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Im mark crumpton. This is bloomberg. Live from bloomberg World Headquarters in new york, im vonnie quinn. Im Jon Erlichman in four men a laying. We are joined by our bloomberg and be an end audiences. Here are the top stories that we are following. Iran thousand engines, unveiling 13 potential nightmare scenarios as retaliation for the killing of general soleimani. In markets, stocks are paring gains, safe havens rising after the iranian threat. What is next . And hoover is plenty to make good on a promise from the jetsons, maybe bringing flying taxis to you in 2020. We are live at the Consumer Electronics show. To we certainly continue monitor the market action, geopolitical tensions front and center. One of the noticeable areas of 500,ess today for the s p two of the past three sessions have seen selling pressure. We are now seeing a pullback in the Energy Stocks that have been rallying as oil move higher. Certainly some cautiousness out there, but when it comes to some sectors, and we have seen this in the nasdaq, there is some continued by yang, particularly in the Semiconductor Stocks when it comes to the technology group. A cautious approach for investors as we continue to monitor the headlines. Innie that is visible, too, gold, the one asset that has rallied at the beginning of the tensions between the u. S. And iran. 40 and outs. That is a 100 gain since this all started. Jon lets get more on this developing story with iran. We mentioned earlier some of those comments from secretary of state mike pompeo. Kevin cirilli is standing by with the latest. What can you tell us about what weve been hearing from representatives for the white house, based on those ongoing comments out of iran calling for revenge . The administration is hopeful taken have a top level meeting with european allies to get them on board with the additional types of sanctions really to iran. Once the u. S. Pulled out of the iran Nuclear Disarmament deal, european allies at the time did not follow. Administration officials are sending a Top State Department official to europe to meet with allies in the coming weeks. As it relates to the domestic political matters, the president facing pushback from progressives. House Speaker Nancy Pelosi said to have a resolution on the floor of the house of representatives that would walk back some of the commander in chiefs ability to use military force without congressional approval, reopening a debate thats been in washington, d. C. For really more than 10 years now. Hes also facing pressure from certain republicans, including libertarian leaning republicans like rand paul, who was on fox news earlier today, to criticize the president s use of foreign policy. Make,l point i would secretary of state earlier today at the state department, was incredibly clear that the u. S. Would continue to strike an act should tehran continue with expansionary foreign policy. That has developed as a nonstarter for President Trump and his administration. Vonnie he also mocked in the assertion that general soleimani was on a diplomatic mission. Has anyone identified the potential 13 nightmare scenarios . Should tehran continue withthat is a direct quote frome iranians. Some there has been conflicting messages at since been reported, in terms of the president himself and personal comments he made aboard air ,orce one in the last 48 hours as well as Public Comments that he posted on twitter, saying some cultural sites in iran would potentially be on the list of potential military strikes. Defense secretary mark esper said that that is not the case and that the u. S. Would follow the International Rule of law. Secretary pompeo echoing those comments on the sunday shows and the press conference earlier today. As it relates to iran, the administration forecasting that, should the ayatollah continue to act, they would strike back just as they did within the last several days against soleimani. The question becomes whether or not the administration, mac for pressure campaign, not just economically but now with military force, is enough to determine iran from continuing to act in that capacity as we move forward. Jon at the end of the day, what should we make of the communication with all the , thes on the Ground Holding pattern, if you will, and the information they are awaiting on where things go from here . Kevin the administration has said this is an incredibly fluid situation and is ultimately up to iran. Should they continue to act, strike, the u. S. Would return action. As the president tweeted out in the last 48 hours or so, a response. Ionate secretary as per saying there are no plans for the u. S. To withdraw from iraq, as had been reported, citing a memo that was released. The bottom line is that all of this comes at a time when iran and u. S. Tensions are certainly escalating. Again, i cannot stress this enough, in terms of the european angle. Also china. They rely significantly on the strait of hormuz for their oil supply and exchanges. Vonnie Kevin Cirilli at the white house, thank you. Potential escalation with iran weighing on investors here in obviously those 13 potential scenarios, we dont know what they would be. U. S. Stocks edging lower but not so much so. Lets get some reaction from sarah ponczek. We are down on the s p 500 but nothing like capitulation or any kind of fear mongering in the market. Sarah we have not seen a strong reaction in the market. What we can say is, yes, stocks are mildly lower today from the bottoms that we saw earlier in the day. We have been inching back toward that flat territory, like we saw happen yesterday. However, we are seeing that reversal in the oil price to the downside. We also see bobs falling again today. The japanese against the dollar. We are not seeing that safety that you think you might see in an event like this. Speaking to investors, Reading Research notes that come across my emails, many investors seem surprised by this, particularly because of the valuations we see in the stock market right now that are stretched compared to historical standards, the run that we saw in 2019. For us to see whats happening now between the u. S. And iran yes, we dont know what form retaliation will look like, what that will mean for oil prices, Financial Markets but still quite surprising that we had an unbelievable year in 2019, relatively high valuations. Yes, you have to take into account that Interest Rates are still extremely low. But we only fall roughly half a percentage point on the s p 500 from alltime highs, is pretty shocking. Jon when you look under the hood, are you seeing any trans with specific sectors based on how things are unfolding, where investors are going . Sarah we had seen Energy Stocks rising to the upside. When we saw Oil Prices Rising as well, the idea being if you can sell, especially if you are a is an oil fore more dollars, that will boost your bottom line. At the same time, we are seeing oil prices come up the back burner. 69, compared to about 70 yesterday. However, one recent thing that stood out to me, you can no longer be underweight Energy Stocks. The reality is, if you look at Energy Stocks as a percentage of the s p now only makes up about 4 of the benchmark, compared to 13 in 2009. If you are underweight Energy Stocks at this point in time, that means you own less than 4 of your portfolio attributed to Energy Stocks. The riskreward right now is not there. You may well be underweight Energy Stocks at 4. 3 . It is not that hard to get there. Helpful context, certainly. Thank you, sarah ponczek. The latest on the market story ended his geopolitical tensions. Has big plans to push its ridehailing business from the roads to the sky. We go to cvs in las vegas to hear that they are teaming up with for the project. This is bloomberg. Bloomberg. Vonnie this is bloomberg markets. Im vonnie quinn in new york. Jon im Jon Erlichman in toronto. Is working on a flying car was young guy, aiming to develop , takingk of air taxis the concept of ridesharing to a higher level. Companies plan to show off a fullscale model at the ces event in las vegas. From the event to tell us more head the project is ubers of elevated, eric allison. Ces is sometimes about concept, sometimes about being closer to reality than we may think. Where does this project fall, how close to reality are we . Eric we like to say this is closer than you think. We have been working on elevate for about three years. Eric we have been developing an ecosystem of people who are aligned with our vision of bringing ridesharing from the ground to the sky. We are aiming to launch our aerial Rideshare Network in 2023. Of eight network partners. Hyundai is our eight partner working on this together. We are excited to be able to do it. Vonnie what regulatory hurdles do you expect to meet . Eric could you say that again . Vonnie what regulatory hurdles do you expect to meet along the way . Eric aviation is a highly regulated industry, so we have to look at regulatory considerations at the local level and national level. We have teams working on all these aspects of it. A good example of this is national at the level the regulator is the faa. Of eight partners. They have regulations on airspace, vehicles. Weve been working with the faa to identify the key blockers in terms of how you bring the vehicles to market, and then identify what solutions we can work with industry on to develop the solutions ahead of time, before the company is working on those vehicles run into those issues. Jon have you thought about what this will cost for the consumer . It is certainly exciting to see the technology, but when it comes to actually using it, what about things like pricing for the individual user . Eric we do a lot of deep analysis on this. We built big simulations of how these networks work, including how you connect the ground side to the air network. We think we can launch this kind of a network in a recently economic way at about uber black pricing. Over the years, being able to develop the efficiencies of using our network and the demand we can generate, we think we can lite in terms of seat basis. Pe per vonnie how is this different from the uber copter which already launched . Eric we launch that as a way to understand how to build those operational efficiencies. We are developing all the Technology Behind the scenes to do that kind of realtime matching of riders from different cars into the vehicles, in this case, the helicopter, so that we can drive operational efficiencies. Uber copter, you could think of airur beta version of uber that we will be launching. As a public company, has to think about the future but also where it spends its money. Can you give us a sense on the kinds of investments you have had to make on this project . Eric what we have endeavored to do is really focus on this being a partnership driven approach. That is my we developed this ecosystem of partners. The Vehicle Companies are the ones that will be investing to bring these vehicles to market. We are able to leverage the Core Technology we have in a way that allows us to build the connectivity behind the scenes and bring those vehicles into the platform. Convince us that this is not a head fake. We have been waiting for Autonomous Vehicles or a long time. The promise was there, they would be here by now. Yet, there are continuous roadblocks to them actually being used by the public. Different . This be it seems even more dangerous. With this type of service that we will be building, really, we have taken a methodical approach to laying out what are the roadblocks here. Fundamentalolving Development Problems with this. This is really an exciting, new form of transportation that is enabled by this technology that has come to life in other industries. That is why the partnership with hyundai is interesting and my we are so excited about it. They can take that expertise of building massmarket vehicles, which they been developing, and apply it to this new kind of aircraft. It really becomes an excellent engineering challenge in a lot of ways, and we are working out the operational challenges, the platform aerial ride challenges can uber copter, so that we bring them together in an aggressive timeframe and bring this new form of transportation to life. Vonnie thank you for joining us today. Have a great ces. Looking forward to seeing those vehicles in the air. That is eric allison. Coming up, a conversation with bill dudley, how he would improve the feds current regime. This is bloomberg. Jon this is bloomberg markets. Im Jon Erlichman in toronto. Vonnie im vonnie quinn in new york. Former new york fed president bill dudley says a standing repurchase agreement facility would make the fud is new regime even better, adding trader os arens due to rep exaggerated. He spoke with alix steel from our princeton bureau. It creates more uncertainty about the Economic Outlook but it is hard to react because you dont know which way ins are going to break. Think about it as risks have gone up, uncertainty has gone up, but it will not lead to any change in Monetary Policy in the near term. Find things like this delayed or postponed is this decisions when youre are doing your fed surveys . Bill it could cause some uncertainty about what would happen to energy prices, for example. Uncertainty affecting the economy has been the uncertainty on trade policy. That uncertainty has lessened a bit, as we are moving toward an interim deal with china. Recently, with every bone markets, in a bloomberg opinion, you wrote a piece about how the fed needs to embrace the new Monetary Policy, and there are certain things they can do to solidify it. And you walk me through your thinking . In the old regime, we had little reserves in the system, the fed had to keep the federal funds rate at its target. We are in a new regime now where the fed pays interest on reserves, and there are lots of reserves in the system. But the fed could make it better. One thing they could do is establish a standing repo facility to make sure there is no a port pressure on repo rates if there is a shock to the system. Second thing they could do is communicate a lot more clearly about why the new regime is better. Makeseasier to operate, reymin systems work better. Most importantly, it is better from a financial perspective because there is no conflict between the fed offering an open ended liquidity backstop versus its control of the Monetary Policy. Under the old regime, the fed wrist losing control of the fund rate. Under the new regime, paying interest on reserves, you dont have the problem. Alix it feels like when Market Participants are most worried about the markets, it is when money outflows will pick up. That leaves the fed having to buy up a lot more treasuries, or for Bank Regulation to be rolled back in terms of what they are required to hold on their balance sheets. What do you say to traders fears on this . Bill they are overwrought. The problem is a small one, not a big one. The Federal Reserve has addressed most of it by adding reserves to the system by buying treasury bills and engaging in a series of open market operations. The fed can make the system Even Stronger by setting up an overnight standing repo facility that would be available to a wide array of counterparties. If there were upward pressure on the rates, people could go to the fed for cash, and that would make the system Even Stronger. Alix so it would not be dependent dependent on money market banks . Bill if you had a standing repo facility, you would want it to be open to a broad number of parties. Providing reserves to the banking indus, but what happens if the banks are not willing to lend those reserves to the people that actually need the funding . Jon that was alix steels interview with bill dudley. Users can interact with the charts shown using gtv. Onwse recent charts featured bloomberg tv, catch up on key analysis, or save charts for future reference. From toronto and new york, this is bloomberg. Mark more than 50 people are dead after a stampede broke out at a funeral for a top iranian general killed in a u. S. Air