Transcripts For BLOOMBERG Whatd You Miss 20171005

Carolina will vote against the next round of Hurricane Relief funds unless Congress Cuts spending to offset costs. It is unclear how many more members will agree but it could complicate the path for relief. Democrats immediately rejected the demand. The Islamic State has last one of its has lost one of its last stronghold in iraq. The fight against the terrorist group is now focused on a stretch of border with syria. Because honestly is desperately trying to hang on. Vladimir putin met with saudi arabias king salman. This is the first time that saudi leader has visited russia. Theyre working on an agreement to curb oil production. Global news 24 hours a day. Powered by more than 2,700 journalists and analysts in more than 120 countries. Crumpton, this is bloomberg. Julia live from bloomberg World Headquarters in new york, im julia chatterly. Scarlet i am scarlet fu. Joe and i am joe weisenthal. Is whatd you miss . The house adopting the budget resolution for 2018, but the unity may not hold as details of the framework come or clear. People are treading cautiously to avoid an immediate independence from spain, but that is not stopping them from apearing in top court with parliamentary session. The u. S. Commonwealth says it will run out of cash by the end of the month, adding another wrinkle to the complicated role of the u. S. Government in its debt crisis. Julia whatd you miss . Between spain and catalonia taking another turn. They have a parliamentary debate on monday. The Spanish Governments position remains firm. This is out of the question. The reasons are that first, it is illegal under the rule of law. The Spanish Government guarantees that the enforcement of the law is going to be perfectly granted in spain. Julia this is taking a tour on the countrys stocks. Lets dive into the terminal function. You can see the spanish stock market, the white line and the stoxx 600, the broader european line. You can see the relative underperformance we are seeing since maybe the middle of september. We have seen today is the bounceback in the spanish market. There doesnt seem to be a degree of inconsistency between leaders and the cattle on cat alon party. Joining us appear coy is peter coy. Is a belief that there was a unilateral declaration of independence and we are still waiting. Rights. They were saying 48 hours after a vote they would be ready to declare independence. I think they understood quickly that that would not be a good idea. They thought they could form some kind of accommodation and that is what we are seeing now. We may not even the that session coming out monday. There might only be some people meeting. There are divisions within the group. It was fine on sunday to get out there and expressed their support for something, but now it comes down to it, you have two sides. They need to have a lot of internal politicking. Brexit . Exactly right. One thing that was surprising if he pointed out in your article about how catalonia got to this point. A few months ago, it appeared the popularity with that a low at a low points. What happens between them when the separatists were on the outs and now when they have momentum . Look at theyou economics, that is what seems to have beeneemed coming down. Maybe it was because of the flame of the financial crisis. Now we realize is there was always a lot of sentiment their independence that would is being quelled completely by a strengthened economy. And then the Prime Minister of spain pushed matters and try to squelch it entirely. Joe by doing what specifically . It. R by banning in canada and the u. K. They had a referendum. Here they banned it and the voters said yes. There was last time an unofficial referendum they simply did not get the votes. We have to be cautious. Spanish governor said told people to stay at home. The relevant people who did what they were told and stayed at home. We do not know actually what the official stats are. They could be skewed. Peter that really does need to be said. Another thing that needs to be set is because this was an illegal referendum, it did not have any of the standard equipment, monitors and so on. We are taking the governments word for these unofficial numbers. That, therewe say was a miscalculation. He doubled down when he probably didnt need to. Peter let them vote and let us see what happens. Even if the boat had still come out with a majority, that wouldnt necessarily compelled stalonia to succeed eceed. You could also turn a blind eye and kind of let things happen. Julia you can. Was this about leverage . Peter yes. Right now, they have more leverage because of the expression of 2 million votes in favor of it. Scarlet f economics was not driving the quest for economics, would bedependence, driving this new need . Peter yes. They could say that you could go slow here. There would be an enormous costs to assume the National Debt possibly. The Spanish Government could stand in the way. We do not know if you will get into the European Union or the euro currency. All of those things militate against going ahead with a risky move. On the other hand, nationalism drives them to do it. They have their own language, culture, architecture, traditions, and history of off and on again independence. They do not want to be subjugated by spain. Julia i can only imagine what the Business Community here is saying because another problem is we do not know what will happen to eurozone membership if they were to seperate. How do we operate and give our investors are customers continuity when we do not know what currency we could be using future . Future . Peter i think what probably happened it the coalition is favoring separatism and includes businesses. You can imagine businesspeople are feeling a little uncomfortable right now and theyre probably trying to have some back room conversation. In a different direction can we steer this in a different direction . Joe people are looking at the broader risks and the next thing they should be watching to see whether the two parties, for more than two parties. But whether spain and the region can somehow find an offramp rather than continued escalation. Monday will be one thing. Whether the government goes ahead with the meeting of the assembly. Well we will be looking for is kind of maybe starting with back ussions and moving on is a more formal mediation of some kind. Start seeing that maybe you will see that we will start to behave like grownups here. It is like trying to save a marriage. Scarlet normal political protocol. Peter coy, thank you so much. Bloomberg businessweek pachulia on the that julia hosts weekends. Coming up, the future in the senate. In new york, this is bloomberg. Scarlet whatd you miss . The gop budget passed earlier today. I wanted to say i am very proud to have gotten the budget across the floor. We worked with 21 of my male colleagues to be able to get out of the community committee. We did have a budget that represented the vision of the house of representatives. Thatwe will be combining with the vision that comes out of the senate. We still do not have a definitive land from them yet plan from them yet. You do go to conference, what would you hold strong to and what other parts of the budget could you actually let be diluted or eliminated . I think from all the members who came to speak to us on the floor, it will there are concerned about the mandatory spending. Of course, we secured more money theour military to up dollars that were lost by the obama administration. Secondarily is the fact that there is mandatory spending and there that we know we cannot continue down the path that we are currently on. There will be a lot of discussion on whether they have that in their budget, how much they have, and how we might be able to combine the two. Of defense spending, there are reports that some people in the white house want even bigger amounts of money for defense. Has you feel about that kind of talk . Do you feel about that kind of talk . Between thegood job fiscal hawks and the hawks that want more money for the military. We were able to find a consensus this 625 million dollars. I think that was a good place for us to land. We will see what happens when we get over to the senate. When it comes to the tax reform plan, Chris Collins of new york says it looks like there will be some kind of compromise on state and local tax deduction. Will these states be accommodated . What will happen in that committee, i dont know at this point in time. I do know there are a number of states who feel strongly that there has to be some kind of maintenance within that fault plan and whether there is a to the amounte or that can be detected, i am not sure. It is difficult when you have a number of members, even in the republican caucus, come from those states. Those are all negotiations that have to take place in the conference committee. If i can just talk about a separate issue on hurricanes and the impact on the budget. There are some people in congress who think there should not be any bailout that does not have a corresponding cut. What is your personal view on whether you need offset . I think we can do a better job. This is a conversation i have had with members of my own committee and other members in the house. When these disasters come along, we want to make sure we have money set aside in the budget. State we call that a Rainy Day Funds. We need to put those dollars in the budget and anticipate. There are some years when you do not have disasters, but this happens to be a year where we are seeing a lot. Let us not forget what is happening in the northwest with a lot of fires. This is not a this is another disaster, not water by fire. I think we can do a better job to make sure we have money aside so we have a Rainy Day Fund for many things happened. Rico, there are some estimates that the price tag on rebuilding that territory near 100 billion. Where should that money come from . I cannot say at this point in time. Is aexists that discussion we need to dig into and say what do we do. At the end of the day we need to plan for these. We also need to have those in the states make some of those plans as well. I think we need to look athletic insurance and 6 look at Flood Insurance and say is Flood Insurance working. I will give a lot of credit to the chairman of the finance committee, who has this under his jurisdiction. I know they are considering that and it is something we need to be realistic about. If you are in a flood sound and your house is been rebuilt 16 times, maybe we need to think about what we do with back into things differently. Tennessee running for governor. How long will you stick around to see this budget through . I will stayy today where i am and will make that next decision in a little bit. Scarlet that is the congresswoman of the chair speaking earlier. Shares forpal paypal, the stocks coming out high. Abigail doolittle is tracking this. Is the digital cap i have used reluctantly. I am slow to it adapts to new technology. It was pretty easy to use and lots of americans are using it. Some say paypal will begin enmo. Izing than m v 64 of these users at say it is their preferred payment method, saying there is room for expansion and those who do use it like it. Expand says they might to millions of other proprietors so that could be very big. Joe when you use it, the you include a funny memo . [laughter] abigail i included nothing and at the last moment i realized it could be made public. I do not have it public and i dont have a picture. I am pretty boring. Joe it is a social network. It makes payments fund. Julia i like the idea of making payments fun. Expended y expanded their mastercard relationship today to different countries. This benefits mastercard to give it an option offered by paypal. Paypal receives financial incentives that were not sure of the amounts but it is a mutually beneficial relationship for both companies. Paypal outperformed both the set and mastercard in 2015. Julia , the september jobs report is on tap but the headline number may be over overshadowed. We have the charts you cannot miss next. Julia welcome back. It is time for the Bloomberg Business flash. The federal judge ruled against wells fargos request to have his bogus accounts case thrown out. Failed for the banks best interest. They made statements to the sec but they were dismissed. Have hit aors shares record every day this week. This is from an analyst that predicts a 13 billion business emerging from gm for self driving car and car sharing. This is a big turnaround for gm. The shares have been stuck in neutral. Mexican beers have been showing up at american holidays. They have been popular at summer months, including during the fourth of july. There are expected earnings that are higher. Going up as sales of wine and spirits slow. Newton locked a few will reporter last night after they asked a normal question. And that is your Bloomberg Business flash update. Scarlet whatd you miss . The impacts from the recent hurricanes on the market. Of consensus is for a gain 80,000 after a reported 156,000 gain in august. If you look at the chart, you can drive a truck through the september estimates. The green line is the highest, the red line is the lowest. The bottom panel shows the spread and that is where it gets interesting. The spread is pretty wide. This is not updated properly. It is now 190,000. Perhaps im looking at the wrong one. 198,000 is the whitest wi dest from 2010. This is not right. Joe the bottom line is no one knows what will happen tomorrow. [laughter] no one knows what is going to happen and it doesnt matter. Economists will stick to their story regardless. Joe exactly. Do you know what people are not into anymore . Gold coins. I remember during the crisis and hordene said to gold coins. Heres a chart. You see on the very right side we havent been this low since 2007. No one is buying these for the monetary apocalypse. Julia no one is selling. [laughter] joe the prices are going down. Scarlet they used to be on all the time, the commercials. Joe this is bad news for my political radio host. Their businesses struggling. Not a good transfer them. Scarlet the market close is next. Take a look at the major indexes with less than four minutes before the close. 500, it hass p broken out of its tight range. It is still not gaining by huge amounts but it is a triple digit increase for the dow. This is bloomberg. Julia u. S. Stocks closing in the green report eight straight day with the dollar strengthening and treasury slipping ahead of tomorrows jobs report. Am julia chatterley. Scarlet i am scarlet fu. Joe i am joe weisenthal. Welcome you to the closing bell coverage. Our market minute and stop me if you have her this, new record highs for u. S. Stocks. Joe eight days in a row, the longest streak since 2013. Remarkable move for the s p 500. Scarlet eight straight game for we are and dow talking about a record low for the vix. The dollar having it strongest day since january, not at its best level since july. As julia was saying, no sign of a risk aversion and more scope in the gains we see today that any previous seven days. Individual movers, speaking of record highs, netflix at a record high, raising the price of its most privately u. S. Service plan by 10 to help pay for all of its original programming. Constellation brands an alltime high after secondquarter eps and sales that Beat Estimates and increased its fullyear outlook. Seaworld entertainment off by almost 7 , analysts doubting the digital buyout or break a after people familiar with the situation said the company had been approached by possible suitors. Makingpharmaceuticals its trading debut, blistering gains of 77 , 30 per share. Joe Government Bond market, not a lot of action but higher yields across the board in the u. S. With twoyear yields up to 1. 49 and 10 year at 2. 35 . Tomorrows jobs report could be the next major thing that affects some of these macro market. There is only so much uncertainty, that is possible market would look for them but 10 year yields up to 2. 35 . Julia slightly higher yields daybreak the dollar and position unwinding going on in yen ahead of the numbers tomorrow. Sterling versus the dollar, eight one month low versus the dollar and three week low versus the yen and u. K. Auto sales disappointed. A quick look at dollar, the threemonth, trade deficit numbers, a deficit unexpectedly widened because dollar cad casing out. 11550. 29 highs, finally, commodities, oil with a bit of a bounce, holding back above 50 per barrel on west texas intermediate up 1. 5 . Gold sinking, not huge moves in gold but it grinds lower. Nicely over 1300 announced a couple of weeks ago and now 1270. Bit. Rate rising a little not historically good for gold, and copper futures with a very nice day. Often seen as an economic sensitive bellwether, gaining nearly 3 . Those are todays market minute. Scarlet stocks after the Fourth Quarter with a trump trade, fueled by tax reform, to go over the market moves, lets bring in the chief u. S. Equity strategist with bloomberg intelligence. The reflation trade has been low growth and low profitability and low yield stocks that are driving everything. What needs to happen to support this trend . They probably need to have further momentum behind tax reform. What you saw in september was a remarkable reversal of face. Higher quality, higher Growth Companies with low tax rates, generally outperformed for the vast majority of the year and we saw a big shift in september towards the opposite end of the spectrum. A lot of that is a consequence of tax, embedded in prices. We do high taxes versus low taxes company and low Tech Companies outperformed all year this year and the last time they are performed by as much as they did in september was the election month of november of last year. There is a clear process going on in the market to try to price tax reform sometime in the near future. We can hold onto this for a while. It can sustain for a wild but i would suggest that, if you get to the First Quarter and second court of next year and still have tax reform, you are subject to a vast reversal. Joe the company is doing well by the same ones that did well at the end of 2016 during the early novemberlate december time. They are Similar Companies but the one big difference is that the multinational compass on the index are still outperforming. That is a big difference. In november of 2016, a clear rotation to domestic oriented company, even in the s p 500. Trade,ss anxiety over because people may have expected donald trump to rip up a bunch of deals that we have not seen that yet and perhaps not as in the crosshairs. I think that is part of it and the dollar would have pointed to domestic stocks outperforming because it rallied in september. That is the anomaly, Multinational Companies have outperformed more in september and then on average even though the dollar rose. The other part of the story is that companies are probably and betting expectations for repatriation. These are the companies with the most cash overseas and likely to benefit the most, if you get a repatriation event and we see share buybacks. Julia a lot of optimism. Scarlet that goes to the idea of tax reform rather than tax cuts which is what the president has been stumping more. Less about tax reform overall. , we have titled our peace stocks want to have their cake and eat it too because we are not pricing in just a reduction in the tax rate but pricing in repatriation potential it. This was just a september reversal, just one month reversal. Do not get too excited about staying stocks are in aggregate really excited about pricing tax reform. There is evidence this is an issue. Julia what about seasonality for stocks as we enter the Fourth Quarter, cyclical names it is, the Fourth Quarter is historically the best time for stocks, on average over the last 4 en years seven years, a bought and that seasonality has improved over the last 25 years with the average about 4. 7 . Have to work against the uptrend going against best in the Fourth Quarter and october is historically the most volatile month and it should be an exciting month. Noticed that we do a scorecard and try to update it frequently and we updated it this week, it supports a pretty cyclical stance. The sectors that tend to fall to the top of the scorecard are cyclical in nature and for the first time this year, both tech and financials are near the top of the scorecard. It is not an eitheror situation going into the Fourth Quarter, it is also googles are pretty wellpositioned. Scarlet im glad to bring up the october curse, not a cursed by the fact that anything can go haywire because we are writing 12, 12traight months straight months of gains for the s p 500. For the incredible that we have begun this street and have now extended it when it felt like times that there was little to continue driving it. Are couple of things extended, this week we noted momentum on the s p 500 crossed a 14the 70 levels, rsi of day basis crossing over 70 has six starkly suggestive the market was well overbought and do for a consolidation. The last two times this happened the market moved sideways and did not necessarily pullback substantially. The areas most overbought are those trump trade like areas, the resurgent value in september which came out of nowhere is overbought. The industrial sector is the most overbought among sectors. There is evidence that may be optimism is getting a little bit too overblown. It is a shortterm indicator and nothing and the longerterm trends suggest it will be more than a modest correction or consolidation. Julia great to have you on come our chief u. S. Equities strategist for bloomberg intelligence. Coming up, all the height another the profits come ,nvestors divided over tesla crowning elon musk a good buy for someone. This is bloomberg. It is time for first word news. Police in las vegas say masters Stephen Paddock did not plan on killing himself following the deadly rampage, investigator searched to hotel room and say they found a note, they would not reveal the contents but say he was planning to escape. He killed himself when police stormed the room theater 58 People Killed and hundreds more were wounded. Democratic members of Congress Held a rally outside the capital today, the deadline for immigrants living in the country illegally to submit their application to stay in the u. S. Under the deferred action for childhood arrivals program. Nearly 800,000 immigrants who came into the u. S. As children have until the end of the day to renew their immigration status or face deportation. Illinois democratic congressman Luis Gutierrez says daca supporters will win their legal fight. We have to make sure everybody understands this is a top priority for our Progressive Movement in the United States of america. We came after the muslims and reproductive rights of our women and planned parenthood. We came after our Transgender Community to. President trump rescinded the program last month fulfilling a Campaign Progress but Gave Congress six months to draft a solution. Hospitals are the latest casualties in the fighting in syria, the red cross says at least 10 medical facilities have been hit over the past 10 days after fighting intensified. Hundreds of thousands of people cut off from healthcare services. The red cross says it is the worst violence since Government Forces took back aleppo late last year. Two astronauts aboard the International Space station took a stroll today, they ventured outside for a spacewalk to install a new hand on the station robot arm. The eight foot armed militant over the summer and it needed repair before a supply ship is set to arrive in november. Tests show the operation was a success. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am Mark Crumpton. This is bloomberg. Julia tesla crowd a winner. A report today giving elon musk s company a buy rating and 500 target price. Is our Senior Analyst a Senior Analyst been great to have you. Bowl bull. R why, why are you so bullish here . You have to look at the longterm opportunity. We have a secular shift in the automobile industry. Towards electric vehicles. Less than 10 2025, years, we think there will be 10 million to 15 million electric vehicles on the road and tesla today has 35 share in the luxury segment of the u. S. Car market. They are introducing a mainstream car called the model 3, which will target a subsegment that is 10 times the size of the luxury market. I the early part of the next decade, they could be shipping north of one million cars per year. That translates to 60 billion in revenue in what we think could be a market capitalization north of 100 billion. Julia if they get around production issues. They have nearterm production issues. Scarlet looking for 500 per. Hare for tesla and 12 months right now, the consensus among analysts have a 12 month target of 340 on average and the stock is trading at about 355. The numbers of buys and holds or even at 10 of these. You are way above consensus. Joe what i find interesting about your report, some say tesla will be in trouble because legacy Car Companies are Getting Better at electric cars. You are saying that tesla has an advantage like Intel Advantage in the early day of computers, they have established an advantage on cost per mile. I think is the metric you look at. That the other players cannot catch up. The same way intel chips dominated all of computing for several decades. Technologyt teslas will do and why cannot the competitors catch up . They can but it is a question of when. To your earlier point, have analysts that cover tesla are automotive and we come from a different perspective. I have spent my career covering the Technology Industry and that is my point of view and looking at tesla. To answer your question, we see a threeyear lead in terms of range. The biggest concern that buyers of electric vehicles have is how many miles can i go on a single charge . Tesla model 3 can give you up to 315 miles per charge, well in a system of the competition. That will only get better, by 2020, the range could be approaching 400 miles. That is a big differentiator for them. Scarlet you have tesla bears, including jim chanos. Listen to what he had to say. They were supposed to be making money now and supposed to be making money by 2020. I am guessing by 2019 we will hear 2025, they are structurally unprofitable and its capital structure is way too leveraged. Scarlet leverage is where i want to pick up because it has made castles plenty of types and will have to do that again, it keeps moving the goalposts, doesnt that hurt confidence after a while . Good sound similar to amazon 10 or kicking years ago, you have a company that could be profitable today but they would be subscale for longer. To produce and ship as many cars as possible. To do that, they will have to invest as much as they can to get to one million cars sold or 2 million cars sold, whatever the number is. I think there is a tremendous amount of leverage in the model, meaning, when they get to a certain scale, profits will come. That is not the strategy today and i think the market realizes it, seeing the stock at 60 year to date. Julia we have these announcements and General Motors yesterday saying they are going to be out producing these guys very quickly in terms of electric vehicles. What you make of that . They are coming and will make strong efforts. Second question, you are bullish call, what feedback have you had for your report . The first question, i think talk is cheap. You are saying a bunch of announcements about new cars. Capex and where is the capacity . We have looked at every model that will come out and target or go against the model 3. You can count the number of vehicles on one hand between now and 2020. Tesla spent three years living of their factory and close to 5 billion. You do not see that investment yet today. They have a sizable lead. In terms of the feedback, people love these stocks and hate the stock. I think the 500 price target, which stands out as the highest in the street elicited quite a reaction from some investors. Julia what kind of reaction, negative . Mostly negative, that we have to testify at the bankruptcy hearing. Stuff like that. People are very emotional about this company and the prospects. Scarlet a great way to put it. Thank you. Breaking news out of costco, earnings per share of 2. 08, beating the consensus by six pennies and revenue 41 . 36 million. When you look at comparable sales. This is the measure folks look at when looking at retailers, including gas and effects, both better than what analysts had been looking for an membership fees, 943 million in the quarter, the one thing consistent for costco because it continued to get the current revenues thing from membership fees, even as they keep margin flow to give customers the best value. From new york, this is bloomberg. Julia what a week it has been for stocks with three major averages putting in record highs each day so far. Our next guest think the bullish action may not last. Lets bring in abigail doolittle. Abigail the senior equity trader who is also a cmt. Happy to have you. Not just for talents around the charts by your view is very refreshing. Everybody i am aware of on the street is bullish but you think the biased maybe to the downside. Can you show us in your first chart why . Thank you for having me. We have had a huge run and if you look at the base back from 1995, 3037 your chart, we have reached a price adjusted in the 25002600 range where we could be seeing some profit taking. I am thinking it may be a time to get a little bit more defensive and maybe higher income type strategies. Maybe a shift to international. Abigail this has the idea that the sideway range between 1995 and 2009, that is a measured move to the upside now that is fulfilled, perhaps time that profittaking. C that supported by that mac . A little bit of a weakening momentum signature and in the last push higher, weakening momentum. Something that raises a little bit of a red flag. , we will have to see if the trend can continue higher , or if we see cracks in the market. Abigail perhaps they could be a bias down towards 2000. Wonder if it will happen this year. Partly reason they have been unstoppable is growth, you think value could be another place to look at now. This is another solid chart that is interesting. This is a ratio chart. This is showing the outperformance of growth overvalued over the past year. This ratio started to top out at the end of the summer. It went in favor of value a little bit recently. To see a correction in the market, value could be the place to be and may actually play a little bit of a comeback. Abigail i remember that happening at the end of 20070 before the big event of 2008. Timing is everything. I understand there is something you use as an equity trader day today on some of the nearterm tells. Talk to about that talk to us about this taken the extra tick index chart . This is showing the last uptick in downtick for the new york stock exchange. In early september, a high rating, about 1000 on the tick index and we have not seen a reading about 1000 in the past one month and the high reading means a lot of by programs that fit the market. High rating indicates that a lot of money has flown into the market recently. If we start to see high tick readings into the higher price objectives, that may be a signal the market is starting to get a little toppy. Choppy. Abigail same true for the bottom by your bias for near and medium term may be more bearish and towards value strikes stocks . That would be it. Bigail back to you b julia next, the bump in manhattan home retail, the situation may not be what you think. From new york, this is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. I am Mark Crumpton and it is time for first word news. The Washington Post reports President Trump plans to certify the Iran Nuclear Deal next week, they certify the president says the obama era pact is not in the u. S. Interest. It would pass the issue to congress for a 60 day review. The White House Press secretary today said the president had not made a decision that had made a decision on the announcement and would say it soon. The house of representatives has a 4. 1 trillion budget plan that includes the cuts to social programs and Government Agency budgets. It passed along party lines but House Republicans had no intention of imposing the cuts and instead it all sets the stage for the gop plan to overhaul the tax code later this year. U. S. Attorney general Jeff Sessions is revising a bush era crimefighting strategy that emphasizes gun prosecutions. Project safe neighborhoods is part of his previously announced the battle against street violence. The Program Sends certain gun crimes to federal court where they carry longer prison terms. It also crackdown on gangs that terrorized communities. Vice president mike pence presided over the first meeting of the revived National States council today, laying out plans for americas return to space. We will return american astronauts to the moon, not only to leave behind footprints and flax but to build the foundation we need to send americans to mars and the on. The Vice President said the u. S. Is falling behind in the space race and that the program is suffering from what he calls apathy and neglect. The United Nations is ending a 13 Year Peacekeeping Mission in haiti as of october 15. The Mission Began when a violent rebellion swept the country and forced thenpresident and to exile. A much smaller peacekeeping mission of about 1300 International Civilian Police officers will begin immediately. According to people familiar with the matter, concerns about the stability of the police and judicial systems still remain. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am Mark Crumpton. This is bloomberg. A recap of the Market Action today, the eighth straight day of gains for the s p 500. The dow adding 113. Scope of the gains have increased as we have seen this run, or the s p the longest week of gains since 2013 and jobless claims and factory orders the estimates and the jobs report tomorrow. A quick stock we want to mention in afterhours trading is yum china after initial Cash Dividend of . 10 a share and increasing buyback authorization to 550 million from 300 million, their shares getting a gain of 2. 5 after thirdquarter that even after thirdquarter earnings per share missed estimates. Manhattan real estate saw a rise in real estate last quarter but not the whole story, Jonathan Miller is here to illuminate us. Like so many things in our society today, bifurcated. One of the characteristics of this market, people look at it through the eyes of 100 million apartments. Only about 13 of the market is new development that superluxury product. In the resale market, we are seeing nationally, record prices. Resale median price in new york city manhattan was 895,000. We are also seeing, even in the coop market, which is a different type of housing sector , most americans from the year market, 75 of our that saw a record price. Supply. Aving tight the product with tight supply, we are seeing record prices. Julia you are seeing Record Number of resales but to get the sales across the finish line, you are seeing some elements of discounting along average, discounting 6. 8 . Break it down in terms of the different segments of the market, who is more reflective over the price they are asking . A lot more reflective behavior in the highend of the market. Theto be cavalier about numbers but when we are talking like north of 5 million come in manhattan, which is about 10 of the market. We are seeing in that market, a sharp decline in supply from bloated levels to excessive levels because owners are letting their listings expire because they have been sitting on the market for a long time. The characteristic here in this market across all price points is that buyers are not budging. When there is more discounting, it means the settlers are traveling father to meet the buyers. Farther to meet the buyers. Joe is this normal cyclical stuff . People get overoptimistic and bill to much, then pull back, or is there something about this that is different than prior cycles . The answer is both. The reason is, yes, we have times where the market gets overpriced and we see it fly back. Slide back. Towards the end of the financial crisis, we saw this aspirational pricing component i like to describe where there was incredibly irrational behavior that skew the price higher where sellers were simply picking numbers that had no basis of reality. There was incredible optimism about pricing not supported by economic. Joe one of the stories around the world and major Real Estate Market is the changing impact of chinese money, much of it capital, people trying to hold an asset outside the country, now there are stories of still people trying to buy in the u. S. But maybe going to smaller cities with lower down payments. Is that having an impact, what part of the markets would you see that in fact . That impact . Transaction at one price point is cash and that is indecent to Foreign Investment in a big way. Ears, peakl boom y high and was 2014, the dollar as it got stronger, we saw currency play fadeaway. There is still a significant amount of activity in foreign buyers and the initial 2014 era, we were hyperventilating about the participation of foreign buyers. Still a big part but not the dominant player in the market. Julia go to london with the sterling got hammered. What about missed prices . Talking about this idea of a great degree of discounting and a reality check for some putting their places on the market, what percentage of a transaction is still above the list price and how is that shifting . Contract or sales activity, roughly in manhattan, 14 percent, 50 of the transactions 14 , 15 still sell above the asking price. Price, thate up in phenomenon sharply contracts. It is 5 or 6 . As you move lower, as much as , how muchmanhattan over the list price, what proportion of the transition on the lower end . Entrylevel market below 700,000 or 800,000, that is , youne bedroom or studio are looking at expecting to pay 3 , 4 above what the asked is on average. Scarlet how millennials hate the suburbs and want to settle down in the city, guess what, they are getting older and having kids in need to go to Public School and they are moot making the move towards the suburbs. How is that shaking up the markets in westchester, . Since mid2015, we are seeing a surge of demand hitting the suburbs and creating multidecade sales highs across the suburban markets. Only in the entry and middle market. The wealthy tend to be oriented towards the city. You are seeing the millennial generation and anybody who cant afford to trade up in manhattan looking forward to the suburb markets and favoring closer in locations. On top of it, in suburban markets, new urbanism type behavior in the city, the walk ability aspect, living near the train station. That is in full force. Scarlet thank you so much. Lets recap you breaking news cashyum china, i initial dividend of 10 cents a share, increasing its buyback to 550 million to 390 and has reported a ceo succession plan, so we watched will be ceo. Joe we want will be ceo joey watt will be ceo. They are on track for a target of reading 550600 new stores in the year. There has been a turnaround in the share price in afterhours trading. This is bloomberg. Joe the tech boom is far from its peak, at least in the Semiconductor Industry with global chipmaker sales jumping to 35 billion in august, the fastest pace in 2010. Lets bring in our Senior Analyst for bloomberg intelligence. We talk about web consumer, tech stocks, how well they are doing but a lot of chip stocks have been on a tear, midi hitting alltime highs. Many hitting alltime highs. Semiconductors are the Building Blocks of the new technology revolution. These are the industrial equivalent of or the foundation of the next generation of technology that will propel productivity in this country and globally. Both across the consumer spectrum and industrial and manufacturing spectrum, and the enterprise, you are seeing substantial Building Block enhancements geared and chipmakers are propelling that. You have manufacturing improvements that makes chips smaller and cheaper. This is an industry where people figured out, if i make stuff smaller and cheaper, people will buy more of it and that will drive the economics of the industry. Joe a fascinating story i think ,ast week about bill joy cofounder of Sun Microsystems and now in a hedge fund who made a very big bullish call with Micron Technology about a quarter of the fund now related to the stock. What was interesting is he said the typical, historical supplydemand cycle for dram is not going to reassert itself for a wild and supply cannot catch up with the amount of demand. Why is that . One of the things that has happened is macron nicely dram and secondarily that is processing memory, stuff that does not retain its information. Fter priority cycle to 65 of its sales are from dram memory and another third comes from nan memory which is storage for cell phones and photographs. Generally, we agree come supplydemand out of whack and it will remain that way through most of 2018. That said, we are not unwilling to look through the history of supplydemand imbalances in memory particularly. It has been these salmon in dram and ram over the last few years these are famine in dram and ram over the years. Irrational competitor over sublimely market. Joe something structurally that makes it difficult for new suppliers . You have much more rational players in the market. Fewer players in the market. They concentrated supply market and concentrated consumption. For a host of reasons, it points to more rationality in the industry and supply being less than demand. That said, all it takes is one Large Supplier being highly irrational for a short time that could throw things out of work. Whack. To crush prices but we are not thinking that will happen. More positive than most, even in ram through 2018. Joe lets talk about the secular supply demand boom happening already. It is intuitive to say our cars will have way more chips in the future, particularly as they go autonomous, what is how much more demand are we talking about 5, 10 years out for this industry overall . This is an industry that grows low single digit year on year from an annual revenue perspective. You have three distinct camps. Memory logic, semiconductors and memory is predominantly commodities, supply driven and a supply shortage right now propelling prices. Analog semiconductors, industrials, cars, sort of a multitude of different industries, that is propelling content increasing. Logic is driving ai, and the Data Center Enhancement you see from amazon and google and facebook. Across all three of these Building Blocks, you have foundational improvements that is going to drive sales growth higher than it has been. Watch. Scinating story to a Senior Analyst for bloomberg intelligence. Julia President Trump rattling the bond market after speculating he may wideout puerto rican debt, how does this and impact investors and their bottom line and how should puerto rico recover from this crisis . From new york, this is bloomberg. Scarlet a slight recovery in puerto rican bonds after a tumble to record lows yesterday. President trump rattled investors after marking that he may wipe out the territory 74 billion debt. How does this play out . Joined by the cofounder of Matlin Patterson asset management. Thank you for joining us. Thatould make the point youre no longer in charge of any kind of daytoday activity at Mount Patterson which but we wanted to get your perspective on how a situation like puerto rico unfolds. Based on what you have seen in the past, where are we in this cycle of figuring out where it goes next . Except for Hurricane Maria and Donald Trumps comments we are far down the line towards the solution. The first part of your question, no great trauma like enron or worldcom or major oil and gas bankruptcies, not happen overnight or are caused overnight. In this case, with a u. S. Government guarantee that is that is why, underinformed people bought too much of the debt. It looked like it had a u. S. Government guarantee. As things got wobbly at a key people brought out a calculator, they figured out this nebraska in proportioniny to the 72 billion of debt and they could not afford it and people woke up and started to run. This things stumbled out of two things, too much of a parent arm , the u. S. Government making the island appeared to be a better credit than it was in people not paying attention and waking up too late. That is the spiral that causes it and you get a run on the mutual funds that is catastrophic. Julia what you mean by quasigovernment guarantee, was there a backstop . I am not a lawyer but they were sold on the premise that there was. Julia implicit . Yes, and many of the bondholders bought them on the island on the premise that they had some form of backing. The back end of your question was how else does this become disrupted and ugly and why doesnt it get sorted out quickly and rationally . Since 1929 1933, there has not been a state like bankruptcy, 485 years. For 485 years. We need a change for 85 years. Our discretion group was investing in Distressed Group was investing in puerto rico and it took the u. S. Government two years to three years to get the right statute passed to enable the bankruptcy to proceed like you and the two go to bankruptcy. Mechanism touch get to bankruptcy. Julia trying to solve this and backandforth with creditors and the puerto rican officials. Movies is estimating 95 billion worth of damages as a result of Hurricane Maria. On top of the debt they already have. Does that throw out any form of negotiation already has happened . Deep question and congregated answers. First, puerto rico does not have one type of debt. Not one kind of debt. We talked generically, 72 billion of debt. Debtare different kinds of , not all of which will be resolved using the same pencil and eraser. Maria eventno happens to a corporate bankruptcy. There are lots of things that go in resolving a corporate bankruptcy and towards consensus, generally where puerto rico is coming to. Getting closer to a general consensus of the different kinds of debt. General obligations down to the electric commissions. A different solution. When maria hits, it has nothing to do with credit, it has to do with human trauma and america has the stafford act to resolve that, not the bankruptcy act. The stafford act governs how america grants and the numbers today are between 20 billion and 39 likely to be the demand on america 30 billion likely to be the demand on america to repair, not a debt instrument that is owed. Aid, a nonretail aid. Repaid aid. Process, theem to u. S. Government fixed that last year and filed this year, puerto rico under title iii of the present and moving forward very well. The president makes a noninformed statement about bankruptcy. You would think he would know more about bankruptcy, given his past and the statement is irrelevant and has nothing to do with one is a bankruptcy and another is an aid and no president or state governor can eradicate debt unilaterally. Scarlet the chairman and coceo of Matlin Patterson cofounder i should say, thank you. Joe coming up, what you need to know about americas trading day. This is bloomberg. Scarlet u. S. Stocks goes in a record high for the s p ive hundred the eighth straight day of gain. Julia job data gains and gary cohn joins me on daybreak at 9 30. Joe i will be looking for the nobel prize committee, announcing its recipient for the Nobel Peace Prize at 5 00 eastern. Scarlet i am watching hurricane nate, the new orleans mayor has called a state of emergency and this is the projected path. We will be watching you are watching bloomberg technology. Reportsington post President Trump plans on decertifying the iran deal next week or yard back at past the issue to congress for a 60 day review. Police in las vegas say mass shooter Stephen Paddock did not plan on killing himself wallowing his deadly rampage. Investigators following his deadly rampage. 58 people were killed and hundreds were wounded. The nra says the bump stock should be subject to additional regulations. The nra says officials should review whether the devices comply with federal law. The district of columbia decided not to appeal a ruling regarding their gun laws. That was ruled unconstitutional. Sessions isy jeff creating a crimefighting st