who are against them on tax reform. thingsre a couple of being discussed, border adjustment tax, guilt, the state and local deduction issue, which has been somewhat controversial. there is potential a pay for on
401k's that asset managers are quietly pressuring the administration and people like chairman brady of the house tax writing committee against. this would be -- how this is being put together is very much evolving. it is very fluid. on the issue of the budget, republican lawmakers in the senate are very much pushing to get the budget voted on by this week. it is the latest political hurdle they have to clear, if they want to get the tax reform by the end of the year and that is why some republicans, including mick mulvaney, are saying that if they do not pass a budget by the end of the year, it looks like tax reform or tax cuts may be pushed into january. vonnie: can we expect a vote around thursday? kevin: thursday or friday, according to sources, that is what they want, if they do not, things will get tricky and not a
good sign for tax reforms or tax cuts by the end of the year. shery: after that, we are getting the conference draws us, how lengthy and problematic are we expecting that to be? kevin: i'm issue of how they will pay for the $6 billion plan remains to be seen. president trump says he will make tweaks, even on the number of rockets there are. he wants to live -- brackets there are come he wants to go from seven to three. and how to pay for this on the state and local deduction tax issue will be talked about. very much still underway. meanwhile, we will be waiting who he will appoint to lead the fed reserve. shery: we just heard from steven mnuchin, talking about taking some of the credit from this stock market rally we are seeing. you have had tax buildup in the past and we could see a reversal. how credible is that?
kevin: not just a market reaction republicans are talking about and administrative officials like steve mnuchin are discussing, but the political fallout, which has a lot of republicans uneasy on capitol hill. they feel strongly that, if they are not able to deliver any type of tax cut or tax reform by the end of the year, their chances going into 2018, in addition to not passing tax reform and health care reform, speaker paul ryan against alexander murray, crossing the terminal, not goodg a major policy win significantly hurt their chances in the 2018 midterm elections. vonnie: thank you for that come our chief washington correspondent -- thank you for that, our chief washington correspondent. the president said he will not enrich the insurers. was interesting
and confusing, i am supportive of lamar alexander, the person and process but cannot support bailing out insurance companies who have made a fortune with obamacare. understanding what the president means will be a key challenge. vonnie: exactly, he says we will see bipartisan agreement. coming up, we hear from the incoming ceo of kohl's on their new partnership with amazon. why she says it is good to work with the online giant, instead of competing with amazon. this is bloomberg. ♪ ♪
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and i am -- i am a vonnie quinn. shery: and i and shery ahn. we have some pretty good earnings results including ibm forecasting its first sales growth in five years. also, investors are very much focused on president trump's meeting with janet yellen about her possibly keeping her position. that meeting will be tomorrow. let's get to the first word news. moree union is unveiling new measures to discover lone wolf attacks. this comes after several attacks in cities of extremist driving cars into crowds of people. democrat elizabeth warren is calling for the cancellation of puerto rico's debt.
senator warren once every dollar of aid going to puerto rico to help hurricane victims. she says that wall street vaulter funds should not receive -- vulture funds should not receive any money from the islands. theresa may told parliament that the government is either ready for a deal or no deal when it comes to brexit talks. >> i can confirm that we are working for the best possible kingdom, butunited it would be irresponsible of government not to prepare for all possible scenarios. that is exactly what we are doing. >> the u.k. and the eu are divided on a number of issues including how much the u.k. should pay to leave. xi jinping will have a gathering of the communist party that is expected to cement his influence for the next decade. he laid out a roadmap to turn
china into a leading global power by the middle of the century. he called for more reforms at state-owned industries, and he promised to open the doors to for businesses -- foreign businesses. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. this is bloomberg. areie: as many retailers dealing with amazon, some are embracing the competition. areome stores, they providing space for amazon's smart home products. 'sma chandra spoke with kohl chief executive officer. >> i think we all have to think very differently about our strengths. ant kohl's has is incredible, thriving footprint.
amazon has tremendous reach. they are a remarkable brand. i think bringing our two brands together is a remarkable opportunity. >> you expect more people to l's to purchase amazon items. >> yes, it is a great opportunity to drive traffic, and it creates a great touch point with our customers to build long-term loyalty. >> tell me how much of this works in terms of cost. amazonmeone buys a product, does that purely go to amazon? what are excited to see the agreement unfolds later today, but we cannot go into detail about the particular
finances of each company. our starting point on this is our ambition to be a leading, omni channel retailer. that is the merit of our strength and physical footprint and our digital presence. we think working with amazon is a tremendous opportunity. it is a huge market out there, and there is plenty of room for both of us to be successful. >> e-commerce has been rather successful for you. kohl's had a great second quarter. it is growing. are you concerned that bringing in another e-commerce retailer will hamper your growth? >> no, i do believe there is plenty of room for us to both be successful. it is a huge marketplace. we do what we do very well. no concern that they will get so used to this
brick-and-mortar space that they will want to own kohl's? >> no, i do not think so. today is just the first day of this experience, and i expect we are going to learn a lot more. >> how does this help with kohl's overall strategy? you are working to not reduce your footprint. experience, if it is successful, then it will help expand things. >> this is a great example of using the space differently. we have really challenged ourselves to think differently, because the customer and industry is evolving. we are taking a chunk of a few hundred of our stores, and we are reducing our traditional inventory in those stores, so you have more space to create
new experiences. >> looking ahead to the holiday season, the national retail federation is expecting a boost in sales. are you expecting that as well? >> i will not comment on sales, but i will tell you that holiday thehere kohl's shows up best. i think it is a tremendously dynamic time in retail. .t raises the bar for us while some find it daunting, i find it energizing and exciting. it forces me to think differently and more out-of-the-box. --turning out to 2018 turning now to 2018, what are your plans for kohl's as you take on the top role? ? what do you hope to achieve as
ceo? >> first, i just want to say that i am excited about this opportunity that will come next may. kevin and i have been partnering tremendously since i have started at kohl's. my job right now is to deliver outstanding holidays. that was michelle gass speaking with emma chandra. coming up, we will speak with the facebook f -- vp of messaging products. this is bloomberg. ♪
♪ shery: welcome back. this is "bloomberg markets." i am shery ahn. vonnie: and i am vonnie quinn should let's bring in -- and i am vonnie quinn. let's bring in abigail doolittle to talk about fitbit -- gopro shares. they are upgrading to a buy from a neutral. the three main reasons he is saying is that the retail channel tracks demand good enough. that is the real reason for the upgrade. second, if we take a look at a one-month chart of all-pro, we see that the stock has been decimated recently after the google launch. they are saying that this is a
buying opportunity. the google product is not actual competition. with shares down, valuation discounts -- all of this leads to the fact that the company is very profitable. next year, they are expected to be profitable. if we hopped into the bloomberg ,nd take a look at this chart we are going to see the rough story of gopro at its peak over here back in 2014. $95 stock. absolutely getting crushed. this is the earnings swell. now, the company is not so profitable, but it could turn a profit next year. if they does go up to that city one cents, then it is likely the stock to go with it. that is what is happening today with gopro. shery: we will see what happens with that.
abigail doolittle, thank you so much. a wall street journal conference kicked off in laguna beach california. -- laguna beach, california. one of the major vips in attendance was the facebook vp of messaging products. withzuckerberg is credited bringing a payment product to the messenger platform. marcus toup with discuss just how much money the company is putting into advertising. >> we do not break out revenues for specific roddick's, but i can say that it is still very early in the development of messenger as a business for facebook. the early signs are promising. if you are a business, and you build in experience inside of messenger that is the right type of experience, and you redirect people either from the facebook a conversation inside
of messenger, then you will increase your business objectives. that is a good sign that we will enable more businesses to be able to create more conversations with their customers and generate new .evenues i have tons of examples for you. a good one to share is that t-mobile is now sharing -- now selling it plans on messenger. we have seen a huge convergence increase with traditional web experiences, because they have re-created the experience you can have in a store with messenger think to this conversational ability next with ui elements. the chat spacein is heating up with apple i .essage and even whatsapp the facebook family is trying to own this relationship. how do you see messenger standing up against the competition?
different very geographic split between different types of messaging apps. what we see is that what's at is very strong in certain markets -- that whatsapp is very strong in markets like latin america, what we are stronger in north america. one differentiation that messenger has is really groups today. when you create a group on messenger, you are never seen phone numbers. so younly identities, know exactly who you are talking to at any given point in time. you can send media very quickly. worksou add a device, it flawlessly. you have all these great chat extensions whether it is creating a playlist with friends the us spotify or playing games or making plans, you can do all of these things much better on messenger, and it is a key
differentiator for us. we will continue investing in groups and real-time. you can upgrade from texting to live video in groups. it becomes a very delightful experience. augmented reality, all of these things, we are really showing that we have some key ideas this year that we will continue to invest in. third-partyentioned experiences, spotify, the ability to buy movie tickets on fandango, share recipes from the food network, how are these features driving user growth? >> those types of experiences are actually driving engagement. once you have this types of experiences, then you tend to stick with messenger and create more and more conversations on messenger. when people actually get what they want, when we can infer intent from a conversation and leverage them to suggest the
right thing at the right time, we see that people are having a better experience. they are sticking around on messenger to create more groups and more conversations. emily: with referencing ai technology, some would say that facebook seems to be behind in the ai game. amazon and google already have products in people's homes. does facebook have some catching up to do? >> we have a very different approach here. we tend to not disappoint when you have an intent you want to complete, because we only surface suggestions when we feel confident that this is something you want to do. the model we have been working on right now is the one that we
have been talking about with suggestions and conversations. we are continuing to invest in bringing a more full-fledged system to market. we have been working on it for a while. if we really want to ship something that is very valuable and will not let people down. this is something we do not want to rush to market. we want to get it right. once we get it right, then we will ship it to the 1.3 billion people on messenger and counting. twitteracebook, google, are all going to be speaking in for the house intelligence committee about russian meddling on the platform. what responsibility does facebook there here -- facebook bear here? what mistakes were made? >> one thing i want to say when these things,, we have lately been talking about the responsibility of the -- when these things, up -- when these
have latelyup, we been talking about the responsibility of the platform, and we do have responsibility. the number of people who connect with other people around the world in ways they cannot even connect with friends and family, the fact that we have turned on safety checks in the 600 -- in about 600 times since we have launched it, the fact that we have raised $17 million for hurricane harvey relief on the platform, these are all things we do not talk about. there are some good things that come out of the platform. when you operate on this scale, there are things that shouldn't happen which did happen on the have am, but we do career -- we do have a clear, crystal plan about what we are going to do about it. we are to hire people to make sure this never happens again,
and we are collaborating special counsel in congress during these investigations. we are taking this very seriously, and we have a clear plan that was outlined recently. we are going to go after it very aggressively. vonnie: that was david markets. coming up, wall street is embracing automation in a big way. that is next. this is bloomberg. ♪
what it means for workers in the finance industry. side focus on the sell first. what parts of wall street are already using automation? >> they are already experiencing with ai when it comes to cash equity. when you think about equity, they went electronic decades ago, so they do have the data. when you have data sets, you are able to use machine learning algorithms and apply it to those data sets. they are already doing that for education and credit. or automation and credit. what is the problem there? >> some of these things do not trade very often. what are they doing to create their own data sets? all about that it is
the data. they are actually treating their own data sets. withyou are on the phone your customers, you are using natural language techniques to grab data from those clients and to create profiles about them to determine what they will want. vonnie: how many jobs potentially could be lost? could beten hear it 30% of jobs over the next five or so years. when you think about that, how many hundreds of thousands of people are employed by these banks, and quite often many of them are doing mechanical things -- it does not seem to be an overestimation. goldman sachs posting these new jobs which seem to be tech centered. as itthe near interim, becomes more and more real and relevant in finance, the people who can help execute on that, that is where a lot of the interest will be.
i'm sure these people are going to be arriving at these organizations in droves. about thelk to us areas already using automation on wall street. how might it affect traders? about youu think bankers, if you get them in a candid moment, when you tell them there is technology that gives them something better, faster, cheaper, then they are going to do it. all things should increase from this technology. what is the biggest expense line of any bank, the people. bank executives keep saying they are optimistic about the future, but what is the feeling among rank and file workers? >> anxiety. someone raised their hand at a town hall and asked what they should say to their colleagues who are concerned about the future? anxiety and some
even some basis for that. are alwaysre financial innovations that goes in cycles. the banks will find other ways to raise capital. >> yes, and that has been the pattern in the past. you have people that will be doing jobs in the future you cannot even imagine existing today. however, the pattern of what this technology does allows fewer people to do more things. at the end of the day, that will require fewer people, and that is pretty much accepted. automationng as how is starting to happen, what this accelerate as time passes? is, think the best question when does ai get to a level where mass unemployment happens? i do not think that will happen anytime soon. all of the companies pushing
automation, they see it as a clear-cut win. ai is going to happen in about 10 years or 20 years. shery: they do so much for joining us. still ahead, we will speak with about theg -- levin outlook of his country -- his company and the future of cryptocurrencies. a quick reminder, you can catch all of our abscess -- all of our previous episodes on the bloomberg. this is bloomberg. ♪ who knew that phones would start doing everything?
shery: and i am shery ahn. this is "bloomberg markets." david: what will take to get the gop on the same page on tax reform. president trump says he will work on both sides of the aisle to pass tax reform. meetings with the senate finance committee today. we will speak about the future of cryptocurrencies in laguna beach, california, coming up. ♪ donald trump met with members of the senate at the white house today. he still expects largest tax cut in history, and he