Pick up led light bulbs. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Julia live from bloomberg World Headquarters in new york, im julia chatterley. Scarlet im scarlet fu. Joe im joe weisenthal. Equity is little changed in the dollar adds to its losses. Joe the question is, whatd you miss . Borish, we have peter the quite group chief strategist the quad group chief strategist joining us. Murkowskiator lisa has agreed to kill the obamacare individual mandate. What does that do enough to pass the measure . Issue guaranteed yes vote . And retailers pull out all the stops in an effort to survive. Friday will be a make or break day for struggling brick and mortar chains. We have breaking news. Broadcom is said to be considering a higher bid for qualcomm, according to reuters. This is just days after qualcomm rival broadcoms takeover bid. Make thee deal could Worlds Largest chipmaker. The original bid was valued at 105 billion. We have been talking this week about whether qualcomm investors would accept something around 70, perhaps pushing the 80 share price. Qualcommsroubles. Facing right now any further headlines on that, we will flush them out and bring them to you. Scarlet qualcomm shares are getting a bit of a pop, currently up by about 1. 6 . Trading at 67. 70. Whatd you miss . A quite trading day ahead of the pasting, but in years, the markets have hit new highs on a regular basis. Here to break things down is peter borish, chief strategist for the quad group. Peter a year is a very long time. If we just looked back at this year, if we thought the equity markets would be doing as much as it has done, with little volatility. The big thing for next year is unlikely, more the same. It is likely to be slightly different. There are a whole host of reasons. Scarlet such as . Peter we dont see the underlying aggregate demand continuing to increase. We are seeing this in the yield curve. And i really enjoy the fact that when everybody doesnt like the story, they go, they yield curve is getting flatter, is the flattest it has been in a decade. It cant be the bond market telling us there is a some problems, it has to be some technical things to do with the fact that people have to buy shortterm. There is always a great excuse to want to be optimistic. As we have to step back, analysts and traders, and listen to the message of the market. It doesnt mean, and i say this every time, there are no. Echnical indications yet when a market is making new highs every day, the trend is your friend. But you always have to be mindful of potential inflection points. Joe to be fair to people who curve, in thethe late 90s it was a significantly flatter curve than what we have today. It got to four basis points, and and in the next year and a half were some of the most incredible years for risk assets that we have ever seen. If there is something out there that is giving the bond market cause for alarm, or if there is some signal, what would it be . Ther lets go back to 199899 year, and say, lets go back and dismiss it. You go and say, yes, we are going to be so smart we will miss the whole 20002003 issue. I think the majority of your guests here will talk about, hey, lets hold for longerterm, a fiveyear or 10 year time horizon. Its not really good time to be buying for a 10 year time , because mainly it runs into 2008. Ago, the fedars started hiking, the 10 year was up to 20. Your we are, three years later, the 10 years at 230 and they have continued tight. There is a new chairperson coming in. We look historically, generally, when a new chairperson comes in the risks some big pickup in volatility. One can go back to the replacement of miller, greenspan replacing volcker, and bernardi replacing greenspan. Thelet what might be trigger for the trigger for that volatility when jay powell is confirmed and takes the reins at the fed. What could he say that would trigger that shift . Have the trigger is you taken this smaller, tightening course at the same time were government fiscal policy is actually being contractionary. We have a government that needs to be funded by christmas, that we havent even discussed yet. Looks at this tax policy, which looks like an entire mishmash that is being run through. Im not so sure it is going to happen. And so, there is a lot of uncertainty there. So youre tightening, we dont know per se, if you look at , the leveraged loans are historical high, if you look at the debt to gdp, so maybe doesnt take that big of a marginal move to cause a significant increase in risk read that is the whole thing with a Risk Management. Our job is to try to be a little bit in front of it. It doesnt do you any good to say, after the fact, o, it was obvious. Go to the asset classes, then. This could be a potential flashpoint the fact that spreads got too tight. You mentioned leveraged loans. Where are the flashpoints . Peter i get people to look at the commodity indices and you want to talk about john deere and caterpillar in these other companies and you look at commodity prices, they have been stressed. How are those Companies Going to continue to expand . So that is another potential spread of leverage. You also look at china, its industrial commodities, iron or. Remember, prices are made at the margin. So for this to continue we have to figure out where is the marginal demand coming from . The 3 growth that we have had is not that abnormal. Abnormal. There was a quarters of 3 growth under the Obama Administration eight quarters of 3 growth under the Obama Administration. And i get that 3. 1 sounds better than three. You have to look at the numbers as objectively as possible. Borish iseter sticking with us. Still sticking with its timetable for rate hikes next year. Well talk about that. This is bloomberg. Julia whatd you miss . Showal reserve minutes members are concerned about inflation. Here to talk about it is peter strategist of the quad group. Inflationsts think could remain lower for longer than they initially believed. What is it about inflation that andant get to 2 , reflation seems to be in the backdrop. Have thats one thing we been on target on, Inflation Expectations. And it has no connection whatsoever to the equity market. One has to be mindful of that divorce. But i love the language. It can stay longer than expected. They had that line in their in what, 2009 . And the same people that had been complaining about it and saying we are going to have more inflation, have been saying the same thing. What worries me now is that now they are in a position of policy, so the potential for a policy era with this change of leadership becomes much larger, in our opinion. What are the underlying factors . Aggregate demand. Rapid technology change. And one has to realize the Technology Works to the benefit you getsides, supply more, more efficiently but you use it more efficiently. That puts a lot of downward pressure on prices, which is why you are seeing the m a activity, the broadcomqualcomm, the whole motion. Moreed to drive efficiencies. We have to reduce redundancies, particularly on the overhead side because aggregate demand isnt increasing and prices are rising fast enough to make up for it. Joe when you hear central bankers talk about an inflation mystery, is that this service . Is there sort of an answer and it has to do with technology and structural change in this incessant need to always call it a mystery, sort of missing a huge thing . listen, thats my opinion. Im not a central banker. The otherve all of assorted pressures associated with being a central banker. But its a mystery if you are saying, hey, we have been incredibly eased, weve had very, very low Interest Rates, and varied terminology for an an extended. Period of time, which is supposed to reduce inflation, but it isnt. East, thee middle equity markets there. There are potshots all around the world, but they are all inflationary. Joe maybe the mysteries that no one is changed their model despite countervailing data. Julia we have to make a decision at some point about whether the game is completely changed. We talk about it in many ways about the stimulus that has been added. Peter thats what worries me. Stimulus at the equity markets saw high. We havent seen any inflation. If there is some turnaround, whether it is voluntary, uncertainty, the government shuts down, fiscal policy is than we think, those are where all the risks are relative to inflationary expectations. They are lower because we have gone this will stretch of we havent been able to do it. If some he doesnt something and tries and tries and tries and tries, and can succeed, im probably not going to give them more money. To get back what you were saying about these first and second order impact as the result of technology on prices, on wages, whatever it is, because you actually have that accelerating down with pressure. But we are not encapsulating right now, we are not making adjustments for intensive supply and demand. Argues for a continuation of stimulus, based on what we are seeing come through in the numbers. What does it make you think when you see janet allen saying, i can explain the past three years of inflation, but i cant explain to 17. Its a mystery. And we start to see concerns in the daytoday. You had Inflation Expectations dipping as well, and now the market is pricing one and a half, and a hike next year. Peter chairperson yellen, which he leaves and writes her book, she will explain the mystery of 2017. Best at that. After something happens, explaining why happens. Julia hindsight is perfect. Lookingforward question. But seriously, to me, one of the issues of the whole tax code and wages and inflation is, if you want to use more of something, i , if you want to use more something, you need to make a cheaper than something else. If you want more labor you need to make a cheaper, relative to capital. Every single one of these policies are making capital cheaper, relative to labor, so it continues the substitution of capital and robots, to labor. Scarlet well said. Peter borish is sticking with us and will get your take on game comments on a competitive tax system. From new york, this is bloomberg. Julia whatd you miss . Jamie dimon, ceo in chairman of chase, as comments on the nations tax code. At a luncheon in chicago today he talked about the need for more competitive tax structure. I think we should get rid of carried interest. I think we should get rid of deferrals for hedge funds. I think we should get rid of state and local tax reductions. If you want to raise my rate, so be it. But whatever you do, do not have an uncompetitive tax system in a competitive world. That is a huge error. Julia here now with peter borish, chief strategist of quad group. Thoughts . Peter is this the same jamie dimon that was kin concerned about stimulus spending under barack obama. Just putting 100 marginal tax rate on anybody the makes money than i do. Joe so when jamie dimon says the only thing we need to make sure we do is focus on reducing the Corporate Tax rate, you suspect that there is something other . As chairperson of a large u. S. Bank, the largest u. S. Ofk, yes, it is just so out line. By the way, there is no guarantee on how that flows through and what it does. And then lets go through, in terms of the whole labor issue and where do wages go . The marginal spending for tax cuts for the wealthy, they dont spend it. What do they spend it on . If you had higher marginal tax rates on the wealthy, maybe the da vinci would not have gone for 450 million dollars. Maybe it would have got performed million dollars. If you put that into the larger n as a whole, with lower income workers, they would spend 100 that. I dont get weather is this dynamic spending and multiplier effects for the higher end. If you increase the minimum wage on the lower end, for some reason that is all static and only going to reduce hiring because you have raised the price of something. I have to scratch my head on some of this fiscal, monetarypolicy logic. Is a get stimulate growth, this policy . Peter no. Thats the one word answer. You arelihood is, putting in more resources and it will this up a growth and have a large unintended consequence. Go, you haveou talked about in the past, when we have talked to you throughout this remarkable bull market, you have seemed concerned but you have to go with the trend. You cant fight it and try to be a genius and a hero and time it. So what do you do . You have expressed various concerns on the fiscal side, inflation, fears of a policy mistake, but the trend is up, obviously. So what do you do now . Peter we always say fundamentals and technicals can divorce themselves for a while, but at inflection points, you need the intersection of the fundamentals in the technicals. The fundamentals may be deteriorating. The technicals have not yet deteriorated but there are warning signs. We are going to keep an eye on that. The russell made new eyes. The dow made new highs. The utilities made new highs. He s p, etc. This is at the game of trying to be smarter, its a game of trying to make money. Thats where we are. We are trying to make money. Im the dumbest guy in the room and im just waiting for some technical indication until there is a chance to take some equity out of the equity markets. Julia how do you avoid losing money . Cant avoid losing money. This is a game of probabilities and uncertainty. You take shots every now and then. You avoid bad streets by being disciplined and having good Risk Management but you are always going to go through a bad stretch. Scarlet or you stick with passive investing and go with index funds because then you are peter passive investing is great. Lookbackbest scenario. At the beginning of a bull market, ever want to be a traitor. At the end of a bull market, everybody wants to be an investor. Its not the time to sell because there are not technical indications to do it. Peter borish, chief strategist for quad group, thanks for joining us. Happy thanksgiving. Julie hyman is here. There is no tractor deflation necessarily, even as you see at price deflation. Its an interesting phenomenon when you look at john deere. The company came out with its first increase in sales in four years. And take a look at the bloomberg. This chart is amazing. It is john deere shares. There it is. The john your shares are in white and the bloomberg agriculture solve index of our bloomberg commodities indexes in yellow. Nou can see the stagnation i a prices. Even if the farms dont have a lot of expendable income, there stuff gets worn out. A lot of this is coming from corporate customers. Bloomberg intelligence says the vast majority of customers are porate so what you are not so you are not seeing the same kind of squeeze it you would see at a small, family farm. Scarlet and a lot of this is coming from overseas, not necessarily u. S. Farms. The country gets 60 of its sales from the u. S. And canada. Some of it has to do with inventories, as inventories are worked down. There is another chart of the bloomberg that shows that overall, in the u. S. , farm inventories going down as sales are rebounding. If there is a threeyear replacement cycle and we are at the beginning of this replacement cycle, then the thinking is it could last a little while. The company gets about 20 of its sales from construction and that area is also growing. Thatand interesting investors have no nafta concerns. Something to watch there, perhaps. Scarlet julie hyman, thank you. The market close is next,. Indexes. Look at the julia whatd you miss . Nasdaq slightly higher, extending a record high. Im julia chesley. Scarlet on scarlet fu. Joe im joe rosenthal. We want to look at closing bell coverage every weekday from 4 00 to 5 00 p. M. Eastern. Scarlet you started with our market minutes. A mixed day for u. S. Stocks. We saw modest declines for the dow and s p. And the nasdaq inching higher by 1 10 of 1 . Really little change. This is after the latest minutes from the fed meeting keeping things persistently low even as they stick with their forecast for Interest Rate increases for next year. Joe s p below 2600. Disaster. Julia disaster. Joe will not have thanksgiving. Scarlet he is in new york so i do not know if he will do deepfried. In the meantime, lets start you off with more m a headlines. We have qualcomm in the news once again. Reuters reporting that qualcomm is considering raising its bid by offering more of its stock. Broadcom has not decided on the level of any new offer and the timing is still uncertain so we continue to monitor this story. Trading at a record high, deere reporting its first increase in annual sales in four years. Ere iss a sign that de climbing out of the downturn after languishing commodity prices. Hewlettpackard enterprise, this is a story we talked about yesterday. 7 because megn whitman is stepping down as ceo. She is retiring. Antonio neri, who is an engineer, so hpe will be run by an engineer for the first time in two decades. Salesforce cutting its reading from neutral to buy. Catalyst for further appreciation in that stock. You can see the red banner. Nasdaq at a record high with marginal gain. Joe there is something to cheer today. Lets take a look at the Government Bond market. Rates are substantially lower across the board. Of wisely got the fed minutes in the afternoon of course, we got the fed minutes in the afternoon. A bit dovish perhaps due to people its pressing concerns about the lack of inflation that we talk about all the time. To 10 year yield down 2. 32. Julia u. S. Dollar declining to its lowest in a month, slumping for a second day. Music trading muted trading. Janet yellen commenting that is a hint of expectation that future price increases. One year and fiveyear Inflation Expectation dictate something to keep an eye on with these. We saw a broader dollar weakness versus some of the cross currency terminal. Choppy trading for sterling today. Hire. 10 Philip Hammonds budget statement slashing the forecast. A bit of a reality check coming from the government. That is feeding into what we are seeing in currency lands. Dollar cad lower. Oil lower. The round of negotiations come with news of hints of progress even as the big players were not there. This is an interesting chart. A relatively decent day versus the dollar weakness we saw today. We have all sorts of noise coming from africa in general, but this is south africa here. We have a runup to the ruling of the African National congresss leadership election in december. Will need for president jacob zuma . What would it mean for president jacob zuma . Who knows . Going from the best performer this year to the worst. All over the place here. What we are looking at is what perceptions we are seeing from currency traders. Implied volati