tv Bloomberg Markets The Trump Economy Bloomberg August 15, 2017 1:00pm-2:00pm EDT
the list of business leaders fleeing the president council continues to grow. now, up to four and the president says good riddance. is the first ceo president losing ceos? others: the prince of darkness, he prefers darth vader. his days may be numbered. we will talk about the man who wrote the book on stephen bannon. about taxes. the trump administration continues to promise tax reform. what are the chances and what do the market believe and what does the market to believe? -- and what does the market believe? president donald trump is losing more ceos from his mayor for trying council -- from his manufacturing council.
scott paul, the president of the alliance of american manufacturing also announced his resignation a short time ago. former treasury secretary larry summers said that is not enough, not enough he goes writing an cand piece "no advisor possibly believe he or she is being effective at this point and all should be ashamed for -- president trump is currently holding meetings in new york and kevin cirilli is right outside and we are joined by a former -- by a bloomberg columnist and an author of a comprehensive he's of stephen bannon's -- and a comprehensive piece of stephen bannon's role in the
administration. what is president trump doing in a data building behind you? heavy he is facing a security presence where he is inside having a series of meetings. later this afternoon, he will have an infrastructure meeting i am told it will be an executive action of some store -- sort instructing folks to look at the permanent process for infrastructure projects to provide disciplinary action should there be any environment it -- environmental issues with the licensing process. no details have been released. no question the fallout from the president's response to the tragedy in charlottesville continues to dominate the political discussion around this administration. i spoke to several consultants who speak with a white house and all of them are frustrated at the lack of communication strategy. before the ceo of the
manufacturing council board has resigned and him of that with three of them resigning after the president addressed these comments at the white house yesterday. i can also tell you that several of the sources i have spoken with who deal with the white house think it will blow over. in the business world, the bottom line from the business community is at the risk of doing business with this president is to hide and essentially, -- is too high and essentially they are trying to cut their ties. notd: the president does want to be thinking about which is ceos have left his counsel. he is there because we had the situation in charlottesville, the tragic riot and his response was seen as too little, too late. at one point is it a national extension of his administration? steveu have written about bannon and the alt-right. how much is inherent in his white house?
situationas in the during the campaign that in august when hillary clinton attacked a truck for his connections with steve bannon and the altar right. or so after been in it was called in. trump survived that. -- that was week after stephen bannon was called in. these are not calls from a democratic rival but nazis marching in the street and a person has died. trump instinct probably fueled itbannon not to apologize, is clearly hurting him badly not only with the ceos but with most americans. what is the president strategy with respect to the ceos? how important are they? probablyy tweeted they should not have been there any way, they are grand standards he called them. >> you see him lashing out and
being called out. having hisrump business experience count for something and being able to sort of parlay that is really to himnt and important for have the support of american business leaders on board as he heads into after the august recess which is a push to get the raising of the data selling and a some sort of if not tax reform, a tax cut -- the debt ceiling and if not tax reform, some sort of tax cut. as he pursues anything from trade policy to environmental policy that has at some point been controversial. episode, a latest couple of members left around his decision on abrupt climate change. these are not the first departures. will they be contained to what we saw today?
if he had not come out yesterday and said explicitly racism is evil and called out some groups like the kkk, you could be looking at the exodus. was it essential enough to stop the departure? the politics. on other one hand, people who believe the alt-right is important to him. there are people who think the position is a this the vast majority of americans. professor and nyu that's what he said about the uniformity of resistance of what is going on. >> there are very few things that rally 98% of americans are around an issue and one is the condemnation of white supremacy and of his blatant racism and violence. it as if the presidency said let's stick a gun and i'm out from a brand standpoint -- and
stick a gun in our mouth and from a brand standpoint. you will see people on the council drop like fleas. some of them more explicitly than others whether employees consumers,rs or your this is a no-win situation staying on this council. tone deaf will for staying with the ones who brought him to the dance? >> i think it is the latter. if you understand the mindset, they do not think of it is do we are doing not support nazis? i think trump of them think about it, -- i think trump thinks, why should i apologize? these are my enemies in the mainstream press trying to associate me with ugly people and i am not going to submit to
that and i am not going to apologize or condemn them. thatnk bannon said into for about two days until it became clear it was an untenable position for all of the reasons the professor laid out. david: what is the professor and the chief of staff doing to get this back on the rails? >> the first is to show followthrough. we have yet to see all of this play out, but, some communication with the families of the victims. was killed andn a car crash, we saw statement from the mother thanking the president. continued out of reach to the victims and the families and some of the aggrieved groups will probably go a long way. the policies of the justice department follows up on. the president is determined to get back to his actual plan, governing agenda of what he
wanted to do for the month and we will see him juggle too needed to deal with a more emotionally sensitive format with what has happened. well also pivoting to move back to some issues like taxes and government that will confront him and congress. dave: many thanks to kevin cirilli, bloomberg businessweek reporter margaret and josh green, this is week columnist will stay with us. a check on where markets stand. abigail doolittle is here with the latest. abigail: not a lot with the u.s. stocks, fractionally lower but one very small gains and losses during the entire session. this follows yesterday's rally. the s&p 500 up about 1%. nasdaq up more than 1% following last week selloff. a bit of tug-of-war, it is not clear what side is winning from
a stock perspective. if we break at the 10 year yield, when the yield goes lower, that says the bonds are rallying. when the stocks were selling off, haven bond rallies. asked outs have a rebound, not fully, the 10 year yield round tripping saying bond investors are not as concerned as stock investors over the recent volatility. speaking of volatility, not a lot for bonds. this is from the beginning of the year. in a blue, the vix. we have this long period of complacency but the last week, a last thursday 44% as fear and uncertainty returned. in white, merrill lynch move index. based on option, barely budged. bond investors are telling us the recent volatility for stocks
david: this is "bloomberg markets: the trump economy," i am david westin. the bloomberg first word news, mark crumpton has more. mark: are -- voters in tuesday's are heading -- in tuesday's are heading to primaries. headed tostates are primaries. luther strange was appointed to fill the post is looking at the fight off challengers that include former alabama chief justice roy moore and a representative mo brooks. president trump has endorsed luther strange.
primaries held in utah. the president will sign an executive order that will speed up the process of getting permits for public works projects. get approval to build roads and other infrastructures will require only one federal decision for major projects. a person familiar says there will be a two-year goal for permits. china is it will retaliate if necessary after president trump's call to investigate how china handles intellectual property. the president directed to look and to chinese policies especially the practice of forcing u.s. companies operating there to transfer technological know-how. china wars it will take all proper measures to protect its rights. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries, i am mark crumpton. this is bloomberg. david: thank you. josh green is a bloomberg view
columnist and published a new book called "devil's bargain." it is a story about of the partnership between steve bannon and donald trump and the so-called alt-right helped president trump win. more and more stories are coming out about him possibly being pushed out including this one from former white house communications director anthony scaramucci last tonight. >> who is leaking now? it is steve bannon? >> i have said of that. i said he was. obviously, he got caught on tape. i have no problem. >> will he be gone in a week? >> it is up to the president. ?? what does -->> what does the moves think? -- mooch think? >> if it were up to me, he
would. david: we are joined by josh green who wrote the book on stephen bannon bennett. what is the president going through? josh: he has to weigh the difficulties of having bannon and his white house and we saw that of the last couple of days in the aftermath of the charlottesville attack and trump's truculent to move to do now neo-nazis and alt-right activists. if the ban in comes from -- bannon comes from a wing of the party won't does not explicitly endorse, they believe it is important part of trump's constituency and one should not have to and to where the finger when -- hasten to wag a finger problem of depressing the base. you cane other hand, see the clear damage that this kind of approach has inflicted
on dry, not just try, not only not only the condemnation but these important business leaders leaving his executive council and essentially leaving trump sitting in the white house as a sort of pariah. reporting, howr much is true belief on steve bannon's part? and it expedient, he run -- he ran breitbart by appealing to the alt-right and some of these more radical groups. is he a troop believer? josh green: i do not think bannon is a white supremacists but a believer that this is secular, liberal culture that enforces a suffocating political correctness that people like steve bannon and donald trump should not be suggested to him. when you get it was situation like this where the forces of
the media and the political establishment are saying you have to do something, you have to the dinner this group, did you have to the dim this group, their ideas to say no. -- you have to condemn with this group, their idea is no a you see the problems. david: anthony scaramucci made het point and he said believed the president did not want us to tell the media what it wanted to hear. how much of this is in the president's heart or expedient to appeal to a base? josh green: it is very much in the president's heart and the nature of his character. trump is not someone who likes to apologize over anything. specific to neo-nazis, he does not like to be told he is wrong. he reacts angrily like we saw with a tweet he directed at ken frazier when he left his counsel. that is who donald trump is. that becomesncy
extraordinarily damaging in the crucible of an alt-right rally like this where people are killed. david: it is in the nature of the presidency where president have to say goodbye even to people they are sympathetic with. doesn't the president needed to be worried about a backlash from some of his base who would really react vigorously if steve bannon were issued out? josh green: i think he would. whether intended, bannon has become the avatar of american nationalism and is thought to speak for substantial portion of the republican base. it would be very discouraging to a lot of trump's hard-core supporters if bannon were fired. that would also lead to the question -- what would bannon do a the outside? would he be more dangerous to trump on the outside is an inside?
that is another question that trump has to wait. david: not just steve bannon, there's report that there are 2 other people who may be in crosshairs, stephan miller and sebastian, advises. you have written about stephen miller. tell us about their role. josh green: they are viewed as bannon acolytes. breitbart editor and writer, a kind of loosely credentialed foreign-policy expert who wound up in the white house by the fact that president trump like to see him as a pundit attacking trump's enemies. miller is a through and through ideologue, he is harder right then bannon and has worked in the senate for former senator now attorney general jeff sessions web server hardline views on issues like immigration, criminal just and who has served
the market differently -- how should investors look at the market the differently today? mihir worah: we think it is fine for investors testing defensively. a couple of reasons for that and we can go into some detail. we think the most assets valuation are pretty full whether u.s. equities, u.s. credit. time, we have seen the big changes on the first one is the fact that the fed will reduce the size of is valid -- balance sheet. we think the fed has been a big part of depreciation. this is a factor investors need to keep in mind. david: when president trump first came to office, we believed we would have the handoff, especially tax reform, is it going to happen? mihir worah: i think the handoff needs to happen but not as vigorous as people were pricing
postelection. at pimco, we had modest expectations for the impact of fiscal policy. it to resolve the actual emblem -- impact will be more modest. we think there will be some tax reform, maybe early 2018 and some infrastructure expenditure. bob probably public-private instead of the government "-- opening up its purse strings. ,ll three are likely to happen but much less than people expected. david: why did the market stay up so high? what is supporting this if it is not fiscal stimulus? mihir worah: one of the thing is still the fed and the lower dollar based on expectations of a dovish fed. postelection, although the markets have a high, there's been a rotation under the hood. postelection, banks did well in
this reflationary trade. with the weaker dollar and expectations of the said on a hold, dachshund vfat on hold, speculative global sectors of the u.s. is doing well -- the fed on hold, speculative global sectors of the u.s. is doing well. david: many thanks to mihir worah, pimco's cio. up next, even of nafta talks getting underway in washington. what is at stake? what are the chances that president trump will get his way or otherwise? what effect will it have on the trade deficit? this is bloomberg. ♪
trump economy. let's start with the headlines on bloomberg first word news with mark crumpton. mark: thank you, the fallout from the president's initial failure to identify hate groups by name continues. the president of the alliance or american manufacturing is the latest to abandon the president's advisory council. two others jumped ship yesterday. on twitter today, the president said for every ceo that drops out, i have many to take their place. has sent an open letter to president trump urging the united states to leave afghanistan. the insurgents say the president recognizes that his predecessors made mistakes and is reviewing american policy. the note also says an american withdrawal would deliver u.s. troops from harm's way. began hisdent pants
visit to argentina today with a stop at the buenos aires metropolitan cathedral. participatedident in a wreath laying ceremony and paged homage of the jewish memorial inside the cathedral dedicated to the victims of the 19 92 bombing of the israeli embassy in when a series. that was followed by talks with the argentine president. both men were joined by their staff at the meeting. the vice president was expected to highlight economic reforms in put pressure on venezuela whose own vice president criticized his trip to the region and called the u.s. -- the real threat to peace. the richest person in the world has made his largest donation since the year 2000. bill gates donated microsoft shares valued at $4.6 billion. that's about 5% of his fortune. there is no word on who receive the gift. he has made most of the donations from the bill and melinda gates foundation which he and his wife use for their
philanthropic efforts. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. isid: the united states heading into the first round of talks and updating nafta tomorrow. the trump administration says they have set an aggressive timeline for completing the negotiations with mexico and canada. what exactly is on the table and what could go wrong? what to go right question mark joining us now from our washington bureau is our bloomberg team leader for economic policy. let me put you on the spot -- what's the toughest issue in these negotiations? off, we have to say it's quite remarkable we are this point. a few months ago, trump was threatening to walk away from the agreement. tomorrow, we will see the start of the trade talks. overridinget as the mission is to cut the trade deficit and that means cutting
it with mexico. how do we do that? number of other provisions below that that they want to change things like tightening rules of origin buy american provisions. they see that as incentivizing u.s. manufacturing, relocating here and creating jobs. .hey want to strengthen labor and environmental protections they want to add chapters like currency manipulation. there are a number of ways that they are trying to get to achieve their number one goal which is reducing the trade deficit. interestingake an point that the trade deficit with mexico and there is a trade surplus with canada. happy reversing the surplus with canada? >> we haven't gotten into a lot of specifics on this. the u.s.rkable that negotiate objectives, reducing the trade deficit with mexico is an objective but there's really no mention of that in the chapter on services which the
u.s. has a surplus with both canada and mexico. there's not a lot of details. what we will see tomorrow is the trade ministers responsible for nafta broadly outlining their goals at a press conference and then things will go behind closed doors. that's when it will get down to the nitty-gritty details. david: they have this goal of reducing or eliminating the trade deficit with mexico. two you have a sense they have done the work behind the scenes to pencil it outsold if they had everything they want a rules of origin and environment and labor , going down the list, it would add up to something that would reverse the trade deficit with mexico? do the numbers work out? >> that's a hard calculation for anyone to make. to the it will come automobile sector. many companies have set up shop there. mexico has done quite well through nafta in jobs growth and
economic growth a lot of that has come from the auto menu strip -- the auto industry. that is probably one area to watch. david: one of the great ironies is that you talked to the ceos of the u.s. auto company's and they are not in favor of putting a barrier up against mexico. because the supply line goes back-and-forth and it would really wreak havoc on their business. what is the domestic support that the president has four taking a hatchet to the trade deficit with mexico? david: there are a lot of interests at play. the u.s. asked for public comments on nafta and they received over 12,000. one would think that corporate america would not have that much to say about nafta. with this negotiation has shown is that a lot of companies, a lot of americans who rely on agriculture are taking a step back and have strong opinions about nafta right now. i'm sure the administration has talked to all of those folks him
all the interested groups will be at this hotel in washington for the first round of talk tomorrow. they will definitely make their views known to the administration. david: thank you so much for being with us. coming up, it's not just mexico but trade actions against china are starting to ramp up and we hear from an expert who says we should expect less production of steel and aluminum from china. will that help in the trade projections? live from new york and washington, this is bloomberg. ♪
sporting goods is the laggard and it may be more of a -- more than a one quarter issue. , take us with this. >> nike is down about 2% today. they have lost about $2 billion in market cap. a lot of the other sporting retailers are down as well. we have a board that shows under which isibbett sports prompted bite week earnings by k's -- androom dic dick's. said that the trend for leisure is over. there was a note that indicated declining revenues in nike.
he said there were declines at other sports and says leisure is over. we had a good retail sales number, ironically. was a sales number and not a prophet number. to some extent, if dick's goes down, dozen or take others with it? >> it's about 3% of nike revenue. it's a similar thing for under armour as well. this is not helped them today. looking at people who may be benefiting, i have a chart in the bloomberg. shorts andathletic the interest among short-sellers since the beginning of this year. it has fallen a little bit but they will not regret the news that retail has died. the analyst i was talking to earlier said specifically in
that note that it would be a terrible mistake to miss out on the opportunity to short this group of sporting goods brands. others seem to be benefiting and . have another chart this shows that nike and under armour compared with their european rivals. they have been trailing the likes of id does -- of adidas all year. market has already started to shift away from hard-core athletic gear so we will see how the end of leisure will affect them. david: thank you so much. we will be joined by the quo at three :00nt p.m. today. when it comes to trade between the united states and china, steel is not the only metal and mod seat. the united states may impose duties on aluminum foil from china.
earlier today, alix steel and i talked with ed morrison and we asked him what the latest development mean for trade relations between the united states and china. >> i wouldn't call it a trade war, i would call it trade friction, underlying reality from an objective perspective. we have actually seen chinese exports of metals declining. steel exports in july were down 35% for when they were a year ago. the still picture is clear that aluminum because it's a bigger element in global trade. you've got to look at the relationship between the price of the export on the china side and the price of average imports on the u.s. side. it's open to move steel from china to the u.s. or aluminum products. it's just not open because the thear is weak, thei renminbi is a stronger currency
and china is taking steps to curb their expert levels. aluminum is different because the chinese happen to be the most efficient aluminum smelting country in the world. that's just the nature of comparative advantage in international trade. alix: we saw trade production up look at the a profit margins we have seen for still companies in china. the charts.lly off how sustainable is that and what's the followthrough impact? >> there has been a speculative and that has brought up a lot of other metals as well. when you have profit levels like that, it will not be sustainable. we have a construction boom at the moment in china and part of that is seasonal and part is what kind of processing they do environmentally when i have a seasonal effort to bring down emissions.
seasonalitytion will telephone a couple of months and we think a lot of that will come off in the market in the profitability. david: what about the environmental constraints? we hear china is getting serious in steel and aluminum, they are shutting down facilities because they simply are polluting too much. is that likely a real constraint on the capacity in china? >> certainly, it's a big constraint and we have seen it in spades and aluminum this year with the targeted level of capacity which is lower than what they are doing. they are being much more aggressive about turning down the capacity and that certainly is part of the reason the prices have gone up higher than people might've expected. we are looking for those prices to tail off, aluminum less so into the end of the year. and it will000 now
probably be lower than that by the end of the year. we think copper and nickel prices will both tail off more than the alumina prices. alix: what about iron or and rebar prices? potential isr, the for a possible crash in the market. iron or is just too plentiful. there are discoveries in australia and brazil. the currency changes in those the production of iron or cheaper and cheaper and over time, chinese consumption of iron or will tell off as they use more scrap in the process of steelmaking. david: that was ed morse of citigroup wil. breaking news the bond market, a seven part bond deal at $67 billion. we reported they were going with
a private issuance of a fair amount of debt we did not know how much. they were going to finance their purchase of a whole foods for $13.7 billion. reporting was that it would be 1.5% above treasury note. it's a very tight spread. up next, congressman kevin brady, chairman of the house ways and means committee is preparing to deliver a key speech on his vision for tax reform. we will get a preview next. this is bloomberg. ♪
david: this is bloomberg markets, the trump economy. from the beginning of his administration, president is emphasized how important tax reform is. newof the architects of the plan for the chairman of the house ways and means committee will deliver a speech on this subject. here for a preview is anna edger
10. what do we expect to hear from congressman brady? >> we expect to hear more argument as to why tax reform is important rather than hearing the actual specifics about what will be included in the plan. done a goodhave job of getting conservative groups and business groups on board with getting the message out about why tax reform is important to the u.s. economy. there is still a lot of disagreement between some of the main architects. hard details and how to fit the bold, aggressive plan they have into the constricted legislative vehicle of the budget reconciliation process that they want to use to pass tax reform without seeking democratic support. rude, arebe a little they kicking open a door? no one is saying we shouldn't have tax reform. devil is in the details. when will we start hearing what
it will be? i'm not sure the congressman has to persuade us that we needed. >> that's exactly right and if you look at the campaign they have had this month, 31 reasons for tax reform and -- in the 31 days of august. that is also 31 years since 1986 when the last major comprehensive tax reform was done under ronald reagan. the reasons they have given are things like the tax code is too complicated, it's too expensive, it's too burdensome to file your taxes, the taxes on job creators are too high. they are things we already know. the details we are still looking is how willon expense and be treated, how will the carry trade be treated, how rate bewhat will the question mark how long will the tax cuts be in place? there are still a lot of decisions that need to be made. they are trying to keep it in the news with the absence of details. david: we will look forward to
the speech so thank you very much. the politicians may be telling us that tax reform is on the way but what do the markets say question mark to get the latest reading, we are joined by gina martin adams. ?hat's going on questio >> the market seems to have priced out any chance of tax reform. after the election in november, the highest taxpayers in the s&p 500 to medically outperform lowest taxpayers. david: i think we have a chart that shows it on that yellow line. thatearly, the market in month alone said great we will get tax reform so let's rotate to the company that will benefit . in each month since, we have seen a rotation out of those companies. it has reversed the november game. at least four of the highest taxpayers in the index so we would suggest the market is not anticipating any form of reform. david: the companies may anticipate what's happening with
taxes. we have the debt ceiling coming up and they're starting to run out of money. maybe they won't pay their taxes as quickly anymore. >> even though the market says we are not likely to get tax reform, the companies themselves are telling us that maybe there's a different story out there. they are holding out some hope. the tax receipts of the federal government have been very low. this contrasts with the earnings stream. earnings are recovering and yet corporate taxes so far paid to the government are up 0% so far this year. they were projected to be up 7% on average over the last five years. but they have grown by only 11%. i don't know if that's the only expert nation for why the corporate are not paying but it certainly is possible is one of the nation. they are waiting on some form of reform. puts extra pressure on steven mnuchin and
he's trying to pay the bills in advance of maybe a cut off and is trying to harbor his money and it's not coming in as fast as he needs it to. >> the only category that has improved in terms of tax receipts faster than anticipated is payroll taxes. householder paying their taxes but the other categories of tax raising are not improving. david: some people out there say that's the way it always works. >> yeah. david: thanks so much. have you here. we want to bring a more on the breaking news on amazon. the company has set the size for a seven part bond deal at $16 billion. to the latest, let's go director of credit research at bloomberg television and joins us from princeton, new jersey. we talked about that this morning when we had early reporting. tell is what we know now. >> we know it's a lot of debt, $16 billion across seven
tranches. one thing that's more notable is the whole curve in terms of relative to initial price talks, everything came up tight, 15-20 basis points tight and a lot of the debt came in that 10 year+. everyone was talking about the 40 year bonds this morning. a lot of the debt was longer dated. long: talk about that junk. the reporting this morning was maybe 1.6% above treasuries question mark where did it end up? >> i think we ended up at 140 basis points. what theytty much were initially talking. it's a 30 year piece so it's pretty impressive. if they want to give you the money, you might as well take it if your amazon. david: they have a $13.7 billion price tag on that whole foods deal. they reportedly taking $16
billion and maybe you just gave us the answer why. if people are willing to give them money that long for that lower rate, why not? >> there will be affiliated cost with the closure so some will go to that. for sure, if i'm am able to 0orrow forty-year paper plus 1 , i'm probably doing that all day long. david: will this affect other parts of the bond market? >> i certainly think so. we saw the same thing with the hazlett deal a week ago. -- with the tesla deal a week ago. everyone wants to be involved in their able to markdown pricing. i compared it to at&t which did over soyear deal at 240 it's quite a market difference between the old economy days when people were more reticent versus the new economy where people seem to be willing to lend them at whatever terms. david: is that just pure glitz?
is that a considered judgment that the new economy will be likely to pay their bills? >> is partly a function of leverage. the new economy big companies like amazon has a lot of cash scattered around the world. it's difficult to repatriate because of taxes but they also think people are making a judgment call that these new growth oriented come basil be more likely to service them over the long-term than maybe a legacy at&t. david: thank you so much. great to have you with us. still i had, danny meyer will be joining bloomberg next. this is bloomberg. ♪
[captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. isit ncicap.org] scarlet: we're live in bloomberg headquarters in new york over the next hour. the top stories we're covering on bloomberg and around the world. president trump's advisor panel loses a fourth executive in the wake of his handling of charlottesville. trump shooting back calling them grand standers and says he has many more to replace them. speaking of exits, hedge funds are breaking up with facebook and apple. some of the biggest money managers trim their stakes in the tech darlings. and the lunch bell is ringing on wall street as one industry leaders cooks up new ventures. myer founder and c.e.o. of union scare hospitality group brings us a first look at his new restaurants this hour. a check on where stocks are trading with taylor rigs. whether it's big caps or small. >> red aero-- aeros -- arrows.