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tv   Bloomberg Daybreak Americas  Bloomberg  October 20, 2017 7:00am-10:00am EDT

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is said to be leaning toward taylor and powell. the budget resolution taking another step toward considering trumps tax plan. ,heresa may comes to brussels offering the cover to drive forward brexit talks. good morning, this is bloomberg daybreak. i am jonathan ferro alongside david westin and alix steel. once again, a fifth straight day of gains. we drive out another all-time high and futures are positive. it is all about the prospect of tax reform and that means a stronger dollar story across the g10 space, euro-dollar at 1.18. yields grind five basis points higher. dollar-yen, look at now below 114. you wind up seeing the spread when you talk about a possible
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dovish fed, the spread continues to steepen. that is more on tax reform, 78 basis points is the difference. the pound just turning positive. a macron-merkel-may lovefest over the past few days. i do want to bring in breaking news over the last half hour from ge, a huge mess on earnings at $.29 a share versus estimates that $.50 a share, and it cut its full-year forecast. the oil and gas environment remains challenging for its spinoff of the baker hughes ge business. what was the huge mess on earnings and revenue came in stronger -- miss on earnings one revenue came in stronger? typically on an earnings day it moves just about 2.8%. what doesions about it do to flannery, the ceo? david: it is typical for a new
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ceo to clean things out, but this is really a big one. jonathan: it says a lot what was going on and maybe for john flannery, he has the appropriate whipping boy to drive things forward. it gets a decent position because these are just numbers and got his. david: he has got to come up with a strategic plan. alix: the cut on the forecast is quite significant. significant downward revision for the company. david: we will continue to cover that and bring you more as it develops. time for your morning brief, how the hurricanes existed u.s. home sales -- hurricanes affected u.s. home sales. loretta mester will speak on the global regulatory schedule and janet yellen will deliver a speech in washington at 7:15 this evening.
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yesterday, president trump at his meeting with fed chair -- had his meeting with fed chair janet yellen. we welcome our chief washington correspondent kevin cirilli. what do you know about the likely successor to janet yellen , including janet yellen possibly? kevin: i can tell you that john taylor and jerome powell have emerged as the two potential front runners in the list of five, five or so potential nominees that president trump and his staff are looking at. the remainder being janet yellen who met with the president yesterday, as well as kevin warsh and gary cohn. if you look at this a bit more broadly, in addition to steve working on mr. cohn setting each choice, vice president mike pence has emerged as somebody who has the president's ear on this potential pick. jeffelationship with
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hester ling, who is a fan of mr. taylor, as well as their economist in the vice president's office, have been working closely on the search as well. david: what do we know about timing? kevin: the white house has been very reluctant to name a certain day when we can get this. they have just said soon. what we are hearing is this will be announced probably most likely before the president embarks on his asia trip in over a week and a half. he find a single republican in d.c. that wants chair yellen reappointed? kevin: no. literally i have gone through my notebook reviewing all of these notes and i cannot find one conservative at all, not at the freedom caucus, not in the senate, not on the senate banking committee, and definitely not in the financial services lobbying industry in washington.
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the big banks on k street, all their representatives. i cannot find one person who wants to see chair yellen reappointed. jonathan: kevin cirilli, some real solid reporting throughout the week. joining us now is ben mandell and carl riccadonna. carl, what strikes me is the the leading two, the continuity in j powell, and a complete unknown in john taylor, they are our final two, or the leading to. , continuouslyseen with these leaks and source stories and whatnot. we knew there was a bit of a conservative push to support one of the republican candidates, especially john taylor. that would be someone that mike pence would support. i am not sure, while the president's team may be leaning toward them, that does not mean
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the president is leading -- leaning in that direction as well. i still think janet yellen has a but ifchance as well, you want a yellen like fred, republicans -- like fed, they want a republican at the helm. jonathan: i wondered whether that would please the president of the united states. as you look at it, i just wonder, is that headline crossed , john taylor nominated next fed chair, how would you respond? ben: hawkish, may be slight risk off on the announcement, that i do not think it will happen you'd i would not be surprised if neither powertel nor taylor -- i do not think it will happen. i would not be surprised if neither powell nor taylor was fed chair. to have an outsider come in and shake things up, and
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transparency in the way monetary policy is set. if you want an outsider, that takes out janet yellen and j powell. if you want low rates, you can have transparency with john taylor but probably higher rates . where does that leave you? gary cohn and kevin warsh. gary cohn is probably more useful on the fiscal efforts so by process of elimination i would say kevin warsh. alix: it was an interesting intraday move yesterday. the white line is that 2-10 curve, got a lot steeper on the headlines from politico -- sorry, that is the white line. the blue line is the s&p financials, moving in tandem with that steeper curve. is this the correct response to a potential dove at the head of the fed? ben: one of the book ends on the outcomes here, the most dovish possible is a continuation of current policy.
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j powell is probably the most emblematic of that stance. what is the current policy? .or gradual tightening if anything, markets seem underpriced for what the fed will be doing over the next year or so. we have had this conjecture that they will resume rate right -- rate hikes. i would not be surprised if they got in two or three next year. carl: banks like steeper yield curves, so i think that was the appropriate response for financials, and you will see an additional layer of potential deregulation. david: the president has not said much about monetary policy but has said a lot about deregulation. which candidate will be most appealing to him on that score? ben: jay powell seems to be more willing to consider post financial crisis the regulations been janet yellen, for instance. we look at the other
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leading candidates, they have talked about easing restrictions on banks. one important consideration here, we know the neutral fed funds rate has been drifting lower. we are in a lower interest rate regime. there was a research paper from the fed saying that we could see interest rate policy at the zero bound, potentially 40% of the time in the future. that means you are going to have to use unconventional monetary policy which means you will have to use qe as a tool. if we look at those hawkish guys, they are not fans of qe. that has some real implications for the economy in a downturn. even someone like kevin warsh who was on the board as a governor, and at that point he was more hawkish than bernanke who was the chair at the time, prior to the financial crisis, but once he swung in 2008, 2009
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he was on board with those conventional -- unconventional measures. carl: john taylor does not seem to be a fan of qe. jonathan: j powell took a lot of -- when he was nominated. the opposition did not just come from democrats, it came from republicans. through his tenure he has had some opposition because he did not stand up to dancer rouleau. -- dan tarullo. ben: dan to -- carl: dan tarullo was in charge of the regulation agenda so powell was just a voice in the background. alix: thank you so much, ben and will be sticking with us and carl riccadonna of bloomberg intelligence. i want to update you on ge, the stock down, a whopping miss down to $.29 a share. the selloff in ge is not as bad as it was.
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it was down over 5%. jonathan: coming up later on the program, looking out for this conversation, steve englander on why he thinks chair yellen is a hawk. say that fast three times. look out for that conversation. this is bloomberg. ♪
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♪ bloomberg, i'm david westin. the senate passed their version of the budget resolution, putting the ball on the house side with potential action as soon as next week. what stands between us and tax reform? kevin cirilli, welcome.
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you wind me up by reading what they put up their. kevin, i'm delighted to see you. take us through. they passed this through the senate and it has to go back to the house. how difficult will it be to get the house to agree with the senate? kevin: not that difficult. i have been talking to a lot of sources on capitol hill after the vote last night, and pretty much what they are saying is they think this will be less controversial then we in the media have made it out to be. they are anticipating this to advance first half of next week, so that is all good in terms of tax reform time efforts by the end of the year. late last night with this budget advancing out of the senate, you did have senator rand paul voting against it. he did vote earlier this week on a motion to proceed, allowing it to come to a vote and that is the broader take away from
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republican establishment of the white house perspective which is essentially, he is against it but he allowed to vote to come forward and there was not any type of blockage. david: the issue for rand paul was the deficit. have house deficit hawks just gone away? the senate says $1.5 trillion in deficit, that is fine. the house says, no way, no how. kevin: it is quite remarkable to note, as you have, just about how a lot of these republicans have been so outspoken in recent .ears about the deficit seemingly are making the calculation that tax cuts by the end of the year are more of an advantage for them, and more of an incentive for them. i think that is the calculations going on. they will still talk about it, but what we saw last night in the senate is a good precursor to what we will see in the house. you should note senator rand paul voting against an amendment
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on the state and local production tax, which has not been as controversial as perhaps the border adjustment was before that was killed. there are a lot of asset managers worried. david: we have to come back and talk to about that. thank you. alix: kevin, tom, marty come all the same. here's what potential tax reform looks like in the market. , a look at the dollar index big jump higher when we got the budget passing in d.c. the 210 spread, steeper on the -- 2-10 spread, steeper on the day. still with us is ben mandel. do you think we will get tax reform? are you buying small caps come along the dollar? ben: i think it is less a function of what happens and more a function of what is priced.
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the dollar has been range bound for the last few months. he tried to look at the basket of equities that would have a positive impulse on tax cuts. outperforming necessarily. there is a strong case to be made that whatever your expectations on fiscal policy and the tax bill, there is very little priced into markets. if we look at the contour of treasuries and the s&p, we see growth prices embedded that took a step up last year and leveled off and has been range bound since then. that reflationary impulse in the global economy seems to be reflected in prices. i do not think there is much in there for tax reform at this point. alix: bank of america and epf, we saw seven and a half billion dollars coming into u.s. .quities this week how much money can be sucked into equities? ben: it could be upside the u.s. equities. i think you want to have u.s. equities as part of your overall
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mix of global equities for a number of reasons, exposure to the upside for the outlook, exposure to downside risk for the dollar, you want exposure to a secular trend in tech, which you get here, and if you are taking a very big pro risk view globally, you want the defensive ballast for your credit card and portfolio as a hedge. you want the u.s. as a higher-quality distributor. david: is tax reform pretty much homogenous, it is or isn't, or do the markets care about whether we actually pay for it? some companies would lose deductions. ben: the focus is more on the near-term benefits, the growth, as opposed to the medium to long-term question of how it is paid for. the u.s. debt level and deficits are not a new phenomenon. they have been going on for some time. they are a bet on the future
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growth of the u.s. economy and those can continue, so there is an unknown of debt sustainability. we think it is perfectly fine at the moment, but what people see in the near term is its effect on growth. injectingt is new is one and a half trillion dollars into an economy that is at or near full employment. ben: that sounds like a big number. when you think about that sort of amortized over 10 years and the way it would hit the bottom line in terms of growth, you are talking about 2/10 or 3/10 on gdp growth in 2018. that is all well and good and that is good considering this is a 2% economy. it is not blowing it out of the water. fiscal policy is not a blank check. it is going to be, if anything, a slight positive. jonathan: what is your hedge? what is your optionality to the shortselling? ben: one of the main risks that
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a prayer risk view faces right now, one of them is that sentiment has been pretty -- pro risk view faces right now, one of them is that -- the other is that central banks which have been tightening in a more synchronized manner globally, go a little bit too aggressively and markets do not like that, so that could be a bad combination. your hedge is to probably be a little more underweight duration , a little more exposure to higher yields if that were to materialize. alix: then mandela jpmorgan sticking with us. tracking the gdp story, down almost 35% in premarket, a big mess on earnings in the power, oil, and gas industries. .argins getting hit we will discuss after the break. this is bloomberg. ♪
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♪ -- taylor: this is bloomberg, i am taylor riggs. procter & gamble posted a quarterly profit that was better than expected, sales slightly less than some estimates. they maintain the forecast for the whole year. sprint and t-mobile may do you announcement of an all stock merger. the wireless providers may wait until several weeks after they release quarterly earnings. that would push back an announcement to mid to late open up -- it to late november. an unpleasant start for ge ceo john flannery. the company slashed its profit forecast this year. this is one of the deepest slumps in ge history. they lost one quarter of their market value in 2017. that is your bloomberg business flash.
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alix: one of the big underperformers in the dow, getting hit very hard. what happened? : on the top line, the power business was much worse than expected. .argins fell 700 basis points i looked for restructuring, it was not in their. oil and gas was also bad. there was a little bit of restructuring but it was still down more than expected. organic growth was down more than expected, 1%. i think the one thing people are going to be most concerned about is the cash flow from operations. they were guiding 12% to 14% for the year and now they are guiding 7%. they did not take a capital dividend which always helps them. part of me thinks he is trying .o clean the dekes
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november 13 he will reset the company expectations and let's just get it in front of us. david: he has not cleared the decks yet. he has not taken a bunch of write-downs to take it back to square one and bring it back up, so he has more to come in all likelihood. karen: it is going to be really -- cash flow, dividends, what will they do when that set sail? and manymany questions people, they are going to cut the dividend, they are not going to cut the dividend, they are going to sell health care am a they are not going to sell health care. jonathan: what are they going to push for? karen: i think they are going to have to sell some meaningful assets. power is a problem, a secular problem. out a few days ago, they are cutting thousands of people from that business. they will have to do big cuts they are bank and probably sell some real assets. jonathan: the biggest loser on
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the dow, absolutely smashed down by about 5%. it is the smallest weighting on the dow. coming up later, bloomberg real dedicated toutes fixed income as we count you down to the fed decision. ,ight here in new york city about two hours and four minutes away from the cash open. here's a picture of equities worldwide. about one fifth of 1% on the s&p 500, call it one third on the dow. 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 jonathan: two hours away and some change from the cash open new york, let's get you up to speed. futures are positive and are of 83 points on the dow. it's the movement and d.c. that
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takes us a small step toward considering trump's tax cut plan. that really is the epicenter of some of the market action today. futures are positive in new york. the story in the bond market is that yields increase higher by four basis points off the backs of the tech story. the fx market is simple to explain with dollar strengthen euro weakness. everything they g10 weaker as well except sterling. no real change in the substance of brexit conversations, but the mood musical whole lot better over in brussels. it takes cable up by 2/10 of 1% to 1.3 181. that's your cross asset picture. let's get some top stories with taylor riggs. taylor: congress is one step closer to a tax plan backed by president trump. the senate backed u a budget resolution that has been signed off. that could allow them to pass the tax cut package without needing any democratic votes. theresa may says there are some ways to go on brexit talks.
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she wants negotiations to move to trade by the end of december. she is attending the eu summit in brussels. the two sides were closing in on an agreement on citizens rights, but there are still large differences on the irish border and the exit bill. u.s. backs syrian forces are claiming victory over the islamic state in the city of raqqa. as the city victory was turned into the center of its brutal rule. global news 24 hours a day powered by 27 journalists and analysts in more than 120 countries, i'm taylor riggs. this is bloomberg. jonathan: the pro-independence catalan government has urged its followers by a twitter to make withdrawals on five spanish banks. that's in protest against bankers who have moved their legal domiciles out of catalan due to the crisis. maria toledo is here with more. this looks sick a sign of
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desperation to me. how is it playing down on the ground? maria: it all started last night. there was a message circulated by social media saying that if you are unhappy of about the number of companies leaving catalonia, go to your atm and pull out money for an hour. andid go to a specific bank we have been talking about the two stocks under pressure. they are catalan and heavily exposed to the catalan region. cute, butd people in they said it was a normal day and they are not reacting to it. we did find one person who said i'm doing this as a sign of protest and not happy the way my bank handle this. having said that, i want to stress that both banks are staying in operations normally and it's a normal day at the bank. having said that, we are getting a little bit of a breaking news from a government spokesperson and also rajoy, who attended a
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summit of leaders. when the cabinet meets tomorrow, they're going to announce essentially that article 155 will be triggered essentially and applied gradually. we are going to have to see how this works out because essentially what wethat this is a standard regional government, but this will be applied gradually. it's interesting to see the data we get and get an eye for the regional elections. you can see on the terminal that we are getting headlines from him, but what's interesting here is the word gradually. the government saying the article will be applied in a way that restores constitutional order, but it will be applied gradually. jonathan: a lot of market participants become desensitized to political stories and then there can one deadline and the other told it's another deadline and we give up following it. is there another deadline politically speaking over in spain? that's a good question.
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no doubt traders really don't a how to trade this. essentially if you wanted to, he could've declared independence unilaterally. implementanted to article 155, they could've. they are standing on the clift adds test cliff edge and i don't want to make a move. it could take weeks for it to be of limited. the catalan regional government has gone quiet. we know parliament activity will potentially resume next week, but again no set dates for potential declaration of independence is any. it is going out slowly now. jonathan: maria, think you very much for joining us. the market is playing out quite simply. the ibex kind of doing nothing. the banks looking very resilient as well, only just a negative territory. higher by about three basis points is not really much of a big deal. the fact that the dollar sum
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much stronger against much of to a10 today is down single currency. mere conversations about the prospects of bank runs and markets are doing this and we don't care in the sink and a happen. ben: more generally political uncertainty has been rising, but the manifestation of the particular political risks are somewhat narrow from the perspective of global asset investors. in spain, very little evidence that's being priced in. there's a different kind of political uncertainty in europe where it's no fundamental risk to the euro. the implications for markets are inherently narrower. you mentioned brexit. we know the lightning rod for brexit as ever is the sterling. indeed you are seeing that as the process oscillates, but that is a call about the currency and ultimately about u.k. equities.
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the boardross today, equities are moving pretty much in tandem. all markets are tapping into a more global progress can o phenomena. jonathan: i was sent over a chart in my inbox and it shows how much the ecb is buying. seven time that instruments -- net issuance. i wonder why the worker to so insulated from real political disruptions. that could change next week and radically in the coming year as well. does it change the way of what politics really means in europe? ben: i'm not sure if that's a fundamental shift for us. we have leaned against two narratives in global equities this year. one of which is everyone is going underweight u.s. earlier this year. we talked about the reasons why you want to stay in the u.s. earlier. the other is going overweight europe versus everyone else since the middle of this year. i also think that's wrong.
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europe is a standout macro performer with great domestic growth and high beta to global growth and accommodative policy is your mentioning. it's got a lot of political baggage and it's not going away. you have these risks from fluctuations in the euro and flareups and politics and the banks to do well. curbs, whichper are also not seen there. whyink that's one reason you probably want to spread out your risk exposure more evenly across markets than the consensus is indicating right after david now. david: a talking sectors -- are you talking sectors geographically? ben: i want to belong in emerging markets in japan and u.s.. we are holding those in roughly equal measure in terms of how much risk we are allocating. jonathan: the mood in brussels asa whole lot tha better angela merkel gives theresa may political coverage.
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theprime minister spoke of eu summit earlier today, something little more positive about moving toward a brexit deal. take a listen. may: i'm optimistic and positive about the future we can get to with the european union because it's not only an interest of british people but in the interest of the people across the remaining 27 members of the european union as well. did the german chancellor just make a call that she would rather deal with the conservative prime mr. theresa may and not a socialist prime minister jeremy corbyn? ben: no comment on that really. this is a process that really has a lot of bumps ahead in the red. jonathan: quite clearly if prime minister may and the president of france get things done in europe, they need this done and dusted as soon as possible. they are, but i think held to the clinical economy of u.k. i do not think that decision is being made outside the
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cave. alix: what is your best case? ben: that we do not have to o rough of the brexit experience. i don't think we are banking on no agreement. david: is this is complicated as we are making it out to be? it seems to me that the u.k. billionw is about 20 and the eu is about 60 billion and only like that is a number in between called 40 and you can work that out by extending that transition a little bit. it's about 10 a year. if we were ceos, we can work this out in five minutes. ben: yes, it's true. you also have to consider what is the outside cost? what is the opportunity cost of an agreement or the lack thereof? when you think about what the costliness of the trade implications are, not having a proper customs agreement in place, i think those costs are ultimately way too large and
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they won't be born to w. jonathan: we are finding out when ceos become politicians. [laughter] alix: well done. david: i take your point. mandel will be staying with us. as you commute and today, tom keene and david gura are on the radio. can beerg surveillance" heard all across the united states on sirius xm radio. live from new york, this is bloomberg. ♪
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taylor: this is "bloomberg daybreak."
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i'm taylor riggs in the hewlett-packard and express greenroom. coming up on "what you miss?," adena friedman, nasdaq president and ceo. this is bloomberg. ♪ shinzo abe is projected to lose two thirds majority in the snap election. does this hurt his third arrow, structural reform? if you are an equity investor, not so much. that's the longest winning streak on record. vail ands now is john ben mandel still stays with us . ok, if you are a foreign investor, you saw the biggest equity flows in japan into a half years, is this a trade
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sunday? are: foreign investors getting excited about the japanese market for several reasons. one is a great play on global reflation because japanese profit margins are lower than the rest of the world and 10 to benefit more in the global recovery when the top line recovers. as for the politics, the news is that abe will survive quite nicely out of this. people were expected quite a challenge at some point and now looks like he will ride through quite easily. alix: the issue though is what are they going to do with all the money? that is the corporations. the have so much money on their balance sheet and they're not spending it. it's like $3.6 billion in corporate balance sheets are the orange lines. the blue lines are actual business investment. as part of the thesis you want that money returned to shareholders versus capex? john: absolutely and that's been going on for quite some time. they've been making some much money that they don't know what to do with it in a way.
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they're are not extremely enthusiastic about it plowing back into their own economy through. capex. buyback should be on the rise. david: the poll say that he should win handily, but will there be enough of a mandate to raise the tax talk about? is locked into that now and he said he will spend the money first before they raise that tax. he has to raise it in my view. so yes, the supplementary budget will be coming through fairly shortly on the. .hat david: i david: is that they can to the equity numbers we have seen? john: it's moving not back into the economy quickly. it's money for education and reeducation of certainly elderly people. it's more for long-term productivity rather than short-term gains. jonathan: we spent a lot of time talking about the next chair of the federal reserve.
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there's a job opening at the bank of japan and is a real mess going at the end of the road. is governor kuroda gone? john: there's actually a consensus that he will stay. he is 72 so he will not stay for a full term. it will be more likely that he will stay for a couple of years and perhaps train the next person coming out. he would really like to be in charge of the unwinding. he does not want to walk away from it and have it blamed on him if anything goes bad. jonathan: you see anything in the tea leaves that this man on the screen right now is getting ready to unwind what they have been doing the last few years and how difficult would that task be? john: it will be difficult for sure with the ecb and highly negative rates. japan's rates are basically around zero and that's enough of a scary proposition to be honest. there's a lot of work to be done and there's no doubt. the stock market a limits the etf purchases. -- eliminates the etf purchases. they have not been purchased for
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several weeks now. jonathan: they've already nationalized the markets. john: they have a decent percentage of market cap, but as long as they are not selling, should be fun. david: do you have an equally rosy view of japanese equities? ben: i think we are positive. i don't know if rosie is the appropriate actions of, but it's certain -- adjective, but certainly part of our global exposure to risk. one japan specific factor is that this potential into low for in japanese politics was the biggest challenge we have seen to abenomics since its inception. starting in 2012, doubling down on qqq you. in 2014, you'll control by the end of 2016. i think a knee-jerk reaction to an abe victory is supportive of japanese equities. the other more subtle shift here is that on the macro front in japan on japanese fiscal policy, the debate has moved away as
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ever from debt consolidation in the long-term toward fiscal stimulus in the near term. the idea of the vat hike coming up in about a year's time move from let's do this as a responsible measure for long-term debt sustainability to how are we going to spend the windfall of that? it's slightly populist tilt and a slightly easier fiscal policy . alix: the structural reform piece of the third arrow has a quite made it. i wonder if you can time he and what we have seen with kobe steel and all the drama that's rolling out there. the latest news is that after the new about the potential bad metals, they still wound up falsifying data. how does that play to a structural reform thesis when you have equities at record highs? ton: i'm not allowed comment directly on that stock and that situation in particular. in general, scandals and japan are quite few and far between. there have been a few big ones
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recently, but generally they tend to be quite conservative in their methods. athink this will accelerate greater trend toward corporate governance so that shareholders have closer watch on companies. david: i understand you can't talk about specific stocks, but when we have had takata and nissan with an ongoing issue, you do not believe that indicates some broader issue within japan? john: i don't personally, but certainly there have been some bad signs recently. the government have to look at this more carefully. alix: thank you so much, john vail. ben, thank you for joining us as well. if you have bloomberg terminal, check out tv to watch is online, clicked on charts and graphics, interact with us directly. just go to tv on your terminal. this is bloomberg. ♪
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taylor: this is "bloomberg daybreak." i'm taylor riggs with your bloomberg business flash. third-quarter profit phil at the parent upper city spends. daimler's earnings were hit by fixing a mission systems from older cars. the world's biggest maker boosted r&d spending by 21% over a year ago. the world's largest metals hedge funds is accusing barclays of manipulating copper prices. red kite management says the alleged market pricing is costing millions of dollars on the london metal exchange. barclays denies the allegations. that is your bloomberg business flash. alix: it's like a $2 billion hedge fund going up against barclays. it's another thing in the line of about headline for barclays . jonathan: they've had a bad year compared to citigroup. where it's going for a stately of the last couple of years is that he had a plan and it was a very clear strategy.
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and a lottic banking of people in the investment bank very happy because i was a big transition away from antony jenkins. i guess now it's about performance. in the same way it is for john cryan over at deutsche bank, ok, you laid out your strategy, and that w now we want the numbers. david: regulators are deciding jes staley can keep his job. alix: there is that too. david: thanks for a much. now we will turn back to general electric. they released the third corner earnings -- third-quarter earnings and stocks fell sharply as the company's mysteries for shares estimates i country mile, coming in at $.29 instead of anticipated $.50. jeffbrought covers -- covers it and just cut his pressure target and we welcome them now on the telephone. thank you so much for being here. in a word, what happened? jeff: this is actually been kind of a slow unwind that has now
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accelerated. there has been pressure mounting in their power business for quite some time. we have had kind of a longer-term disconnect between the earnings and the cash flow of ge. it just feels like a lot of that is now coming home to roost. the approximate culprit today is a lot of pressure in the power business. david: the new ceo has got to november 13 to lay out his strategy. are they going to have to cut the dividend? jeff: i think they should cut the dividend. it looks like they will actually need to. it's possible they could go through machinations to try to youict it, but just to give a flavor of what we are looking at today, they cut their operating cash flow number for 2017 to $7 billion for the year today. it was previously 12-14. that was an operating cash flow number and that is before you pay and pension
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obligations. industrialing at free cash flow $.17. the dividend is $.96. next year should be better, but i don't really see a path to $.96. if they continue to pay the dividend and they are doing not operational thanks to support it, which would not be wise in my opinion. alix: there's no way they are not going to cut that from what you're saying. i want to get a read on why the power business was so that. we know oil and gas is struggling in that power business is in a structural downturn, but 700 basis points in margin downturn? what was so bad about it? jeff: there's a couple things going on in the business. new equipment is declining. we are seeing now yo erosion in the operating tempo of gas turbines in the field. utilities use of their turbines. also, the company had a bubble of sorts in activity and upgrades, which is now rolling off.
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to a tougherted number in the quarter, but quite frankly, this number is worse than i thought it would be. we will be looking for some explanation from them on why it's that bad. we expected it to be bad, but this is much worse than we thought. jonathan: is getting a clear in the premarket. it's down about 7% a points. jeff, think even much for joining us. coming up next on this program, steve england will be joining us to explain what he thinks fed chair janet yellen is a hawk. that's next. this is bloomberg. ♪
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♪ jonathan: in the race for fed chair yellen's seat, the
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president's team is said to be leaning towards jon taylor and jay powell. the uni u.s. senate is taking small steps toward considering resin trump's tax-cut plan . chancellor merkel is coming to prime minister may's proposal driving forward brexit talks. good morning. this is "bloomberg daybreak." i'm jonathan ferro alongside david westin and out steel. alix steel. after another five weeks of record gains, the product says -- prospect of a dovish fed chairman cut futures are up a quarter of a percent on the s&p 500. are higher bys four basis points at 2.36 on the u.s. 10 year. it's the story of dollar strength on the back of high-yield. 814 on the eurosterling. alix: the curve
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steepen's just a touch. i want you to take a look at sterling up 1/10 of 1%. the president of france is the brexit talks are surrounded by fake news, false news. taking a work from president trump's playbook there. the spanish stock market up 2/10 of 1%, a going geopolitical risks today. let's take a look at ge as well. dismal, dismal earnings. now analysts coming out and saying that they should cut their dividends. morgan stanley says they are probably going to have to do that. the likelihood is increasing. we will be discussing the throughout the show as they cut their full-year forecast. david: alix alice can update on what is making headlines out of the business world. taylor riggs is here with first word is. the u.s. senate has taken a major step toward rewriting the tax code. they pass a resolution signed by republican leaders. attacks capeep
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being pushed by president trump you prime minister theresa may says there are some ways to go on brexit talks. she wants negotiations on in december.inue she says the two sides were closing on an agreement on citizens rights, but they're still larger differences on the irish border and an exit bill. sizer edging closer to the cliff on a standoff over catalonia. minister's cabinet will sign off on plans for taking control of the rebel region. he still needs the approval of the senate. meanwhile, the catalan president 's government is working out how it might stage a declaration of independence from spain. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries come i'm taylor riggs. this is bloomberg. david: janet yellen's term as federal reserve chair is up in february.
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the president is spending a fair amount of time these days sorting out who's coming next, interviewing a handful of candidates, including all herself. we turned our chief washington correspondent kevin cirilli. where are we, kevin? kevin: janet yellen meeting with president trump at the oval office for the final meeting and told of what will be the presence interviews and selecting the next federal reserve share. we are reporting on bloomberg that jerome powell and jon taylor have emerged as the front runners in the race. that list asis on well as kevin warsh and gary cohn, the latter of whom has been part of the team interviewing and selecting the next federal chair. in addition to steven mnuchin and vice president mike pence, they have been helping with the interview process. david: ok, thanks so much, kevin cirilli. jonathan: joining us around the table this stephen engl ander.
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let's get it straight into it with you. we usually put up the candidates that are running for fed chair up on the screen. we can put it up for viewers right now and we will write dove or hot. awk. under janet yellen, 99% of people labeled tha janet yellen of those. you are saying she is not. in a picture as to what. -- paint a picture as to why. steven: three or four years ago she was undoubtedly a dove. andafflictions are so low she's quite adamant and pointing to a december hike. almost undoubtedly she had three hikes in for next year. she seems to be saying that she thinks the phillips curve and cyclical pressures are going to dominate and the fed has to move relative to the market. a hawkkes her relative to some of the candidates. jonathan: who's a dovish
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candidate? powell seems to be more dovish. i suggest cohn's dovish. the one big dove i would say is gary cohn. powell is sort of a moderate. alix: why? when you think of continuity, you think powell? with continuity and that's a suffer play -- super play to get it through congress. steven: some of the comments he has made have been slightly more dovish than what yellen the same. is saying. i do find a dove as someone who be sympathetic to the idea that if you get tax reform and tax cuts that supply side is going to bail you out in terms of any kind of inflation or aggregate demand consequences. say we get a tax bill.
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which ones will automatically say we have got to start hiking faster and which ones will say, let's wait and see what the supply-side effects are? for the market point of view, the second category are the doves. the first category is more hawkish with a very kantian framework we're talking about. alix: if that plays out and you see powell on a more dovish side, what happens to the curve? tom: we saw yesterday good preview of what would happen to the curve as we had an article late in the afternoon where the market rally. you see a little steepening of the curve. i think powell really doesn't have a whole lot in the way of good text or commentary on how he views inflation and how he views the current rate environment as supporting more inflation growth. i think the suggestion is he would be a little more lenient. you could see more inflation kind of continue to accelerate
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because the last few months we have had some signs that we are getting some building pression there. i think you would foster that and long and rates would selloff further than what would happen in the front and because obviously he would be keeping those rates lower than otherwise. david: another is data dependent role. in fairness to janet yellen, she's a hot if the data is coming in. she might well dilute back if it wasn't coming in. on that score, where does powell sit as opposed to really having a viewpoint he's going to drive through almost respective? he is probably more data dependent, but the distinctions are relatively slight. i would put in the shade kind of more dovish in terms of this. if you look through chair yellen speeches, she tends to have a lot of inertia. he might be more flexible in terms of changing his mind. david: we think of taylor being much more rule oriented,
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but in fairness, there's a lot of variables. might he be more flexible than we give them credit for? steven: i think in anticipation, yes. many of the speeches he has given over the last six or seven years until very recently kind of had the implication that they should be hiking quicker. i said to make them into a relative dove, you need to have pretty extreme assumptions on all the parameters going into that taylor rule. jonathan: let's get the dot plot up on the screen very quickly. its various fed officials and they plot where rates are going to be. where is jay powell? steven: i think is pretty much of the media. -- at the medium. we know that there are four doves. the question is who's the fifth dove in 2018? my guess is that it's either caps on are deadly -- kaplan or
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deadly. at most he's a moderate does because there are two dots right underneath the media. he is not a super dove by any means. alix: great stuff. both of you will be sticking with us. coming up in the next hour, bianco will be joining us and we dig deep into earnings. this is bloomberg. ♪
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david: this is bloomberg. i'm david westin. the senate yesterday passed its version of the budget resolution, putting the ball on the house side with possible action as soon as next week. oftake us through the timing what stands between us and tax reform at this point, we welcome on the telephone, the compass
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point policy analyst coming to us from washington. isaac, welcome back to the program. let's take it one day at a time. will get you think we a joint resolution and we can move forward? isaac: i think last night was an important step and not just because the senate cleared its package, but also because the senate put an amendment into the tokage that i think is going allay some of the concerns that house members had come which means we can actually get a consensus agreement next week, which is then opens the door to get legislative language on tax reform actually released before the november recess. i think there were two good parts to last night. the senate clearing the package, but also the senate clearing the package that can now move to the house next week. david: let's talk about the legislative light which. we don't have it yet, but have we gotten indications of what it could be to get this resolution out?
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what have we want about the state local text induction? -- tax deduction? isaac: what we have learned is that there is still a fair amount to be worried about here. there are a number of sticky issues that are going to be played out over the next few weeks. state and local tax deduction is one of them. what does this tax package due for the highest earners? and the around that, especially for members of for reelection next november. battles that we knew are coming are still coming, but at least now we can finally have those battles. david: one of the battles may well be over the deficit. we had a house version that said we don't want to increase the deficit and the senate side says $1.5 trillion is just fine with th us. how will that play out how will that affect the actual tax package that place the? place through? isaac: what they did is they dropped the houses call for over $200 billion in spending cuts.
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they also cut the senate's $1.5 trillion in had room for additional deficit spending. what we have here is the overarching goal of tax reform, pushing down on the republican deficit hawks. we have really seen this battle play out over the past few weeks and it looks like the push for tax reform is more important deficit historical concerns of the gop. david: isaac, thanks so much for being with us. as isaac from compass point. alix: here's the reaction from the market and i want to look at the dollar index do to that big jump last evening when we got those headlines about the budget. we are now off the highs of the session. still with us is stephen engle ander. it's not just a catalyst. is it just the floor at this point? steven: i think the market
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expectations for tax reform are so low that even what we had last night, which was a very basic step and did not really involve much substance was enough to get the dollar going a little bit. if the actually managed to get significant tax reform through, the dollar could go further. as the previous speaker was saying, there's a lot of issues and the question is can you corral enough republicans on the same package? that's very uncertain at the moment. it's much more on the dubious side than on the likely side. alix: also the question becomes, what are you going to do about the deficit? this expands $1.5 trillion, what does that wind up doing for your duration risk? thomas: it puts quite a bit of pressure on treasuries. over time we will have issuance that will accelerate rapidly. if you look at the budget deficit projections given x tax reform and whatever
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comes afterward, the protection is quite scary. deficits are well over $1 trillion. this is going by the cbo's projections, which relative to what we have seen the local front now seems very optimistic for a narrower budget than what would be else was. duration risk is very significant. treasuries are going to be coming in with quite a bit to sell. at the same time, the fed is over the next few years going to be adding additional financing pressure for the balance sheet normalization as well. it's a pretty strong tide moving that direction. jonathan: we have this push and pull in the fx market and we have witnessed it in the last 24 hours. the poll is the prospect of a dovish fed chair and the push side is higher with the prospect of tax reform. i wonder if those two things will come together next few months? thomas: a dovish fed chair would be a commented of of what comes from taxes for.
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my backs guess is that we end up with powell. steven: he is moderate he fitsng and certainly into more boxes than any of the other current candidates. on tax reform, think we would get something. they may not be much of anything, but it will be something. it will be very hard to find a that gets allls the republican senators on board. you may be able to find a narrow set that will do it. jonathan: the dollar went lower on powell and higher on tax reform and yields went lower on powell and higher on tax reform and stocks were higher on powell and high on tax reform. the certainty is the buy stocks? steven: i'm in inflation dovwe. the lowflation that we have had in the pressure of the sharks means the pressure on the central banks is that the height
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has been minimal and that's a very good situation for equities. david: you both are going to be staying with us. coming up next, we have a great lineup of senior corporate executives, including dave rick's, chuck stevens, steve schwartz, and bobby jenks -- bob shanks afford. afford. this is bloomberg. ♪
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taylor: this is "bloomberg daybreak." i'm taylor riggs with your bloomberg business flash. it's an unpleasant start for the general electric ceo john flannery. thees are falling after company slashed its profits this year. we spoke about the company with home depot cofounder. >> this horrible situation at
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general electric should not have happened. they have got a mess on their hands and you're going to see it all come out when flannery bears his chest in november. taylor: g he has lost a quarter of its market value this year. procter & gamble posted a quarterly profit that was better than expected. sales came in slightly less than estimates. p&g maintained its forecast for the whole year. keepsnce, credit agricole lowering the fees that will charge for research under the new rules known as mifid. it's marketing a basic package for $50 and a premium package at .wice the amount o over the summer promoted the package for more than $140,000. the bank is not commenting. that is your bloomberg business flash. alix: well, that was a change.
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we were worried about inflation. jonathan: when i was five years old and used to get a parties without the kids at school, we put up line. on and we played -- it blindfold on and we played hi 10 the tail on the donkey and it feels like that. alix: judy spin around really fast? -- did you spin around really fast? jonathan: no, that's what they do in the cease week. the method think is a problem that existed 20 years ago and doesn't exist anymore and everyone's figure out how to get around it. david: it's probably crating a few new problems. i want to turn to a series we have been doing all this week. bloomberg has been reporting on the transformation that technology is working on wall street and the series concludes today with a bit of a cautionary tale on some of the limitations that automating the financial world may have. craig butterworth joins us now from london's tells us how it's working inside a big financial firm. still with us is steve and thomas. .ive assistance from inside
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how is the automation process working? craig: thanks for having me. to give you a bit of background, ledproject is a business transformational project and it was launched in november of last year. italy focused on addressing a lot of the challenges that our industry faces and really in many cases tried to turn this into opportunities to help improve client service, and productivity, etc.. clearly there were challenges to driving that change in the investment bank, but that's a super exciting time to work on a project like this. david: give us a sense of where it's working better and worse not working quite so well -- where it's not working quite so well. this shows hedge funds using machine learning as a way up 62%. funds using gathering data at 80%, but when you use about
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investment decisions or surf air portfolio's comments down a 25%. is you are finding that automation is working better for some applications and for others? craig: no doubt. it's in the early days. i think the reality is that there's somebody different areas of a bank where you could apply technology. there was some around and just making internal processes much more efficient. it's perhaps more relatively monday and opportunities and how they can improve efficiency and the client services derived from that. there's plenty of time to think around some of the more exciting things around ai. their applications out there right now, but this is the start of a journey. none of us have crystal balls and none of us know how it's going to work out. we will see in the years ahead which of the technologies went out. david: one of the things we hear repeatedly is that we have a lot of data but it's not usable.
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a lotve a problem using of the data that is not ready to make use of? craig: i think every bank out there is thinking about this right now. i think historically banks tend to view data almost in a little bit of an awkward byproduct of doing business in some way. people are looking up to the fact that data is incredibly precious as a commodity and it should be used to drive data-driven insights to business. they can also be used to differentiate against your competitors and even more in terms of -- to be able to think around things like how do you apply data for different instances? you need to be capturing the right data enemies to be clean. -- and it needs to be clean applicable. david: just quickly, has this changed your life so far, automation?
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not data as you've always been a data person. steven: i think a lot of routine tasks are more automated. you look at cragg's over there and there's a lot of computer screens. happenssay 25% of what like working at mcdonald's. jonathan: craig butterworth, thank you very much. steve, thank you. coming up in the next hour the program, mike wilson, chief u.s. equity strategist. he is been the biggest ball on the street. one hour away from the cash open and futures are up almost 80 points on the dow. positive six on the s&p 500. this is bloomberg. ♪
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♪ jonathan: just over one hour away from the opening bell in new york city. five days of gains. four were less than .1%. another record is another record
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high. coming into friday with futures positive. about.ngs to think the prospect of tax cuts helping to drive market action. the epicenter, treasuries. the tax reform story progresses. the yield higher on the 10-year. market, strong u.s. dollar is the story. to oneo moves back dollar 18. 31.pound up to one dollar a p.r. push helping to change the story on the margin. that is the asset picture. is one stepss
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closer to a tax cut plan backed by president trump. the senate passed the resolution house republicans have signed off on. that clears the way for the republicans to pass the tax cut package without needing any democratic votes. taylor: president trump's top advisors have narrowed the field for the next chair of the federal reserve. they are stirring the president to either john taylor or jerome powell. president trump has promised to announce his decision by next month. syrian forces are claiming victory over islamic state. it is a major defeat for islamic city thet made the center of its brutal rule. global news 24 hours a day. i am taylor riggs. this is bloomberg. jonathan: thank you. the brexit mood music improves
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in belgium -- brussels. theresa may said there is zero indication the talks will not succeed. here is theresa may speaking earlier. >> i am positive and optimistic about where we can get to in relation to the future partnership we want with the european union because it is not only in the interests of the british people, it is in the interests of the people across the 24 remaining numbers of the european union as well. jonathan: joining us from brussels, what has changed in brussels in the last few hours? >> i was in that press conference with prime minister theresa may. the question on everyone's mind and question i asked was when she would put a number on the divorce bill. the e.u. is still pushing for a clearer negotiating position from the u.k. what has happened over the last 24 hours is the e.u. has given the green light it will start making preparation to move the
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talks to december. that is just preparations. no guarantee. to do that, they want more details from the u.k. i said to theresa may, when can you put a number on it? here is what she said. >> i have been clear all along, as the united kingdom has all along throughout this, that the full and final settlement will come as part of the final agreement we are getting in relation to the future partnership. i think that is absolutely right. i think that can only be done in that particular context. that point remains. not give a straight answer, as you heard. you do need to wonder how much progress can be made. we have heard from emmanuel macron in the past hour or so where he said the board is very much in theresa may --ball is very much in theresa may's court. people familiar with the matter
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never bemberg that may a final number published because they will break it up to make it more palatable politically. i thought that was very interesting bloomberg news managed to get that from people familiar. even though the e.u. president , he there has been progress says he is open to move on to trade talks in december. hope this not always translate to reality. jonathan: they have to agree to have talks to have more talks. not much changes. something that has changed is chancellor merkel is given political cover. how significant is that and how powerful will it be? >> that was really interesting. it was a much more upbeat tone from angela merkel where she basically said there was no indication brexit talks would not be successful. it is one thing to say they would be successful. the question is, successful by
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when? the clock is ticking. she said she was very motivated to move the talks on to trade by december, so perhaps this will be helpful and give a push because it has been reported before angela merkel has been one of the more intransigent ones. this did not come across last night. she was more upbeat. she said it is for the u.k. and e.u. to reach agreement. that is interesting. previously, it has been one side saying the ball is in the other's court. angela merkel was saying the ball is in both courts. you have emmanuel macron saying the ball is in theresa may's court. still a lot of things to be worked out. jonathan: i always as confused as when i started. thank you. this is how it goes. we talk about brexit for a couple of minutes. i turned to a guest and say, why is the bank of england talking about hiking rates? and they do this. they do it again.
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why is the bank of england talking about hiking rates? >> i think if you hang your hat on and the inflation target, when you get to what looks like full employment, your inflation target is breached and you have to talk about hiking grades. it is a disadvantage. the problem for central banks is when your inflation levels reached a rate where the decision is taken out of your hands, the financial market and asset market environment can be different from when you are below targets and have complete discretion about what you did. i think at this stage, they are committed to hike. i think they can still say they are removing some emergency stimulus and slow down the expectations of further hikes. alix: what do you think? >> i think there is a reasonable forecast. the situation the bank of
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england is in is that the brexit process is so protracted and long and has no foreseeable, definable end that even though it seems like it is a bad idea to continue to hike, they have to be data dependent on the current environment. it seems appropriate to continue. alix: what i do not understand is if they make it clear it is one and done, it feels like the boe is saying legit one and done, what does that wind up doing? >> just because they say one and done does not mean it is one and done. it can be one and then we have to do two or three more if inflation numbers do not come down. we are so accustomed to central banks able to say inflation is below target, we can cut rates, we can do anything we please. now you have a bank sort of against the wall and discretion
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is removed from them. as a broad comments, the financial world would be a lot different if we got targets. we may not be as happy getting to targets as we think we will be when that happens. jonathan: fairpoint. when the only data point that beats expectations is inflation, you have got a problem. it sounds like a problem. i look at the situation for the bank of england and think he will start having a fading basis point in the next few months. what are they freaking out about? >> i hold enough to remember stagflation in the u.k. it is a dilemma they face. if you are at full implement and get a supply shock, you will have inflationary pressures. i do you bet they will dissipate or you take them. jonathan: thank you very much. coming up a little later, we
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will be catching up with bloomberg radio with tom keene and david gura. "bloomberg surveillance can be heard across the u.s. on sirius xm. this is bloomberg. ♪
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taylor: this is "bloomberg daybreak." i am taylor riggs. in the next hour, the head of u.s. equities. this is bloomberg. alix: a terrible quarter for g.e. sending stocks down premarket. now off by 7%. looking at g.e. opening at a two-year low. sutherland.s brooke we heard from the c.e.o., dividend is a priority. i don't think stockholders will feel reassured when they have something like free cash flow at $7 billion. >> that is the big worry now. you are right.
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priority is not going to cut it. they have been saying that because people have been worried about the dividend going into this quarter and expectations were already low, and they were way worse than people expected. this is not going to put dividend concerns to rest, and we will see more from john flannery in november or we have to see dividend cut. alix: november 13 is when they will unveil their strategy. also saying things will not be the same at g.e., much smaller, more focused corporate operations. what does that mean? does that mean they have to sell more, streamline, get smaller faster? >> this is a trend you have seen across the industrial landscape. honeywell recently thinned businesses. this has been a recurring theme with g.e. they have done a lot of streamlining. they got rid of most of their capital assets, appliances.
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it is so big and sprawling. hard thing when you have a company that large is you can have some businesses perform well. in this quarter, aviation was a decent performer. but you had horrible results in the power business and energy operation. they counterbalance each other. it is hard to get a clear of any excellent quarter were all businesses are firing on all cylinders. david: when flannery talks about corporate operations, that sounds like the corporate office. we have heard about cutting back on company cars and jets. how bloated was the home office of general electric? >> we are seeing it was a lot more bloated than people thought. there has been the since around g.e. that maybe there was a lot of excess costs floating around. the previous c.e.o. committed to this $2 billion cost cut goal under pressure from activists.
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we knew there were some lingering cost. these reports about the private planes following the c.e.o. around empty and the corporate i think you are seeing just how bad the problem is. david: when we look forward to november 13 and we do not know what the new strategic plan will be, mr. flannery will leave money to invest. where will you get that money? it takes time to do that. is he going to have to cut back on capital expenses? cut back on the dividend? where can he come up with real cash for investment for the future? >> one of the reason g.e. is finding itself in the place now is some asset sales were diluted. you would sell the assets but never made up of the cash flow you were losing and you kept the dividend at the same level. that is why they're having the problem. they have to smart about the divestitures they do. they have to take a serious look
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at the dividend and ask if it does make sense for the company today. can we sustain this? re will have to be hard decisions made. they have a good credit rating. you could issue debt, but do you want to be doing that to pay your dividend? alix: how many shareholders really own g.e.? it is like a blue chip on the doubt that has a dividend -- it is like a blue chip on the dow that have the dividend. >> i think there is a large retail shareholder base. i can tell you how me emails i've gotten from shareholders that still hold it against jeff immelt from when they had to cut the dividend during the financial crisis, and they are still upset about it. there are a lot of people in it for the dividend. in terms of long-term fundamentals, that is a hard debt to make with where g.e. is. alix: what is going to be the
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number one on the call aside from the dividend? what other assets can they sell? >> they have sort of said they will be doing this positions. we don't know what those will be. they have said they will be doing dispositions. they have talked about the transportation business. g.e. makes locomotives. fire --t an obvious there is not an obvious buyer. analysts speculated about a health care spin off. the health care business is pretty good. the risk is, what are you left with and are the remainder assets going to garner a higher multiple? another option is they combine the energy business with baker hughes. they still own a significant stake. some have speculated that could be a prelude to a spinoff of the business or more significant separation. alix: those earnings were
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terrible at the end of the day. great to see you on g.e. if you have a bloomberg terminal, you can check out tv . to go to tv on your terminal. ask a question, and we will get to it in the next segment. we are bloomberg. this is bloomberg. ♪
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taylor: this is "bloomberg daybreak." i am taylor riggs. may waitd t-mobile until several weeks after they release quarterly earnings. that would push back and announcement to mid-to-late november. honeywell posted bigger profit margins in five years.
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it was driven by the aerospace and energy units. the company is preparing to spin off its automotive and home businesses. yft has raised $1 billion in new financing that i is the company at $11 billion. that is your bloomberg business flash. heard fromjust taylor about the $1 billion from apple. rival a pile of cash. jeff osborne covers the rapidly interconnected world of ridesharing. we welcome him to go through what the latest alliance could mean for the players.
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apple several years ago invested in uber. now they are investing in lyft. has there been a falling out? >> the new management team coming in. over $80 billion has been invested in autonomous vehicles in general. it is too early to call a winner. there is still debate about what technology will be used. i think everybody is spreading their bets around. the oem's have a big focus on this. there is a big challenge in the space in terms of investment. people have to spread their bets out. that is another case in point. david: google is spreading their bets out. there is a little bad blood because this person that waymo was recruited by travis kalanick to come over. it did not end well. betty:'s angry about it -- uber was angry about it. >> it is a big statement, $1
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billion. the trend in our view is still three to five years away minimum. there are still moving pieces to be resolved. ongoogle lacing a bigger bet one? this is the lead challenge now. david: another investor is general motors. do we expect this would mean waymo may mean the way into autonomous vehicles for lyft. >> i think waymo can be the isetform software and cru can be a combined solution. there was a quick way of adding software talent to general motors. tesla is doing a lot of this in-house as well. ford just had a new c.e.o. change and laid out their strategy as well. david: thanks so much. alix: i to highlight some movers
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we are watching into the open -- i want to highlight some movers we are watching as we head into the open. we know the quarter was bad. the call is underway now. here are some headlines we are getting. the c.e.o. saying the dividend is a priority, but that is not inspiring confidence. they're focusing on smaller corporate operations and saying he was will not stay the same at g.e. where are they going to improve it? you will have to wait until november 13 when they unveiled their strategy. in a totally different story in the industrial space, honeywell jumping the most since 2014. sales getting a good boost from existing businesses. that jumped 5%. arrow space, energy unit doing good. they have announced a plan to spin off home products as well
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as the automotive unit. skechers a rare win. gettingde premarket, upgrades across the board. i remember getting my first pair of skechers shoes and i felt cool. i not sure there is anything cool about that. i am going to get you up to speed on market action. we are about 35 minutes away from the open. up about .10%ve, on the dow. s&p futures positive, up .25%. the store yesterday was the about the next fed chair. put together with the prospect tone forts, a decent
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equities. the story in the bond market is high yields. we are up about five basis points on treasury. bonds as usual, yields are higher usually means dollar strength. a weaker euro story emerges and a weaker yen. euro/dollar coming back to one dollar 18. the outperform or today is orrling -- the outperform today is sterling. the music begins to change in brussels. this is bloomberg. ♪ is this a phone?
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is considering two. it slashes the forecast after earnings fall short of expectations. from new york city, about 30 minutes away from the opening bell, good morning. this is "bloomberg daybreak." i am jonathan ferro alongside david westin and alix steel. futures are positive after we grind out another all-time high to close on the s&p 500 for a fifth straight day of gains. the story in the bond market capturing the risk off theme means yields are higher, fueling a stronger dollar off the back of his high treasury yields. the big story has been the stock market and the dow. alix: we cannot talk enough about this story. g.e. off by 8% premarket.
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the lowest level in two years. it has been the biggest underperformer in the dow this year. the big headline was how much they cut their target for this year. on the high-end, 110. the issue is the power generation business led the declines as well as oil and gas. those accounted for a 700-basis point decline in their margin. the question on the call has been what happens to g.e.'s dividend. it yields about 4%. how did they do it when their cash flow target was reduced by $5 billion for the year? lots more coming up on g.e. through the hour. on the upside, look at paypal, up 7%. got a boost from retailers trying to use paypal to conquer the amazon issue. they had the third most buy recommendations from analysts on the stock.
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we did not hear the bad news from paypal. they raised their forecast on global growth. on the downside, procter & gamble off by almost 2%. core earnings did be estimates -- beat estimates. total, it only grew about 1%. vote play outroxy after earnings took a weaker tone? president trump is expected to announce his decision on who should lead the fed in about 10 days. congress is moving forward on tax reform. to take us through it all, we welcome carl riccadonna and kevin cirilli. let's start with the fed. the famous interview with janet yellen yesterday. we are told we will get a decision may be next week.
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what is it going to be? >> i think he is testing the waters by maybe letting some of the stories drift out about where he is leaning or whatnot. i still think republicans in so thatwant continuity, points to either the existing fed chair or someone of that regime which is jay powell. i think those are the two major front runners. john taylor is a brilliant economist. kevin warsh is certainly qualified. i don't know they will pass the trump litmus test of not impeding the trump fiscal agenda by raising rates more aggressively if the economy picks up on a tax cut or big infrastructure. david: the president has said he wants to be progrowth. >> and low interest rates. david: who would be most condition to progrowth? >> i think it is chair yellen
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and jay powell. i would say chair yellen would be more progress. we rank all the fed members. we have yellen anymore dovish setting than jay powell. interest rates of the throttle for the economy. raising rates will not lead growth to accelerate. it is the cost of financing. if the cost of financing is lower, people are more likely to embark on risky investments like tech and does things rather than just pouring money into safe assets like securities. low rates will help the economy accelerate. david: let's go to washington and get a report from kevin cirilli. you are on capitol hill. you have been covering the fed. what is your take? >> dive into the terminal. we can look at who investors are predicting is going to get this. if you look at that report, jerome powell based on the
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political report as well as bloomberg's report putting jerome powell and john taylor is front runners. it looks like investors are agreeing jerome powell is clearly the front runner at this point. i can tell you from this forces -- the sources i have spoken with on the senate banking committee that the nomination process will likely approve any of those five names would have been discussing. this is a much less contentious fed chair race. this is more conciliatory in town. not tocans would like see janet yellen re-nominated. some republicans are on record as having voted against jerome powell before. but likely to not have any
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hiccups. -- let's let's mike wrap up the market action. the dollar is holding the two-day slide briefly touching the highest level in a week as investors turned cautiously optimistic on president trump's tax cut plans. michael joins us. he remains the most bullish on the street. in the last 24 hours, the fed chair versus tax cuts. >> a lot of the storyline we have been talking about this year is now playing out. in august, i don't think it was so visible we would make progress on tax. there was uncertainty about the next fed chair and what the fed policy would be. we have more certainty around these things so asset prices have reflected that. pop could mark a short-term
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in terms of the excitement now that it is obvious what is happening. we are getting closer to the fed chair certainty. we have the present resolution which is a big step in the direction of tax cuts. target reached our price in the short-term we put out in august. i think you have to take a breath and say a lot of good news has been digested. jonathan: year end, we have you at 2700. >> the 2700 target was a was the first quarter of 2018. it could happen earlier. what could get us there is what has gotten us here, continued expansion around the idea growth is sustainable. earnings look good for the next several quarters. we are getting a lot less uncertainty around policy which is making people feel more excited. what we have not yet seen is investors come in fully on the retail side in terms of flows.
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institutional investors are doing their year-end ramp up trying to play to the fourth-quarter rally. there is more to come. that could take us to 2700 easily. alix: $7.5 billion in inflows this last week. starting to reverse that. or 28% on tax cuts, how do you model earnings? >> our base case is 25% corporate rate. we think there is about a 6% benefit to s&p earnings across the board. one of the outliers is energy which could get a 20% pop. that is one of the reasons why i think energy is doing better. small mid-caps, we see north of 10% in terms of benefit. that is a one-year pop. it is not going to get that every year. the market will adjust and absorb and discount that quickly. i want to throw one other thing out.
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everyone is focused on the fed and monetary policy as being the reason the cycle might end. let's talk about fiscal policy. this is a politically motivated tax cut. i think it is hard to argue we need a fiscal stimulus at all right now. we have 4.2% unemployment. consumer confidence at an all-time high. business confidence at an all-time high. why are we doing fiscal stimulus? alix: is that your worst-case scenario, that we get fiscal stimulus and have a fed that has to act faster than thought? that seems to be the thing that could kill your thesis. >> i want to throw out the idea this cycle might end from a fiscal policy mistake. and not because they are cutting fiscal policy but because they are expanding. it is the perfect trap. we have been talking about this for a year. it has played out and people are starting to get excited. we are not there in terms of being fully priced. we have not had the full bloom
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yet. i want to lead the witness as we are thinking about 2018. david: how much of that analysis depends on it being a tax cut rather than tax reform? they have to talk about paying for it. if you have substantial reform in terms of eliminating deductions, what does that do to the market? >> real tax reform is transformative in terms of what it can do to sustainables gdp growth. let's be honest. a 10-year tax cut. ? that gets me there for the next couple of years. it makes me feel better about the sustainability of this acceleration of the next couple of years. that is all markets can think about. markets don't think about 10-year horizons. they think about 12-month horizons at best. alix: mike wilson, you will be sticking with us. i want to update you on the g.e. call. abigail doolittle is monitoring headlines. >> the g.e. call is serious and
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somber. thatement is acknowledging the earnings miss is an acceptable -- unacceptable. they slashed the profit outlook. c.e.o. john flannery is saying things will not stay the same. organic growth would have been up 2%. that is also the reason for the big margins miss. overall margins were down more than 200 basis points coming from the power division. haso. john flannery outlined three basic ideas, saying they are going to redefine the culture, they are going back to basics, and reducing complexity. they have identified $20 billion with the assets to cut over the next two years. everybody is concerned about the dividend. decliners said that will be john flannery said that will be addressed in
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november along with other issues looking to 2018 and beyond. alix: next week, we have a great lineup of guests. a big lineup. this is bloomberg. ♪
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alix: if you are investing in u.s. stocks, expect a 10% adjustment that could push the s&p down over the next three months. here is what they wrote yesterday.
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cue the music. this is very dramatic. jonathan: i did not expect that from them. alix: very dramatic. let's break this down. i wanted to get your take on the first part, the corporate profit issue. wages are rising. unit labor costs will be squeezed. what happens to corporate profits? >> i tend to agree 2018 is going to be tougher for margins and profitability because you will see wage pressure. i think it is too early to make that call because we have not gotten to the peak rate of change on this rally theat began in 2016. i think it is premature. i'm not looking for a dramatic decline in the first quarter. i think we rally into the first quarter and the chances of making the top in the first
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quarter is more likely than a low. alix: it seems like the peak market debate has been around forever. what sectors are vulnerable this time? >> it is very narrow what has driven profitability. it is tech and a lot of health care companies. the composition of the stock market has changed over the last 20 years. more service oriented, more asset light. the companies that embody that is what has been driving the record corporate profitability. there is another driver recently. we had the recession in 2015 of the old economy. because of that recession, they did another number on corporate cost-cutting. they have done a phenomenal job. we are seeing them participating in market expansion. i don't think margins can go a lot higher next year. just because margins peak does not mean the stock market has to
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crater. i want to put out a narrative that has been out for a while. we have had bottom line growth because costs have been cut and we have had big buybacks and have struggled to generate topline growth. is that going to continue to be the story? is that the storyline now? >> i think that story has changed. we have written about this substantially. last year, there was a regime shift around the world in terms of fiscal policy. this populist wave around the world. governments around the world are throwing the fiscal lever finally to drive growth which means nominal gdp. .ou get better inflation more fiscal spending and get higher nominal gdp. that is your proxy for revenue growth. revenue growth is better because nominal gdp is 1% higher than a
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year ago. that is what has changed in the last year. while 1.5% does not sound like a huge number, it is when you are on the razor's edge. too much debt around the world. if you are at a certain level on nominal gdp growth, you can slip back into deflation. i think the market for the understands that. david: how big of a threat to future corporate profits is the fact it has been too long since we have had a downturn? when corporations get serious about costs, there is a downturn. we are seeing general electric talk about how much money they have in the home office. >> i think in the next downturn, there will not be as much ability for u.s. corporations to cut costs because they have done such a good job. one thing corporate america is good at is cost-cutting. they will not have the ability to refinance.
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probably not looking at a deep recession whatever we have. there is not a lot of excess in the broader economy. the recovery off of that will not be as dramatic either. it will be kind of more of the same. boring but kind of predictable. not exactly what people have been expecting because everyone is waiting for this crash or big excitement. that is not the environment we are in anymore. we had that environment. jonathan: mike wilson morgan stanley, always great to have you with us. coming up, 30 minutes dedicated to fixed income. i will bring that to you midday new york time, 5:00 in london. this is bloomberg. ♪
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alix: apple stocks saw the
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biggest decline yesterday in about a month. earnings estimates being revised down for big names. apple holding up at a revision. google and microsoft seeing revisions downward over the last few days. joining us is the head of u.s. equities and mike wilson of morgan stanley still with us. we can make a big deal about the downward estimates. other income is still expected to expand 18% on average. let's put that in perspective. expectations are high in the stock. >> expectations are somewhat demanding from both large-cap tech stocks but they have been deliberate in terms of strong growth and better growth than the overall equity market. i would not make much of taking down expectations. that is when management was to make sure 2018 is within reach. my guess is they beat expectations. alix: limited expectations.
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when you look at tech, where do you see the value and the growth? is it in the fighting -- fang names? >> there is nothing bad to say about the stocks in terms of fundamentals. growth stocks will remain expensive. i look at a stock like ibm which has been left for dead. it is a huge part of the index. example oflassic something people do not own that they might need to own. these are the kinds of things i like. the market has played out much as we thought. a lot of things have worked. i want to go somewhere where people are not. i think the lack of willingness to do that by live investors, this is the kind of thing that can drive momentum in a stock like this for a while. jonathan: let's go back to the bank of america call.
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the old-school tech companies like ibm were untouched. is that positive as well? >> expectations are low, unlike bank stocks. they are a big beneficiary of a weaker u.s. dollar. they managed that quite well. you have the lack of ownership. you don't have issues around potential regulations, department of justice, etc. the last thing is we are late cycle. this has been our call. ibm is a classic beneficial of capital spending as companies need to spend money on things to make themselves more productive. ibm is in the wheelhouse of that. the 4% dividend is not bad. the question with ibm, is why should you be there? they are late to the cloud. what are you betting on when you are betting on ibm in terms of growth? ai, watson?
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>> that plays out when there is tremendous upside. you don't even need to make that bet to on the stock here. you have a rate of change going on with margins and you're on your revenue growth. that will drive the stock higher short-term. for six months, i like it. longer-term, i don't need to worry about that because nothing is priced in for the long term. they are getting no credit for that so i got have to worry about that now. alix: where do you like tech? >> we like tech broadly. many of the biggest names, we are constructive on. that includes the fang names. i agree there is value in many of the older, the cap -- big cap names. we see higher valuations on many consumer staples. i think there is value in older tech names. we think there is good value at the newer cap names.
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broadly, we like semiconductors is a good play on parts of the u.s. economy showing strength, where manufacturing meets consumption. jonathan: david bianco sticking with us. mike wilson, thank you very much. the opening bell coming up in about four minutes. the biggest news set to be g.e. futures remain positive up .4% on the dow on a five-day winning streak in the united states and coming in hot to friday on another all-time high. from new york, this is bloomberg. ♪ retail.
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver.
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>> five days of gains, potentially six, the s&p 500, it is a positive one. futures up, s&p 500. is media year end forecast 25:30. high closing once again. for a dovishood fed chair and tax guts. -- cuts. yields push higher, it usually you'll be dollar bid. we are up a third of 1%. let's cross that into the cash open. >> del jones and s&p at new
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record highs. that would be 53, closing record highs for the s&p 47. the nasdaq is sitting around a record intraday high. the ge is at the lowest level since august 2015. right around a two-year low. the worst fall since 2011. a lot of negative statistics. is only 7/10 of 1% of the doubt. a lot of questions, we will be following that later on. john was talking about that huge selloff we are saying. -- seeing. take a look at bank of america. ge have the best sales since 2014. sales were up ahead of spinoffs.
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ironically ge didn't want to be a bank anymore. they spun off synchrony financial. a bad loanid have charge-off that fell. it phases high credit card default rates. breed bad on the consumer -- read. i want to take a look at where we are versus the 10 year yield. .he white line is the s&p index the blue line is s&p forward earnings yields, minus the 10 year yield. the hire against the higher earnings yield is. currently it is 5.5%. the earnings yield is about 2.5% on average. if we rerate to that level you are going to wind up seeing more of a rally in stocks as the yield comes down.
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the longer-term case that you will have to see more and more records in the equity market. david.s cross over to i gave you that stat, we have blasted through that. do these things matchup? >> we have 24:50. we thought it was bullish earlier in the year but the markets have gone past our targets. does it matter? i remain constructive on this for the longer-term. we have to keep in mind how far we advance. we have gone far too fast. the market is vulnerable. i was start protecting gains. you could have a little bit of a rally and move into the defensive. >> give me more color are on how
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you would protect those gains. what would you do? >> we stay invested in our equity funds but those who are toning funds, we would have raise cash into the year. we think we will get better opportunities next year. we think there will be disappointments on the timing of when the corporate tax rate gets done. i would look at utilities. a 10 year yield doesn't move up. i guess it is up slightly. this justifies higher valuations. the size of the cut matter even more? >> yes. butnt to get a simple significant corporate tax cut. 25% is the right number. any business that wants to grow
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would find 25% attractive. >> how much does it affect your decision how they pay for it? you eliminate the business interest deduction who does that hurt? .> that introduces uncertainty i don't think they will go down that path in a significant way. we are looking for a true corporate tax cut. 25% is what does that. it allows repatriation to be done. it provides an attractive option to today's partnerships. >> is this a matter of competitiveness? the nominal rate is higher. 40% of is only because profits come from abroad. rates, it is because they are paying above 30
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on domestic profits and usually low 20's on foreign profits. if you drop to a 25% rate there is more incentive to do business here and invest here. healthy.economy is we need more investment spending. rise inlk to me about a short yields. what we need to's -- to see to offset that? .> we need hikes a fed hike in december, a couple more next year, that is good for bank profits. a fed hiking should be a net positive. it leads to a flatter curve. it could be a challenging outlook. >> what is more important at this point? someone hikes more aggressively or the shake of the yield curve?
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>> mathematically for the profits of banks, where the short-term rate goes is important. markets will be alarmed if the curve goes completely flat. the bond market would be too fast. given the candidate so far i believe we will have a continuation of policies. there is no need to move quickly but there is room to move upward. alix: general election sliding to its lowest -- general lowestc sliding to its in years. now down by about three. somewhat of a recovery. cioing us on the phone, the -- team remains neutral and believes the stock will trade lower.
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how much more downside do you think is left? what are the biggest unknowns? direction the company will take. they need a seismic shift. declinepany has been in for many years. share prices have been in decline for many years in a raging bull market. they need a new direction. someone on the call today, also in november when they host their analyst meeting. today thanen larger it was yesterday because of the results today. what would be the best result? is it basically selling things? >> they made a number of mistakes. servicesinto the oil
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at the top of the oil market. they got out of the media business before media assets took off. i believe that will include power generation, jet engines, water or vacation, those are the key areas they are going to hopefully emphasize. -- i is still down 10% wonder if people are arguing now is a good entry point. presence on the board to drive things aggressively full word in terms of direction of this company. why wouldn't today be a nice entry point? >> it could be. this could be the washout everyone is waiting for. they have a new board member, a new cfo. they have new management changes. all of these new factors usually can mark a turning point.
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they need to cut the dividend. a they do that would be washout for the stock and could mark the bottom. >> how concerned and might this was such a surprise to the marketplace? what else might be under that could i don't know about? >> i think what they are going to do is announce a massive restructuring which includes asset sales. there is one more big earnings day coming that will include a lot of write-downs and that could mark the bottom. alix: do you like industrial? >> in large part because we tried to be overweight in technology. industrials have done well year to date. tech has outperform. we have seen strong pmi's. i'm a little uncomfortable with i don'then multiple and
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believe they do much better than mid-single-digit earnings growth for the next few years but they have that for the next few years. we are more comfortable with the long term that has no -- more upside on technology. joining us. for 11 minutes into the session. let's get you up to speed. the sixth straight day of gains on the s&p 500. from new york, this is bloomberg. ♪
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-- >> this is bloomberg daybreak . coming up later, an interview with a dean of friedman. this is bloomberg. >> united airline ceo had a bad day yesterday the disappointing third-quarter earnings which hurt the stock but then he got on his earnings call. once we have ourselves in a hole from a competitive perspective. the team we have gathered here is about regaining competitive advantage. >> the stock was down the most it has been in eight years. celine bakker said we had anothers about potential management change after the call they are not rumblings but full-fledged screams. princeton,now from david of the tig.
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on in this call yesterday? >> analysts are looking for more clarity on how united is going to enact their vision of improving their yields in the u.s. domestic market as they tried to close that delta. that is the secret to more the intensey given competitiveness on international routes. oscar in his management team were not giving details. a lot of frustration in the analyst immunity as he didn't give many great details to adjust models and figure out how this is going to turn things around. >> it is not a secret united airlines has a lot of challenges . they have had a series of mishaps. to wasn't this ceo prepared
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have tough questions from analysts on this call? beenthink they should have ready to provide more details, how they are going to enact their strategy of getting better i don't know that i can answer that. all of these airlines are at generationally high profitability. while united has had mishaps in the public relations department, profitability is not bad. it is just not what it is at delta and american. >> the stock took a hit off of this. is it a question of whether he can keep his job? >> there is a lot of questions about what is going on. it is not just him. , who came overt from american, they are going to compete heavily with the
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low-cost carriers, that is a hard game. deliver more expensively than frontier. the analyst community was looking up for a let up that strategy as well. isis not just mr. munoz, it a different strategy here at united analysts are grappling with and upset about. someone asked us a strategy and it was like i don't know. had you feel about airlines? >> we are overweight airlines. we recognize the price competition they have particularly internationally. our pecking order that we were in it for the long run. alix: we -- you sound scared right now. >> we are overweighted. it is an industry that has
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reformed its ability to operate well with their unions and price value to customers but still try to get good returns themselves. read transcripts. you hear the town and the sentiment, that is why i am squirming. >> the airlines may have gotten more efficient. have they gotten over their tendency to go into price wars? that has been the problem in the past. >> that is entirely what we have seen. i don't think they have gotten over their tendency. the market is challenging. i see little barriers to entry especially for leisure travel. they take a $25 cheaper fare. it is price competitive and what we are seeing now is a market share war.
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delta has kept themselves above it. itted seems to be mired in and it hurts profitability. alix: thank you. you are sticking with us. terminalve a bloomberg check out tv . interact with us directly. 's growth are in check out anything you may have missed. this is bloomberg. ♪
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this is bloomberg. i'm david westin. a safe bet for shinzo abe. we will hear from the u.k. prime minister theresa may she makes a statement on the progress of brexit talks. the ucb will be holding its policy meeting where mario draghi will talk about what they are going to do about qe tapering. still with us, of those, what
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are you going to be paying attention to? >> we pay attention to year up. we will look to hear from the ecb. tapering is going to occur but they are still having an impact on the longer-term bond market. we think they are probably going to make it clear they don't intend to hike rates until probably into 2019 at the earliest. low rates out of europe, something pressuring financials there. the important thing is for european financials, the fed show they are going to hike rates into next year and raise the umbrella high enough that the ecb hike rates and they can get out of negative rates without having a stronger currency. david: there is that relationship at this point. is there any significant if the ecb becomes the second central bank to start coming off of these balance sheets?
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, it hasof the boone constrained how much the yield curve has gone up. yields of reasons why the curve has been flattening. assets beingl acquired by the ecb. it is still a giant influence on global and european interest rates. >> it seems they have one of two options. by a big amount and expand the program for a longer time or cut by a shorter amount and you extend for a shorter time. >> a good question. i think part of it has to do with how do yields react to what the u.s. is doing? europe is going to be looking to see what not just the fed does but how interest rates react. the fed is going to be selling some assets. i think that is part.
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>> what are the pluses and minuses of either option? let's talk about what the options are and what they mean. >> what they would like is to get out of negative interest rates but they can't until the fed gets higher. they would like a steeper curve with the overnight rate being positive. they are a long way off. europe has been healthy but the periphery is not ready for a strong currency which is why we think there is risk to the downside because the general message will be the region still needs monetary policy medicine. alix: the yield differential not matching up in the fx, if you look at the spread, why? >> europe has surprised the upside on its growth. earnings growth has been good at
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european companies. it is a difficult call. we are bullish on financials. we think european industrials make a lot of sense because that is where you have sensitivity to improve global economy. the european economy. and the currency is in a problem. >> for anyone looking to get exposure to european risk, the either play the global story or they look to play the domestic european story. you say play the former, not the latter. >> that is right. you have to translate it into how does the improved european economy translate into financials? we think that is going to be delayed but a big upside. us, thank youth sir. sixth heading towards a
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straight day of gains after another record high close thursday. futures were positive. in thep a third of 1% united states with records across the board as well. this is what it looks like in the bond market off of the prospects of chair powell. yields are higher by six basis points. have high treasury yields feel that dollar bid. you see that across the g10 space with the exception of sterling. 1%. half of full coverage here on bloomberg. from new york but this is bloomberg tv. ♪
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>> it is 10:00 in new york and 10:00 in hong kong. mark: welcome to bloomberg markets.
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vonnie: here of top stories we are covering, the ge ceo in the hot seat in the aftermath of the very disappointing earnings and profit outlook. it shares are lower, retracing steeper losses. ge well on track to being the biggest loser in the dow this year. lawmakers paving the way for president terms tax reform. the senate passed a budget resolution which would allow passage to tax output. divisions could threaten any next step. kkr a former


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