Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170420

Tip auction. It breaks even under 2 . Im interested in the demand and the yield that it goes for. And federal reserve, the governor Jerome Powell will be speakingen a panel on washington. And Michael Mckee interviews Robert Kaplan at 7 30 a. M. Eastern. Is going to be an exclusive interview. How do they square that . And that Balance Sheet. David that exciting base book. Jonathan i want to know what the rest of the week looks like. [laughter] lix it has them cringing. David ok. Bank regulations frames the news with preposals kicking around including bringing you back glass seeing toll free up banks in other ways. An exclusive interview with bloomberg, former chairman paul volker thought he thought it would be a bad idea. What i would oppose if they do that and thinking that the Investment Banking operation, trading operation is going to stay super vacation and regulation which is i assume may be the thrust of this. But that just doesnt fly and thats where we were. Nd thats what broke down. David were joined by marty schwenneker. Welcome back to the program. When heard this, i thought they just run out of things to do . What about tax reform . What about health care . They decided they want to take that and by the ways the government might shut down next week. I know. Youll excuse me, this bill may be dodd on arrival. Alix oh, no. David this early in the morning . Its true that jeb has been on dodd frank case for a number of years. He had a bill in 2016 that went nowhere. This one goes even further. It would repeal the rule which youve just discussed. It would eliminate stress testing to just once every two years. And theres a lot of things in this bill that banks frankly wouldnt like and its probably not going to go anywhere. David marty, who is deciding which bills go forward, dont go forward . You already have the health care thing that didnt work out so well. Now it sounds like we have to do it again before we get to tax reform. Is paul ryan really in charge . Well, he says mess and in london yesterday, he said that there will be a resolution to the budget bill next week. And time is running out. From our understanding is they havent even decided where that bill will start, whether it will start in the senate or in the house. It sounds that neither body wants to kick it off. So it is a very good question whos going to take charge of keeping the government running . And theres a lot of other stuff going on besides repealing oddfrank. David how big a problem are they, the Freedom Caucus . You cant imagine a Republican Party shutting down its own government but it could happen. It could happen. It looks as though the republicans are going to need democratic help to get a very clean extension through. And theyre trying to do it quietly behind the scenes as to not bring up the Freedom Caucuses very strong feelings about how we run the government and how we spend our money. David marty, im sure youre going to sort it all out for us in washington. Alix are they on vacation or are they back . David no. David larry told us yesterday that he didnt feel the tighter regulations could hurt the u. S. Economy. He did weigh in on what does need to change. Just the fact by changing the tone of regulation will ease some of the issues. Many bankers are saying we dont want regulation. Many bankers are saying we just need to amend components of doddfrank, components of the volker cruel and many of those things are valid. Alix joining us is the Global Equity strategy. Upgraded as recently as the end of march. Great to have you, andrew. The s p financials are down 8 since that peak in february. Do financials need some sort of regulation rollback for the next boost hire . When we look at it, the key driver of financials is nothing other than the direction of the u. S. 10year bobbled yield and the expected raise in the fed funds rate. The key to financials is basically the 10year bond yield. And what weve seen since the end of february is the 10year bond yield fold and thats taking financials with it. Alix you have the spread between two and 10 about 103 basis points. Youve got break evens rolling under 2 . Can you make a case for buying financials here . We and on a global strategist much prefer japanese, indian and european financials rather than the u. S. When we look at u. S. Financials, we are concerned about free aspects. One, the evaluation is higher than elsewhere. Secondly, provisioning looks low relative to create spreads. Growth is , loan lower such as auto. So we would highlight areas elsewhere in the world, particularly europe where low growth provisioning and Interest Rate trends. All look better than people expect. Jonathan there is a narrative out there that says its being made up by dead issue in the market, a record First Quarter into the United States you. Buy that particular story and if it does resonate with you, isnt that good for the banks anyway when you see fixed income trade popping in a lot of these banks . Depends what banks youre talking about. But if youre talking about u. S. Banks, its not ambiguous. Loan growth has slowed down. Nevertheless, if you look at bank lending conditions, they tend to leave loan growth by about six months suggesting that loan growth will pick up. If we look elsewhere, the best indicators in loan growth in europe credit to marlin m1 with consistent with loan growth picking up more than people realize. In terms of of your second point, i dont believe thats right. For example, when you look at european banks, three quarters of lending, two quarters were bone by danks. In the u. S. , its only 20 . So if you get disintermediateuation, it hurts the european wholesale banks much more than it benefits them because the benefit will go to the Investment Bank but they well be u. S. Investment banks due to Corporate Bond issuance. So i think it is a clear negative. Having said that, i think the chances of disintermediateuation going to u. S. Levels is somewhat limited because 88 of european corporates employ less than 10 people and clearly, a small family firm caught issue on orporate bond. David what would really drive the Financial Institutions in those places . Just a point of clarification, around 80 of the improvement in the european profits come from lower provisioning. Or me, the key to banks is basically provisioning trends. And i personally think in europe, the free drivers of provisioning particularly for retail banks which are collateral value and employment banks which is almost similar to u. S. Levels and the level of Interest Rates, if Interest Rates are very low, it doesnt cost you to roll over an m. P. L. , suggests provisions can surprise in europe. What i said was in terms of expectations. Elies the expectation now is there will not be a deposit rate rise in europe. But i think there would be a deposit rate hike in september. Alix you want to talk about europe and i promise you well get to that. You have a 2,500 call on the s p. Youre not digging financials here in the u. S. What gets us there and what sectors do you bet on to get us there . What has got us where we are yeartodate, its basically tech and that is one of our biggest overweights. But, you know, if youring and if youre asking why are we still constructed on the s p, its for three key reasons. One, earnings revisions are still positive and the key driver is the acceleration of nominal g. D. P. Relative to nominal wages and nominal wages are far more in constrain than what we felt. The second key driver is the socalled value relevant valuation. We look at the equity risk premium in the u. S. , thats around 5 25 . The third key driver i still think is something of a bond for equity switch with risk adjusted returns in equity being much better than bonds and that encourages the bond equity switch. Jonathan andrew will be staying with us. Coming up, an allstar lineup of guests including Robert Kaplan and david zero boss of jefferies. From new york city, youre watching bloomberg. This is bloomberg daybreak with your business flash. Two trading firms combine according to a person familiar with the message. C. G. Ave agreed to buy k. Holdings. Virtue makes as much as it can. K. C. G. Has six times as many workers. The worlds biggest feud Company Netflix Beat Estimates. Revenue grew. Among the reasons, price hikes on net cafes and u. S. Sales. Overall, necessarily has been able to raise prices 1 amidst weak consumer demand. Bill oreillys departure looks like a nonfactor for the profit machine at fox news channel. Oreilly was the much watched star in the u. S. Hes leaving the channel over allegations of sexual harassment. One analyst says his exit may cause a couple of Percentage Points in ad sales before factoring in the channels expected grace. And thats your bloomberg usiness flash. Jonathan a candidate can win on the first ballot if they take on a 50 or more of the vote but the election goes with second round. The winner in round two is then named president. The first round will take place april 23 and the second round may 27. So far, the support is up while republican candidates have been declining. Le pen has remained unchanged at 22 . Some stability for french debt. 94 basis points. A remarkable calm gripping european markets. The euro firmer. Still with us is Credit Suisse head of equity, andrew, what is your base case at the moment . Andrew my base case is that we overreacted to the reactions which occurred in brexit and trump. Jonathan what do you mean overreaction . Where does it come from . Andrew well trump lost the popular vote by three million and it is the most unpopular popular president and bricks was brexit was only a 4 swing. And i would also point out there have been some recent european political results which have gone against the populous vote. So, for example, in holland, we w the populous builders lose by 8 points when in january he was meant to be the largest political party. And of course, we had the president ial populous candidate in austria in december lose. So i do think that this hopefully, that will be an environment where the polls have basically right. Jonathan with that in mind, where is the missed price in market . And if the base case is mack ron wins which we assume is the friendly outcome, the consensus is a wall of money ready to go in europe . What are you advising clients . Andrew well we think because by le are always breaking Political Risk that they people are waiting to put more money into europe. When we look at europe, it is our most preferred region. The have a 3,80 target on year end stock. And we think its very simple. Ian growth could be stronger than u. S. Growth again. Youre playing nearly a 20 discount. And youve got earnings revisions relative to Global Markets being better with 11 Earnings Growth. And weve got the fiscal and Monetary Policy which are highly supported and we have a european cycle which is three or four years behind the u. S. Cycle given, of course, where unemployment is. So political accidents aside, i think the euro stocks is the place to be. David so andrew go with in europe. You do anticipate real fiscal loosening. Which countries do you thinks particularly will benefit from that and which may not as much . Andrew well, i think its relative. That we have in the past seen fiscal tightening and now its more fiscal loosening. No country is going to admit theyre doing it until a after the event but in election years typically countries ease political ease. France will. Italy. Germany is increasing fiscal spending. But theres another issue here but because growth is stronger, particularly nominal term, corporate and overall tax receipts are stronger and that allows better fiscal revenues allows governments to be easier on fiscal spending. Jonathan one of my colleagues point out how tough it has been to have a longterm horizon and how you need to shorten your time horizon based on whats happening in the First Quarter. Once yaw get past the French Election, how quickly before everyone starts worrying about say italy and the prospect of them having an election that could go the wrong way as well . Andrew yes. I mean i fully acknowledge the ndamental problem of the eurozone is fundamental flow of europe has not really been addressed. We know that. And that will always, i think, cause some degree of discount in europe. But bottom line is that i dont think a country exits the euro until a majority of the population wants that to be the case. If you look at the euro stat data, particularly in areas like france and even in italys the vast majority of the population still want to remain in the euro but i do agree with you. Italy, not france is the weakest link and we consistently highlighted that and italys had the worst growth in europe on a g. D. P. Per capita basis, worse than greece in 2000. Its done the least reform. Its got the worst government debt. The worst banking position. Its most vulnerable to tapering. So italy, above all else had 60 of electorate to support the euro skeptic or e. U. Skeptic parties. So italy, i agree is the weak link. David Andrew Garthwaite will be staying with us. And we have a remarkable lineup of guests. And that will include dallas fed president Robert Kaplan, home depot founder ken lang gone and avid zero vose of jefferies. This is bloomberg. Jonathan from new york city, lets get you up to speed on the market this thursday morning. Futures positive up 43 points on the dow. A couple of date of marginal loss observe the benchmark in the United States but we are positive on the week so far. If we switched up the board, treasuries coming up the back of five yields of gain. This week, a big repricing on one day and we reprice back higher again. 223 to yield on a 10 year. Remarkably flat. Were up about a basis point in todays session. The euro is a remarkable calm that its gripping european markets ahead of the firstround vote in france which nobody seems to know the outcome of. We stay firmer at 1. 07. Crew catching up a bit. The saudis, they want the cuts to be extended. Surprise, surprise. I wonder what they think when keeps away. Emma and france had that killer bond auction. Some companies have Pricing Power over in europe. Ecessarily up. 2 . Organic growth with necessarily up over 3 . A full percentage higher than previous stimulates. Estimates. Earnings for Second Quarter that were 15 15 cents above estimates. Executive devices gets 13 of its revenue which supplies apple. And amex up by 2 . Revenue falling but still wind up beating estimates. The revenue is because it lost its contract over at costco. And the interday. You have the Saudi Oil Minister saying we talked to country, not all of them but we may agree to extend cuts. What matters is iran and russia on. Im betting they were not a part of the talk. Jonathan a little bit of verbal intervention. Next, Robert Kaplan joining bloombergs Michael Mckee. Thats a conversation thats coming up shortly. And a conversation with the Prime Minister of canada, Justin Trudeau in a Bloomberg Business week debrief at 11 30 eastern. Youre watching bloomberg. Jonathan the story of the market so far this morning on the week so far as well. Here are the scores for you. Futures up 40. Positive six on the s p 500. Were positive on the week as well despite a couple of days of marnal losses on the s p 500. Ill tell you whats happening on the other side. France got to weigh some shorter dated data. The targeted range lower but the yield was lower than the previous auction. The bid to cover ratio was stable and it is remarkable how calm markets are in france on sunday. Thats the french bond market. Thats firmer. The euro firmer as well. Were up about a third of 1 of the dollar. The pound grinded back hard at 12794. We can talk about a bond market and more. From dallas with a very special guest is Michael Mckee, bloombergs international ditor. Michael thank you very much. We would like to welcome the president of the Dallas Federal Reserve bank to Bloomberg Radio and worldwide. Thank you for having here in the big d. Welcome to texas. Ichael the consensus up 1. 5 . The yield curve flattening. 10 years coming down a lot. But the financial conditioning of the index are loosening. So what is really going on out there . Is there something happening that were not picking up . Well let me start with the last part on the 10 year. Own sense is the 10 year is reflecting the fact that expected g. D. P. Growth is going to be maybe sluggish as it has been the last several years. And also theres some geo political events, particularly whats going on in europe. Potentially other geo political events that might be causing people on balance to be on the u. S. Dollar, be in the 10 year. In terms of g. D. P. Growth for the First Quarter, the key underpinning to this economy still still is the u. S. Consumer, household Balance Sheets in the United States are in relatively good shape. How old Debt Services are in good shape. And the consumers got the ability to spend. The question is will they spend . And i think theres also some uncertainties for them. The Health Care Reform discussion may have some Chilling Effect on some consumers because theyre not sure how much their health cares going to cost. Maybe some other uncertainties. My own view is the household sector ultimately is going to spend this year because theyve got the capacity to. And so i think well have a little better g. D. P. Growth than First Quarter suggests but i do think because of aging demographics and a number of other headwinds, properspective g. D. P. Growth is still challenging and it is a big issue for this country to deal with. Michael the market is started to price out. The fed this year pivoted towards a faster pace of moves. Is there anything that tells you that that pivot may have stopped or slowed . Robert no. The hink the three median of three rate increases this year is still a good baseline. If the economy develops a little more slowly, then we can do less than that. If the economy is a little stronger, we can do more than that. But i still think were making Good Progress toward full employment. Theres still some labor slack but were approaching full employment. The trickier issue is inflation. The work were doing here in dallas and our work suggests the core inflation continues to slowly gradually move up. But i think excess capacity globally particularly in china and possibly growing because they keep investing in excess capacity in china and technology and Technology Enabled disruption which is impacting businesses Pricing Power and increasingly replacing people with technology. Those are having downward pressure impacts on inflation. So i think the inflation mandate will have to watch a little more closely but i still think having said all that the three is probably a good baseline. The patience means to me when i say we should be gradual and patient, it means we have the ability and the flexibility to wait and see how the economy unfolds, turn over few more dards and i could council thats quite appropriate that we exercise that patience. Michael with 75 basis points to 1 , the proper setting for rates at this moment or should they be higher or is it just a process of getting there . Robert heres how i think about that. For me, i always think about whats the neutral rate . Ive talked to you about whats the rate where were neither accommodative or restrictive . If you ask me today, i would say neutral rate and its a theoretical rate is closer to two than to three. So if were at 75 to 100 basis points now, that tells me in that framework were still accommodative, but we dont have that much room to get to neutral. So were accommodative but not as accommodative as people think. So thats how i look at it. So i still think 75 to 100 basis points is appropriate place to be. And i think if we continue to make progress and employment inflation and the economy unfolds, around 2 g. D. P. Growth, i still think itll be appropriate to get a little closer to neutral and continue to remove accommodation. Michael for years, i would come down here and ask you whens the fed going to raise Interest Rate . But the question wall street is saying is when is the plans for the Balance Sheets are . How soon do you think we get the program that you want . Robert my own view has been that we need to get a little further along in socalled normalization of rates before we need to let the Balance Sheet run off. For me, that could be as soon as later this year or early next year we should begin the process of letting the Balance Sheet roll off. That means not selling securities. It means letting our treasury securities and mortgagebacked securities run off as they mature and i still believe we should do that gradually, parishly but i think that process, again, could begin as early at the end of this year. Michael tapering . Robert yes it should be garagele and the objective ought to be to do it in a way thats gradual enough that we dont have a Material Impact on either the treasury market or the Mortgage Backed securities markets. Michael a lot of decisions have to be made in the operational aspect of this. When could we expect that . Robert i think similar to that time frame. I think its appropriate at least a couple of three months before we begin that we make some type of announcement as to the plan. And so i dont want to prejudge what the exact timing of that will be but again, if i think were going to start as soon as layer this year, early next year, we should make some announcement, at least a couple of months in advance of that. Michael now the Balance Sheet question is how big should it be . At the end, if you determine how youre going to taper. Do you have an idea of what youd like to see . Robert well i dont think we have an exact fix on that because weve got much more global liquidity. We have a different financial regime, capital regime. Its going to be bigger than the 800 billion we used to run but still the Balance Sheet could be substantially below the 4. 5 trillion we are today. So i think itll be lower meaningfully than where it is but its going to be higher than where it was eight years ago. Michael do you want to keep substantial excess to be able to repo and ioer system of managing fed funds . Robert for the time being, i think we should but i also think thats something that would be healthy for us to visit and revisit as this process unfolds. Michael fiscal policy. Did you include any stimulus in your forecast that youre having to back off on . Robert no, ive said consistently since the election, im not explicitly factoring in any fiscal or Structural Reforms into my forecast and the reason why is some of the things being iscussed i think are positive. Regulatory review if its done thoughtfully, Infrastructure Spending if its done appropriately, tax reform, undermine the word reform could be helpful. And some of the policies could be negative. Depending on health care, how its actually dealt with, how we deal with immigration. Ive seen consistently the biggest challenge we face in this country is slog workforce growth. We need policies either help workers get retrained and discourage workers back in the workforce and at some point were going to need policies that take a more constructive look at immigration if were going to grow g. D. P. Adequately. So i dont know which of the positive or challenging policies are going to get implemented. So i think the best approach is to do with a weve done which is make a forecast based on things as they are, but well continue to monitor it and adapt as policies are enacted. Michael you have the greatest interaction with mexico. Have you seen a change in the economic relationship since donald trump came to office . Robert yes. Weve seen a lot of concern. Ive spent a lot of time, as you know, in mexico and let the held of the central bank and my biggest concern would be i believe nafta will get renegotiated. Ill stay away from the details. But im confident about that because a lot of those conditions were already made as part of t. P. P. I think there are other parts of the rhetoric that having some inflammatory effect on the mood, the public mood in mexico. Theres going to be a president ial election in july of 2018 and i think the United States benefits enormously, economically and geo politically from a Good Relationship and a constructive relationship with mexico. So i want to be vigilant that the rhetoric here does not create a situation where it makes it much more likely that the person gets elected president of mexico is going to be more negative to the United States. That may turn out to be the way to get elected in mexico. I dont think thats likely to be in the interest either economically or jih politically in the United States. Michael if donald trump asks you your opinion of janet yellen, what will you tell him if robert all i can say is i have a great working relationship of janet yellen. I think very highly of her and i think our approach of being patient and garagele and very fact dependent, i think has probably served the fed well. Its created controversy on both sides but i think shes an excellent leader. Shes an excellent economist. I think the group works well together around the table. And so ive been very positive about being able to work with her. The fed though is a different kind of organization that its used to people around the table changing and still forming new relationships being collegial and making good decisions for the country in an apolitical way that screams out Political Considerations and im confident no matter whos around the table were going to do that. Michael Robert Kaplan, thank you for joining us on Bloomberg Radio and situation worldwide this morning. Back to you. Emma as Michael Mckee talks, interesting interview. I dont know what the middle ground does it. You put them together. That was exactly what kaplan was. Jonathan pretty much everyone is a dove just various scales of being dovish. Jonathan not a lot of and then theyve got a percentage point. They get back to neutral. Emma it is a far cry of 3 . There does only breaking news and that is verizon earnings pretty much missed on whatever in the rick you want to give them. Earnings coming in a penny short. Revenue coming up 700 million short. Phone users fall big a net 289,000 and there was a higher churn. Lower churn is better. Now we know why verizon said hey, guys, give me a call. Lets hook up. David we need to do a merger. Emma coming up, ken langone of home depot will be joining us. Later, david westin, jefferies chief Market Strategist is here. Hes pretty outspoken. This is bloomberg. Emma this is bloomberg daybreak and this is the hewlettpackard enterprise greenroom. Coming up, ken langone, co founder of the home depot joins us. And now, business crash. Cinco broadcasting targeting Tribune Media for a takeover. Sinclair wants to finalize a deal on or before the same day tribute reports First Quarter earning which is supposed to be the week of may 8. They have a market cap of 3. 3 billion. American express has proven life after costco. The largest credit card issuer by purchases reported better than expected revenue in the First Quarter. Last year, amex lost its partnership with costco. And it responded with a campaign and improved rewards program. And thats your Bloomberg Business flash. Im emma chandra. Bloomberg out. Emma take david take a look at the bond arket. Alix u. K. Over that 1 . Still with us is Andrew Garthwaite. Andrew, what bond market is most overvalued right now . I well, i think theres no doubt about it. In my mind, it is the german market. I find it vaguely ridiculous to points on to 20 basis the yield when we could have uropean growth this year being 2 . It wouldnt surprise me if its Even Stronger and the core inflation which dipped to. 7 in europe could end the year around 1. 1 , 1. 2 . Historically, the e. C. B. Do tighten policy when new orders are at 56. Theyre above that level. So i think theres quite a high probability that political accidents aside, that we do see a preannouncement tapering in september and as people focus on that, then towards the end of the year, the german yield could ise sharply. Jonathan bart simpson saying must never short budden. Must never short buddens. Why can the market not become marquette the widow than it has for the last decades . Last july, you would have made a lot of money. Basically, the only reason to be to belong is theres a breakup risk and the probability of that at least for this year is overstated. Emma alix the best example this five year here in the u. S. Weve had short positions reduced but theyre still double when they normally are. Talk to me about the positioning versus the fundamentals. Well, i mean, there are two forms of positioning. If you look at the barclays bond index, then the net Long Duration is the highest its ever been for over seven years. If you look at the fundamentals for Pension Funds and insurance companies, i would argue theyve ended up because of a liability matching of being structurally overweight bonds and the more ond yields fall. So i struggle to believe people are overweight with bonds. I think it is more consultants and Liability Managers dictating bond waitings. And i think in some parts of the world, bonds have gone from a risk to return to a return as risk. If you look at japan or germany. Emma so you wind up seeing a bundup say in behind yields. Selling . Ng to be i do agree to kaplan that some part of the explanation of the fallen treasury yields this year has been the bund yield and t has been a close relation. But the reality is weve got this big anomaly of the soft data their survey data being close to record highs but rolling over and the hard data being much weaker but slowly picking up. So the question is whos right and whos wrong . To put it simply, what we find and this is quite anomalous, but we find equity market sectors cyclical surprise themselves off of survey data but bonds have priced themselves off of hard data. So we think there would be some convergence. In other words what, will happen is bond yields will rise and that rise in bond yields will help nonfinancial will help financials relative to nonfinancial cyclicals. Emma great stuff. It is a pleasure to have you on the show. I love your charts. Andrew garthwaite of Credit Suisse. Rtue chu is going to buy k. C. J. Holdings. It is now a delayed in terms of opening because of the news pending. 20 a share. This is Securities Investment tieup here. 20 a share. Virtue buying the holdings. Check out tv go. You can watch us online. Interact with us directly. Go to tvgo on your terminal. If you want to ask a question go ahead. We might ask it for you. This is bloomberg. Jonathan from new york city for our viewers worldwide, youre watching bloomberg daybreak. The story of the market, risk getting a little bit of a bit. Futures firms. Up six on the s p 500. 0. 27 up into positive territory. Treasuries up. Yields up about a basis point at 223. The dollar broadly weaker with the exception of one cross dollaryen reclaiming a handle. Everywhere else, the euro is firmer. Up a third of 1 despite the election in france on the horizon on sunday. And a cable rate firmer at 128 flat. Ma virtu and k. K. C. J. Holdings are joining forces. Industry profits are shrinking. That deal is 20 a share. And virtu is going to issue some stock. About 750 million in stock. A 15. 60 a share. Going to be raising debt at 1. 65 billion. Virtu sees an 65 increasing on that deal. And Pay Attention to verizon. After a miss on every metric that you want, earnings as well as churn as well as revenue. That stock down by 2 as we wind up on the calling block. Come on, disney. David they needed a new idea. Thats why they brought in yahoo . Jonathan coming up, ken langone, home depot cofounder will be joining us. Were almost a full hour. And later, david zervos, jefferies chief Market Strategist will be here in new york. The man with a cause. This is bloomberg. David former fed chairman paul cue,er, raining right on replacement for doddfrank, calm grips european markets, anything but certain, french bonds stable, the euro firmer. Opecbutbia indicates supply cuts may need to be extended, surprise, surprise, surprise. Good morning. Good morning. Welcome to bloomberg daybreak. Lets get you up to speed. Bid, futures up fivesix points on the s p 500, treasuries on offer, crude pushing towards 51. Alix more fed speak from Robert Kaplan. This hour, Jerome Powell speaking at a panel in washington. In half an hour, weekly initial jobless claims and philly fed numbers. The u. S. Treasury will auction 60 million and five year tips. Cant wait. As if congress did not have enough already, House Republicans working on a 600 page repeal of doddfrank that will start hearings as early as next week, two days before the Government Shutdown if they dont get a resolution. Joining us now is our chief washington correspondent, kevin cirilli. They need an air Traffic Controller down there, dont they . Kevin this is the second iteration of the financial choice act, which would dramatically repeal huge parts of doddfrank. Conservativeh more alternative to a doddfrank repeal. The senate is moderate and dragging its heels, because of politics and makeup of the senate, anything that passed the house would be dramatically different than what the senate passes, so are a lot of these things are nonstarters. David who is in charge down there . N was takingry coh on deregulating the banks. On doddfrank, any type of doddfrank legislation and repeal would have to go through Senate Banking and house financial services, so sources they are talking with secretary mnuchin and gary chon and Vice President pence. Cohn and mike pence. They said they will start to do big things with doddfrank. This is still a firstyear priority, and with Community Banking relief, that could get done, but this is a more ambitious conservative plan. David ambitious is the word. Responsible for taking ross perot public to cofounding home depot. His Venture Capital firm remains an active investor in companies and securities, and he is a major philanthropist. Ken langone joins us now. Welcome to the program. You have been a supporter of republican candidates in the past. You did not start out with trump. He started out with governor christie. You ended up a good supporter of donald trump. Could beill think he one of the greatest president s we have had given what we are seeing in washington . Showing guts. Is he is making tough decisions. He is learning that unlike in , unlike in sector wantedernment, if you something done, you could get it done like that, but he has learned it does not work that way in washington. I think he has shown courage and made a lot of decisions. I think smacking syria was brilliant. Forget about the big bomb, the fact that he sent to the journals that you will fight that war, go do it. That is a major breakthrough. We have not had that in a long time. By the way, a pox on both houses. Look at what rumsfeld did. The generalpised street the mess in the middle east today, so i will be , lookive, to get one guy at the mess we created in the middle east, ok . There is enough blame to go around. I think trump comes in at a point in time where there is a lot of need and a lot of things that need to be done, so for example, doddfrank. Doddfrank,se of the competitive environment and banking is less. Small banks cant get started because regulation is the equivalent of a regressive tax. You pay it whether you make ey or not, so little banks i was an investor in a very nice bank in connecticut, field point bank, and what we have gone through the last five years for and our Balance Sheet 500,000 a battleship, to 600,000 a year and regulatory costs. To 2007 inaction 2008, and by the way, again, lets go back to 2000 and 2008, they blame wall street. , wallll wall street street will figure out a way to make money. That is why we are there could that is what we are supposed to do. Go listen to barney frank talk right ofis an inherent every american to own a home and i want to make sure that happens. Theevery american has financial wherewithal or the common sense or the discipline to live with the requirements of homeownership, including paying your bills every month, paying your mortgage every month. You say there is a lot you believe needs to be done, but is there a problem to do all of it at the same time . Wonderful club in palm beach, the palm beach country club, the best food in the world, they have these buffets. When you go up there, you dont know where to go first. This is the equivalent for trump. Problems are opportunities in work clothing, but you got to the table and you go, oh, my god, look at this. Look at this. Weak, tookmay be my point is there is much to be done. David doesnt he have to set priorities and say this is the number one priority . If he tries to do all of them, he may get none of them done. You have a problem, politics. It is not just his agenda. It is the congress could look with Chuck Schumer did. By the way, thank god for harry reid. Thank god we did away with that nonsense of 60 votes. Know that ifpeople you have 52 out of 100, you control, then you have this wacky rule where you needed 60 votes to get it out of the senate. Thing fora wonderful us because he got neil gorsuch in, and we will get the next guy in. Jonathan the market is in trading off of neil gorsuch. It is trading off stimulus and tax reform. Every Single Person has come on andshow and told me that, we saw a breakeven on the unit price after he was elected. Every person who makes a decision is a market. The rise in breakevens and 10 year yield after trump was selected did not have to do with help of stimulus and reflation . In part, yes, it did, but it also had to do with the realization that the last eight years are over. We were spending ourselves into silliness. We have real problems in this country. We have to learn to live within our means. One of the big problems with tax reform, where do you get the money from . Part of the reason they want to do the Health Care First is because that is where some of the money will come from to allow you to do some of the things with tax reform, but it is very complicated. Notion that wehe get a lot done in 100 days is foolish, absolutely foolish. Comedy who thought that there are a bunch of bridges over here, give me five dollars and you can take your pick. Come on. These are complicated problems. They did not get complicated overnight. It took a lot of years and a lot of hands and a lot of foolishness to get it to where it is. David your point on the Previous Administration is a point that has been made by others as well. Build, and now you have a business friendly administration, but saying your business friendly and doing something business friendly are different. What can he achieve in the next three and half years to become business friendly . Let me tell you the things, if i had a clean sheet of paper, i would say mr. President , this is what i would like you to do. I will give you a for instance. A very substantial portion of my net worth is an retail, home depot. The retailers are going nuts with the border adjustment tax. I think the border adjustment tax would be one of the greatest things that ever happened in this country. , but iftake some time you think of for possibilities, if we can get Economic Growth, 3 to 3. 5 year, there is not a retailer in america the wont have a Better Business and make more money. Think about it. It does not seem like a big number. You get gdp growth for five years and 3. 5 and you watch a lot of our problems go away. Tie the border adjustment tax into 3. 5 growth . The me to you why. We have to find a way to get the money to do other things with tax reform. Number one, retailers problems today are topline growth, ok . They have to figure out how to included,me depot home depot included, but some number one, first of all, i hope they will be rational, in other words they wont do it all at once. They would do it gradually over 23 years, give us time to go to foreign sources, renegotiate contracts, and pay them in their currency come us of the dollar will go up in value and the home currency will go down and you will get the benefit of the arbitrage. That will eat up some of what you are doing, ok . The other thing is, remember this, the most important thing about tax reform, not corporate taxes come of the little people. The American People are angry. Think of how shocking it was that donald trump won the election. He won it for one reason, the American People sent, we have had it. We are going outside the box. David when it comes to growth, you think the personal tax cuts would be more important . You put more money in our customers wallets, trust me, we will sell the more stuff. That is the name of the game. David one little problem. President trump has not come out in favor of the border adjustment tax. Around, there are people who i respect highly, gary cohn. We have invested together. He is as smart and as good as they come, ok . Think he feels too enamored of wilbur ross. Steve mnuchin, im not sure about, but the point is we all have to have skin in the game. Maybe you wont get a 20 border , butbut maybe 5 or 10 over time, we can live with it. The one in economist i have known many, many years which i really respect as having common sense, and im not they all dont have common sense, but there is a shortage among them, but larry lindsey, he has this thing oodled out. ,f you dont have some faith you go to a doctor for a brain operation and you say, you guarantee me i will wake up . The guy says, yeah, you will wake up. He will do everything he can to make you think he will wake up you will wake up, but he cant guarantee will wake up. Fxid when you talk to the guys, the basic assumption the dollar will appreciate 20 is flawed. It is a 5 trillion a day fx market. Just because you adjust the border tax does not mean you will get the fx adjustment. I know nothing about currencies. I know zippo. I know nothing about the macro field. There are two guys, one guy, stan drucker, i gave him money when he had less than 1 million in assets never had a down year. David he know something about currencies. You get them in here, and trust me, they will be able to explain. Can they prove it question mark of course, they cant prove it. You that i to will be alive tonight . I expect to be, but show me how its going to be for sure. Come on. This is one of our problems. You have a headache, give me a pill, i want to be fixed in five minutes. Would you bethan able to say you would not be cutting staff, costs . Absolutely. That would be a shortsighted as you could do. We always took the position, and it works. Look at the retailers that have cut back on service. Look at the retailers that have cut back on offerings. We went the other way. And by the way, im not bragging, but if you look at the , homescenery of retailing depot is one of the more successful by the way, the guys running the company today are 50 times better than those of us that founded the company and ran it. No doubt about it. These guys, they are so good it is scary, all right . But the point i am making is, we have to get back to all of us having some skin in the game. Remember world war ii i was 56 years old. We had can drives, paper drives, cloth drives, everybody went to war. We had blackouts. We had rationing of gas did i a onr my dad had an his windshield that told the gas station, can have. I remember painting the top of the headlight black comments of the lights on the went down and did not go up, and i remember air raids. America went to war. We need not to go to war, but we need as americans today to all have some skin in the game. Patriotism has become a bad word. Isnt that sad . Isnt that sad . You will bengone sticking with this. Crude this bid on morning on the comments of for saudi arabia. David zervos will be here. From new york city come up for our viewers worldwide, youre watching bloomberg. Andthan three days to go not a clear winner in sight for the french president ial election , polls showing Emmanuel Macron of, Francois Fillon declining, le pen unchanged at 22 . French voters have yet to decide on their candidate according to estimates by multiple polling firms. Aberdeene now is investment senior strategist and ken langone is still with us. You talked about skin in the game in the United States. There is interesting keeping the eu together. Why . How can we. How can we . How can we influence britain, france, or whoever to stay in . I amnow, im not sure right, but i heard one of the candidates in the French Election says if you make more than 30,000 they would tax of 100 . Jonathan it is closer to 400,000. Look at what is going on with venezuela. How did he get there . The people thought these guys would lead them to the promised land, and what did they feed them too . Deprivation, food shortages, a way, the by the biggest oil reserves in the world are in venezuela. Now if this is what the european people one, socialism, if they think this will be the best for them, then go do your thing. Jonathan have it we get to venezuela from europe . Venezuela is an example of the people themselves. They did it. Chavez, this guy was going to leave them to the promised land. Jonathan ahead of the vote on sunday, what is the best case at the moment . The left or the middle . I think it is tough to say. Opinion polls have been consistently wrong in the major elections in europe and the u. S. Over the last 18 months, so there is a degree of skepticism as to the outcome, but french pun yields have moved up and markets are relatively sanguine in the face of uncertainty. The base case is Emmanuel Macron and Marine Le Pen go into a runoff and Emmanuel Macron wins, but there is a healthy selection of tail risks you can choose from. Talk about the terror risks. Risks. Tail i think you would have a similar i think you would have a similar outcome. Expect Emmanuel Macron to win. A difficult situation would be if you ended up with marine le the other candidate in a runoff. As an investor, is your appealing to you . No. Look, i buy american. All my and investments are for the most part in america. I understand american laws, american rules. I understand how things work for the most part. I see in or miss opportunities in america the next 25 years. I think its going to be hard for america not to be one of the big winners in the next 25 years. We have some stuff to go through, big time, and we will get there, but i dont understand a lot of what goes on in these other countries. Is in a lot of that potential for america based on trade . Increasingly we are importing and exporting. Isnt that a critical element of future American Growth . Except when you look at the fact we have trade deficits. If we are trading, we are giving more than we are getting. On. Day ift the end of the you have a product, the technology and the people will buy it could look at apple is in demand all around the world. Why . Developed ae product. At the end of the day, it gets down to you need this utility, value they are also sourcing stuff from china, which is cheaper to make. They are smart. You should always try to buy where you can what is best for your customer first, then what is best for your business, but your customer first. David i understand the issues of our trade deficit, but we have Remarkable Growth and success in this country through a lot of years when we have had net trade deficits, so they have not heard in the past. Why is it hurting the United States now . I dont think they are good let me explain something to you. One of the worst things in the world that could happen to home becomes a lot of people unemployed good Unemployed People dont have money to spend in our stores. At some point, if that straw on the camels back, so i am thrilled to see we are trying to reemphasize creating jobs in america, because as i said, the more employment we have in people, the more money have in their wallets in america, the better it is for home depot. Tox talk about employment, bring it back to the French Election, Youth Employment high, unemployment high, what is the trade over the next four days into the election . I think this sensible trade is to keep a cool head and expect common sense to prevail, which is what is most likely will happen. We are not positioning ourselves around this election in any way. We have been investing in europe for the last 78 years and have been through a volatile time politically and the number of crises. I dont think this is anything more than what we have seen over the last seveneight years. We managed to get through that. Jonathan thank you. Coming up, bank of America Merrill lynch head of global commodities. Youre watching bloomberg. Jonathan you are watching bloomberg daybreak. I am jonathan ferro. Futures are firmer this morning come up 67 points, positive 35 on the dow. Breaking data in the u. S. , treasuries on the march, yields up a basis point. , 1. 28. Le rate , an upsidec data surprise, marginal. Thuman read on the labor market, softer. Jobless claims, multidecade low, back to the 1970s for these numbers. , downsidess outlook surprise, 22 dead, we were looking for 25. 5. Alix new orders getting hammered in that philly fed survey. Now the survey data is starting to rollover. Datanarrative of the hard was going to pick up perhaps now changing. Heart we were hoping the would come up to the soft. With the still is Emmanuel Macron ken langone. Lets talk about the job situation in the United States. We have been creating jobs month after month, and yet donald trump says we have a real problem with jobs in the country. How can both those things be true . There are jobs, then jobs. People need jobs where they make a weights they can live with. To me, the biggest challenge we have as americans is income inequality. David why is that . It is white and stubborn. Wide and stubborn. It is not just business paying more money. It is people being qualified to be paid more money. Plumberve a great working for us that does a super job for customers who buy bathrooms and kitchens and whatever, he is worth his weight in gold. We have a serious problem in education in america that nobody wants to talk about. David that includes the president. We have not heard the president talk about education. A we are talking about problem as a country. You want to beat up on the guy . David shouldnt we be focusing on education . Look what he did. He put a firebrand in there. Does. See what she i am betting big that betsy devos will shake things that you know in the city right now in the city there is a shortage of carpenters and plumbers. They are importing them. We are short plumbers and electricians and carpenters. Do you know that half the construction in york city today is being done with nonunion labor . Going, but we have to give people the basic tools, the mindset and the knowledge to do the job. A question from a viewer, if we wind up getting companies able to repatriate money overseas, should there be on restrictions what they do with it, no buybacks, no dividends per they have to use that for x and richer come investing in different workers. What do you think about that . We need less regulation, not more. That are a lot of ways repatriation helps. Number one, not every company is enlightened. Home depot is spending a fortune right this minute on technology. We have reached the outer limit of practical locations. We are spending billions of dollars to have the customer have this experience. Look at amazon. Look at what they are doing with technology, enlightened companies dont need a gun at their head to do what is good for their business. Now, home depot has been a billion buying our stock back, but that was for a simple reason. Buildings, 90 ur of our real estate. There is no place left for us, so the sensible thing to do instead of blowing it on acquisitions that dont make sense think of the number of acquisitions made that you think, oh, my god, what a mess. And at what hewlettpackard how they wrote this business is off. , pursley im making is what i would like to see happen and now im talking out of both sides of my mouth i would love to see a requirement that if you bring money back, a portion of it has to be used to purchase Government Bonds solely devoted to infrastructure. I have an ax to grind here because if you build more roads, bridges, and schools, home depot gets a lot more business, but the point is we do need infrastructure badly in america. Tunnelslities, bridges, roads are a mess. New york city, i mean just think how many roads you say, oh, my god, the spring in my car is going to break. As i said come on the one hand i am saying i would love to see something that i think would be and a lot of people philosophically say i dont like the government telling me what to do with my money, but levitate why i think we ought to do that. These other countries are going to get at that money if we dont get at it. Irelandh the eu did to about apples money over there and said, hey, you better tax it, ok . They are hurting over there. Im not sure i would want to be a hostage in a foreign country as much as they would in america. Back to what i said about knowing the rules and think ions here, so i have a lot of faith in common sense and management. I think most people running businesses would do it make sense. Look at the drug industry, eli lilly. I have been an investor in eli lilly since 40 years ago. Eli lilly spends 25 of its revenues on r d. That is a big number. That is betting on the future. But guess what . If a drug company does not invest in r d, it has no future. Lets turn to health care. You have invested in it. Apply your common sense to health care in this country right now could where are the Smart Investments to be made . , i tell young kids, i look at a Market Opportunity like i have never seen before, i will be 82 in september. I dont know how shorts work. The market that is being created by People Living longer and more actively, we are not just living longer. I was in the gymnasium this morning at 5 30, so we are living actively. Im still working. I am not unusual. There are people all over the world doing this now. This is a huge Market Opportunity. David so how do you invest in that opportunity . Out there to help people live better quality lives . In example, a looming crisis the world is diabetes, huge. Why question mark why . Is a cost. Everybody is working on something to do with diabetes. Look at our diets. We eat the wrong food. Kids are getting heavy. Guess what . As i said, i look at problems as opportunities and work clothing. That was henry kaisers expression, and it is a good one. It is a good one, and i think you look at all the things we want in america. We are living better and longer. Think of the things that are a death sentence but look at we did with polio. Way, both are nyu medical school graduates. David you have an affiliation with nyu. I sure do. Look at the technology coming down the road. Ook at stents i am an investor in a Company Called shockwave, a device instead of using plaque, the use , like when you have kidney stones and they blow out the stones, well, affectively that is what they do, but this catches the degree when it debrisup, it catches the and pulls it out so it can cause a stroke. It is wild how much there is to do in the world today. ,avid you mentioned eli lily pharmaceuticals, are you concerned about that as an investment given price control cost control and price regulation . In theof the problems drug industry is you dont know you have a winner and tell you have a winner. Eli lilly spend a fortune on an Alzheimer Drug and came up emptyhanded. Risks and everything. It is like a wildcat are in oil. Now we have more Technology Today that helps us narrow the risks, but the fact of the matter is when you look at the Unmet Health Care Needs in the world, thank god there are Drug Companies out there that are willing to spend some money and have some skin in the game. , go to theen langone palm beach buffet. Alix are you treating . I am not a member. I cant get in. They have, im serious, you go to that buffet and say, where do i start. Alix ice cream. Always start with the ice cream. They have chinese food to die for. David where do you start . , the homen langone depot cofounder. Great having you here. Alix thanks. Americap, bank of Merrill Lynchs global head of Commodities Research will join us as crude inching higher on the day. This is bloomberg. This is bloomberg daybreak and this is the Hewlett Packard enterprise greenroom. Comingcoming up, jeffries. Nestle posted firstquarter sales growth that the estimates. Reasons, price hikes. Nestle has been able to raise prices 1 in the midst of weak consumer demand. U. S. Steel taking on china in a case attracting attention from politicians and unions. Wants the government trade agency to revise claims the chinese steel makers join forces to keep prices low and undercut competitors in the american market. The International Trade commission will hear u. S. Steels arguments today. Rebound afterhe saudi arabia signaled of potential extension to opecled supply cuts. Here is what the oil minister said. Although there is a high level of commitment, we have not reached our goal to reach the fiveyear average. There is an initial agreement that we might be obligated to extend to get our target, but we did not communicate with all the countries. Joining us now bank of America Merrill lynch global head of Commodities Research. We talked, but we did not talk to everybody. How much jawboning will we see like this over the next month . Quite a lot of it, and the market will be jittery until we get the final deal and , thell see the numbers supervision mechanism put in place, we have see that all agreed again. Im sure that will create some jitteriness. Not forget there are macro events on top of opec swinging markets around. Alix you actually had a note out about the French Election. I have not seen an analyst compare French Elections and oil. You said this could be a turning point good what is your downside and upside . The things happening a global Commodity Markets is we had a strong dollar, and the strong dollar has been a big headwind for oil. Part of that is the weakness in to eurozone, and some seems be reverting. The british pound had a move up because of the election call, which has been viewed positively, but on france, i think if we get the right result, we are going to see a , and thatn the euro is important because it means we get a softer u. S. Dollar back drop, and that is a positive environment for Commodity Markets, which has been facing a negative macro for quite a while. If you look at emergingmarket data, underlying survey data, pmi, it all looks positive, see you need that election, French Election confirmation, to push the euro higher and together with the Commodity Prices and oil. Alix what is the correlation between dollar and oil . Im looking at the correlation over the last 120 days, it is not the Strong Negative correlation you would think yo. R it depends on her you look at the correlation. Sometimes oil leads, sometimes the dollar leads oil, and it depends on the time, but if you look at 2014 in 2015, oil was leading the dollar index. What i am saying now is part of the reason why oil is lower prices was drop in impacting the u. S. Current accounts positively. Is a big net importer, so the collapse in prices is enabling the u. S. To import more goods. That could start to change if the euro recovers. Has been undero a lot of pressure because of internal domestic politics in the eurozone, so that is one of the reasons why we think the correlations will pick up from here. I definitely agree that 045sevenns can be months, but over a longer time, they tend to be higher. Ofx i have not heard a lot people talk about that. What is the Downside Risk for oil . Trying to talk the market of. Inventories are not coming down the way they helped. Has. The demand cover there are some products are there are real market dynamics. You think at pro taint and butane for cooking and home heating propane and butane for cooking and home heating, we have not seen those price hikes fee through the entire channel, and part of that has to do with diesel demand in emerging markets has been solved. Why is it so soft . ,rowth and trade have been soft the politics are in the way a little bit. We need to see incremental pickup in global trade flows and incremental pickup in industrial activity in emerging markets to see increase in consumption and oil price higher. That is what drives oil. Big picture demand is about diesel, jet fuel, and gasoline, and so far strong jet fuel , demand for driving not as much, and demand for trucking has been soft. The demand side will go up and down, but on the supply side, are we bound . If it goes up to high, the u. S. Shale producers come crashing in. If it goes too low, opec and saudi arabia get together and say we will cut back. I think there is a little bit of that. Goingguments was it was to come down a lot with the opec cut. We said we have had tremendous bullet to the and oil, but we and have lower volatility volatility has dropped 60 . Alix just ask goldman. Movinglutely, we are into a ban. In some ways, the only way to break out is if we have a geopolitical event that takes us 75 to 80 range or we have a melt down and demand which takes his lower. We are still positive into the summer months. We believe there is a 20 run up in crude prices. Again, it may not last long. I think it is seasonal, but we are still constructive because once we get through the French Election risk and the euro is no longer acting as a headwind, once we get to the opec meeting and get the deal done, which i think we will likely see, then i think we go into a strong season in the u. S. Alix the number for that . 70, but0s, maybe much more narrow gasoline margins. , you arencisco blanch sticking with the spirit if you have a bloomberg terminal, check out tv and interact with us directly. Go to tv on your terminal. This is bloomberg. Jonathan from new york city, breaking news. This is what happens when of 144 allion euro company buys 144,000,001. Unilever buying condiment upstart sirkin zinc ands sir kensingtons. I cant even make this up. Alix something you dont want to put on your sandwich. It is interesting they are doing a bit of m a. Im going to run out and buy some. Slumping into a bear market. It has been hammered over the last few weeks. , have to ask Francisco Blanch what has happened here . Is this positioning, or is this fundamental and we need to forget about china . It is a bit of everything. Our view is iron ore at 60 a ton, and part of the reason is it is a common element, so there is plenty of it and cost is around 50 to 60 a ton, so it has to revert back to that level, and that is part of what has been happening. I think the steel market is under pressure. Obviously there has been talk in the u. S. Around using u. S. Steel for construction here or contracts. A lot of the comments of the administration have been very geared towards u. S. Produced commodities, which is a different angle than we have had for decades. The chinese producers have found themselves with a bit of overhang and stock. 1350 gold, do we get there . I think so. The market for gold is strong. It provides a geopolitical hedge. Electionea, french risks, people will russian to gold. , the one one thing asset class that is not too expensive. Always appreciate your time. Coming up, david zervos joining us as we count you down to the open in 34 minutes. Bloomberg real, yield, 30 minutes dedicated to fixed income. A really choppy week. From new york city, youre watching bloomberg. Jonathan former fed chair paul volcker, House Republicans unveil a draft to replace doddfrank. In advance ofalm French Elections. Izon falls after it lost the most subscribers in a decade. From new york, good morning. Good morning. Welcome to bloomberg daybreak. The market open 30 minutes away. Dow, up. 25 on the on the benchmark in the u. S. Treasuries on our for all morning, yields a two basis points. In the fx market roughly, the dollar weaker, the cable rate, 1. 28. On theet you up to speed movers and the stock market. Here is alix steel. Izon, a record Wireless Subscriber loss for the company, 300 7000 subscribers, missing on sales and profit estimates, and rising churn. Putting it all out there, please buy me . Will they do just that . A nice boost for qualcomm. Overgetting a runup, up 2 , revenue did fall two point 5 , but still Beat Estimates by 100 million. Of thatnue was the loss costco deal, and that impacted the company. Income did fall 13 because they had to spend on rewards to retain customers. Nonetheless can still of premarket. David you might have thought congress has enough already. Downe way, they may shut the government next week, but now House Republicans decided they wanted to work on doddfrank as well and come up with a 608 hell. 600 page will. Bill. How does this fit into Everything Congress is trying to do . Wonks are getting their hand on the 600 page bill. Does is it is a conservative ambitious plan that is much more to the right than anything the senate could pass, thehe is saying that if senate is going to take up deep regulatory financial policy, they will have to play ball with him. This is a chairman very much in of lot. Kemp school he has received assurances from the white house that this is very much still a firstyear priority item, but as you said, they have so much to do when they get back from recess on monday, including tax reform, health care, which is starting to boil over again because once thattrump legislative victory before the 100 day marker. David you mention the white is the white house sending signals to republicans on the hill that this is what we want to go first, second, third . Are, but i they continue those messages from the sources i talk with on capitol hill are that that communication could be at her. Officialith one senior at the bunches office telling me essentially they are trying to use people like Mick Mulvaney as tol as people like gary cohn Work Together to correct some of the areas errors that they will admit they made with negotiating on health care when someone like director moping he is interesting because he has been working with gary cohn behind the scenes to win over the conservative votes. Director mulvaney just came from capitol hill, so he knows people up there. Thank you. Jonathan larry fink told us yesterday that he does not feel tighter regulations have heard the economy. Just the fact by changing the tone of regulation will ease some of the issues, many anchors wantaying, we dont regulation. Many bankers are saying we just need to amend the components of the volcker rule, and many of those things are valid. Jonathan joining us now is Terry Simpson and gina martin adams. Great to have you on. What is more important to the financials, the prospect of regulation being scaled back or a tenure at 2. 2 or . I would say both. We are focusing on the terms spread and steeper yields. We have to recognize deregulation has impacted financials. Various studies show wide margins. To 0. 5 dies show 0. 4 shaved off gdp. If we get easing of regulation, that could help financials. Jonathan to use the word larry fink use, tone. Is tone important here . I think tony kanaan increased volatility and move stocks in the shortterm, but over the longer term, it is about earnings. Tone only means so much. It does not mean a lot to an investor. I think the 10year is the single most important factor driving the sector because it means a lot for earnings, and the 10 year has been the proxy and moves the most. The fed has been slow to move that short and. Alix where do we stand and financials . It is reporting season. Generally we are still waiting to get better improvement on consumer and business lending. As we came off the election, there was still a lot of uncertainty there. As we go into q1 and q2, you could see some lending backup and that should be beneficial for the Financial Sector are. Jonathan we had a big repricing on treasuries and financials. You talked about the importance of the 10 year again and again and again. We have repriced aggressively lower. Have we done this much on financials . They have followed closely with the 10year. Stocks are leading the 10year. Since march 1, they are down almost 8 , a pretty steep decline. We did a little work on the government potential shutdown and look back at 23rd team. There was a lot of volatility at that point. Financials led the selloff in stocks. The financial selloff was half of what it has an already in anticipation of this potential Government Shutdown, so i think financials have corrected a lot inconsistently with the long bund. Alix that there is we have had so much run in the financials, but thats not true. They are not in overbought territory. Valuation has been attractive for financials and energy for a while, but unfortunately, valuation is not what is moving the shocks stocks in the shortterm. At some point investors look for some beta place, some risk, for somebody wish and opportunities. We have to get to those oversold levels on the broad index first before you see capital look for opportunities in these groups in my opinion. David if you are President Trump and what to get to 3 to three. 5 percent growth, do you look to the financials to leave that growth . Do you need them healthy to bring the rest of the economy behind it . It is important. One of the reasons we have had this lackluster recovery is that basically financials have been impaired, particularly the banks, so you want to clean up the Balance Sheets and improve their ability to lend and that can flow through to the real economy. We focus on large cap banks, but i also focus on smallcap banks and small businesses. Small businesses create 50 of all u. S. Employment, so smallcap banks which have a harder burden to comply with the compliance in terms of regulation, if you ease regulation, that can be impactful for small banks and small businesses. , they did do pull a survey of small and mediumsized businesses, they put lack of credit at the bottom of their concerns, so is that a demand or supply problem . They are saying we are not sure we want the loans. It is the demand. That is where government comes in. You have the private sector not contributing to the increase in the economic recovery, then that is where the government comes in and says we will try to create some demand to have the private sector participate on the back half of that. Alix so the theme has been you buy beta, cyclical. Do you still do that or do pair that back and keep exposure . What do you do when we have uncertainty until august . Our model has said that the market was due for some sort of churning correction, and i think we are still in that phase. If you are a shortterm investor, it is clear we have broken that 50 Day Moving Average and failed to surpassed the 50 Day Moving Average on the s p, the short term technicals are the market is in consolidation market mode. Longer termat the trend and you are a longerterm investor, the trend is still higher. Consolidating within that uptrend, so you look for the opportunities when everyone gets bearish and we get fearful, as long as the Economic Data is not turning over and the longterm Earnings Growth outlook remained solid, you look for opportunities for cyclical exposure. Is spinning. D after the election, you want to get out of defensive into cyclicals, now we are saying out of cyclicals back into defenses. Where are we going . To be manye going cycles and a trade, so it will not be a Linear Movement from the election to the end of this year. In those cycles, it will be an opportunity for investors to say where do you want to ship positioning. Cyclicals areve the better of opportunity, but there will be pockets of opportunity where defensive outperform. We believe in the reflation trade, so that means sticking with your cyclical trade. Coming up later, Justin Trudeau at 11 30 a. M. Eastern time. Plus, President Donald Trump holds a News Conference with italys Prime Minister at 3 50 this afternoon. Live from new york and washington, this is bloomberg. Kaplan has said he sees the neutral rate of 2 , accommodative, but not to accommodative. He made his case for three rate hikes for 2017 with Michael Mckee. The median of three is still a good baseline. If the economy develops more slowly, then we can do less than that. If the economy is stronger, we can do more than that, but i still think we are making Good Progress towards full employment. There is still some labor slack, but i think we are approaching full employment. Joining us now is jeffreys chief Market Strategist. My bloomberg terminal says something different. This is where the fed fund should be based on Market Expectations at the end of 2018. 2019. Ue line one more hike this year, maybe not even any next year. Roberts, markets or kaplan . This has been the story with the fed for quite a while. Alix this time should be different, and it is not. I sort of agree with that. I think we have a better chance of seeing the fed be right than wrong this time around. We are closer to full employment as mr. Kaplan said, 4. 5 . The inflation story is next, but we are still hanging around two, so for me, i think the market is getting nervous around the French Election, some other geopolitical events, and that is taking the yield curve lower. Once you get those events out of the way and start to see some of these deregulation policies and fiscal policies come through, i think the fed is back on track. Jonathan it has been the most talked about spreads, the spread between soft and hard data. Does the soft data reconciling lower to the hard data mean anything materially for the federal reserve, or is where the hard it is that currently enough to keep them on schedule . Lets be clear on hard data. We have 4. 5 unemployment, inflation around 2 , give or take. This is not a terrible place to be. People are making it out like it is the next recession. Every q1 is soft. This is another soft q1. We get a big inflation print followed by a small inflation print. I think you have to be careful with the highfrequency stuff. The economy has not been growing quickly, up 1. 5 to 2 . Stagis what i call secular reflation. If we get rid of regulations i do that all the time. You know that. Believe in the reflation trade, and therefore i assume you are closer to Robert Kaplan than where the market is. To go back to what david said, there is this little thing called the underlying economy, like gdp growth, which we are not seeing yet. How are we going to get that grow to grow . Right now for the fed is how much they will look through q1 weakness and some of the hard data, regional seasonality, gdp numbers, softer ip print in march, so how with the fed think about that . Our view is that as we come out of q1 into the rest of the year is that Economic Growth will pick up, but the heads of view is your understanding that we are eight years and its economic expansion and we are not at need of a high level of monetary accommodation we have had over the last eight years, so we want to start unwinding that. David netnet, where are you for growth . Q one was not that good, so you have to make it up on the backend. Correct. Between 2 and 2. 5 real gdp. Anything at the top end would be optimistic. Clarity or fiscal reform, tax cuts, deregulation, that could boost us over that 2. 5 hurdle, the we will not get back to that 3 real gdp number we have been accustomed to. David to make it to 2. 5 plus for the year, you have to do 3 plus for a couple of quarters. That is what we have seen, the residual seasonality where q one is week and then he gets revised up and we go into the last couple of orders to produce stronger numbers, so we think we will have some good sentiment. Alix good sentiment, so where do you put your money, the u. S. Or elsewhere . Scarce. Is what we are trying to identify his opportunity to rethink the next part of the cycle. Through,ying to skate leading us to international markets. Alix where international . We like europe and emerging markets. Of ourre two of conviction trades right now. When you think about europe, investors are still underweight europe here it money is coming back again, but not to the extent where we talk about u. S. Equities. Get to theefore we buy euro, is it a trade or in investment . It is a trade. It is not an investment. I dont think the European Investment story great. Biggie not talking about regulation stories, big fiscal packages, although we see a reduction in austerity, but the way the german elections are going, we are seeing a rise of the left in france as well, this is not the environment where you get really excited about being a capital holder, but if you can get over the Marine Le Pen hurdle, you get a big pop in the euro and euro stocks. I say we think about the reflation trade is not just a u. S. Story. It is a global story. Pickupseeing an and activity. Last year, global trade, 2. 2 , so we are at that inflection point. Europe is an export driven economy that could benefit multinational corporations in the European Equity market and something investors should think about as they dont international positions. Coming up, Goldman Sachs catches a bit, and earnings miss, its biggest decline in the year, but today one analyst is saying by the debt. Chris wheeler makes the case for Goldman Sachs next. You are watching bloomberg. David Goldman Sachs released earnings this week, the smallest fixed income trading gain thus far. The result . The biggest selloff and nine months in goldman stock. The post firstquarter earnings selloff is the overdone and will rebound, that at least is weaver,g to christopher who just race goldman from neutral to overweight. He joins us now from london. Good to have you here. You think the market has overreacted here . Yes, it has. There was a big miss. They tended not to miss. Fixed income was 25 below consensus, but they made up for it in other areas. The overall mr. Earnings was 3 to give and that they demonstrated cost control and some performance elsewhere like i amting and lending, downgrading my earnings forecast this year for 1 . David fair enough. , this isme time Goldman Sachs. If you expect them to excel, you expect them to excel in fixed income, currency, and commodities. Isnt that the problem here . Lets be fair. Generally they are the fourth biggest bank in the u. S. In fixed income. They got thirdbiggest in the quarter of last year. But, you are right. Report, theiry fixed income numbers have been volatile over the last 1012 orders. When they have a week quarter, they bounce back. Around a lot of it was indexing around energy, but nevertheless, i dont think this means the franchises busted. David does that explain why they did worse than their peers did . It could be. One big wellknown newspaper was saying there is a problem with revenue at all the banks. E dont know what is in their that is part of the problem and it is best to deflate things by saying we were not good enough and navigating the quarter. Thank you very much. Coming up, here is the state of play. Futures are positive, 41 on the dow. Treasuries have in on offer all morning, yields up on the margin , 2. 33 . From new york, you are watching bloomberg. Attention homeowners age sixtytwo and older. One reverse mortgage has a great way for you to live a better retirement. Its called a reverse mortgage. Call rfree information kityour with no obligation. It answers questions like. How a reverse mortgage works, how much you qualify for, the ways to receive your money and more. Plus, when you call now, youll get this magnifier with led light absolutely free when you call the experts at one reverse mortgage today youll learn the benefits of a governmentinsured reverse mortgage. It will eliminate your monthly mortgage payments and give you taxfree cash from the equity in your home. And heres the best part. You still own yohome. Call now ke control of your retirement today you are watching bloomberg daybreak. Moments away from the opening bell. Dip a little bit. Up 47 points on the doubt. Up on the s p 500. Switch out the board quickly. Treasuries are higher. The dollar largely weaker. The dollar index back down. Some Dollar Strength against the yen. Crudes come up. It strikes me amazing how excited people get. Alec still get the market open. Alix i would be into it. This is where stocks are trading, little bit of a relief here after the dow has moved triple digits over the last four trading sessions. A little bit of calm. S p is up. Nasdaq is up. Oil can potentially be a drag, relatively flat on the day. You wind up having yields a touch higher. Yep qualcomm and american express, that will help the dow today. Ebay off by 3 , lowering the Second Quarter guidance below consensus, trailing amazon in growth. Shocker, i know. Groupon of over 2 . 22 aftermped earnings last quarter. Says the worries about the web traffic our way overblown. Foot locker getting a bit as well. Oning aggressively buy weakness, says february sales missed during the key nba allstar game period was a onetime event, so buy aggressively. We talked a lot in the last three hours about the reflation trade and where we are. The big sectors that perform well at the end of last or were industrials, energy, and banks. How are we stacking up when the hard data is coming in on earnings . This top panel is the average sales growth for those three industries, and the bottom panel is average earnings. The white bar is energy for sales moving a little bit higher, but still not a huge pop. Industrials, the green bar. Financials, the blue bar. This is all securities on the s p. The reflation trade beating out the rest of the s p and terms of sales growth or Earnings Growth, pretty disappointing across the board. This is what we will have to. Eal with in earning season the overall reflation theme of being drained out of markets, but the underlying sales growth not so terrible. How do you square it . Jonathan lets ask david zervos. Great to have you on the program still. Do you see supporting factors in the earnings were seen so far that the narrative over the last five or six months . Not really. I would not expect it. I think were sort of six months into the election, a little less. Much less since the inauguration. The big story for me is regulation and deregulation, and the idea that will kick in one month, two months, or three months i think is a tough sell. That is why the soft data is going up, because people are super happy about the idea. They are not making their plans immediately on that. Jonathan starting to bleed and rollover. At what point do we actually get the regulatory change . Talking about the importance of tone. At some point, you need the hard regulation, dont you . It is like theres a big celebration, nobody believed it would happen. The fi be skyrocketed. I think that is the best one to look at, small business. At the end of the day, you expect there is going to be some kind of coming back to earth a little bit and recognizing these things take a lot of time. I think the Trump Administration has done a lot of executive orders that people dont even fully appreciate and cannot fully understand. I am silly not an expert, but im trying to get better. Not an expert,ly but im trying to get better. We have not thought about regulation much. Back and do some Hard Research on the economics of what it means to deregulate. There is no Good Research out there. There is no good institutional stories on what this means. A lot of the cost benefit analysis that has to get done just has not been done. I guess im going to go back to my sort of freshwater economic roots and my beliefs about what happened in the 1980s and say, i think the deregulation stories a huge deal. David is it deregulation . Should we be calibrating in the sense . It takes time. Another thing you say, were the record to stop or slow down the pace of new regulation because the Business People say, you know what . If they will stop where they are, i will be better off. That is a fair statement, but i dont think it is enough. I think there is relief. Probably the most ive heard the most in terms of labor laws and environmental structures is that a lot of this is going to come from the agencies, from the interior departments, from the department of labor. Instead of getting bombarded with the new regulation every week about what you need to do in our bathrooms at work or what you need to do in terms of applying for a new permit to build an extension to your factory, a lot of it is just going to come not through congress, but through the new leaders at these agencies that are much more proderegulation or antiregulation. Jonathan lets get more specific. What can a financial regulatory changes could we see, material ones . Jerome powell gave a speech last night. I think you wrote a nice story about it where he really talked about pulling back all of these regulations for the community bankers. It reminded me a lot of what happened with the snls in the 80s, that did not end well, but and contributed to a big real estate boom. I dont want to go back that far, but i want to say there is a lot of bipartisan support for pulling back what dodd frank did front. Community bank i think you get that across all walks of political life. I think the one tricky part is this reinstating of glasssteagall, which nobody is really talking about. One has to think about, is that actually deregulation or regulation, and will that be something that could slow things as the big banks need to think about what their new role is as brokerages and Investment Banks, cut themselves from commercial banks . That is a big deal. The financial landscape and i think the stocks tell the story is a tricky one, especially big versus small. Alix are you starting to make bets on this change . How are you structurally managing that in a portfolio, for example . The big change posttrump for me was that we were going to potentially a higher equilibrium real rate world, for lack of a better way to say it. And this idea in kaplan interview this morning, talked about real rates being closer to two than three. I thought that was not a particularly hawkish statement. I think were moving more toward three number. I think a return on capital is coming from the economy, not the fed. It is the unwinding of the stagnation that is the part of that regulation. This whole process it is a higher real rate world and slightly stronger dollar world, which was the initial reaction to trump. I think we will find some footing and we will continue that trend ended in of the year. Lets get you up to speed on the Market Action quickly in the u. S. If you switch out the boards, yields are up about a basis point. Up session highs. Pound. O and the from new york city, with more action in equity market coming up, including verizon begging for someone to buy them, youre watching bloomberg. Coming up later, a conversation with the Prime Minister of canada Justin Trudeau at 11 30 eastern time. Alix the biggest laggard in the dow today, verizon, lowest level since november this morning. The Wireless Company shutting more or missing on sales and earnings. The Company Really highlights its need for strategic transaction will stop joining us on the line of the conference call, an analyst. What did they say about yesterday asking the companies, call me, lets do a deal . Andhey tried to downplay it phrase it as, well, we were just responding to a question. Scott moritz had an exact quote from the seo, seo of a 200 billion market cap company. He is circling well aware is on the record. He is certainly well aware when he is on the record. They try to downplay it, but a quote is a quote. Alix we are seeing a being trolled a little bit by tmobile as well on twitter. The idea is, who would want to buy this company or team up with this company went you take a look at the number second out today and hard to find something really good in it . I think it is more about withon having some issues their strategy. The wireless business i think is looking like it is rolling over here. Theyre losing companies customers. Not tried go 90, which did do that well. There in search of a strategy. One way large companys do that is through very large acquisitions. It could be more out of verizons need they would go out and try to buy something, whether they can entice someone to sell, you know, certainly another issue. I think when lowell was being interviewed, that was one of the things mentioned, maybe we have not found a willing seller as of yet. That is going to be maybe a goal for the company in 2017. David this is a form of distribution buying content. Has this been done successfully before, big distribution buying big content and making it be worth more than the individual parts . Comcast bought nbc. Overall, that is, depending on who you ask, has gone ok. For at t, we look at it as more of a diversification strategy. They face the same challenges as verizon. Verizon could theoretically do the same thing with disney. If disney is not a willing seller, then maybe charter makes sense for them. Fundamentally, we think what they should be buying is dish, but they really need to supplant the capacity on the Wireless Network and perhaps keep it away who tmobile from using it, is really hurting them on the subscriber five. That would make more sense. It is not a transformational deal. It seems to be the type of thing that verizon is looking for, which might be more like a charter or disney. David do they have a plan b in place . They are smaller content company. Disney is a big one. There are smaller deals they could make, right . There are smaller deals. For example, they could buy they talked about this on the call today, were they were asked about this billion dollar investment they made with corning. Them, theirumpstart version of a 5g strategy. They might be looking for something more rigor in transformational. As far as plan b, it sounds like theyre looking for plan b and c and d and e. Looking at every copy they can think of that can help them move on as far as finding a new narrative for a company that looks like it is entering into an extended period of decline. Alix Walter Piecyk , thank you very much. Jonathan european markets, french bonds are stable. The buy eu again and again on this program. Guestr on the showr, a tells us what he says to buy europe when we look at u. S. Financials, we are concerned about three aspects. One, the valuations are higher than elsewhere. Secondly, provisioning looks low relative to credit spread. Thirdly, loan growth is rolling over in some areas such as autos. We would highlight areas elsewhere in the world, particularly europe, where low growth provisioning and Interest Rate trends i think all the better than people expect. Jonathan i want to borrow one of the most frustrating phrases on the street, cautious optimism. Why is everyone so cautiously optimistic . The election. It could go in a pretty dramatic , two different dramatic ways. One is Marine Le Pen, which is a complete fracturing of the european project, in my opinion, at least the start of it. I would even argue you may see french depositors start pulling money out of french banks if le pen wins. Talking about the return of a french franc. It happened for candidates who were seen as more extreme. To be very careful with the election. People are being very careful with the election. I think a lot of u. S. Fund managers started the year thinking, we have the elections, probable italian election. Who knows what the greeks are going to do next. There is deregulation, the me run over here and spent some time and leave that alone. I think a lot of people have left it alone and it has been orphaned. People have some exposure back to it now, but not a lot. If she doesnt end up in the drivers seat, i think youll get a nice little trade, as we discussed in the last segment. Jonathan andrew was talking about bonds. This is the antistock trade. Andrew says it with a much better accent than i do. We used to Work Together 20 something years ago. Speak with those wonderful accents at the lunches we hosted together. Bonds are very clearly a defensive or aggressively defensive play as the short and with the german twoyear. Look, i think we are talking about the same thing, just putting it in the mirror. This is a knife edge trade. If she wins, it is a real mess. It is a pretty big mess. If she doesnt, youre going to get a nice trade, nice pop, people will buy the euro, by euro stocks. Then they will say, ok, what is next . Is europe really going to grow a ton . Im not sure that looking at the structure of Political Movement in europe today, is there a lot of reform on the table, is there a lot of fiscal expansion, is there a lot of deregulation, our the stories great . Not really. Especially if schultz takes the had in germany. David where do you see the robust growth over the long period of time as you look around the world . We came out of the trump sort of win taking we would have higher real rates of return to u. S. Capitol. Not for any other reason that we would have lower taxes and less regulation. So on the margin, that just made the u. S. Look a lot more interesting to me. And those real rates being higher are still kind of come in my world, going into the end of the euro your. David you still have headwinds. Not growing very fast. That may limit the extent of growth over a long period of time in the United States. Where around the world do you find opportunities, if anywhere . We were very excited practice the election jonathan you came on this program almost around this time. The reason was, because they were freezing the dollar. They were not going to let the Dollar Strength anymore. That was an agreement. I know a lot of central bankers tell me a never happen. I believe it happened. That was a great trade. The you spin it back to posttrump world, that agreement is not in place anymore. Reform androper tax property regulation, i think rate on the dollar head higher, as they have done with weve had our consolidation moment back. I said earlier, i think that will resume is self, but that is not a great environment for job into commodities or emerging markets. It kind of takes you back. Jonathan whether they can remain resilient it is back to 250 or 275. Are you saying a blanket no . Im not. The brazils, argentinas, moving way from populism and toward something more business friendly, lets say, those are still great stories. The 10year note, two or four, brazil at 12 is still a pretty high spread. For argentina. I think that story is fine. The guys that are that you low yielders, certainly in Southeast Asia as well, you have a little more hiccup. The europeang trade is a bad trade. I think it is come of a good trait to have on going into this, but it is a trade for me, not in investment. I am still more excited about the changes happening in the u. S. Alix david zervos, opinionated as well. Heck out tv interact with us directly. This is bloomberg. David this is bloomberg. Still with us, david zervos. We continue to hear reports that Steven Mnuchin is intrigued by longerterm u. S. Treasuries. 50 years, even 100 year bonds. Good or bad idea . I think it is interesting. I think it is going to happen. I think they to veto into it with some a little bit of trepidation, but in the end, it is a good idea. There is demand. There is Insurance Company demand, but you have to tease it out. You have foreign demand on the insurance either can be quite good and the pension side. It will be tricky. Changing the treasury schedule is always a dicey subject because it is considered to be one of the most stable things and financial markets. Jonathan in recent history, they say the average yield has been drastic, much longer term in the u. K. And shorter term in the u. S. How do you affect the functioning of the market if you start radically altering the treasury market . It hasnt had a Material Impact on the gilt market. One could argue it is even creating more demand for the because it has build a stadium and they will come theme to some of this stuff if there is perceived liquidity, then people will come into it. There is that story. I am separate that it to it. You have something to say . Alix go ahead. Finish. I do subscribe to that build the stadium and they will come idea with this stuff, but it will be a one b process. Py process. Many guys will find that interesting part of the curve to play in, but i dont think will be orphaned anyway. It is a good idea. It fits the trump view that we should be taking advantage of these exceedingly low Interest Rates and doing something more productive with the expenditures, whether it is infrastructure or any other tax reform. Alix the risk is liquidity and ava the primary dealers to b when they cantuy hedge that risk. I worry about that as well. Everybody has the requirements of participation. Theres a much direct and indirect bidding and so many people that have relationships with the treasury outside of that Dealer Network now that im not going to get too hot and bothered about that. A build do think it is a stadium, make it happen, people will come play football in a stadium. Theres a lot of people who would be interested. Lots of accounts. Jonathan good to catch up with you. Nearly 26 minutes into the session. Lets get you up to speed on the markets and wrap up bloomberg daybreak. We open higher and are higher. If you switch the board, a little bit of risk. Yields of a basis point. The dollar weaker across the board with the exception of dollaryen. A stronger pound and euro. From new york, youre watching bloomberg tv. Is 10 00 a. M. In new york, 3 00 p. M. In london, and 10 00 p. M. In hong kong. From new york, im vonnie quinn. Mark live from london, i mark barton. Welcome to bloomberg markets. Vonnie we are want to take you from new york to london and cover stories at a paris and tokyo. But first, some headlines out of the bank of japan. Speaking to francine affected ination is the shortterm. They say they do not see constraints to doj policies and the japanese economy is growing well above its potential growth rate. Doj has 40 of the japanese Government Bond market. That means 60 is still in the market. Is current pace of purchase to continue for some time. If the fx