tv Bloomberg Markets Balance of Power Bloomberg June 13, 2018 12:00pm-12:59pm EDT
a focus on the intersection of politics and the economy. david: top stories. trade civil war. congress moves to limit presidentrump's trade actions. .e talk with senator ben cardin what's the deal? both sides have their own views after the summit. is the threat really over? let's get together. adc court gives an emphatic green light to at&t by time warner. what deals are waiting in the shery: the federal reserve tells us at 2:00 this afternoon, what it has decided over its meetings. markets are certain, policymakers will announce a
rate hike. the bigger question -- what comes next? insight, our bloomberg intelligence strategist, great to have you in new york. today,nknowns, how exciting is a going to be for the treasury market? >> the treasury market maybe not so much but for the future of policy, it will be interesting. there are a lot of potential gsn annnce. a press conference at every meeting. probably that interest paid on excess reserves is not going to be raised as much today as target range, there are technicalities going on in the market now. we have also got a hint that maybe what the terminal rate will be. when will the fed stop? you have policymakers saying we are close to neutral rate. when we get te neutral, h gh is it willing to go a if they do, how far? there are potential questions that can be asked. will jay powell answer them? we have to wait and see. david: three or four hikes this
year, the top line shows what the market this. that is a little below 3.5 this year. right in between. the yellow line is next year, closer to 2. what will you be looking at? >> for the treasury market, it is not so much the case of hikes but how much will be the endgame. the number of hikes between now and the end of 2019? that will be the key. looking at stops, not so much for the pace, but more for what is the terminal rate, will be ultimately important for five-year bonds or 10 year notes or even auto loans. most auto loans are priced off five-year debt, because of that, g go?nt to know how high the ife important, they will hike in january december -- doesn't matter. shery: back in march, mr. powell
showing concern over uncertainty. in europe, could this have an impact on what he decides to do and in the future? >> certainly in the future. there will have to be an announcement thathere are risks in the market. when you look at u.s. data, yesterday's cpi data, today, ppi, you have to look at the preponderance of u.s. and developed market growth and that has been good. it is hard to imagine the federal reserve off pace at this point but at any moment if you have a significant market of people that could potentially impact the economy, yes. you saw that in 2015. 2% devaluation of the chinese, stop them from hiking. -- stopped them from hiking. david: we pay attention because we believe the fed can up the rate. now there are questions whether they can do this.
explain this issue with the excess reserves issue? >> the federal funds rate, banks trading with each other, that has been creeping up. the federal reserve sets a range of 25 basis points. for eight years, the fed fund rates traded 10 to 15 basis points in the middle of the range. it is creeping up, only five basis points from the range top. they are worried about supply, the tightness in the purchase market, markets are inspiring the federal funds rate to create up. they don't want to ach up, they don't want the headlesl ines to say we have reached that rate. line does pay attention more to the statement and what they think about the economy going forward shery: we had treasury auctions this week. how do they go? >> it was so boring. david: that is remarkable. >> one of the fears was, when
thtrsury department increased auction sizes in february, we were in that demand at auctions would not show up. demand is fine. when you look at the number of bids for the amount of bonds being offered, those sell initially, they have stabilized. one of the things that surprised people was thomas risk -- how much risk there was. they think the fed will do its job, there will not be runaway inflation and we will wind up with 10 year yields 3% plus or minus a few basis points, so why not just buy them now and hold them? david: that is why we do not have any deficit hawks in congress. shery: we can pay for them. david: great to have you here. bloomberg television and radio has coverage of the fed decision starting at 2:00 eastern time.
let's get a check on where the markets are. >> mkets are yawning. because of course, investors are waiting to hear what chairman powellas to sa we have at this point have that rate hike priced in but we do not know what the indications will be for the future. all major averages not much change. nasdaq, exception. gainingortends a 1%, at a record. -- gaining 4/10 of 1%, at a record. ump, this is on the heels the judge ruling that at&t-time warner de could go ahead. there is other speculation about so far, to. -- vertical mergers. fox,first -- 21st century who will be successful in buying them? shares up a present.
discovery, brickley mentioned. viacom,-and-forth with that has quieted. all of them gaining, ashe speculation about what other deals will get done. elsewhere, netflix is at record. goldman sachs now has the highest priced target on wall street, $490 a share. the erage is $336 significant positive cash generation in 2022. this year will be the peak negative cash flow year for netflix. intel rising after the company introduced the first graphics chip. that happened during the day yesterday. w're still seeing a lift today. there is a general that in some makers again. two bonds, in advance of the fed, watch the 10-year and everywhere in the curve.
the 10 year, not much change, 2.96%. there en ermous change already leading is. rter end. we have seen the big gains, a point gain in various treasuries. two-year has the biggest, causing a flattening of the juncker. -- the yield curve. 10 in the middle and 30 on the bottom. shery: thank you very coming up, -- thank you. speaker ryan strikes a deal to avert a republican rebellion. why congressman dave sees e that is next. this is bloomberg. ♪
♪ shery: this is "bloomberg markets: balance of power," i'm shery and. david: i'd wein we turn to mark crumpton. >> thank you, a development in the case against president trump's personal lawyer. abc news reports michaelohen is now likely to cooperate with sources tell the network the law firm representing them is expected to give up the case. the prosecutor sees 4 million --uments -- see formally seiz 4 million documents when they raided his documents. speaker ryan cautioned today that the next steps toward an agreement with north korea won't happen quickly. rrs, "the president has disrupted the status quo with this historic meeting in singapore." in other new italianoast
guard ship has arrived in a sicilian port with ha migrants on board. the aquarius, which rescued more th 600 of them on the mediterranean but was refused safe harbor by italy is still out at sea. a spokesperson for the charity that organize the rescue confirmed the approach. >> it is now sailing for valencia. a small flotilla is going to valencia, the first ship, a coast guard vessel like this one. the other one is a military ship, a warship, italian warship. >> spain agreed this week to grant the aquarius passage and harbor in the port city. the charity group says it will continue rescun the open as until there is an adequate plan to address the humanitarian crisis on the mediterranean. egypt's president defending the
government's latest austerity measures. that hed today ary reforms, including calls boosting electricity costs by more than 25%. he said "we have to pay the price together." the government raised he cost of tap water. globou a day on aiictoc twitter, po more an 2700 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. david: thank you. we are down to the deadline ouththe dreamers. house conservatives are of bobng the approach tt and democrats have an a supporter of the bob goodlatte bill, dave brat, he comes to us from the capital. congressman, welcome back. rep. brat: thank you. david: let me ask you a
question. what is the fight about? it seems to me the bill agrees something needs to be done about dreamers? on the other hand the moderates agree something has to be done about the border? isn't this just a negotiation about price at this point? rep. brat: not really. the major issue is, will this happen again? have you fixed the issue? the bill goodlatte bill has a keep these which has to do with legal hiring and that turns up the magnet. it has the wall. the compromise bill is the goodlatte bill, you have 700,000 kids who need a pathway out of the shows. $1.8dent trump said biion and mo sd no no one likes this political anxiety. we want to solve it. what keeps you from getting daca in three years?
once you throw up the compromised deal, you get a wall,e deal, you still have the green light, the magnet is still in place. the folks coming have broken rules of law in their home country, guatemala, honduras, we do not want to go down that road. the most important thing is our sovereignty and rule of law. let's assume for the moment that the moderates say -- let's put this in. you have to figure out where these people are coming from. could you reach a deal on the amount of moy being ent on the wall, the virtual law and whether there is a past the citizenship? toa path to citizenship? rep. brat: this is not conservative versus liberal. this inobama ran on 2005.
hillary was yes on it. that is what the democrats used to care about cheap labor and wage rates going down. now they have flipped over to identity politics. they are going full open borders, they don't want the security part, the wall part. they don't want to give republicans a win. all he want to see is reciprocity, with the discharge petition which would result in a more democrat friendly bill winning, the e t most s, a full al out amnesty bill would win with 200 democrat votes. senate wered the given to the republicans and we have to keep our promises to the american people and they are left out of the debate. when you say taking care of the daca kids, could you included path to citizenship in the bill?
but we don't want to let yone cut in line. that is the issue. th wl have pathway to citizenship but they have to wait in line like everybody else. hispanics in my own district, if you look at the polling data, they don't like cutting in line. everyone should be treated equally, they get pathway to a new status were there not hiding in the shadows and fearful of deportation. y: you still need a compromise bill. called the goodlatte bill a compromise bill but there is another one being worked on by moderate gop members? we don't know the details of what could come out of that. could you include a path to verify, to get your way on century city's? rep. b i just covered that. they wanted diversity the american workerovered -- we
have not done any of that. the order matters here. 25 left got our attention, republicans went to work with 200 democrats, leapfrogging the president and paul ryan and mccarthy and scalise. taking over the house floor with democrats. that is not typical. usually we work on a bilthat goes through a committee. we whipping together a bill at the last moment, negotiating with the press. the debate should be with representatives who were representative of the american ople. they want diversity border security and wages going up and a concern coming out of the sea that we are going to take care of the american worker first. david: i can't blame you for not wanting to negotiate with the press. let's talk about the american people. go back to your seventh district in virginia, how important will display? you n oppone thadid
well, got more votes than anyone else did in the primary yesterday. a former cia agent. is this going to be a major issue in your reelection campaign? rep. brat: we listen to the people and yes, there will be a major issue because it is a major issue for the people. they will have a choice between rational policy, that senator obama voted for and ran on and clinton voted for versus a very thatsive candidate shares the vie of nancy pelo on open borders, etc. the american people don't want that. they will continue to socialize obamacare. their solution is to add another federal program on top, while the federal program is already plder itown weight folaears. they're acting like this is a recent innovation. 107 democrats voted to increase taxes 10 chilean dollars. nancy palat -- $10 trillion. l rai taxes. has made it clear
had 107 votes to raise taxes by $10 trillion over 10 years inging the economy to a standstill. you haven policy -- growth of 3%, maybe 4% according to the atlanta fed. you have historic unemployment rate lowwith african-american, hispanic community. we have good news on all fronts. it looe it is asy choice and i won by 15 points last time and i think the people are basically better off. i can see why you're tough to negotiate with. thanks to congressman dave brat, republican of virginia and member of the house freedom caucus. ahead, the winners and losers from the court decision at&t-rner merger. coming up next. this is bloomberg. ♪
♪ months, tensk 18 of millions of dollars in fees and an opinion but at&t finally got word from a federal judge in washington that it can go ahead with the $85 billion acquisition of time warner. goodfriend, david he specializes in telecommunications and technology policy. great to have you here. david: thank you for having me. david: why on earth would the government bring this case, are they in worse shape? david: it is interesting to note the judge himself in this fouron noted it has been decade since the government brought a case against a vertical transaction against, like this one. if you recall, then candidate donald trump said we should block the deal.
the head of the antitrust division had said, i don't think this presents any trust issues, book once becoming -- the ones becoming head, said there are issues. there is a lot to be said for the rule of law today. i have advocated against vertical integration and big media. logovern the case and it speaks loudly to the objective standards of antitrust still apply. shery: the rise of new technology is impacting competition analysis. it was very different when the corporal in 2011 about the merger -- when the court ruled in 2011 about the merger them. david: the judge very much emphasized the presence of netflix, amazon prime, sling tv, directv now, all these over-the-top internet delivered video services in terms of virtual and netflix.
space, the media traditional definition of video market has expanded. this judge was willing to accept evidence and relied on it to ke ruling that there is competitn f tradional companies. what is more important -- the judge made it very fact specific, media properties in time warner were not the so-called must have properties that the government said they were, meeting, there was a theory the government had that time warner could threaten to take away cnn or pbs. that did not hold water in the case. david: you said and you have said in the past you have concerns. netflix and amazon are getting big. are the antitrust laws of today, going back to 1890, can they
deal with new problems? should there be reforms? senate democrats have proposed changing antitrust laws. do they need to be changed? david:hat you're talking about is whether or not consumer welfare standard is the right standard. that is measuring the effect on consumers of prices. i don't think we need massive changes to undernes. enforcement has plenty of tools today. senator richard blumenthal of connecticut, who used to run microsoft, he is on the same page. shery: david. we are running out of time. thank you so much for that. senatoben card coming up next. ♪
estate wayn by real and telecom weakness. impact from the approval of the at&t-time warner merger. nasdaq highest on record, gaining for the fourth consecutive session. david: we now turn to mark crumpton. >> north korea has not committed to a timetable for giving up the comic weapons. president trump -- giving up atomic weapons. president says the regime is no longer a threat. the president returns to the u.s. he said everyone can feel much safer now than they did the day he took office. former fbi deputy director andrew mccabe is suing the department, saying it has repeatedly refused to provide him with documents related to his firing in march. his lawyers claimed the doj has withheld information, out of
fear of additional lawsuits. the suit in federal court in washington comes days ahead of a justicdepartment inspector general report that is expected to criticize senior fbi officials, including andrew mccabe for their actions during the hillary clintonil investigation. germany's new foreign ministe ys europe's response to a america first strategy should b europe united. in his first major policy speech since taking office, he saideurr what he called balanced partnerships with the u.s. he says this means working with washington where possible, filling voids in areas where the u.s. is withdrawing and pushing back where america is seen as crossing red lines. u.s. national team did not make it to moscow this year for the world cup but the governing body of the world's most popular sport handed out a consolation prize to north america. the 2026 location
to mexico and canada. canada, mexico and my country, the united states thank you for this incredible honor. thank you for trngs with this privilege, of hosting the world cup in 2026. >> the joint bid by the three countries beat out morocco. the u.s. will hold 60 of the 80 matches, canada and mexico get 10 games each. the final will be played in new jersey. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. crumpton, this is bloomberg. vid: thanks very much. president trump has been active on the trade front. the fractious meeting withdavid, then tariffs on $50 billion worth of goods due to take effect, with respect to china this friday. we welcome democratic senator
ben cardin of maryland, serving on the foreign relations committee. senator cardin: -- david: you will be meeting with the canadian foreignter a short time from now -- one of the country's upset with us. is canada? what we say -- what will you say? senator cardin: the president's language does not represent iciews. we may have our differences and we believe these need to be addressed, but we do not do what president trump did and walk awayour traditional allies and embrace those who are our enemies. i hope it is a meeting where we reestablish the lines of communication and the friendship. canada is critically important to the united states and the united states is critically important to canada. david: for some years the president has taken the lead on
trade. the constitution says it is up to the senate, the congress to set tariffs and determine the borders. is the senate willinto move forward to curtail presidential authority? your colleague, senator corker with a bill. is it time to shift the balance toward your end of pennsylvania avenue? senator cardin: congress these to act as an independent voice with this ministration. the way that president trump is conducting foreign policy, trade policy, is not representative of america. the united states congress needs to weigh in. i hope we can of votes on the floor of the senate, senator corker is trying to get a vote on his amendment. congress needs to reassert itself and say the way the president is conducting these ign policies is not what america is about. shery: how we go about doing that? it is being blocked from being added to the annual defense bill. you'll have to find another avenue. we're also hearing reports from
the wall street journal that the white house is going to try to language, there was another amendment introduced by senator trying to undo relieving sanctions. it seems that cones has been shutout of the whole process. how you go about it and technically do it? senator cardin: you're right about the provision, they got into the manager's package without too much controversy onleagues. that is an important provision. amendment is an congress needs to reassert with itself. republican leadership, need to recognize that the framers of the constitution envisioned an independent legislative branch of government. it is time that we act that way and take up these issues and vote. i expect on why mitch mcconnell does not want votes is that these will pass on the floor of the senate, as they
should, to stand up against president trump when he is wrong. shery: let's talk about china. the white house planning to block in some way the zte language in the defense bill. china is a patron of north korea. should we be expecting more trade tensions because of the chinese leverage in this issue? senator cardin: our relationship with china has multiple facets. we have to be able to do more than one thing at a time. north korea, quite frankly i'm not sure how that was handled during the summit. we have concerns about china on trade. we have to be able act, when china is wrong on trade. we also have problems with china in the ocean. on human rights issues. we have to be able to handle these different aspects of this relationship and quite frankly, we have to be strong. david: i want to know -- are
they different aspects or part of the same thing? is this administration linking them directly? tariffs,y we will have $50 billion worth of shipments in from china, mi up on is it possible tho will be suspended or modified because of what happened at the summit in singapore? senator cardin: if you look at zte, it looks like the president was combining national security issues concerning trade with north korea in a way that was totally unacceptable. i don't know and i can't tell you what the trump administration will do. i can tell you i would hope, we held stand up and say, no as tries to say china can continue of these of trade practices and that is ok with us. that is not ok with us. korean state media reporting that kim jong-un said in the summit the president promised to lift sanctions. you are optimistic about plomatic solution, you
favored a diplomatic solution. are you concerned the president may have overcommitted? senator cardin: let me clarify. i am not sure i'm optimistic but i favor the diplomatic path. that is the way we can resolve the issue. it will not come quickly. it comes with the united states maintaining a strong position. no concessions until north korea makes definitive action to get rid of the nuclear program. it starts with a declaration of the nuclear program, an opportunity to inspect, deals with the missile programs and a plan to dismantle. until that takes place, there should be no concessions. i think the president has already make concessions by meeting with kim jong-un and changing military exercises in the region. if we getanctions relief now without concrete steps taken by kim jong-un and north korea, to me that is a major mistake. we cannot trust what he says. we have to see action. david: good foyour thoughts
expects north korea to take major steps toward nuclear disarmament during president trump's first term, seeking to quell criticism that north korea didn't make any commitments at the summit in singapore. is a cofounder of rice hadley gates llc with us from san francisco, the key quti -- what would then,fy as major steps, what timeline would be feasible? anja: thank you for having me. we have had the photo op's. the leaders got them and now the real work begins. this is tough. major steps would include, the north koreans handing over a list of nuclear assets, including the ones hidden from intel services so far, getting inspectors on the ground to understand what is going on then
started to dismantle the program systematically. this is really tough. we went down this road. clinton administration got an agreement in 1994 and in 2002, north korea was found to have a secret uranium program that no one knew about. the bush agreement got an agreement in 2005, north korea violated it in 2006 by testing nuclear weapons. this is a long road ahead. shery: what i found interesting in the summit declaration and follow-up negotiations, the u.s. put mike pompeo to lead those and yet, north korea, a relevant high-level official -- doing no officials negotiate on the same topic for -- we know that officials note negotiation on the same topic for decades. anja: secretary pompeo is the perfect person to lead the talks. he will do so in coronation with
national security adviser ball and the defense secretary national security adviser bolton, and the defense secretary. he has the ear of kim jong-un which is what you need to get an agreement. shery: -- david: go back to first principles. have the parties agreed on what denuclearization means and the scope? the reference in the agreement was for the peninsula. know, there is i a lot of ambiguity. you put yourger on one of them. it is the statement that was put out in singapore is so vague we don't actually know of both sides have the same definition of the term, denuclearization. all of that remains to be seen. david: as we read the tea leaves, does it appear the agreement moving forward is
moving toward things china has been proposing all on,ncluding backing off of military exercises? anja: absolutely right. china has been proposing for months that asn opener to negotiation, the u.s. and south korea and japan stop doing regular litary exercises. president trump seemed to agree to that at this meeting. there has been some talk in d.c., even in the day since the summit happened, that maybe the u.s. walks that back slightly or would be more careful. no military exercises between the u.s. and south korea would certainly be a win for china. shery: what will this mean when it comes to the political will of countries like china to anja i hope they will be motivated to continue it. as much as we can be critical of china, they haeally done a lot since 2017.
they are 90% of north korea's trade. that is down substantially. it is hard to get accurate numbers but trade between china and north korea is down by at least one third. that is one of the big things that got kim jong-un to thetae. i hope they do not let up now. that is a lot of our leverage going in. atry: anja manuel, partner rice hadley gates llc thank you so much for joining us. anja: thank you. shery: mgea. time warner and at&t, department of justice, clearing the path for a merger announcement. tonight, don't miss the season premiere of peer-to-peer conversations with david rubenstein. the guest is tim cook. this is blooerg. ♪
♪ david: this is "bloomberg markets: balance of power," i'm david westin. shery: i'm shery ahn. a quick check of the stock market. dow holding steady. a level we have seen the whole week, s&p 500 is also pretty much flat. after telecom weakness, the approval of the at&t merger, we will be speaking about morning couple minutes. the nasdaq at a record high. -- around 2.9% level, pushing to 3%. this coming ahead of the fed hour and 10 minutes.st about an a hike widely expected but it is more about the outlook for future policy. dollar weakening after three days of gains, euro gaining, given ecb decisions, speculation
we could see an announcement at the end of qe. david: the u.s. government suffered a defeat at the hands of a judge that ruled that at&t could proceed with acquisitions time warner without any restrictions. we welcome a prominent member of the trust bar, logan green. good to have you with us. is the head of the antitrust department, regret that he ever bought this case? doan: whenever you lose you some monday morning quarterbacking and reconsider. i don't think the department of ice antitrust division is afraid of cases. they will challenge, anticompetitive and whether they win or lose they will do it. i don't this wildissuade them from bringing cases they think are violations. david: they didn't just lose.
he lost big-time. the judge went there 172 pages and did not find anything persuasive on law or fact. will this be cited by other people in future cases, that might not be helpful to the government? logan: absolutely true. this case ll snds edentdent, -- as prec for how companies think about mergers in the future. this will make it much more difficult for doj to challenge vertical transactions that may have procompetitive benefits. shery: how much does the case highlighted need for updated guidelines on veical merrs? this hasn't been updated in more than three decades. logan: very goodoint. the last time they were updated was 1984. rizontalergerdelines were updated in 2010. it may be that those guidelines need to be revisited.
there has been economic development of thinking since 1984 on the topic of vertical mergers. fundamentally, this case was not decided because of doj merger guideles. it was a consequence, this was a typical case for doj to win for a number of reasons. . primarily, in a vertical merger, the doj doesn't get presumption of anticompetitive effect. in a traditional horizontal merger, the government shows a certain increasing concentration of market because of the deal, gets a presumption of anticompetitive effect under an old precedent from the 1960's. that didot apply because this was vertical. doj had to prove every single element of the case and that is hard. david: put two things together. andical mergers on one hand what is going on in the technological area. aetna, a vertical merger.
the transition to digital saying, we need to vertically integrate. will we see a spate of these? logan: that is likely. vertical considering transactions on the margins of what could be done under antitrust laws, are now going to be emboldened to try them. vertical consolidation in media sectors have been happening for a long time. comcast nbc, doj approved in 2011. you have seen a trend toward vertical consolidation. i don't think that will abate. is -- what do the justice department do next? there are mergers pending that are not vertical. t-mobile-sprint for example. logan: there are elements of the judge's decision that would have implications for future reviews. he spent a lot of time in the opinion talking about the significance of innovation, the
evolution of the industry. the way the competition was changing as a result. thes static analysis of competitive effects based on traditional distribution re did not resonate with the judge. those same innovation-based arguments apply to a number of other potential deals, as you mentioned, t-mobile and sprint might be another one, where the merging parties can argue their world is changing, their industry is evolving and the transactions they are considering our responses to that and will help those companes prepare for the new world a face and provide better services to consumers as a result. shery: the doj took a look at horizontal mergers and guidelines. but this was a vertical deal. will new technologies have an impact on horizontal mergers because of this? this transaction was purely vertical.
some implications of the decision could beelevant for technology mergers horizontal or other transactions that don't fit inox there are a couple takeaways, lessons doj can learn from this. some they learned in all cases they lost. example, boj relied heavily in this case on economic evidence and customer testimo customer saying we need content or we're not going to be able to compete. there was not any substantial evidence the cla the judge did not give them credit. the last time doj lost a merger challenge was in 2008. in that case, they put most weight on customer testimony and the judge dismissed it. that cost them the case. doj learned from that in 2008. subsequently they brought a different challenge focusing on
internal documents that showed, these companies, who know th dustry better than anyone, understood the potential effect of the merger. that is very compelling evidence. doj did not have that in this case and the judge called them out. david: many thanks. very good to have you here, logan. he is from hogan lovells -- and we want you to sign up for the newsletter to get the latest on global politics in your inbox every day. shry: coming up, the fed , itdes at 2:00 eastern includes alan blinder. this is bloomberg. ♪
scarlet: i'm scarlet fu. this is "bloomberg etf iq" where we focus othe assets, risks, and rewards offered by exchange-traded funds. calling all contrarians. downtrodden dogs bark the loudest? th have the highest potential to revert to the mean. measuring liquidity here and how do you get nervous and institutional investors as the idea of fixating on an etf trading volume to look at the liquidity in the underlying stock in the basket?