And potentially we have a deal. What about the irish border . At one point it was that a twomonth high, 5 10 of a percent. And we are talking about 58 basis points, modestly steeper by a basis points as you had supplied coming from the front end earlier this week. Bitcoin, 10,000. Jonathan about the happen again. Alix 11,000 call . David it just keeps going. Extraordinary. We want to get some news outside of the business world. First word news. Emma good morning. Breaking news, matt lauer we understand has been fired, according to the new york times. More on that story as it crosses. On capitol hill, republican plans to push a tax bill through by the end of the year picking up steam. There was a closeddoor session, called somewhat of a lovefest. The Budget Committee looking to send the tax bill for a vote as early as tomorrow. And north korea warns that the latest missile can deliver a Nuclear Warhead anywhere on the u. S. Mainland. The regime conducted its first missile test in two months. President trump responded, we will take care of the situation. They are meeting today on the matter. And the u. K. And European Union have agreed on an outline deal for what britain will pay when it leaves the bloc. The irish border is the last obstacle. The Financial Times says they have accepted liabilities of 21 billion and aims to pay half of it and spread it out over many years. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. David thank you. President trumps nominated chair of the Federal Reserve has d a confirmation hearing yesterday and it satellite janet yellen was speaking. He talks about gradually reducing the Balance Sheet, about normalizing Interest Rates, and not raising rates at the next meeting in december. We will be shaking the Balance Sheet by allowing securities, as they mature, to roloff passively. And that should take about 34 years before we reach our new sort of stable level of the Balance Sheet. Now the economy is strong, unemployment is low, and it even appears to be picking up, so it is time for us to be normalizing Interest Rates and the size of the Balance Sheet, as well. I will say, senator, i think the case for raising Interest Rates at the next meeting is coming together. David to tell us what we learned yesterday, we welcome our International Economics correspondent mike mckee. What did we learn . Mike we learned that policy right now is on a set course. The fed has already said just a they will raise rates in december and Jerome Powell is fine with that. He is fine with looking at policy the same way she did going into 2018, but what happens if something changes, the economywhat if alters the trajectory perhaps the tax bill, that will be the question. The focus today will be on the economy and the outlook. And what Monetary Policy program she is leaving for him. David as journalists, we are always looking for something surprising. But we were disappointed. We did learn two things. He was very poised in professional and would answer the questions. And number two, he will be the next chair. I interviewed sherrod brown, the Ranking Member yesterday, and he had nothing but to say. The only question was, will donald trump leave him alone . Mike no question he will be the next chair. He is very practiced at addressing congress, but in a very different way from janet yellen. The most interesting thing, which might carry over today and make news, was he avoided as much as possible any comments on the tax bill, except when asked by one senator. If you added 2. 2 trillion to the national debt, what would it do to the economy . That is what they have been talking about. He said it would be bad because it would push Interest Rates and crowd out private investment. This is a guy that wants Senate Support for his job, but janet yellen has nothing to lose and in the past she has commented about the debt. If she gets added today, she could have harsh things to say. David look for janet yellen today, but his testimony yesterday on fiscal policy, he could have a path, we have not seen it yet, but we say we are always concerned about the fiscal situation. He is laying the groundwork. Mike has the fed model this . I mean, they of the most powerful economic models in the United States and you have to figure that they have a pretty good idea of what they think would happen. David thank you so much. Jonathan to summarize, dovish on the job market and hawkish on december. They are looking at continuity with the fed and stirring a rally in financials with the biggest banks in their biggest moves in months. We have a Jpmorgan Investment manager at the desk. And we have the chief economist. Vince, what did we learn yesterday . That there will be no change to the fed . Vince he will be janet yellen 2. 0, the same policy that she delivered in 2017, not the janet 2015 andat delayed in 2016 and put out tightening as long as possible. So i think that Jerome Powell will deliver the dots. That is more hawkish. Jonathan i think the takeaway for a lot of people this morning tell us about the takeaway for a lot of people this morning . Not an obvious catalyst. You have the chair discussion, which was swung toward the continuity candidate. You have the Balance Sheet underway and the paint drying in the background. You have a rate hike for december that is slowly priced. Rhetoric back into the direction of concern on inflation. What is the catalyst that gets you higher bond yields as a result of perception of tighter policy . Im not sure what it is. Alix we have spoken on how he was dovish on unemployment. This is what he focused on, the precipitous a patient the participation of prime age male. You could see an economy that is going to go below 4 unemployment. Vincent, that does not sound to me like somebody who wants to stay with a three rate hike scenario next year. The Federal Reserve is going to do its job, maximum employment and a stable prices. If it turns out that there is slack much, there is more than we think and inflation does not rise as in the forecast, they will deliver a less hawkish policy. But that is not their forecast. He was basically given the game plan. They will do their job. If it turns out that inflation is softer, he expects they will not tighten as much. But do not think that is what he expects. Alix so for a market participant, whether we want to do today that we did not want to do yesterday . What is the trade . Ben as a market participant, you have decided, we will start from the premise you decided to lean toward the risk in your portfolio, how do you do that . Are you overweight on equities or credit . Are you betting on bond yields going up or are you underweight on cash . It tells you we do not see a lot of obvious catalyst pushing the bond yields up, so maybe you are overweight in equities and go underweight on duration. Jonathan you are staying with us. Later today, for coverage of Janet Yellens turn, as she testifies before the Economic Committee in washington. That will be attack that a. M. Eastern time right here on bloomberg. Coming up, just around the corner, one of the Critical Senate votes in the Budget Committee. Textare pushing the ultimate next stage. We will have an exclusive interview with senator ron johnson. Futures a little bit firmer now. This is bloomberg. Emma this is your Bloomberg Business flash. a shake of this morning, nbc news has fired matt lauer. According to the network, it was informed that he was involved in an appropriate workplace behavior. The today show announced the dismissal a few minutes ago. Tiffany posted thirdquarter earnings that beat estimates. Comparable sales were flat, but better than expected. Tiffany maintained sales and Earnings Guidance for the full year. The Cap Investment banker at barclays is warning that staff is at risk of having bonuses cut this year. They say that he said that they will boost pace for top performance and cut those consistently ranked in the bottom half. That is your Bloomberg Business flash. David when senator ron johnson talks about taxes for Small Businesses, he knows what he is talking about, he ran a Small Business in wisconsin, so it is no surprise he has been front and center as they sort out how the Corporate Tax cuts they are proposing will affect Small Businesses not incorporated. We welcome senator johnson from the capital. Thank you for being here. Sen. Johnson good morning. David as we went into the Budget Committee meeting, we were on tenterhooks about how you would vote, for or against. You voted for it, so does that mean youre can firmly you are firmly set on a yes for friday . Sen. Johnson we still have work to do cabo President Trump made a good case and we have been working with Senate Leadership and we are making Real Progress. Bob corker, i am sympathetic with his concerns on the deficit. He made progress. We both thought there was progress to be made to really use the Committee Process to move this thing along in the right way so that we do not so we will be more focused on the process, so sort of a want ish vote yesterday, but i think will make it easier in terms of passing this. David it is obviously going to affect a lot of peoples lives. Lets get into some of that wonkishness. What language will it take to get you to vote on an actual bill . Sen. Johnson let me talk about the businesses i have been defending. We have so many manufacturers in wisconsin, it would devastate the community is the employer ran into trouble and went bankrupt. These are owner operated, run by people who have a longterm view, multigeneration and they want to pass it on to kids and grandkids. I have nothing against big business, but they are run by hired guns, shortterm thinkers, fiveyear stock price, and when they cash out the stock they have a different mentality so the problem in the house and senate bill is so much of the tax relief, is directed toward those big corporations which is only 4 of american businesses, so they are getting some are between 70 80 5 of the tax benefit and it is simply not equitable. 70 80 5 of the tax benefit and it is simply not equitable. It is imperative we make our businesses competitive, but we need to maintain the balance between the passthroughs and the sea corpse c corps. Everybody knowledges it is a problem. The president said it is going to get fixed. So it gave me the confidence to help us proceed to the committee. David it is important to light all of that out, but lets get to the brass tacks. There is a 17. 4 deduction right now for the passthrough situation, do you need it to go to 20 to support the bill . Sen. Johnson i will not say where we are going to get to. Prior to obamacare, differential waseen passthroughs and 3. 6 . With obamacare, it went to 8. 4 . If you are a trust, it goes up to 22 . The problem with that is a mix those businesses less competitive. It makes them less competitive internationally, because Companies Get territorial treatment and passthroughs do not, so there are so many aspects of this matter making passthroughs less competitive and a lot of my colleagues say that have them turn into c. Co rps, but rather than being taxed at 30 , it is 18. 5 and the revenue loss for the federal government will be massive. Ive been arguing with my colleagues, that we are better off spending the money to bring down the rate, to close the 8. 4 rential, get closer to i would like to get to a. 4 , i would like to honor the commitment of the framework of a 25 passthrough rate, but we are constrained by the 1. 5 trillion so there is a lot of demand on those dollars, so we are trying to manage this is much as possible, but i think we realize that we want to narrow the gap as much as possible so we do not have the flood of passthroughs converting. There are enormous amounts of revenue or let them stay in a competitive position. David i want to pin this down. As of now, youre not a yes, but you think you are moving in that direction, is that fair . Sen. Johnson yes, there has been a Real Progress made over the past couple days and you get closer to the deadlines and that the was true president came and gave the peptalk, talked about how important it was for the economy. The American Economy is not even close to realizing as folk potential full potential. We have to have progrowth tax reform. Now we are in the legislative process, the sausage making, it is not pretty sometimes but we are committed to achieving success. David you mentioned the progrowth desire of the senate to get this done, let me talk about senator corker that you report to. It you explain to us why would make sense to have a situation where you would raise taxes, if growth was disappointing . Normally that is the reverse way. Sen. Johnson it is a concern. From my standpoint, there is one reason i am fighting for the pastor. For the passthrough. If we pass a progrowth tax package, we should not have to worry about that trigger. Hopefully it will be designed that it just slightly increases everybodys taxes across the board, does not really attack one sector of the economy. But as a fallback in terms of added deficit. I share the concern. The last thing you want to do is when you hit hard times is raise peoples taxes. David thank you for being with us. Alix coming up, bitcoin was the topic of the day at the consensus conference. The biggest question, is it a bubble and when will it pop . We will dig into the next. This has become the biggest bubble of our lifetimes by a long shot. I want the record to show i did not say that. [laughter] mostly because it is so global. Alix now we are on 11,000 watch, bitcoin up 55 since october, over 800 so far this year, and of the bubble calls are multiplying. Bitcoin is undoubtedly a bubble, but the only problem with anybody, you have cash in a bubble, you have no idea if it will double before it halves. It could go way back down, but between now and then it could hit 20,000 pretty quickly. You cannot short it. Witht with bitcoin but block chain, it is fair to say that going in today is a bubble, very clearly, but we do not know the Market Driver beyond this price valuation. There is a lot of fraud mixed in. A lot of fraud is in anything as exciting as this, so i think it will become the biggest bubble of our lifetime by a long shot, mostly because it is global. I want the record to say i did not say that. Mostly because it is so global. Bitcoin is successful only because of its potential for circumvention, the lack of oversight. It seems to me it should be outlawed. Alix joining us from london is ed robinson who reports on bitcoin. Ed, walk us through how bitcoin will be classified. Is it a currency or commodity . We do not know how to identify it. Ed i think right now it is everything at once. To be serious, it really cannot be used as a currency in the present moment, because it is appreciating too quickly, why would you spend bitcoin on a couple of coffee or a book, when it could go up 17 by the time you complete the transaction . For those that say it is an asset, that makes more sense at the present moment. Of course, it was designed as a currency, so perhaps it will eventually fill that role at some point. Jonathan is it digital gold . For most people it has way too much volatility to be a stored value. What are your thoughts . Vince the end of the day it will be how governments get involved. We hold currency because we can pay our taxes with it, we are willing to put dollars in the bank because the government gives us tax repayment and transfers. At some point the government is going to have to say, we accept this as value. When that happens, it will be legitimized. Until then, it is an asset. It is tradable, you could just as well be trading baseball cards. Jonathan isnt that the point . The value is because the government is not involved, and to some extent that is a doubleedged sword, because when they do get involved it will make it less valuable . How do you get around that dilemma . Ed i think that is right. The original purpose was a decentralized currency that does not need a central bank. I think it will be a long, long time before Central Banks ever move into any kind of action that would mainstream or legitimize the currency. I think that they will be the last parties to come to this. Where you want to look now is big ecommerce merchants, that may develop apps that say we will accept bitcoin and exchange it for yen or dollar sterling, or whatever. That is the next frontier. Alix when we have bitcoin features listed, then you can short. You have banks looking at it, they are rejecting current platforms. How does this advance the conversation . I think there is a big question, is the demand outstripping the infrastructure that is coming into place around it . You see that with the announcement of futures. There is probably an etf down the road in the first quarter. Will there be enough Capital Market for structure there to support, demand liquidity, the ability to borrow shares to short sell all of those are in the air, even as demand is soaring. Jonathan great to catch up with you. I imagine you will be back on the program very shortly. And vincent reinhart, you will be staying with us. Coming up, a brexit breakthrough, reaching a deal on the divorce bill, but challenges remain. Is the irish border the new divorce bill . Sterling is a lot from her. And firmer. We are trading right at 134 on the cable rate. This is bloomberg. Away fromtwo hours the open. Lets get you the score quickly. Down a third of a percent on the dow. It cut the for percent on the s p 500 after we closed at another alltime high end of the best daily gain since september on the s p 500. In europe, decent broadbased gains. Stoxx 600, up three quarters of a percent. On 19 Industry Groups on the benchmark in positive territory. The story of the fx market, we are treading water. And the cable rate reclaims at 134, the highest since the back end of september. The mood is changing around brexit, its progress and progress could be around the divorce bill. Before we get there, headlines outside the business world. Emma nbc news has fired today show host matt lauer over allegations of inappropriate sexual behavior. Thetoday show announced dismissal this morning. They said in a memo to staff that it received a complaint about matt lauer from a colleague on monday night. They also said it may not have been an isolated incident. Mylar became coanchor of today in 1997. Senate republicans have taken a step toward getting a tax reform bill passed by the end of the year. The senate Budget Committee voted to send it to the entire senate. Lawmakers could vote on it as early as tomorrow. President trump spoke with republican holdouts in a closeddoor session and described the meeting as a lovefest. One of the most senior saudi royals detained in a crackdown has been freed after paying more than 1 billion. According to an official, he had been released yesterday after the settlement. The other suspects have also agreed to settlement deals. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. Jonathan a brexit brinker, the European Union and u. K. Have agreed to an outline deal on what britain will pay when it leaves the bloc. The irish border is the most recent obstacle. Last obstacle. For the latest, we are joined from london by emmitt thomas. Great to catch up with you. What has improved in the last one for hours . What will have we learned 24 hours . What have we learned . There has been an outline agreement on the divorce bill. It has not been presented to the eu leaders, or in paper to the European Union, so the people that need to sign off on this have not actually gotten it in their hands. That will probably happen on monday when theresa may has lunch in brussels. This is a carefully choreographed process. Interesting to note, no backlash in the u. K. From the conservative party to this higher offer on the bill. The domestic politics are very important. Is theppens now agreement on the wording for the commitment on what they will offer to the eu and it with irish border will look like. It is very tricky because each side has mutually exclusive demands on what the border should look like, so they all agree there should be no border, but they do not agree on what that means. So that is a really tricky obstacle that needs to be sorted. And the irish prime mr. Was minister wasme saying it was developing quickly. They do not want to hold things up. Minister, if he could go down in history as the one that makes it divided again, it would be bad for him. Jonathan and six month ago, the irish border was not on anybodys radar until they came to a deal with Prime Minister may and the u. K. Government to keep her in power effectively and give her a working majority. The situation in the u. K. , is the domestic issue still important . Emma you are right. And of course, the problem with their position is that europe says, we will leave Northern Ireland in the customs union, leave it on the same sort of Regulatory Framework so trade can continue freely across that border, but Northern Ireland says, no, if we remain aligned with those partners, then potentially importer is erected between Northern Ireland and the u. K. They are try to keep Northern Ireland totally integrated in the u. K. Jonathan taking a step back, a year ago when the brexit bill was brought up in a material way it was seen as leverage on the u. K. s half does occur a good trade deal. Now it looks like that bill is just to get access to trade talks, not a good trade deal. So the u. K. At the moment, it looks like a loss of leverage. , from the people you have spoken to the experts, is that what it looks like for them as well . Ina what happened is back june of this year, the u. K. Agreed to the European Unions schedule for talks. They said, first of all we will talk about the divorce, the settlement, then irish border, only then will we talk about trade. So the u. K. Agreed to that, then they have been resisting it ever since and i think now it is very clear that the clock is ticking. And the commitment had to be made in order to push along the talks. It is worth noting, nothing is agreed until everything is agreed. So that means if the u. K. Is not satisfied at the end and there is still a chance there could be a walkout at the last minute, then the bill will not go through. Jonathan im still struggling to keep up. Thank you for keeping us up to speed. The pound yesterday was absolutely vicious for anybody trading. We trade at 134 right now. At the first report of this story, sterling surged. Then the denial about accounts, we dropped. Then we went higher again. Still with us, ben from j. P. Reinhardt ofnce standish mellon. How much pity do have for anybody with sterling . I think you have to keep the long term perspective, this is still an uphill battle. There is lots for the u. K. There is irish border issue. Ben if you get past all of that, you have to pass a conference of trade agreement in 12 months. So unless you take the eu and canada deal as a template, i think it will be difficult to meet the timeline. Time is not on their side. It will be difficult. Jonathan is it still a story of long europe and when does the valuation change that . Ben that is our position currently. We are neutral on the u. K. , just because it will be difficult to navigate with the currency, like we saw. But europe is still the same macro performer. I do not see any reason why you would not want to have that is part of an overweight portfolio. Overweight equity portfolio. David it strikes me how the pound reacted so immediately to just a little bit of good news. Impact thatle that is upside potential as this unfolds . Vincent look, we are talking about borders that are not borders and the directions of trade. I would say it couple of things. Europe mightyes, be upside down equity prices, but it probably means outside on yields. It could be long one thing and short another. I think you are exactly right in that everyone is onesided on their view on the pound. And so it could work out. There is lots of things that theresa may could talk about on monday that could change the situation. David if you were investing your money and you wanted to hedge on the possibility it could be better for the u. K. Than we thought, where would you look . Ben that is a difficult question. How do you navigate an equity market that swings so heavily with the currency . We are neutral at the moment. Jonathan and to broaden it out, there were a big fears postbrexit that this would bleed into wider issues with global trade, they were big fears after President Trump was elected that things would get a lot worse, and they have not really. Do you anticipate that they will, or are you taking a step back to say a lot of that was overdone . Vincent there is one word that answers the question, china. The big fear is about china. Gdp islargest economy by growing stably, delivering 6. 5 growth, an d an engine for global trade, everybody will be less worried. It is true that the u. K. Can be a source of volatility, but the u. K. Actually is about 5 of world gdp, lets remember that. It is an island. The main story is actually away from us. It is about the asiapacific rim. Jonathan it is a price tag and not a price maker. Ben globally in terms of international trade, we have actually seen an upswing this year relative to a very disappointing out turn in globalization postcrisis. What is driving that . Part of it is you have a cap x global cycle that is picking up into has been supportive of Manufacturing Activity and international trade, that is independent of the politics. Jonathan and the yen has rallied with it. Thank you for being with us. Alix thank you. Thank you vincent, john. I am always calling you john. [laughter] alix ok. Coming up, the opec ministers we are watching for clues on the extension of production. What they have said so far. It is treating at 63 a barrel. David and you can always listen to the radio. Tune into our colleagues over on bloomberg surveillance. You can hear it in boston, washington, dc come across the United States, on sirius xm radio. Live from new york, this is bloomberg. Emma this is the hewlettpackard enterprise greater improve jeff curry greenroom. Jeff curry with his thoughts on what to expect from the opec meeting. This is bloomberg. Now to your Bloomberg Business flash. The ceo of the london stock is change group stepping down immediately. He announced last month that he would be leaving next year. Since then, there has been a battle between the board and the hedge fund management, which wanted him to stay. Directors have asked that he leave the company now. The latest software for Apple Mac Computers has a security flaw, allowing anybody to log in without a password and Access Private documents. The security bug involves the new version of high sierra. Apple says it is working on a fix. This but Artificial Intelligence has proven to be the key to keeping terrorist content off of the social network. Executive say that 99 of the Islamic State material is detected by Artificial Intelligence tools. They say that the Automated Solutions are not perfect. That is your Bloomberg Business flash. Alix opec Oil Ministers gathering ahead of their meeting on thursday. Producers say that they support 2018. In to continue the dialogue is not a temporary fix. It is something that we aim, at least some of us, we came to continue with the dialogue for years to come, because i think it works to discuss, especially the big ones and the russians, mexicans. We will discuss different scenarios, among them the ofension of for the whole 2018 and 2019. It is not the only option we will discuss. We will discuss other options. We are waiting for the meeting e, theow with the, th committee. Arrived inhave not vienna, it is too early to talk about the agreement but studies differ in terms of reaching the normal level of inventories. The question of what is a normal level is a technical issue that needs to be studied and discussed with other parties. It was nine months, not six months, so this is solid. Most, i think the majority will agree to that and will be in conformity with that. Alix we did not hear from russia. Oil minister just arrived and said a lot of nothing. Joining us from london, will kennedy. What do we know and what is russia going to say . Will we are not sure. What we do know is the mood from vienna is optimistic. The lowerlevel russian officials have anticipated in preliminary meetings, giving good signals that they are on board to extend the nine months until the end of next year. The market cannot really be sure of that until we hear from novak and here that he is happy to extend, because as we reported russia has legitimate concerns. It has a Different Oil industry to some of the opec members that rely on one oil company. It has different private sector Oil Producers that it have to communicate with and it has a russian winter to contend with, so it needs a good time to get those wells back up and running and if they extended till the end of 2018 they have to turn them on in the middle of winter when the temperatures are freezing. Hard to do. Alix what i am puzzled about is, why hasnt the conversation been, how do we exit next year . Will that is another key concern. The consensus for extending through next year is based on the fact that the oil market is healthy at the moment. Traditionally it is looking weaker as we come out of the Northern Hemisphere winter and the demand declines. So we are looking dicey for the Second Quarter of next year. Opec wants to shore up their position. Many people are thinking about the end of next year and if the market continues to improve, how they will pay for the cuts, how they will get out of the deal without putting 1. 8 Million Barrels of the oil straight back into the market. That theythe reason need to focus on how to get out of it is because theyve been so successful . Earlier they did not have to worry about it, it quietly dissolved. Is part of the problem compliance . Will it has been a very successful process, that is right, especially for the last few months we have seen compliance strong for most countries, we have seen inventories fall. You are right to point out that cheating, and we could see that again next year as the market continues to improve, we will see those countries gently pass their quotas. Russia is asking questions about exactly how the processes work, how to communicate with oil companies. Alix they are new to compliance. Good stuff. Thank you, will kennedy from london. If you have a terminal, check out tv. You can interact with us directly. Coming up, i will be speaking with the Kkr Health Care Strategic Growth Fund head. Ony just closed a 1. 4 by dollar 1. 5 billion fund. We will discuss why now and what is the potential next . This is bloomberg. Raised 1. 45ently billion for a Growth Health care fund. Kkrfirst of its kind in and it will be focused on different areas of Health Care Including diagnostics and services. Joining me for more as the head of the fund, ali satvat. He joined kkr in 2012 and is leading the new fund. Why did you decide to do a new fund . Ali i think it is a natural extension of what we are already doing. We have been in the market in health care for over 12 years. We have been investing for over 40 years. A lot of the investments have been larger investments. With the new fund lets us do is approach growth in the companies that are not ready to be larger private equity investments, but the on the point where they reached proof of concept and they are in the gap where we think they can grow. Alix what do you expect the average size to be . What would it be for this . Ali they are focused on companies where it would be under 100 million generally. It gives a lot of flexibility within that range. These are companies where there where they are ready to be bought out. Maybe they are not ready for a larger m a. As you look at the ipo market, some of these companies are not yet ready. They will be a look to grow and partner with us. Alix that raises the question of exit strategy for these investments. Is, we areiteria looking for highquality management teams, we are looking for Business Models that really scale and that we understand, we are looking for health care come it is a three chilean dollar plus market. So 3 trillion plus market. Togives you an opportunity play in those parts of health care that insulated from pressure, where we can be opportunistic. We help the companies scale, we bring different resources of our health care team, the experience of track record and, all of our resources are here globally to help the companies. Alix are looking for a buyout or are there bigger firms to come in and by the company . Walk us through the sectors and what the correct exit strategy would be for them. Ali i think the sectors determine a little bit with the right exit is. If you look in biofarma, we are investing in platform so it gives the opportunity to optimize parts of the portfolio and also gives you the chance to fill the companies or take sell the companies or take them public. We are investing important ways of products that belong to a larger acquirer, who see them as additive to what they are doing with infrastructure. Those tend to be more like m a transactions. On the services side, and these can stand alone, they generate cash overtime, or they could be trades to private equity firms, or they could be standalone or become parts of larger strategics. It depends. Alix what part of doing a Fund Specific and what part is demand . Ali a lot of places did not have the exposure they wanted, so this was a way to give them dedicated health care exposure. We heard that message. We have a lot of investors coming back from other parts things they have done. We also have a lot of new investors who said, our view is we want to have more exposure here and we think it is a good time to be in health care. Alix sylvain also got to this. The fund is less, but will this be the new strategy . These growth initiatives. Ali i think for spaces like us, this is a good strategy and i think what is interesting in health care is a specialized sector it has its own dynamics. The fact we have been in the sector, we have a 15 team that looks after this space, we think this is really portable to what we are doing in the growth space. As a testament to that, we have seen investors on the private equity said that we have done deals with on the growth tied, so we think there is synergy for our companies, that form our larger portfolio and vice versa we can see with the disruptions are for the bigger portfolio and take advantage of those. Alix how much leverage are you taking on . Ali that will not really be vital to the strategy. Have equities are helpful private equities are helpful. And if you actually look, even in the private equity portfolio within the health care team, the vast majority of returns are coming from growth. It is driving fundamental growth, topline growth, but it translates into bottomline performance. It is that same characteristic that we are looking for. Alix thank you. Real pleasure. Ali satvat. A shift in the industry, if it is going to be about growth, what does that really mean . Jonathan interesting conversation. Coming up, more room to run. We will be discussing stocks and record highs and we will get thoughts on bitcoin as well as we approach potentially 11,000. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Jonathan the republican tax push takes another decisive step forward. Senators debate the bill today. Bitcoin surging through 10,000. Quickly closing in on 11,000. The relentless rally continues and the bubble warnings multiply. On an exitd eu agree bill, but the irish issue remains prominent. This is bloomberg daybreak europe im Jonathan Ferro bloomberg daybreak. Im Jonathan Ferro alongside davis weston and alix steel. The s p 500 is looking at futures firmer by 0. 1 . Eurodollar doing not a whole lot. In the treasury market, youll gher, but stillhi in the tight trading range. Alix the big action coming from the u. K. Take a look at the selloff in the gilt market. Yields are up 8 basis points. The curve in the u. S. Stevens a touch. 16 basismost to that point level. Seriously, guys. Bitcoin. This is bitcoin all day. Remember jonathan two weeks ago or was it last week . [laughter] david up several hundred dollars since weve been on the air. Alix since we have been talking. Janet yellen and her testimony to congresss joint Economic Committee is breaking. Michael mckee is here. Krishna memani, the oppenheimerfunds cio. Mike she separate he much what you would set from janet yellen at this point, that the economy is getting stronger and the labor market is getting stronger. Wage growth remains relatively modest. Given the Economic Conditions right now and here is a quote we continue to expect that gradual increases in the federal funds rate will be appropriate. You could look for a december move. She is pretty much locking that in. She goes on to say the expectation is based on the view that the current level of the federal funds rate remains a somewhat below its neutral level. A couple other interesting things that she notes today. The question of inflation. Normaleats the feds mantra that what we have seen is temporary and likely to pass. She says, i anticipate that inflation will stabilize around 2 over the medium term, however, it is also possible that this years lowinflation could reflect something more persistent. In other words, here is a handoff to jay powell you are going to have to deal with this if we turn out to be wrong. The other headline of the day is picking up on what powell said yesterday about we are seeing a little bit of choppiness in the markets. He was not topping talking about bitcoin, but the equity markets. She says they are not particularly worried. Although asset values are high by historical standards, overall vulnerabilities appear moderate, she says. That the fedhink is raising rates to maybe choke off an insipid bubble in the markets, but janet yellen suggests that is not the case, they are just doing their job given the state of the economy. Alix in the market, we see the 10year yields at the highs of the day. Up nearly two basis points. A modest, Modest Movement because why bother . She will not be the fed chair. What will be the question that Market Participants need to gauge at the testimony . Mike you are probably not going to get much out of her on Monetary Policy and the implications for 2018 because she has laid out the path that they have been following for quite some time. Where they may go with her is on the tax bill and the implications for the economy if that passes. She notes in her testimony that the reasons we have seen such slow growth in recent years is the slowdown in the growth of the labor force and the unusually sluggish, as she puts it, productivity numbers, and suggests congress do something to fix those things. The tax bill is probably not going to do much for either one. Interesting to see how they will expand on that. Jonathan some news from chipotle. The chairman and ceo and founder of the company in 1993 will become the executive chairman after they have completed a search for the new ceo. They begin a search for the new chief executive officer. Will become the executive chairman and will remain the founder of the company in 1993 and they will look for a new ceo. The stock down over the last year by almost 28 . Im not sure what retail is more interested in this morning. Chipotle or bitcoin. [laughter] david chipotle has been in the news a lot more and they would like to be over the last year. Not good news. [laughter] jonathan that is the question. That is the breaking news from chipotle. The stock still holds. Looking at the story for the Federal Reserve, chair yellen, set to be chair powell come it does not feel like a whole lot of difference. If you are going to get the same chair, you get the same outcome and it is going to be low volatility. Is that your view . Krishna absolutely. In the old days, the difference between janet yellen and jay powell might have been significant, but when you are talking about policy in the current regime, they are right on top of each other. No expectations of changes in policy and, therefore, no expectations of change in the volatility of the outlook. At the end of the day come a we are going through a synchronized global recovery. Policy is easy. That is a Good Environment for low volatility. David so, right now, volatility will come back sooner or later, right . What will trigger it when it does come back . What is the unexpected . Krishna indeed. Unexpected by very definition is unexpected. Stating the obvious, of course. For the regime to change, something has to change. Either growth has to slow down, we have to deal with the prospect of a recession we dont think that happens anytime soon or the inflation outlook changes meaningfully to read again, we dont think that is going to happen either. This is going to be the longest business cycle, the longest credit cycle, longest market cycle any of us have ever experienced. Because we dont have experience dealing with this, we are having a great deal of difficulty dealing with the low volatility that is persisting. David we lost our gps a little bit. Both jay powell and janet yellen are equipped to say we are not exactly sure what is going on with inflation. If we are not sure, then we dont know what is out there. Mike we dont. That could be the factor krishna is talking about. Janet yellen talks about wages being very subdued, but that they are starting to pick up a little bit and a lot of people are noting with the economy getting stronger, we should see wages start to rise. If they do, then that will rapidly become the story of 2018 for the markets. If it doesnt, volatility stays low because the fed is not going to be moving quickly. Alix krishna, what do we do about banks . Flat yield curve, bad. Deregulation, regional, good. Inshna if you are investing banks, higher rates or things like that having said that, i think banks are really good value at this point. Deregulation would help, growth in the economy would help. Overall, banks are good investment. If they have to hold it longer than what they may have anticipated for the thesis to play out. Alix thank you very much. Later today, we will have full coverage of fed chair Janet Yellens full testimony. That is at 10 00 a. M. Eastern. Lets get a look at first word news with emma chandra. Emma nbc news has fired longtime today show host matt lauer over allegations of inappropriate sexual behavior. According to the new york times, nbc said it received a detailed complaint about matt lauer from a colleague on monday night. The memo said it may not be an isolated incident. Matt lauer became coanchor of today in 1997. North korea warns that its latest missile its latest missile can conduct a Nuclear Strike anywhere on the u. S. Mainland. President trump responded by saying, we will take care of the situation. The United Nations Security Council meets today. It is a breakthrough on brexit. An agreement on an outline deal for what britain will pay when it leaves the bloc. The irish border remains the major obstacle. The u. K. Accepted liabilities of up to 120 billion, but aim to pay half of that and spread it out over many years. Global news powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Jon. Jonathan you usually take on a mortgage to acquire something, not to leave. [laughter] david that is fair enough. Jonathan coming up, Senate Republicans advancing their tax bill after a crucial debate yesterday. We will break down the market impact. One hour and 20 minutes away from the opening bell. Futures a little bit firmer by 0. 1 on a record high s p 500. This is bloomberg. David the senate took a big step toward tax overhaul yesterday when it sent a full bill to the senate, but they still have a ways to go. We spoke earlier with senator ron johnson of wisconsin about what is left to sort out and one of the issues is a puzzle from senator bob corker. Maybe we should increase taxes automatically if the new cuts dont lead to the growth they are anticipating. We should not even have to worry about his trigger. Hopefully, the trigger will be it just slightly increases everybodys taxes a little bit across the board. It does not address or attack one sector of the economy. Just as a fallback at a deficit. I share your concern. The last thing you want to do is raise peoples taxes. Is stillishna memani with us. We are doing an awful lot of the economy does redoing an awful lot we are redoing an awful lot of the economy at the 11th hour. What sort of uncertainty does that serve in the economy . Krishna thats a blue means that if you get anywhere close to a recession, you are guaranteed to have a deeper recession than you would have otherwise. From a fiscal policymaking standpoint, that is the most insane thing that you can implement and i guess we are going to do some part of that. The overall tax proposal, i think, the net impact, we will probably get a onetime pass. In terms of changing the growth trajectory of the u. S. Economy, investments have to pick up, upductivity has to pick none of that happens with the current proposal. Materially, we are still in the same regime. David how big a pop . Material . Krishna yes, if you cut taxes by 10 Percentage Points or 15 Percentage Points, you are going to get a material pop, but that does not change the trajectory of the markets. Then we are back to whatever Earnings Growth are going to be. Jonathan how do we solve the following dilemma, why all politicians dont understand countercyclical fiscal policy . [laughter] jonathan when are we really going to address this in the United States . Krishna there is no reason to try to a dress in the middle of a synchronized boom. When we do get to a recession, the policymakers have been pretty adroit at addressing those issues. The 2008 recession was a good example. We had implemented lots of policies and the deficit was as much as 9 at that time and everyone was copacetic. Jonathan when they are out of power, it seems like they start thinking about the countercyclical approach to all of this. Krishna again, this is politics. They want to pass a tax package. If there is going to be a roadblock, they are going to find ways of addressing the roadblock. It is civil politics and has nothing to do with fiscal policymaking. Simple politics and has nothing to do with fiscal policymaking. David they say, we are addressing productivity because of capital expense, it is going to encourage it, we are going to repatriate funds, they are going to cover Corporate Tax rates cut Corporate Tax rates. What is your answer . Krishna if funding costs were the real issue, which is all of what this addresses, i think given where rates have been for a long period of time and the high profitability level in cash flow level of companies, we would have seen a rebound in investments in a meaningful way. Investments are clearly coming back for sure. They are not rebounding to the previous level. Yes, it is possible. I just dont think it is very likely. Jonathan Krishna Memani of oppenheimerfunds, you will be sticking with us. Ecb sends a warning on overpriced asset prices. Our interview with the Central Banks Vice President is coming up next. This is bloomberg. 500 trading at p an alltime high. The ecb warning that the markets could face a sudden drop. Matt miller spoke with vitor , the ecb Vice President , and asked him about asset prices being overpriced. Vitor in europe, 16 times. Example of an an important market where the situation is more overstretched. They are trying to demonstrate that nevertheless that corresponds to changes in fundamentals that can justify that. In any case, it is an indicator together with the low volatility that any small price correction can be amplified suddenly and lead to a spike. That risk is out there. Maybe it does not materialize in a significant way and then it is a normal price correction connected with a situation where all advanced economies are now having healthy growth and seem t o be leaving behind the recessionary times that have prevailed for too long after the crisis. Jonathan matt miller joins us now for more on that interview. Is there acceptance on the european Central Banks side that they have a whole lot to do with some of these valuations . Not completely. In fact, that was one of the questions that was asked at the press Conference Today in a different way. Someone asked if the ecb would accept responsibility for the low volatility situation Vitor Constancio because was talking about a voluntary situation because Vitor Constancio was talking about it being an issue. You see these kinds of low volatility levels, not these kind of valuations, in different markets through the world. Memani stillshna with us. Central banks are buying corporate debt and they are complaining about high asset prices. Does that make sense . Krishna what they are trying to do is try to stabilize the globalized Global Economy after the financial crisis and they have succeeded at it in a spectacular way. Having said that, the core issues with the Global Economy have not been addressed. Because of globalization, because of other issues, overall inflationary pressures on the economy have died down. Until that revives, the low volatility issue is going to be something that we will have to accept and deal with. Jonathan but the solution to one crisis often leads to the next one and what we have seen from this is that they have come out bravely and addressed the financial situation that was almost an absolute catastrophe 10 years ago and most people would agree with that, but at the moment as we have seen assets go up and those with assets, their wealth increases, and those without, their wealth goes nowhere. Thatt wonder whether plants the seed for the next big issue. Krishna i think that is absolutely true. But aside markets for a second. Inequality in the world is increasing and that is really not a good thing from a longerterm perspective. From a policymaking standpoint, that is something that needs to be addressed. Unfortunately, the fed is the worst entity to be able to address anything of that nature. That is really politics, that is fiscal policymaking. Counting on the fed and ecb to do anything about it is unrealistic. Jonathan it looks like those that will gain from this particular tax bill are those at the top end of society. It is not going to feed into the bottom and that most people would hope. It is directed at corporates and not at the consumer. Does this tax bill address any of those issues . Krishna no, this tax bill addresses the Corporate Tax rate more than anything else. It does not change the growth projection of the u. S. Economy. For us to have lower income inequality and higher level of growth, which is what we need to address this issue, basically we mix thanfferent policy just reducing Corporate Tax rates. Alix then why are we seeing the s p 500 targets increased . You have economists not doing the same for both. Krishna thats precisely. We see a onetime pop because tax rates have gone down in the etf level and markets will go higher. Whether the overall growth trend in the u. S. Changes meaningfully , i think that is really the crux of the issue. At this point, my belief is that that will not happen. As i mentioned earlier, it is possible, but very unlikely in my view. Jonathan some of the brexit nerves are easing. We saw a firmer pound against the u. S. Dollar. The 10year gilt rising 10 basis points. David. David i want to go back to what we were talking about on the fiscal and monetary side. Is there a trickledown problem here . On the monetary side, it was saying that if you increased asset values, it would trickle down. It does not work either place, specifically because the people who spend the money are the people who have less of it. Krishna yes, again, from a longerterm perspective, for us to have a different political environment, we have to have u. S. Economy grow at 3 or normal 4 . The current policy mix for you keep rates low for a period of time or cut Corporate Tax rates, i dont think that changes the picture meaningfully. The u. S. Economy is doing well. 2 is nothing to sneeze at. The likelihood that the current policy mix will get us to 3 or 4 , i dont think that is very realistic. Jonathan we have left matt miller all alone over in frankfurt. Did we learn anything we can apply to what Monetary Policy might look like from the ecb next year . Matt not so much to Monetary Policy, although Vitor Constancio said they stand ready to change it if needed. Obviously. What i thought was interesting was about the overstretched valuations. He continued to refer to the u. S. Assets as overstretched and maybe some other global assets as overstretched, but repeated that they did not see that anywhere in european assets, assuming you take bitcoin as a global asset. He really was, the ecb really is less concerned about overstretched assets anywhere from housing prices to bond , as they stock prices are about asset prices globally. Jonathan matt miller, great to catch up with you. Joining us from frankfurt with a great interview with Vitor Constancio, the ecb Vice President , which you can watch in full on bloomberg. Com. Stickingemani will be with us. Gdp numbers are next. A second read of u. S. Gdp. I want to bring you the scores of Financial Markets worldwide. A nice rally happening in europe on the dax, up about 0. 9 . The s p 500, futures firmer. Dell futures up dow futures u p. Onsing at all time highs some of the major benchmarks in the United States yesterday. Rockets being launched from north korea, etc. , etc. From new york city, a beautiful one today. This is bloomberg. Mberg. City for from new york our audience worldwide, the market opens in about an hour. Futures are firmer. A record close yesterday on the s p 500. The biggest daily gain since september. Some really nice gains across the continent in europe, as well. Treasury yields on the 10year up by about four basis points. The selloff in gilt a little more vicious. The data drops now. Gdprd revision for the u. S. The estimate was 3. 2 . Was 3 . Ial read the print, 3. 3 . Core pce quarter on quarter coming in a little bit firmer at 1. 4 . It is an upward revision and a nice three done u. S. Gdp. Alix yes, and corporate profits also. In the third. 4 quarter. In the Second Quarter, we saw a rise of 6. 4 . Rising, but slowing sequentially. Financial industry profits increased almost 14 . Bank profits up 1. 5 . In profits when it comes to banks and financials. I love getting that read because it shows where we are. Alix here is the situation jonathan here is the situation on the markets. Still a selloff at the front end of the curve. Twoyear treasury yields are pushing a little higher. The 10year yields pushing a whole lot higher. The dollar coming through with a little bit of a did, as well. Lets bring the dollar index up. That gives you a crossasset field to a reaction of some of the u. S. Data. Lets bring in the guests. Still with us, Krishna Memani of oppenheimerfunds. That is a nice little read on u. S. Gdp. It is nice to see it stay above 3 . This is pretty good. One of the most encouraging things about this quarter and the quarter previous to that was the way, business investment, that long missing ingredient seems to be coming online. Jonathan would it be fair to say that the enthusiasm in the soft data on the confidence numbers, are starting to feedthrough . Daniel the gap has narrowed, lets put it that way. If you go back to the start of the year, this idea of new normal, mediocre growth, was very on vote. Vogue. Synchronized recovery is all anyone can talk about now. David 10 President Trump declare victory . Daniel there are many players in the u. S. Economy beyond the white house, david. You could probably say the u. S. Economy and the various people and factors and trends that have contributed to that can feel relatively satisfied. I would not want to shoot it home to anyone individual. David what is the longterm Growth Potential for the United States government . How much of this is correcting disappointing gdp growth earlier in the year . Krishna absolutely. It does not surprise me a bit. The data that im focusing on is the softness in consumption. Suretments is coming back, that helps. But the softness in consumption is an issue that we will have to deal with in the second half of next year because that is 70 of the economy. Savings rates have already gone down. Unless you see meaningful , overallin income Consumption Patterns may flatten out and that may take the bloom off a little bit. We will grow north of 2 , but the likelihood that in 2018 it is going to be 3 , i dont think that is going to be the case. Alix hang on. Consumer spending is sequentially slower, but it is not like 1 or anything. Durable goods, 8 . Those are solid numbers. Krishna absolutely. This is not saying we are going to go to a 1 gdp growth rate. What im saying is expecting that higher than 3 to sustain itself in light of the Consumption Patterns you have seen in three quarters, i think that is something to worry about. Hing to kind of go really you know, go really downward, but at the same time, it is not as strong as the rest of the numbers. Alix i want to dig into corporate profits a little bit. Again, how long can we see those profits continue to rise if wages pick up and we wind up having an inability to pass on any price increases to consumers . Daniel as long as this synchronized global recovery, which has been one of the buzz phrases of the year, develops, then u. S. Corporate profits are going to hold up. This is not the u. S. Company Profit Sector of 25 or 30 years ago. Many of these companies have at least as much revenue coming in from outside the United States as they do from inside. Back to what krishna was talking about. Wages and consumption. Is there a direct relationship between wage growth and gdp growth because 70 of the economy is consumerbased . Daniel if wages are going up, david, that is a great thing for everybody, but you dont want wages to go up too far because you dont want Central Banks thinking they have to step on the brakes. Thus far, they have not stepped on the brakes. It has all been about removing policy. Jay powell was asked about this in his confirmation hearing and he was very careful to stress he still sees this 2 2. 5 range. ,lix to circle back, krishna yesterday, a guest said the actual implication for tax reform is going to be disinflation because companies are going to use that to price compete and win out the competition. Do you see that as a reality and what does that do . Krishna i think in the context of synchronized Global Growth, to use the phrase of the day, i suppose, i dont see that happening. I think we will see more activity in terms of buybacks and giving cash back to shareholders, but i see think translating that into disinflationary issues on a global level, when growth everywhere is quite good, i think that is unrealistic. Jonathan what is the 10year treasury doing . Krishna the 10year treasury is doing what it is supposed to do, which is to reflect the term premium that is required, the inflation level that exists in the marketplace, and what is the expectation for future inflation. The 10year treasury will go to. 80 when we expect inflation in the future to be meaningful higher than what it is today and that is not the case. Jonathan if gdp was running north of 3 and unemployment was down in the low 4 s, we would expect that to be happening, wouldnt we . Why isnt that happening . Krishna nobody knows. [laughter] jonathan i proceeded the honesty. Krishna i wish i had the answer, but i think the fed has more economists trying to answer that question and they have not figured it out. I expect because of globalization, labor force issues, and things like that that would not be resolved anytime soon, but i cannot tell you with certainty what the driver is. Daniel there is this fascinating exchange in powells confirmation hearing. Said,chaap the shelby you dont know why inflation is so low, do you . No. [laughter] daniel it was brief, but it was very insightful. Alix next year, Global Growth, are we at 4 , but is that is good as it gets . Krishna i think 4 Global Growth rate is fantastic in the current environment. I think if the world sustains that growth rate for an extended period of time, there will be all sorts of issues in the World Economy will be resolved as a result. Jonathan u. S. Gdp revised to 3. 3 . Coming in quite hot. Krishna memani from oppenheimerfunds and daniel moss , thank you very much. Here is emma chandra with first word news. Firednbc news has longtime today show host matt lauer over allegations of inappropriate sexual behavior. His dismissal was announced this morning. According to the new york times, nbc told staff that it received a detailed complaint about matt lauer monday night. It may not have been an isolated incident. Matt lauer became coanchor of today in 1997. The House Intelligence Committee investigation is unlikely to resolve anything in russian meddling in the election. They will conclude that there is no evidence of russian collusion based on what the committee has learned so far, according to officials familiar with the matter. Democrats say there is plenty of evidence, but they were not given enough time to investigate to read one of the most senior saudi royals has been freed after paying more than 1 billion. According to an official, he was released yesterday after the settlement. At least three other suspects have also agreed to settlement deals. Global news 24 hours per day powered by more than 4700 journalists and analysts in more than 120 countries. This is bloomberg. Alix that is a steep bail tag. [laughter] alix i will get out . 1 billion . Hey s opecup, this week meeting. We will discuss what it means for the oil market and potential downsides. One stock were watching at the chipotle. The company trying to pull out of a twoyear slump after an e. Coli crisis hurt the stock. This is bloomberg. Emma this is bloomberg daybreak. Coming up in the next hour, the volvo car ceo. This is bloomberg. Alix in the oil market, oil prices a little bit softer on the day. Questions about whether opec will extend cuts. Part of that is what is happening with the russian oil minister. He is staying mum and saying vague things about how he wants to extend cuts. In the market, you are seeing brent net long off the record high, but very extended. T,ining us now is jeff cur the global head of commodity , therchie jeff currie global head of Commodity Research at goldman sachs. Jeff what metric are going to use in terms of measuring inventories . If you use the opec data, it would say we are roughly 50 of the way to the rebalancing process. A ninemonth extension would make sense. If you use the iea data, it suggests roughly 65 , which would mean 36 months would make sense. The uncertainty does not stop there. Do you use the inventory levels . Do you use data forward . Has level of uncertainty treated a lot of uncertainty around the outcome of tomorrows meeting. Alix you have a chart in your recent report that exemplifies this. Opec and iea versus where they think inventories are. You can really see that discrepancy when we pull that up. What is the middle ground for that when you dont know how much inventories have actually fallen . Jeff data dependency. Alix you feel like im talking about the fed right now. [laughter] jeff you listen to the rhetoric coming out of the russian oil minister. A threemonth put extension with a lets wait and see and see what the data shows us when we get to that point and reassess it whether it was a ninemonth or a threemonth or a sixmonth, it will ultimately end up with a data dependency decision in the end. Alix a fed data dependency is the markets start to ignore the fed. What does the market due to a datadependent russia and opec . Jeff my concern is the one where demand starts to accelerate if we get into next year as we get into next year and they start drying inventories much faster than anticipated drawing inventories much faster than anticipated and the deal starts to unravel. I see that more as the risk then moving in one direction or vice versa. I think the real issue here is why the market is so long . It is has to do with the underlying market. Not only do we have globally synchronized growth, but the demand across the barrel, it is across the entire range of the barrel, across all of the geographies in the world we have not seen this demand growth in over a decade. Alix i have a chart to help you articulate that point. Global pmi. If we can pull up that bloomberg terminal. We talk about so much optimism being priced into brent because of the opec deal, but the purple line is the pmi composite and that is reflecting what you are talking about, the positioning, as well as the price. How much is opec, how much is Global Growth . Jeff if you look at the overall runup in price that would be associated with the position, roughly 2. 50 would be associated with opec. Which means the lions share of this mood is being driven by the underline this underlying demand underlying demand. Copper broke 7,000 a ton recently due to underlying demand. Alix your fear is that we are going to see stronger demand, we tighten quickly, we see lower prices in the future. Jeff lets be careful about what are the fears. I would argue that going into this meeting, the risks are to the downside. Meaning that the market has priced in something between six months and nine months on the extension and if they get six or less, you probably have Downside Risk in the immediate term. Alix longerterm or mediumterm elsewhere, you see spikes at the end of the day. Jeff in terms of getting into demand destruction, given into the the health of the economic environment, i think you would need to see sharp spikes to do demand destruction. It is running out of supplies, demand destruction. Looking at the ability for shale to respond, i think it is difficult to make an argument that we are going to get so tight we have to do demand destruction. Alix lets roundup geopolitics of the region. Russia versus saudi arabia, we usually only care what saudi arabia talks about. Now, russia. Iran in the background. You have yemen, lebanon. How does this factor in . Jeff i like to look at gold prices. They tell you a lot about geopolitics. They are right in the middle of the arab spring. The level of uncertainty today is not nearly as high as it was in 2011 and 2012, when you have the arab spring going on, you had u. S. And iran had words with one another. You look at gold prices, roughly 1900 an ounce and today they are running 1300 an ounce, which is a far cry. Alix the saudi government basically calling the iranian government hitler at the end of the day. This is a significant rampup of rhetoric. Jeff if you look at the underlying environment, it is relatively still. I like to call it a cold war between saudi arabia and iran. Going back to the u. S. Russia stalemate, the time period was relatively stable in the cold war. You look at the purge in saudi arabia, it is creating the foundation of a much more stable environment. Far more stable today than what it was in 2011 and 2012 in the middle of the eric spring arab spring. Is stickingurrie with us. He is doing some soulsearching on bitcoin. This is going to be fun. This is bloomberg. Alix bitcoin, 11,000 . That is what we are talking about this morning. Of 65 since october. Justice to glitz Joseph Stiglitz said it should be outlawed. Bitcoin is successful only potential for circumvention, lack of oversight. It seems to me about to be outlawed. Alix also with us is jeff currie from goldman sachs. Bill dudley saying it is not a stable store value. What is it . Jeff it is a commodity. If you look at a definition of a security, it has a liability attached to it by definition. Commodities do not have liabilities. They are bearer assets. You look at bitcoin in that context and it is not much different than gold. I dont see why there is all this hostility toward it. If its the same old as many of the other commodities. Mold as manye same of the other commodities. The push back i would have against bitcoin has to do with its liquidity. , it has 8. 3old trillion of gold above ground. That is really liquidity. The lack of liquidity in bitcoin is creating that volatility that has everybody concerned. , the realttom line benefit of bitcoin is the block chain technology. The block chain itself. , putan take gold, bit gold it inside that block chain, and treated just like bitcoin. The real innovation is in the block chain. David everyone says the block chain is valuable. Isnt there another difference with gold, you dont see gold shooting up 65 in 30 days . Jeff right. David how valuable a commodity is it . What goes up can also come down. Jeff lets go back to the liquidity point. Versusllion in bitcoin 3. 8 trillion in gold. It will never have the same volatility is bitcoin. If you give bitcoin decades to grow, then the volatility would come down. It is a relatively nascent market with not much liquidity. We were talking earlier about evs and cobalt and lithium, these are tiny markets. These things have rocketed up because they are small markets without liquidity and then you throw a lot of demand on top of it. David but there is a limited amount of cobalt in the world. When you come to bitcoin, are we confident that it will take as long for bitcoin to grow into that is a liquid market as it has for other things . This is proceeding at a breakneck pace we have never seen before. Jeff on this whole point about lithium or cobalt, we searched all the commodities throughout history and we found that u. S. Natural gas in 1910 is the only thing that has ever grown by a factor of four in 10 years. It is pretty rare to see any of these markets grow with supply creating more liquidity going forward. Bitcoin will struggle, too. The mining process is difficult and energyintensive. Jonathan which analyst made you do that, jeff . [laughter] alix no comment. Jonathan they deserve a shout out on this program. [laughter] alix i think that sounds really cool. Bitcoinioned gold in a scenario. This is a fourweek trading range on gold. It is just 33. We have not seen that since before the financial crisis. Is bitcoin cannibalizing any of this . Jeff what are we looking at . Alix a fourweek trading range in gold. It is 33. Jeff is it cannibalizing gold . There is this situation that you would argue that gold is similar to bitcoin in the sense that it is an independent currency, but the reality is most people that trade bitcoin that i talked to dont see them as interchangeable. Lets take that 8. 3 trillion of gold sitting above ground, how much of it is sitting in Central Banks . Central banks control an enormous amount of the supply of gold, which does not make it a complete substitute between bitcoin and gold. You look at the people trading bitcoin and they are doing it for different reasons. The other issue about bitcoin that needs to be resolved to make it like gold is that it still needs to be vaulted. You put all of this money on your cell phone, somebody steals yourself on, it is like stealing the gold. It has to be vaulted. The other big issue with auditing it. Determining the value becomes very difficult. Fromhan jeff currie goldman, thanks for catching up. Coming up, why the bear market could just be around the corner. From new york city, we are about 34 minutes away from the opening bell. Futures are firmer. Close to an alltime high. This is bloomberg tv. Jon the republican tax push takes another decisive step forward. A vote could happen tomorrow. The fed chair nominee jay powell sets the case for another hike. Further support and bitcoin surging through 10,000, could be closing in on 11,000. The rally continues. , 30 minutesk city way from the opening bell, good morning to our audience worldwide, this is bloomberg daybreak. Lets get you up to speed on some of the Market Action this wednesday. Futures are from her after we closed yesterday at an alltime high and closed the session with the best day pop since early september. The dollar doing not a whole lot against the euro. Beginning ismarket a lot with yields pushing higher by five basis points at 2. 38. That is the cross asset picture this morning. Alix individual names, Nuance Communications higher in premarket. This is a speech and Imaging Solutions company. Fourthquarter profit did top estimates and it also reorder rate it reiterated growth through 2018. Theyter for have not revenues of over 613 million. Consolidation in the chip going. Chipotle 5 in premarket. The founder and ceo will be leaving the company. They are looking for a turnaround expert. The company has been hit with a lot of problems. Nout formed a 25 restaurants in the path of hurricanes and had it in a about 400 25y had restaurants in the path of the hurricanes and they had a data breach. How much change can you expect when the ceo moved to executive chairman . Jon ive always thought the market is brutal when a ceo can create value by leaving. And then the stock rallies. David how depressing is it to read that the stock went up when you left . Jon great work. Thank you. In terms of the markets, the biggest winner is bitcoin. We are on 11,000 watch. Its urged well past the 10,000 milestone. 800 up this year. Bitcoin is undoubtedly a bubble. Bubble,lem with any you have no idea if its going to double before it halves. Between now and then, who knows . It could hit 20,000 and then turn predict turned out pretty quickly. That it isir to say clearly in a bubble. We dont know what the Market Driver is behind this price. Theres a lot of froth and asud in anything that is exciting as this. Global. Bitcoin is successful only because of its potential for circumvention, lack of oversight. It seems to me it on it be outlawed. Jon bitcoin goes through 11,000. It is quite remarkable, isnt it . You leave for 30 seconds and come back and another milestone. David he says it will be 10,000 by the end of the year. We thought, my goodness, what a bold call. Jon just incredible. Anding us now, kirk hartman Barry Bannister. Climbs you dont actually cover bitcoin. Barry im not getting a lot of claim questions. Some of the institutions are asking, but it hasnt been a retail question. Im looking at bitcoin in terms of the way it is denominated in currencies. Not concerns me is it is that bitcoin is going up, it is that currencies are crashing versus bitcoin. Thats what it really means. Is it going to be money . Or is it just a speculative asset driven by liquidity flows . Jon do you have a view on that right now . Barry we could spend the whole program talking about bitcoin, there is so many facets to it. It is not as good a store of value because of volatility. It doesnt have its own army or irs in terms of selling transactions and forcing compliance and paying taxes. No, it is not. Software eads the world, is this a technology disrupting money . Its one of the last things that tech can disrupt. That is on my mind. Jon whether it was the written word that people view that as a technology. I remember when the ipad came out, i laughed about it and said i would never get one of those in several years later, i bought one. She thought that was going to be an expensive coffee table. Our people wrong about this are people wrong about this . Kirk i would be very wary about bitcoin. It is subject to government regulation. That nuclearee fuel is treated through bitcoin or some thing like that . You will see Government Intervention pretty quickly. It avoids taxes. The fact that it is nontransparent is a big issue for me. Alix Central Banks continue to weigh in on the debate. Heres what he had to say. Heres what Jerome Powell had to say. No question that valuations have gone up quite a lot in the last year or so. Again, from our standpoint, cryptocurrencies are something we monitor very carefully. We look at block chain is something that could have significant applications in the wholesale payments part of the economy. Dudley also talked about this today saying he is pretty skeptical of bitcoin as well. It is not a stable store of value and not legal tender. What is the broader shift that we might see in the monetary like a fed coin . Will we see some kind of currency at some point that is devoid of Monetary Policy influence . Barry when powell talks about they are watching it and they talk about a fed money, centralbank money going to a block chain technology, he is correct. Block chain is real and it is going to grow in terms of wholesale payments technology. It also facilitates their ability to use negative rates at some point when you have electronic money because theres no hoarding of paper. This will not be well received politically. Thats one of the aspects in the back of their minds. Alix when do you have to buy it . Kirk i dont think you have to buy it. What is money . Money is journal entries at the bank or ious at the federal government. There will be an evolution. I wouldnt be surprised if there isnt some kind of government type of product that is similar to bitcoin with government backing at some point. Evolvingtechnology is all the time and it will be interesting to see what happens. Jon guys, you will stick with us. Barry bannister and kirk hartman. We will get their reaction to Jerome Powells remarks before congress yesterday. Lets count down to the catch open. Volatility across assets, futures just a little bit firmer, up. 1 on the s p 500. Dow futures up by 80 points. After a really strong u. S. Gdp print, we come in higher, five basis points higher on a 10 year yield at 2. 38. The dollar is not doing a lot against the euro, weaker against the pound. A littlet mood music bit better over the last 24 hours. This is bloomberg tv. David we took a big step toward tax overhaul yesterday when the senate agreed to send its bill for a full vote. Earlier, i spoke to someone whos vote is key to passage of that bill, republican senator ron johnson. As important as this process is, it is not always pretty. Sen. Johnson President Trump came to our senate lunch yesterday. He remarked about how important this was for our economy. The economy is not even close to realizing its full potential. It needs a competitive tax system globally. We have to critical tax reform. Now, we are in the sausage making. It is not pretty sometimes. We are all committed to achieving success. David to take us through that process, we welcome kevin cirilli. You are right where the sausage is being made. Give us a sense of what is being done down there. He is one of the folks who is really in the center of the storm because lawmakers arent dissipating to set up a motion, a procedural motion that would set up a vote in the senate by tomorrow on tax reform. There are a couple of holdouts. You have people like senator johnson who have issues over the lowering of the tax rate. You have tax hawks who are concerned about what this would add to the deficit. Leadership is feeling very confident about this. As we have seen play out all year long, it really is going to come down to the final vote. David it is good that leadership is so confident, but i dont understand those two cams and how you put them together. If you are trying to do what ron johnson wants, it costs money. The deficit hawks saying we are already spending too much money. How do you square that circle ech . Kevin when you look at the ,arying points of tension according to sources within the Republican Party that work on capitol hill, they feel that some of the folks, some of the lawmakers raising concerns about the lowering of the pastor rate have concerns but ultimately would not fall through that sort the passthrough rate have concerns but ultimately would not fall on that sword. Those votes could be a bit more difficult to get. David they are not up for reelection, either. They are the wildcards. Alix at the same time, we have growth in the third quarter, 3. 3 . We are already at the 3 growth level. With us, Barry Bannister and kirk hartman. Analyst after analyst upgrading our 2018 price forecast. What about you . Barry i put in a probability of tax cuts. 2018 im at 137. 50 in 2018. That is pretty strong growth. I could see it noting up if growth is stronger than i expected and the tax bill is structured in a certain way. Im reserving judgment until i see some of the details in terms of interest adoption Interest Deduction and industries that are directly affected. They will assess the tax on overseas cash as well. Alix Jerome Powell didnt take any of the big yesterday bait yesterday. I think the tax reform will be muted. There will be a positive impact on the economy. Although i dont think it will be that strong. I think 3 is a quarterly figure. Im not sure that we will have 3 yearoveryear. The thing i continue to be concerned about is the 1. 5 trillion added to the deficit. You have to be concerned about that. To the question of how do you reconcile the two forces of fiscal conservatism and tax answer ise you cant. David in fairness, that is over 10 years. That is not a lot in this economy. Kirk although you have to remember that the chinese and japanese own 1 trillion of u. S. Debt. We will have more overseas buying of our treasuries. That is a concern. It is over 10 years, but it will have a positive effect. It wont be as strong as everybody thinks. David is there positive upside possible upside here . If we do this tax reform, we will increase productivity and growth. Are they right . Barry tax cuts generally come to address the deficiency in the economy. Reagan had to cut personal rates in the early 1980s. That freed up Balance Sheets and corporations because people had been pushed into higher rates. We were coming off the tech bubble bursting and 9 11. Today, the deficiency is investment in productivity. I disagree that the debt is such a big concern. The interest is very low on the debt. Growth is more important. Over 25 years, you had 500 trillion in gdp. Not as worried about 20 trillion in debt. Jon there he is sticking with us barry is sticking with us. And increasing divide over at barclays. Top performers might get a boost in pay. More on that, next. This is bloomberg tv. David dark place is warning its Investment Banking staff that half of them make it their bonuses cut this year. Even though some top performers make it raises. Itsarclays is warning Investment Banking staff that half of them may get their bonuses cut this year. Even though some of the top performers may get raises. They are looking at a cut in the overall size of the pool. Thats right. Its not hugely surprising. Weve seen that performance in trading this year. Revenue is down 7 at barclays. That is not a surprise. The new investment head is trying to introduce a bit more differentiation in what they are paying their employees. They will take the top 25 and give them a lot more. Halfottom quarter or should expect their compensation to shrink over time as they inject more competitiveness into their Investment Banking division. David the new head of Investment Banking is the new sheriff in town. They have to shake it up some. All of the talktalk is being done by tim. Its hard to imagine jes staley isnt 100 behind this strategy. He handpicked this guy to run the institution. These run jon are we still seeing this big competition for talent . Has that died down a little bit . This is reflective of the fact that if they want to try to compete with the big american banks, they need to hire some of their staff and just daily has hired a lot of people. Jes staley has hired a lot of people. If they want the top people running these units, they have to find the money somewhere to pay them. Moreu differentiate a bit there will be some unhappy people, but if you perform well jon is that the kind of incentive you want to see a bank ceo deliver to the staff . Kirk you always want to see fiscal response ability. Good management means you have to manage your cost. Jon a nice bid yesterday following jay powells comments over deregulation and then the grinding forward seemingly of tax reform down in d. C. As you look at things from an equity perspective, the you like the regionals or big banks on wall street . Barry the one part of the economy where there is still potential for Capital Growth is housing. 250,000ill short of the right level given household formation. As incomes rise and rates stay fairly low, if you free up these regionals and Smaller Banks to make loans, the Residential Lending excites me. If the Market Action is strong, obviously the big banks and if it on the trading desks. Thats why the entire banking index was up yesterday. David listen to jay powells testimony. We heard a lot of great things about community banks. Is consolidation one of the things that will drive up the value of some of these banks . Barry theres no question that we have too many banks. We are not as overbanked as europe, for example. They tend to have more consolidated banking sectors. One of the things that jay powell talked about to a degree is the overreaction after the financial crisis that led to pretty tight regulation of the banks. They are pretty heavily regulated. They may be lightening up on that a little bit to help the credit flow. We need credit flows in a modern economy. David after President Trump was elected, there was a rampup in the value of financials because of the regulation. Deregulation. Kirk a lot of it has been priced in. This is a function of the yield curve. You get it back up and rates, that will help the financials. Jon what is more important at this point . Kirk deregulation will help all the financials. You have seen that in the price movement. Jon the regionals or the big banks on wall street, which of those to you like . The president talked about the regional banks. His team talked about helping the small lenders. Is that where we will get a nice short squeeze . Kirk it will benefit both. The regional banks will benefit very much from the Housing Market, which will continue to improve. The big financials will benefit from the stronger gdp and steeper yield curve. David you mentioned housing specifically. Where will we get the loan generation from . We havent gotten the level of loan growth that we had anticipated. Does that tell us about the overall growth of the economy . Barry most of the loan weakness is in commercial and industrial. Where im talking about residential, that would be more of a consumer category. Within the banks, you look at the big banks, they tend to move with the 10s. Bank of america, they tend to move more with the twos. Im more optimistic about the curve. I think the easing back of qe abroad will reduce the pressure on the u. S. Term premium and allow the u. S. 10 year yield to rise along with late cycle inflation. Its a mistake to think the fed wont hike rates. They will go to times between now and june of next year two times between now and june of next year. Jon the opening bell is four minutes away. Yesterday, one of the best daily gains in a couple of months. Futures up by. 1 . Dow futures up by. 3 . Gdp coming in stronger once again on the second read, well north of 3 . Yields pushing higher by five basis points to 2. 38 on the u. S. 10 year. This is bloomberg tv. Is this a phone . Or a little internet machine . [ phone rings ] it makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And ask how to get a 200 prepaid card when you buy any new samsung device with Xfinity Mobile. A new kind of network designed to save you money. Click, call or visit today. Jon i think i have said this well over 60 times so far in 2017. We come into today sitting at an alltime high. S p 500 futures positive. 1 . In europe, 18 of 19 Industry Groups in positive territory. As you hear the opening bell ringing in new york city, heres the story in the bond market. Treasuries lower, yields up five basis points at 2. 38 on the u. S. 10 year. As d. C. Moves toward tax cuts, the dollar cannot get a bid. That flat on the dollar index and a little softer on crude just after 58 a barrel. Alix dow and s p at a record high. The nasdaq slipping by five points. Nasdaq, 70 record highs so far this year. The s p, 56. The dow, 61. The grind higher, but not a lot of evolution. Here,le front and center trading up over 3 . The founder will be stepping down as ceo. They will try to hire someone who is a turnaround expert to help the company. He will become executive chairman. What kind of changes can still be made . The issues, the data breach and hurricanes. Marvell technology on the upside after the purchase of cadmium. Square hasn plays some of its users buying bitcoin app. Gh their square cash they have 400,000 worth of cryptocurrencies. They have to have something. Theyve been struggling on the retail front. Jon thank you very much. Four record highs in equity market in United States. We head toward an eighth straight month of gains. The longest quarterly gain since 1997. I want to bring in Barry Bannister and kirk hartman. The quarterly gain, the monthly gains, they keep racking up. Where will the fuel come from for the next leg . Barry anytime you have fairly low inflation and a fed unwilling to push the short rate through the 10 year and these and earnings, you will have an upmarket. The market continues to grind higher. Hasings divided by price tracked closely to mid grade Corporate Bond yield for the past 15 years as the global savings glut started. If that is the case, it is hard to see more than a 5 baa. You are looking at 20 times whatever estimates you have for 2018 as a real possibility. That is pushing you to the high to thousands. 2000s. Kirk i think the key is the correlations around the world. The fang stocks have driven markets in the u. S. And the alibaba and tencents have driven the emerging markets. It will be testing to see if the Health Care Technology sectors will continue to drive the market. Alix what does that wind up meaning that next year wont be as easy . In terms of growth, next year, not that easy. Notthe momentum trades going to work next year . Kirk they will work, but your expectations have to be a bit more muted. Im expecting 510 next year. Next year will be good. On top of the year weve had, it will be hard to beat this year. Alix you cannot expect them to run as much next year, so you want to diversify into other areas . Barry markets tend to move in these big decade cycles. If you think about what we have been trying to escape now for 10 years, its deflation, overcapacity and over indebtedness. You get fed exit, you get a higher yield, you get cyclical growth, you can capital spending. We think valley will have a nice rally in 2018. We could be wrong, but it looks like that would be the definition of confidence when you overcome that fear of the post crisis inflation. we have to think about and make your we are well invested their make sure we are well invested there . Bery the value tended to rising off the bottom. Environment,ower you would expect value to be late cycle. It takes longer to recover. It is a flipped cycle. Alix thank you very much. For more equities we are watching today in the market, chipotle shares up during the day by about 4 now. Founder stepping down as the ceo. Ning us now from princeton nick as a neutral rating on chipotle. You want to have a buy rating if we see a Management Change . Its a good thing that steve is stepping down. He was reaching into the past to address the Current Issues. The Current Issues were the direct result of some of the moves they had made in the past. We needed a new perspective, which is why we are seeing positive reaction today. The near and mediumterm challenges are daunting. For any ceo. Term uncertainty only increases with the lack of a ceo. The reason why they are doing this, they need somebody who can focus on margins and profitability. This isnt aimed at trying to bring in somebody that will be successful in driving sales growth in the mediumterm. This is for someone that is a turnaround specialist, someone that can basically drive profitability improvement having given up any hope to drive sales crisisy to pre food levels. Alix come inside the bloomberg here, this paints the picture. Samestore sales are the white bars, the blue line is inventory days. Inventory days are higher and sales are weak. How did we get here . What is the management play now . It has been a tough year. This was supposed to be a big year for the turnaround. Things havent gotten any better. Weve had the nora virus outbreak, the credit card breach. This has pushed out a samestore sales recovery. A big part of it is going to be running better stores, having better operations, getting the restaurant margins where they need to be. They will have to bring some sales back to do that. The restaurant game is a top line game. Yourest way to improve margins is going to be to try to bring some sales in through those doors. Jon how difficult is this sector right now . Fast casual was the big hope. This year, mcdonalds is up over 40 . Fast food is back in a big way. Of wonder whether fast casual has much of a future at this point. Im pretty skeptical that it does right now. The Income Growth is concentrating on the lower income demographics. Its not just mcdonalds. Everyone else is on fire in qs r as well. All of qsr his taking share from fast casual and casual dining. The trends arent going to change in the near to medium term, in my opinion. That fast casual category is going to continue to see some headway in some headwinds and chipotle is no exception. You have the small guys opening up continuing to be in that fast casual category. With the declining transactions in that category per restaurant, its even worse. That is not going to change anytime soon. Alix when you wind up having steve elko continue to be executive chairman, how many substantial changes can you really make . Skepticals why im there will be much in terms of repositioning the brand and different marketing that will try to get these guys to a different place in terms of their ability to drive sales growth in the near to medium term. I do think this is by the way, those two categories they play in, right now, no one is going after sales growth. Right now, everyone is trying to battle inflationary headwinds in terms of margins. Aside from the qsr category, no one is going after sales growth right now. Theres no sales growth in the near to medium term. You have to bring in someone that can hunker down and say, ok, this is where the cost cuts are going to come from, this is how we will keep our margins flat or improve margins. We activist take here was are going to be able to do 20 plus margins even at 2 million because you have other guys out 20 margins19 , at 1. 3 million sales. Why shouldnt chipotle be able to be more profitable even with current sales trends . This is not aimed at trying to regrow sales. Jon what is the future of the activist in this particular sector of fast casual right now . For and askey look for next . That is a good question. We think they should ditch the burger and pizza chains. They are just a blip and a distraction, if anything. We would like to see the refranchise internationally and grow that through franchisees. It will speed up the development and reduce the needs the cap x needs. Great to catch up with you. Thank you very much, guys. Volvo cars deal with uber. Equities at alltime highs on the s p 500 once again, up another. 2 . Alix it will be 57. Jon on the dow. On real for 2017 unreal for 2017. This is bloomberg tv. This is bloomberg daybreak. Representative john delaney, democrat from maryland. This is bloomberg. Volvo cars had a big announcement last week when we learn uber would by 24,000 volvo sportutility vehicles to form an entire fleet of driverless cars. Ceo,lcome now the volvo Hakan Samuelsson. Welcome back to bloomberg. Lets start with this 24,000 acquisition. How are the larger you moving into ability through this sale . It is a very interesting new segment for us. If you want to do and autonomous car, you have to start with a car that has safety. To circuits during an to circuit breaks. Steering and two circuit breaks. It will be volumes up. David youve already had a relationship with uber. You have some cars youve been working on. Who has the Technology Behind the autonomous driving . Ers . At volvos or ub e the technology in the cor was developed at 12 oh with the support thats at fault though with the support at volvo with the support of uber. Thats what they will do with these cars supplied from us. We will use the same base car and create a car that has a highway autopilot. It is a commercial product we are seeing is interesting for our customers. We will use the same basic car. David what is the use case for this 24,000 vehicles . Is this urban situations . Hakan i would say so. It is a ride hailing application where the car will take you from a to b. Interesting Market Segment for us where we want to supply base cars to actors in this segment. The segment is for the premium cars, such as volvo. We will be supplied with an advanced autopilot in the future, allowing people to make use of the time they are spending on the traffic jam situation. Today, that time is wasted basically. David what is the strategic decision that volvo will partner with uber and others down the road in developing Autonomous Vehicles rather than developing your own . Hakan it will be two very different segments. One is the right hailing segment. That is strategically important for us to supply such base cars. Supply to other ride hailing companies. Our role is very clear, to supply the base cars. When we go into the premium car lvo will of course, vo have the highway autopilot system. That is another use case. David i know that you have plans to invest over 1 billion in a plant in charleston. To what extent is that a response to some of the trade issues raised by President Trump and others . Hakan this decision was taken early. We have ambitions to really grow in the u. S. Market and we have to get closer to our customers and suppliers and r d partners. We want to be present here in a totally different way. That includes a factory in south carolina. We recently decided to expand that. We are talking about 1. 2 billion investment. We will create around 4000 jobs in this sector. David i have to note that the owner of volvo cars just bought a company in the United States for flying cars. Should we be expecting a flying volvo anytime soon in our future . Akan it is very important to follow whats going on in the tech sector. I can understand that our owner has interest in that. It is something that is related to volvo. David that is Hakan Samuelsson of volvo. Jon janet back on capitol hill very shortly janet back on capitol hill very shortly. Janet yellen back on capitol hill very shortly. This is bloomberg. Janetoments from now, yellen will testify before the congressional joint Economic Committee. She will discuss her latest outlook, 24 hours after the nominee, jay powell, had his confirmation hearing in front of the senate. Around the table, michael mckee. Are we expecting to see any daylight between what we heard yesterday and what we are about to hear today . Michael no. Pretty much the same thing jay powell said. The economy is growing and the labor market is getting stronger and wages need to go up a little faster, but that is starting to happen. Inflation should rise and that means we get a few more Interest Rate increases. Jon stephen has done the compare and contrast of the Statement Today in the statement yesterday. He said the powell approach has a close ended nature. We expect Interest Rates to rise somewhat further and yellen is more open ended when she says we continue to expect gradual increases. This seems very nuanced to me. Michael i see some angels dancing on the head of a pin here. Openended for janet yellen lasts until february 3. She notes that the neutral rate is quite low by historical standards, which implies the fed funds rate doesnt have rise much further to get to neutral. It doesnt sound like we will have a long string of rate increases your. David the fed has been the center of the universe when it comes to Financial Markets. Are we about to see a period when its not as important . Steady as she goes, no surprise is here. Michael they would like that very much. The nextx bill passes, question everybody on wall street will ask, what is the fed going to do . They will have to lean against this. They will be thrust back into politics. If the fed raises rates in reaction to the tax plan, somebody will be tweeting about it. They may not get their wish. They would like to withdraw and go back to being the guys who every once in a while reacts alix what you wind up hearing about tax reform and growth gdp over 3 . Are we going to hear Something Like we dont need tax reform . Michael probably if somebody poses the question. She has said in the past that we dont need to stimulate additional demand. How far does she go in suggesting that might create problems for the economy . We saw jay powell dance around all that saying we dont have exact numbers. Increaseggest if you the deficit by a lot, that would push Interest Rates up. Jon growth is accelerating in the u. S. There is clearly a correlation i wonder whether the economy is exhilarating because of tax reform and deregulation. Michael it is hard to parse that out. Traditional economics would this is just ao, continuation of the economy picking up speed because the economy has been gaining momentum. Maybe theres an increase in Business Confidence since then. If you look at the individual numbers, you havent seen consumers start to spend a whole lot more money. Alix michael mckee, great to have you with us. Jon in just moments, we will hear from janet yellen. In the markets, more record highs. Up. 2 on the s p 500 after closing at a record yesterday. Another record on the cards. This is bloomberg. Vonnie you are here on bloomberg markets, and it just moments, Federal Reserve chairman janet yellen will testify before the joint Economic Committee of the u. S. Congress in what will likely be her final appearance as fed chair on capitol hill. Good day from new york. I am vonnie quinn. Mark and live from a bloombergs new European Headquarters in the city of london, i am mark barton. Chair yellen will be Briefing Congress on the feds economic outlook. We have data on the u. S. Housing market. Abigail doolittle has more from new york. Abigail were looking at pending home sales for the month of october and very strong readings here. Month over month reading statement of over 3. 5 versus the survey of of up 1 . Yearoveryear basis, little better than expected. Much stronger than september. We are seeing an impact from hurricane irma. Plus, not a lot of supply. Nonetheless, pending home sales for the month of october relatively strong, and that it is forwardlooking, suggesting that the Housing Market may continue to have momentum. Not a lot of influence on the major averages
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