It has accelerated to some extent, particularly in the nasdaq, down by nearly. 5 of 1 . We have been watching outside of the stock market. In the bond market, selling the cost the curve. It is acute on the longer and as we see a steep increase in the 10 and 30 year yield. Six basis points and seven basis points, respectively. That is having an effect, a feedback affect on certain segments within the stock Market Real Estate and utilities, namely. Lets talk real estate. This morning, we got singlefamily homes and Housing Starts at the strongest case in a decade. That means a lot of supply, even as it can be a good, strong read and healthy read on the economy. We saw a residential start to 3. 2 . In particular, supply of apartments are ample. We are seeing apartment builders and owners on the decline today, also hurt by the increase in yields. Also, if you look at the homebuilders, it is true. There is the hurricane affect that we may have seen a bounceback following hurricane that increased those numbers. Kd home seeing declines. I want to bring back the chart we talked about with homeowner equity. If you look at the bloomberg, this is Real Estate Equity at the percentage of market value, in other words, how much is your home worth at this point . We have recovered all the way to the place we were prior to the housing and financial crises. This would appear to be a healthy sign for the housing flights out after there hurting the company sent rising rate, where it is perceived that could hurt demand, as well. Shery julie hyman, thank you. Congressional republicans kicking off a final sprint in a sevenweek race to overhaul the u. S. Tax code and deliver a policy victory for president donald trump. Vonnie theyre expected to vote to 98 minutes. Mitch mcconnell has promised a senate vote this evening. Kevin cirilli is on capitol hill. With Mitch Mcconnell promising a senate vote, is it a done deal . What happened to the 10 hours of debate . Kevin pretty much a done deal. We are about to get started in the house of representatives, where i am on. Lawmakers are voting and from there, it goes to the senate. The could be efforts by democrats and democratic members in the senate to delay it as much as they can. I am told by republicans and democrats that it is pretty much a done deal. This vote is expected in the senate, if not tonight, then tomorrow. The big takeaway, within the last 1. 5 hours, we were sitting with a republican from tennessee, bob corker, and he was pushing back to reporters against accusations he made some type of real estate deal in order for his boat to be a yes his vote to be a yes. He is pushing back on that developing storyline. From here, talk is to whether or not the continuing resolution to keep the government opened by the end of the week. Shery quite interesting with bob corker because it was surprising when he became a yes vote over the weekend. Lets talk about the government funding because we are coming towards that deadline. Is there any progress . Kevin a little, not much in the last 24 hours. Aides are privately behind the scenes working on a onemonth extension of the continuing resolution that would put it to january. What to watch is whether or not house conservatives, Freedom Caucus members, for example, feel emboldened in the next calendar year, particularly on the issue of National Debt. We have noticed some democrats raising concerns about the growing National Debt as part of the tax form plan, a sure bet that republicans will have those concerns into the next year. We will talk about things like keeping the governmentfunded, particularly about increasing defense spending and infrastructure, which we know the president wants to get the next year, tweeting about it yesterday, as a result of the tragedy in washington state. Vonnie to get back to the passage of the tax reform bill, if it happens in both chambers of commerce, will it be copacetic among republicans . Or will there be some lingering Little Things bothering some members of the house . Will that matter to the leadership . Kevin i think there are going to be some holdouts. It will be interesting to see which house republicans, when they vote, will vote against this and the state of tax reductions. No surprises coming. Republicans will wrap this up. Theyre confident and President Trump will sign the system is possible, i am told, once this is finished in the senate. Shery talking about President Trump, he has been the cheerleader of sorts for the tax bill. How much of what he is one tape has been reflected in this final bill . Kevin remember when we were talking about the Corporate Tax rate at 50 . That will be 15 . That will be 21 . He wanted to limit tax brackets to three. They will stay at seven. When you talk about the passing rate and things like that, there has been give and take. It is an effort to get more republicans on board. Make no mistake, the administration is out in full force as they try to really hammer home what they believe is their first major policy win and a win for the middle class. On the flipside, democrats will be campaigning ahead of the midterm election. They feel this is a deeply unpopular bill, when they think of the launch of their 2018 midterm ambition. Vonnie it has not been polling well, but is that likely to change . If messaging changes and becomes about the 2000 plus dollars each family will say . Kevin i think that is what they would like to shift the conversation toward. There is a report on the bloomberg about 401 k s, as well as the passing rate. Areiddle income americans able to juxtapose the passing rate and 401 k am a despite increase overall tax if they factored in those two components, they could see an overall tax decrease. Theres a lot going on. We should note this will not take effect until next calendar year, so after the midterms. Movingre still a lot of parts that the administration is trying to get in front of an selfassessed that major win. You are right. Polls suggest the majority of americans now are a bit unsure about this. We are going to have to wait and see about how this pans out. Once it does that affect. It willkevin cirilli, be a long night, and thank you. Shery now, first word news, Mark Crumpton has more. Mark in washington state, federal investigators say that amtrak train that derailed yesterday was speeding before it reached an overpass. According to the trains data recorder, it was going 80 milesperhour in a 30 mile per hour zone. At least three people were killed. More than 70 others treated at local hospitals when the train hurtled off the overpass. It was making its first run along a new pastor, routes, between seattle and portland. House Speaker Paul Ryan has told the republicans he has no intention of stepping down. In a closeddoor meeting with rankandfile members today, he indicated that it may no sense to leave when we are winning and have the momentum. That is according to georgia congresswoman, who says republicans responded with applause and a standing ovation. The u. K. Once a significantly better trade deal with the European Union after brexit then the one canada had with the block. That is according to Prime Minister theresa mays spokesman. He says the Prime Ministers cap is unified behind the agreement that may reach with the European Union last week. As United Nations security council, the u. S. Today vetoing a resolution that would it cost countries not to establish Diplomatic Missions in jerusalem. Less than two weeks ago, President Trump promise to move the u. S. Embassy there from tel aviv. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am Mark Crumpton. This is bloomberg. Shery thank you. Been one oft has the longest and deepest bull markets in modern history, but how long can the good times roll . We will have announcements. This is bloomberg. Shery this is Bloomberg Markets. I am shery ahn. Vonnie i am vonnie quinn. This market rally not showing signs including soon. Our next guest says investors are not partying like it is 1999. He has got the skinny on what is weighing on investors mind store 2018. He joins us from boston. First, that sounds a good should be a song title. Tell us what happens after tax reform passes. Will they party like it is 1999 then . I do not think they are partying like it is 1999. I think are three things weighing on them. First, valuations seem stretched. Easy Monetary Policy of the last decade has inflated Financial Assets and investors are concerned when it might end. , thehe length of it business cycle, is a concern. Folks seem to be waiting for the recession to occur. Lastly, the bull market continues to inch closer to nine years, making it one of the longest. Folks continue to wait for that other shoe to drop, so that anxiety should provide skepticism where the market may continue to rally despite that skepticism. Shery at least smallcap seem to be partying. If you look at this chart on the bloomberg, viewers can see the 2000 performance against the s p 500, which tracks President Trumps Approval Rating in yellow. This upside, does it have traction or could this be the initial him from the excitement and then fade late into next year . Michael this started in early september, when trump extended an olive branch to posey and schumer around Immigration Reform and budget spending deals and gave folks confidence that we could get a tax plan. Now we are getting that tax plan. It looks like smallcap earnings are going to rise next year as a result of lower taxes and less regulation, which should benefit them. Valuations foris you a small caps are on the high side. They are already reflecting much improved Earnings Growth, so that may temper some of the rise we get. They are rallying based on this optimism about the tax plan. Vonnie when it comes to the great rotation, does that continue . We had a great piece out on Bloomberg Intelligence same value stocks might look overbought but that does not mean there is much more money coming into them. Michael i still think we are in a bit of a modest growth, low rates, low inflation environment , that still largely is predicated on what Monetary Policy looks like. It still remains easy. In that environment, i still think you need to go with the sectors of the market, stocks that can really generate Topline Revenue growth, generate a tremendous amount of free cash flows, that they can buy back their shares, paid dividends, reinvest in their businesses. And those are still in growth sectors of the market. Financials, technology, health care. Folksk this is still getting a bit ahead of themselves in the value trade. Shery what happens accompanies do not deliver on their Earnings Growth giving the lofty valuations . Michael i think that is the biggest risk to the market in 2018. In that Companies Fail to deliver on what is expected to be a big year for earnings per share growth. For s p 500 companies, earnings are basically flat in 2014 to 2016. This year, we are going to get 10 earningspershare growth. Next year, we are expected to get more. Especially with the tax package plan passed. My concern is that if we do not get it, you could see stocks except for next year. Vonnie what is the character of this market in the sense of the confidence backing it up if we stop a small selloff . Could that trigger something larger . Michael potentially. It seems the sentiment these days for investors is by the dips and the have not been any. It seems as though investors are really enthusiastic about buyinb this markef buying this market. If i look at indicators, it isnt euphoric. They are not partying like it is 1999, but theyre comfortable buying stocks, risk assets in this environment. I do not see that changing given the current environment that good growth, rising corporate profits, easy Monetary Policy and low rates, low inflation. Shery i love that you said buying the dip because we had this chart that shows the point. We have not seen a pullback a 5 or more. Those are the white lines. We have not seen a pullback in a long time. The longestand streak since the 1960s. Can you even try to buy the dip at this point . Michael it has been more than 400 days since we have ready 3 decline or more, the longest ever. If we were to have a bit of a pickup coming hiccup, you could see accelerated selling. I do think the fundamental supporting the stock market rally continue to remain there. As we talked about earlier, i think the linchpin is corporate Profit Growth to this. We will find out in the middle of january when fourthquarter earnings come to market whether we are going to see those results. The market is expecting big things. Comparables are going to get tougher. Fourth quarter 2016 versus Fourth Quarter 2017 is going to be harder. That is going to be important. If you do see a miss, you could see the market slide a bit. Vonnie thanks to market alone michael arone. Shery it is time for the Bloomberg Business flash, look at the biggest business stories in the news right now. Carlos slim is planning to sell more than half of his 17 stake in the new york times. The stock has risen more than 50 since he boosted his stake in 2015 and became the times largest shareholder. He began Building Holdings in 2009 after lending the times 250 million to help her get through. Paydays are better these days. The average compensation is the highest since the financial crisis. The bank said aside 1. 83 billion for employee pay this fiscal year. Nearly 3500 employees are at jefferies. That is less than the precrisis average. Volkswagens rebounds from the diesel emissions scandal has upgraded its earnings forecast and has helped its search ahead of german peers. Quarter, returned this the best among european stocks. While daimler has gained 5. 3 and bmw has little change. That is your business flash update. Vonnie ahead, an exclusive interview with Robert Kaplan, president of the dallas fed. That conversation recorded earlier, next. This is bloomberg. Vonnie this is bloomberg market. I am vonnie quinn. Shery i am shery ahn. The fed spent the past year gradually raising rates and beginning to wind down its balance sheet. What comes after tax overhaul . Michael mckee caught up with dallas fed president Robert Kaplan for an exclusive interview. He asked about the u. S. Employment rate and implement rate in the fed going forward. Unemployment forecast is probably more aggressive than the median of the sep. Expect willshould happen, even though we will have solid rates of growth, i believe, in 2018 and 2019, as we approach for employment. You have heard me say u6 in the lingo, which is unemployed, plus discouraged workers, plus people working parttime for economic reasons. Thatmeasures a percent, higher than the 4. 1 . That is that the prerecession low. What you will find and what people should expect as we get or near or overshoot full employment, job growth will slow somewhat and the degree of production in Unemployment Rate may also slow some. I think that may explain why you see a little slower rate of reduction in Unemployment Rates. Michael the question is, growth goes up and nothing happens with inflation, why not . You have tw tempt you have two competing forces. One is the cyclical pressures. Im confident there are more shortages for skilled workers and at the low end of wages, there is wage pressure. If you make 20 or more, i am not sure based on my discussions with businesses there is wage pressure. But cyclical forces are building. As we take more slack of the labor market, that will build more. Then you have a headwind, technology and it means people being replaced by technology and it means consumers being able to shop more aggressively for the lowest price. Pricing the power of business is limited. It means new Business Models for selling and distribute in goods, and that is causing businesses to be very challenged in passing on wage increases into prices. I think that Structural Force is intensifying. You have the cyclical, the structural, and i think that is creating a muting effect on inflation. That is why the dallas fed is doing a lot to study this phenomenon and we are holding a conference in the spring to try to encourage the system and academia and businesses to do more. Michael why not adopt the charlie evanss approach to wait until you see inflation accelerates before you raise rates . Here is why. I believe we should take a balanced approach to Monetary Policy. We have a tool mandate, full employment, and price stability with the 2 target. We are already at or near full employment now. I believe we will overshoot for employment in the next year. I balance that against the back we are undershooting are inflation target. But it isnt one or the other. I think you got the balance and the degree of the overshoot is such. My concern is if we wait too long to remove accommodations, we will be playing catchup. In the history of playing catchup by the fed is it happy one. The history and we over ship unemployment is we tend, that tends to lead to recession because the fed has to play catchup imbalances build. I think a more gradual, patient approach will serve us better. Michael a lot of talk about the yield curve in the markets. One of your colleagues worries about conversion and recession the coming year.