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tv   Bloomberg Daybreak Americas  Bloomberg  November 15, 2017 7:00am-10:00am EST

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leads through financial markets, global equities retreat. deutsche bank's john cryan finally get some good news, the german lender attracted a new top investor. investors wait for u.s. cpi. with tradersash over whether inflation is poised to move higher. ," i is "bloomberg daybreak am jonathan ferro alongside david westin and alix steel. a mild risk off tone ripping financial markets, futures a little bit softer, down by one half of 1%. yen strength and euro strength, the euro on its sixth straight day of gains, up for tens of 1%. a bull flatten or in the treasury market, the 10 year yield down for basis points. alix steel, it has not gone missing, crude starting to crack. alix: my special call to top,
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that is what i've been hearing. let's look at the risk off tone in europe that is being hit the hardest. we are now at eight straight down days and have not seen that kind of streak since 2014, the dax hit particularly hard. a bit of a safe haven bid as far as bund yields. that does not feel like a risk off move in bunds. the dollar-yen down 6/10 of 1%. the bloomberg commodity index down 3/10 of 1%. not just oil and copper, the base metals across the board hurt. david: now we turn to emma chandra. emma: senate republican leaders may have made tax reform a little more complicated. they decided to add repeal of the obamacare individual mandate to their tax package to help them meet the fiscal target but
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will change the vote calculations in the senate and house. twice the senate tried and failed this year. the russians have agreed to restructure more than -- in venezuelan debt. the credit rating firm declared venezuela and its state oil company to be in default after missing payments. in zimbabwe, the military has seized power and is threatening the role of robert mugabe a. -- mugabe. he and his wife are now in custody. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. a new the senate has version of its tax reform package with two important additions, doing away from the
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-- with the obamacare individual mandate and doing away with -- to take us through the state to play in washington we welcome kevin cirilli. the individual mandate is back in play. congress has not had enough to do? just ast is back president trump arrives back in the united states. i am told this is to preempt the reconciliation conference process by realigning the house version of the bill with the senate version, making permanent -- the senate the version also would not phase that in until 2019. i have been told by several sources that while there is that one year delay or when that corporate tax rate comes, we all know that business leaders are planning for that well ahead of that one-year implementation
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period. the signal that this would send would be strong in the business sense, at least that is what my sources are telling me on the republican side. procedurally, tomorrow is when the house of representatives will likely vote on their version of the house bill. that sets it up for the senate to do the same if not next week before thanksgiving, shortly after. they are still on pace to get this done. david: they were on pace to get the health care revisions done as well. i want to come back to the individual mandate because it sounded good in the abstract, but once they moved forward they have a lot of constituents say, wait a second, i will lose my health care. health will this play -- how will this play with the middle class? absolutelyare correct in the way this will severely impact their chances of getting centrist democrats on board with this, because we have
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noted that democrats were completely united against altering the health care, affordable care act when it came out this year. so people like the treasury secretary and gary like to get some centrist democrats on board, this throws a wrench in that. from the republican perspective, they do feel that they have to get something done on obamacare because they have failed so significantly to get a major health care legislative win through this year. in their perspective it is a major legislative promise they have to fulfill, but from the democratic perspective it is a nonstarter. risk off toneld taking over markets today, u.s. stocks joined a global selloff in equities yesterday. a new survey shows investors are riding a wave of "irrational exuberance" as they extend
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bullish positions with 16% taking on above normal levels of risk with less downside protection and less cash. joining us is robert sinche. the story of the market today, a , a cracks across asset little bit of fragility. what do you think? robert: i think the uncertainties of washington are not helping anything. our view has been that much of this rally and risk this year has been about growth and global growth, and that is where we are beginning to see some cracks. i think there will be a lot of talk about what is going on in washington. we had very weak data out of china for october yesterday. i think the uncertainty there comes from the fact that a lot of people believe they frontloaded a lot of their spending in front of their party congress this year. that is over, and the question is, is there a sag in growth in
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the fourth quarter? the economic surprise index for china is significantly negative, so i think what is going on is an extended market, as we saw a lot of risk appetite was taken on, and there is a hint about uncertainty of where global growth will be in 2018. jonathan: is this a global story or a temporary fall back? robert: in the eurozone and the u.s., the momentum is still good . what i worry about on the tax package, it is great to say businesses will discount a tax cut in 2019. history suggests, if you tell somebody i will tax your earning less in 2019 than 2018, you will push off a lot of decisions from 2018 to 2000 19, and that could give us a short-term depressant on the business sector for 2018 if in fact they say, yes, we will give you a tax cut a year out. alix: we are also seeing that
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weigh heavily on the treasury curve. this is the 2-10 spread, six basis points. there are varying degrees. robert: we like to think of the famous book-- the "inside the yield curve" -- as one continuum, but i think there are two different forces operating on the yield curve. one at the long end, is this continued absorption of government on debt -- bond debt around the world by the ecb and boj. if they keep depressing their long-term yields it has a spillover effect here. needed is signaling they to normalize the short end of the yield curve and bring short-term interest rates close to zero, which is perfectly reasonable, which gives you a
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federal funds rate between 1.75 and 2%. global markets operating on the long end of the curve, i do not think it is that problematic that it is really telling us there are different players in different parts of the yield curve. alix: if you take a look at europe, something similar is playing out. the yield market got hit and there has been somewhat of a --ly in boones b --unds bunds. is the same distortion playing out? so, but in terms of the bund curve is still have the ecb staying around for nine months to a year so that keeps an artificial bed which -- did which permeates the world. central banks are continuing to depress the long end of the curve with the fed moving toward some sense of normalization. jonathan: can i get a sense from
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you on what kind of curve flattening we might be? bear flattening has been where the big selloff has been an this morning has been different. it is a bull flattening story where the heavy lifting is coming from the 30 year, the 10-year, etc. is that something you see developing further in the coming months? robert: something we are looking at and what we have been seeing is a range trade at the long end of the curve. we think that may pick up a little bit, but clearly the -- opportunity will be next year and you could look at a fed funds rate moving in on 2%. where we are really seeing that is into year yields, that have been -- in two year yields. alix: coming up, oil and base metal selling off overnight after concerns about economic slowdown in china, yields jumping as well. how the president's strategy to
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glow the economy is affecting the market. target up by 5%, the negative in the early earnings report is that guidance missed the average annual estimates. the average move is about 3% after earnings, so the 5% to 6% move is significant. jonathan: bad news for target, good news for deutsche bank and the ceo john cryan. the stock is down 2%, down thing off of session lows after we learned deutsche bank is set to attract a new top investor amid an overhaul to stage a bit of a turnaround. we can confirm that cerebrum's is said to emerge --cerebrus is set to emerge as the new stockholder. from new york, this is bloomberg. ♪
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♪ emma: this is bloomberg daybreak, i am emma chandra. target reported quarterly revenue sales and profit that beat estimates. they posted strong sales of new, exclusive brands and raised its earnings forecast for the full year. company says it is confident in its plans for the holiday season . it is the biggest commercial plane sale in ebbers -- airbus history. 430 planes from its a320 family, valued at more than $300 billion. 737s, sale valued at $27 billion. there is a new big investor in
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deutsche bank itches struggling to stage a turnaround. it is said to be a private equity. billion bank raised 9.5 dollars from shareholders this year after concerns about its financial strength. that is your bloomberg business flash. alix: is this a good thing or a bad thing? do you want a distressed investor associated with you but you want the money? jonathan: it is more money coming in. what do you think? robert: from the movement of the stock, they are not paying tubing much. -- paying too much. muche is still very economies that are driven by the banking sector, not necessarily the financial sector but the banking sector. that is a view, their view there is some opportunity to develop something as we go forward. mifid, you are
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potentially at the bottom of the cycle. u.s. cycle, we are seeing some reduction of the regulatory burden on the financial sector. given the lags in the process in europe, there is a view that maybe you will see constraints on the european financial sector coming off in the next few years. jonathan: the ultimate proxy for any economy is the performance of the banks, and we have established the view in 2017 that everyone is bullish europe. so iare not getting a bit want to know why the economists are so berlin -- -- bullish? robert: what has to give is at some point you will normalize interest rates. you have an extremely low interest rate structure in europe and that is hurting the banks. why do we have that low interest rate structure? the ecb buying up debt.
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you could say the thought process is the economy is good, the yield curve is extremely depressed by ecb action if that will change by the end of next year and we normalize curves, where would you get the potential biggest bang for your buck? bankshares off the lows of their session in germany, but elsewhere it is a risk off move and part of that came from china. the biggest two a decline in about three months. you have the bloomberg commodity index down 2%. joining us from london is stuart wallace. still with us is robert sinche. stewart, what is going on? stewart: it has been somewhat anticipated. if you think about what happened in the futures market in soticular, it got so long
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fast and there was no doubt it was too much too soon. we are not at the capitulation stayed yet but it is somewhat alarming in that it has been thedily upwards and then sudden sharp drop, but i challenge anyone to be surprised. currenciesing-market are holding up pretty well considering. what do you make of that? robert: with u.s. rates coming down, the dollar is softer and that is helping emerging-market currencies hold their value. there is still relatively there is ans, but unsettled tone to markets and that is coming at a time when risk appetite is fairly extended . from a technical point of view, for those who follow that, we had a key day reversal a week ago in crude oil off the absolute high of the move. that would tell you there is a reversal taking place and it looks like that is starting to happen.
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we are sitting with wti crude still at 55. it is really down just below $50 a barrel. i think we could have another significant correction in crude oil over the next month or two as we go into the winter season when prices are seasonally weak anyway, and we are finally beginning to see u.s. producers increase the rate count. production is picking up, demand is slowing down, markets overextended. we could be looking at a pretty significant correction. be all too oil or will it be the base metals that have to do with supply a not be in china that as big as we once thought? stuart: i think it is oil, will probably always be oil and if nothing else because of its waiting in the indexes, but metals are important as well. the share ofabout the market in metals, it is a
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much bigger deal. what we are expecting on the china front, the consensus is for slower growth and the argument is does the central government intervene if the growth gets tubing slow, and to what extent do they roll back? alix: we have seen fixed asset investment fall but investment continues to pick up, which shows it will be the government supporting growth again. what is your take? robert: that is what the data tell us but the data is looking behind rather than ahead. are we going to see a rollover of this stimulus in the public sector as we go forward as the party congress is over? i would agree, i think oil will be the leader partly because oil has become much more flexible on the supply side than ever before. it used to take a fair amount of time to change supply and demand unless it was something the saudis were doing.
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amountoes up and within of weeks we see u.s. producers put rigs back into play, see production pickup so the oil market has become much more but short-term supply-demand market and the balance is starting to shift. alix: it is all about oil, i keep telling everyone about that. , as u.k. coming up prime minister theresa may answers questions in parliament, we will bring you the latest on brexit and what written's weaker -- britain's weaker job numbers mean. this is bloomberg. ♪
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♪ u.k. prime minister theresa may facing questions from parliament ahead of the second day on her brexit legislation. that debate continues, the
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u.k. labor market is showing signs of a slowdown, employment dropped in september for the first time in almost a year, signaling modest economic growth could be putting pressure on their workforce. robert sinche still with us. one and done at the bank of england? beneath the headline numbers, not great. robert: the unemployment rate held at a 40 plus year low but the labor market data in the u.k. is a three-month average thing they have going on. that was the three months ended in september and what was interesting to me is for the three months ended september versus the prior three months, the level of employment was actually down. we have not actually seen the movement yet. we have heard a lot of talk about companies potentially leaving the u.k., but i think 2018 is the time when you are likely to see some of that happening. we have seen asking prices for
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real estate in london now turned negative on a year-over-year basis. we are seeing employment numbers coming off. well wages are up 2.2% year over year that is meaningfully behind headline inflation at 3%, so you have employment flattening out, slightly negative real wage growth. does not paint a particularly right picture. -- bright picture. jonathan: there is a fascinating case study in the u k. unemployment is incredibly low and unlike in the united states the participation rate has held up quite well, yet wage growth is nowhere to be seen. what is going on and what can we learn from it? robert: it is a global story, and i think what we have seen over the last decade is the inclusion in the global economy of many economies that have a much lower wage structure.
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i think that has been a permanently depressing impact as you bring in lower wage workers whether in china, vietnam, parts of africa, those are competition for global labor. but we have seen is that employees are much more concerned about maintaining a job the necessarily getting and asked her 1% or 2% wage increase. jonathan: has carney made a mistake? robert: no. jonathan: he can stick with us and tell us what he really thinks on a commercial break. coming up, we will check out deutsche bank. andas a new top investor some good news for john cryan, that is next. ♪
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. . .
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jonathan: two hours away from the opening bell in new york city. futures down by .4 percent, dell futures off by 100
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, and that continues in europe. the loss in frankfurt, germany and the dax, impacted by what happened on the fx market. a sixth straight day of gains, the longest streak so and in thear, treasury market, very well bid. yields lower by two basis points. those commodities continue to appear. down by 1%, crude, $55. at around 10% for wti. you up to speed on some headlines outside the business world with emma chandra. emma: thank you. republican leaders are hoping the third time will be the charm for repealing obama care. the move could complicate calculations in both chambers of
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congress. twice already th this year, tried and failed to repeal obamacare cared in the u.k., prime minister theresa may is having a showdown with members of her own conservative party over brexit. dominic greene says he will stop may's proposal to write brexit into law. the eu andwill force others into trees even if there -- intoal on a trading treaties, even if there's no deal on a trading relationship. a broad range of candidates is in the running for mohamed the fed job, including mohamed el-erian. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. jonathan: thank you. he is also a friend of this program. what a nonstory, the fed story,
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is turning out to be. jay powell is the chair, and potentially mohamed el-erian is the vice chair. that is not something that scares investors at all. people who are knowledgeable look at the federal reserve. without please you, that pic? aboutou know, you think the vice chair position as one that, in recent years, has been someone who has real gravitas, you know, solidly founded in economic analysis, hard to find anybody who i think -- i had the pleasure to work with stan fischer. he is a terrific guy. hard to imagine anyone who can john stan, but in the same or would be mohamed el-erian, who i know reasonably well also. that would add a lot of gravitas to the board, and i think it would probably make the staff feel a lot better than they have somebody they can go to and talk to about very intricate analysis. he is on your
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speed dial. [laughs] for now he is still on your speed dial. david: if you go back to years, we have republicans in congress, then enough to audit the fed, this could become a political institution, and the establishment nature of a jay powell or mohamed el-erian really puts the livelihood in there, it will still be the independent, professional environment we have always had. bob: yes, i think we have seen that, for the most part, the appointment of the administration. breaking talk of washington and changing anything, and i think it is particularly encouraging at the fed that we are getting some sense of stability, and like i said, gravitas and professionalism leaving the central bank. jonathan: are we getting stability for deutsche bank? deutsche bank stocks also low as the attempts to turn around the bank are low.
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being shared with morgan stanley, moving back into positive territory. joining us now is bloomberg's ruth david. tell us about it. exposure is not just to deutsche bank but across the german banking sector at the moment. we have a stake between 3% and 6%. early in the year, severus had accumulated a stake in -- c had accumulatederberus== -- had accumulated a stake in deutsche bank. they were appointed as i advisers, and deutsche bank, if you remember, is one of the largest banks, and this year they raise about $8 billion from investors. this is the turnaround plan, and cerberus seems to be banking on
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that. h&hthan: john cryan with was a big deal, and he was stated to communicate with some of the biggest investors. how important is the chief executive officer of deutsche bank? ruth: there are important, and you would imagine they would be having these conversations now, right? it is fascinating because you investors, you have age and age, and now you have cerberus, and you can imagine all of them have some pretty strong views on how they should be balanced. i am talking about what the turnaround should entail for deutsche bank. looking at the european banking sector, there was evidence that john cryan might be looking at cuts again, looking across the bank, looking how technology might be implemented.
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private equity in these types of players get involved, and maybe some to think about, can think again? definitely isthat one consideration for them when they are looking at this, right? how are they going to play out, and one of the the questions they are asking is europe is what the implementation will be, however banks like deutsche's, ubs, how are they going to manage? to bes the impact going in terms of research and investment banking, and will they have to cut costs there? the answer in a lot of cases seems to be yes. but how muchint, more cost-cutting can we really bring out of these things, when the conversation really is -- how can we pivot them to growth? ruth: exactly, and that is the $1 million question or $1 billion question. i imagine what you are talking about, whether research in these banks is not as critical for earnings, and do they cut that? if they cut them, that will have
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an impact on jobs, right. one of the things we have been seeing in the sector is that u.s. things, especially when it comes to investment banking advisory, we have seen that dominate in debt advisory to extend this year. the european banks are talking about a turnaround, but how much of it on the ground has actually happened has been limited. alix: fair point also. we have had entity names, which raises the question as to whether exit strategy is -- what their exit strategy is. ruth: commerzbank is a great example of that. all the time, we are talking about consolidation there. they did something similar with baba. they are doing this, and they understand european banking sector. i imagine they are playing on those. jonathan: prince david in london, it is great to have you on the program. thank you. -- ruth david in london. it is great to have you on the program. thank you. we have seen something similar
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in deutsche bank and i'm sure john cryan will be very happy with that. alix: let's just get in there. does the german government want to? jonathan: coming up on this program, the zimbabwe shakeup. big points surges on the country's prices. i heard someone say this morning it might not be a coup, but you kind of know it is a coup win your news anchor is no longer your news anchor, and someone from the military academy says "this is not a coup." that is coming up next. this is bloomberg. ♪
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is "bloomberg daybreak." i am emma chandra. coming up, the chief u.s.
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economist. this is bloomberg. david: we woke up this morning to news of the military apparently assumed control in zimbabwe. general moyo appeared on television to say it was not a coup but it was to stop military action against president yougov mugabe. to assure thesh read robertcome moog abe -- comrade robert mugabe and his family are safe. bob, let's go to you.
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one of the real surprises to me from all of this, there have been a lot of surprises. they do not have their own currency at this point. the use u.s. dollars. they have 95% unemployment rate that is not a secret. and had bitcoin exchange, bitcoin with through the roof in zimbabwe. is the modern equivalent of gold. gold has never taken off the way you would expect the amount of liquidity it has created globally, and i think what we are seeing is this more speculative element moving into bitcoin as a way to gain that exposure, but again, it is , ratherindication that than being a currency or store that, bitcoin is something people run to in times of stress when they do not want to be
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discovered, their identity found out, and everything else. i do not think this is necessarily a good thing in terms of the development of tocoin, but what it suggests capital flows in china that we think drove prices higher -- this is really a sign of stress and a way for people to move capital without being discovered. david: is that where its principal value comes from, the anonymity? if that is true, that may well limit, ultimately, its role. bob: well, i do not use "value" samebitcoin" in the sentence, but that is the source of his greatest interest is anonymity, and to me, that suggests inherent growth long-term is really limited by the fact that there are only a certain number of people who are going to want to do that. second, you know, you just do not have the safeguard. if you lose the money and one of your exchanges, you do not go to
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the fdic. again, it has a very concentrated area of interest in terms of who is interested in it and why they are interested in it. i think that is still going to be a very small percentage of total money in the global economy. jonathan: cerberus founder stephen feinberg has a 3% stake. we learned earlier that deutsche bank has a new investor. now we learn that cerberus founder stephen feinberg has a 3% stake. it is a story we will continue to follow on bloomberg. managing director christine lagarde at the imf talked about bitcoin in a quite a positive light. she referenced emerging markets and countries that had failed currencies to when you think of a country with a failed currency, you think of zimbabwe.
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does that support a large governmental institution for these kinds of things, for countries that cannot establish their own currency, have a history of no currency, and in some ways, dare i say, bitcoin offers some sort of stability in some sense? bob: it provides than alternative, and it provides them a place to move some money out of the country completely undetected. i do not think that it's really the safest for stability going forward. stability really comes from a sense of confidence, the markets, and you see the movements in the price of bitcoin in the last couple of weeks, and i would not say those are particularly deep markets. you get uncertainties about the competitiveness and stability and certainly the price is down 20% in a matter of days. look, i think it is serving a purpose. some of it is constructive. i do not think most of it is constructive. i think it is rather destructive
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and avoidance of tax issues and identification. does create a potential for those who are looking to move assets around the world, but they do not necessarily look to the dollar anymore. i think maybe that is the bigger story here is everyone has been looking for an alternative to the dollar. it, but think this is again, it is another sign that people are looking around -- well, i cannot really own the chinese currency, a lot of do not want to only chinese currency, do not necessarily want to go to dollars, so you have this new, little, shining star in the corner that everyone is gravitating toward the light. it willd, i'm not think ever become a big percentage of global assets and global money. alix: i love how you were talking about in terms of gold. and comes out of bloomberg, it shows some larger volume spikes for gold. on friday, we had a big spike
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down. on monday -- excuse me come on tuesday, you had another big sale in another big by. this is not the chart you see when you're looking for a safe haven. thender what that does to likes of bitcoin, to the likes of treasuries, for example. bob: what i find interesting in your chart is the price of the beginning and the end are the same. as shakespeare might say, it signifies nothing. we have had a lot of volatility on a day-to-day basis, but you are not seeing anywhere near trend kind of movement that you are seeing out of the coin, which tells me the supply-demand in balance is a lot greater in bitcoin. does it make for a stable market? does it make for a great store in value longer-term? if you are looking for something that is moving, it is hard to find something better than bitcoin. i was11 years ago, covering gold, it was going to
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be $2000 announce. i wrote about it. those people who read gold articles are crazy. you get a lot of action in the gold community. jonathan: so many messages. alix: i just tell it like it is. there is a lot of passion out there. gold is kind of ranked top in the -- big,oh, no, i think the bright light right now is bitcoin. nobody is crazy in any nobody is crazy in any -- alix: in gold. jonathan: long, long, long. always be will $10,000 announce at some point in the future. bob sinche, you will be sticking with us. jon? jonathan: a top investor in the bank. we also learned the founder, mr. stephen feinberg, has a 3% stake
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in the bank. the stop up .9%, alix. alix: we are keeping a close eye on the fed this morning. the tpi report is due. if you have a bloomberg terminal, be sure to check out tv . you can watch us online, check out our charts and graphics, interact with us directly. tell us your thoughts on bitcoin and gold. this is bloomberg. ♪
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alix: and just about a half-hour, we will get a slew of economic data. we are obviously keeping a close eye on the inflation data. the chicago fed president spoke about inflation in a speech yesterday, saying low expectations for keeping inflation down may not be temporary. he said the impression that 2% is a ceiling, our communication should be much clearer about our willingness to deliver on a
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symmetric inflation outcome, much different -- a greater chance of inflation at 2.5% in the future than what has been communicated in the past. michael mckee, are you back here again? michael: it has been argued for years that it is not a target. the role of has been in recent months about whether inflation targeting, whether you're deliberately trying to get above 2% for a while will make up for all the time united below 2%. f administration -- the current said administration has soundly rejected that. alix: we have new car sales, car prices falling. telecom services stabilized. what is the new ones of what we hear today?
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pushel: energy prices everything up over the last couple of months, and that has started to watch the data, although if it is not filtered through, we will see. whether we see an oil-related rise in inflation going into the new year. with this, the question that arises out of yesterday's information, although the two are not completely related, is that there are some things in the core that were not energy or food-related that were rising. that is what the fed was waiting to see. we will see if that translates. jonathan: the fed is seeing how the market position for inflation and what economists expect inflation to trend like any couple of months. the markets saying not much, and economists are saying it is coming. for somebody who lived through the inflation of the 1970's, 14%, 12%, this battle
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seems to be between 1.5% on the downside and 2% on the upside, and pardon me for not getting too excited about which one is going to be correct. that i doto an issue not think anybody wants to address -- why do we think higher inflation is so good? we have a global environment where growth is running along globally north of 3%. you have got real growth around 2.5% in both eurozone and the u.s.. you have very low inflation. where i grew up, this would have been a pretty good world. we seem to have this fixation on this 2% number, and if we are .3% below that 2% number, suddenly the world is a horrible place. honestly, i kind of don't get it. jonathan: it comes down to six basis points, and the reason the --ate is as is because debate exists is because the federal reserve created it. bob: absolutely.
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targeting to abandon the official mandated target. bob: this gets back to the whole communication issue, and the question is -- have we gotten to a point where there is too much communication a? -- now? there is too much information. traders love to have targets. if someone said to percent is the magic number, they know how to interpret that. if it is a low 2%, that is one thing. if it is above 2%, it is another thing. our objective is somewhere between 1% and 2%, that would make the world a lot tougher place to analyze, wouldn't it? michael: they probably are not going to do anything with the target for the time being. it is basically a guidepost for the market, aiming at 2%. the question is, will they make ridks around the edges, get of the dot plot which some have suggested may have outlived its usefulness.
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it is not john taylor with his rule. alix: didn't you have the whole central conversation, kuroda, draghi -- michael: they were arguing bob sinche is the problem. jonathan: central bankers themselves agree. alix: we are so great. jonathan: i am not sure investors agree with that. michael mckee, great to have you with us on the program. michael gapen of barclays and anne lester of jpmorgan will join us. that is coming up in just a moment. we will get you up to speed on a deutsche bank story as well as we have good news for john cryan with a big investor coming in for the man at the top at deutsche bank. that is next. this is bloomberg. ♪ is this a phone?
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or a little internet machine? it makes you wonder: shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. 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 ♪ bleedsn: a risk-off wave
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into the financial markets. commodities like, markets rally. john cryan gets some good news as a new top investor no longer struggling to face a turnaround. investors face the cpi, questioning whether inflation is poised to turn higher. good morning. this is "bloomberg daybreak." i am jonathan ferro alongside david westin and alix s teel. a mild risk-off down around 10, 11 points. euro-dollar for a sixth straight session. strongest single currency since may 2016. we where we come in at two basis points, $2.34 on the 10-year, alix. alix: you had the yields coming down about three basis points.
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you had an option that was not soft, it was kind of lukewarm, right in the middle, if you take a look at the board. european stocks hitting the lowest level in about two months, the worst to slide. it is down. the biggest life is about 2014. commodities also. news outside the business world, we head over to emma chandra. emma: senate republican leaders are hoping the third time will be the charm for dismantling the obamacare. they want to dismantle the affordable care act's individual mandates. year, theady this senate tried and failed to repeal obamacare. --sia is giving venezuela the two countries have agreed to restructure $3.1 billion in venezuela that. the debt is rescheduled in ways that requires a minimal payment for the first six years. venezuela now faces a more difficult job of restructuring the debt. in zimbabwe, the military has seized power and is threatening
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the role of longtime president robert mugabe. the head of the armed forces forces of the action was necessary to prevent violent conflict. mugabe and his wife are now in custody. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. david? david: thanks. if you want to get your tax cut, you may have to give up some health insurance in order to get it. at least that is what the new senate version is pointing to. we have the latest on the horsetrading going down in congress. we welcome our chief washington correspondent kevin cirilli. who is going to win? really the house of representatives last night, david, trying to get their version of the bill, i am told they will try to vote on tomorrow, more in line with the upper chamber.
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here is how -- first and foremost, lowering the corporate tax rate from 35% to 20% will be of limited in 2019. that is what the senate wanted -- will be implemented in 2019. that is what the house wanted and the senate it shifting toward. suggesting there will no longer be a requirement for folks to have that. that juxtaposes the notion that republicans want to address some kind of health care reform before the 2018 midterms. they campaigned on it for a long time. they failed to get significant reforms done on it this year. on the flipside, a lot of democrats say that is a nonstarter, david. david: thanks so much, kevin. jonathan? jonathan: thank you. risk off on the back of the market, not feeling much good a global retreat yesterday, hitting the lowest level of the month. a new survey by bank of america-merrill lynch shows there are finding a way "an irrational exuberance."
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taken above normal level of risk. joining us now is anne lester, jpmorgan asset management portfolio management, and michael gapen, barclays chief u.s. economist. anne, let's begin with you and talk about not just the text of a vote what is happening globally. tax cuts, that we would be seeing the steeper treasury curve -- we do not. we see a sharper treasury curve. what is going on? anne: i think the markets are taking a breather right now, and given how well they have been doing in the space of some pretty steep challenges over the last six months, i am not sure i view that as a bad thing, frankly. you mentioned inflation -- we will have the numbers in a few about where the curve goes and what the inflation will be doing and what
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the fed will be doing is a change in regime at the fact. -- the fed. i am not sure the move is surprising. i think what remains to be seen is whether we get legs in the bond market rally or whether we revert back. michael, this was the story we were told about 12 months ago. what happened to the roles currently? they have been favorable. growth has accelerated in the u.s. the thing that people expected to happen is happening. tax cuts are taking a little bit longer. they look like they will happen. the bond market is not evolving in the way people expected. michael: right. the inflation risk premium has come out. that is one factor. the broadview, at least for the u.s. curve, as you have a fed that is normalizing policy, and that is flattening the curve. shaking out risk premiums only adds to the story. a very gradual normalization only feeds the story as well.
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the global fundamentals are good. global growth of five u.s. is running about 4.5% right now. we think a lot of that momentum is maintained next year, but you do not get the acceleration, and maybe markets are reacting to that. alix: there is a great article. "rising long-term interest rates can be a headwind to economic growth at the same time that falling yields are supposed to hurt growth." that is a very obvious and fair point. what kind of curve do we want? anne: that isanne: a great point about inflation and the fed normalizing rates. you get a flatter curve, and here we are. back to your point of global growth, you know, every pmi a country around the world is showing green, and we have seen that into earnings. again, i think the fundamental could afford a strong market. can we have zero negative volatility?
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that is impossible. again, i think this is a healthy pause. i think the market has got -- maybe "rich" is the wrong word, but strong growth. alix: let's wrap in the tax reform debate. 3300 on the s&p by 2018, potentially, if you want to gain a 25% corporate tax rate, etc. michael gapen, you are a little more conservative on the growth side. michael: right. at least relative to my expectation, the plans are skewed more toward cuts in the corporate sector, and cuts, not reform, so your average corporate has a lower marginal propensity for time to build, investment projects put into place, so i think we have a little less upside for growth than if you just have a large tax cut for households. the discount is skewed about $2.5 to one dollar in favor of tax cuts.
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that is more than a temporary effect on the economy, and i do not think it has much effect on long-term growth. if you get a temporary boost -- we can argue how much of that you get -- but i do not think it really lifts the supply-side economy. david: you, to some extent, basically disagreeing with the republican congress about the growth that would come from a tax plan. now they are saying they will delay the corporate tax for a year, those cuts, right? by the way, those corporations are going to get some of the bad effects by raising revenue and cutting back deductions right away. michael: let me argue why a delay in the corporate tax cuts helps the investment side. ear is if you cut it, you get dividend liv-ex and share buybacks with balance sheet optimization, not plan and property equipment. if you accelerate the appreciation, right, the value of that is higher. taxou delay the corporate
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cut, you tell firms -- if you invest this year, you can write off the 35% rate, next year that so you could0%, argue it incentivizes firms to go the investment route rather than the balance sheet optimization. i suggest delaying the corporate tax rate is what they should do from an incentive point of view. david:m i want the other side. the republicans be right that we will get the capital investments while it is right, we will expand that right away, and that will get productivity two pro --will get 2.5%, 3%, even 4% growth? market cap size, the most likely to benefit from them, when we look at retrospective tax rates come on average 21%, depending on how you are assessing the data, and certainly smaller companies tend to skew toward higher affected
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tax rates, so i would argue -- i will not get into the calendar year thing -- but i will argue that you possibly see more be benefits in small companies that actually could provide a boost in terms of sort of real hiring, and i will talk not capital investment, but people adding more workers to the economy. so if that is true, and you see it proportionally benefiting smaller companies, i think that could be an interesting twist. the thought about modeling is through is of course -- anne: a longer project. michael: coming at it from my point of view -- can you incentivize firms to do what you wanted to do, if you want to get growth to 3%? which i doubt that you can. to me, investor, equipment, and a little property -- what you do not want it to do is have a leak out into dividends. too, planning is helpful,
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right, i mean, a little bit of time. michael: a one-year delay in the corporate tax cut is not enough. i think you want to phase it out over five years over the period. "onathan: "bloomberg daybreak brought to you by michael gapen at barclays and anne lester at j.p. morgan. [laughter] jonathan: wager on the german banking industry. we are up about .5%. that story is next. from new york, this is bloomberg. ♪
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a new investor in deutsche bank as the bank attempts to turn it around. an investor in cerberus.
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a person familiar with the matter -- joining us from frankford is bloomberg german make reporter steve. tell us about the investor base over at deutsche bank now and how it might be changing. is a: yeah, i mean come it big change that, by the way, they just confirmed a few minutes ago, so it is on the record now. it is a big change. it is the first time a private equity company owned a big sta ke in deutsche bank there is revolutionary for the bank. obviously, the big question is now what does cerberus want from deutsche bank, and we will be watching to figure it out over the next few days. jonathan: what is the parallel inween what cerberus has common is they and therefore what they might ask deutsche bank to do? send us a -- rus
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commerzbank and therefore what they might ask deutsche bank to do? us a note,berus send they are undergoing restructuring programs aimed at boosting profitability, and if they can pull it off, any interest rates -- which are going to rise at some point in the future -- i do believe they can find a big return on the banks. jonathan: in commerzbank, there's already a massive return in the books. for a lot of people, that is the bet on consolidation. do you see deutsche bank going to that kind of story, or is this very different compared to what commerzbank are up to? steven: let's not forget -- we pointhere were at some last year, there were merger discussions between deutsche bank and commerzbank. cerberus now owns a big stake in
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both banks. i am not saying this is and at a merger, but it is one question many people will be asking in the next few weeks. jonathan: stephen, there were reports over the last few months about deutsche bank ceo john cryan and his supporters' unwillingness to step down with hna, the big chinese investor. do you think they will be more willing to sit down with a private equity firm? steven: that is a difficult question for me to answer. i know john cryan does put a high value on integrity. i do think cerberus has a track record in germany. they are a well-known investor. they have a good contact with regulators, long-standing contact. my guess -- just a guess come obviously -- my guess is yes. david: you said you have read the statement from cerberus already. they expressed confidence in german fundamentals. do they expressed confidence in mr. cryan? is cerberus betting on mr. cryan
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and his plan, or will they be gone if it does not work right quick? steven: i do think they will make the investment if they do not believe the turnaround plan, at least one, especially the integration in postbank, the retail subsidiary in the business, which does not amount to much. but they have big faith in john cryan being the man. david: how long does he have? steven: it depends on who you ask. a fewswers range from quarters to 2020. on the nextpends quarter performance of deutsche bank. the latest quarters have been disappointing, slightly disappointing, i would say. thef this trend continues, time that investors are willing
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to give to cryan will shorten with each quarter. jonathan: intentions of cerberus so far, fantastic reporting so far. anne lester of j.p. morgan around the table with us. we talked about a positive view on euro and really finding a way to push that through the market and actually deliver a return. young the data for europe, may say i will go overweight financials. financials have not delivered the gains you thought you might have got. you have got the economy on the one hand and the financials on the other. anne: i really think that the two countries -- i rely on our specialists to do those plottings for us, so i will not go away into financials vs. the bond market. we see no reason why that is going to shift. we look at the cyclical position or cyclical recovery in many european markets in addition to where we are in the u.s., you
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know, europe continues to be a place we would rather be putting money into that in the u.s. alix: [indiscernible] well, if we think about europe and where each country is, i think we continue to see a lot of room th and i think in terms of peripheralse, yes, they are just getting going. if you look at valuations, if you look at the amount of recovery from where they sold off, broadly speaking, essentially the rest of the world has a lot of risk on. jonathan: anne lester from jpmorgan, great to have you with us, and michael gapen from barclays. coming up, concern over an economic slowdown. the chinese 10-year. we will take a look at how president xi jinping's economic plan begins to affect the market maybe just a little bit. from new york, this is
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bloomberg. ♪
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alix: the risk-off feel overnight pick up a little bit of steam. take a look at this chart. you can see what i'm talking about. the bloomberg index, you have seen the rollover in the last couple of years. it has seen the worst level in a couple of months. thenyou have shied war -- you have another moving over 4% yesterday. still with us, anne lester of j.p. morgan and michael gapen of barclays. a good feel to have over what is happening in china because if we see a rollover, the risk off there, what do we need to do? anne: i was in shanghai a couple of weeks go, and one of the things we were talking about is china's sort of systemically slowing growth. they are not an emerging economy
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anymore. certainly not all of it is. if you are in downtown shanghai, it is an incredibly vibrant city. as that growth normalizes, you have to ask how does it affect the rest of the global economy. where is in china, a 4% growth? so what are we talking about, and how will it ripple through the ability of americans and europe to infiltrate into china? i am not sure it will be a knock until the party is over at all. alix: michael, the focus to me would be the commodities sector, not just oil rolling over. we are seeing that in base metals as well. is it the same thing you would have seen two years ago in china? ago, right, years was the big downside risk in china, and what that would do to . and the.wth commodity right now,but a metals are great, and everyone feels a little complacent . you cannot identify real term
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rates on the horizon. any kind of rolling over in china and propagating to the commodity market and global growth would be a big downside risk at this point in time. people i don't think have it on the radar, so were that to materialize and people stepping down global forecast for next year, yes, markets would react most definitely. alix: here is what the mp said. they want to go on emerging markets. they like emerging-market texch. ? forget about commodity -- does that not a play you should be looking at? forget about commodity. anne: yes, i think it is great, and emerging markets, notwithstanding recent action on the dollar, that is just going to be good news for emerging markets and equities there. basically we are long everything, but we are funding. jonathan: i love that. alix: "long everything." anne: except treasuries and
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investment grade credit and the u.k. stock market. [laughter] and diversification, you see correlations drop across the world, you would be a lot better off spreading this around. jonathan: michael gapen, head of u.s. inflation, we have seen two times going into this number, around 65 basis points. how can this account for what is going on with what is happening in the markets? michael: i think the markets are looking at this and saying "it does not look like w will get a lot of inflation in q1, and" i would agree with that it does not look like we will get a lot of inflation in q1, and i would agree with that. i do not think the data today changes that story at all. i think we will be year on year encore. that number needs the more like
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2.4. we have got a lot of room for even inflation to firm before anyone gets worried about it. jonathan: the estimate is 1.7 coming year on year. on year, just a headline number, looking for 2%. that of the month on month, 0.1%. that is coming out in four minutes' time. michael gapen of barclays will be sticking with us, anne lester of j.p. morgan. oming up, the inflation story. we will get a free through the cpi number. get a read through of the cpi number. from new york, this is bloomberg. ♪ is this a phone?
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or a little internet machine? it makes you wonder: shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. 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 27 seconds away from breaking economic data here in the u.s. mild risk is global equity markets. by back for two --
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dow futures down about nine points or so. in the bond market, the long and rally, 10-year treasury coming in but basis points. the fx market, the dollar shows weakness for the euro-dollar. dollar-yen, yen strength. retail salesngth, coming in a bit firmer than expected, the previous number was 1.6%. this is october month on month. so a bitooking for 0%, firmer than expected, but much lower than the previous month, which was revised higher to 1.9%. retail sales now, let's rip through the cpi, shall we? in a zero point 2%. both of those numbers a bang in line with what was expected. year on year, 2%, bang on what was expected, a drop in 3.2%. the year on year number, a little bit firmer, 1.8%.
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alix, the story we have kind of been expecting. alix: yes, if you look at the tells here, you have housing costs were a big factor in helping boost the cpi. medical was also up. importantly, used car sales were actually up .7%, ending nine months of decline. margin, a little bit of support for the inflation data. through whataking markets do on a backend, the 10-year treasuries are already down about three or four basis stays, the 10-year yields there. 2.4% is how we traded 10-year. the fx market, a lot of euro strength in the past week has mentioned a lot of dollar weakness. still lower by about .25%. not really a big move from what we were expecting. michael gapen of barclays and anne lester of j.p. morgan. michael, the hurricane effects, how it influenced the previous month's numbers, just walk us through it. michael: you see cpi and retail
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sales, so last month we had a big boost in energy of the headline level, which pushed headline cpi, which came off this month. i think you are seeing the core, as you mentioned, strength in shelters not a new story, but that is fine. the used car story is probably a hurricane response, a surge in autos in the september, october period, it will likely blend down to the used car sales. i think the market will look through the unexpected surprise if they think it is driven by autos. retail sales them as you mentioned, they are very strong, above 1%. last month, that was driven by a surge. in gasoline prices prices at the pump went higher. also, auto salesman higher last month. coming off of that is why the headline is weaker, but underneath, core is ok. jonathan: we got 180. it is a matter of 10 basis points. is that a noisy number, or is it something you look at and say look on the we are pretty much
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there? 170, 180 is kind of what we need, right? michael: it is what we need. it definitely gets them into december. that much is clear. you will get a pause this year if you do not get core moving higher. we assume base give margins at this point in time to say hey, the end of q1, if it is true that most of this is transitory move above year race the core level, then we get back on track. i think you need to go up from here to get to it next year. if you stay, you get most 2. nne, at what point do business is get more pricing power, and when they don't, what do we look at for labor costs? anne: that is the big question. what will happen to inflation and wages, and do they have the power to push those higher costs through?
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theink when we look at employment position, the ability for the consumer to keep going into this and confident, it does seem like you have got indications that some of these will be punishable, if that is the word. if that is the word. but it does not suck so far. it remains to be seen whether people are willing to pay higher prices, or if they will keep restitution. i think we will see attempts at price increases and various substitutions. i do not think of that is the internet looking at substitutes. i think that is the big question. for if people are feeling a little more. michael, it is addressed it, a small business report wagesday so profits up,
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up, workers on the decline, and something about that did not make sense to me. [laughter] have been saying workers are hard to find for quite some time, it has not come correspondent to wage improvement. alix: but for them to raise wages, profits are not necessarily up. michael: watch what i do, not what i say, perhaps? it is not nearly out of line with this 1% labor productivity. something on that has to move. productivity has to start getting better, labor scarcity can maybe support that. if it is truly hard-to-find, they have to get creative in producing that output with a little less labor input. but i think we are probably .5% or so behind wage growth relative to where i expected we would be. gapen, as you look at the economy overall, looking at the average wage increases, if you have an
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overall average, the very top, we are really benefiting, and in a consumer-driven economy, you may be worried about the middle range or even the lower range. shouldn't we be paying more attention to distribution? michael: over time, as the benefits of the economy have become a little more segmented, right, so the argument would be, for example, the main criticism of that policy was, well, you just boosted income inequality. those types of things are relevant. as a macro economist, i am looking at the aggregate data. if i am missing some of those segments, then yes. david: do the segments matter? the people at the top 10 to not spend as much, not consume as much. anne: i think they absolutely do. if you look at the average hourly earnings, which we are shifting of some higher pay people if they are not necessarily on the same page, then folks, as you say, are going to gear into spending that money at the store, at the gas
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pump. michael, 65 basis points even after that data. we spend a lot of time talking about economic data. is 10say that that curve basis points further south going into december, how many people in the f1 see get -- fomc get nervous? michael: not necessarily for the butmber's hikemichael hike, everything thereafter. jonathan: weighing only long game, i want to understand from you the real world can't consist -- the real world economic consequences of a flat curve, whether it is recession or the central bank has done it. michael: i think it is the first part that you mentioned. can adjust the flight to an inverted yield curve and is a high signal of a recession. the fed can have some room here
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at the front-end. you are now hearing this from fomc members where they say we all to be careful about inverting the yield curve and assuming its balance sheet policy is a depressing the term premium, and that is ok. history says inverted yield curves do not result in good outcomes. that is my view. jonathan: anne? anne: i think again, it should put more money in the pockets of people who have their money on their sidelines. it is not necessarily going to be bad for long-term growth. i do 100% agree that it is a sign of inflation. i guess the question i would ask the brand-new fed chair experiment in unwinding the balance sheet, will it always hold true, i think we have to watch. michael: absolutely. alix: anne, would you be more willing to take on credit risk or duration risk than? anne: i would take credit.
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you? has that changed for anne: again, we were short and we are holding a longer position. at barclays, gapen anne lester at jp morgan asset management, thank you for your up, global leaders gather to talk about how to implement the paris climate agreement. we will dig into the investment in korean technology. you can hear our team over the radio. "bloomberg surveillance" can be heard across the u.s. on sirius xm. maybe jon ferro talking about what now? jonathan: i don't know. it depends on what he is coming for. we will talk about the world cup. cerberus all right -- alix: all right. this is bloomberg. ♪
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emma: this is "bloomberg daybreak." i am emma chandra. coming up in the next half hour, ,gluskin sheff. this is bloomberg. alix: global leaders are defending on germany today to -- are descending on germany today to talk about global climate change. what is the opportunity for investors? according to bloomberg's new energy finance, from 2015 to 2016, world investment in energy investment had its sharpest drop ever from $287 billion in china, accounting for most of that slowed up your joining us now from washington is ethan zindler, head of bloomberg's new
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energy finance. i thought energy was going to be the hot investment over the next few years. why the drop off? ethan: there is good news and bad news of course. total volume is down. because cost of the modular panel, wind turbines, those are also down, as you can basically build more so for less money now than you could a couple of years ago, so it is not all bad news. , plus orion globally minus, spent over the last five years or so. alix: when you see the u.s. a lot of the paris climate accord, it is up to private investors and private companies to boost whatever investments we're going to make. what do you see in terms of those flows? where are they coming from and flowing into? the stories around paris negotiations is how much money will flow into developing countries. 2015 broughtines, some not so great, total dollar
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volume fell sharply. the majority fell. there is some rebuilding that needs to be taken place in the next year or so. alix: the you expect that to happen? quite possibly. we are generally bullish that the cost will come down. brazil, chili, other places around the world, delivering a contract in which you see clean energy competing against fossil sources, undercutting it on price, unsubsidized. that does bode well for the industry longer-term, but there are definitely some schools that need to be improved, more financing that goes into these countries. alix: ethan zindler, head of americas new energy finance. michael gapen and anne lester still around. do you like new energy investing? anne: i was thinking about that
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from the point of view of our clients. --have nothing but increased people really want to understand how the companies we are investing in our planning to do that. i do not think it is an either/or question. i think we are asking how does it stack up from the government's perspective, from the environmentalist perspective, in particular, and as you point out, companies are picking up the load in doing a lot of this himsel themselves. i'm not saying i want to buy win d farms, but we do see that as a theme that people are asking for. alix: is it a company that has to sell a bond that then you have to do something green with that money? visit tesla selling avon, even though they could be making lithium with it? -- is it tesla selling a bond, even though they could be making lithium with it? if we are going to own
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companies for a long term, which is what we do for our clients, we want to make sure they are well-run companies that we want to own. jonathan: companies that actually go in produce clean energy, or companies that ride the wave at the back of it. anne: i will make an analogy to toll roads and say most people who go to toll roads do not make a lot of money and the people who buy them up and run them generally make a whole lot of money. that is a well trodden path. thank you very much. pleasure to have before the hour, michael gapen of barclays and anne lester of jp morgan asset management. the textile markup putting the obamacare mandate repeal back on the table. we speak with a west virginia senator. she will be joining us next. this is bloomberg. ♪
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david: this and is moving
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quickly and forward with its version of tax form, expected to have a completed bill as early as this thursday, voting perhaps as early as thanksgiving next week to one vote that will be critical is shelley moore capito of west virginia. thank you very much for your time. i know you are busy, senator. i want to start with the report overnight that the senate version is likely to actually have a repeal of the individual mandate that comes with obamacare which goes toward health care. does that fair for constituents you have in west virginia? sen. moore capito: i think this will be welcome news in west virginia because 81% of people who is paid a tax because of the mandate on obamacare make $50,000 or less, and by repealing the mandate, we are saying that you should not be penalized through the tax code because you are unable to afford your insurance. i think actually this has a good companionship with the tax bill,
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and i think it will be well received in my state. david: i know, senator, you're particularly concerned with the middle class in west virginia. sen. moore capito: right. david: you said so that they can afford to pay for their insurance. it is one thing to give them a tax break, ok, they do not have to pay the individual mandate, the other hand is the subsidies for health care insurance. how they feel about that? sen. moore capito: we are not taking back the subsidies. we are not doing anything with medicare. we are simply saying -- medicaid. we are sadly saying that a, if you cannot afford insurance or b, you do not wish to buy it, 41% of the people, i said 81% make 50 or less, -- $50,000 or less, 41% make point $5,000 or less, and they are penalized if they cannot afford not wis or dt wish to pick up health care. david: fair enough. the way the insurance market works, if you have enough people
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participating in the insurance market, it actually brings down the cost. do you do not expect if you illuminate this individual mandate, you will have far fewer people actually participating? sen. moore capito: there will be less people that take of insurance. that is why it will be important for us to move forward at the same time with the concept that senator alexander has put forward, which is to shore up exchanges, and so i think you will see that as part of this movement, too, not separate from a tax bill would also moving along to make sure that you have the exchanges that we can keep prices down. david: so you are confident at this point just, just to talk nextics, that come november come of republicans who voted for this repealing mandate will benefit in the next election, not hurt. i absolutely believe it. remember, everybody is getting a tax break here. everybody is getting a tax cut. the average tax cut for a median family in a state like -$1900.
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that is what they will remember. a b they we use those dollars to purchase health care -- maybe they will use those dollars to purchase health care. that is an individual choice, not the government say and you have that to buy it, and we will tax you if you do not buy it. david: one thing likely to be in the senate bill is they will not be permanent, they will phase out with the byrd rule, which says you cannot have a deficit over a 10-year period. ok, we get a tax cut, but it is going to go away. sen. capito: i think that is an issue up for discussion. that is something we try to fit the numbers in, that the finance committee felt the direction they are would go to -- that is what they will be dealing with today, the permanence of the individual tax bracket. that is important to me. that discussion is ongoing, and we will see where it lands. david: how important is it to get the growth of the republicans, including the president of the united states, say is so critical to tax a form
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to get the country growing. if you get a growing, unit permanents, don't you? permanents: you need and stability, and you need to look at the whole package. in order to get growth, and we need to lower the corporate rate to make our country more competitive. we need to help our small businesses to file taxes, to make sure they are seeing significant tax relief. i think that is where the growth portion comes in the form of higher wages, for employment, expanded capital expenditures, all these kinds of things i think are going to push our growth, and the individual tax brackets will help with the. keep in mind, we have also doubled the child tax credit, which helps middle income. we have doubled the standard deduction. i think this is targeted toward the middle income earner as well. david: we have been told, it might be a sticking point in the house or senate, might be the state and local tax reduction. you can deduct $10,000. of thed to the chairman
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house ways and means committee yesterday, kevin brady, and this is what he had to say. he was pretty adamant. mr. brady: i am confident the senate bill will have the priorities of the house. i certainly do. that will help us keep the state and local pretax in concrete. i fully expect that to be the case. david: just to drive it home, that is a redline over which you will not cross. mr. brady: it is. sen. capito: you heard congressman -- david: you heard congressman brady there. sen. capito: a pretty affirmative statement there. david: this is where you help them out? sen. capito: this is where you watch the legislative process. we know that the state and local tax issue is a problem for members of the house and members of the senate. i think what you will see is we will negotiate here. if kevin brady with a red line
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down -- i know he is somebody who will be very reasonable -- but i think he feels that very strongly, and i think that will come out with proper support. at this point, we are making our mark on it, which will remove the state and local tax reduction. david: some of your constituents are hurt by eliminating entirely deductions for state and local taxes. sen. capito: i think of course that is an issue, but if you lower the bracket, i think that is where you hope to make of that loss of a deduction. in my state, 81% of the people use the short form, use the standard deduction. that is predicted to increase by 10%. at least 90% of the people are going to get the doubling of the standard induction. there are some people that will look at losing the state and myal deduction, but in state, which has state taxes, could cause them some problems. that is why we are lowering the bracket. you,: how confident are senator, that the president will have something to sign before the year is out?
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sen. capito: i am very confident. i think we are united. we know this is good policy. we know this is good politics. we know that the american people believe that they would like to keep more of their hard-earned dollars at home. i am giving it an 8.5. david: ok. thanks so much. it is great to be with you, senator shelley moore capito. next, globaling up equities. find out more from jim bianco of bianco research and david rosenberg of gluskin sheff. risk-off futures down over 100 on the dow. from new york, this is bloomberg. ♪
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jonathan: u.s. core inflation
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accelerates for the first time since january, a move fed officials could welcome. of bleedf waves through financial markets. commodities slide. haven assets rally. john cryan get some welcome news. cerberus emerges as a top investor. from new york city, good morning. welcome to "bloomberg daybreak: americas." alongside david westin and alix steel. 30 minutes away from the opening bell. futures are down about 11 points. euro strength for a sixth session at lower.ies alix: let's take a look at the movers in the equity market. breaking dealing with saudi arabia and soft bank. softbank lending and investment
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of $25 billion in saudi investments. we think it will be part of that new city. softbank will support the project with solar projects and robotics. softbank it raised a $100 million fund to invest in that. now investing in the saudi new city. that is a good sum of cash. didn't the saudi's invest in softbank? big chunk ofut a change in. jonathan: they have given him a load of money to invest in the future, and he has taken that money and invested back into saudi arabia. david: not sure how that works, but that is correct. apparently, artificial intelligence, so no traffic jams. here are some individual movers we are watching. center boosting
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its full-year view but the midpoint was under consensus. comp sales up by 1.9%. online sales rose but the midpoint guidance is what is weighing on the stock today. time warner also lower. many analysts say the standalone value of the company is $80 million if the deal fails. a% of analysts surveyed see 60% chance the deal will close. the tig says they are looking for the doj to block the lawsuit as early as today. revenue falling, comp sales down by about 1.5%. challenging retail environment. i thought beauty products were the jam. if you could not sell clothes, you could sell mascara. jonathan: i am reminded i am a foreigner when you talk about those companies. who? you would be think buying sally beauty products anyways. david: i am a foreigner on this,
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trust me. i don't know sally beauty. alix: that is why they are doing poorly, apparently. caution sweeping the markets today, u.s. stocks joining the global selloff. economic data earlier showing you as inflation accelerated for the first time since january on the core measure, bolstering the case for a december rate hike. wavete that, this risk off has gone through europe and carry through to the u.s. joining us from chicago is jim bianco. davidg us on set is rosenberg gluskin sheff. jim, what do you see in the market today? ok.ation numbers are relati what are your thoughts? right, thek you are story is the yield curve
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continues to get flatter. with inflation, we may finally have a number that be consensus. it's been forever since that happened. it that will heighten the chance the fed will raise rates, and we are and 94% for december alone, the market is afraid the fed will go too far and slow down the economy, and that is why the yield curve is flattening. we all know one of the best indicators of recession is an inverted yield curve. flate on our way toward a yield curve because the long and is looking at the data saying it will go too far and we will have a problem later on. jonathan: that has been the story. 65 basis points at one point. what is the signal that comes from 65 basis points on the 2/10 spread? david: if you believe the dot plots, and we will get some new figures with new faces on the fomc, if it says it goes the way
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we will go, we will have three rate hikes down the road. probably december 2018. same old cycle. i'm not so sure why they are .aising rates i don't think it is because of inflation. you go back to janet yellen in august of 2016, jackson hole, she basically said what the fed was going to be doing, conventional policy bullets to fight the next recession. this is basically the summer of 2016. like ablem there, it is bee trading my foot and having the podiatrist next door to reattach it. look at the cycle. we never delivered. a huge credit cycle. the economy in the u.s. added $14 trillion to national debt at every level of society. huge credit cycle. we have never been more susceptible as an economy.
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jonathan: the consumer the lever to a certain extent. david: in the mortgage market. subprime auto's? no. in the corporate sector, huge amounts of borrowing to buy back stock. sector, writment large, total data in the u.s. is 250%. the peak of the last cycle was 225. when people talk about why inflation is stuck in the mud. this is punishing debt load. it is a strain on the economy. that,the flipside to morgan stanley says we are not seeing excessive tightening policy, not an extreme buildup in debt and you don't have exuberant sentiment. what parts of the you agree with, what parts do you not? jim: as far as excessive monetary policy goes, you don't have it today but the market is
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always a forward-looking thing and it's fearing that you might get it. fedhe. lots form, if the things that is what they are going to do, they will invert the curve. if the consensus is right, the ecb will be done buying and they will be talking about buying -- pulling back more. you at all that up and you have excessively tight policy coming somewhere down the road. based on that, do you want to be selling into this, or do you need to be buying because the light cycle will not peek anytime until tomorrow? talking aboute stocks, there is a different dynamic going on. , but it is thet death of active managers and everybody putting their money into passive management. the passive cycle has been tremendous. money comes in every day. as long as people want to continue to buy indexes, etf, there will be underlined support for the market.
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that will keep volatility low, too. at some point you want to sell it, but it will not turn the money toward risk on assets. it will not turn that off because we are seeing down the road some excessive policy. that will come later. for now, it looks like stocks will continue to grind higher. jonathan: great to have you with us, jim. david rosenberg is sticking with us. the senate's new version of its tax package. two big changes and what they plan to do with the corporate tax rate. 22 minutes away from the opening bell. risk off across the board. down by about half of 1% on the dow and s&p 500. the volume turned up on the dax because of what's happening in the fx market. euro-dollar advancing for a six straight session. dollar weakness across the board against the majors in g10.
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yield lower by four basis points at 2.33 on the 10-year.
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jonathan: the opening bell 19 minutes away. mild risk off tone today that carry through asia, europe, and the u.s. the dow off by about 1.5%. the story of the fx market, commodity currencies underperforming in the g10. a dollars it is strength story versus the commodity currencies, crude is down .9%. , yen strength,
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euro strength for a sixth straight session come a 823.-dollar at 1.1 treasuriesn ok but stay in so strong with the yields down for basis points, 2.33. the yield curve gets flatter. david: we will see what congress will do about that. that is what we are talking about next, tax reform. the senate has its own version. it has a couple important additions, one would eliminate the obamacare mandate for health insurance, and phases out tax cuts for individuals and pass-throughs. or what this means for the markets, we are joined by michael mckee. jim bianco and david rosenberg are still with us. it looks like the two houses are coming toward each other. mike: actually, they are going in opposite directions. the house rules committee met to
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look at last-minute amendments to the bill that they plan to vote on tomorrow. they rejected the idea of inserting something on obamacare. it is likely this is putting them even closer to the idea of having to do a difficult conference committee report. david: at the same time, there have been members of house members on the republican side in favor of eliminating the mandate. the president himself has done that. we just had a talk with senator saido of west virginia who it would be ok to go along with the house things. she has always been on board of the obamacare repeal but it is the other senators that voted against it when it came through last time that you have to worry about. are they still going to be worry -- willing to be able to throw people off of insurance, medicare, medicaid if this goes through? if obamacare starts to collapse because the mandate is an
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important like of that school, and makes it harder to come up with a replacement. they make it more complicated. that is what has people in the house concerned. they could pass their bill now without it, the question is, what happens when the senate passes their bill and they have to merge the two. alix: jim, are we looking at a small cap, high tech stocks, is this how you have to look at taxes again? if you have toow hit one of the things going on with the tax bill is this has got to be done under the reconciliation rules, which means there will not be a tax cut. it will all be revenue neutral. we will cut some taxes, raise other taxes, and rearrange deductions. you can see that in the national federation of independent businesses, when they asked them how important tax cuts are to you, only 17% said yes. 83% said no. i don't think you would interpret that as saying they don't want a tax cut, they just
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don't think they will get one. some of their taxes will go down, others will go up. at the end of the day, they will pay the same amount, just in different ways. alix: fair, david rosenberg? david: we are all talking about tax reform. it is really all about tax stimulus, if the year of the expansion with a 4% on a planet right and the fed is raising rates and flattening the yield curve. nobody looks back to 1981 when ronald reagan cut the top margin personal rate. how did the fed respond? they plunge the yield curve. to everybody surprise, we had a recession after a monumental tax cut. what people are not asking is, what is the fed's reaction function? fiscal policy is not going to extend the cycle. is a mucholicy powerful influence on the contours of the business cycle and the economy than fiscal cycle does. we know the fed will raise rates
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a few more times without fiscal stimulus. if they try to engage fiscal stimulus at this stage of the cycle, the question is how the fed will react. people should go back to the 1981 experience. that policy produced a six-quarter recession after huge tax cuts. do you think this sort of tax reform is the wrong thing to do right now, for the reason a david said, that it may stimulate further rate hikes? wrong think it is the thing to do because it will just be revenue neutral. cutou did a 1981-style tax as david said, and you actually cut taxes and the deficit went up, that would be far more stimulative, but we are not talking about that. as far as being too stimulative for the economy, inflation is low, growth is not that high. you could probably tolerate some stimulus in the economy, but david is right.
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it is what the fed thinks about all of this. if we pass a tax bill, that stimulus the economy, the fed will use this as a reason to pushingtes and keep on on this tightening policy and probably undo any stimulus they want to put in. there is 1.5 trillion dollars approved by both houses right now of stimulus. the only issue is after 10 years it has to be revenue neutral. it will not be for the first 10 years. am: $150 billion a year on four-year budget is not a lot of stimulus. it is a very small percentage. i don't think that level of stimulus is really going to impact the economy to a great deal. the 81 tax cut was far greater on a percentage basis than what we are talking about now. jonathan: great to have you with us. jim bianco, david rosenberg, thank you. coming up next, deutsche bank has a new investor. cerberus takes a 3% stake in the
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bank. deutsche bank now flat on the day. from new york, counting you down to the opening bell. this is bloomberg. ♪
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jonathan: there is a new investor in deutsche bank attempted to turn things around. cerberus. stake is being held for morgan stanley and shares are moving higher on the news. joining us is chris whalan. great to have you with us on the program. what are your thoughts, what is the signal in this? chris: i don't really know. cerberus, a distressed investor, has bought into this bowl record in europe. deutsche bank has been
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mismanaged for a long time. there was a fascinating article going through all of this. i just don't know how this will turn out. most of the decor of the deutsche bank business over the past couple of decades has been london. in a lot of respects, brexit was the worst thing that could've happened to them because they don't have much of a german banking franchise. they are a derivative, capital market shop. they just got done cutting that to align revenues with expenses. i think it's a very speculative trade. from 35 thousand feet, what i would expect private equity to be doing in europe is to look at a place like it -- italy, find a small bank, loaded up, do a ton of work with it quickly, something more nimble. i would not have thought deutsche bank. just getting my head around private equity and what they can play with. you ask the right questions. they have been trying to raise equity, common equity.
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the terms on a preferred issue would have been punitive. the only credible institutional investor they could attract was cerberus. that does not fill me with great confidence. ultimately, europe is a very dead or friendly place. italy, i would not want to do distrust in italy. as a creditor, you have very few rights. the courts are politicized, there is no bankruptcy system. there is no process there to resolve. exists, ithe process just takes a whole lot longer than everywhere else. here you are talking years, europe, you're talking decades. the one thing you can be sure angela merkel does not want to talk about is either deutsche bank particularly, or banks in europe in general. you said distressed investor. often they will go in and say, it is bad enough, something has to give.
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i may not know what it is going to be but something has to turnaround. one of the great assets deutsche bank has is its name. the german government will not let it go too far south. might that be a strong investment? chris: it is like the situation we have with citi. deutsche bank management has to tell us what the business is going forward. how are they going to manage risk, continue to clean up litigation they are facing from 10 years ago? they just settled their mortgage claims from the u.s.. john cryan, to his credit, has been doing enormous efforts, to get things stable. he has the opportunity to consider the future. right now it's about stabilizing his franchise. i'd like to see the not have to go out for more money. that's the issue. alix: i'm sure shareholders would not want to see that as well. chris: we saw this with citi, when the saudi prince
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transferred his posits to equity. but to your point, david, why are they in here? alix: if you look at european financials versus u.s. financials, european has underperformed. you like at deutsche bank and you say, it's for good reason. which would you rather own? jim: a lot of the financials have been struggling as of late, especially on the earning side. were not good numbers. the financials are going -- they have a lot of headwinds going with them right now. flatter yield curve, which will pinch them. not having higher rates, a derivative of the flatter yield curve. the business is changing. london is fundamentally changing the way they are doing the business. you can see it in the number of people that were named the managing directors at goldman sachs. all of a sudden, they have a lot of coding and engineering
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degrees and not those traditional mbas. when you added up, you have a business in transition. be that is what cerberus is looking at down the line. thinking this may be a very different bank in five years than it currently is now and are trying to take the opportunity. chris: it has to be viewed in the environment we have seen since the financial crisis, the trading principal activities have gone away, vastly reduced. if you are running deutsche bank or goldman sachs, you have to look for other ways to make money, simply. volumes have been down as well. the buy side has gone to passive investing, have not been trading the way they have. the bull market has been in debt, rather than equity. to his point about the yield curve, financials are going to trade off. they have to. this is the yellen pet. -- put.
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she thought she could adjust the benchmark rate, and that is a mistake. jonathan: cerberus is in. how long does john cryan have now? chris: weeks. he has to articulate a vision. he has to tell us why this very impressive and long existing shop like cerberus has decided to put a bet down on him. jonathan: chris whalan, thank you very much. given weeks to come up with a turnaround plan. jim bianco is sticking with us. the opening bell is minutes away. this is bloomberg. ♪
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jonathan: a little bit of softness in global equity markets today. the opening bell here in new york city. futures are weak and lower, down 120 on the dow.
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inflation data comes in ok relative to expectations. this market looks straight through it. yields are coming in, the curve is flattening from the long end come all the wise known as a bull flattening. the dollar cannot catch a bid. 93.70 is where we are. the real story is this euro strength, and the overall weighting that it has in the dollar index. euro advancing, yet advancing, commodity currencies weaker given what is happening with crude. down one percentage point on wti. the opening bell. here is alix steel. alix: core cpi at 1.6% not helping. by 13 points, the nasdaq off by 40 points. we have the longest losing
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streak in european equities since 2014, started in asia, continued in europe, now spreading to the u.s. after that softer session yesterday. some retailers also not helping equities. .arget is off by almost 7% regardless of what it's quarter wise, it was the midpoint guidance miss. that is the pain trade there. also the pricing more with walmart hurting margins. this is spreading across other retailers. the reason why these guys are getting hit his because amazon says they will lower some of their food prices for whole foods in the specifically around escaping. 22% household essentials. walmart, 36% groceries. this is the next war for walmart. supermarkets are the neck major industry of pain. stocks reflecting that today. stay with a retail theme and the amazon effect, average sales
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beat on top, on the bottom, average sales growth. directs internet and market retail. the blue is specialty retailer. assume, average sales growth for the internet guys are strong. slowing but strong. earnings growth also better than specialty retailers. sales growth not as terrible as you would have thought. still around 5% but earnings growth minimal. this is really just encapsulating the has and have doubts, amazon and everyone else. jonathan: joining us now is patrick mckeever of mkm partners. with us here in new york city is luke kawa. i want to start with these retail numbers. who has got this right, and who is still struggling? patrick: very few, i think have it right.
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i think target does, even though the stock is taking a hit this morning on the fourth quarter guidance. they are generating positive traffic, up 1.4% in the quarter. they just reported a third-quarter a little bit slower than the second quarter, up just over 2%. the comparison was tougher. walmart has it the dollar of stores, dollar general, for example. where you are seeing positive traffic, you have some niche concept. five below is generating some positive traffic. there are some winners, but overall, it's pretty tough. .learly, it is amazon the big issue for a lot of traditional retailers. jonathan: of course, the ugliness is always relative considering the price. i'm looking at the price and the short interest in some of these
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names. i was going through with my producer. take a name like jcpenney. north of 50% of the equity flows is out short. when you get to these kinds of levels of short interest, do you get nervous about what could trigger a vicious squeeze? definitely. it would be anything positive, really, that could trigger a pretty big squeeze on some of the names like the ones you mentioned. jcpenney, for example, they reported the numbers last week, not so great, but better than some of the lowered expectations. there is no doubt. know, we are not seeing a lot of positive surprises just yet in this third quarter. david: luke, compare walmart with target. target took a big hit investing in online -- walmart take a big
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kid investing in online. then target reacted. on the other hand, walmart made a huge investment in can target get there? luke: target has been plenty to play catch up with walmart as walmart tries to play catch-up in e-commerce with amazon. is there such a thing as third mover advantage? to comeer target trying into canada after walmart, burning money there. pulling up stakes very quickly after 14 quarters, getting out. , itthey are doing the same looks like, walmart. you wonder if it is too late, but you also look at some of their new introductions that seem to be bearing fruit. david: is that what is indicating that target is on the right track? what are the indications of that right now? patrick: what target is trying itso right now is reinforce
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exclusivity, if you will. and differentiate their stores and online business from walmart and amazon. as part of that, they have ruled out eight new exclusive brands this year. those brands are doing well, mostly in apparel, home. they are seeing some nice traction there. that differentiates them from the competition, gives the customer a reason to visit target and not amazon or walmart and not just focus entirely on price. that is a big part of this change at target, to go back to what made the company great. it was that they were different. they were not walmart. i think they are doing more of that now and you are seeing it in the results. it will not happen overnight, but i think that will help them drive a continued positive
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traffic trend. that is what is key right now to the stock. kid to targetmy all the time right now because of their kids line. we knewruck the season, the amazon story was out there, bit,f you miss a little like your cop was good or guidance was like, you got really hammered. what is the asymmetry we are seeing in the market for retailers? luke: ahead of us earnings season more than others, it seems like a lot of the results, positivity was being priced in well ahead of time for every sector except tech, which is why you saw some of those big names really beat. i think it kind of affirms what john was saying, the pessimism in the short interest in these names. people are really pushing heavily on these things. they are very unloved right now.
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short interest setting a narrative on that. luke kawa, patrick mckeever, thank you. still with us is jim bianco. where do you like retail? jim: listening to the conversation, whenever you talk about retail, you are really talking about amazon. that is because it is so dominating. you can see the way the market is trading. since may, there has been an in .lue of risk on one of the worst performing sectors in that time has been u.s. retail. one of the best performing sectors during that period has been emerging-market technology. these are companies that are trying to bring a version of walmart to the czech republic or north africa, or to the asian continent. that is what people are looking at right now when it comes to retail. it is all about online, this push toward technology. all the money seems to be
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flowing that way. while we're talking about huge short interest in u.s. retailers, the stoxx going crazy right now are emerging technology because people think there will be versions of walmart in these emerging -- amazon in these emerging countries all over the place. alix: where is the value? we see the technology play. there has to be value somewhere. jim: it is hard to ascertain value. at this point, what is the value of a brick-and-mortar retailer? right now the only place where you may see value is in the dollar stores. since 2016, 1not, third of stores opened in the u.s. have been either daughter of general or dollar store. that seems to be the only place where you are seeing any growth in store openings. take them out and you have a massive contraction of the number of stores in the u.s. there may be some value there in these small towns across country
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that value dollar stores and dollar general shopping experience, but other than that, not a whole lot. jonathan: quickly, dennis gartman says the bull market is over. what do you say? jim: we are only done 1% right now. i cannot be that good. we are five days off the high. i cannot be that good predicting the bull market. i think there has to be other things that fall into place before i would be on the same page as dennis. probably starting with things like the yield curve flattening more, other indicators as well. right now, this looks like just a long-overdue correction. jonathan: i know there are investors out there who will see that as a buy signal, where gartman goes. great to catch up with you. 10 minutes into the session. a slight pullback, mild risk off feel dominating the market throughout the day so far. down at about .6% on the doubt.
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losses picking up on the s&p 500. the story reflected in other asset classes as well. crew down by almost one percentage point. treasury yields down by five basis points. the winner in the fx market expected to be the japanese yen. 112.60. it is a stronger yen story. bonds are advancing. commodities are week. this is bloomberg. ♪
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>> this in bloomberg daybreak. coming up on bloomberg markets, russell goldsmith, city national
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bank ceo and chairman joins us to discuss tax reform. this is bloomberg. jonathan: it is looking messy out there for the bulls. into the session, potentially the biggest one-day drop on the s&p 500 since august 17. .8%. the dow down by over 150. momentum started to build to the downside. the nasdaq off by 1%. this is reflected throughout the asset classes. weakness across the board. softbank plans to invest as much as $25 billion in saudi arabia over the next four years, according to people familiar with the matter. and we will deepen ties between the kingdom and the japanese company.
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$15 billion of the $25 billion will go into the new saudi mega-city called neom. joining us now is our senior editor for global business. is this a coincidence that it sums -- come so soon after the crackdown of the saudi prince? >> what it shows is softbank is going to make a long-term bet on the crown prince. this is an investment we are looking at over 3, 4 years. it's been in the works before the crackdown. certainly, it reflects the fact that softbank is willing to bet that the crown prince can transform saudi arabia's economy and maintain stability at the same time. they will invest in this new and they are taking a big stake in saudi electricity. seems like a long-term bet on the stability of saudi arabia. david: does saudi arabia need the money?
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they have already said they will put $500 billion of their own money into this. is this for the investment or more for, as you say, the endorsement? interesting to note, there is a little bit of recycling going on as well. who is one of the biggest investors in softbank? is aaudi wealth fund pif, big investor alongside soft tank. in into saudivest arabia after saudi arabia invested in soft bank. i think the signaling is probably more important than the actual dollar amount. is importantnaling so long as there is a signal here. the initial takeaway for a lot of investors is is is good news, money being put to work in saudi arabia. but when you look at the numbers, saudi arabia given $45 billion from the fund that softbank runs. they recycled the money back into saudi arabia, using the
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money that saudi arabia invested in the fund. my question is whether this is an absolute pr stunned for saudi arabia and softbank to give the money and then give the money back again. >> investors will have to make their own decisions and we have to see how this plays out. nothing has been signed. there is a memorandum of understanding for soft tank to invest in the utility. the rest of it, we are talking three to four years. words are one thing. we will see if the actions follow suit. alix: thank you. still with us is jim bianco of bianco research. the markets look ugly out there. .nergy getting beat up over 1% tech also done by about 1%. when you pair these headlines with saudi arabia, it makes you wonder what it means for oil and energy equities. jim: energy is definitely in the
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flashpoint right now. on the one side, you are talking this saudi arabia, we have whole game of thrones thing going on with princes being arrested and being put into the ritz-carlton. i know it sounds funny but it is serious. ,ecause of the run-up in oil and i think it's been somewhat politically motivated, you have had a tremendous amount of speculative buying. a could be right for correction, unless we get more political instability prayed bring in the softbank story and it looks like saudi arabia is common down and oil is may ready for a correction now. alix: long positions are so long that you could maybe make that argument. see'm an investor and i junk getting killed, 2.33 on the 10-year, selloff on the s&p, what is your message to me? the market was up 17% year to date through its high, november 8. one of the lowest volatility is
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we have seen ever. it was two for a correction. if this level hold where we are .t today, we are done over 1% the typical intraday move has always been that the low comes in in the first hour because all of that risk on buying comes in the rest of the day. we saw that yesterday. if that pattern continues to hold, i think we will see this looks more like a correction than something big. as far as the junk market goes, that is a very concentrated decline in three sectors, health care, telecom, and consumer staples. there is a lot of the junk sector holding together, and that looks more like a correction, too, similar to what we saw in march. the message here is this is a correction right now in the market, unless other things are to fall into place. we have been waiting for one for about four months, and it looks like we are finally getting it. jonathan: how much more before
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the fed gets nervous about december? jim: we have not had a 3% correction in the market for 260 days, the longest period ever. let's see if we can get a 3% correction. for old market people, that is almost laughable. that was to w viewer days, it used to be. but if we could get a 3% correction, i think we would start to look at wirp, to see if those odds start to change. the on that, i don't think it will move yet. jim bianco, thank you. the story is a slight pullback, correction may be that we have not seen for a long time. .3% south on the s&p 500. the dow is much softer, down by 150. the nasdaq down by almost 1%. bond market stronger, treasuries are bid. 112.67.ngth at
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this is bloomberg. ♪
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david: last night, the senate tax writing committee introduced to give you a new additions to their bill on taxes. first they propose to do away with obamacare mandates, ensuring health care insurance. on the other hand, they are phasing out tax cuts for individuals and pass-throughs. we are joined by kevin cirilli to tell us what comes next. my basic question is are the two houses moving closer together or farther apart? told by a source in the senate and the house on the republican side that the goal has been to close the gap between the house and senate versions. some differences still exist. that said, the house will take of its tax bill tomorrow. david: one of the differences is the house made of tax cuts permanent where the senate is proposing to make these pastors
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temporary. i asked senator cap know where she was on this and this is what she said. they are dealing with this today, the permanency of the individual tax brackets. that's important to me. i think that discussion is ongoing and we will see where it lands. to her, evening that element, she is not sure that will stay. that would move them again closer to the house. the big issue right now for the administration is whether or not middle income to, when theyng fill out their taxes, see their taxes lowering. that's important because some are seeing gains in their 401(k)s, gains and other investment areas, but the bottom line, if a key constituency does not receive a tax break, that is a failed campaign promise. how then the subject of middle classes affected, state and local taxes have been a big
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issue between the two houses. we talked to the chairman of the house ways and means committee, kevin brady, who said there was a red line, that they had to have that $10,000 deduction for real estate. , sheng to senator capito iss, i know him, he says it impossible redline. will the senate have to keep to that? we arethe other thing talking about is the pass-through rate, as it has been framed as benefiting business pick this. what to look at for is how the senate tries to refrain that narrative in towns -- in terms of how pass-throughs would benefits all businesses and medium-size companies as well. even if you are a small business owner, if you are not seeing a tax lowering, that could be a political risk for them as well. david: do they get to conference committee by things giving? will get outk they of the house before thanksgiving, if not the week after. david: thank you. of ahan: how much more
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pullback before republicans come out and say we have to get this done because the market is starting to correct? alix: president trump tweeting about the stock market today now. pressure ontting his republican friends to get it done, even though everyone who sits here on wall street says it is not about that, but something else. alix: elections are coming up jonathan:. 26 minutes into the session, it is a pullback. no drama considering we were only at all time highs just a moment ago. in the market today, potentially the biggest one-day selloff since august. down .3% on the s&p 500. coverage continues on bloomberg markets. this is bloomberg. ♪
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>> it is 10:00 a.m. in new york, 3:00 p.m. in london. from new york, i'm julie hyman. am markd in london, i barton.
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welcome to "bloomberg markets." julie: here are the top stories we are covering from the bloomberg and around the world. u.s. stocks open lower with thegy and tech hit hardest. u.s. for inflation picks up for the first time since january. how much will wall street workers be getting paid this year? the ceo of options group tells us why there is good news for tech workers and not good news for anyone else. can blackberry make a comeback with software? we will speak to the ceo in an exclusive interview. it is about 30 minutes into the u.s. trading day. barton-stylemark to the hand-checking the markets. down.ree major averages energy falling


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