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tv   Bloomberg Markets Balance of Power  Bloomberg  March 13, 2019 11:00am-1:00pm EDT

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headquarters in your, i am david westin. -- in new york, i am david westin. and even less uncertain brexit. and another jail sentence for trump campaign manager paul manafort. from washington, sean diamond on where we are with trade talks in china. it seems even less certain than it was yesterday. >> this was a week we were supposed to get some degree of certainty from brexit. theresa may had hoped her deal would pass yesterday. of course, it was defeated a second time by the stomping -- numbervotes, eight of votes. it is not quite take it off the table. that is the default under the u.k. law. if a deal is not reached or some kind of delay is agreed, which may happen in the vote that is
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to come tomorrow if no deal is ruled out today. it is complicated. we do not have greater certainty then we had a couple days ago. -- van we had a couple days ago. there a lot of questions around the future of the primacy. david: we heard from the chancellor. we want to talk about that in a moment. first, let's go to greg in new york. you paul manafort in front of a judge today. >> he is about to be sentenced in the next hour to crimes he pleaded guilty to a few month ago. his cooperation agreement blowup. he has a problem here he did not have in virginia. the judge in this case has determined he lied to the prosecutors and therefore violated his prosecution -- his cooperation agreement. she has already put him in night -- has put him in jail.
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he is almost certainly going to get a stiffer sentence than when he got in virginia. david: they was a bit of leniency -- there was a bit of leniency last time. paul manafort has been before this judge several times for misbehaving. she ended up putting him in jail because she did not trust him to be out on his own. >> he faced far bigger penalties in virginia and got a lighter sentence. he could get most of that 10 years. some of it could be consecutive. david: could it be extended beyond? >> usually it is overlapping. some of the counts be overlapping. the real fear for manafort is that one of the five -- he could get a five-year sentence that is consecutive. that bounce him up to nine years. that is what he has looking at. david: let's go back down to washington. there are things going down -- going on with china trade negotiations. the president is meeting with
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some senators today. where are we? >> what we are seeing now is the tension between the domestic political pressure that trump is under to be tough on china. we heard that from chuck schumer , telling the president he should be ready to walk away from a bad deal with xi jinping. that is a theme we will see at the white house today when he meets with senators. at the same time, there is the tension with the chinese that donald trump needs to come to the table to close the deal. we heard that they are in the final stages of negotiations. he said yesterday they are weeks away from either a good or bad result. take that whatever way you want. this trustis now in question he faces. will he come and close the deal with donald trump? will he tucked -- really trust donald trump enough to get on the plane? on theto keep his mind
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mystic politics. we are in this complicated end game. david: i talked to rob portman, the senator from ohio who will be meeting with the president this afternoon. he said he does not believe they will do a deal unless there is substantive change on both intellectual property and on the subsidies issue, which he admits are difficult. we believe the chinese will make those substantive changes? question., the big we have moved away from the idea that the trump administration would agree to a big purchase order for soybeans and aircraft. we hear this from bob lighthizer regularly that they want serious structural changes in china. the question of whether the chinese live up to their commitments is only going to be something we will be able to answer in the years to come. that is why lighthizer and others are putting attention on enforcement. the enforcement mechanism is the
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toughest part of the deal. it is one of the hardest issues to resolve. it will be the last issue resolved. david: thank you for reporting. i want to go back to london. i mentioned earlier the chancellor. let's look at what he had to say about the economy and brexit. frank, last night's events mean we are not where i hoped we would be today. our economy is fundamentally robust, but the uncertainty i hoped we would lift last night still hangs over it. we cannot allow that to continue. it is damaging our economy and it is damaging our standing and reputation in the world. david: most people i suspect would agree it is damaging the economy to some degree. the report i understand was a bit rosier than we thought. does this give theresa may a little bit of wiggle room?
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>> the main message that philip hammond wanted to convey was that no deal would be a disaster for the economy, that public finances would improve if there was a deal. he downgraded the growth forecast to 1.2% for the year. really change the picture for may. proponents of a no deal exit will say, there is all of this extra room testbed. if we leave -- to spend. if we leave without a deal, we will cushion the blow for those who are worse off. that will be a hard thing for her to push against. in consensus is, except firm -- except for a minority, most people agree with hammond that a no deal exit would be a bad thing for the u.k. economy, which is already seeing business investment decline. you do not have a crystal
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ball. i would ask you to look into it. we have a couple days of votes in parliament. does theresa may end up being prime minister the next week or so? >> i wish i did have a crystal ball. one thing we can say is that, reports of her political demise are very much exaggerated every time they come out. she is a supreme survivor. it is hard to see what more she can do if she has lost the confidence of parliament. she seems to be clinging to the hope she can bring it back. she has not scheduled another vote on it. she does not seem to have given up on it, which tells us something. the e.u. has said negotiations are over. they have nothing more to give. i think it is not possible that she could be forced to step
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down. it is not quite clear what mechanism would be used for that. pusharty can only try to her out through a vote of no-confidence once a year. they tried that in december and failed. that leaves a number of months before the formal process can be initiated. they would have to be some other mechanism. here is biggest problem. who are they going to replace her with? what solution do they have to the problem? the conservative party is divided. different potential leaders would propose solutions that might also not gain a majority of support in parliament. one of the things that keeps her in office is that there is no consensus candidate or consensus way forward. cannot replace somebody with nobody. checkt is time to get a on the markets. >> we do have stocks climbing on this wednesday.
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take a look at the dow. but the s&p 500 and the nasdaq up for a third day in row. s&p 500 gaining two and a half percent over that time. a rebound from last week's worth week since late last year. investors buying the dip. we also have crude oil trading higher. up 1.8%. this after an inventories report came out showing there was a drill down as opposed to a build. it is somewhat bullish for two of the airline companies. up half a percent. the last two days, down 11%. the worst two days going back to the 2009 fallout. that from the tragic ethiopian airlines crash. southwest continues to fly the plane. those shares have been down nine days in a row. the faa standing by the 737 max.
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we have some big gainers for some other movers including united health, up 2.1%. they are going to start reimbursing consumers directly for rebates. paypal holdings up to .4%. -- up 2.4%. giantamerica's e-commerce should be a home run. 62% by up 11.8% on the in from brookfield asset management. this will create a $470 billion alternative asset manager. finally, the pound. you all are talking to me about brexit. goldman sachs is bullish on the pound. saying that if the vote is delayed or if there is an extension, that will be a positive for the pound. it will tell you the u.k. will be growing closer to europe. so many details and possibilities. david: so many possibilities.
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thingsup, one of the few lawmakers and the white house agree on his tackling high drug prices. to ae going to talk republican senator about his plan. that is next. this is bloomberg. ♪
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david: this is balance of power on bloomberg television. we turn now to courtney for bloomberg first world news -- first produced. managerr trump campaign paul manafort is in federal court to hear his sentence on conspiracy cards -- conspiracy charges. he could get up to five years for each count. last week, a judge gave him less than four years when he could have gotten 24.
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it is u.s. aviation officials versus the world. the faa is standing by its call not adept rarely ground the boeing 7 -- not to ground the boeing 747 max. meanwhile, ethiopia will send flight data and cockpit voice recorders to europe to be analyzed. tpg has put executive dilma clash in on leave as he was charged in the conspiracy involving admissions to some of the nations expose apologist. he and other -- he was allegedly paid to help students cheat on exams. global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. missus bloomberg. -- this is bloomberg.
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david: president trump says of needs to be done to get prescription drug prices under control. alex a's are told is a big part of the problem is the rebar -- the rebate system that pays a good part of the money to the pharmacy benefit managers. >> i am sure you saw when the pharma companies put out there price increases, almost all of them said, we are checking our prices up so that we can funnel more rebates to middlemen. what kind of a bizarre system cannot be when every incentive is to higher rebates? david: we welcome republican mike braun of indiana. he comes to us from capitol hill. thank you for your time. >> good to be on. david: why don't you explain to people who might not understand how the system works. >> this is one aspect of the health care system that frustrates people. about 10 years ago when i took on the health insurance
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companies to get a better value for my own employees, i really started digging in to the entire industry. it has -- it is broken from top to bottom. let's focus on this. everybody runs into prescriptions. back when i resigned as ceo of my company, to get a prescription filled in my hometown, a generic one for 10 34.50 in place, another. only where you have huge margins, could you have a middleman that makes money by deciding how the discount is split up. it does not make sense. alex a's are is doing -- alex azar is doing the right thing to shed transparency on the whole thing. let consumers directly benefit and start driving prices down. david: do we need legislation for this? r said that the
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private sector would come into alignment. i sell that with new employees, you have to make sure that your employers get the rebate benefits. >> i would love it that way. sometimes you can use a big microphone to make a point. i am going to continue doing that. whether it was coincidental or related to it, that happened a day after i dropped my bill. it is not make me any difference. if it would cascade to where all drug companies get rid of rebates to pbm's, you put pbm's out of business for a partially up discount. if they still want to get a fee for advising somebody how to use the health care system, that is different. it is an other reason that people do not trust the health care system and the cost of it. david: there is no question that people are dissatisfied with the cost of health care. the kaiser foundation said people are overwhelming --
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overwhelmingly disapproving. some people do not use the medication they have been prescribed because they cannot afford them. to what extent with this alleviate the problem? >> it would just be the start. care -- if the health industry wants to have -- it has got to get with it by becoming transparent. the insurance companies want everything run through an insurance claim. minor health care does not need it. the big thing we need, where he spent so much money and never asked, how much is it going to cost -- never ask, how much is it going to cost? costs, i designed it to where some employees would have skin in the game to investigate what the cost was an bill an insurance plan to encourage them doing it. we cut costs by 40 to 50%.
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we had to pull teeth to get it done. the industry, if it does not yet with that, i see signs they are starting to with united health care. as far as getting rid of rebates to pbm's, they need to be more aggressive. it is about transparency. david: i want you to put on another hat as a member of the budget committee. we have requests from the administration. would you budget this way? there are projections of 3% growth. basically no recession over the next 10 years. aren't we being a little unrealistic? >> we are being terribly unrealistic. i have been a real supporter of shaking up the system, which i think president trump has done in general. i am a fiscal conservative. out hoping this is just here to start the negotiation. the fence was enabled in 2018.
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it popped up almost 70 to $80 billion. it put it back in good shape. the fact that it is so out of line and all the domestic problem and -- programs were cut, i am a believer across the board. we are never going to fix the problem in d.c. if people want their -- if people want to cut everything else. we are right on the cusp of a trillion dollar deficit. if you extrapolate it into the future, it is a trillion and a half soon. we are going to have a series of one, biggerr a big than 2008. i am hoping this is the start. i have a suspicion it is similar to business as usual in d.c. where people only want to cut what they are not interested in. david: one of the things that has been cut his funding for the faa. the boeing 737 is in the news
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right now. are you concerned that we are maybe cutting too much on things like the faa to keep ourselves safe in the air? >> there are going to be priorities in the budget in general. i don't think you can relate the current budget level to what happened with 27 37 max's. shortou have two occur in amount of time, i would air on the side of safety. a few senators have come out. i would be in the school of thought to where you would ground the things until you know what is going on. resources are not the issue in washington, d.c. spending grows and grows every year. revenues are growing at record rates. we have a discipline problem. we do not want to live like the rest of the world does, like all state governments do. we need to be freezing.
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not growing a budget by 3%. david: thank you so much, senator. really appreciate your thoughts today. still ahead, the man who grounded the boeing dreamliner when safety questions arose. we'll be joined by the secretary -- the former secretary of transportation. this is bloomberg. ♪
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david: we have breaking news. volkswagen is stopping it preparation of an ipo for its trucks unit. it says the market conditions are two turbulent. it wants to do it later when the markets settle down. they wanted to spin off their trucks. the product shift changes on both sides of the atlantic. the victim -- the news right now is that volkswagen is suspending its efforts to have an ipo for the trucks unit. the stock of the hour, this very
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important cannabis stock. a strategic advisor for the company. he is getting options on 20 million shares. if he exercises the options, he will become the second-largest shareholder of the company. the reason they are bring him on is to be a strategic advisor. i am sure you will remember the constellation brand partnering with canopy growth. other cannabis companies are scoring these major strategic partnerships. there is some hope that they will be able to facilitate that as the override chairman says they are looking -- as the aurora chairman says they are looking for partnerships in strategic goods. the fact that he has been on the board for procter & gamble is creating optimism. david: all of those companies are north of the border. if you are in the packaged goods
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business, you have to come to the united states. the chances of the united states opening up? >> the chances have maybe gone down a little bit. especially now that the fda commissioner has announced he is resigning. his departure may derail the effort to -- it may derail the effort. you saw pot stocks wadley dropping on that news. aurora was one of them. david: thank you for being with us. -- hassident has printed predict he is going to be sued. this is bloomberg. ♪ this isn't just any moving day.
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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. david: this is balance of power on bloomberg television. -- bloomberg first world first word news, we go to courtney. >> theresa may is giving up on her bags at plant.
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-- her global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. -- delayher option is to brexit in hopes of getting better terms. she has warned that a delay could lead to a second referendum for no brexit at all. -- or no brexit at all. capital goods orders excluding aircraft gained a tense of a percent. the broader measure of all goods i excitedly broke. that is -- and the trade war with china. the parent of united airlines has entered a multiyear search that has ended a multiyear search by deciding to its -- by deciding to stay in chicago. tockstone group agreed renovate. united will extend the lease by five years. u.s. health regulators are moving ahead with a plan to keep e-cigarettes out of the hands of
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teenagers by restricting sales to flavored products. the latest effort by the government to combat and up adamic -- combat an epidemic of underage vaping. figures show one in five high school students report using them. global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. david: thanks so much. president trump came to office promising to create jobs. most people hearing those words did not think it would immediately lead to constitutional lawyers seeing an uptick in jobs. of --facing a spate welcome now, samuel of nyu law school. he is a professional -- a
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professor of constitutional law. let's start with huawei. as i understand it, the president has authority given by congress to say, you should not be selling equipment to the military. >> there are two questions. this is putting much in the wheelhouse for what presidents do. it is foreign relations and national security. there is no conflict with congress. congress has acted to give him this authority, understanding these are detailed transactions. this one does not pose any theet's talk about complaint. one is due process. you have tried and convicted me without a jury trial or a court trial bench. another is bill of attainder. it goes back to the founding of our country. any merit to either of those? >> not that i can tell. the due process claim is usually a claim the government acts with outside of its normal
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procedures. here, the procedures are the president has to evaluate contracting authority within the military. the bill of attainder is when you say i am going to convict all television hosts of what ever and that just does not apply here. let's move to the tougher case. the building of the wall. the taking of the money, even though the president asked congress and the gave him some but not as much. what about that, is that >> that is al clear constitutional conflict. the constitution gives the insident certain commander chief powers. usually, those have been reconciled because congress gives the scope of authorization to the president. in those instances where the president has acted in direct disregard of congress mandate, we have had supreme court cases,
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we have had judicial intervention. most often, this has worked out between the adults. nobody wants a constitutional conflict of this sort. for there arguing president. there seems to be a couple things. pretty broad powers, we give the president a lot of authority. it is not as if congress says we do not want a wall. even democrats have said some wall is ok. it depends on how much will it is. it is a matter of degree rather than kind. >> i don't think the second point is quite so critical. i think what congress has done in the past is it has picked up the american constitution. we don't have emergency powers and our constitution. a have habeas corpus, that is very weak emergency power compared to every other democratic country. when it iss said, really a national security emergency, you can act. there is a whole bunch of statutes that give part troll --
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partial authority. always understanding congress could pull it back. the supreme court said you cannot have the legislative veto and so now, all of a sudden, we have the president off on his own on when to declare an emergency. this is a scary power because this is something that was not anticipated constitutionally and where courts generally have tried to back off hoping the political branches can resolve this. >> when president announced this he said i will be sued, i will lose in the district court. and i will appeal and lose again. and then is up in court will win. does he have a point? so. don't think i think this is understood to be a major constitutional conflict. i don't think on this one he will get automatically the reception that he expects. mayybody understands that
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president trump is of a different mind. today is is the republicans in office, tomorrow it will be the democrats. if this is an emergency, so his health care comic-con -- health care, climate change. there is a proposal to pass a law that says we will not interfere with you, but we will say you can never do it again. no president can do it again. does that strengthen his position? if they if they pass the statut says that, that is fine. chances of getting that through the house seemed to be zero. would it be implicitly a
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would it be implicitly a ratification? >> absolutely. the point you made earlier is key. would it be implicitly a ratification? >> absolutely. the point you made earlier is key. the courts don't want to get involved here. that scene, as a political accommodation, this may be a tough one, we will give you this political accommodation, this may be a tough one, we will give you this much and no more. congress has spoken. the one time the supreme court really, strongly, interceded the one time the supreme court really, strongly, interceded here was back during the korean war when president truman tried to nationalize the steel mills. the supreme court said when it is clear that the president is acting in direct confrontation with the congressional mandate,
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then we have got to come in and and his powers at the lowest step. said ok, that is the issue. >> you said the korean war. said ok, that is the issue. >> you said the korean war. traditionally, this conflict comes in times of war. what about personal situations like the pentagon papers? have we ever had a situation where there is not a war going have we ever had a situation where there is not a war going on where we have a confrontation between president and congress over emergency powers? >> no. it has been understood that this is extraordinary constitutionally. therefore, you don't do it unless you really, really have to. when president trump said not only is it an emergency but i am doing it because i don't want to wait for the congressional authorization, that is in disregard of the constitution. authorization, that is in disregard of the constitution. >> there is that. i could have done it the other way, but it would have taken me longer. >> that is throwing it in the that is throwing it in the face of congress. >> you can feel them cringing. >> it will make the supreme court cringe. there has to be some threshold here. >> thank you for being with us. bonnie and richard rice. coming up, the former secretary of transportation on the decision not to follow the rest of the world and ground the 737/max eight. that is coming up next. this is bloomberg. ♪ ming up next. this is bloomberg.
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westin.avid the crash of ethiopian airlines boeing 737 has divided world aviation regulators. theireciding take ground craft. the faa deciding otherwise. we talked with jim hall, he said the americans were making a mistake. is a huge mistake for both boeing and the federal administration. it is basically, sends the wrong message to the world. -- it is basically -- sends the message -- the wrong message to the world. david: someone who has been called upon to make a decision to ground a different aircraft when he was secretary of transportation under president obama. dust comes to us today from washington. thank you for so much for joining us. comes to us today from
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washington. thank you so much for joining us. is the faa making a mistake? faa, innk the cooperation with boeing, should get their inspectors in a room and start inspecting these planes. ground the planes. get the faa inspectors. get the boeing inspectors. get these planes inspected. give the flying public 100% assurance that these planes are safe. happens, dotat remains a high standard for safety. david: when you had to make that decision about the dreamliner, give me the arguments on the other side. these are decisions you make in high positions of government. they are not easy. what are the considerations of the other side of the decision? >> they are not easy. when the dreamliner was having fires, and we figured out the lithium batteries were being there, we said we will
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ground these planes and make sure these fires don't take place anymore. i obviously talked to our friends and cargo -- colleagues are notaa, these pleasant conversations. they are conversations that need to take place. decisions need to be made. if the number one priority is safety, which it is, then this has to be done. it should be done in this instance. david: we are showing a graph of the rate of accidents, it has been going down consistently. me ask you about the faa. does it have the funding it needs? the president is now proposing further cuts. some people are saying things like self certification may be raising the risk of it. >> self certification is fine.
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when these incidents happen, somebody has to take action. it has to be the secretary of transportation in collaboration with the faa. standf the faa will not in the congress. proposes andation congress disposes. is enough safety minded people in congress, they will make sure that the faa has every resource possible to maintain a high level of safety. david: if they maintain their position, do you have any sense of a time horizon over which we if theseate to know incidents are connected or if there is some problem with the aircraft? one of the top safety agencies in our government is the ntsb. the national transportation safety board. they do a great job and they are
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very professional. they take their time. this idea that we will wait until they come out with a recommendation is nonsense. that will be a year from now. it is well within the power and authority of the department of transportation, in collaboration with the faa, to ground these inspection, save the american -- say to the american public these planes are safe. we don't have to wait for the ntsb. david: when the dreamliner incident occurred, were there nearly as many dreamliner's in-service as there are 737's today? it would be disruptive if we grant -- grounded them for a while. >> they have already been grounded. the disruption has occurred. , europe have made a decision to ground the planes. the disruptions have begun.
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other countries and other regions of the world have made the decision that they will not fly these planes until there is 100% assurance they are safe. david: does congress have a role here? we are already hearing from some members of congress. >> we are also hearing from the chairman of the commerce committee from mississippi. he will hold a hearing. we are hearing from a number of senators that the planes should be grounded. many of them, including senator ted cruz, who is the chairman of one of the top committees on the commerce committee, is for and makinghe planes sure they are inspected. when these kind of senators with this kind of influence get involved, there surely will be hearings. david: i want to turn to
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infrastructure more broadly. we recently spoke with the command correct governor -- connecticut governor about the need for infrastructure. listen to what they had to say. >> we all have the same goal, we want to see somewhere close to a trillion dollars invested in infrastructure. it is broadband, water systems. >> we have not invested in transportation. a big emphasis on fixing our transportation system. david: i hear an agreement and yet nothing seems to get done. are removing any closer? >> i had the privilege of testifying at the first transportation committee in the house chaired by peter defazio. what i said to them is pass a big bill and pay for it. raise the gas tax. use tolling. use public-private partnerships. use of vehicle miles traveled.
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use a combination of things to fund it. make it a big ball bill. raise the gas tax at least $.10 per gallon. index it to the cost of living. youwill have a pot of money can work with. there is no debate in america about what needs to be fixed. america is one big pothole. people are sick of the potholes. they are sick of the interstate crumbling. we need the resources. house willeve is the the a big ball bill, raise revenue, and then it will be up to president trump to really come out full force and say to the senate pass a big bill. if president trump gets behind this, boom, we are back in the business of building infrastructure. david: is this an ideological issue?
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the will call it a tax and president's base won't have -- won't want to have a raise in taxes. is that the main problem? >> i have heard the president say he would be in favor of a the gaslon increase in tax. i have heard other people say $.10 per gallon. republicans don't like to increase taxes, but the gas tax has not been raised since 1993. 25 years, almost 25 years. everything else in america has gone up. gas prices are relatively low. now is the time to do it. combine it with other funds. it will take the president to get behind this to convince republicans in the senate this need to be done. in the lasttes three years have raised their own gas tax. not one politician has been thrown out of office for doing that. david: they are raising a larger question. one of the people we talked to
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was the connecticut governor. they will put tolls on their roads to pay for infrastructure. a lot of people outside of washington, getting tired for waiting to washington -- waiting for washington to do this. they cannot do it on their own, they simply don't have enough money. bridges,lly deficient they are very costly to fix. interstate crumbling. very expensive to fix. the states can do little things here and there but they cannot do the big things. the tunnels between new jersey and new york need to be replaced. that cannot be done by new york and new jersey. the federal government has to make a huge commitment here. the way they do it is provide the resources to get these big projects funded. david: one last question about the boeing situation. crossed saying the canadian government is grounding boeing 737 max aircraft. is there a political hydraulic
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pressure on the faa when it is the only one left, can they resist that? is a bigre there debate going on within the faa and the department of transportation, and the trump administration. how long can we hold out as the lone ranger? perhaps, it is a good idea to do some inspections on some of these planes to give the assurance to the world community and to the flying public. david: thank you so much. former u.s. transportation secretary. always good to talk with you. paul manafort is in court in awaitingn dc right now his sentence. an update on that next. this is bloomberg. ♪ ♪
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david: this is balance of power.
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i'm david westin. paul manafort is in court awaiting his sentence. he says he is sorry but the judge is saying he is not being straight with her still. greg ferrell covers the case. she is showing no mercy. it is a completely different scenario, we saw last week in virginia where the judge showed a lot of deference to manafort. the judges castigating him for the lies he told while he has been charged. the lies that got him thrown in by her into prison. this recurring theme of no collusion, there is an inference that he should not be charged. he is demolishing that saying conduct is -- irrelevant,sion is whether he lied to the court. lied to the prosecutors as well. this is the person they said
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don't talk to the witnesses. he went and did it. he had been warned not to talk to witnesses and went ahead and did that. he had been warned about his conduct having an op ed written in ukraine defending him in violation of a gag order. ofre are multiple instances him not being straight with a judge. she is letting him hear it. david: and you have the prosecutor. says he lied to me, did not tell me the truth. jury,lied to the grand the fbi, the court. she has a much smaller number that she can throw at him, but she will be much more firm, much more tough then he the other judge was last week. -- and then the other judge was last week. david: -- greg: i think that continues. part of his agreement was that he would not appeal sentences like anything under 10 years.
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he would have a difficult time getting out of whatever she will throw at him. david: when this first happened, we have the real issue was whether it would turn. from what we have seen, he has not done that. greg: he has not. last september, when he lost one trial he agreed to cooperate. turned out he did not cooperate 100%. he will not get the benefit of that. david: thank you so much for reporting. coming up, the european close. the show will have coverage of all that develops -- developments surrounding brexit as debate continues in parliament. live from new york, this is bloomberg. ♪ ♪
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this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. guy: 30 minutes left in the european trading day.
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from london i'm guy johnson. , vonnie: in new york, i'm vonnie quinn. this is the "european close." guy: let's talk about where we are spirited about continues to rally. takee watching the debates place in parliament right now it we have a series of things taking place today. the debates in the house of commons is about whether or not the motion put forward by the government takes the no deal brexit off the table permanently or temporarily. then we have this bellman amendment. and then we have the malt house amendment as well, which points parliament toward a managed no deal brexit. a a lot of debate about where the u.k. is going. the pound continues to rally into the market believes we are heading for an extension of article 50. and european stocks are up, up by 6/10 of 1%, but overnight we saw a dip, a rare dip for the
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chinese markets. vonnie: in the u.s., we are awaiting sentencing for paul manafort. we will bring you headlines when we get them. canada is now grounding in the boeing 737 max 8's. it started out with a balance of 2%, but it has lost 10% of market capitalization. s&p 500 is up, going higher as the day goes on. we have two of the best performers here right now. although we did go below .26% overnight, we are back up. and inventories for crude oil from earlier on it we see. it trading around $58 mark guy: let's go back to the brexit story. parliament voting later on the prospect of a no deal scenario, or is it? theresa may saying the deal that was voted our last night is the only one of her grabs.
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for more will bring in our bloomberg opinion columnist. let's talk about, first of all, theresa may's deal. it was voted down for a second time last night, is it dead? >> no, it will never die. ote, we will possibly see this again next week, but i think it will be after the summit of the european leaders. if there's anything that comes out of that, which at the moment looks like nothing, but i think she will have to come again. if may come out with the saying there will not be a delay, or they will sanction the european countries with a lot of conditions, vatican would offer a window perhaps to present -- that would offer a window perhaps to present the deal again. even though they will issue 10 billion less -- next year, this has not budged, because everything -- everybody thinks this will get through.
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and it will be some form of managed, other former do, customs unions and all that. everybody is looking to the upside, no downside. vonnie: we have a sentence for paul manafort. he will serve an additional 43 months to the virginia sense handed down last week -- sentence handed down last week. so a total of six years for paul manafort. a total of more than six years to be served by paul manafort. we were waiting. on this sentence in the last few minutes the judge was a speaking. and now we know that paul manafort will serve more than six years. we will return to this story with some context in a moment. marcus, what is the market waiting for? is this a just watercooler talk? lookteresting as it is to at the details politically and who is doing what, ultimately,
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you know, does the outcome make a difference to the markets? marcus: it will. at the moment, this is watercooler talk. that is a good way to describe it. this is parliament looking at its bellybutton, looking at everything, pulling itself apart without coming up with any cohesive answer. we will get a little bit closer to it tonight, but not much. the nonbinding votes. parliament does not want a no deal exit, but that does not mean it will not get one. so the question is whether or not there will be some form of definitive answer, but i do not think we will get it today or tomorrow. it is something that as we get closer to march 29, finally at some point we will get an answer, or it will be no deal brexit. guy: theresa may is resisting the idea that parliament will have votes to figure out if there is a majority. is that smart? marcus: she has been forced into this.
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itn so, as parliament thinks can take control away, the executive will grab it back and i am sure she will work her way through the process. these things are more like going through the motions, trying to keep the cabinet on side, because at the moment her cabinet has split into three different factions. the markets are taking a very calm view of the and until we get clarity i think there are not great expectations moving much. the gilt market is not taking too much pride on this, yields are up, not down. and sterling is flatlining, a little more volatile, but within that range. we have not taken out the highs of february, or lows we saw much before that either. so we are left in limbo-land. 1.3224, what do you see
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related to sterling, whether it is risk on or risk off trades? marcus: i think it is for the brave. it is great if you are prepared to get in and out. i think that people certainly, yesterday, were getting excited that a deal would happen, but we were proven wrong. scared ofct that it people who may be were more brave on sterling. nonetheless, the duration of travel, despite that massive loss yesterday that shows you the instincts of the market is for sterling to go higher. i think that is brave, because i think there is a risk of no deal. regardless of whether you think it is good or bad, the chance is still there. i'm surprised early and is doing so well. if a deal does come through, which is probably the most likely thing, then sterling will be higher. guy: limbo-land, that is where we now live. marcus, thank you.
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vonnie: back to the breaking news on paul manafort. a total sentence of more than six years, this following a second sentence. in fact, that sentence may be more than seven years. we will bring in greg for the final count. we were waiting for the judge to be finished with remarks. what is the current picture for him, for paul manafort? >> 7.5 years. he look at credit for survey nine months. d to lastis -- compare week's relatively light sentencing, this was pretty harsh. does this mean in terms of the wider story? there was a sense that maybe the original sentence was light. clearly, this has been changed. is this an indication of how others can be expected be treated as well?
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greg: i think the thing to keep an eye on is whether the sleep -- this leads to a pardon. one of the reason he has hit so hard is because of the cooperation deal that fell apart, he lied to prosecutors and the grand jury in the process of attempting to cooperate. and the judge noted that and hit him hard for it. so why did he lie? one there he is he wanted to get favor with the administration. he has been praised by the president. i think the long game, the game he has been playing, is what we will see happen next, whether or not he gets a pardon. vonnie: the judge criticized the argument that he would not have been charged if not for the special counsel. she said that no collusion mantra is a non-secretary zinke, it is not a plea for leniency. what does this do in terms of paul manafort's ability to request a pardon or get a pardon, will the president pardon him? greg: we will see, but this puts
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more pressure, or at least raises that hats pitcher -- raises the temperature on the president wanting to pardon him. if he is going to do a long stretch, he might think i will go into what i got, probably too late for paul manafort, but he will probably have to think about that. if the president is thinking about pardoning him, this heavier sentence is an impetus to do that. vonnie: what does this mean in terms of the robert mueller investigation, what is the bigger picture, or does this just close this chapter for now? greg: it closes the chapter. it is incremental information that paul manafort could've helped with. rick gates has been extremely helpful to the mueller investigation. we will see the report, or it is expected to be filed, if not within days, it will be filed at this month. vonnie: thank you.
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much appreciated. guy: going back to westminster. robert walker is the undersecretary of state, weh it comes to brexitn -- when it comes to brexit. good afternoon. the first question is a straightforward one, is the withdrawal agreement dead? no, i do not believe it is. i think that we will see something similar coming back to the house of commons before long, because the choices before us are really to leave the eu with a deal, to leave without a deal, or to ignore the referendum results. two of those are not good choices. i think that leaving with a deal is the best choice our country can take. and right now that is what michael is making the case for. campaign, andve that is what he is making the case for in the house of commons. guy: the motion this afternoon, does it remove the risk of a new
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deal brexit? >> i think it reduces the risk, but the reality is there is no way of removing the risk altogether, except for getting a deal. so colleagues in the house, who i know want to make sure we leave within agreement, need to recognize that the eu says this is the only agreement on offer. they need to recognize that compromises need to be made. and i think that the eu also needs to recognize that steps were taken to adjust the house of commons, but there are still clearly concerns about the nature of the backstop and what would happen in this and are you that people felt that both sides had worked in their best endeavors to achieve a deal, but there still was not agreement. it has been clear that that was a major concern that led people to vote the way they did yesterday. vonnie: undersecretary walker, what do you want the eu to do or
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put in writing in order for this to please all the constituents in parliament? >> i voted for the deal yesterday, i voted for a previously and i will continue to vote to exit the european union with a deal, i think it is the right thing for our country to do, but clearly what we have heard is a degree of concern, particularly about the attorney general's advice on the legal risk, which has not changed. on my own reading of the advice, he was recommending to people to support the deal. he felt the balance of risk -- that this was a deal worth supporting. but the wording around the legal scenario,e had in one the scenario where both sides had worked hard to address the issues of the backstop, but were not able to reach agreement at the end of the period, i think that is where the outstanding concerns remain and i know it is something that the secretary of
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state pushed hard on over the last few days. guy: minister, why doesn't the house have indicated -- have indicated votes to find out with a majority is for, then the u.k. can take that to the european union and say this is what we want? because we are pretty clear on what we do not want at the moment, but there seems to be mystery around what we do want. >> i think -- we have to achieve two things, we have to achieve an agreement as to whether u.k. wants, but also recognition of what is negotiable. we have an agreement and political declaration that delivers on key aspirations with regard to trade, with regard to our future relationship with agencies and programs, which has widespread support in the house. but we are looking at crucial issues, such as they need to avoid a border in the ireland area, and are no deal approach.
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i think the issue with the argument around indicative votes, there could be something tomorrow that suggests this and the house can consider that, but the issue of the argument is you can have these indicated votes on things that may not be possible, either on negotiation or as a realistic position for the government to take, and that would not help the process. we have had votes on custom unions, on people's votes, and those have been rejected by the house of commons because of the concern people have about the u.k. having an independent trade policy. guy: robin walker, thank you. vonnie: first word news now. paul as we have reported, manafort will serve 7.5 years for felonies uncovered as part of the special counsel's investigation into russia election interference in 2016. a judge sentenced paul manafort for illegal lobbying and witness tampering. he will serve 43 months on top
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of 47 months he already received. the sentence it was well short of the 34 years he could've received. and he could still be pardoned by president trump, who has stood by him through his prosecution. nancy pelosi says the chamber will not consider a public in legislation intended to give congress more power to block an emergency declaration from a president in the future. the hope is that president trump would endorse the plan and more republican senators would oppose a separate resolution blocking the president's current emergency declaration. willpeaker says the house not take up the legislation vote to give president trump a pass. u.s. aviation officials versus the world, the faa is standing by its calls not the temporarily grounded the boeing 737 max -- ground the boeing 737 max following a second crash in five months. hong kong and india joined other parties that have grounded the
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airplanes. ethiopia will send the flight data and cockpit voice recorders to europe to be analyzed. the chancellor of -- is warning that leaving the european union without a deal would damage the u.k. economy and leave people less well-off. he says that the rejection of theresa may's brexit deal has created a cloud of uncertainty and urged politicians devote to rule out a not brexit deal in a vote later today. >> the idea that there is some simple, readily available fix that can be deployed to avoid consequences of a no deal brexit is just wrong. mark: the chancellor unveiled new growth forecasts with the outlook for this year cut to 1.2% from 1.6%. though he added the economy is "remarkably robust." global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700
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journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. vonnie: thank you. hong kong, lebanon and thailand join a long list of countries abandoning the boeing 737 max aircraft on the heels of that fatal crash in ethiopia. this is bloomberg. ♪
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vonnie: in new york, i'm vonnie quinn. guy: in london i'm guy johnson. ,vonnie: paul manafort has are saved his second sentence. it will be a total of more than seven years for paul manafort. now we will go to washington dc
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and the u.s. legal reporter who was inside the courtroom. andy, tell us about the judge and the comments the judge had for paul manafort. pretty tense, i imagine. andy: she was cross with him. she criticized him for lying both in the lead up to his being charged, after he was charged, after he pleaded guilty last year. she criticized him routinely for what, to her, even through the proceedings today seemed like a resistance, if not a failure to accept responsibility for what he had done. paul manafort gave a more heartfelt, a husky voiced allocution and addressed the judge today, expressing responsibility more forcefully than he did last week in
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alexandria. it did not really seem to help him, as the judge sentenced him to 60 months on one conspiracy count, and the illegal lobbying, and 13 more months on obstruction of justice and tampering with witnesses. the first 30 months will run concurrently with this sentence from last week. 33 more months on top of the 47 he will already serve. vonnie: and we do not know whether the president will pardon him at some point. but i want to know about this judge, because roger stone is in front of this judge, will this decision and comments here have any impact on roger stone and his defense? andy: the judge made it clear, as did the judge last week, that this is not a case where referendum about whether or not there is russian collusion with the trump campaign in 2016. the roger stone case is
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tangential in terms of what he might have gotten from wikileaks during the election, he is in trouble with the judge for possibly violating her gag order with an introduction that came out that he did not tell her about last month. i do not know if i would want to be roger stone tomorrow, given the demeanor of the judge today. vonnie: thank you. guy: here is abigail doolittle. u.s.have a rally in the all higher, the nasdaq up for a third day in a row, the best three days since early january. a rebound confirmed by the fact that the vix, the fear index, is lower. not a lot of fear across assets. wewe take a look at a chart, will see that multiple asset classes are feeling good. yellow is oil vix, blue is bond s, and in purple we have a
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currency vix. you see the spike later last year, all lower than last year at this time, except for oil. some complacency out there. and the bulls out on the financials. we will take a look at the banks. big banks rallying. pullingave the bonds back a little bit, so that tells you that the yields are higher and helping out the banks on the day. guy: thank you very much indeed. pressure continues to grow on boeing, canada grounding the boeing 737 max within the last hour. joining us is ben. for candidate to do this, this is significant as well. what do all these agencies around the world know, because we do not still have details on the black box, so this is a huge step for the canadians to do this. ben: we saw the european safety agency, the step to ground the planes, that was a remarkable step because usually they and
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the faa are on point, it is mutual ground into they look to each other. the faa regulates boeing. but for candidate to step up, they really look to the faa for this kind of guidance. so candidate was one of the few allies the faa had left in terms of countries that had not decided to ground the aircraft. guy: these safety agencies, they do not know what is in the black boxes yet, are they looking at other data which could be encouraging them to make these moves? ben: it appears that this is whether the conflict is between the faa and other regulators, that there is satellite data recovered, just taken from the satellites that keep track of the aircrafts. and canada and europe, they seem to think that this is sufficient enough to ground the aircraft. the question is for the faa, which is quite firm that it is not conclusive enough towards that action. guy: how big of a snub is this,
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that the black boxes are going to europe? ben: we do not know where they are sending them yet, perhaps germany or france, or the u.k., but it is a snub to the faa. it is a boeing aircraft. ge engines from the u.s. so it is unusual that this will not go back to boeing. guy: what is the timeline, once the black box arrives come how quickly can we understand what happened? examples is an atypical because of the groundings worldwide. the reaction has been remarkable, so i imagine there is pressure to try to get as much data as possible and as quickly out to the public as they possibly can. guy: airlines are lining up, saying, who will foot the bill? who will pay? for norwegian, which is really struggling at the moment, how critical is this issue? ben: that is an airline that has suffered repeatedly, issues with engines, which also led to
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groundings. and they had late deliveries of their boeing 737 max, so this is another thing where a company like that that is struggling with cash flow, it is a question on whether they can get compensation and how quickly they can get the cash to help pad their books. guy: cash flow critical as ever. ben bringing us the latest on what is happening with the boeing. we are just around three minutes away from the end of regular trading. 40 ftse is down, but the cac is leading with a 6/10 of 1% higher. this is bloomberg. ♪ want more from your entertainment experience?
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just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. 30 seconds to go for regular trading. the london market is lagging, but the pound is higher.
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trading higher on brexit news, not up by much, but up 1% or a little bit more. the french market is the standout today. let me show you the numbers. said 1.50 is where the ftse 100 is trading. and not really much of a move. down within a point, what am i talking about, absolutely flat. the cac 40 i want to focus on. oil stocks doing quite well. on theond-biggest gainer cac today is airbus. we were talking about blowing a moment ago. you can understand why this point has been across, they think that airbus will struggle to make gains in terms of the narrowbody fleet, as a result of the trials boeing is going through with the max, however just incrementally some are stillsome that
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talking about may be making a shift. but airbus is one of the reasons why the cac 40 is outperforming. take a look at these other stocks in europe to give you an idea of what is going on. vw is one worth paying attention to, up by 7/10 of 1%. it is trading strongly. and the auto sectors are doing quite well today. speculationdown, earlier on that the execs in asia, at the center of the investigation, had gone missing, but wirecard says that is not true. it is still down. and standard life, gilbert is losing his co-ceo position over there, so one of the biggest names in asset management in europe is stepping aside, let's put it that way. and it is trading up.
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here is the volume story. it is solid on the volume today. theblue line in white line 30 day average and where we are, pretty much in tandem. european stocks generally reasonably well bid. that is a look at the european close. vonnie: it is the third day of a bounce for the s&p 500, monday through wednesday higher after drops last week. being led higher by take two interactive, unconfirmed speculation of a takeover earlier on. that was doing the rounds and it seems to be bringing up that stock. crude oil inventories coming in, not as high as expected, but it is a build. and we are around $50 a barrel. i want to point out the 10 year yield. we did just below 2.60 earlier on, now holding around that mark. we had a bounce back earlier on for boeing, after things seemed to have settled, but on
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news that more countries are grounding that aircraft, now it is going lower. 11.7% lower in the last three sessions. guy: thank you. going back to the brexit story. no deal is on the docket tonight in the house of commons. we effectively have a government motion that is designed to take no deal off, for now. we do have an amendment that will be voted on which would take it off forever. and the author of "eu wargames" joins us now. theresa may's deal, dead or not dead? >> not dead. we have been in this studio before, a year ago, wondering how long theresa may's tenure can continue to run. this deal is the only way that i
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can be an orderly brexit, unless the conservative party changes its red line. the eu is not reopening the agreement and there is no renegotiation, so it is her deal, no deal or no brexit. guy: which of those is most likely to happen? nina: i will still put her deal on top. i know that sounds crazy, but if you look at all the options, they are all on likely. -- all unlikely. but i think that the parliament will vote that they do not want no deal and the only way to do that is by voting for her deal. the least popular option, given the referendum and how divided the country is, is to revoke article 50. i do not see that happening. i would say a second referendum is even less likely than a no deal brexit. vonnie: parliament is not able to vote yes to anything positive. it will vote yes today, but that is for a not a no deal scenario,
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so how do you get them to vote yes to something proactive or positive? nina: that is theresa may's gamble. as the clock runs down, i think that she is hoping to bring it back for a meaningful vote three, then persuade parliament that if they do not vote for it now it will be in no deal brexit. it would be a devastating blow that the no deal brexit would deliver to the country, something that most will not be willing to take. but you are absolutely right. if they vote down a no deal brexit today, that does not mean anything unless they are willing to vote for the legal instruments that would prevent that from happening. the only thing that would prevent that from happening is requesting an extension, kicking the can down the road, or revoking article 50. vonnie: the main problem is there is no conception of what a divorce is. at least, you know, the
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conception, some people agree with parts of it and do some people do not. we will still have a irish backstop problems. we will have the question of what happens with various industries. europe will not think of anything new. nina: if there is a new deal brexit, the irish border issue will not go away. you will have some hard-core brexiteers saying in the event of a no deal, we will not have a border and we will continue trading, but that is going to be -- there will be a de facto border. in order for the u.k. to come back to the table with the eu, the most important trading partner there, you can bet that the first thing the eu will say is, if you want to reopen talks at this time, the first thing we will put on the table is the backstop. so the idea that by voting down the deal in a no deal scenario you can escape this choice is simply nonsensical. you will have to make that choice under even worse
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negotiating conditions. guy: we are watching ken clark speaking in the house of commons, the currents chancellor -- -- the current chancellor was there earlier on. he hinted at the fact he would want to see theresa may backing a softer brexit. i am assuming he means a permanent customs union with the eu, which is what the labour party is talking about, or going for a norway plus agreement which would mean they stay in the customs union and the single market and effectively have to deal with the free movement of people. what is the chance of the u.k. going down this road? if you were to put those options in front of the house of commons, what kind of majority with these command? nina: i do not think either one will be put forward, theresa may has advanced a hard brexit in her deal, where you see the u.k.
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leaving the single market and customs union. nonetheless, there is a majority in parliament for a softer brexit, a kind of customs union membership, but of course theresa may will not put that on the table, even though she's adjusted -- she suggested she might do that, because it would split her party. i think that even though philip hammond is concerned with the economy, there are other considerations at play and for theresa may, the prime minister, one of her main considerations is to end the free movement of people. guy: breaking news. we will leave it there. thank you very much indeed. on paulbreaking news manafort. he has been indicted in new york by state prosecutors. this is crucial because president trump does not have pardon power over state charges. that is why all eyes were on the state prosecutors, given the paul manafort did get a 7.5 year
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double sentence earlier today and has served and will continue to serve some of that, now the presidential pardon potential is going away. he has been indicted in new york by state prosecutors. so, a significant development, the prosecutors claiming that paul manafort lied on mortgage loan documents. and the manhattan district attorney has filed criminal charges. we will keep you up-to-date on all the headlines regarding paul manafort. now first word news. has: actress lori locklin turned herself into the fbi. she and felicity huffman are among 50 people charged in a college admissions scandal. parents were accused of bribing college coaches and other insiders to get their children into selected schools. loughlin and her husband allegedly played $500,000 to have their two daughters labeled as recruits to the university of southern california crew team,
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even though neither one is a rower. emergency crews in nigeria working to rescue dozens of children from the wreckage of a collapsed building that houses a school. officials say as many as 100 children may have been inside the three-story building when it crumbled. citizens have long complained about poor construction and a need for better inspections across the area. witnesses gathered at the side of the accident, they said that the building had been marked a sign that "xx," it was to be demolished. a leading rights group says the european union states have been complicit in the violence against thousands of asylum-seekers at the croatian-bosnian border. amnesty international says governments are not just turning a blind eye to the assaults by the police, but helping to fund their activities. croatian authorities have denied such reports in the past. and u.s. health regulators
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moving ahead with a plan to keep e-cigarettes out of the hands of teenagers by restricting sales of most flavored products in convenience stores and online. the new guidelines are the latest effort to reverse what health officials call an epidemic of underage vaping. federal law bans the sale of e-cigarettes to those under the age of 18, but government figures show one in five high school students report using them. 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. i'm mark crumpton. this is bloomberg. back to you. guy: thank you very much indeed. let's check or the stocks have settled. we are through the auction process. a bounce back for the ftse 100, up seven points. it finishes in public -- in positive territory. dax going down a little bit. the cac is reasonably flat. the story today is airbus,
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trading higher. do not forget to tune into "the cable" show as you are getting in your car. you can find it on digital radio and all of your bloomberg devices. this is bloomberg. ♪
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vonnie: breaking news, paul manafort has been indicted in new york by state prosecutors. he will face 16 charges in new york. charges related to mortgage fraud and falsifying records in the first degree, as it relates to paul manafort. this is important because the president does not have pardon power when it comes to state charges. and it all comes on the heels of a second sentencing of paul
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manafort, which pushed his time to be served to 7.5 years. here is the timeline. earlier today, he received a second sentence from a federal judge, that pushes his time in jutta 7.5 years. the question over pardon power would have come up at this point, but now we are hearing he will be indicted or has been indicted by state prosecutors in new york interfaces 16 charges in your state court, for which the president will have no part of power, if he is convicted. guy: time for a bloomberg exclusive with a major player in the mortgage market, erik schatzker sat down with a cochairman and co-ceo of killing partners. partners. >> we started to use them as a way to provide hedge, partly because of the weakening
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fundamentals and underlying credits, probably because of the weakening characteristics of those instruments themselves. >> how big a deal is this to the firm? >> enough to provide insurance in downturns. we saw it helped in december and we are looking at the characteristics of some of the underlying properties. it inherently has some of the lower quality commercial real estate mortgages, but today the percentage of those assets that are interest only loans has increased dramatically. earnings are starting to miss projections and are actually down in the fundamental credits, as opposed to being projected to be up. values that are comfortably above 100% in a fair bit of some of those portfolios, even though they are still paying coupons. >> some people say that what is happening in commercial real estate today is reminiscent of what was happening in
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residential mortgages before the financial crisis, do you see those parallels? josh: i think it is an overstatement. i think that the layers in the edbs world were very thin, pil under debt. and there were practices causing excessive issuance of poor mortgages back then. i would not say that is the case with commercial. however, we should not forget the commercial real estate is 173% of the value it was at at the peak before the crash in 2008, where residential is only at 110%. so there is a good bit of room to fall. >> prices are 73% higher than the previous peak? josh: yes, and that is facing secular headwinds as well. we have heard a lot about retail, how retail is being hurt. we have something like eight times the square footage of germany per capita of retailing.
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we do not need all of that retail space. >> that is where i go back to mortgages, again, i know that you say the parallels are overstated, but there are some things better -- things that are the same. there is oversupply, the fundamentals are deteriorating, and in a structured product there is deteriorating collateral quality, structural quality, those are all the same. josh: i would not get as alarmed -- i mean, no, i love it. it is a great hedge. it goes against the market, it has structural headwinds and bad lending practices have helped. you have the basic issue of retail being of our stored. that is all great. but a residential mortgages, you had an incentive of having massive amounts of issuance with no down payments, causing no price discipline, as well as a healthy amount of poor
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documentation and other things. some things in residential were a caricature of the extremes of the market, and i do not think that is the same thing with commercial mortgages. but i do think that they are awfully short right now. >> give me a sense of scale, $25 billion firm, this accounts for how much of the eminent -- josh: a little over a billion dollars. >> that a substantial. when you talk about hedging and they need to hedge at this point, would you say that canyon is being cautious about how it is positioning? josh: our long exposure is probably less than it has been in recent memory. our equity exposure, including post bankrupt equities, is something below half or around half of what it was maybe last april or so. saw the guess, we
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fragility of the market in december and we think that there are warnings in the overall macro economy that are more than just, that are more than just noise today. you are seeing fundamental weakening in china. weakening in europe. you have seen the limits of monetary and fiscal policy and its ability to extend out a long been. -- boon period. it is hard to see rates being lower than today. mario draghi, when he spoke about pushing off any reversal of quantitative easing, you could read that either as a bullish signal, or as a sign of fear. i read it as a sign of fear, about the slowdown. and we are part of a global economy. so i think it is time to be cautious. >> how do you express that caution? joesh: lowering total exposures. ahving event oriented situations, where they are much less market dependent.
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and adding hedges. constructing a portfolio that is going to be less correlated to things like duration, just rates, over all beta and market exposure. i watch the daily fluctuation of our pricing versus, for example, almost any market index, any type of beta, and we have really consciously dropped that dramatically. >> how big of a cash position do you have? josh: well over 20% right now. >> that is relative to what a year ago? josh: close to flat cash. guy: that was josh friedman speaking with erik schatzker. now our stock of the hour, shares in the retail index ara with its biggest drop this year. emma, why?
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emma: sales growth is slowing. the sales growth was 3.2% last year, compared to a few years ago, in 2016 it was more than 15%. we also are seeing an issue that is affecting retailers, that is growth pressure. the company with an intense environment from competitors, it lost sales, that led to competitive sales loss. but they do think that sales will improve this year. vonnie: thank you so much for that. this is bloomberg. ♪
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guy: 54 minutes past the hour and it is time for our global battle of the charts. you can find these on your bloomberg at gtv . james, taking a look at the etf
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story. james: everyone has been talking about chinese stocks and marijuana stocks, because they are crushing the market, but one area overlooked is this area of ipo etf's. there is renaissance capital and first trust fpx, and they are outperforming the spy by 19% and 16% year to date. there is a huge difference between the two. ipo holds only for two years. the performance is coming from some different areas. the otherfy, roku and side is a kraft heinz, that is a big position, which has been crushed this year. vonnie: i am taking a look at something that was pointed out, the bank and utilities index in white and interest rates on the 10 year in blue. take a look at how these are performing, no increase in
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interest rates anytime soon. guy: ok. i like both charts. i think i will give it to vonnie, i think that the banking story, you take a look at what is happening today and banks are doing really well in the interest rates story goes with that. at 1:00 watch "etf iq" p.m. in new york, 5:00 p.m. in london. 1:00 a.m. in hong kong, if you like to stay up. plenty of coverage is coming up. i will go back to westminster. the brexit vote is ongoing. this is bloomberg. ♪
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scarlet: i'm scarlet fu. this is "bloomberg etf iq." risks,s on the access, and rewards offered by exchange traded funds. ♪ scarlet: less than zero. negative with a new etf that will pay people to invest in it. larry says go passive, young mandrake he pushes for loading up on passive funds even if there are worries that data is the next crowded trade. top dog. betting on the

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