tv Bloomberg Markets Americas Bloomberg December 13, 2016 12:00pm-3:31pm EST
from bloomberg's world headquarters in new york, we have stories from washington it, moscow, and tokyo. the dow is closing in on 20,000 in on tomorrow's fed meeting. taps rex tillerson for secretary of state. we'll hear from jonathan gray here. he will talk about the stewardship of blackstone's massive real estate portfolio. to 20,000.going julie: i think our graphics are not updating. i am looking at the bloomberg and i see 19,000 894. it looks like we are higher than it appears. let's start with the bloomberg.
this compares to may 1999. that's the last time we had a rapid trip of 1000 points. 20,000, it'sser to interesting to look back at those other situations. the daily rate of return is 0.27%. now it's a little bit smaller. it's only been 15 days since 19 days -- 19,000. we are going up by smaller increments. the dow is now higher for the seventh straight session. if you look at the dow gains today, we've got nike which is rising. we've got a general lift in the athletic companies today. they report earnings december 20. apple shares are higher today.
there was a callout saying there are five reasons shares trade higher in 2017. benefits, a sticky user base. ibm is participating in the surge we're seeing. arenasdaq and the s&p hitting records throughout the session. some other individual movers that weren't mentioned, they are up steeply in percentage terms. that companies fourth order is beating estimates. they also said they will pursue alternatives for not to teaching business. hertz is rising on some speculative traits. the shares appear to be reacting. jetblue is rising 7%. it's going to fall one to 2%.
it is also bringing back its buyback program. vonnie: thank you. let's check in on first word news. the first shots being fired in what's likely a confirmation battle over donald trump's pick for secretary of state. he has concerns about exxon mobil ceo rex tillerson. he questioned his ties to russia. vice president elect mike pence says he is an example of the caliber of people that are joining the administration. gratefuldn't be more that someone of his proven leadership and accomplishments would step up as our next secretary of state. vonnie: -- courtney: joe manchin says he will be staying in the
senate and will not take a job with donald trump. after meeting at trump tower, he said he was humbled to be considered as energy secretary. according to people familiar with the situation, that job will go to rick perry. syrian rebels say a cease-fire has been reached to evacuate civilians from aleppo. the syrian government is on the verge of sitting -- seizing the city. the un security council is about the hold an emergency meeting at this hour on aleppo at the request of france and the united states. attorneys for dylan roof say preventplan to
witnesses. they indicated they would focus more on the part of the trial where jurors decide between the death penalty and life in prison if he is convicted. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. i am courtney donohoe. i am courtney donohoe. david: it is day one of the market committee's last two-day meeting of the year. we expect a rate decision tomorrow. the question is not if there will be a rate hike. that is all but guaranteed. how big of a hike could we see and how many more could we see in the new year? let me start with you. looking ahead into next year, is the february meeting more important? >> at least by the february
meeting we will have a sense of what the expansion might look like. it probably won't the past. there will be the start of some flesh being put on some bone. tomorrow, the chair is not going to get into a narrative about something that hasn't been drafted. there will be more of what we heard this year, rate increases heading into next year. vonnie: will the interest-rate increase be to stave off some runaway inflation? >> all of our economists expect a rate hike tomorrow. expect to hikes to come next year. more to the second half of the year than the first half with more clarity on the way of
overall physical policy. once we have a better handle on that, we expect to see to hikes coming in. david: what will you be listening for tomorrow? janet yellen will speak and be asked question. what you going to be listening for? understandings on thing they will be protecting? any of the newct administration's policies to be reflected. we will be listening for any hint of change in their expectations on the part of they will expect the ultimate rates to end up.
a lot ofeally expect clarity on any of these issues. i will look for hints of any of those. not lookingare you for another interest-rate increase next year? what could derail the recovery in terms of data between now and sometime for the middle of next year? is a lot of policy uncertainty. administration, we have some sense of what the congressional republicans will want to accomplish. there is some difference between what they want to a compass and what they may be able to accomplish. some of this needs to be resolved to some extent before we can see the effects of this action.up in
all of these things will be more geared toward the second half of the year than early in the year. earlier, were talking ,hen you look at the economy you can't say we have a labor market full capacity. what other aspects of the economy might the fed be concerned about? dan: one thing to remember is president paulson is considered a hawk. one thing that is true on inflation points, the atmospherics around this, they seem different from the others we've had this year. not just because there is a forecast. if you look around the world, there is a sense that the islation, disinflation scare abating. we thought this was going to be
the year of big central banks. they might be converging around this idea. boj has pulled back. ecb is in a taper? we will see. the boe says it could go either way. the dire predictions that the fed would have to cut again this year? it hasn't happened. when we look back at the central of central banking, it may well be we are in a watershed at the moment. vonnie: the two-year yield is at 284%. what happens to the 10 year yield? we have seen the lows. >> with probably seen the lows. by -- thereion is is some uncertainty. the market will start to consider what the new chairmanship would be. all of that will result in a 10
year treasury. we expect some of that uncertainty as it abates. we expect that to settle down to around 250 i the end of the year. they are joining us here in new york. we have special coverage tomorrow beginning at 1:00 in new york. they will issue their decision on interest rates. vonnie: coming up, donald trump announced no new business deals during his time in the white house. is that enough for the ethicists? they say the conflicts of interest are still too great. this is bloomberg. ♪
vonnie: this is bloomberg targets. david: we have a lot of activity at trump tower as donald trump makes more selections for his cabinet. rex tillerson has been nominated for secretary of state. rick perry is said to be donald trump's pick to be energy secretary. we are outside trump tower. all, wesk you first of saw very publicly the parade of people he brought in for interviews. a lot of people who have government experience, what he settle in rex tillerson? >> they met earlier this month and they hit it off. bycame highly recommended
condoleezza rice and jim baker, people that donald trump respects. he connected with rex tillerson as a businessman who has global business experience. they had quite a bit of report. donald trump says it's the reason he liked him was because he had connections with people all over the world through his business. he will be able to use the same skills as secretary of state. much has been made of his relationship with russia. he won an award for being a foreigner and friend of russia. is that relationship going to dominate this term? >> he is going to have a lot of questions to answer when he goes to the confirmation hearings, especially from republicans like john mccain and marco rubio. it's something he will have to address and something we will
that isot about area why he likes him, he believes he has a global footprint and he can be a global player because he has those relationships. david: you are up on fifth avenue today. what are people there saying? is this going to be a contentious hearing? >> definitely. we have sony republicans who have raised concerns, so many who are going to likely be joining democrats asking tough questions about the relationship between rex tillerson and the russian government. of support from republican stalwarts. mitch mcconnell has spoken out in favor of his nomination. we will hear a lot of tough questions and a rex: if we see
tillerson john bolton tagteam, what kind of administration will we have and get involved in foreign wars or situations? >> that's going to be an interesting question to watch. donald trump is putting together a team of different people who have different ideologies and bolton seems to be much more hawkish and supportive of things like the iraq war. it's not clear that tillerson has those same views. he has a business relationship with world leaders. it will be interesting to see how they play off one another. opposed byeavily people like rand paul because of his hawkish foreign policy. it'll be interesting to see how this goes through. david: a lot of people in been coming through the lobby of trump tower. jim brown it, ray lewis, kanye west. are we looking more to a
secretary west? what was he doing there today? >> it's becoming more like the celebrity apprentice. they are up for cabinet positions. donald trump was to cast a wide net. he is reaching out to people who have sway in different communities. he wants to continue his outreach to the urban community. we also saw bill gates come through just a few minutes ago. david: there are a lot of silken valley types meeting with him this week. his blonde hair seems gone already. the president-elect tweeted he will make no new business deals. he hasn't given more guidance on what he will do with his business at sets or organization. part of that tweet, i don't want to call it a group of tweets.
two of his sons will take over his business interests and he will do no new deals. will they keep to that promise? >> that remains to be seen. storm, three is a tweet storm. that's just an announcement. i think that wording is flexible. what are they going to do about project that of already been proposed in contracts have been signed? they are looking for permits in buenos aires. what are they going to do of a project comes up against a municipal authority that is looking to change some of the terms or get them involved. it's not clear what they are going to do. i think that wording would leave them open to be able to operate in that space so they can technically be within it while still doing some business activity that would get ethicist anxious. david: i know you would like to
propose those questions to the press conference -- the president. he moved the press conference back. any information as to why that happened? >> the explanation we got from the trump team is these cabinet it to they are making busy for him to come up with a planet. he has said about two weeks before that he was going to come up with that plan. signing some of those contracts and figured out how some of those branding agreements which require him to be tied to them, how that can be wrapped up in do want to seewe how he is going to deal with those conflicts of interest. that pressl we get conference before inauguration day? >> it's difficult to say. the trump team says we will get
that. it may point to some of the legal advice we hear from the team. course, donald trump has before told us he is going to be doing things like releasing his tax returns and he just can't keep putting off. david: he mentioned his sons in those tweets. he did not mention his son-in-law or his daughter. both of whom are involved with his businesses. what do critics of him being president say about the roles of those two people? kind of hybridt role where she could be an informal advisor to one or birth she can't be formal in the white house because of some of the ethics laws. stop the really president from talking to his own family. they say this might be the locus
of some of the most damaging or concerning conflict of interest. these, the trump team's opening themselves up to these questions. there may be no fire where there is smoke. so long as those links are there, there is going to be a lot of people from the media and the democrats are going to be asking questions about what those links mean. vonnie: the likes of the chief of staff and steve bannon will be able to keep anything untoward from happening and make sure the president's opinions and what he decides will be consistent with what the whole team wants. >> they have said they will be in charge of that, they will be keeping watch on that. you elected us. you knew we were business people. to diveste trust him
himself emotionally or practically, even if in fact there is enough to do the job. they may be keeping that. it could be hard to police every single interaction and stop questions about everything. vonnie: we have to stop unfortunately. still ahead, stocks are tracking at record highs. the dow is closing in at the 20,000 mark. 500, up 7/10e s&p of 1%. we will keep an eye on that throughout the afternoon on bloomberg television. this is bloomberg. ♪
71 billion dollars. the shift has been underway since the financial crisis of 2008. airbnb has completed its first investor share high-back, buying back 94 billion -- $94 million in stock. shares in thee second quarter. airbnb declined to comment. morgan stanley did not them easily respond for comments. apples wireless headphones are available. they will be an apple stores starting next week. ♪ this is bloomberg.
donohoe. courtney: transition team of president-elect has requested names of contractors who worked to advance president obama's climate agenda but at the agency said it will not identify individuals. request hasam's left many people unsettled. u.s. defense secretary said three leaders have been killed in syria, among the dead were two tied to the 2015 attack that killed 230 people. there were killed in an airstrike. cosby will bill battle to limit the numbers of accusers who can testify at his sexual assault trial. call 13ecution hope to other women. willefense will credit -- discredited the credibility. rex tillerson's nomination to be
secretary of state is being credited by someone who held the position. condoleezza rice called him an excellent selection for it she said he has remarkable international success. general electric's ceo said tillerson has a ground-level mostof the country's important relationship. marco said he has serious concern about tillerson. he expressed concerns about tillerson's relationship with vladimir putin. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am courtney donohoe. this is bloomberg. david: thank you. breaking news on the company, habet, it is spitting out the google's driverless car into a separate company. we will have much more on this developing story and the next hour with cory johnson.
vonnie: a look at where the stock is trading in a moment. we want to take a look at where the industries are trading. we were at records and getting closer to the doubt 20,000. it is that 19,898. the s&p up over .067. technology stocks having a particularly good today. abigail doolittle has been taking a look. tech is a bigc -- boost. apple is on top. the best day in about a month, trinidad mayor session highs. has listedrom citi five reasons to be bullish on apple. including the all-important iphone 8 super cycle we have been hearing so much about. an upside.
we go to bloomberg and a longer-term chart for the intimate support jim's bullish view at cit. -- longer-term chart for apple support. citi.'s bullish view at low and behold, we have seen declines on fundamental issues and bullish congestion that apple may climb higher, especially since the downtrend has been broken. one of the big stories out of the election is as a trump. once cycle that has been hit is technology. we have a bit of a rebound in tech. set -- tech&p 500, sector index and we are looking at gains and around 3%. , over 4%riven by apple over the same time period. the big question is whether the
banks can join in? v, facebook, amazon and apple, since the election and the big declines, the companies international exposure will heart the companies and we just will hurt the companies and weaker ties with silicon valley. they are all unknown. they are starting to climb. stock youtock is the both were talking about and that is alphabet. vonnie: thank you. up 1.5%. president-elect drilled does wall street titans while on the campaign trail but he put a blackstone ceo part of his advisers. in an exclusive interview, erik schatzker talk to blackstone's global head of real estate that met with the president-elect. erik: a bit surprised to get the surprise, i bit
am a democrat. i was encouraged because of that are reaching out. i went out to bedminster and sat with the president-elect and some of his team and we talked about a range of policy issues. i will not discuss what happened specifically, but i will say they have a high focus on accelerating growth. i would not be surprised if in the early days of their administration, they move quickly balls on executive bases and legislate -- both on executive bases and legislate with to grow. erik:erik: at the very least, yu contemplated when you walked into the room and is was -- and it was if he were to offer me the job, would i, would you? toathan: i do not want speculate on that. what i said publicly, i have a lot to do with a blackstone and that is keeping me quite busy.
erik: you knew donald trump from before in real estate in new york and you know his daughter and her husband. based on those relationships and the conversation you had in the meeting, and based on the people he has picked to be his advisers, tell me what you would expect from the trump administration? i think: like i said, there will be more of a business focus. twix celebrate growth and you have seen in the public statements. reductionll see his in taxes, both corporate and individual taxes. i think we will see fiscal stimulus around infrastructure and i definitely think you will see a pullback regulatory issues . and i think when you look at that, that's likely to lead to higher growth going forward. ,he challenge for all of us what does it mean around deficits? what does it mean around inflation, interest rates?
the same question when you think about trade, which they are focused on. you see it played out in the stock market, which is enthused about the growth story, which is they are focused on. the bond market, people are getting a bit and nervous about inflation and we are all watching that closely. phrased in nicely after the election, you said "if we get stronger growth with more moderate inflation, that is very positive. if we get the negative -- opposite, that is negative." do you have a greater sense of confidence sitting here today in either of those scenarios? hard to say how this will play out. >> it is intricate and in terms of multidimensional, you have to understand what are the policies that will happen. how much will they push on things on trade relative to reducing taxes?
how much will the deficit grow? having a clear sense for anyone today is tough. i would say overall, i think we will have higher growth. and i think that is something all of us are starting to factor in as we invest capital. erik: how has of this change, the calculus if you will, inside of the meetings were you and your colleagues, tony james and others at blackstone make these investment decisions? what are you doing perhaps differently six or eight weeks ago? loweran" we had been in a prolonged environment. low rates, low growth, low inflation. we were seeing a pick up in wages. generally, that was the base case. were growth is higher and interest rates are higher, it does have an impact showing real estate in particular, you would
say i am more confident with shorter-term duration assets, maybe apartments and hotels on the more regular basis. i am a little more nervous about owning a 20 year lease government office building, which feels more like a bond and does not have the benefit -- benefit. flows but also the potential to charge higher rents , that is what we are seeing. it is beyond that. questions about what is the energy sector going to look like? industries like coal may fare better than they would. we are seeing banks rally because they may not face the same kind of restrictions as before. none of us have a crystal ball to understand what will happen, but a lot of us are trying to spend time focusing so we have the best look forward on how to deploy capital. erik: have you made any such decisions?
jonathan: we are constantly making decisions. every monday, we have investment minutes about how we deploy capital. it is influencing how we do decisions. contemplatingly rates moving up more than we had before and growth being higher. see the downow, we approaching 20000 and valuations are awfully high. did that make black so more for baylor than a site -- seller done a buyer? we deployed about the same amount of capital that will return to investors. itis hard to deploy when goes up, if the outlook is stronger -- higher valuations could be justified. people sometimes are a little too binary when looking in investing. we invested in 2007 and bought chilton world for -- hilton
billion, probably not a good time but we made three times our investors' money. that was a terrible time. even as by wages are tougher, you could find interesting things. we found the largest life-sciences building. we have seen tremendous growth. yes, when it there is not as much a distress. it is a big world. although the u.s. may say more full valuation, we see southern europe and places like brazil where there is a fair amount of distress as well. vonnie that was erik schatzker west jonathon gray -- west -- vonnie: that was erik schatzker with jonathon gray. bank -- david: this is bloomberg. ♪
david: more on breaking news from alphabet, into separating some driving cars into a separate business. emilyerg technology's chang joins us from san francisco. let's start with the motivation. we have now google has been experimenting and investing with self driving car and why created this? emily: google has been at the very first of the big technology companies to work on self driving cars and a lot of questions why google has not commercialize the technology more quickly perhaps perhaps a movement to transfer it. it has until now been within a division within google x, the
experimental high risk taking part of google. i spoke with sebastian, the so-called father of the self driving car who invented when the first autonomous vehicles and went on to work at google many times. they've been working at the technology. i wrote in a some driving cars about four years ago. other companies like uber have self driving cars on the road and partnerships like volvo. there have been questions about for one moved so slowly. they are moving this division outside of google x and will be led by a man who has been running the self driving car project for the last year. there's been a lot of turnover. the former head of the unit left after a couple of years. auto kinds more of a of guy. he comes from the traditional side and tried to get it
commercial life and on the road. vonnie: can we draw inferences they may be closer to put index of driving car on the market? emily: that is the idea, ultimately, it certainly we can infer that want to get these cars on the road. the question is, what kind of resources will they get? and shethere is a cfo is taken a closer look at all of google isalled bets making the weather in sciences or hardware. web seen a lot of turnover and a lot of high-profile executives will he. tony fidel, the ceo. we spoke to one yesterday, the founder and ceo of google ventures. our colleague mark has reported on some of the internal going on, calling one person ruthless ruth. she probably wants to get
clarity on how much resources and these other bets need and they deserve. david: we see you driving to one of these priuses. you have been in one. what remains to be done in testing? did we got any more insight on the next steps for testing? emily: and speaking with sebastian, he already drives when he can in a cell driving car and he feels safe enough to take his wife and child with him. as far as we know, the technology works very well. inh more smoothly when i was the car, apparently four years ago. the goal is to really move forward and they have the idea behind it, waymo, a way forward in terms of how we move. will we see more partnerships with google? they have a partnership with chrysler.
we are seeing other automakers and other technology companies partner up and google to a certain extent has been left behind. vonnie: emily chang, thank you. 1.6% of the market. emily chang and tune in to "bloomberg technology" at 6:00 p.m.. david: is a time to embrace british tailoring? that is next. this is bloomberg. ♪
vonnie: this is "bloomberg markets." i am vonnie quinn. a check on the markets. market movers and you will see the nasdaq indices are the best today. this is on tesla motors which is up quite substantially over 2%. amazon.th some of the companies moving because of their ceos are in a meeting with president-elect donald trump. you see currency wise, the euro is reversing course. it was stronger earlier and a slight bit weaker. is trading the yen weaker against the dollar. all of the other currencies,
commodities, a little stronger. speaking of commodities, wti, brent is up. a look at some yields. 2.5 percent right now in terms of yields. i will send it over to you david. david: the epicenter of tailoring. norton and sons is working to convince american clients to embrace the british side of mainly in the form of a 3500 two piece tailored suit. let's start with the norton and some spring give us a sense of what the shop makes. >> they make suits. sinceave been doing it 1820. they founded the reputation as a retailer. specialize in suits you would wear if you were going to the radio event the 20th
century, they began to doing to until there were rescued in 2005. david: talk about the rescue. what prompted the rescue? troy: patrick grant is not a fashion guide, -- guy. he might have been an architect or landscape architect in another life. and his previous career, he was an engineer and doing fiber optics stuff. he had an adchool, that this old tailor shop is for sale. david: what does it say it was for sale and how well it is doing economically? troy: it says something, and the time this particular house had not kept in steps to adapt to the times in business or style.
a part oft became other filling houses that had no clear mission. he was able to sort it out and --ch these bad ideas about and concentrate on the core business. david: how many sues are they selling in a given year and how much are they looking to expand? troy: they make about 300 sous a year. that is not quite enough. -- 300 suits a year. patcher grant has used norton and sons as a foundation of a burgeoning empire, likewise for other british brands and combining innovation and tradition. david: let's talk about the partnership with the j.crew. troy: yes another company, one of these old tailoring shops that had been obligated --
amulgated and he revived the name as something that was more sportier and fashion forward than the typo suits sold at norton and sons. with fashion people and the high streets around the world. what goes into making one of the suits? if one of us were to go in, what is the process? troy: you can usually get it done in 2 fittings. a tailor and a cutter, it is made exactly for you. the pattern built on your exact measurements, if your left arm is longer than your right, the suit will reflect that and will fit like a dream. david: did you see as much demand for the suits in the states? troy: there is a limited clientele, both in terms of people who have the means and
taste. but, what he is doing on a broader scale was other collaborations, it is catching on. david: thank you. troy patterson. you can check on "pursuits" just go to it on bloomberg. thevonnie: -- vonnie: markets pricing in 100% of the rate hike. what fed chair janet yellen says. hin's, why he can expect to be grilled. this is bloomberg. ♪
vonnie from bloomberg world headquarters, we are carrying stories, here's what we are watching. you as averages hitting records. the dow is closing ahead of 20,000 ahead of tomorrow's fed decision. tells us what he thinks about donald trump. and steve mnuchin, the pic for treasury secretary, but he is not likely to have an easy road confirmation. details are ahead. to the trading day and julie hyman been keeping an eye on the records. julie: the dow is up for a seventh straight session and getting closer to 20,000. only about 100 points away right now. the as it be 500 is at a record and the nasdaq set a record.
of thenot seeing all same trades and trends we have seen since the election. the 2000 and is not hitting a record. interesting how some of the rally is intact but we are seeing faltering, commodities as well. oil prices, for example. the nasdaq seeing the most of the major three as we are seeing the so-called fang stocks rallying. abigail doolittle touched on that earlier. talking about the thousand market increments. and look at the doubling we have seen in the dow. by 1980, doubled 1995 by 1987 and then by and then has taken all of this againo potentially double . we are not quite in there yet. a fund chart to look at that exponential increase we have been seeing in the doubt.
in terms of year today performers and the stocks that have contributed and the dow year, caterpillar up 42% to date, bouncing back from a poor performance last year. united health not the bouncing back. straight year. goldman sachs is the biggest contributor of number of points, a higher-priced stock. it is price weighted and it added it nearly 400 index point to the dow. the biggest point contributor. interesting moves we have seen in the dow this year. i want to look at the bond market, particularly with a 30 year yield. the 30 year back to the election and we have seen a 53 basis point gain, the selloff in the treasury market. we have a 12 billion year -- $12 billion 30 year bond option them -- auction, which is slightly
lower yield than what we saw at the deadline here. perhaps not as weak as we have seen and not as weak demand as we have seen recently, but a lower yield. of highest since september 2004, that implies weaker demand. we will keep looking at the 30 year option and we will look at our various charts of the day later in the show. dave: we look forward to that. the first word news. taylor riggs has more. taylor: president-elect donald way tos considering berman for u.s. trade representative, according to the safety and a press with people knowledge. he is a senior advisor to blackstone group and was a strong supporter of mario rubio. goldman sachs president and ceo
told employees'in the companys podcast saying goodbye is hard and he is leaving in a strong position as he excels a new role as president-elect's economic policy adviser. >> today, for variety of reasons, capital, regulatory reasons, the competitive landscape has changed dramatically. and we are as uniquely positioned as we have been. futureforward into the years of goldman sachs, it is exciting as i have ever seen. have one of will the most influential panels and the white house helping to coordinate the economic program. top nuclear invoice are pledging to implement new sanctions against north korea including taxing the country's coal exports to choke off cash into the nuclear weapons after the meeting in seoul, the countries
have agreed to monitor how sanctions are working. , which is tower normally open day of every year, is closed because of the strike over salaries and working conditions. company that oversees the apologized and said negotiations are underway between management and staff to try to reach solutions so they can reopen. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs, this is bloomberg. vonnie: taylor, thank you. the u.s. federal reserve expected to raise interest rates tomorrow for the first time this year. they barely resemble the last time they made the second hike. they guided their way for a path forward for economic growth. editor us is economics
michael mckee. michael, let's start with you. , our marketsity surprised, any kind of reaction? michael: not reaction to the rate of loop unless they decide to go 50 basis points instead of 25, no indication they would. everybody will look to the statement to see the guidance for the future and the projection for guidance and probably will not get anything. you talk about no presidents to lookat, we cannot even into the future. we do not know what donald trump will do and what type of fiscal stimulus we will get. david: picking up off of that, we saw when janet yellen, a love about her future as the federal reserve -- a lot questions about
her future at the federal reserve. isis suspect some reporters will ask about. what will you ask? a lot of supporters will ask about the that. >> she will give the standard reply, the fed will have to respond. she will make it as apolitical. ande remaining of her term retire gracefully and zero chance she will be kept on and i think with that, the biggest late 2017,forward is if something were to go run and the fed were to respond, it is difficult the market would take it seriously because they would know that would be somebody else coming on a board will probably would look at things slightly different. is convinced that janet will not stay on.
the federal reserve might be left alone. >> there are two openings he will probably move to fill and maybe more if he puts in a chair for supervision which is opposed that barack obama never filled. they would probably usurp. there might be more openings. anything about janet yellen and stanley fischer is how they year developed and how the fed reacts and he has cohn. he will be in his ear. how cohn tell some the market will react to a change. if the markets are happy, he might go ahead and do that. it would be very dangerous. david: we had one interest rate hike, how is it?
what has the fed learned? >> i do not think they learned a lot, maybe they went to long for a second time. dollar,the rise in the it is still pretty easily and a like has to do with the equity markets. the equity market telling the said they want it and they can tolerate a hike. it is probably different than last year when people were more nervous. the fed has been saying they are doing debt and the fed -- and the markets are saying please do it. important is the direction going forward and we will be looking at the word "gradual" and a statement and it was in at the statement last time. as it will look at risks is balanced. do they keep it or upgraded and suggest a faster pace? they are doneots,
in advance. you can have a few dots migrating higher even if the board is not forecasting any kind of fiscal impulse. there is a possibility the dots move higher a it is not something janet yellen wants. theie that as part of problem. the fed has nothing in term of fiscal numbers. comes out in what terms of economic projections and the forecast tomorrow? are they of any use whatsoever? >> know, they are very useful. they are a baseline. theo not know what president-elect will do and how he will get it done. and the trade-offs he will be willing to make to get it done. comeest you can do is to up with scenarios and planned them out. fed, your the projection will be primarily on
what you expect is the most likely scenario and you start with the baseline and i'm sure they will have a secondary scenario with a fiscal policy push but now one and they will talk about and we will learn about for quite some time. david: how with the fed reckon with inflation? we talked about ecb and mario draghi and how low it is and that statement was released last week. michael: with the dollar rising, more disinflation whether it is significant and we do not know, it is offset high rising prices for energy. inflation will be the key. normally, fiscal policy would create a job. we are at 4.6 percent unemployment. what do they mean if prices go up to bid people away from doing infrastructure work. well they will not explosively say it, you may get come in from janet yellen in her news conference that whatever
happens, we will be watching inflation and we will react as appropriately. i think she will say we will raise rates as appropriately to let mark is they are watching and they are cognizant of not trying to get political notice in there. vonnie: it will be fascinating. drew matus, thank you for joining us and michael mckee. will be reporting from washington, d.c. tomorrow. watch special coverage as it begins at 1:00 p.m. eastern. bill gross, hubbard will always in on the first rates move in a year. david: steve mnuchin of may phase tough court -- may face tough questions on how he ran his bank. this is bloomberg. ♪
david: this is "bloomberg markets." steve mnuchin it is a pick to be next secretary of treasury. if he is chosen, he will face tough questions about he -- how he ran his bank. more on his legacy. our reporter joins us with more on his reporting. let's talk about the investigation. steve mnuchin randall one west -- ran one west. what is huddle looking at? >> this centers on a division of the bank that mnuchin ran. it was financial freedom and is specialize in reverse mortgages. they serviced 90,000. their job is to collect the money from borrowers when it comes due and foreclose if they
need to. the allegation that hud is were they properly keeping track or if they followed all the rules to get reimbursed from the government for their expenses. vonnie: reimbursements from the government but not mnuchin? the only person not the government involved is one west. they are filing insurance and servicing on fannie mae which is controlled -- vonnie how long will the investigation cap rim? ben carson -- vonnie: how long with investigation carry on? ben carson will be the next hud? zach: they are in talks. that investigation touched off the bank looking at their books and realizing the books were a complete mess. they do not know how much money they had. they had to set aside another
$235 million for a shortfall in all of this money and they were bed the claim from the government like they were going to be able to. do have any indication he left the bank because of this? zach: that is a great question. mnuchin had agreed to stay on for three years after the sale of the bank was complete. he left less than one year in the term. we spoke to people close to the situation will set his departure was really about other things. it was not exactly like he was going to be leaving the bank. vonnie how much does mnuchin make out of this? zach: the amount of money he about $380 the bank, million, including dividends the bank paid to investors and the proceeds from the sale. david: we see the contours of
opposition like rex till does rex tillerson -- rex tillerson. is his mortgage history with mnuchin going to be? ach: democrats made it clear they will talk a lot about his ownership of this bank. it has been called a foreclosure machine. it's foreclose on a like 36,000 people. he is no question democrats will make an issue. he inherited some terrible loans , clearly, they had to revolve somehow. they had to foreclose on some people. it is hard to know how many. vonnie: you could argue and i'm sure they will say you was doing his job like he was supposed to be doing and that is what happens when you are that type of an investor. that is right.
the questions are harder to blame on somebody else because essentially they involve a new owner finding got the accounting was a mess and having to set aside more money than they thought that having an investigation. thank you very much. that was zach. vonnie an exclusive interview with colm kelleher and he does not expect a rollback of dodd-frank. that is coming up. this is bloomberg. ♪
uncertainty for brexit continues pre-eight surge and inflation. -- a surge in inflation. --nie: a deal mark: libya five years after the dobby -- gaddafi's departure. vonnie: inflation in the u.k. the fast fact -- rose is in five years. it has been driven by the british pound decline since brexit leading to higher import prices. mark: goldman sachs' president telling employees in a podcast saying goodbye is hard when he is leaving in a strong position as he accepts the new role as president-elect donald trump's policy advisor. today, for variety of
reasons, capital, regulatory reasons, the competitive landscape has changed dramatically. and we are as uniquely positioned as we have been in the competitive landscape. i look forward into the future years and goldman sachs, it is exciting as i have ever seen. head the council among the most influential in the white house to develop the president's economic program. said for thempany very first time, marjorie workers -- muddy waters capital, shares could fall as much as 52% from yesterday's close. muddy waters accusing them of using aggressive accounting. the company said they have a totally different view. japan's company has agreed to
buy from anheuser busch. that brings ab inbev of closer to meeting antitrust requirements. the move strengthens the foothold in europe. earlier, it agree to buy c aroni. what time for quick take. the 2011 uprising that led to gaddafi ouster and death unleashed hope the oil which company would be turned into a pariah. instead, battles between rival militias worsened fighting between dueling governments. the turmoil field a crisis -- fueled crisis and allowed islamic state to take root. on one side, a divide of a group that took control of the capital in 2014 paris on the other are lawmakers that relocated in the
east. they are allied with the renegade general who rose to power who is blind for the 24 death of u.s. ambassador chris stevens. they haveate -- diminish the area under control. the background. , libya has oney of the largest oil reserves. 3t is only outputting about 1/ of 2011 levels. one of the world's pours into one of the wealthiest in africa but gaddafi sponsored terrorist found fertile ground in libya triggering violence that led to nato airstrikes on gaddafi's forces. here is the argument. byen the threat posed islamic state, a number of countries push the idea of intervention. libya.. barred arms to
a group of 21 countries, including the u.s., said they were willing to accept an arm's request. the risk is the libyan party could use the country's turmoil. you can learn more on bloomberg and go to bloomberg.com for more stories. ♪ what you think we are looking at the markets as we approach the dow that's close to 20,000 -- vonnie: we are looking at the markets. the dow is approaching close to 20,000, a record. this is bloomberg. ♪
david: this is "bloomberg markets." let's start with the headlines. taylor riggs has more from our newsroom. electeddonald trump has rick perry to be energy secretary. that is occurring to people familiar with the selection process. he has encouraged investment in alternative sources such as wind and solar. temer and don't trump have spoken on the phone. that's an donald trump have spoken on the phone. the two planned for their teams to meet on the issue in february. a syrian led counterterrorism operation in eastern aleppo will and in a few hours. this, after a cease-fire agreement to allow civilians to leave the city. government forces claim they have control of 99% of the city.
rebels and civilians have been pushed into a small sliver of territory. in italy, the new prime minister is in his first full day of the job. he outlined his agenda to lawmakers in rome today. he's hoping to have his government in place before a summit on thursday. he wants to boost economic growth and he says italy is pretty to collaborate with the new u.s. administration. that's willing to collaborate with the new u.s. administration. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. financials have been the best performing sector in u.s. postelection thanks to expectations for a slow corporate tax rate and easing of banking regulations. asked colmker kelleher --
>> if you look at the underlying flows, yes, they have picked up, is onlyoverall theme marginally up on the year. i don't think this is a significant pickup and activity versus last quarter. >> i want to get a sense for what's going on inside your firm and as it relates to the rest -- >> business is improving. the degree has been slightly overstated. the equity markets are not improving anything like that percentage. we are the number one equity trading house as well. we see what is going on. the dow has no business being anywhere near 20,000? colm: i'm just talking about flows and commissions more than anything else. the flows and what we are seeing growths of projecting
seems to be very high for client activity. the issue here is the election has been relatively recent. we have had a big uptick in your for you that euphoria and expectations. erik: people want to extrapolate. it is human nature. they see trump get elected much rating is going gang busters -- they want to believe the glory days are back. >> there's a difference between fourth-quarter expectations and the future. mi positive about 2017 and 2018? yes. do i think we've seen the bottom of the revenues? without a doubt. do i think there could be some regulatory tailwinds? yes. these are not fourth-quarter events. bottomf we have hit the of the cycle and there's regulatory tailwinds, what does that mean for morgan stanley?
it's a business in which you have scaled back in terms of risk-weighted assets and headcount. is it time to rebuild? colm: it was not that long ago. everybody was putting pressure on us to close our fixed income business. we've always had that our business needs to be critical -- you cannot be a bracket investment bank without a credible fixed income capability. we resize our business last year. on the basis of the opportunity in terms of global cap revenues. the market had been looking at one of billion dollars -- $100 billion. the equivalent number is 83. 66 across the big nine. the market is recovering. have more than enough operational flex in our business model to take that into account and to grow along with the recovery in the markets. >> no plan to hire, no plan to dedicate more capital?
colm: we are adequately sized and we have a critical fixed income business. we want to see this continuation in fixed income for a period of time. ispart of this exuberance based on the expectation that the trump administration is going to roll back dodd-frank and potentially eliminate the volcker rule. >> i don't expect much initially. first of all, i don't expect a significant rollback in dodd-frank. some of the republican alternatives were in many ways just as unpleasant as the fully fledged dodd-frank. i think there was over duplication. in terms of crude leverage ratios and so on. the broad thrust of regulation has been very good. you cannot argue with the principles behind that regulation.
work.done a lot of that we think the model is good. where it went wrong was there was multiplicity on things like the net stable funding ratio, liquidity wer coverage ratio. i don't think they were thought through as well with a view to second quarter consequences. you will see some fine tuning of what was in a publication. erik: there is this prevailing narrative that wall street is trying to fight financial regulation and is supporting donald trump's efforts to get rid of dodd-frank. think wall street is fighting for it is engaged constructively with regulators to improve the regulations themselves to avoid unintended consequences. is int think wall street favor of dismantling the framework. erik: what to do pickup in europe -- what did you pick up in europe? >> europe is a sad place.
a broken banking system. 80% of lending in continental via banks.s were the banks are not , theytely capitalized acted as a drain on liquidity to the economy. there was a real sense of resolve to solve the banking issues. mps has been discussed. this,s want to buy into they see a way ahead. probablyide is you will not see any real developments in the capital markets for a while. vonnie: that was morgan stanley president colm kelleher. nine: next guest says years of misery does not go away in months.
vonnie: this is "bloomberg markets." david: time now for the bloomberg business flash. we start with air b and be having completed its first major investor share buyback, repurchasing $94 million. nb having completed its first major investor share buyback. morgan stanley did not immediately respond to requests for comment. setlue says the airline is to reduce annual costs by as much as $300 million by 2020.
the couple's efforts to boost revenue have done better-than-expected. tothe company's efforts boost revenue have been been been inspected. nordstrom is the first to offer an electronic giving service. andomers can order items recipients can accept the items or exchange the merchandise. nordstrom that's the new options will help it win over last-minute shoppers looking for convenience. that is your business flash update. vonnie: let's head over to julie hyman who has our chart of the day. julie: as we've been seeing this big bond rout, i wanted to look at several different measures of demand for treasuries right now. we just had a $12 million option of 30 year bonds here in the u.s. here's a measure of how the demand was for that auction --
the bid to cover here mother redline, 2.39%. that was up from a nine-month low. yield was the highest since september of 2014. we saw indirect bidders at 63.9% , the light bar here and the primarys the dealers -- overall, the translation of this is we saw a bit of improved demand for this particular auction. some analysts were saying that is because we have seen the yields climbed to such a degree that it is now attractive for some folks to get back into that market. other maturities have been holding auctions. the 10 year bit to cover ratio, the five-year in blue, the 10 year in white and the two-year in purple.
declining demand that has mirrored the decline in price that we have seen in treasuries. a bit of a bounce here. finally, a measure of short .nterest in the treasury market this comes from jpmorgan, a survey of active clients that shows the biggest bet against u.s. treasuries going back to 2014. you see the uptake most recently that goes back to 2014. all of this a reflection that we have been seeing waning demand for treasuries. the 30 year option signaling a bit of a different sign after we've seen such a dramatic rapid move in treasuries. perhaps some folks are starting to come back and take some nibbles in this market. we will see what the fed commentary looks like tomorrow. president-elect donald
trump has raised expectations or lower corporate taxes and higher interest rates and the possibility of bank regulations being eased. bank stocks have rallied since the election. you just heard from morgan stanley president colm kelleher. is billus now for more smead. let's start with your reaction. we've heard the commentary about the prospects for dodd-frank being ripped up or reconfigured. the history appears to be similar to the 1980 election. it was felt that a republican president was going to be incredibly favorable toward business and finance and cost cutting and the markets put that into price leading up to inauguration day. and then when the sausage started getting made in the first year and a half of the new term and interest rates were incredibly high, the highest and 30, 40 years, we had a
garden-variety bear market that took 20% out of a very cheap market to begin with. you are talking about a market and the 1000 in 1966 1981 with 780 at the bottom. we might be getting ahead of ourselves. of treasuries shows we are getting ahead of ourselves and the movement. the end of the 35 year bull market is over, but there may be fits and starts in that. we are very optimistic about the next five or 10 years. we want to be involved in what's going on on main street. you're better off playing the things that don't require legislation. vonnie: we were illustrating what you were saying there about the dow and s&p and the various administrations. at 4889see that chart
on your bloomberg. the stocks that will not be .mpacted by legislation is that because you are not quite sure what legislation is going to be put forward? isl: the nature of it president-elect trump will find out what is involved in making something happen through the legislative process, which he has no personal expense with. experience with. the general tenor and the biggest impact we think that president-elect trump will have is that he is the risk taker. we have a nation of 86 million people between 22 and 41 who had the worst financial meltdown happen in the early adult life work on shy -- who are gun shy. it might matter that we are going to have more new 35-year-olds in the next five
years than anytime in the last 40 years because they are getting married and having babies and buying houses and buying cars in a way that we haven't done for 10 years. i'm talking about buying their first home. david: there any financials that are particularly appealing to you at this moment? bill: like aflac, they sell supplemental health insurance. let's say two successful career people in their 30's are having a child and one of them backs off on their career, the income of the other person becomes incredibly important and should be backed up by supplemental health insurance. that is a huge market. we have asked numerous people and nobody can tell us who the number two is behind aflac. it's the best branded company. can they put that into play as these folks create households? -- ie: it sounds like
don't get the link between this and the new administration. bill: you've made a great point. we wrote a piece before the election and we argued that the tailwinds for the next president regardless of whether it was mrs. clinton or donald trump incredible surge the next 10 years in and the number the5-44-year-olds those are people that make good incomes and are forced to spend it all by their circumstances. we are very positive on housing and providing health care and medicine to people over the age of 55. activityhe economic that will be on the ground, a main street phenomenon. that is the big change here and at one is wrestling with this. is internet going to be the big theme? is legislation, tax policy going
to be the big subject? bursts of 35-year-old women will be the lead long-duration way to make money from investing. vonnie: nothing has changed. bill: our thesis has worked ok. the answer is, if you want to make the five-year money or tenure money, you need to be working on the five to 10 year projects. homebuilders, home depot, berkshire hathaway, comcast, disney. a baby is born, that is automatically a disney customer. david: do you still on wells fargo? bill: yes. david: what do you make of what happened there? in terms of what we've seen regulatory. troubledown both
siblings of 1850 five. american express and wells fargo came out in the same company. wells fargo has had a major sinble, committed big-time in their relationship with numerous customers and they got a lot of work to do. that they've taken ownership of it and humble themselves my think they are on the right track. -- i think they are on the right track. we let our position shrink. did the officers and directors believe in this? jamie dimon stepped in and bought $27 million of jpmorgan at the bottom. got $34 billion back in 2012. we are watching that to see. outstanding company and american express is an outstanding company. the company that has been successful since 1855. had to go through quite a few of these dramatic events or
the drop he anticipates seeing before the end of the year. the nasdaq is up 1.25%. the nasdaq 100 is also up a little more than that. this aztec leaders gathered in trump tower dish this -- this as tech leaders gathered in trump tower. not a lot of movement for the yen or the euro. 115.30.trading at to 60.55.down the 10 year yield at 2.48%. that will likely change tomorrow. building a diverse workforce has become a priority for many tech leaders. slack says it is challenging. we spoke to alan hewitt. >> a story that starts a couple
years ago in 2014, a lot of pressure on these big tech companies in the google, apple, facebook to release demographic data of their workforces. it.le was the first to do in 2014, they put out their numbers. a bunch of other large tech companies followed. the numbers all looked kind of the same. very few blacks and latinos and --ot of men, usually around >> let's talk about slack technology. why did you choose to focus on them? >> they are a particularly interesting company when it comes to discussing diversity.
they're run by stewart butterfield, who's been around the valley for a long time. he cofounded flickr. slack is a fairly new project that started in 4014. -- 2014. they were a small team when this was going on. this all these large companies -- google had 50,000 people. 30-50, weht we have have a chance to start early and higher from a wider range of people now. thisare an example of second guard of companies that started prioritizing -- ♪
we are live from bloomberg world headquarters in new york over the next hour. plus, covering stories out of washington, los angeles and moscow. another day, another record for u.s. stocks. all three major indexes hitting all-time highs. the dow edging closer to that 20,000 mark. trump has nominated rex tillerson for secretary of state and senators from both sides of the aisle are raising concerns, .ncluding senator ben cardin we will speak to him in moments about his concerns. president-elect donald trump's pledged to boost and researchers spending has given a boost to -- shares havelm surged 40% since the election. the chairman and ceo joins us on set this hour. u.s. markets close in two hours. i gave waaway the breaking
news -- julie: we have those record highs. we got very close to 20,000 here. tech heavy nasdaq is showing the most strength of the three major averages here. look at the dow over the course of the session. points, the highs of the session, the dow at 19,953.75. less than 50 points away from 2000. if we do get to 1000 depending on exactly how quickly it happens, could be the quickest trip ever, the quickest 1000 point trip ever. a lot of investors trying to take a step back and see if this happens too quickly. take a look at the big movers we are watching in today's session. we've been talking about the
dow, but the other majors aren't records as well. we have apple trading higher on a call from citigroup that the stock can continue to climb next year. microsoft shares up almost 2%, facebook is gaining 3% today. exxon mobil also rising. more into what commodities are doing in the commodities close in 30 minutes. in terms of percentage gains in the s&p 500, a lot of that has to do with oil as well. some ofil, noble energy the top percentage performers and then there is seagate, rising after digit times reported that seagate will be forming a joint venture to ,evelop solid-state drives offering competition in that industry. those shares are up 5%. we can keep talking
about the dow because there is a lot going on. getting to that 20,000 for the first time ever. doesn't really do much in terms -- we chart and whatnot will see we can close about that whole number. quite a bit of strength across all the sectors today. scarlet: currencies little changed. we will see how that plays out ove after the rate increase tomorrow. oliver: donald trump has announced he will nominate exxon mobil ceo rex tillerson for secretary of state. here's mike pence earlier today praising the choice. >> could not be more grateful that someone of rex tillerson's proven leadership and a accomplishments is willing to step forward to serve our nation. the choice sets up a confirmation battle with senators who question to larso''
relationship withs that pillars tillerson's relationship with letting up in. putin. vladimir let's cut to the chase. what will folks be doing here to examine the choice and potentially move forward or not move forward with the confirmation? i think thein: confirmation process will be very, very important. has relationships with mr. putin that we want to know more about. mr. putin has created some new problems for the united states. he is not our friend. he is a bully. we are interested in knowing the relationship between mr. putin.rson and mr. whether mr. tillerson understands his response abilities. and what russia is doing
intimate places in the world against u.s. interests. kind of discussion is there among democrats about seeking republican backing in this pushback against rex tillerson to block his nomination? senator cardin: each senator will have to make up his or her own mind. you've already heard from many republican senators who are concerned about mr. tillerson. they have legitimate concerns but we are all worried about russia's involvement against u.s. interests. they've attacked us in cyber and try to influence our elections. this is not an ally or friend. we want to make sure our top diplomat understands exactly what russia is doing to the u.s. oliver: there's been russia in the focus throughout the election here with hacking the emails and now the choice of secretary of state who has
expense dealing with putin that experience dealing with putin. what is most concerning here? are we not thinking about the keep your enemies closer here? cold war, there was a lot of shrouded secrecy that oiled up tensions. do you not want someone who has experience dealing with a threatening figure to the nation? senator cardin: i certainly want someone as secretary of state who has experience in the global diplomacy. mr. tillerson brings business experience, not governmental experience. it's not just what russia has done to the united states through cyber attacks. we've been attacked. right now, there are people aleppond aleppo -- in thinks to russia's support for this year and government. we need to protect innocent lives.
russia is engaged in and occupying part of ukraine. we have sanctions against russia. mr. tillerson came out against those sanctions. he came out against those sanctions as ceo of exxon mobil. scarlet: what is your confidence that corporate leaders like rex tillerson can make a clean break from the private sector and put national security interests first? senator cardin: that is the question we will be asking during the confirmation process. i understand the responsibilities of a seo but also the response ability to make sure that america remains safe. we expect companies to respect some basic understanding. the sanctions against russia helped unify europe and america against russia's aggression in ukraine that we would never accept their annexation of crimea. this is a matter that is of great interest to members of the
congress and if it is going to be talked about during the confirmation process. trump: we are expecting to hold a meeting to discuss what he is going to do about his potential conflict of interest with his business. he will be putting that off until the election -- what do you want to see specifically? senator cardin: first, i am disappointed that the decision is being delayed. we want to make sure that donald -- that we don't have a constitutional problem. the provisions be directly about his international interests and he it could compromise -- also has conflicts in the way he runs his business is. every president since george washington has taken steps to isolate himself from the conflicts of their personal wealth.
we want to donald trump to do that. it has nothing to do with his business. we want him to set up blind trusts and divest from these holdings. we are anxious to see how he intends to separate himself from his business. thank you so much, senator ben cardin joining us from capitol hill. scarlet: donald trump has pledged to make america's business structure second to none. we will be speaking to the ceo of aecom. this is bloomberg. ♪
-- and researcher spending -- today, we are putting the spotlight on one company, a ecom, whose shares are up 40% after election day. a number oferseen infrastructure projects from concept to completion, including one world trade center. joining us now is the chairman and ceo of aecom, mike burke. you are in new york city, you held an investor meeting today in which you discussed your targets. i want to get rebuke him a sense of how much the election of donald trump changed those outlooks. -- i want to get your view, a sense of how much the election of donald trump changed your outlook. mike: it's changed it for three principal reasons. one, we are now seeing broad bipartisan support for infrastructure. two, we are seeing broad public support and third, we are seeing
a whole host of new capital sources being attached to infer structure. i was in washington last week and there was no question that we are seeing support across the aisle. we saw it earlier this year in the transportation bill, we are seeing it with the proposal for the $1 trillion trump infrastructure plan. at the local level, we're seeing broad public support. balance200 billion in at the municipal level wholly dedicated to the infrastructure. b attachedng private to public capital and public-private partnerships, 23 states increase their gas tax in the last year, 37 states that implemented public-private partnership legislation. optimistic future for infrastructure for those three reasons. oliver: one of the few areas where you have some across-the-board collaboration. when you look at the economy right now, we've made a lot of
progress. donald trump thinks this big and researcher spending plan is the way to take it to the next level. it the correct use of money, the correct use of the country's capital to take employment even lower? -- unemployment even lower? mike: the friction we have on -- everymy d today single year, we have a $120 billion burden on the economy due to traffic congestion. that is a burden on the economy today that we will alleviate. you look at the trillion dollar ad for such a plan, typically project generates 40% of the x spencer -- expenditures with labor. scarlet: what will those jobs
look like in this coming infrastructure boom? compared to previous cycles when infrastructure spending was up? mike: we are hoping we have a different spend on infrastructure. in the last stimulus, we had a time shovel ready fix. we hope it's dedicated to long-term writers that will have a long-term enduring impact on the economy, not short-term fixes. we are hoping it's much more thoughtful and much more long term in nature. regulation -- we've seen financial markets do very well. we've seen financial companies rallying since the election. anything in the past eight years or so, any project that aecom has worked on where you thought this would be easier if these barriers weren't there? regulation is an
incredible burden on development, not just in the infrastructure space, but in the private sector. see across the entire energy sector, the lace up on projects due to regulation. we've seen it in the private sector real estate the moment and certainly infrastructure the late due to regulation. scarlet: clearing out some of that delay will help in that long-term victory were just describing. how quickly will we see trump's infrastructure spending put into action? are we talking five years, 10 years before we see those fruition?ake mike: the current incoming and suggestedon has a j it will be one of the top three
issues -- it will take a long time to build these projects. they are sizable projects. this is showing what percentage of the company's revenues go to where. usa, about 20% roughly from the latest data. i'm wondering, to get your take on the way president trump has gone in and dealt with individual companies so far, some of which have strong relationships and revenue streams that go to the government. what you make of him going in and picking out individual companies? mike: there's a lot of room for improvement. we do a lot of business with the u.s. government. it has been a good business for us. we expect to see the incoming administration do more on the outsourcing side.
scarlet: we've been discussing the trump transition. pennsylvania played a key role in trump's victory. let's hand things over to michael mckee. he is joined by tom wolfe, the governor of pennsylvania. mike: tom is the 47th governor of pennsylvania. he's been in office since pennsylvania is the sixth largest estate in the beenry but the economy has
growing more slowly than the rest of the nation. the on rate bottomed out at 4.6% in february. it has been going up since then. is pennsylvania having some economic problems at this point? unemployment: the rate is going up in part because there are more people actively looking for work. they're been 127,000 more people in the workforce than two years ago. we've created 100,000 new jobs. is moving forward. more people are optimistic. manufacturingline state that voted for donald trump. deliver on theto promises he made to the voters in your state? governor wolf: that will be a problem. the promises he made, i'm not sure they can be fulfilled.
the real promise of manufacturing in pennsylvania is doing what i'm doing, which is to invest in training and workforce development and , trying to attract more business is to pennsylvania to create good jobs. that is what we need in pennsylvania. governor wolf: that is what every state -- mike: that is what every state needs. how does your message differ from other states? governor wolf: pennsylvania is a really great state. i've been in public service for two years now. for that, i ran a business. that, i ran a business. pennsylvania is a great place to do business. we have a great workforce. we have a great location. we have some great natural resources. it is the perfect place to do business. you do have large supplies of natural gas. donald trump has promised to make it easier for fracking.
governor wolf: i'm not sure what he can do -- we need to make sure we are doing drilling correctly. we have a lot of wealth in pennsylvania and a strong gas industry and i'm very supportive of that. i'm also supportive of a clean environment, clean water and clean air. we can do both. we will. the shell cracker plant is being opened. it will create thousands of construction jobs, hundreds of full-time permanent jobs and it will create a whole host of manufacturing companies surrounding the plant. gas is big already in pennsylvania. it will continue to be big regardless of what happens in washington. borrowing costs are rising faster relative to treasuries. the third largest spread among u.s. states.
fixed?s that get governor wolf: it is not intractable to we can do something about it. , areost recent budget borrowing costs came down -- our bar wing costs came down. we're doing the right thing. we are on the right track. costs cameowing down. when i took office, that was a big deal. the prior administrations had let that slide and arm bar way costs that go up. costs go up.ing mike: are you going to have to raise taxes or keep them study? governor wolf: you will have to wait and see. i have my budget address on february 2.
areeed to make sure that we working with a balanced budget. i am determined to do that. i have spent the last two years focused on that and i will continue until we get to the point where i am satisfied that the ratings agencies are satisfied pennsylvania is doing the right thing. mike: the president-elect wants to repeal obama care. making medicaid a block grant. would you want a block grant? governor wolf: usually, block grants are excuse for lowering support. i expanded medicaid. those are 700,000 people who are going to be very upset. pennsylvania will have a big bill to pay if those people are insured. -- uninsured.
in commodity markets. oil is the exception today. it's been bouncing around, has flirted with losses over the course of the session. a bit moment, closing i higher, up .3%. we had some new numbers coming iea saying the opec production cuts will diminish supply. we are seeing gold and silver continue to sell up ahead of the fed meeting. copper is also down as we see a reversal of the recent postelection trade. --are watching energy stocks despite the bouncing around between gains and losses in oil prices come energy stocks have been holding up well pretty consistently throughout the day. up 1.4%, one of the best performing groups in the s&p 500 today. , we got the opec and
non-opec member agreements. now -- up about 7% now. we are watching chinese production as well. priceseen a rebound in and a rebound in chinese output. china is the second largest buyer of oil in the globe. we are announcing that output rebound from the seven-year low. now seeing that output rebound from the seven-year low. onething to keep an eye here. scarlet: with the fed is set to hike rates tomorrow, will this hurt private equity and firms that deal heavily in real estate? jonathan gray spoke to erik schatzker in an exclusive interview. >> i don't think it hurts us.
you think about what we do, we own companies and real estate, we lend to companies throughout gs of business. generally rising growth, rising ish flows for businesses positive for what we do. we don't own a lot of long-duration bonds. in real estate, there's a little more risk with things that are more stabilized. that is not a big portion of what we own. a higher growth environment should be better for our investors, the pension funds we deploy capital for and our shareholders as well. erik: one of the places you've been able to monetize is, at least through the chinese, you sold a great guilt property and a big stake in hilton to chinese buyers. you are negotiating to sell more property, perhaps in japan. what happens if the chinese followthrough with what appears
to be a plan to restrict the amount of foreign currency capital that leaves the country? for property deals and industrial deals. jonathan: there's a lot of liquidity out there. we sell things through the public market. we sell a bunch of assets to canadian pension funds, just sold a large hotel to a korean investor. we're seeing a lot of demand for high-quality assets. what we saw from china was an announcement that they will focus -- i don't think we will see a complete cessation of outbound chinese investment. they may make it a little harder. we still think there is plenty of liquidity out there. i'm not overly concerned. i don't think you will see a complete stop from the chinese. the are still some
questions about how you were able to pull up at hilton deal na.h agent day -- h i they had to agree to a standstill and a voting agreement. how do you do that? jonathan: you have to take a longer-term perspective. looked atat hna hilton and said this was a unique opportunity to buy a large stake in a great business and id at a reasonable price. we have a spin coming up that will unlock additional value. would have driven up the price a lot more than that by buying up stock. they took a long-term perspective. the stocks rallied back to their price at this point.
looking forward, it will look like a smart investment. erik: you're also in the process of taking your residential rental home business innovation public. why take it public now? a situation where the cost of refinancing a home or buying a new home is only rising again with the jump in long-term bond yields, that might drive more people to the rental market. and that make the business more attractive for you? comment on cannot invitation homes. we've been very active investing in housing in the u.s. in the last five plus years. we bought 60,000 family units, apartments, 50,000 single-family homes. even this year, probably need a
million fixed homes to keep up with population. --, we've only built you talked earlier about a related business infrastructure. there is a great till of hope that the trump somehow kickstart investment in infrastructure. stone'se black stone ambitions there? jonathan: we've done a fair amount of infrastructure over time energy, bringing power lines down from hydro plant in canada, we bought some cell towers in u.s. and brazil, we've done some other things in africa. we don't have a dedicated business, dedicated capital. it is a big asset class. it is something we are looking at and we should evaluate over time. erik: how would be in for structure fund need to be that's
how big would the infrastructure fund need to be? jonathan: we tend not to do small things. often times, you start with these things in a small way and you build them over time. we want to be scale players. we think scale is a competitive advantage. you get better investment opportunities and attract better people. if we go into something over time, we like to do it in size. >> how does donald trump get congress to go along with deficit spending and structure plan? jonathan: i don't know the specifics of what their plan is going to be. what is interesting about an protector, it is one thing that both the folks on the democratic side and republican side agree on. they may disagree on the form of implementation, but they all agreed that building new infrastructure which will create
a lot of jobs and give us a return on that capital invested, new roads, new bridges, new airports, everybody agrees that is a positive. there will be some sort of an protector bill passed in 2017. -- and for structure bill passed in 2017. ininfrastructure bill passed 2017. emma: president-elect donald trump at a meeting with bill gates at trump tower today. mr. gates spoke to reporters on his way out. >> we had a good conversation about innovation, how it can , the impactucation of foreign aid and energy. a wide-ranging organization about the power of innovation. emma: tomorrow, a number of tech leaders will head to trump tower. cook,ing apple's tim
alphabet's larry page -- after a meeting at trump tower, the democrats and he was humbled to be considered as energy secretary. perry.b will go to rick health careama's legislation being lauded -- 23 million additional americans now have health insurance because of the portable care act. the uninsured rate has dropped in all income groups since 2013. in italy, the new prime minister has won a confidence vote of his first full day in the job. he outlined his agenda to lawmakers in rome earlier today. he's hoping to have his government in place before a european council summit on thursday.
global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. scarlet: coming up, we dig deeper into steve nugent -- steve nugent -- steve mnuchin's role. a lot of green across the screen. european stocks also did well. oil up a bit. energy stocks doing a lot better than that as far as percentage gain. oliver: the dollar and the 10-year gilts not doing much before the fund c decision tomorrow. -- 10 year yields not doing much before the fomc decision tomorrow. ♪
oliver: this is "bloomberg markets." scarlet: time now for the bloomberg business flash. boeing is moving the headquarters of the defense space and security division closer to its largest customers, the u.s. defense department. the move to northern virginia is not a big one. the manufacturer will still employ 14,000 people in the san luis area. it is set to reduce annual costs by $300 million by the year 2020. the carrier says efforts to boost revenue have been better than expected. jetblue says improving efficiency is the focus, but there are no plans for furloughs of nonunion workers would
alphabet is separating its self driving car business into a new unit. the move was announced today in san francisco. the company has been developing autonomous vehicle technology for more than six years. that is the bloomberg business flash. julie hyman has today's sector spider report. we are looking at technology today as we see the nasdaq set a new record and is the best reformer among the three major averages. -- the best performer. today, among the best of the various etf's that we track. , we've gotomponents seagate which is also the best-performing stock in the s&p 500. it formed a joint venture on solid-state drives with s k.
oil is a better performing group today. that is a trend that we have seen born out all your long. that's all year long. xlpxl k in white versus the , it has outperformed considerably when you look at the year-to-date performance. that would seem to be good for oil investors. here are the weightings within the s&p 500. tech at 20.7%. text relative underperformance raises questions about whether we can continue to see gains overall. -- tech's relative underperformance. of theis in the middle
pack and it accounts for 7.6% of the s&p 500. at the relative performance here, it's important to consider the weightings as well for the overall averages and what they say about the average's ability to keep making these records we've been seeing. trump'spresident-elect choice for treasury secretary is no stranger to controversy and he may face questions at his confirmation hearing over the bank you sold last year. that's the bank he sold last year. joining us now to discuss it is zach mider. steve mnuchin is coming up for confirmation here. now, some questions about his banking background. he owned a regional bank in southern california for six years before he sold it. he made a huge profit. he bought it for $1.6 billion
and sold it for $3.4 billion and took $2 billion of dividends. a fantastic deal for steve mnuchin and john paulson and george soros. point -- at what one point the problems begin to emerge? zach: he's got a lot of criticism about foreclosures. they foreclosed on 36,000 people during the course of time that mnuchin ran the bank. since he sold it to cit group last year, a lot of new things have emerged about a unit that handled reverse mortgages. the government started investigating their foreclosure the new owners found out they basically had books that were a mess. they were short $230 million. oliver: was this related to the freewheeling mortgage practices
during the financial crisis mystically different -- or distinctly different? zack: a lot of the problems were things mnuchin inherited. he bought this company from the government in 2009 when the government was desperate to find someone to fix it. the issues that have emerged since he sold the bank are really about practices that went on during the time he was running it. beenank may not have meeting federal deadlines it was to getd to meet in order compensation from a government insurance fund and yet commit may have gotten that compensation anyway or may have been on the hook for it and not even realized it. is key: that last part because it might indicate that it was not intentional. are there any other banks that are in a similar situation? zack: the only other bank that is faced this issue is a company
called walter investment in for the. they settled for $30 million. after he was lower raised issues about practices there. -- walter investment in florida. they settled for $30 million after a whistleblower raised issues about practices there. oliver: he is gone and that's where our ties end. zach: the new owner, cft is time to put those issues behind them. we put new management in place and we are getting our head around it now. oliver: is this something that matters because it could influence how he is received in the confirmation hearing? is this something they can snowball into support? zack: the republicans have 52 votes in the senate right now, enough to confirm nominees.
the democrats are going to raise issues about mnuchin and particularly focused on his ownership of this bank and the foreclosure practices there. whether it will be enough to sway any republicans is hard to say. scarlet: coming up, a fed hike tomorrow a foregone conclusion as evidenced by the start. oliver: the fed likelihood has not changed. this is that funds futures. fed fundsnds -- futures. we will dive into that more. this is bloomberg. ♪
there anything she can say to raise eyebrows? we have 100% odds of a rate increase tomorrow. that makes me nervous anytime there's 100% odds. there are a lot of remaining questions there that people have to sift through. .> the big one will be the dots they are currently looking at two hikes next year. historically, they have brought them down. we will see. people will be trying to figure out any hints of how the fed is anticipating the impact of fiscal policy in the new year -- market implied expectations have moved up. it will be interesting to see how that changes the fed's thinking. there was a great article today
about whether donald will tweet about the decision at some point. scarlet: you think you will be watching the news conference? joe: i would like him to life tweet. -- live tweet. i do think the interesting forward ising whether republicans who've long complained that the fed should i ve hike a lot sooner complaining that the fed is only hiking because -- oliver: coming up, politicization of the fed, continuing even more so with other fed governors joining in -- is there a way to politicize it even more? joe: it would be interesting if the nominee that donald trump
forward is sharply divided from the status quo. it would change the flavor of how people read fed policy. three of the dissenters in the last five meetings are the ones that will not be on the fomc voting membership next year. how much can we take away from how much can we take away from the dots if these people won't be here next year? joe: the dots, how much can we take away from the dots anyway seeing how they've not had much picked ability -- predictability? if we were to get into a situation where the dots fell below the market expedition, you would start to hear how the fed is behind the curve.
were one curve and another curve, we could say -- oliver: 100% likelihood. a lot of surprises lately, but hopefully this won't be one of them. back in 30e will be minutes. joseph nye will be discussing donald trump's foreign policy and the russian-u.s. relationship. oliver: coming up, president century'ss the 21st cure -- 21st century cures act. .his is bloomberg ♪
♪ >> we're live from bloomberg world headquarters in new york over the next hour. we will be covering stories from washington, chicago, and beijing. u.s. stocks heading to fresh approaches 20 dow k. treasuries are flat as the fed begins its two day meeting. traders are pricing a 100%, billy of a rate hike. the question is, what happens after that? financials and industrials are some of the best performing sectors it since the -- since the election. julie: using pumped. oliver: i'm pretty pumped. ,ulie: the bulls are pumped to especially if you look at retail
investors. looking at a doubt 20,000, for example, is not necessarily an begot within less than 50 points about level. we could see the quickest move dow,on 1000 points in the if we do get there within 35 calendar days. that's the number to be. the s&p 500 is nothing to shake a stick at. a record. at the one index left out is the 2000, which has been making simultaneous records with the other three averages, but not so today. when we look at a potential 20,000, there are a lot of questions about how frothy the mess is. has it gotten ahead of itself? this is an interesting long-term trendline. the editor of the new markets live blogged on the bloomberg, which can be accessed at tl y z, brought this chart.
dye --thly move in the in the dow going back to the 1940's, with a dropped trendline through it, what this shows is abovet was considerably the long-term trendline. now that we are nearing 20,000 we are much closer to it. more in line with the long-term trend of the average. in terms of what we are watching for today's session, pushing the dow in particular higher, 19,000 rising with the other athletic stocks, reporting earnings on the 20th. apple has been rising on some positive commentary coming out of citigroup and ibm as well, up 1.8% today. when we look at the gains in the long-term trends, we can look at a measure called relative strength index. something we have been talking about ever since this rapid rally. not just in the dow, but in the other major averages as well. it's a way to measure whether the gains we have seen are justified. top,ow itself is on the
and when it stays between the red and green line is an sort of overboughtthat's not or oversold. when it gets above it, it's potentially overbought. by this momentum indicator this is the most overbought at the dow has been in at least 20 years. this is something that folks look at when they are trying to determine if stocks have gone too far, too fast. finally, getting away from stocks and back to treasuries, we will of course hear from the fed tomorrow and the final verdict or final confirmation on indeed whether it is going to be raising rates. ahead of that we have got yields pushing higher on the two-year and 10 year, going up a basis point lower on the 30 year. interesting divergence the we are seeing today. there was a 30 year option that was more successful than the shorter durations we have been seeing as of late. so much,hank you julie. i like that, advertising for the stock market getting to 20 k. scarlet: let's get to mi in the
newsroom. emma: republican senator, marco rubio, says he has serious concerns about the exxon mobil .eo, rex tillerson mike pence said it's an example of the caliber of the cabinet members joining the trump administration. >> i couldn't be more grateful that someone of wrecks's proven accomplishment is stepping up to serve our nation is the next secretary of state. emma: jeff n.l. says that tillerson has a ground-level view of the country's most important relationships. president obama says any president who is not reading intelligence briefings would be flying blind on national security matters. a response to the donald trump suggestion that he doesn't need daily briefings. trump said that he's not
interested in daily intelligence briefings unless something changes enough to merit his attention. in oakland, california, investigators said he still can't and point the specific cause of the warehouse fire that killed 36 people. the electrical appliance was plugged into the rear of the building when it began. murder charges are possible as they try to determine if there are climbed -- crimes linked to the fire. building inspectors have not entered the warehouse since 1980 six. gatlinburg, tennessee, officials investigated the deadly wildfires last month that caused 500 million dollars in damage, blazes that killed 14 people. an official at the great smoky mountains national park says that no amount of manpower could have stopped the spread of the flames, which were driven by extreme winds. secretary-general says that opposition forces control 5% of eastern aleppo in syria.
they have reportedly received credible reports of civilians killed by summary execution. he called for an immediate end to violence on all sides. global news, 24 hours per day, powered by 2600 journalists and analysts in more than 120 can't -- countries. this is bloomberg. scarlet? oliver: president obama -- scarlet: president obama, signing the 21st century cures act right now. providing money for treatments, including cancer. if you want, you can watch the ceremony on the bloomberg at live go. turn now to tomorrow's eagerly awaited fed decision, and investors suspect they will lift rates for the first time this year. what else will they say about the state of the economy? joining us from new york -- from new york is michelle.
it sets a much about the rate increase that has been priced in, but what they will indicate about next year, about 2017. what are you looking for? michelle: i actually don't think we are going to see much more. that alone is something different, because we are used to every meeting seeing the dots moving lower. stayed the they just same that would be a change in the trend, if you will. are looking into the past for rate hikes. and to what extent those views are changing in the wake of the election. i just don't think we are going to get a lot from the spread at this time. janet yellen already told us in early december that they need more details. they need to see more specifics about the plan before most of the fomc participants would be willing to make a meaningful shift in the outlook for the fund rate for growth. oliver: michelle, the idea of
the dots not moving much seems like it should be concerning to markets. you basically went from a consensus view before the election that a donald trump victory was going to send the likelihood of a december rate hike to zero. now we are at 100. it seems like there is very little room for error for the fed to not indicate a higher rate past to sustain the kind of inflation in the market. michelle: you see inflation expectations beginning to move up. the back and forth about the process for december rate hike had to do with the fear that a trump victory would lead to weaker equity markets and a tightening of financial conditions. of course, the exact opposite has happened. ,he case for fed action today tomorrow, and in the future has gone up. it's just i think the fed will be somewhat hesitant to price in or change the path of tightening
without enough yet to really base a change in the forecast. let's all look ahead and say -- look, a more expansive fiscal policies going to mean monetary policy is going to be less accommodating. i'm sure that the fed agrees that that's the direction we're headed, but in terms of making meaningful shifts in the , morek, it's slow moving thoughtful, and probably premature. we seeing a tightening of conditions now that the dollar stronger? >> we are, but with equity markets going to record highs, i don't think we are balancing tight enough conditions that would warrant or keep the fed from making moves. from that standpoint, it really is less about the market and more about fundamentals that simply warned rates being higher than they are currently. oliver: there's a similar posed earlierwe
in the show -- the idea that donald trump has outlined support for infrastructure spending plans. not too much detail right now, but the expectation is there is going to be a lot of it and it will jumpstart the economy. how much of a jumpstart does it need to be? what do you need to do to assess whether or not this can push the economic measures that are lagging to a better condition? michelle: it so much not about infrastructure spending. we are so used to talking about fiscal stimulus in terms of what the government can do in terms of hiring more people in building more things. this is a different kind of fiscal stimulus. this is the kind that will come from tax cuts, from less regulation, from removing the burdens to the private sector. to me that is going to be sufficient to sow the seeds of a stronger growth trajectory. and to me it is really -- that's the crux of the better outlook. not the potential that we make it more infrastructure spending. particularly in the form that we
are essentially talking about, where it is going to be more of a private public partnership. there are a lot of details to work out, but there are real clues that we will get from growth and it's going to come particularly on the corporate tax reform side. get we still don't know what kind of policy president-elect trump will put in place with regards to infrastructure spending. will we be expecting to see a wider range of bigger dispersion and economic projections for gdp, for instance? we really don't know where it could take us. the growthn terms of forecast, i think ultimately you are right, that's where it will go. for tomorrow i suspect that most participants will have just been in a wait and see mode. that's why i don't think you are going to see much of a divergence or change from the summit economic projections than we saw in september. but you are absolutely right. different members of the fomc are going to have different
opinions about what fiscal stimulus in this form is going to mean for the u.s. economy. fomc, i would be highly skeptical that you would get the kind of growth that the administration is talking about as the result of tax cuts. others might be more open to that. you are right, there will be differing opinions about the growth outlook from the administration and therefore what that monetary policy might be. exactly right, we might see, particularly from his appointees named to the fed, we might see it right now quite a bit going forward. scarlet: we will look for that, then. reminder, we will have official coverage of the fed decision beginning at 1 p.m. new york time. oliver: coming up next, more insight on what to expect from global stocks next year from david harris. this is bloomberg. ♪
scarlet: this is "bloomberg markets." the bloombergo business flash. a look at the biggest stories in the news right now. knowing is moving forward with its defense and security division. the manufacturer will still employ about 14,000 people in the st. louis area. a media company saying that it won't repay, going to senior creditors who have tried to push the company into bankruptcy. they said the almost $200 million held by others would be paid in full at maturity. the long-awaited wireless headphone, air pod, from apple,
finally available for online orders. the tech giant said that they will be in retailers -- retailer stores next week. 100 $59, including the charging case. they were originally planned to be shipped in late october. that is your bloomberg business flash update. scarlet: they look like hearings. oliver: there you go. scarlet: ahead for equities, we , the cioh david herro of the international equity team at harris. david: as you start to see better expectations, better environment for loan growth, this is actually good for the banking system. the cleanups are good because they enable growth to happen. thanks are basically the conduits to an economy and if you have healthy banks, it helps the economy, it improves their health.
it is long in coming, by the way, but this is a very good sign the we are finally coming to grips with some of these banking issues and as a result we are starting to see better loan growth, starting to see more loan losses and aspects the bank earnings that are quite positive. >> are you going to be participated in the capital raises? are you going to be buying? david: we have shares in italian banks today. very healthy banks that are well capitalized and pay nice dividend yields. exposure to northern italy, the healthiest art of the italian economy. we do have italian bank exposure. we will take a look at these two c we can get them on the cheap, but if they don't represent good value to us we have plenty of italian -- good quality italian banking exposure that we are happy with. >> we've spoken in the past
about valuations. you used the word cheap then. as you have been paring back your positions elsewhere? >> i won't comment on current trading, but yes, you are exactly right, two months to three months ago there were huge doll you asian differentials in certain sectors of the global equity market and i argued that people were overpaying for safety. and that they were underpaying, really, for disk -- for consumer discretionary, industrials. we have seen some of these valuations compress a bit, but i think we are nowhere near where we should be. to use a baseball analogy, we are probably in the second, third, or fourth inning of this valuation equalization. maybe not equalization, but a compression story. still, you have valuation
differentials that are too large. not as large as they were. some of the move has happened but there is a lot more to happen. >> david, what is your highest conviction contrarian bet? david: if you look at how the portfolios are positioned, we still have this exposure to consumer discretion, industrials , i think that these are the sectors still that are selling unattractive valuations. >> even now? >> even now. yes, they have moved, but they are still selling to cheaply. eight and a half times earnings? i don't see those earnings collapsing. if anything, they should continue to grow. i think that these types of businesses are still selling at two low prices. yes, they spiked up a bit since the summer, but don't forget, these stocks,
especially the financials, have an absolutely hammered. now they are up 5%, 50%, 20% in some instances, still nowhere near their fundamental value. david herro, was cio of international equities, harris associates partner. oliver: still ahead, options insight, trade today with triple q trust tracking performance in the nasdaq 100. reaching all-time highs today. this is bloomberg. ♪
records for the s&p and the nasdaq. what do you think is really powering this rally higher? kevin: last week we really -- we briefly spoke about seasonality. what is driving today's market action is to things that are at play. performance chasing in the u.s.. if you are lagging, you've got to put money at work, ultimately turning it into the year end. which we have never seen play out before, people are not selling for tax gains, right? they are waiting to hold onto next year, when a new tax regime -- tax regime could happen. next year there capital gains might be lower than this year, so there is no reason for them to do that. that's quite a gamble. kevin: it is, but you have the tailwind behind you. meanwhile, we haven't enacted any of the fiscal policies pushing a lot of the markets coming with the research
out, earnings are over, so you don't have a reason to have me push the cell button. one of the interesting trends that we have been talking about today, the nasdaq in particular is outperforming, but one index has been left out of the party. something you noticed also. seen: we are starting to the rotation go back to the former leadership we have seen, 2.3 times the amount of calls we need purchase versus put in the nasdaq 300. getting back to the go-go names that we had. the iw m, the etf for small caps, we are starting to see a lot of people putting trading at 1.7 times the amount with a bifurcated market going to small caps that ever the run basically versus former leadership that hasn't participated fully in the rally. julie: do you think that trend is going to last?
when more go in that come out? kevin: absolutely. one of my trades for today is to do the risk reversals on the qqq q, the nasdaq 100 etf. it should go up talking about no reason to really sell until next year. going until february it will be the 118 121 risk reversal, costing you about $.75. that is the minimus to the upside. you would have to purchase the etf down at 118, but we are seeing this base level of support with a recent rally. one of the reasons is that we haven't had earnings come out. earnings are coming out in january, so you will want to go to february. in regards to the financials it will come out in january and push the markets higher, so it should run up with that. julie: at the same time, you are not looking for that much upside. 121 -- kevin: that's when you start
participating. 121 until infinity. all technicals are off because the markets of blown through this and you will basically see that a lot of these tech companies are going to grow with it and you are going to see management saying that and that is going to drive is well past 121. julie: kevin kelly, thank you so much. back to you guys. still ahead, the professor and former dean of the harvard kennedy skill -- school, joseph knight, we'll be talking about the u.s. relationship between russia and china. looking forward to that one. this is bloomberg. ♪
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: we had a good conversation about innovation, how it could help education, impacting foreign aid and energy and it was a wide-ranging conversation about the power of innovation. tomorrow, silicon valley luminaries and other tech leaders will head to trump tower, including tim cook and cheryl samberg. joe manchin says that he will be staying in the u.s. senate, not taking a job with donald trump osteen. after a meeting in new york he said he was humbled to be considered as energy secretary, but people familiar with the selection say that the process will go on and that the job should go to rick airey. top nuclear envoys from the united states, south korea, and japan, say that they will be in fomenting to penalties against north korea. it could involve choking off the