Jonathan coming up on this program, we had an important conversation with jeff currie. That is all coming up a little bit later. Softer,a little bit negative four points on the s p 500. A marginal move to the downside. Follows thats as yields lower by a basis point. The euro down a dollar six cents. It will lower by about 0. 1 . David Major Development in washington just sense since yesterday. We are joined by kevin up on capitol hill right now. Start with the Health Care Plan. Ryan House Speaker paul finally unveiling his plan to repeal parts of the Affordable Care act. It will keep some key parts of obamacare preexisting conditions in providing health care to folks. That said, the story line is whether or not chief Party Members will fall in line with this. It could be the battle the first battle that Speaker Paul Ryan will have to battle to keep his party in line. The House Freedom caucus is already speaking out against this including some tea party g roups. They cannot advance the ball on health care or tax reform unless the Republican Party is unified in repealing parts of the Affordable Care act. David we are starting to get some sense of what they think about it. When will we get concrete evidence . When will there be hearings . Later today, House Speaker paul ryan is expected to talk with reporters at his weekly press conference. In terms of hearings, they are already scheduled for next week as well as the coming weeks. All of that said, in order for them to move they have to get conservatives on board. They also need to keep key members of the senate should it advance to the senate. Obamacare isas what parts of the conservative base, there is still a large portion of the country where it remains popular. Particularly in the sense we are heading into the 2018 midterm elections. It is going to be a political tightrope for some senators to walk in the Republican Party. David we have to get health care to get the tax reform. How much confrontation will this be for the Deputy Attorney general later today . Kevin that will happen later on the Senate Judiciary committee. Important, because the nominee for Deputy Attorney general will be the point person for any investigation involving russia sent attorney general Jeff Sessions recused himself. Jonathan optimism around the future of this economy. Capturing the story in the following quote, the disconnect with financial vulnerability, it could derail the modest recovery. Withositive assessment market valuations appeared disconnected with real economy prospects. Chandlers now is marc of Brown Brothers harriman, global head of currency strategy. Glad have you with us. Do you agree with the statement . This is what the market you well. It is not just looking at that news and tracing that in. It is about anticipating future news. They are anticipating that inflation has come to an end, and we have reflation going on around the world. The chinese data looks better than it did a year ago. Now, we need to see some delivery. Jonathan i hear a lot about that synchronized global growth. If you look at the abundant treasury spread right now on a twoyear basis, we have loan out wide. Ro era what does that chart tell you about the state of affairs now . We have to look at what is driving that spread. Last week, it was the u. S. Because we had fed officials talking about a rate hike last week. We also had downward pressure on the german twoyear yield due to the French Elections in the ecb buying these twoyear notes at 40 basis points. Ofated this scarcity instruments. Jonathan on the latest data, we see the average maturity of bones on the basis she have buns the german bund has fallen. The economy is very solid and stable. The trend growth in the u. S. That longterm growth if operating at full capacity is slightly below 2 . In europe, it is about 1. 25 . The eurozone continues to grow above that 1. 25 . They are absorbing this excess capacity. The economy is doing fine. I still have this risk of core labor inflation. They are still concerned about that, and they are filled with excess capacity in the eurozone. It is taking a while to absorb. We have this beginning of the spread ahead of significant political events. What happens after we get over the French Election and german election hurdle . Does the spread it start to narrow or does it stay wide . I think the german side it come back in a little bit. The german twoyear yield could recover partially on the back of what will happen later this year. Inflation will pick up in the eurozone. The ecb likely to taper in later this year. U. S. Yields could continue to rise. The Market Pricing it only at about a one in three chance or a one in four chance of seeing the hikes this year. Of seeing three hikes this year. They had changed the timing of the hikes and not the pace of them. Jonathan lets talk about dollar dynamics. What does it mean for the dollar this year . I think this widens differentials. That is the key force driving the dollar higher. It will continue on a trend basis. Jonathan traditionally, we have been talk about the tailwagging the dog with what the fed is going to do. We sit in a position where the fed is the driving force in a have a hand on what is happening . Trade dollar is on a weighted basis. It weakened in december and january. From the fed point of view, the dollar is not really a problem right now. I think they are most concerned about the pace of dollar increase rather than the level it gets too. The pace as been very gradual in the past few months. Jonathan Marc Chandler will stick with us. We want to welcome in our twitter viewers. If you are watching this morning, bloomberg daybreak is bloomberglive at live. Twitter. Com. Coming up, we will be joined by bill gross. A big lineup coming for you. Market, we are about 22 minutes away from the cash open. Futures, after a day of losses in the United States, down a little softer again. From new york city, you are watching bloomberg. Jonathan in the fx market, sterling falling to seven week close against the dollar today. It comes as a result of the final debate about the brexit bill. Theresa may looks set for another defeat. We are joined now by Simon Kennedy bloomberg exit editor. Ditor. Exit e has a house of lords reputation in the u. K. For checking the work of the house of commons. They are likely to vote on this amendment that would subject theresa may to a meaningful vote in parliament. Theresa may saying today that would tied her hands in the negotiations with other europeans. That they could put a bad deal forward in the hope that the u. K. Would stay. It will go back from the house of lords to the house of commons good we will have what is called house of commons. We will have what is called holiday tree pingpong parliamentary pingpong jonathan what can the house of lords do to oversee this . It has been a longstanding question. The legitimacy of the house of lords. Cases, it is because it theyre great, great grandfathers have helped william the conqueror win a war or Something Like that. They know they cannot do too much in the modern day. They cannot scrap brexit, but margins tweak it on the like they did last week amending the laws on the restrictions in the u. K. Already. Tonight, they will try to do it on this meaningful vote. If it goes back to the house of commons, it could be that we are just spinning our wheels. In the end, there is no sign of what the house of lords will try to achieve. Tomorrow is the budget debate. What do we expect from the budget this year . A spending spree was promised. He will try to keep what he calls fuel in the tank. In order to buffer the u. K. Economy as brexit negotiations may turn south. He has a few more pounds and the budget thanks to the economy doing a bit better or a lot better in some courses before the referendum. So, he has that money, but he is not going to play too much with it. Money forday scolding. This will very much be a budget of backing down the hatches. Stillan joining us now is Marc ChandlerBrown Brothers harriman head of global currency strategy. Seeave not yet started to this in a significant way. Have you seen it at all . There has been very little impact. I watched sterling king earlier, and i agree with him. I do not think there will be a lot of impact. There are things that will affect the u. K. Economy more than brexit. Jonathan are we seeing a mispriced in the fx market than . In the long term the sterling is a very cheap currency. It is getting hit hard by brexit. When you have a big current account, that is what we need. Jonathan Marc Chandler, do you agree with that based on the direction of the economy in the coming years . I am not so sure. If you look at the german spread in the u. S. Spread, the same thing is happening in the u. K. They are the largest they have been in modern times and that is going back to the mid90s or late 80s. I think the Interest Rate differential story is weighing on the euro and dragging the sterling down separate from this brexit story. I think there will be some affect. I think businesses need to take some time and make a decision on where they make their investments and hire people. We are seeing changes in their employment strategy, so i think this will be important. Were still not sure how it will unfold. Theresa may may suggest this is either her deal or no deal. I do not think that is what people signed up for. Jonathan but talk about what it would take to get the rate differential between the u. S. And u. K. Too narrow. It would take in improving u. K. Economy. You see that happening . I do not think there is much likelihood of the economy in u. K. Growing stronger. They have a floating Mortgage Rate market. ,f you pull Interest Rates up it has an effect on how much people pay on their mortgages. If you look at europe and the situation there which is politically challenged, look at the u. K. Right now which is politically challenged, where does the dollar can put to work . The dollar has a lot of momentum behind it. It is inexpensive currency that has gone up 30 . The has taken it from fairly valued levels to a fairly overvalued levels. In the shortterm, who knows . The Interest Rate spread may tended to keep up with pressure on it, but it is expensive. Jonathan u. S. Sterling. That is interesting to me. Marc . E have from there, we have the elections coming up in the netherlands next week followed by france and then germany. I think people are concerned about the nationalist populist movement. I do not think we will see the netherlands, france, or germany going that way. We then returned to the underlying economy. Qeare likely to see more late this year and early next year. I think it will give the euro a bit of a bid on the sterling past the election. Jonathan with the elections that we have questec think there is a lot of uncertainty. I think there is a lot of uncertainty. Get the sebyou may taking over as the biggest body on the cdu. But you will see a lot of rhetoric against the ecb. The germans do not like this level of quantitative easing and negative Interest Rates. They are putting a lot of pressure on the ecb to take it away. Jonathan does the pressure have a Material Impact on the ecb . Doesnt change the way you look at valuations across europe at the moment . I think germany is very powerful and can put a lot of pressure on the ecb. Mario draghi is committed to this course of action. I think it will put a lot more pressure on the Weaker Companies of europe in particular italy which has seen its yields supported by a huge amount of qe. Jonathan great to have you both with us. Coming up on this program, jeff currie, global sacks global head of commodities research. About hisking out call on the ecb to hit the 600 after closing yesterday on 23 75. You are watching bloomberg. This is bloomberg. I am david westin reporting live m washington, tc you washington, d. C. Getting a live look at the capitol dome. We have heard from Speaker Paul Ryan about his plan to repeal and replace obamacare. We are joined now by drew armstrong. Drew, we have a little bit of time to go over this very detailed bill that they have put forward. What are the differences from obamacare . Is it really in appeal repeal . Yes, in a lot of ways it is a repeal. There are some ways it will look similar such as subsidies for tax creditinch to buy medical insurance. Not asference is that many people will receive coverage. It will be enough to buy you may be a plan with a very high deductible that offer some catastrophic coverage. We do not get the same kind of generous coverage for lower income people under obamacare. In the higher income levels, those folks tend to do a little bit better. We will see some of the affect here. It will matter for the Insurance Industry as far as who their customers are. It will also matter for the hospital industry in terms of what kind of coverage the folks coming into their Emergency Rooms will have. It might not be the best news for them given that you will see people having a little bit more trouble paying the front end of their bills when they show up. David lets start with the Insurance Industry. One benefit for the Insurance Companies under obamacare was that a lot more people came into insurance plans. Under this plan, as far as we understand it, with those people stay in insurance or will they lose a lot of customers . It is hard to know. Right now, we do not have a what is called as a cbo score a nonpartisan actuary that any time they look at a piece of legislation they can say how much it will cost taxpayers. In the case of an insurance bill, how many people will gain or lose coverage. There is an expectation here that there will be some people who decided not to buy coverage because there is no longer a mandate under what republicans are proposing. That said, there are also some penalties for not having coverage. Drop it,se coverage or you have to buy it again. Republicans are saying it should have a 30 penalty on your premiums for the next year. That is another penalty what it does in terms of actually incentivizing people to buy coverage and maintain their Health Insurance coverage, i think we have yet to see it. It may not be the strongest penalty out there. David we have a reaction from the Insurance Industry yet . They have said they are still looking at it. Anytime you have Something Like this where you have hundred pages or more of legislation that has not yet been scored a cbo you are waiting to see how this will shake out. Trump tweeted this morning saying that the bill is open for negotiation. If you are in the industry and looking at this, you are saying that ok House Republicans are one small part of the legislative process here. You have to get members of the conservative caucus on board. It will have to go to through the senate where the republicans have a razor thin margin. You can only lose to both a sickly. Two votes basically. This is the very start of what will be a long process both politically and from an industry standpoint. David it may be open to negotiation, but as we shown in their president in the et. Sidents twe he called it a wonderful bill. Will those in the industry under taxes benefit . The work taxes on health insurers, pharmaceutical companies, and a lot of the stuff they are proposing is going away. What is not going away is called the cadillac tax which they put on high insurance plans. It is being delayed. It will be interesting to see if that survives the negotiation process. It is being delayed until 2025 which is a long road. Some of these things are staying in place. We have not yet seen exactly we need to see a cbo score before we know if this will balance from a budget perspective. David what is going to determine if this will get done quickly . Conservative republicans in the house . Yes, i think so. Passing it in the house is the first step. If it gets blocked in the house that is a problem. Democrats will not help them. It then goes to the senate, and good luck there. David thank you, drew armstrong. We will coming up, talk live from the gevo auto show geneva auto show. Futures starting up a little bit softer this money. This is bloomberg. Livestream your favorite sport at the airport. Binge dvrd shows while painting your toes. On demand laughs during long bubble baths. Tv everywhere is awesome. The allnew Xfinity Stream app. Xfinity. The future of awesome. For our viewers worldwide, this is bloomberg daybreak. I am a Jonathan Ferro in new york alongside david westin in washington, d. C. A marginal risk on the downside ahead of the premarket. If you look at the open, we could have a move to the downside at a 0. 1 on the s p. For the dow, on the treasury market, the option cycle begins today with three your notes. Ields unchanged we are down by 0. 1 . In china, Foreign Exchange reserves have come in at just over 3 trillion at the end of february. That is higher than forecast. It marks or rise since june. It comes in the midst of a. Inense dollars selling the midst of a period of intense dollars selling. What got us here . I think you have to consider a number of things. They are making it much harder for sabres and companies to get money out of china. They brought down the capital ers savers and companies to get money out of china. They brought down the capital borders. Moving money market rates higher. If you look back at the general , themy story in china general economy story has stabilized quite a bit. You see that a new manufacturing in the manufacturing data. Take it all together, and it is a better story for the yuan. It takes a lot of pressure off the china reserves. The question is how long this can last in the face of a fed hike. Jonathan the has not been the past couple of months. On the bloomberg, reserves which are the yellow line have dropped. It is not enabled the chinese to stop or prevent this surge of the u. N. Going much higher than it already has. Is the direction of travel going to change anytime soon . Right now, it just screams weaker chinese currency. Certainly, america was to push it weaker. That is where a lot of expectations live. Is significant risk lies on your side with the fed. If they go ahead and tighten, if they signal more rain heights to come rate hikes to come at a quicker pace, it will put pressure on the you want and forced china the yuan and put more pressure on china. They do not want anything on a destabilizing pace. It has been a big year of political change in beijing. I think it is all up to janet yellen. The risk of at least another slide in the yuan will not wane in the near term. David joining us from hong kong, bloombergs latest on the expert onbloombergs the latest of fx data. Marc chandler still with us. How much political pressure is there going to be . It is really more of a strong dollar story rather than a week are in the story. R b story. I do not think the chinese economy will begin in the shortterm. The r and b is up slightly this year against the dollar. Here we are to the first week of march, and the rmb has stabilized this year. The . Han for many chinese officials is when we woke finally hear the official line out of this administration of what they really think of the chinese currency. David it has gotten very complicated. As a candidate, the president has sort of manipulated it one way. Now, it is being manipulated the other. So, what you are trying to do to keep the currency up, they might say it is just fine. Inc. You, maam. Thank you, maam. There, i think we will see a shuttle subtle shift in the administrative administrations view on currency manipulation. Has not been singled out by any president on the campaign trail cents the mid90s. I think the administration might be looking more at valuation. Currencies that are currently undervalued. In an area of in an era of Floating Exchange rates, there balancee no sustained is pretty it tells you something mischievous is going on. A shift in the focus to undervaluation and a focus on a larger chinese trade surplus puts the pressure on china in the treasury report coming next month. David they will likely focus on that traded by trade restrictions such as things like tariffs. How does that affect the currency cross . I am not so sure protectionism like that is the likely is the likely scenario. It is really a question of whether or not we have that with china right now. I do think there are other ways that the administration will ratchet up pressure on china. That includes a report that went out in the last couple of weeks talking about how the u. S. Might adhere to finding a world finding a wto. Jonathan capturing that story on the bloomberg could you can see the dollar as your base currency. You can compare it against and everything in the g10 space. On the lefthand side, you can also do purchasing power and parity. What you see is the euro significantly undervalued. The japanese yen significantly undervalued. Will they look at this as well . Will a point fingers at the europeans and Chinese Japanese . , i think you will see that but there will be a lot of pushback. This is a snapshot. Really, it is a moving picture. Years, the dollar was the undervalued currency and these currencies were overvalued. Well be to do is move it out for the cyclical changes. Of course the dollar is strong. The question is whether or not this is a sustained undervaluation or overvaluation of the dollar. Jonathan we get the treasury report in the next month or so. They can call the chinese a currency manipulator which is clear. They will try to establish that they can get some kind of trade advantage from it. I think any kind of trade advantage ultimately does that. I am not sure how far they push they will push that line. The question is how much of a competitive advantage you are getting. If this is just in terms of companies useu. S. Chinese labor to assemble goods. If the u. S. Puts a tariff on washing machines made in china, that does not just heard chinese manufacturers but also u. S. Manufacturers. The jobs here the argument that the administration had was that imports hurt jobs, but that is not really a waste the case. I think we will see that as people respond to the administration. Jonathan david, is there an argument being made it down in d. C. . People coming out and saying this is not your the taurean era trade situation Victorian Era trade situation . There are complex supply lines that affect everything. Is that being made in d. C. . The firsts is not time in the at administration has been behind the economy and needed to catch up a little bit. There are certain areas in which china really does put orders borders up for our trade. That is really resonating with the base of our president. It is kind of like a rorschach test. Trump gets left with 50 of the vote, and we are still trying to decipher why 40 of the voters voted for him. 40 of the voters voted for him. I do not think trade was a dominant factor in the u. S. Elections. However, i think there is still that concern that someone is taking u. S. Jobs. I think it is technology, automation replacing u. S. Jobs and not china stealing jobs. They too are replacing jobs. Marc chandler, always great to have you on bloomberg. Lets get over to emma chandra. In the u. S. , republicans have come out with their own plan to replace the Affordable Care act. Might have they problems getting conservative republicans to sign on. Will include a refundable tax credit to help people buy insurance. According to a document obtained by bloomberg, a conservative group calls those tax credits a republican welfare entitlement. In the immigration advocates are planning legal challenges to President Trumps revised travel ban. It is seen as less restrictive, but lawyers say the executive order is still a ban on muslims. Iraq has been dropped from the list. , and northlaysia korea, tensions are budgeting of after the murder of kim jonguns half brother. That comes after north korea barred all malaysians from leaving. Malaysian Authorities Say that three suspects in the murder are being are hold up in the north korean embassy. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. David coming up, we will have mike mullen and in obama architect joining us. From washington and new york, this is bloomberg. Emma this is bloomberg daybreak. I am emma chandra. Coming up, jeff currie, Goldman Sachs global head of Commodity Research. This is bloomberg daybreak. Time for other stories making headlines at this hour. I and emma chandra. Hunter harrison has been named as ceo. His job is to turn around the least Efficient Railroad in north america. His predecessor will resign after the annual meeting. Shareholders agree to his demand for 84 million. Chief is taking a wait and see attitude towards the General Motors sale to psa group. He spoke to bloomberg at the geneva auto show. Strongermakes psa a brand in europe with a more Efficient Company and that is good for customers, that is good for the industry. It is still too early to sell tell how they will run the company. Margins inhile, russia are improving. Espn will cut jobs after concluding they have too many on their staff. That is according to someone similar with the matter. No word on how many jobs will be cut. The Sport Network is owned by disney. Theyve been forced to entrench because of the lowering audience for sports on cable. Jonathan thank you, and you, emma. Thank yesterday, when Ceo John Cryan announced a new strategy and revealed a turnaround plan from a year ago. Joining us now is chris. It has been a problem the past couple of years for them to even catch up. T do you make of these these current strategies which are a reversal of the old one . I think john was very much involved in the old one him up because he was a senior. I think he wants to try and respect the fact they had this new strategy, but after repeat appealing to that, he has to do a lot to stabilize the business. They have to do a lot more now to ratchet up the annual returns the bank is making. Jonathan chris, as you put it, they are selling a high r. O. E. Business and integrating a low r. O. E. Business. Hand he wantsis a to play only if he is forced to. What is the story there . I think when the postbank sale was announced to match the big u. S. Banks, we all went hang on a minute. It is going to go for 50 of book. That is a big right off to take unless they can find someone excited about it. They have not yet found anyone. It off post last year, and now they have to integrate it again. Meanwhile, spinning off talks of talks of spinning off one of the biggest Wealth Managers in the world. We have both now deputies for the chief executive office of john cryan. He has indicated quite clearly his decision. How much of this right now is about the next ceo of Deutsche Bank . How close are we to a decision around that . I suspect were still a long way away from that. These two guys are in the running, but so often it does not work out at big banks, because there are quite a few people just below those levels that might suddenly come through on the rails. Big organizations have some very talented people there. John will still be there for a few years. He wants to walk out thing he really got out of the race and let someone else take it on to ratchet up the terms. Jonathan if you look at the stock price, on friday at the close, i can chart a very quickly for you on bloomberg. On friday at the close, we had a situation where the price was at a 20 premium to where the stock price is currently. Then, we moved. It is narrowing. Do you see it continue to narrow . There is still obviously a long way to go before they detail the terms of the Capital Raising a going to be. What kind of discount they are going to be selling at. There is a lot of uncertainty ahead until clarified. Jonathan for the rest of the financials in europe, we have seen the window is open as Deutsche Bank comes to market. Who is next . They stick out like sore thumbs, banks that need capital. Most of the other big banks have done what they need to do. I am not sure we will see a lot of that. Were seeing a lot of debt Capital Market activity because expert gearing up for their total loss absorbing capacity. I think we can cross our fingers and say that two of the biggest concerns have been ticked off if these deals are complete. Jonathan chris, great to have you with us to break down what you bank. Chris wheeler, always great to get your insights. Up, jeff currie, Goldman Sachs global head of Commodity Research will weigh in. Later, the biggest ball on the street, you will hear about his call for the s p to hit 2600. Futures a little bit softer ahead of the open. 0. 1 . S down the situation with treasuries ahead of the auction cycle begins today with the threeyear notes, yields unchanging on the u. S. Tenure ten year. You are watching bloomberg. David this is bloomberg. I am david westin reporting live washington, d. C. Yesterday, President Trump rescinded his older travel ban executive order and submitted a new one. Here to talk about that is a partner at the frogman law firm. Thank you for joining us. My pleasure. David to start, how does the new for from the old one differ from the old . The first major difference is that it removes iraq from the seven and countries. Banned countries. Seven total one had countries. Currently, the removal of iraq is a noticeable difference. In addition, part of the action is to make the process move more smoothly and address the challenges raised in the ninth circuit court. So, the last order had intermediate impact. Impact. Mediate it takes affect on the 16th, this new one. That will help to do with a lot of the chaos that ensued. David a lot of the issues that ensued were people with green cards were caught outside the country. This one will handle that differently . Absolutely. A big difference are that lawful permanent residents and ring card holders are exempt from the travel ban which is a 90 day pause on the issuance of these is to those countries. To those countries. David how many people will this affect . Of people may not be as high as people suspect, but it is still quite impactful because we are talking about highly skilled professionals in several instances. The numbers are not exactly positive in respect to the impact. David does that mean it will have a disproportionate effect on the companies that need these people to come in and work for them . Absolutely. This is impactful across industries. With the First Executive order, Business Leaders express significant concern from the outset. That is because of the impact on highly skilled workers from the very beginning. Certainly, it is something that Business CommunityLeaders Across Industries not just the tech sector. It impacted the Financial Services sector, health care, consulting firms, this was something that impacted across the board. David the First Executive order has been withdrawn but it did run into problems with the courts right away. How vulnerable is this order . There is no specific reference to religion in this order anywhere. In addition to the changes on the first order to the second, it also impacted the refugees and put syrians on par with the ban on the issuance of visas. Remediedrability was in large part by the actions taken. So, this roll out is more robust and professional. With a lot ofals in the firsts issue. We still may see a lot of challenges based on bans being issued based on country of religion beingim predominant in those countries. David thank you so much for joining us. Jonathan coming up, we will hear from the geneva auto show. Later on, jeff currie, Goldman Sachs mobile head of Commodity Research global head of Commodity Research. We will be joined on tv and radio by bill gross on friday. , wer a fourth week of gains open monday with and move to the downside. Futures a little bit weaker as well at about 2. 1 on the s p and dow. Treasuries, the auction cycle ticking off today with 24 billion on threeyear notes. The euro still a little bit weaker and south of the dollar. Down by 0. 1 . On aund treasury spread twoyear basis, we have blown of 200a euro area wide basis points. From new york and washington dc, you are watching bloomberg. Jonathan repeal and replace. As theinsurers brace Republican Party reveals its longawaited answer to obamacare. A sevenweek low of fed ahead of the brexit debate. The Central Bank Increases its purchases of some deposit rate yielding german bonds. Thats one of the stories in the bond market. From new york, im Jonathan Ferro alongside david westin in d. C. Finally a little bit of substance on health care. David we are starting to get some details from present trump and President Trump and what the republicans are planning. We got tom prices plan. We are going to be going over so much of the buzz here in washington. Lot going on that involves the budget, the military budget and china. We will have with us mike mullen, the former chair of the joint chiefs of staff. Jonathan here in new york city coming up is jeff currie. We will talk china with him as well. The scores lower, futures softer by. 1 on the s p 500 and on the dow as well. About an hour and 29 minutes away from the cash open. The dollar50 and stronger on the margin against the yen and the euro by. 1 . The white house and congress have been pretty busy this week on everything from immigration to health care. Here is our chief washington correspondent kevin cirilli. Are we starting to get some reaction from the hill . I just spoke with senator richard blumenthal. Hes calling this a nonstarter. Heres where it gets interesting. There is a mechanism should the house of representatives pass this Health Care Plan and be able to get on board the more conservative wing of their party to support this, should it go over to reconciliation to the senate, they could try to avert having to utilize the democrats to bring it to a vote. They would need to get 60 votes. There is a mechanism to do that. They have to show that this Health Care Plan would not cost the government any additional money. They can try to use the procedures to get around having to bring on board some democrats from a procedural standpoint, but they have to make sure it doesnt cost the government any money. That is precisely the concern that the tea Party Members in the house and the senate like senator ted cruz have about this bill. There is no score on this yet and they have to utilize those number in order to clear these big hurdles. Opposition on this not just from democrats but from all to conservatives ultraconservatives as well. David thats basically a at getting around the filibuster. Have 60 votes. To you can do it with 51 votes. Are going to be concerned anyway that its not costing extra money. How long would it take to get scoring out of the cbo . Is going to take a couple of weeks. Hearings are already scheduled for this week in the house of representatives. The filibusterid they have to get a positive scoring on how much money this would cost. They then have to bring on board House Freedom caucus members, tea Party Members and more conservative members in the senate. This is the First Political rattle on policy this white and paul ryan is facing in congress. David we are going to be coming back to you to cover a lot of it thanks so much. Jonathan. Jonathan an uphill political battle about policy, but optimism in the future about whats going to come from d. C. Disconnect between Financial Markets and fundamentals, potential market volatility and policy uncertainty could derail the modest recovery. Joining us now with how to play the current environment is pimco cio from newport beach, california. Talk me through that quote and whether you endorse it. I dont think there is such a huge disconnect. One of the things that has changed in Global Markets is we have gotten rid of the fear of deflation. Deflation goes away and we go into this varies phase where we expect nominal growth. In addition to that we have the expectation of fiscal stimulus and deregulation. Markets of. Markets are ok. They should have reacted to the political news as well as the change in inflation. It is possible we get much higher inflation than people expect and also uncertainty. Markets look very certain. Volatility is way too low. On a inflation, what is the signal that you take from the bond market currently . The bond market has bought the reflation story. The bond market was worried about deflation. On deals are up. Inflation expectations in the bond market that you get have moved up from around 1. 2 a year ago and today they are pricing 2 per year for the next 10 years. This is probably still too low. The market is not processing pricing that the fed will hit its inflation target. We think there is still room to move higher. Jonathan i can bring up the u. S. 10 year breakeven very quickly. Kicks in. Ion trade over the last couple of months we have stayed flat. What are you saying that the bond market doesnt seem to be getting in the last two months . Why does this look like it disagrees with what you are saying . I think the bond market and the equity market are still somewhat backward looking. They have priced the end of the commodity correction, all prices are higher and we expect prices to stay around here. What markets are missing is that a lot of the policy, we dont have a lot of detail, a lot of the policy recommendations we are getting out of the white thinkat a time when we the economy is operating close to full employment, whether it is tariffs against imports, infrastructure spending, all of those tend to point towards higher inflation and the market isnt pricing the risk of higher inflation because it is still backward looking. The risk was low inflation or deflation and the market still hasnt quite priced the fear of deflation out. Jonathan i want to talk about what this means for correlations. The bank of international sentiment wrote that it was well devoid of Significant Growth for ample liquidity. We saw a Market Participant moves driven primarily by centralbank policy. Risk onlved was this risk off situation. Are we seeing the breakdown of that and a significant regime change . A move away from the investment environment of the last five years . We do think there should be a change. Central bank was driving the pricing of bond markets. Now we have a number of factors. The baton is shifting from Monetary Policy to fiscal policy. There will be winners and losers. Thats one of the technical reasons under the hood why volatility on the s p and the vix is so low. You have some winners and losers. Some stocks are going up. Others are going down. At the aggregate index level you dont see much of a change. The fact the vix is so low is one of the indicators of this move. Jonathan one assumption at the marketevel is that the is too optimistic about a seamless handover from monetary to fiscal. Do you think we are too optimistic about the ability of officials to hand over in a seamless way to politicians in d. C. . We do think the market is being a little optimistic. Expectations of tax reform, deregulation should have driven markets somewhat higher. The fact that volatility is so low, markets are pricing a seamless transition. Handover fromct monetary to fiscal, perfect trade policy and tax policy. There is room for errors and the market is discounting that. Jonathan thank you, pimcos mihir worah. Bloomberg daybreak is now streaming live 7 00 to 9 00 a. M. Eastern time. Coming up, retired admiral mike mullen, former chairman of the joint chiefs of staff will be joining us from d. C. With david westin. From d. C. And new york city, you are watching bloomberg. This is bloomberg daybreak. Im emma chandra. In europe there is a warning from the organization for Economic Cooperation and development that says the Global Economy may not be Strong Enough to withstand some potential risks. Increased trade barriers, overblown stock markets and currency volatility. The oecd forecasts Global Expansion to reach 3. 3 this year. The Housing Market in the u. K. Keeps cooling. British home prices rose 5. 1 . Halifax expects price growth to slow by the end of the year. A newis warning of weapons race after the u. S. Began deploying a new Missile System in south korea. The first element of the system arrived a day after north korea testfired for missiles into waters off the japanese coast. The u. S. Says it is defensive and not meant to be a threat to china. Im emma chandra. This is bloomberg. David u. S. China relations have and in the forefront throughout the new administration on everything from currency manipulation to trade to the one china policy. Admiral Michael Mullen has dealt extensively with china. He served as chairman of the joint chiefs of staff and before that chief of naval operations. He joins us now here in washington. Welcome. Lets talk about north korea and the deployment of these antimissile defenses. It is not just a geopolitical issue. China is taking some trade sanctions against south Korean Companies because of this. Since the Obama Administration announced deployment of this system which ,s a defensive Missile System the chinese have reacted very strongly. They actually believe it is a system that will see into china and affect them. As the deployment gets closer and closer and the Trump Administration is appears to be ready to deploy it. I think those sanctions are going to get tougher on south korea. There are huge challenges in south korea now. All of this continues to ratchet up issues and tensions in that part of the world. Going if anything thats to get worse. How does that read against u. S. China relations . Have a Trump Administration making aggressive noises about trade with china. Im not sure how it comes out. Ihave said for some time that think the most important bilateral relationship in the world is between china and the u. S. And that is because of the economic relationship. When you add the other geopolitical tensions out there, north korea, the south china sea, its really trending pretty significantly in the wrong direction. I think our administration and the chinese leadership have to figure a way to make sure it gets to a position of relative calm. David Chinese Government is feeling some pressures. They are feeling internal pressure to keep growth going. How much of their approach to the United States is really informed by their own internal domestic issues and how much does they limit that limit what they can do with us . I think they are very focused on internal issues. The president is trying to sort out where the United States is going. Coming up for a renewal of his administration which will enter its second fiveyear phase toward the end of this year. I expect him to be more aggressive in that phase. There is a window of opportunity here to establish a relationship between our new administration really focus on keeping that part of the world stable. David meantime we have the Trump Administration trying to get an economic plan going. We havent heard much about the trump budget. He wants more money for the defense. He wants 54 billion additional for the next fiscal year. It wasnt that long ago you were on capitol hill testifying about the budget. Does that make sense to you . He wants to add about 10 of the defense budget. Initially he also wants to add about 30 billion this year in the amended budget. That principally will be focused on readiness for all of the services and that is really sequesterecause really disabled the services from a readiness standpoint. Is somethingase that will be debated. The Services Want to get bigger. The navy wants to get bigger. The army wants to have more troops. I think that will be debated. I am not against a marginal increase with respect to defense because we got a growing challenge with russia, the terrorism challenges, and emerging china. Where the situation threats are growing. Atm really concerned about least as i hear in the media where the money is going to come from. Size lets talk about the of the navy. You were chief of naval operations. He wants to go from 272 ships to 350 ships and the construction in itself will cost. Does that make sense to you . We need more than we have. 10 years ago i looked at a requirement which was 313. The current chief has developed a strategy and requirement for about 350 ships. The challenge is how do you pay for that . The shipbuilding budget is the largest part of the navys budget. Where does that come from . Where are we going to get the money to pay for all of the initiatives . David can we save it on costs . President going after Lockheed Martin for the f35. Can we get the cost of the ships down . That approach, can we reduce the cost of our acquisition system strategically is a terrific approach. I really applaud what the president has done in keeping that pressure on. If you build more theoretically if your numbers are up you get them at lower cost from industry. Its an extraordinary amount of money that will be adding just to the shipbuilding budget or the personnel accounts. Where is that money going to come from . David to address the question, the president said we will take a fair amount out of foreign aid. How do you feel that would work . The media is reporting their going to reduce the state Department Budget by 30 . I just fundamentally disagree with that. I believe strongly that a healthy good effective investment is going to lessen the requirements for the pentagon. I have testified to increase the state Department Budget. And we decrease that budget pull out of the world is much more likely we will be using the military in places that we havent even thought of. David thank you for being here, retired admiral mike mullen. Jonathan we can head over to geneva where standing by is probably the most excited man in the whole of europe. Matt miller. Good morning to you. Matt i am here in geneva at a very exciting show talking to somebody who flew all the way from atlanta. Klaus zellmer. Let me ask you. The u. S. Is such an important market for you. A contingency in place if there were a border tax . That is obviously a subject that creates some energy in our brains. I think there is lots of discussion at the moment very different versions and lets wait to see more cards and then we will make our plan how we react to that. Generally believing we believe in fair and free trade. Matt you have had five or six years in a row of record sales. And youinue to climb are standing in front of a new fourdoor wagon version of the panamera. Can you continue that growth . We certainly hope so. It is not all about volume. We want to make our customers happy. This certainly is an extreme and for the United States. If you look at the share of wagons in the United States, that is somewhat underdeveloped. Car lovers know that a wagon is always the right choice. For europeanxpect growth . Is it going to continue to be a strong market for is it peaking like a lot of people have said is the case in the u. S. . We see a plateau in europe at the moment. We cant expect growth for more than six or seven years. The economy is solid. It is robust. We have the right products lined up. The whole variance we have in place with the panamera wagon, that is important. European customers. We are actually rather confident that we can still be very happy. Market we have left out, you can still talk about china after the reduction in their gdp outlook. Is that a problem . In terms of volume it is the most important market. You have the right product you can outgrow the average growth or the average Sales Numbers in any country. We have a solid Sales Organization in place in china and we can also be rather confident over there. Me ask you about new products to come. You have your own test track in atlanta. Vy run any electric 911 have you run any electric 911s on it . We are working on an electric field vehicle. The phase has started where this car is being tested also physically. In atlanta there are far too many nosy customers. Matt what about Autonomous Cars . Do you think that your customers are going to want a car to drive them once in a while . Is all about meeting or exceeding expectations. Wantink customers will steering wheels. They want to be engaged in driving a sports car. They will also want that button that takes them home. We will have to bring a solution for autonomous driving. You have such a big presence in the u. S. The president signed an executive order yesterday, a second version of the travel ban. Does this affect any of your employees . Are you concerned about any of their welfare . We are not concerned. This is regulation that your administration has now put in place for their reasons and we have to accept that. So far there is no bad impact on us. Continue to see growth this year. What is the longterm outlook for porsche . You sell a little under 200,000 cars . A little bit over. 238,000 globally. Last year in the not dates we sold close to 55,000. United states we sold close to 55,000. Matt do you have to cut it off at some point due to exclusivity . I dont believe in numbers being an indication for exclusivity or not. If you imagine that parking lot with 1000 cars and three of them being porsche, i still think we can pull that off. Matt thank you, klaus zellmer. Back to you in new york. Jonathan would you buy an electric 911 . I will just keep my personal opinion out of it. Coming up next, jeff currie. Goldman sachs global head of commodities research. And later, former u. S. Ambassador to china and obamacare architect. From new york and d. C. , youre watching bloomberg. Jonathan from new york city and washington, d. C. , this is bloomberg daybreak. Im Jonathan Ferro alongside david westin. Futures at the moment a little bit softer. S p 500 futures down. 2 . Treasuries are on offer at the margin. The dollar marginally stronger against both the euro and the japanese yen. Dollaryen reclaiming a 114 handle. At trade balance comes in 48. 5 billion. This of course for the month of january. The trade talents at 48. 5 billion. Joining us now is jeff currie. I want to talk about the trade balance data and the negotiations down in d. C. That data point is going to be a catalyst for conversation for the next four years. Can they do anything about it . Its very hard to do something about it especially where Monetary Policy is going to go. Going torates are continue to affect the currency and trade deficit going forward. You can do things that will slow it down but you will not be able to stop the trend. Jonathan do you assume they can narrow the trade deficit and what does that mean . The all the way they could narrow the trade deficit from an oil perspective is to do Something Like a border tax adjustment. We dont see that eating a high probability event. The one thing that is likely to happen with opec reduction cuts is you are likely to see a drop in crude oil imports substantially. That is likely to be reflected in lower inventory. Jonathan is that the conversation down in d. C. At the moment . Importing less crude into the United States and the border adjustment tax just wont happen . David importing less crude does not help President Trump and the people who elected him. They want more jobs. It seems to me one of the the morethey have is they strengthen the dollar which ironically drives up the trade deficit. When you bring it back to the commodities space the one thing we have seen since october last year is a disconnect between Oil Commodities and the dollar. The natural shock absorber the system has had over the last 15 years is likely gone. Regimek we are in a new where that correlation is unlikely to return to the same level as we saw over the previous 15 years. Steven ricchiuto,r shootout doesnt think the fed will hike in march of this year. Why not . For internal do it compliance purposes. I put out the move in way. The budget in april. The fed would have the opportunity to assess the data. To wait until you saw the budget numbers. I still think thats the driving issue right now. Will bemoving in march a premature move. Its very comparable to what they did in december 2015 and it didnt end so well for them in january and it put off further tightening until december of last year and they run the risk of making exactly the same mistake. Jonathan is it a case that Steven Ricchiuto thinks they will not hike or they will . When they look at where the data is they will have a few more pieces of Important Information about whats going to happen. I think they will say we are not moving in the month of march. We will have a press conference after the may meeting and they will move in may. That is my call. Jonathan you have to calibrate your investments to where we are in the Business Cycle. Can politicians in d. C. Extend it . Lets think about the Business Cycle as being in four different phases. Phase one is below capacity and shrinking. Phase two is below capacity and growing. That is where we are today. The at the data in both u. S. And china. The output gap is roughly zero. We are moving into phase three which is above capacity and growing. What does that mean to investments . Commodities outgrow Financial Assets in phase three of the Business Cycle because Financial Assets anticipate when you hit capacity. Real assets like commodities are spot assets. They perform well when you are actually in the above capacity environment. 1970rically going back to the ratio between commodities and financial asked thats every single time in the second half of the Business Cycle you get out performance of those cycle in . You run out of commodities. I dont believe you are at that point in the transition. When you look at Balance Sheet being adjusted, we still have improvement taking place in the household Balance Sheet and the Banking IndustryBalance Sheet. Been dealing with credit cycles more than inflation cycles since 1990. We are still in the first phase of this cycle. Beingill probably wind up the longest Business Cycle we have had in economic history as long as something stupid doesnt happen in the fed doesnt cause a major disruption. It would be a very short one or two quarter negative gdp. Forould not be the type of sessions we have had since 1990. David jeff currie tells us that we are really seeing global reflation when it comes to commodities. To what extent is the fed looking at International Data and not just a mistake . Reached the top of its cycle. We are starting to see the evidence come through that a lot of whats happening is a function of the currency and not real permanent movements. The reflation globally as a function of commodity and thats not a real permanent upward movement. Thateflationary bias is the economy has simply taken a temporary jonathan you think the eurozone is at the top of its cycle . Its hardly got started. I think that is at the top of its cycle, yes. China, we are at the middle of the npc right now. They are talking about taking capacity out when it comes to coal. Will that have longlasting effects . It goes to an important point about the Business Cycle and how china got to the zero out put gap. Reduction of capacity as well as stimulating demand. A lot of that capacity is gone. Its too expensive to bring back online from an elemental perspective. You have taken supply out of the market and stimulated demand at the same time. A more important port here point is that commodity depends on the pan levels. Even if i agree that growth rates are likely peaking or slowing down the level is going to keep pushing up and stressing the system in places like china. Most of the upward growth we have seen in china is a function of leverage. Gone to 250 of the debt to gdp in just seven years. That is at the level where global economies cant accelerate. That is where we ran into problems in japan. If you look at europe and you take germany out of europe its about 325 debt to gdp. Growth is actually going to decelerate going forward. Jonathan what do you think . Its not about growth. Its about activity levels. The levels now are high enough. Those 20 year over year demand growth rates got us to levels that are stressing the system. When we look at china and the composition of credit is to separate the esso ease from the private sector. It has been focused on private sector and created more of a virtuous cycle. Higher Commodity Prices resolve some of the insolvency problems. Jonathan jeff currie is sticking with us. Steven ricchiuto, thank you for joining us. Chandra. Ma withts get you caught up first word news. Republicans have come out with their own plan to replace the Affordable Care act. They may have problems getting past the conservatives to sign on. The legislation faces out key parts of obamacare over several years and uses a refundable tax credit for people to buy insurance. A house conservative group alled those tax credits republican welfare entitlement. Immigration advocates are planning legal challenges to President Trumps revised travel ban. The new measure is seen as less restrictive but the executive order is still a ban on muslims. Iraq has been dropped from the list of predominantly muslim countries. Malaysia and north korea have ratcheted up the tension over the murder of kim jongun. Koreana has banned north diplomats. Murder arects in the probably holed up in the embassy in kuala lumpur. Im emma chandra. Coming up, we will talk the oil market with jeff currie of Goldman Sachs and we will talk equities. From new york city and washington, d. C. Youre watching bloomberg. This is bloomberg daybreak. Im emma chandra. Hour, thein the next former investors china and the architect of obamacare. Max baucus. Jonathan from new york and washington, d. C. , youre watching bloomberg. The outlook for food in new york to 57 a barrel before declining to 55 for the rest of the year. Still with us is jeff currie. Demand talk about the problem and the supply response. Walk me through where we are with both. Think about the Positive Side of the ledger. We have seen an upward revision to 2016 demand levels and also macro data that suggests there is upside risk in growth in 2017. Also you have had core opec compliance much better than what we thought. Ledgernegative particularly in the u. S. The supply response seems to be gaining momentum much faster than what we thought. Is productivity gains and also access to capital. We didnt change our forecast because the positive things offset the negative things and we and up in the same place and we are confident you are going to see those inventory draws. You put up that equation. We have prices only showing a modest appreciation up to 5750. The real core of our view is into a backward curve. We are getting close. Underlying fundamentals are much more supportive. We think about what generates returns from a commodity investment. Its the positive carry that is generated. When people say there is no volatility anywhere and you cant make money, you say look at this and you can . Go back to 2012 and 2013. The oil price started at 110. Generated and 11 annualized return. We think we are going into a very similar environment. Jonathan whats the biggest pushback to this actually happening . Is leaking that the supply response will likely overwhelm any type of demand increase. We look at this market. I did a survey of our clients in houston last week and i asked them where do you see longterm oil price is. This is houston. 90 of the people between 55 and 65 a barrel. That is impressive. Or four years ago that was probably a 50 band. Why am i bring this up . We are getting a consensus on longterm oil prices. All prices need to do is get above the cost level of that certain supply source to be able to stimulate the investment. This was exactly the set up in the 80s and 90s. We werent worried about the supply is going to come from. Rise above the cost structure to be able to bring on investment. We can remain bullish because demand continues to grow in the second half of the Business Cycle. Supply is playing catchup. Go into a markets deficit they stay in a deficit for several years. Demand isy gets above a very difficult challenge for the market to shift back to a surplus or deficit. Jonathan you dont believe that the rigs are going to come back on aggressively if we get the bullish scenario . We believe it. We upgraded our outlook on u. S. Production such that we expect to see a hundred 50,000 Barrels Per Day at the end of this year. Thats a big number. At the same time updated our demand level. Why you see an outperformance of commodities in the second half of the Business Cycle is because activity levels are high enough that they push demand above supply and put a lot of stress on the system to create that due to lower inventory. We think we are going into an environment like that. Thats whats going to be driving our outlook. I want to be clear about this. The difference between activity levels and where other people see economic road. Draw a distinction for me again. We think about the first half of the Business Cycle. Supply is here. Demand is down here. If isolated demand growth rate is 20 you know it is going to cross supply at some point in time. Bonds and equities trade off of gross rates. Be oil with supply here and demand here . No, you are in a surplus. As demand across the fly and you end up in the deficit. Gross rates offf underlying gdp. Real markets tradeoff of activity levels. Lets agree that activity levels are slow down. That doesnt mean that growth rates are likely to slow down. Doesnt mean the activity level is going to dip. You will still end up with demand above supply. Jonathan what about if we got the fiscal stimulus from washington, d. C. . The bond market and the fx market would adjust but the fundamentals are still bullish . Absolutely. One of the key reasons goes back to that point. Once you have demand above supply you get the backward dated forward curve that generates the terms and the bullish outlook on commodities. Is this why we see a stronger dollar but we dont see the reaction in the commodity market . I disagree with that term. The correlation between oil and the dollar it existed from 2003 to 2016. A riseppened between was in excess savings and a decline in excess savings. Correlatesmovement to of when the excess savings went up. In houston the ban on prices was 55 to 65. Axa 2003 saudi plans for 20 and gets a 30. 2004 they planned for 23 and got 40. 2005 they planned for 25 and got 65. He had all those excess dollars that weighed on the dollars. Oil prices went up. They plan for 90 and get 70. Plan for 85 and get 50. You can do they are sucking dollars off the market. Theres a lot of confidence that longterm oil price is somewhere between 55 and 65. They plan for 60 and get 58. We are going back to an environment where they plan for 20 and get 18. That will take the correlation between oil and dollar out of the system. Jonathan its been great to have you with us. Iq you, just hurry. Thank you, jeff currie. Youre watching bloomberg. David this is bloomberg. Im david westin. You are looking at the Capitol Building on capitol hill. Overnight we got the first look at the republican pan plan to repeal and replace obamacare. Obamacare was 2700 pages. Going to get an initial reaction from a republican member of the house of representatives who is in a unique position to evaluate the plan. Larry dashon is not only on the Health Subcommittee of the house energy and commerce committee, heartalso an experienced surgeon. Its great to have you with us. Bille we get into this new we just saw from the president a new tweet talking about the fact that we are going to have a second and third phase of this repeal and reform effort on health care that will address questions of state lines. Should we be expecting more . Doneis is going to be through reconciliation initially. It is a specific process that only allows you to do things that have a direct budgetary impact. Going to see some action hopefully through the department of health and human services. Then we will have to work forward on legislative texas to the Affordable Care act and we will need bipartisan support to do that. My understanding of reconciliation is you cant have an effect on the amount of money going out of the u. S. Treasury. There is not scoring on this new bill yet. Do you have to have scoring before you know whether you support it . I dont initially going through the committee. Certainly we will have to have the cbo score before we go to the house floor. It has to have no budget impact or save money for the federal budget or else it doesnt meet the requirements of reconciliation. I think it is imminent that we will have a cbo score. David do you have any expectation on that score . Its going to have no budget impact or save money. We have worked through this process over the last six years. Last year we ran on a better way plan that speaker ryan put together forward. Reconciliation it has to save money or have no budgetary impact or else it cant go through. If the cbo comes back with a positive score than we will address that. Assuming you make it through the scoring process and reconciliation what effect will this have on the number of americans who have effective Health Insurance . Wholee we get through the process we are hoping that more americans are going to have insurance. Even under the Affordable Care act 26 million Americans Still dont have insurance and the ones that do are seeing deductibles that are sky high and premiums are going up rapidly on the exchanges. If you have a 10,000 family deductible is that really good Health Insurance . I would argue not. Once we get through all the portions of what we are trying to do to get Health Care Affordable for the American People im pretty confident we will accomplish that goal. The president has pointed out that under obamacare there were problems with the insurance system because you had Healthy People staying out of it and that really changes the insurance system. You are eliminating the individual mandate. Doesnt that indicate that actually you will put more pressure on health Insurance Companies . I dont think so. Its true they predicted about or percent of people would be under the age of 35 and they have seen about 28 . That has driven costs up for andybody in the exchanges made it impossible for the insurance to function. They are dropping out and prices are going up. The americanleash Health Care System so we can get back to a more marketbased system. So the Insurance Companies can offer policies that people want to choose from and that gives america choice. Im pretty confident that we will have a lot of choices. There will be policies that people want rather than restrictive policies coming out of washington, d. C. Under the Affordable Care act. David what about lower income people . This would have reform of time. Id based in over a lot of americans were through the medicaid system. Are you concerned those people will be thrown back out . They wont be. We have said we are not going to pull the rug out from under anyone. Plan the initial Medicaid Expansion is still in place for people that are on the expansion and we want to slowly work our way out of that back to where its affordable for the state and where medicaid covers people that need it. I dont want anyone to lose their Health Insurance and our plan doesnt allow that to happen. In indiana we have healthy indiana plan. I dont want those roughly 300,000 people to suddenly lose their health care. We are working to make sure that doesnt happen. David many thanks to congressman larry bouchard. Thank you for being with us. Repeal and replace. Health insurers brace of the Republican Party unveils its longawaited answer to obamacare. Fund managers have started lowering up onin a mood feel len economically sensitive sect yours. He is the biggest ball on the street. Than twoas added more chilean dollars since the u. S. Election. The man himself says there is more to come. Achieve global strategist of Deutsche Bank dining us. A warm welcome from new york city, i am Jonathan Ferro. Softer,are a little bit down. 1 on the s p. 24ou switch up the board, billion on treasuries. It is a marginally stronger dollar story against both the euro and the japanese yen. Dollaryen getting to 1. 14. Eurodollar, a marginal moved to the downside. That is the story in the wider market. Lets bring in the chief global strategist of Deutsche Bank. He has a toy 600 call on the s p. Upgrading your view on the s p 500 already. Why . Clear, we have not upgraded our view, that has been our view all along. We publish the target early in december. It is exactly the same, 2600. That would be a little more than 15 . We expected it to close at 2300 last year. It is a continuation of the view, not an upgrade. 13 gets us there is about and earnings growth, a few decibels on the multiple. Looking those of you at the market saying we have already had a big runup, we need to see a material policy response from d. C. , what would you say back to them . Normal for500, it is it to pull back 3 to 5 every two to three months, 2. 5 months is what the statistics would tell you. We have never run for almost four months since the dip that we had through the president ial election. This really is starting to get up into the top 10 percentile. We are just talking about a very normal pullback. I do not believe the rally is dependent really on what comes from washington. In fact, many elements of what is proposed would present light cycle risks. Jonathan talk about the complexion of the buyers in the market. We have not seen the retail buyer. That has been the argument the last few years. Is it coming in in a more significant way . Iskeep in mind, what we had this sounds like sort of ancient history but it is extremely important to keep things in perspective. The middle of 2014, we had a very severe u. S. Dollar shock, earnings went into recession. Almost two years of very large outflows of u. S. Equities. We have been getting inflows into u. S. Equities since around november, coinciding with the election but also the turn up in the data surprises. Most of that has come into etfs , which you would identify as institutional investors. It is a question of time, the under allocation of u. S. Equities remains a large, even after the inflows that everyone is talking about. There is still a cumulative outflow going from the u. S. To other markets, and into bonds to the tune of about 250 billion. I would argue that this process has further to go. Jonathan what do you make of the difference between how the bond market is trading, with yields that are south of 2. 50 . The equity market seems to have priced in a lot of optimism. Does one inform the other . I dont believe the equity markets priced in that much optimism. As you rightly said, i am very optimistic. Imagine, i get a lot of is the bond market a morning signal for the equity market . The pricing in the bond market is a morning for the bond market. They are pricing in very little. Yield look at the 2. 5 and you break it up into two parts, into breakeven inflation rates and real rates, breakeven inflation rates have almost normalized back to their historical ranges. Breakeven inflation rates, a little bit over. Sure, it has upside as growth comes back. But if you look at real rates, depending on your measure, 20 basis points, 50 basis points. With the tips, maybe 75. Maybe ahat looks like severe miss valuation, if not a bubble. Jonathan isnt that just the global bond market story right now . Maybe long rates specifically dont have that much about the general economy anyway, it tells you more about shortterm risk management, what is happening abroad. In that is the case, low bond yields supporting higher equity prices. It is not a fundamental disconnect. Verymber one, equities are strongly positively correlated with real rates. As real rates go higher, equities should go higher. Real rates to go up from the lows in the summer. It is just a level that they are that is too low. Historically, there are a lot of hypotheses about what drives the real rate, shorter, longer run movements, but if you look at history, one thing is very clear. Actual, or veiling real gdp growth rates provide a real anchor for where real rates are. They say you had to adjust for the risk premium, but those are small details. Real gdp growth in this recovery is back smack in the middle of the channel it has been in this entire recovery. Basisates should be 225 point higher than where they should be. 10year yields are grossly mispriced. I would argue it is exactly real rates that are grossly mispriced. I would argue it is Monetary Policy that has driven rates to where they are. Saythan some people would that they are grossly mispriced on the s p 500. The equity markets are forwardlooking. No doubt, we had an earnings recession. If you are talking about trailing earnings, just look forward. Earnings are coming back. In the First Quarter of last year, talking about trailing earnings, 7 growth im sorry, 5 growth, plus three, plus seven. The First Quarter of this year will likely be doubledigit growth. That is off of a lower base, but we should stay doubledigit growth for the rest of the year. Jonathan if the market is mispriced because it is not optimistic enough currently times estimates are we in for an earnings surprise . There are similar Growth Numbers to what we have, we would probably differ in the composition, but that is really splitting decimals. Upside on the s p 500, 30 comes from earnings, a couple and at from the multiple, good way of thinking about the outlook for u. S. Equities is to think about it in demandsupply terms. Think about the demand side, think about the supply side. We talked a little bit about the flows, a massive under allocation to u. S. Equities over the last few years. Ande outflows stopped over the last month we have been getting inflows the supply side takes over. If you get no outflows, the supply side is by back. We project a modest uptick and continuation of the growth in the last two years outside of energy, materials, and mining. Points to a 10point upside on the s p 500. Number two, outflows for two years. It would be reasonable to expect normal inflows, which would easily give you 5 to 8 . I am a 15 but i think that is on the conservative side. Jonathan where are the cash allocations . Mostly in bonds. Cyclicala very normal, acid reallocation process that i think most people would agree around a recession, the money goes into fixed income for good reasons. Equities are very cyclical and dont give you any diversification. You come out of the recession, the fed continues to cut Interest Rates, people remain overweight fixed income. In this cycle, we have not had the rate normalization. Normalization, a good reason to believe that investors will reallocate back to equities. Amounts, 800uge billion by our estimates over allocation to fixed income. Trillions in equities. Jonathan the biggest ball on the street. Baucus, former ambassador to china and obamacare architect. Countdown to payrolls friday, countdown to the open today. Futures a little softer. 29 points on the dell. The s p down by four points. Jonathan this is bloomberg daybreak live from new york city. The Financial Markets is the epicenter of the news. And congressse have been busy this week on everything from immigration to health care. To bring us up to speed is our washington correspondent kevin cirilli. Talk us through the Health Care Plan and whether you think it will pass. Kevin right now, i have spoken with some courses in senator rand pauls office, the architect behind a more conservative version of the Health Care Plan. They are holding a press conference with House Freedom caucus, a more conservative wing of the house of representatives this afternoon, to criticize this plan. Rand paul tweeting out house leadership plan is a obamacarelike. Conservatives are not going to take it. Clearly, the battle lines are being drawn right now. Led in thestration house of representatives by paul ryan and house ways and Means Committee chairman kevin brady, looking to navigate this. I cannot underscore this enough. They cannot get this bill passed unless they have the support of the tea party, of the conservative movement. This is the first test on a policy front for the president and his administration. Jonathan the Financial Markets want to see tax cuts. A lot of that is baked into the program. How much longer is it going to take . Aren the hearings scheduled to be underway as beginning as early as tomorrow in the house of representatives. I spoke to richard blumenthal, democrat from connecticut, about the opposition lining up. You are right, they cannot get to tax reform unless they get to health care because of a procedural set up in congress. I want to play for you what senator blumenthal had to say this morning. Show itlicans have to does not increase the deficit, does not have a higher cost. That will be difficult to do for them. Even then, even if they are able to use the reconciliation process, already seven of their own members in the senate have said it is a nonstarter. So this socalled Replacement Program is pretty much dead on arrival. An order for lawmakers to over the filibuster. If republicans want to ever that filibuster in the senate, they need to prove this plan will not cost money. Senator rand paul and a House Freedom caucus members about to lambaste this this afternoon. This will be a policy fight for President Trump. Look at theen you politics and the other situations on the issue of russia specifically, is that isolated, or does that bleed into other issues like health care, tax reform . Just under one hour away from the Senate Judiciary committee holding a confirmation hearing for the rodty attorney general rosenstein. He would be in charge with investigating this administrations ties with Jeff Sessions recused himself. Sources i talked to on the democratic side of that committee tell me they will aress him to appoint special prosecutor. Jonathan kevin cirilli, thank you for being with us. Lso with us is binky chadha if you look at the sector situation, as you collide with the politics, wall street like that. D. C. Is like this, slowly crawling along. When does it catch up with the reaction in d. C. . The market as a whole is not pricing in anything right now. That is a slightly longer discussion that i would be happy to go into. Jonathan a lot of people would sit here and say the market is. The rally we had coming out of the president ial election is a very typical rally that we have after all agile elections, give your take a few decimals, depending on which day you count there will be differences. Other than that, there is really no difference, a really typical postelection rally. It is more like an uncertainty risk premium coming out of the markets, rather than the market getting optimistic. And i would argue exactly the same dynamics at work on the u. S. 10year treasury yield which went vertical at the same time. The second set of points i would make is about the composition of the rally. Is thert answer there biggest driver of relative performance after the president ial election runup was really just the 10year yield. We always come back to the 10year yield. If you take the 24 Industry Groups in the s p 500, you look at relative performance, and you to theem by their beta 10year of prevailing before the it lines you would see up really well, correlation of a little less than 80 . Jonathan lets be clear about something, this was not just a traditional postelection rally. We came into this with a large biased in the market that this was a risk off candidate, and that was not Hillary Clinton, but donald trump. Within hours, price set narrative. We had a downturn, a tick up, and then everyone got bullish. That was not the story in the weeks before the election. I think there is a peculiarity about this election that led to this misperception. The peculiarity about this election was that, if you started to look back in july, august, the election oscillated between periods where it looked close, times when it did not look close. It is a fact that Hillary Clinton generally led donald trump. When it was not a close election, clinton was leading by a lot. So it was no longer a close election, so the risk premium would come out, the market would go up. When it was a close election, the market would go back to the trajectory of being flat. It got misunderstood as Hillary Clinton be good for the markets and donald trump isnt. If you have been listening to me , you would not have had a misunderstanding. Jonathan binky chadha is sticking with us. Be among Capital Markets chief investment strategist joins us for the traditional reality check. Counting you down to the open. You are watching bloomberg. City,an from new york here with us is binky chadha. Joining us now is oliver renick. Rep of burning season, when is the takeaway . Solid earnings season, we are out of the earnings recession. However, goals are pretty high for the coming year. We are looking at the bloomberg, 20 growth from the trailing earnings right now. 109 per share. 130 five and of the year. Expectations are pretty strong. We did a story almost a month ago. On an analysis of earnings calls, looking at some of the language. Part of it was from bank of america. Looking at the number of times executives use the word optimistic. There was certainly a sent in from the executive board. Jonathan how do you gauge expectations . How do you quantify the optimism . I would argue that a whole set of leading indicators has been moving up from very low levels back in january of a year ago, so sentiment is up. Tually going to catch if anything, this is a little bit overdue than it has come post all kinds of manufacturing and Service Sector indicators. I am surprised it didnt come earlier. We spoke about at length about earnings,ed recovery just going back to where we were. Very much like a shock coming out of the system. Oliver there is an interesting point to be made. We are talking about some of the numbers that have shifted back. N that vshaped earnings you also point out in a lot of these indicators, very sentiment driven. If you see consumer sentiment, optimism from ceos, i wonder when you look at your bull case on the s p 500, is the hard economic data, which has also been surprisingly positive, has it been the data you want to see that well have the growth to backup the 20 gain in earnings . Ver i have a short is,y the short answer confidence is moving up from unduly low levels and it is still short of normal levels. We are far away from optimistic levels. The long answer would be confidence is cyclical. A simple way to capture the Business Cycle is the Unemployment Rate. The Unemployment Rate and Consumer Confidence, for example corporate confidence is almost perfectly correlated with Consumer Confidence. It tends to follow the on implement rate. Past recoveries, you will see certain recoveries where people were really optimistic. The early 1980s, Ronald Reagan and paul volcker disinflation, you see that confidence massively led unemployment. 1990s, theat the first half, unemployment led confidence. ,he reality had to get better believing is seeing. This recovery has had both phases. The simple point i am leading up to is confidence has moved up from very depressed levels relative to an Unemployment Rate south of 5 . We still have another 10 points in Consumer Confidence to just get to the current Unemployment Rate. The 10 and 20 points to the other side were i would say the market is getting overconfident. Jonathan coming up, the opening bell. It is about four minutes away. Futures are a little bit softer on the s p 500. , a marginal moved to the downside. 1 . Ative by. Im Jonathan Ferro. Watching bloomberg television. Jonathan from new york city, im Jonathan Ferro. David westin is an washington, d. C. Moments away from the opening bell. 34 points on the dow. It is a marginal moved to the downside after the big runup. This is what the situation looks like. Treasuries auctions kicked off today. If you look at the 10year yield, 2. 51. Where yields go, the dollar typically follows. Up by 1 . That is the situation across assets. Lets get to the market ove pen. We are looking at a bearish open for the averages in the u. S. The dow, s p, and nasdaq are all slightly lower. Last week, we had a big rally, the best rally of the year, followed by the worst pullback in the month. Investors still sorting out what is happening. The nasdaq is also not far from giving back its gains from last week. Bonds have been noting, and the yen are off of selling. Investors dont seem to be too concerned by these declines in stocks. Your one surging 14 . The company preannounced to the upside. They said they are closing 100 stores over the next two years. Investors are cheering this considering the stock is down from its record peak in 2013. Met earnings estimates but there got it was a little light, the low end like by about 19 . Last year, they hit a record high, helped by the closing of Sports Authority but right now it appears they are having some issues keeping the momentum. Speaking of momentum, snap, the biggest tech ipo, not so much over the last few days, down 20 . The stock surged 40 on its first day. Five of seven analysts who cover rating,e it a sell average price target of about 18. This is a question of growth here. They dont know how the company will get from 400 Million Dollars in revenue from last year to the estimate of 1 billion this year. Pretty big Growth Without a lot of users relative to facebook. Jonathan joining us now is one of the straightest talkers on the street, brian belski. Isnt binkyl chadha. Could i get your thoughts on snap . Thought the bears things were frothy. What do you say about that . It is frothy, but i dont even know what snapchat is. Havew my kids and my wife it, they go back and forth with the pictures, but i am an old guy. The market is thirsty for ideas. With new real issue ideas, so this new ipo comes out lets get all excited about it. I dont think it is anything you want to own longerterm at this point. Jonathan the market is thirsty for ideas. Of the the risk narrative in the runup, the enthusiasm feeding optimism . I think the biggest problem in the market right now is we have become so macro dominated in terms of investing the last 15 years, we dont know how to pick stocks anymore. We are reacting to every data point. I blame the tech sector in the late 1990s. We as analysts and strategists stopped feeling, with good remember in the late 1990s, 2000, you dont listen to the analysts, they are too bullish. Then the economists this is all about global growth. We forgot how to pick stocks. , it is likespective taking candy from a baby in terms of stockpicking and building a portfolio that will outperform. We are reactive investors that are so shortterm oriented that they cannot see the forest through the trees. Binky i would argue, it would puts a different culprit for why we have become a very responsive and macro during and. I would put the blame at the door of the three major Central Banks in the world. We are running a Monetary Policy that maybe makes sense to some people but not to us. For years, what the market has gone on to is every word from three Central Banks. You could take Mutual Fund Performance for several years and overlay the 10year yield, and that is a tight fit. One bond yields are going down, active managers were underperforming. My retort to that would be, that is what was. What is happening next . Binky rates should begin to normalize. Brian so what are normal rates . I love what people say normal rates. Binky short run policy rates this morning should be 375 basis points. Argue this process of normalization will be the most positive thing that will happen for u. S. Equity markets. Yourhan i want to get to point about Central Banks, putting the blame at their door. The bank of international sentiment wrote about this. We had to put money to work, had these highly correlated markets. Is it really about being into stock pick or identify the breakdown of correlations run here . Breakdown in correlations means that the dispersion is increasing, meaning you want to pick assets. That is stockpicking. You just explain the question yourself, well done. At the end of the day, my question for you is, do you think that the job in investing has become harder or easier the last 15 years . Jonathan probably harder. Brian exactly. So why is everyone trying to default to the easy trade . Trump says this. Sell. It is not really working. We think any potential correction that everyone is looking for i caught the chicken little market. Is today going to be the day . No. Our call is the correction will because by something not trumprelated. China,ng with korea, something with brazil, something we are not talking about. Corrections happen when you least expect them, they have been in an acid or data point that we are not examining. We are over examining everything that comes out of the administration and we are missing it. Binky i would agree. Is waysensus narrative too strong about how washington is running everything. I would argue the stock market is where it is at. Even if we had a different outcome in the president ial election, its been about the earnings rebound. I would argue that there are aspects of the growth rebound that are yet to come like, the labor market. Brian even without a President Trump victory, the train has left the station. Earnings were improving, the economy was improving. We were just seeing the laws of diminishing returns happening. We had to see some sort of fiscal response. That would have been change your whatever would have been done through the clinton administration. Wake up this morning, you see the dow at 21,000, the s p at 2370. Do you chase this from here, brian . Dips, whenullbacks, we see these types of rallies, we would be peeling back our favorite names. We would own less names. We would take our bets. We would rotate back into true fundamental investing. That is what will outperform. I would argue 3 to 5 pullbacks every two months is normal, we are overdue for one. I would argue it is difficult to time those. I would stay with what is most miss valued in the market, what is most miss valued in the market in our opinion is all of the rate exposures. Staying with short rates in the equity market. 43 for every 100 basis points in the 10year yield. That is a better way to be short rates in equities. Jonathan im going to Say Something dangerous and then let brian have the final word. Be a stock picker. Find those areas that are best on a fundamental basis. From our lens, in terms of sector basis, it is financials. The bestre has been performing sectors so far. Everyone doubts this. You want to go to the area where people are doubting because they are emotionally attached to health care. Jonathan thank you for being with us. These two guys dont think it is all about the president. David brian says it is irrelevant what is going on down here, so im not even sure why i am here. Investors becoming antisocial. Shares of snap lower for a third day and now flirting with a bear market. We will speak to the call manager of snap on the health of the few market. And the max baucus, the obamacare architect. This is bloomberg. This is bloomberg daybreak. Coming up, kentucky senator rand paul on the latest Health Care Reform news. David there are a few people in this country that no Health Care Better than max baucus. He spent a career in the u. S. Senate, including chairman of the finance committee, spots before drafting what became known as obamacare. He joins us from bozeman, montana. Good to have you here, mr. Ambassador. Max good to be on the show with you. David we now have the proposal coming through republicans. You have looked at it, what do you make of it . Is sad, it is an abomination, for couple reasons. Number one, a lot of people are going to get hurt, they tend to be low income people, children, a lot of people with private Health Insurance will no longer have coverage or it will cost too much. A lot of people will be hurt. Second, we neednt be here. We worked very hard on a nonpartisan basis, republicans and democrats, to put together a health care bill, and we work together. End,tunately, at the republicans became very partisan and political. We didnt work on Public Policy and it fell apart because republicans voted against it. Cancer or heart attacks hurts people irrespective of whether you are republican or democrat. We should be working to put this together, and there are ways we can do so. That is the second set part of this. We had representative bouchard earlier, the republican representative who is responsibly partially responsible for the bill. He says more people will be insured because we are giving healthy tax credits to people and they will participate in the private insurance markets. What do you make of that . Willfirst, a lot of people drop out under the socalled Medicaid Expansion. On bill tends to fall back low income coverage on medicaid. Fewer people will have Health Insurance, including children. Second, the tax credits that are replace,out will allegedly, some of the other benefits in the current law. Those tax credits propose will be much lower. They will make it much harder for a person to buy Health Insurance. We are talking about people who dont work for a company but people who are selfemployed, or for whatever reason, need to buy insurance themselves. They will be hurt. President trump and others have said, obamacare it sought was not going flawlessly. There were a lot of Insurance Companies pulling out of the private markets. Didnt there need to be some sort of fix such as tax credits here . Clearly, the bill we wrote is not perfect, but it was good. It helped provide a lot of coverage for a lot of people, it was a good bill. There are flaws. One is i think the current law is a little bit too inflexible. Incan be more flexible formularies, medicare provisions, no question about it. Downis what this all comes to, working together to fix some of those flaws. Threet add, the last years, unfortunately, the Republican Party, the Majority Party has cut back on a lot of provisions in Health Care Policy in the aca, which make it difficult for Insurance Companies to cover people. It is a way to prevent the law from working very well. It all comes down to working together. This is hard, complicated work. But again, illness does not care if you are republican or democrat. We all work together. Let sit down together and write a bill. Not make it political. Figure out where it needs help, and there are a lot of areas where the bill needs to be improved. David a critical question of how much working together needs to happen is whether they need to do one votes or 60 votes, and that has to do with the reconciliation mechanism. That has to do with whether the bill will affect the amount of money going into the treasury. Do you have a sense on whether they will see this as revenue neutral . The socalled reconciliation process you mentioned has to do with funding. There are other parts of the Affordable Care act that did not have to do with funding. That the cbocore will come up with is going to be one that will be very difficult to deal with. Down thent is probably road it will cost more, not less. People who do not get health care are going to need health will go to they emergency room, and i will cost the American People even more. You said you would like this to be nonpartisan. Tell us about the political ramifications potentially for the republicans if this bill, as written, is enacted . Max you get what you pay for, what comes around goes around, comes around. The Republican Party made things very political in 2009, 2010, blamed democrats, called it a obamacare. Now it is reversed. Republicans now own it. It is trump care. They hate obamacare so much they want to do their own, but i have to tell you, when they worked to try to pass trump care, they will find it is so complicated, the only solution is to find a way to work together. If they make it political, as they are, they will own it, and in the meantime, a lot of people will be hurt, and they will rue the day that they decided they wanted to make it their bill rather than work together. David thank you so much for being with us today, max baucus, former ambassador to china and former finance committee chairman. Shares of snap are lower for a second day, no flirting with a bear market already. Who wrote that . We are speaking to carlo mac on the ipo market. This is bloomberg. Jonathan from new york and washington, this is bloomberg. 21 minutes into the session. Marginal move to the downside, no real drama,. 25 on the dow. 3 lower on the s p. Treasuries unchanged. The auction kicks off this week with only 4 billion of threeyear notes. A marginal stronger dollar story against the euro. Lets stronger on the cable rate. Lower by half of 1 . Where there is euphoria, last week, and it was snapchat. Down 20 over now the last two days. Seven analysts surveyed not have a buy rating on the company. Joining us now is jmp group comanager on the snap ipo carter mac. Lets talk about whether this ipo has created an unsustainable valuation for this company. It is hard to answer that today. Obviously, there will be market gyrations, the stock up 60 in the last two days after pricing phil, a good reception in the first day of trading. This is a very high growth story with a demographic that is coveted by advertisers and high engagement, and that is what people are buying. , we good topline growth need to see over time how they are able to monetize that. I would the question ask is is this going to encourage other companies to come public, and how small is the window . Carter i dont think the window is small at all, i think it has been open for the last few quarters and we have not seen a lot of people taking advantage of it. That was because there was a lot of uncertainty around the election. But if you look at ipos in general, only a small amount of ipos last year in the u. S. Market, only about 100. The average i feel last year is up 36 , huge returns. Right now is as good as it gets for ipos. Volatility is low, markets are up. Deals are doing well. Investors are really interested in seeing growth companies. There are a couple of Technology Ipos that are on file publicly that should come out. Alterx, which we are involved in as a comanager, is another. There are a lot of others on file confidentially that will flip to public filings, and you will see more activity. In private markets, there has been a discussion about whether we are seeing frothy valuations for a long time. How many investors that were in the last round of investing in private markets, some of these Big Companies that could come public, how many are not going to see an exit for a long time, unless they are willing to realize a loss . Carter it depends. You are realizing a loss only on paper at the ipo if you are not selling. I think you are not going to see more Companies Taking advantage of the ipo market. They may get valuations that are at or below the last private round, but they are betting on performance in the Public Markets to get above that valuation. We have seen a number of companies that have come out that have realized higher valuations in the Public Market than their last public round. I think what you will see is there are not as Many Companies now that can raise money in the private markets at ever increasing valuations. So the ipo market is open, we have seen a good reception on the first couple of days to snap. That has a coattail effect, but even outside of snap, the ipo market overall this year has done extremely well. We have been involved in two , the ipos, one in biotech best performing ipo in the u. S. Markets this year. We were also involved in invitation homes, a 1. 5 billion ipo in the Residential Real Estate market, that is up 10 . Really good performance outside of snap. Jonathan the last two days has been pretty ugly, down 18 percentage points. Carter mack, great to have you with us, of jmp. Big 24 hours in d. C. , what is coming up the rest of the day . Isid one of the highlights a 11 00, kevin brady, chairman of the house ways and Means Committee. He will have a News Conference to talk of this obamacare proposal, which is the talk of the town. Jonathan take a look at pharma stocks quickly. The president tweeted about drug stocks this morning. Fizer down by. 7 26 minutes into the opening session. Quities marginal moved to the downside in the United States. Softer session emerging. 2 lower on the dow. If you switch up the boards, treasuries are largely unmoved ahead of a load of auctions. You are watching bloomberg. Vonnie from new york, i vonnie quinn. Mark i am mark barton. Welcome to bloomberg markets. Vonnie we are going to take you from new york to london in the next hour with stories from washington to geneva to south africa. Heres what were following from bloomberg and around the world. After years of talks, republicans have unveiled a a plan to repeal and replace the Affordable Care act, but you is coming under fire from conservative critics. Mark the market in danger of extending its losing streak in four days. Are we pointing toward a correction or is the recent rallies taking a fall . Carl tavarez discusses his Companies Deal to purchase gms opel unit to become the secondlargest carmaker in europe. We will learn from him and other chief