Transcripts For BLOOMBERG Whatd You Miss 20180130

Democrats are upset that the report was not accompanied by fresh sanctions for russias alleged meddling to the president ial election. Liste on the all a card are not subject to penalties. After coming under extreme criticism, pope francis decided an investigator to investigate victims of covering up for the countrys most notorious pedophile priests. The general secretary of the conference announced that multis archbishop will travel to chill who has denied charges of the abuse. Frances defended the archbishop. Nassar run capitol hill today on legislation that requires governing bodies and amateur athletics to probably report abuse claims to law enforcement. This is not for lawmakers make changes and sent it back to the senate for approval. I want to thank the very brave Young Athletes who have come forward and spoken about their personal experiences of sexual abuse. Thank you for shining a spotlight on this horrendous crime. Mark the legislation extends the statute of limitations for victims to superb traders, recognizing that children sometimes dont recognize that they are abused. Global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Julia live from new york, i am julia chatterley. A choppy trading session and the u. S. , stocks are at a low and all eyes on the global rates market. Whatd question is, you miss . Apple could be in trouble with regulators over Software Updates that slow down older iphones. With jpmorganrces to form a Health Care Company for u. S. Employees. The unexpected move sent tremors in the health care industry. President trump is scheduled to deliver his state of the unit address. Scarlet u. S. Stocks declining today with the dow falling and on track for its worst day since august. And has come back quite a bit here, with the s p also in lows. Is an equity phone strategist from massachusetts. Is tempting to call it a selloff given the gains we have canthis year, but you call it that when the s p 500 is still up for the year. I am a little concerned about what might happen in february, and i think it will be healthy if we saw a pullback of five to 7 . People need to be a little careful, you look at the internals and the advanced decline. Seek the s p with advanced decline, and it is not for 21 stateve, and we have the of the union speech, and the market tends to bounce off of that every year. Also, we have big earnings on thursday. The one stock everyone is worried about, apple, is down 9 , and that is built on disappointment. Itgerterm, in february, could still because of problems. Joe what about safe haven when the dow is down 400 points, that 10 year ld is not dipping low 2. 7 below 2. 7. Selloff in prices, which has led to the rise in rates, whether it be germany or japan, and obviously the u. S. We are seeing highgrade corporate bonds. Market, ipal bond think people are afraid. It is a chicken or a situation that precipitated the equity. Nothing in 2018 has been normal, and the rally we have seen as the fear of missing out. I think we could see a bounce in the near term, but i hope we get more of a pullout because this is not in a normal rally. The greatest rallies of all time, we see a pullback of five or seven, or 10 . I think that if we see a real get a 3 and we didnt last year, but something in the five or 7 range will be more healthy and help us digest the gains. The matter what the underlying we can see that kind of move i can allow it to go higher later than it what if when straight up from here. Julia thank you matt. Big news on the health care front. Teamingnd jpmorgan are up to create a Health Care Company to will only be available to the Corporate Giants combined 1. 2 million employees. The news comes as a shock as Health Care Stocks dropped. What does this mean for the Health Care Landscape . Came up this morning and we saw the headlines of Amazon Health care, and we got ridiculously overexcited. When you dig into what we have, how exciting is this . Think you for having me on the show. Over the last few months to has been speculation of amazon moving into the health care marketplace. Todays announcement was surprising to some degree. The three players here are going to focus on improving quality of health care and allowing employees to have more costeffective, higherquality health Care Experiences. Joe how big of an opportunity with buying Power Companies offering concessions and how much is actually changing the model to the point where it is more consumer friendly and more transparency . In our research, we focused that the employers are already selfinsured. They are large and already have significant negotiating clout when it comes to negotiating with health care providers, as well as managedcare Companies Might serve as administrators. The initial focus is based on developing Technology Applications to enable Better Health Care Experiences for their employees. It doesnt necessarily the cloud they have today is not translate to the ability to develop effective technology, and the most important thing is changing behavior of their employees. That is what this announcement is really about. Scarlet as you mentioned in your note, a Company Called ferner assumed the administration of its health benefits. How has that worked . Are there lessons to be drawn from that as amazon, jpmorgan, and berkshire get into this venture . They focus on Health Care Information technology. Scarlet there are already in the industry . They are already in the industry and are selfinsured. Scarlet so they take on the financial risk . Correct, this happened 10 years ago and eliminated the use of a thirdparty administrator and decided to go out and minister administer their own health plan. It was a wild success and they offered a health plan to employees. Build an inhouse clinic that employees go to, and then, based on the expense at the clinic, they went out and sold the concept to other corporations and run health care clinics. For the most part, they are a Technology Company that has done this Health Care Initiative by itself. Has it look to develop a Business Model and manage an entire and if it package for operates, but they clinics and clinic setups across the United States. Julia what the success ultimately look like for these three companies . If that is a success, is it scalable, and who is it a threat to . I would define success if you lower the cost of care while improving the quality of care. In theory, if this is successful many years from now, it could be those companies that have exposure to the selfinsured market. Having an app to manage your Consumer Engagement strategy is one small piece of an overall strategy. Companies that have a wide range of solutions will still be much better competitively positioned. Julia is this the moment that amazon disrupts health care . I dont think so. Joe you mentioned that part of it is companies to change their behavior of their own employees. Can you clear what you meant by that . Years ago there were companies that focused on transparency, giving employees an app that can have their can their prescriptions filled, and they can go to in mri in a network that is cheapest. Changing that behavior is extremely difficult. Think of your own Health Care Purchasing decisions that you make. Data is extremely interesting. Managedcare companies have a tremendous amount of data over years and years, and that is something that no company outside of the managed care and easily duplicate. Scarlet interesting. Thank you so much for joining us. Coming up, major and for such are spending can be on the horizon. Is also take a look at where stocks are trading right now. Moving up asield investors flee from bonds. At one point, the dow lost as much as 411 points, that was a 1. 6 percent decline but we come back here, the worst today tradeoff since august. Whatd you miss . This is bloomberg. Scarlet the state of the u. S. Infrastructure will be a big part of President Trumps state of the union address. Analysts predict that companies will benefit the most in what could be a trillion dollar infusion into aging infrastructure. Flourishny that could is floor. David, great to speak with you and taking the time. With the president said to speak on infrastructure, i would like to hear from you on what kind of detail you can get from the president and what ideally congress can do in order to make the in for such are Spending Program that can work. First, thanks for having me, i am a big bloomberg fan. One of the things i am looking for is that the president s plan has to be thoughtful in terms of the longterm and shortterm. About spending a trillion dollars, we have to make sure we are focused on 2050, and not next year. The second phase is what are we going to do to support commerce. Is thatthis statistic 40 of the fish that go across the market in new york goes across that bridge. We are in the process of replacing that. If there is a catastrophe, think of the Economic Impact of aged infrastructure that would have on commerce. The National Association of manufacturing suggest that we dont deal with infrastructure issues that we have right now. Millionbetween 2. 3 manufacturing jobs by 2030, so i am looking for something that is a little bit longterm, but a shorter term fix. Howof your guests earlier, are we going to pay for this . To work whether it is a Publicprivate Partnership or some other method . Market is the ppp clearly one that should be used. Up five,n you scale it six, or seven times . Feasible, and also, what is the biggest blockage that you see outside of the financing that prevents the United States from tackling the obvious infrastructure issues that we see every day . Answer to the second question is easiest, regulation. We finished a Light Rail Program from denver to downtown. Over a decadeook to get from basically the thought and the plan to actually cutting the ribbon. We have to deal with the regulation. When you think about the financing piece of that, the biggest benefit the government can do is to deal with the programs that is there. Highly Successful Program that allows the Publicprivate Partnership to actually fund these projects. There is a lot of money sitting on the sidelines. Whether it is a highly lanes project in d. C. , or bridges that i mentioned, those are all Publicprivate Partnerships that take advantage of federal loan guarantees that are so important in that financial model. Joe theres a lot of reporting on went in for searchers to take place, theres extraordinarily cost overrun. How much it takes to do a mile in the subway is mind blowing. To what do you attribute this incredible cost . Regulate and make things faster, but where is the low hanging fruit in getting the most thanks for your buck so we are not widely spending on infrastructure that it takes two decades to come to fruition . We shouldegulation, be regulated and it should be safe and operational. It hasto make sure longterm benefits to use these assets. Thefact of the matter is, biggest piece of our business is the process industries. What they look back is what it takes to actually do what is necessary. Debate turned back gets whacked out of the decision there is the phrase, what it be nice . Wouldnt it be nice . What weto understand are doing, but the biggest impact to cost, schedule, and delivery is the regulatory that we find the United States and right now. The ability or the needs to do regulate before you start the money on the situation, or the right combinations being had . So far, so good. Epa and think of the the other organizations responsible for it, they are looking at what makes sense. That is the most important thing. Sense is an easy thing to say, but i think we wouldntourselves, and it be nice if we did such and such as opposed to what is the real need and the use of the asset that we are trying to build, and make sure we stick to that and not have overruns. Julia sounds nice to me. Usrlet that you for joining thank you for joining us. State of the Union Special coverage that starts at 9 00 p. M. Eastern time. The stock a look at of the hour, chipmaker corvo. There are up 10 . Abigail doolittle talks about what is driving that move. Abigail we have this chipmaker up sharply. It is best known as an apple supplier and their revenue comes from apple and they provide the chips that goes into all those products and medication products. Communication products. The company may have been selected for the high band socket for the next gen lcd iphone, replacing broadcom. Perhaps as much as one quarter of a trillion dollars in revenue, and billion dollars on a 3 billion revenue company. Bigger picture, they report tomorrow. Investors are looking for them to put adjusted earnings at 842 million in revenues. And thelook is key reports of the week of iphone intel. This could be it is starting to break down a little bit more, not surprisingly. We see that they are flirting with that 100 day moving average. This entire day setting up for a it could fall potentially disappoint on the quarter. Scarlet i love how this all comes together as there is a linkage to apple. Thank you abigail. Coming up, we are going to take a look at where stocks are trading before we head towards a close. We have talked about this twoday retreat, and the dow is down. This is bloomberg. Julia stocks are down a second straight day with the dow falling 411 point. Its go to julie hyman with a check of the current market action. Are still now at this 112 session straight with all three major averages falling in a signal session. Have backed off, volume is relatively high today, 18 above the s p 500. Take a look at the daily moves in the s p, were looking at the strength indicator for the s p 500, which reached overbought levels. Extremely overbought levels have come down as the rubber band has stepped back. Session, with the health care, there are concerns with amazon getting into the business. Iphone, there are concerns with iphone x. Scarlet great summary, julie. The market closes, and where looking at red across the screen. It is also across europe and asia as well. This is bloomberg. We use our phones and computers the same way these days. So why do we pay to have a phone connected when were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Fell 100 411 points, and the u. S. Rate above the. 7 . If you are tuning in live on twitter, we want to welcome you. We begin with the market minute and have been waiting for pullback in stocks, and we seem to have gotten it today in a twoday retreat. An early blush, we are looking at the biggest twoday loss since before President Trump was elected september of 2016. A 361 pointing at drop. Earlier it dropped as much as 411 points. It comes after a global, asian and european stocks declined. Joe we have been joking about. 1 or. 2 selloffs i think we could call this a real selloff. Scarlet and you have volume picking up as well. This. Was some vigor to julia a healthy correction or a healthy move. Youlet speaking of health, have a lot of news on that space jpmorgan, and berkshire announced that they are forming a new Health Care Company that will reduce the costs of ensuring ensuring insuring employees. 8. 6 . E declining for annuityreserves and pension clients, this because it has to take a bigger charge than expected for the fourth quarter. Will not be holding a Conference Date originally scheduled, and mcdonalds is off by 3 . A big decline are in the dow, although estimates were comparable to last quarter, you could see the stock is down. Investors expect more now from mcdonalds, the bar has been raised. That is according to Bloomberg Intelligence analysts. Joe now a look at the government on markets with u. S. Rates higher across the board. That is the most interesting aspect of todays action. Swift risk we didnt see safe haven assets 10 year yields hanging above. The one Government Bond market that didnt see a big rally as the russia 10 year yields declining after the Trump Administration the client to do anything fresh on sanctions. We suck russian asset rally rall, and a to 10 spread twoten spread. We are getting it bit of that steepening as well. Julia from russia with love, but not so much love for the u. S. Dollar we did get treasury secretary Steven Mnuchin saying that the price of the dollar isnt an issue and he supports a stronger dollar. Thank you for the clarification. The sterling higher as well. The parliamentary committee, a bit of a support there, but little reaction overall for the eurodollar despite what we have seen. Simply cant catch a break. That me show you what is going on in the risk reversals. The slope here, the recent story we are seeing in crude oil, Canadian Dollar strength plays. Its rich inning as people are buying downside protection. Withe said it volatility up across the curve and in decent volumes here. The demand for Canadian Dollar continues to move in the nearterm. Im going to try to use this and see if it works. Scarlet you did it. Julia works. Macro investors adding speculation. European central bank preparing the stimulus. Virtually, a number of players in the market are saying, tracking way back to january of 2017. Bankre looking at deutsche. No finally on commodities, safe haven anywhere. Oil down nearly 2 , gold up modestly. Lumber is red hot, the 24 year high. And palladium one of the big gainers down 3 . That is the theme for our market minute. A lot ofobviously, red. Cameron, and one think that did not decline is a vix. , it is starting to creep up and as joe mentioned, it is climbing this year. A it is a little bit of warning sign that people are starting to realize last week that it was getting silly. We talked last week in this program that the market was in a sugar rush, a sugar high. People were buying options in the second half of last week, it may be suggest that there was a desire to stop on some hedges. Now we can say it was probably the right thing because too much candy, you go to the dentist and get drilled. Scarlet we pulled up a chart here what does through what you see here. There is a very good longterm relationship between vix and trends in the stock market. You can short run, quantify that relationship by ercent in the s p can relate to such a move and such a level. This data since the beginning of i am since the vix is, try to explain what the alltime high is in the equity market and the data suggests that the vix is consistent and anything about there is that suggested stocks are in a drawdown. Vix is consistent with a drawdown, which is a little bit further than we have to go. There are also risk events whether it is earnings, state of the union, you name it. To what extent are we seeing a correlation connection and what we are seeing in the rates market and equities . One of thend, biggest risk events that we have, as you mentioned, the treasury. They announced the anticipated auction schedule of next quarter. What we are going to see is projections for issuance not only in the upcoming quarter but upcoming years. We havent seen an uptick in the treasury since the financial crisis. Courtesy of the fiscal tax cut, we should see a large increase in treasury issuance coming at a time when the fed is going to be pulling back. Coming at a time were corporations are potentially going to be my bringing money back home. You could be seeing a perfect storm. Bunch ofard there is a rich people getting a tax cut and they need to invest their money somewhere. [laughter] joe the vix showing a eventual drawdown but when you look at nasdaq, what is going on here . It was remarkable yesterday. Vrx, or vxm, the nasdaq equivalent of vix closed higher than at any point last year. Is the nasdaq 100, and they lost half a percent that is the canary in the coal mine. As i explained in the s p, trying to back out what the market is pricing, a potential drawdown based on implied volatility. It is a 6 drawdown, which is substantially more than we have seen. It suggest that somebody is worried about locking. Witha great to chat you. Meeting ns final what we should be expecting. This is bloomberg. Vladimir putin says the u. S. Treasurys to release the list of russian oligarchs with speaking at a campaign event, president putin declined to escalate the situation, saying the whole world will breathe a sigh of relief if they see that the two Largest Nuclear states are building relations in a modern way and with respect to each other. Environmental Action Agency scott pruitt is distancing himself from his 2016 statement that then president ial candidate President Trump is a bully and the constitution Sheldon Whitehouse tried to use prudes words against them when oversight hearing. In februarycomments 2016 appearance on a conservative Talk Radio Program in oklahoma. Pruitt said he appeared several times but does not recall making those comments. The first annual Strategic Dialogue between the u. S. And persian gulf nations. Secretary of state Rex Tillerson and james mattis were joined by counterparts at the ceremony with the two nations agreeing to bilateral cooperation on a range of security and economic issues. Significant made progress to combat terrorism. As a result of the memorandum of understanding that our country signed in july, the United States and qatar have sent on information sharing on terrorists and terrorist financiers. We have taken steps in improving aviation security. Ministerar foreign backed the Trump Administration forever to improve relations and to take just position on the saudi blockade of his country. In egypt, the coalition of eight parties and 150 prodemocracy public figures is calling on voters to boycott the march president ial elections. The elections are being called a farce and absurdity bordering on madness. Global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. State of the union. Inflation, you name it. We are joined by chief economist who can give us wisdom on all of this. Look at thewe market today and there is sensitivity and nervousness on rates. It is expected to be an anomaly given past years. It is clear that the u. S. Fiscal position is changing. It is funny that on the same day we have a fed meeting, treasury refunding, and the treasury refunding is more interesting than the fed meeting. The treasury is going to start at the front end of the curve. We will see the truth tomorrow afternoon, but what people are worried about is that as the need to borrow money and the deficit grows there will be more issuance at the long end of the curve. Supply pushes up yields. Joe do you have a view of where it could go . When we talk about a bond selloff, we talk about 2. 8 , what is the magnitude of a potential move . These questions are hard because there is the nearterm, kneejerk reaction. Our strategy team, longterm yields are not likely to go up that much. Learnedone lesson we from the taper tantrum is that there could be a reaction in the short run before people come to their senses. My hope and expectation is that the treasury they have a great career staffer they are going to message this well. That messaging helps calm the market. Scarlet speaking of no big money , tomorrows , there isould be proof o talks that Goldman Sachs will be hawkish in its inflation and balance of risks. I think the feds official line is that every meeting is a live meeting. Remember exactly how many meetings i went to, but inside those meetings, there are live meetings in terms of debate and actively debating where inflation is going, how sure are we on the forecast . That is critical in setting up how we go. Is it a lame duck meeting for janet yellen, making it less likely would they be less inclined to make major change in the statement . Dont think so, jay powell is not new to the fed. Is going to be the new chair and a couple of days, but he is not a new fed. The entire committee knows them, respect them, they all Work Together well. His relationship with janet is extremely good, so it is easy to overstate how much of a transition it really is. Julia always these different questions on the market and the fed, where is inflation, what can we explain or not explain on the moves that we have seen. Off camera we were talking about the oil price move, but we are not talking about the significant runoff that we have seen in oil prices. Tie that into the conversation, to what extent that at some of the wage increases we have seen, minimum wage increases. Feeds into the discussion here. Oil is in a completely separate that category separate category. Shiite is a young, but when the oil went up, gas when oil went up. It went up to medically, and we have the view that an increase in spending in 2017 was driven heavily by energy driven investors. Hire all prices look like they are pretty good for the u. S. In terms of gdp. For prices, so many moving parts going on. Inflation is clearly low in the United States. The fed has to be asking themselves about this pentup demand. Rise,lation is going to it will do so gradually, but the fed is wondering what are the signs we have to be looking for. Scarlet no indication of where going to get a jump. Thank you so much. Apple. Up, a bad day for also, may be some trouble with the fcc and doj. This is bloomberg. Julia shares a Bank Holdings punching today after research said that they may be consuming losses by refinancing loans that customers were unable to pay. Of the south african bank denies stories and allegations when he joined the murder earlier today. At the dna, we have always been thought to be transparent and explain everything in detail. You can see it in our financial results. We spend an awesome amount of time on building relationships with the media, asset managers, etc. We have been open and people can talk to us and ask us questions. If we dont have an answer, we come back immediately. So ite been transparent, is quite striking that a studiedd report we the report during the day and there is a lot of inaccurate facts in the report. That was published without our input, and there is another side to the story. We find it very onesided and inaccurate. Shares fell as much as 25 , and they rebounded at almost 3 . That is the stock market reaction. Can you tell us about the customer reaction. An unusual amount of withdrawals today from your customers . Has there been an acceleration of withdrawals . We have communicated with our branches early this morning. What helped a lot is that the African Reserve bank supporting said that there is no problems. We have communicated to branches and retail deposit people, and inquiries,n all day, a business as usual. Have you consulted lawyers and considering suing my suing . At this stage, all of our attention is focused to ,ommunicate to our stakeholders so we have spent a lot of time on that today and will continue doing that in the next couple of days. You say there are factual inaccuracies in the report. Can you give us an example of one or two . We have been reconciliations, and they have done billions of sorted just on our capital advance, and we have been reconciliationa. S. We consulted 100 , and there might be errors and that to give you a simple example, making a statement that every manager is getting a salary of 13,000 our managers are getting 2000. I think the other side is, to the kleins is being exploited i dont know why they published our side of the story our court papers. That gives you a completely different story. We see it as a lot of Incorrect Information and one side of a story. Scarlet that was the ceo of capitec earlier today. Up, a preview of President Trumps state of the union address. This is bloomberg. Mark Speaker Paul Ryan houseing a vote by the Intelligence Committee to release a memo on the russian investigation. To show improper surveillance in the probe which could be in violation of american civil liberties. There may have been malfeasance by certain individuals. It is our job in the executive branch to get to the bottom of that. What we want is all of this information to come out so that transparency can reign supreme and accountability can occur. Adamant itpeaker was be released Robert Muellers investigation be allowed to run its course. A military campaign in syria heckled Sergey Lavrov opposition groups boycotted the tocalling it the assert the role in geneva. Alassads regime. John j sullivan says there is not a change in u. S. Policy on afghanistan. Kabul condition based. It sends a clear message that the taliban cannot wait us out, because our commitment to afghanistan is not based on a timeline. An in during partnership and will work with the Afghan Government to ensure that afghanistan is able to prevent terrorists. Mark trump ruled out talks with the taliban. Pope francis has decided to send the vaticans most respected covering up for the most notorious pedophile priest. It was announced that multis of would travel to chile about the case of one borrows. Barros. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Scarlet lets get a recap of todays market action. Across ourrows board. Emergent market currencies nowhere to hide today. Scarlet a lot of red. ,lia whatd you miss . President trump is expected to strike a bipartisan tone tonight. One area where republicans and democrats are trying to reach a compromise are on immigration reform. Joining us now is congressman carlos crivello from capitol hill. What you want to hear tonight from the president regarding the daca program . You think this will be the thing that resonates with voters . Absolutely. This is a critical issue because it is holding up so many other issues. We really need to get it done, not just because its the right thing to do, but because the political system needs to move move onration so we can other issues that are important. What the president needs to do tonight is really push both and i say push intentionally, because republicans have been very timid about addressing immigration policy over the year years and i think democrats have enjoyed weaponize in the issue, election season. Both sides need to be pushed to come to a bipartisan agreement. Step likeus important putting it on paper what they think the agreement should look like putting in on paper and tonight the president has to make that sell to the American People. Its a push for democrats and republicans to move to the middle. Scarlet and you will bring a backup permit holder as your guest. Many of the dreamers themselves say they dont want to be used so the president can end the current policy of family unification and install quotas on legal immigration. Is that an acceptable deal to art of politics is the the possible. I dont agree with everything from the administration, but president obama protected about 800,000 young immigrants brought to the country as children. The Trump Administration is posing legalizing, giving full of american citizenship to nearly 2 million. I understand why some on the left are struggling with that. I dont think they expected the white house to have such a forward leaning proposal on dreamers, but the fact is they happen. For those of us that really want to help the young people, those who want to welcome them to our as i say, they are americans, the largest has to catch up to them we have to be willing to negotiate and accept some things that we would probably not put into a bill if it was our own. We need tuesday at the table. It is easy to focus on what divides us. Its why we have got nowhere on immigration for 12 years since george w. Bush introduced the idea. Lets make this time different because there are 800,000 lives at risk. From the other side of the aisle we have seen criticism of the framework laid out by the white house in conversations that you are having, how optimistic are you that democrats will and engage with a proposal and take it seriously as an opportunity for a deal . Behind the seas there is a lot of conversation and cooperation. Either way, the white house didnt say this was taken or leave it. They said they were open to modifying it so it can get the 60 votes it needs in the senate and 218 in the house. Havingn optimistic, but said that, this is an going to be easy. There is a reason why congress has failed for 17 years on the dreamers. It has been 17 years since the first legislation was filed and it has been about 12 years since we have been discussing copperheads of emigration reform. We shouldnt be overly optimistic about this, but the truth is there is a large Bipartisan Group of senators working on this and on the house side there are many of us trying to find a way to get a yes, as well. I remain cautiously optimistic. Scarlet the president is expected to talk about some of the big wins, the tax overhaul, the stock market, deregulation, jobs gains. For all of the positives surrounding the administration, why isnt the president more popular here and isthe big thatg to be a problem for the republicans in the midterm . Up until now the tax reform legislation has obviously been a great success. We have seen all through the country how economic recovery is reaching deeper into our society and benefiting many people who only read about a recovery, but didnt experience it. We have read the headlines, but in our communities Small Businesses are investing more in their workers. This is good news. The reason why a lot of americans remain pessimistic is because of our politics here it is so divisive. It is so ugly. The parties constantly bickering. That has to stop in the president has a unique opportunity tonight. It only comes around once a year, to aggress to address the American People and turn the page on this nasty, divisive. Hapter on ugly politics the president can do that tonight and we hope he gives it his best and follows up after. Is doing well, things are doing better, but our politics seem to get worse and worse every day. That is what we have to turn around. I have committed to doing that in the congress and i hope the president is committed to doing that tonight as the chief executive. Thank you for your time. He sure to join bloomberg president to watch trumps first state of the union and to get expert analysis. Coming up, a bad day for apple. Also, some trouble with the sec and doj as well. and get involved in the conversation. Im going to be hosting our onerage over at ticktock bloomberg. If you want to stay locked into twitter, that is the place to be. This is bloomberg. As we count you down to apples results on thursday, the doj and sec are looking into whether they violated security fraud. Specifically on a disclosure on iphonee sold over models. Explain what the sec is looking into. Older iphones was in breaking the law, but the fact that they werent telling people could be an issue. This issue bothers consumers, probably many watching,s probably some of us, but the sec has some believe that lack of disclosure immediately about the slowdowns could have altered the stock in some fashion, could have messed with investors. I dont think thats the case. I dont think apple did anything in terms of slowing down the phone in terms of appeasing investors. Julia they have cut prices on replacement batteries if people want to get that fixed as well. Scarlet i have an issue with that. I can cut the price of the battery, but they dont let you replace the battery because of an apple diagnostic test, which is impossible to pass. K in order to fix the issue, have your iphone 7 and older not to slow down, you have to get a new battery and before the battery caused 80 dollars. So people are saying they are just doing this to do some profits, but instead we are. Oing to reduce this to 30 personally i feel like they could have gone a little lower, maybe even free as a goodwill gesture. Scarlet they have to allow people to be able to pass the diagnostic test. Joe lets talk about sales in coming quarter, all eyes will be on iphone 10 sales. Various reports about production, suppliers, stuff like that. Do our best evidence on what we have seen so far, what do we know about sales relative to where people thought they might be . The sales of the iphone x will likely be lower. In reality, this is what investors. About, asp and overall revenues. It is a very unlikely that apple misses its guidance. I have been looking at the company for 10 years, i can only recall one or two instances over 10 years has been missing guidance in any significant way. I dont anticipate that happening. Iphone asps your looking at markups of 3 , 30 , 40 increase given the starting price point of the iphone x. And the production concerns, reports from asia about cuts to production, you have heard those on numerous occasions as well in the past and it hasnt turned out to be as alarming as initially thought . Mark yeah. This is really an annual thing. Searchgo online and iphone order cups, put the year next to it, any year you choose, and you will see the story it. This is par for the course for apple. It seems like they order more than necessary because they would rather have too many phones rather than too few phones. Mark gurman, thank you for joining us. Scarlet mark was mentioning how apple tends not to miss guidance. This is the su are people to and apple misses the estimate, lots of green. There have been a couple of instances where it has missed, but it is few and far between. The currencyt is exchanges showing their vulnerability. We will speak to someone who says decentralization is the way to security. That is up next. This is bloomberg. Jo the fivee hundred Million Dollar hike of going check on the Currency Exchange demonstrates the dangers of crypto assets. Is there a better way to store and trade cryptocurrency . Exchangealized recently raised 50 million in its initial offering. Thank you for joining us appeared the typical cryptoCurrency Exchanges, people send money and they have a database of your money and coins. Decentralized version . Another heist. It has happened before, i think it will happen again. It allows users to have control over their assets. Works . Plain how that where does air swap come in . You can write these things called smart contracts. They allow you to Exchange Assets at exactly the same time. Joe explain the models that exist right now, essentially big databases and the countries have to hold the wall it. If someone uses air swap or one of the other exchanges, are they never at any point handing over control of their coin . The exchanges in crypto are even more centralized them the exchanges on wall street. They act as an exchange and also as a broker. They act as a bank and they act as a clearinghouse. They act as a broker because they are charging the fees, they decide which trades clear and have discretion over which clear. Doeswhich of those roles air swap play . There is no fees, no clearinghouse. Blockchain allows you to clear assets atomically. We provide a platform that provides seamless interaction between peers. Joe theres no way you can transact with dollars on an exchange. You cant go where there is a theory him and move that to your exchange, so theres no way to totally avoid the risk of some sort of centralization . Correct. I think the on ramps will stay centralized, but when youre trying to do token to token or pointtopoint they will move to decentralized the rapidly in 2018, i think. Joe you said no fees, so how do you make money . We provide a token model. Fee. Like an exchange joe the theory is you by the token and you would profit if the demand for the token rises . Share. We are very wellcapitalized. We are in a good situation, able to build the next generation Trading Platform here at we have had a lot of interest from wall street coming out to engage with us appeared they want to see if the next generation Trading Platform exists. It is very exciting for us. Ups joe we see more enforcement action every day. Saw moves against the decentralized exchange back in how do you make sure you stay on the right side of the law with the coins that are permitted to transact . I think the Regulatory Environment will involved significantly. They are basically looking to get some answers from these exchanges that are opaque. In our case we are never in control of user funds. There is no custody of assets . Inthink it will involved 2018. Have seen a big selloff since the start of the year, and late last year. Have you seen an impact as far as interest in your platform changed since we have gone through this down period . If you look on a shortterm basis they are kind of inconsequential. Ultimately weve we really believe in technology. I think we will continue to be significant. Outside impactf it has all been positive. Joe coming up, what you need to know for trading day. This is bloomberg. Scarlet a two a decline in u. S. Stocks, the biggest retreat since august. Coming up, dont miss this, we will bring you live coverage after the president s first state of the union. Joe i am looking at tech earnings. Toia and theresa may has china for a threeday visit. Joe probably looking forward to get on the scarlet thank you for watching. Bloomberg technology is up next. Have a great evening. Alisa im a alisa parenti. Lets start with a of your first word news. President trump is expected to tout a Strong Economy when he delivers his first state of the union address. You will call for bipartisan action on immigration reform. We will have special coverage right here beginning at 9 00 p. M. Eastern time. The president will review a republican memo on alleged fbi abuses before releasing it publicly. It alleges counterintelligence abuses and trumps inner circle. Trump has five days to review the document. Her paul ryan defended the plan to release the memo today. Rep. Ryan there may have been malfeasance at the fbi by certain individuals. It is our job in to get to the bottom of that. We want all of this information to come out so transparency can reign supreme. Ryan says it is unrelated to Robert Muellers investigation. The sec says the