Of theround the highs session after an earlier date. It is a relatively low volume week, its a spring break here in new york city, trading is closed on friday as well. Tends to be a holiday week. This has been the case in the past month or so, we have had this rift in u. S. Markets. Look your at the bloomberg where you simply have a chart should feel action of the s p 500 and ask, mastec and blue. All three major averages, the last time they had simultaneous records of a closing basis we have seen the sideways Movement Since then. A Biggest Group in the s p 500 index, one of them, financials. As we go into Bank Earnings, which is beginning later this week, we are taking a look at what the bk x, Kbw Bank Index says, specifically since march 1. It is down by nearly 9 . A note today for Morgan Stanley saying there is a bumpy road ahead for First Quarter big Bank Earnings. That appears to be further away waiting on sentiments. Counterbalancing that is what is going on in oil stocks. Oil itself is trading higher, crude oil up by 1. 4 , highs of the day but still gaining. Exxon mobil and chevron along the oil majors higher. There is some supply constraints again in libya. That is prompting this long rally that we have now seen in oil prices. Also making headlines today, jeff good mock of the wellknown the head of the capital company. He spoke in an interview its of the reflation trade will Consumer Price inflation goes down in the next few months. This is a chart he referred to last week that we brought up, where he said he prefers nonu. S. Stocks. In this this year we have in and out performance amongst them. We have the rural index here and what, the s p 500 and yellow, then the msci eu index and purple. You can see that outpacing gains and emerging markets. That also outpacing gains. We have not seen a divergence of the markets outside of the u. S. And the u. S. Stock market. Well see if it sticks with that position and if this continues. Oliver good stuff, thank you julie hyman. Members of congress are back home for recess. Where does that leave the president s agenda . Earlier today former reagan economic exotic advisor says i still sees an economic broom under the Trump Administration. Im pleased with the administration so far. Like all of them, when they first come together, these are people who have not worked together, not all politicians they will make mistakes. As time goes on expect to see the quality of a personal rising and expect to see their cohesiveness and ability to work increaseds a team radically. Its just the way it was with reagan when we first came it was just a big hodgepodge of people not working well together. As time goes on i think youre going to see this administration become extraordinary and deliver good economics. What specifically do the see do you see the ministration getting past Conference Congress . Court protects rate reductions, thats the key to Economic Prosperity in the short run. We have the highest Corporate Tax rates, one of the lowest revenues in the oecd. We are the only country that has a global tax not a territorial tax. We have depreciation rules that are bad. If he can get that rate from 35 to 50 , get rid of local taxation and make it territorial and have 100 expensive capital processes, this could be one of the most explosive growth in u. S. History. This could be in there, thats what i mentioned to them. When is it going to happen. . If i knew that i would be rex rich. I think will happen in this administration, i would i would expect big tap tax cuts wont happen until the year after. 1986 whentax bill was we dropped the highest rate from 50 to 28 . We cut the corporate rate from 36 to 40 34 . Thats when we unleashed the growth in the economy. It may take some time with this administration but im inspecting it sooner rather than later. Why should i be patient as an investor, and wait for something that will take one or two years . You have no choice. All ofrs will pass for us. If you sell your stocks off and are impatient and take your games right now, someone else would get the real profits that you will not have. Ifongterm investor 1982 until 1980 it say the end of the clinton upinistration stocks are 750 in real terms. You are in for a. Of expansion very much like that. If not better. Makehold on, bull markets everyone very first part and i love bull markets. That s arguments theres lots of differences to the federal reserve, quantitive easing, and the Global Environment and how global we are now compared to the reagan administration. Let me ask you first about the fed normalizations. Hello that put a banner in the works if at all . In this economy in before stimulus that you just described . The feds policies over the last eight years have been very bad. They have held Interest Rates way too low which has restricted the supply of capital to the housing market. Investors do not want to invest when i have no return. Does not understand the supply side of the money market and investment market. Sooner that they left Interest Rates rise, the better off the economy will be. We have new sales from 1000 population at the its lowest years during the fed quantitative easing. , because of quantitative easing, not in spite of it. Soon as they get up the heck out off we wille better be as soon as they get out of the financial market. We should not have an activist fed. Do think the government will shut down . Know, the risk is not big. If it shuts down for todays the ruby so much commit commotion they will reopen quickly. We have been to this movie many times, it always has the same ending; they shut it down for a little bit and then pop, huge backlash so they open it up again. I hope they dont go through that peiord, but they might. These guys in congress are all into themselves and they hope they dont do it but you never know. Art lepper, formers chief economic adviser to president reagan and chairman of laughter investments come speaking earlier Bloomberg Markets. Julie check and a first word news with mark crumpton. Mark White House PressSecretary Sean Spicer says the United States is holding open the possibility of mortar strikes in syria. Daily press briefing, spicer told reporters that he cannot imagine a stable, peaceful syria, the president Bashar Alassad stone church. Spicer added that the u. S. Special envoy for syria is coming to washington. President trump says neil 49 euros Appeals Court from colorado was sworn in this morning. Ceremonies, the first took place privately in the justices Conference Room with chief justice john roberts, administering the oath. The ceremony took place at the white house. Oath was a minister by Justice Anthony kennedy from gorsuch once served as a law clerk. Foreign ministers from the group of seven industrialized nations met today in following last weeks chemical attack in syria and the u. S. Military response. The leaders are hoping to itssure russia to end support for syrian president Bashar Alassad speaking secretary of state Rex Tillerson said quote, we rededicate ourselves to hold into account any and all crimes against the anywhere in the world. In egypt, the president is ramping up the fight against terrorism after deadly bombings at two christian churches. At least 43 people were killed, the Islamic State claimed responsibility. President lcc declared a state of emergency. Also created a new antiterrorist movement was sweeping powers. Global news 24 hours a day power, the 2600 journalists and analysts in one 120 countries. Im mark crumpton, this is bloomberg, julie. Lets take a quick look at stocks trading. We have been talking about the earlier date. A rally somewhat somewhat. But talk about what the next catalyst might be to drive markets in one direction or the other. Michael running, chief , u. S. Ment strategist intermediary business. This is bloomberg. Julie this is Bloomberg Markets, im julie hyman. Renick. Im oliver investors chu of fridays mixed jobs data, a resin jim geopolitical risk and earning season. During his now chief investment state street which has 2. 4 million of assets under management. Lets talk about the general markets for there is pretty interesting things going on. When you look now and see these risks of bounding, things seem pretty quiet. Are we pentup, is this something that will blow . Is tradinge market very awkwardly, almost as awkward as my sons seventh grade spring dance. [laughter] its unbelievable. Oliver who is courting who . Michael and who is mixing across the aisle of the dance. Market has we are trades going on. One thing i find interesting is the temper tantrum cycle is finally over. From 2000 112016, every with of a fed break wait hike started with stocks trading off, bonds and Interest Rates trading higher, dollar strengthened and emergingmarket hiccup. Now we have three rate hikes and lost 15 month, the fed said last week will begin tapering our Balance Sheet and reducing the size of it, and stocks or near alltime highs. Interest rates are up marginally. Dollars come nowhere in two years preto emerging markets are doing just fine, think you very much. Julie is that reassuring or worrying . In other words, is the market looking at the risk associated with that, or is it pricing it in in a healthy way . Michael this is all based on the Global Growth trade. We will see some falls, the Global Growth will return in the u. S. , more broadly in the global economy. That is where the markets shrugged off Monetary Policy conditions, not only here but other experimental policies being slowly but surely backed away from. All interesting, its predicated on this idea that Global Growth will return. Three things im keeping an ins a small capital rich capital dynamic, small caps have not followed through this year. Julie i have a chart of that if you want to bring it up while we are talking. Russell 2000 relative performance to the s p 500. Michael its unusual that you do not see falls. Small caps did very well last year but we have not seen that this year. We believe in the Global Growth deregulation fiscal policy story , lower taxes, small cap should benefit. The other is the tenure curve which has been flattening. It is an indication that expectation for growth and Inflation Expectations are going sideways. Before it was steepening. The implication is financials. Something i keep an eye on is the price of oil which has rebounded a little bit because of geopolitical concerns but we should see oil stabilize, maybe even rise a little bit if Global Demand returns and Global Growth. Three things i would keep an eye on to see if we see that. Oliver lets talk about one specific point, banks. Financial companies in general. You have big ones in your portfolio that you manage. Youve also obviously been popular here, people have been looking at a posttrump trade as we get more expensive. What is going to happen with earnings expectations . Will followthrough on everything we have seen, or will this be a sector that continues to trade on speculation . Michael it will give way from trading on Interest Rates alone. Lets face it, that has been a lot of the mood in terms of financial expectations, higher Interest Rates. Willng followthrough now have better Global Growth, an increase, better in terms of fixed income currency commodity trading. Most of it should be better. If we do get that Global Growth and to see a steepening of the yield curve, that should go great for a profitability which should be positive. Forget, many bankers are having a sigh of relief on the promise of deregulation. I think earnings from banks and financials more broadly should be better. At stocks still trade 131415 times earning compared to a market that is trading closer to 20. Julie there is the promise of deregulation bright . [laughter] . Ut it will it materialize there was a report that President Trump is abandoning his original tax plan and has a different tax plan which of course is beyond financials. Theres talk about financials fiscally. Our when are we going to get it . Our bank stocks pricing and too much . Michael one of the things i think is interesting is that, during the postelection rally, everything was priced to perfection. I was skeptical that the Trump Administration will get all that through. Now the pendulum has swung the other way. Nothing will get done. I believe we will see some relief to regulation that will followthrough to mike financials. And timing of these things, its uncertain and probably longer than anyone had headed anticipated. I still think we will get tax reform, deregulation. I think that will help financials in particular and the markets more broadly. Oliver final question speaking of financials and earning expectations. Tech which expects 60 Earnings Growth in the First Quarter, financials behind 15 . Not a lot of room for error. Michael absolutely, stocks have come a long ways based on invitations, higher Interest Rates, and regulation. That said oliver, i think even with that growth expected, multiples on the stocks have not come up with much, which i think is interesting. The look at financials were broadly compared to markets, they still traded at discounts. You should factor in that Earnings Growth, not a bad idea. Oliver michael perrone, great to have you. The funds he managed up 22 in the last year. Fore it is time enough Bloomberg Business flash, you look at biggest business stories in the news. The builtin has turned down a proposal from billionaire paul singers elliott management, to overhaul its business. Elliott owns 4. 1 of the agency, it wants the company to spin off u. S. Oil assets valued at the 2 million. Chp says the cost of the proposals would outweigh the benefit. Extendedtail woes have to m a, mergers involving apparel shoes and Jewelry Companies dropped 12 over the past year. Deals that did close in the retail space having the smallest premiums since the 2000 it recession. Many site the growth of amazon and other Ecommerce Companies driving down mulch traffic. Fired airlines is under for a heavyhanded response, after a seated passenger refused to get off the flight. The airline called the police after the passenger refused to disembark the overbooked plane. Officers eventually dragged him toward the island off the plane. He was not accused of , was not a security threat. United over booked the flight and randomly selected the passenger to get off. That is your business flash update. Ahead, chipl stocks, semiconductors are on fire. What is fueling the raiders latest rally and will it last . Insight and analysis. This is bloomberg. Oliver this is Bloomberg Markets. Im oliver renick. Julie ken julie hyman. A rally that has exceeded every industry, the Philadelphia Semiconductor index, composed of 30 chip related companies up 48 since last april. An unprecedented flood the makeup gadgets like refrigerators to smartphones, has fueled that rally. Joining us now, ian king who covers the Semiconductor Sector for Bloomberg News and san francisco. Ian, what is interesting about are rally is that there some analysts who are still bowles, which is not the typical playbook for semiconductors. What are they saying is different . Ian thats exactly right. Theirrnings found argument is, it is most you can get that open, they are arguing that chips are getting into things that they have never been in before. Autos for example, airconditioning, you name it trade the socalled internet of things, there talking about a secular market expansion. That will boost that in make that p e ratio look not as promised. Oliver this is a direct growth purchase looking forward . Growth that can justify loss valuations, keep evaluations high . Thats exactly the bet that some people are making. Analysts who are saying, hold on, look at the growth rates. Not too bad in the first half of the year but where you we are worried about the second half. Investors we spoke to looking at new areas, new expansion. Take a look at the bloomberg, this is a chart we the stocks of the Philadelphia Semiconductor index. Its pricetoearnings ratio on top and white, that of the smp in blue, the yellow line the average over the past seven years or so of that evaluation. It is about that level. Monolithic, is not 30 stocks as we mentioned. There a big london mayor that arent there are big ones in there that arent doing as strong. Whats go through those and what that tells us. Amd last year stars were and couple of graphics makers, processor makers. Everybody loved them last year. Video get its card, to be fair they did show progress. This is a Company Coming back from the dead. Now people are saying actually, there is a lot of competition out there that might put them under pressure. They are doing ok, maybe not wanting those 34fivefold increases that we saw last year. Thats whats going on, what we are seeing downgrades and a few more opinions on the prospect. Julie ian king, thank you so much. Longtime coverage of this industry talk to us about valuations. Still had the commodities closed, the Trump Administration said to be considering executive orders that would call for review of unfair trading practices. This is bloomberg. Wax from bloomberg World Headquarters, this is bloomberg headquarters. Moderate he markets closing in new york, so lets take a look at oil up 1. 6 today. Ofded for the longest run games this year, up five sessions in a row. Nine of the past 10 sessions. Libyas biggest oilfield suffered another outage. Russia signaling it is considering output cuts beyond six months. Crude oil settling just above 53 a barrel. If you take a look at the soft commodity survey, the fda scheduled to release the progress weekly report today at work p. M. Eastern. Been pointed, 52 of which is in good or excellent condition. Storms do risk slowing down corn planting. Dry weather in the southeast will stress winter wheat this month. Beat futures are settling up a little more than 1 . As for precious metals, weve got a look at the bloomberg for this one. 766 in the bloomberg chart library. Position extremes have been eliminated. Positions,astic long that is in the white. Combined gold and silver opened interest to manage money net conditions are now near historic levels. Historic averages. That is the purple line. Theyve come back to where they were on an average basis. Lets move on to base metals. The possible dumping of commodities into the u. S. The u. S. Officials, the Trump Administration is considering an executive order that would call for review of whether Foreign Companies are selling deal and aluminum in the u. S. To undercut competition. Joining us is Shannon Pettypiece in d. C. Lets start with shannon to get the lowdown on the executive order here. Say exactly does it specifically . When could it be rolled out . Shannon everything is still very fluid at this time and in the discussion phases. We are more like weeks away then days away from having anything firm and concrete that the president will sign. The general thrust would be to direct the u. S. To investigate, to review trade practices, these socalled dumping violations taking place in commodities. What does dumping mean exactly . What are we talking about really . Another country is selling this to and aluminum at a lower price than what the market is typically offering. Julie how can they do that . People will buy it. I am thinking of a trash heap of aluminum. The only way to get a deal done is if they take a cut on the price . Both the aluminum and steal space in which there so much made that the steal has to go somewhere. The leftovers, where can we send this . Obviously, the steal companies had such a good year. They were successful on a plethora of trade cases. Many of them against china. Out thise came morning, one of the questions was, so what . Everyone in the steal industry in the aluminum industry had a pretty successful year. What more can they do . Nobody will say that we dont want this kind of attention. What are we going to see coming from the Trump Administration on this . Trades are being executed. Someone is saying that this is ok. Or are they putting them into the black market for commodities . That is an entirely different thing we can discuss. Your downstream makers that end up selling airplane blades and all this other stuff, they would say, we want the aluminum of the cheapest tries to make our products to sell it to our at a competitive price. Deeper, kind of dig in there is dumping going on from china or brazil, Something Like that. We did see an increase in domestic hotrolled coil. The price went up because we stopped so much dumping. If the debbie geo is working, if the system is already working, his or any kind of emergency to get this done right now . There was a lot of progress under the Obama Administration and we were moving in a direct to clamp down on these practices. And so, like all of these executive orders, to some extent, they are trying to show in a symbolic way that they are carrying through on their Campaign Promise to get americans a better deal on trade and make sure we are not being taken advantage of by other countries. Its much more symbolic than any big change in policy and rules. Theres only so much they can do as an executive order. The administration showing that toare taking this seriously pursue with every avenue we can. And of course, there is also the message it sends not only to industry in the u. S. But industry and government abroad. China. Ng any indication they talked when they met . Andrade was a big issue they didnt have clear thanthroughs other an agreement to keep talking. Market access, better access to financial markets. It was a relatively brief meeting the chinese had with the president. Things now are in the starting stages of that. Something else to watch on this front. Lets check the headlines now the bloomberg first word news with mark crumpton. Ark were following developing story, the police chief in san bernardino, california says four people have been shot in an elementarys whole classroom in what authorities believe was an apparent murder suicide. Four people are hospitalized including two students. That lawures report enforcement and fire crews from across the region are responding in the situation has been contained. We will bring you more developments as soon as we get them. Tillersonof state rex s mission to moscow just got a lot more complicated. Messagebring a tough following the u. S. Cruise missile attack on syria. Likely totillerson is get criticism from Russian Foreign minister sergey lavrov. The kremlin says there is no plan for Vladimir Putin to meet with secretary tillerson. In sweden, people are questioning the open immigration policy in the wake of the truck rampage that killed four. His request for a residence permit was turned down and allegedly went underground and eluded authorities. A second person has been arrested. By the year 2030, one quarter of the miles driven in the united dates could be in shared self driving electric cars. Thats according to a study from the boston consulting group. In large cities, people will find it easier to leave their personal vehicles and use robot taxis. Im mark crumpton. This is bloomberg. Julie thank you very much mark. Appreciated. News from whole foods sending the stock spiking. Jenna partners has built a 9 stake in the company and wanted to speed its turnaround or even can utter a sale. Consider a sale full foods has been languishing over the past year or so. The shares were up 13 but theres been a lot of concern about the pace of the company and the turnaround prospect. Glad it is a pretty good way to describe it. And a lot of volatility the past two years. Coming up, one money manager performance is often overlooked in the debate over passive versus active investing. Youll talk about stock returns. It will get nerdy but it will get useful. That. E not talking about this is bloomberg. Julie this is Bloomberg Markets. Oliver stockpicking, hopes are high. But the upward battle might be even steeper than expected. Aboute to rob arnott passive versus active investing be getting the nature of stock returns. And why the concept of positive been overlooked. Rob we looked at it in terms of what it means, in terms of if you can see the future. What would it imply in terms of the growth and value cycle. There is no size effect. Small stocks dont beat large stocks on average. Underperform. Cks onwhy do small stocks beat the one in 10 big home runs. That is part of the analysis. When i was looking at the paper published, it has been a topic revisited initially in the late 90s. It doesnt seem like a lot of active managers know about this idea. You essentially were examining and seeing the results of positive skewness. Why has that element of the conversation gone overlooked . Portfolios,s of rod investing inu are that is a smooth distribution. Instead of 10 stocks that are drawn from that distribution. And if you are buying 10 stocks, the chances of you getting that extreme outlier are much lower. I guess when you sort of talk to people, obviously, you are no stranger to the academic realm. In the debateing versus active investing. What, right now, do you see as being almost overlooked piece of the puzzle that people perhaps arent putting together right . One of the most, elements of the active versus passive debate is that there is a debate at all. Active managers collectively cant win. They cant. It doesnt mean finding a good active managers a complete waste of time. There is fantastic active Management Strategy out there. But think of it this way. This way, framed in pointing out that the market is capitalization weighted. The index funds are capitalization weighted. Pull them out of the portfolio and what do you have left . The same port polio. Its the same portfolio. So they cant win. So when they talk about this market is good for the active managers and that market is bad for the active managers, come on. They cant win collectively. I want to push on the idea of the stock tickers market. Goldman sachs said this would be an environment better for stock pickers. Bank of america echoed that sentiment with a said they see not only be back same but the environment improving for active management. Despitepite volatility, dispersion, you say that is bogus. If active managers collectively are winning, who is the loser on the other side of the trade . Funds cant be losing. They are matching the market. Oliver what about the idea that when youre in a low rate environment and you are in a highly etf environment now, that it is hard to get rewarded for the fundamental properties of the company that you own . The active picking the right stock not improve in this environment but the right stocks will gain in such an environment. Think it is not hard to beat the market. Hard for active managers collectively to win. And thats an important new wants. If you create strategies, performance chasers are legion. If not in active managers, certainly in their customers. Manager notorious for pouring money into strategy. Those performance chasers and the clients of the managers and, to a lesser extent, the managers themselves, they create wonderful opportunities for thaters and strategies take the other side of those trades. Batteredthis has been down. This has been pushed by the performance chasers, so let me sell it. The market by being a contrarian, that is real. The fact that they wont always win is what keeps the game going. It keeps the opportunity alive. Nover that was rob arnott, stranger to the realm of academic pontificating. We talked to him about an article coming out later this week. Very interesting stuff. You have breaking news . Speaking of stockpicking. Julie the wall street journal had reported that jenna partners had taken a stake in whole foods. The company is confirming that and saying the stake is a. 3 . They might be looking to look at options for 365, and have discussions about that brand. Is a kitchen sink of everything. Oliver people paying for food that may or may not be organic and whether or not you want to pay for all that. Julie although i dont i mean, in new york, the price differential is not as extreme. I want to take a look inside the bloomberg. Sales. King at samestore this goes back to 2011 and you can see pretty clearly that this is a percentage change in samestore sales. Downturn the company has been experiencing ever since the Fourth Quarter of 2015. Even though the stock has recovered over the last five years, it is down. Comparable sales are an issue, for sure. Oliver i guess that is the whole point of active management. We want to remind you of bloombergs tv on the terminal. A way to look at what is going on live throughout the day. Youve got the show in various channels of bloomberg. Hit thereaking news and point that we just went through. Get the entire interview and text from press conferences. You can watch all those on bloomberg at tv. There is a little inception of me right there. This is bloomberg. Oliver a critical spots compensation methods has pulled the albums from the streaming service. Lucas, you have been tracking these streaming service is pretty slanted seems like a pretty substantial loss as they try to bring a more highprofile artists. Who is more highprofile than jayz . Jayz is one of the best selling hiphop artist ever. Universal Music Group Just signed a new deal with spotify. A source of great acrimony. And over the weekend, his whole this appears from spotify and apple music and nobody is saying much of anything. Is there an ending . Theyre trying to get more artists involved and be a more advantageous situation. Is there any connection their . Jayz acquired the title, they had a splashy press conference. It was supposed to a war artist friendly service. Iss a little greater than it today. It is still a problem but a little bit less s. E. C. A couple years of growth in the business. But he has convinced a lot of partners to release their music exclusively to ring and more customers. He wouldnt be punishing apple which is a pay only service. Some of his music is still there. But you have to think that his ownership of title is at play here. Oliver where does this put spotify . It,her or not they intended they raised more albums. Basically seated just for spotify. It only matters if it inspires other people to do act. Therwise you havent seen artist. Covering for us in los angeles. Tells the just elite staff today that he got to personally involved when it came to a case over a whistleblower. Attempts tosful find the Anonymous Employee behind that. This is bloomberg. It is 3 p. M. In new york, 12 in san francisco, and 8 p. M. In london. Im oliver renick. Julie and im julie hyman. Welcome to Bloomberg Markets. Oliver were live in bloomberg World Headquarters in new york for the next hour. We will be covering stories at a san francisco, washington, and in london. These of the stories were covering. A bombshell at a bark ways. The ceo reprimand with a pay cut of trying to identify a whistleblower. We will discuss the fallout. Said the fed president central bank will reduce its Balance Sheet even if key growth and leaders indicators slowdown. We will hear from fed chair janet yellen in the next hour. In a milestone for tesla. It the company briefly eclipsed General Motors making the most valuable automaker in the u. S. And one hour away, lets get a check on markets with julie hyman. Julie stocks are hovering around the highs of the day. It is sort of a sideways motion we have been seeing for much of the last month. In terms of what is moving more in todays session, we have to look into the oil complex. We sustain a lot of the games we are seeing today. Crude oil prices of around 53 a barrel on supply constraints. Some of the other Oil Producers are higher. Have a decent amount of m a activity today. About the deal that has slowed, awaiting clear indications from the Trump Administration, but there is act committee. Not clear something will materialize. This is a generic drug maker, by the way. For 1. 6by at t billion. Swift transportation being bought by knight transportation. Its a 5 billion deal. Se,finally, not a deal, per but management revealing a 4 stake in the company and pushing for changes including for a potential spinoff of the energy business. All of that is pushing those shares higher as well. Theres also was going on with whole foods that weve been talking about over the last hour or so. And Jana Partners has revealed in a. 3 stake in whole foods. Many Different Things looking to potentially change all foods or have discussions about it including the 365 brand. Real estate, management, logistics, procurement, you name it. The shares are trading up 4 . It makes the gain in the last year about 12 . It has fallen over the past five years. Oliver . Oliver julie, thank you so much. Us turn to banks of highly anticipated firstquarter earnings. Another story today, barclays eeo facing a significant pay cut and a regulatory probe for trying to unmask an anonymous whistleblower. Joining us is the Senior Finance writer for numbered news. This is pretty wild stuff. What could happen here . That is pretty unusual regulators, not just the bank itself, but regulators go after a ceo. His team went after a whistleblower. The bank, barclays had just implemented better rules to protect was a blowers. It is unusual. But it doesnt look like hes going to use lose his job yet. It doesnt look good for them. Reading between the lines here looking at this story, the whistleblowing was about another withyee who had worked them in the past and had some sort of relationship with. Do we know anything more about that . He has seemingly gone out on such a limb for the colleague of his. Whistleblower was complaining about his close colleague and he saw it as a personable personal attack. He wanted to protect this other person he felt was unfairly being attacked. If the investigation turned out anything. Regardless of what the ceo thanks of the merits of the case, they are not supposed to try to uncover what it is. It is all the rules out there these days. Not anymore. You have to respect the whistleblowing. If nothing comes out of the investigation, thats fine. But it is not advertised publicly. The person doesnt have to be feeling vulnerable either. He did something wrong there. He shouldnt have. Are sort ofowers the lifeblood of the financial investigation unit. In new york, when you get in a cap, there is an additional line beyond assault if you do anything to a driver because they keep the machine going. That is what the whistleblower is essentially. Charge of leading the investigation . The u. K. Is looking more closely. It will come from there. And the Company Might be reprimanded for not doing enough. They took thehat pay cut. Get how the 10 cases. Im sure this happens all the time. 10 is a gem and we need that. It is crucial for regulators. Julie i will switch gears. Barclays is out with earnings later this month and we get banks later this week. Out with a note today saying it will be a bumpy ride for that first order earnings reporting season. She talks about slower loan growth, mortgage production. What is the general sentiment out there about this coming Bank Earnings . They kick it off before everyone else. For about a focused year now, almost. Nine to 12 months. The fed is slowly inching it up. Before the fed started raising intereste yield on rates are rising. Ok . What does that mean for banks. It is great for them and wonderful because they can actually increase the spread. They charge between loans and they pay on deposits. A bumpy road, because the timing isnt always perfect. How fast can you increase the rates on the loans you make versus how fast do you pay your depositors . According to the market rate. It is a tricky thing. If the money markets, for example, come in and try to take away deposits from them. On the other hand, typically loans are low returns. It is hard to tell. Theseusually say that profits will abate as Interest Rates rise. But until we get there, those couple of quarters, you know, you can see ups and downs depending on when the deposits change. Looking forward to bank customers, higher rates on positives. If there is competition there. We look ahead to those Bank Earnings later this week. Lets get a check of the headlines. Following a developing story. There has been a shooting at an Elementary School in san bernardino, california. Including two students were wounded in an apparent murder suicide. Law enforcement and fire crews from across the region are responding and that the situation has been contained. Judge neil gorsuch was sworn in today as 113th justice of the u. S. Supreme court. Senate exposedhe a bitter partisan divide that resulted in republicans changing the rules so that only a simple majority of yes votes was required for confirmation. To the trusted placed in me today. I will never forget that to whom much is given, much will be expected. And i promise you that i will do all my powers permit to be a faithful servant of the constitution and laws of this great nation. Dorset replaces the late Antonin Scalia whose seat was held open for over a year by senate republicans. Conservativesish are supporting a call to cap net migration at 50,000 once the country leaves the european union. It underscores the pressure of Prime Minister theresa may to satisfy the eurosceptic wing of her party. Have called for restrictions of working pieces and a fiveyear freeze on unskilled immigration. The u. S. Is making a show of force toward north korea, warships sent toward the peninsula. That northon warned korea has made significant investments in developing a Delivery System for nuclear weapons. Uns regime john should take heed of the attack on syria. If a country becomes a threat to others, there is likely to be a response. Global news powered by 2600 journalists and send over 120 countries. Im mark crumpton. Oliver coming up next, a bloomberg exclusive. What james told us about the jobs report and prospects for u. S. Economic growth. This is bloomberg. Julie this is Bloomberg Markets. Oliver it is time for the Bloomberg Business flash, a look at some of the biggest stories in the news right now. Wells fargo pulled back an additional 28 million from former ceo jon and canceled 47 million of Stock Options from the former executive that were among managers that failed to heed warnings of spreading sales abuses. In charge of employees opening accounts without customer permission. And pimco has become less bullish on the dollar. It also said to trim investments that it now calls expensive. Pimco says because of the a good time tois dial down on risk. Emerging asian bonds dropped last week, the biggest inflows and more than two years. Swift transportation and knight transportation have agreed to merge and an allstar deal valued at 5 billion. It will create one of the biggest longhaul carriers. Value of about 6 billion including 1. 1 billion of net that. The carriers will be combined at the Holding Company for transportation holdings. And that is your Bloomberg Business flash update. Chair janet yellen will answer questions today at the university of michigan. The st. Louis president spoke exclusively with bloomberg tv. He weighed in on the importance of Balance Sheet normalization and on fridays jobs report. My interpretation of the jobs report is that it was a bit weaker than expected based on the headline number. It is consistent with 2 growth. He also have week gdp tracking for the First Quarter. Can normalizing the Balance Sheet be a substitute for boosting the benchmark . One of the issues is that it is putting downward pressure on the medium and the longer end of the yield curve while the increases in the policy rate of putting upward pressure. It is kind of a twist operation. Im not quite sure there is any theory that says its the right thing to be doing. What you would like to do is allow the yield curve to adjust in a more natural way. One way to do that is to begin allowing some of the Balance Sheet to run off. A very important question. I couldnt help it. Im Kathleen Hays with daybreak asia. We have a weak jobs report. You dont think we need another rate hike. If jobs fall short and the fed doesnt hike is much as it is going to, how can you move ahead and start letting the Balance Sheet run off . Do you think the Balance Sheet you have to be well on the way to normalizing Interest Rates by raising them . This is going to be a fantastic policy. We think the policy rate doesnt have to be raised on that much from where it is today in order to keep inflation and unemployment about where they are today. There isnt that much normalization that needs to go on with respect to the policy rates. That is the st. Louis fed position on this. It leaves Balance Sheet normalization to occur. The reason you want dallas sheet normalization is that the longer like i was just saying the longer end of the yield curve, you wanted to adjust to the policy rate increases. Otherwise you have some sort of bastardizing and of the process in which you are raising the policy rate at the short end of the yield curve and somehow twisting the curve and keeping longer rates low. It wouldnt really be normalization if we did that. Oliver i want to dive back to the bloomberg terminal and call up 7515. The fed Balance Sheet 4. 5 trillion there. How much of an unwind you think would be appropriate to ovoid market volatility. That if andervous when this happens, it will be a lot of volatility out there. What, in your head, is something that is appropriate . James first of all, it is higher than anyone thinks it should be. If you want to create policy space for the future and have the option of doing quantitative easing in the future, stir getting the Balance Sheet down to a reasonable size today. Another aspect of this is that all you have to do is allow the end, andment policy to an you can gradually run off the Balance Sheet size over time. If you figure out what has been maturing when, it looks kind of lumpy. We can manage that and smooth that out in a way that it declines at a given rate. It is not a matter of doing something that would cause volatility in markets, it would be taken in stride by markets and i think we can get to a lower number than 4. 5 trillion with a reasonable policy. James bullard there. And coming up today, janet yellen what answer questions at the university of michigan. We will bring that to you live on Bloomberg Television and radio. It ahead is options insight. Todays trading involves british petroleum. Oil prices way on energy stocks. Will that continue . This is bloomberg. Julie this is Bloomberg Markets and it is time for options insight. Joining me today from the cboe is the chief Market Strategist at bullseye option. Alan, i am curious how the market looks to you right now. We have seen this sort of sideways trade over the last month or so. At the same time, we have oil up a little bit and earnings approaching. What do you make of all of it in terms of what we will see next . Have seen a bit of applause in the last few weeks. The market made an alltime high, so its been a bit of a time here even though the nasdaq did make the alltime highs last week. Markets catalyst to the upside. But what got my attention, we had a frantic friday. Is thursday. That should set the tone. Were already starting to see the shift of more options activity into single stock names. There are trading indexes altogether or you could be more aggressive. You have the risk when you have a single name. Vix really stagnate. Its been drifting higher. It cannot get above 13 and stay that way on a weekly basis. For me, its a key indicator the trend is still lower index and higher in stocks. Julie lets get you the trade of the day. Talking about Oil Prices Rising recently. Wer trade involves vp and could call it a conservative bullish strategy. Is that a proper way to term it . A very basic stock strategy. Oil wells make about 53 a barrel. It was down to 47 and people thought it was over. The bull market is still in tact. A push above 55 since crude oil to the high. And the measure move target objective. We see another short squeeze coming. Bp is down 5 compared to the s p up 5 . Is about value, reward to risk. Im looking at the 30 call. Its been trading between 32 36 for a year. We are trading at 35 so five dollars in the money. The breakeven is a quarterfor the january option. Julie i guess thats why they call a conservative bullish situation here. You would call it stock substitution strategy, right . Right. It ties up a lot less money than buying the shares it health. Put in. At half of what you pay. Negatives wheno it comes down to options trading. Bigger picture, looking for crude to make another burst of the upside in bp will benefit. Julie appreciate your time, alan, chief Market Strategist at bullseye option. Oliver good stuff. Still ahead, sitting down with mexicos Deputy Energy minister. A great interview coming up. Dont miss it. This is 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 take control of your retirement today mark welcome to bloomberg first word news. There has been a shooting in san bernardino, california. The police chief says four people including two students were wounded in an apparent murder suicide. Qe bc reports that lawenforcement and fire crews from across the region responded and that the situation has been contained. A senior u. S. Official says the United States has concluded that russia knew in advance about syrias chemical weapons attack last week. A russian operated drone flew over a hot little in syria as victims of the attack were rushing to get treatment. Hours after the drone left, a russianmade fighter jet on the hospital. They believe it was an attempt to cover up the usage of chemical weapons. Sevenn ministers from the industrialized nations are in italy for an emergent a meeting to discuss a unified response to the chemical attack in syria. Borisreign secretary johnson talks about the tougher case against syria and russia