to "bloomberg daybreak." good morning. in the markets, all-time highs on the s&p 500. points ahead of the open. if you switched on the board and check out the euro despite german business declining, it is a stronger euro story, stronger pound, and a weaker dollar. alix: up against a wall. trump plans to unveil actions on national security, including building a wall. deficit details. nick levine he says the national debt needs to be addressed sooner rather than later. may the force be with her. you cap theresa may is battling a rebellion from her own lawmakers. she faces jeremy corbyn in the

house of commons momentarily. you are looking at a live shot of parliament. theresa may is expected to begin speaking any moment. we will review any relevant headlines when they cross. she will be answering questions from the members within the hour. jonathan: always fun. alix: i wish congress was like that. rumble a little bit. david: president trump has told us his plans in a tweet saying "big game plan on national security. among other things, we will build the wall. joining us now is mike mckee. bring us up to speed. what can we expect to bring out of the president today? mike: three days of executive actions.d other this is an appeal to get back to his base and say i am following

through. chief among them, build the wall. his signature promised during the campaign. he will use the 2006 law. it costs $1.2 billion. largely completed, but it leaves authorization in place. he has a way to fund additional construction. not sure where the money is going to come from or how much he will reprogram. it could cost $10 billion to $12 billion. most of the estimates are $25 billion or more. democrats are saying he will not get what he wants because republicans are not going to want to spend that much money. a couple other issues under consideration for today, one is whether or not they will block syrian refugees from coming into this country and significantly cut the number of immigrant refugees allowed from the trump administration, whether they

will increase the number of deportations. the obama administration theificantly ramped up number of deportations, particularly on criminals. the question is what they do with the people that they do catch who are high-value criminals or people convicted of or suspected of terrorism. will they change their terrorism policies? trump stated he might do that. the big issue is what he does about the dreamers, the 740,000 people brought to this country illegally as children. obama gave them protected status. trump has been on both sides whether he will kick them out or let them stay. david: spent a minute on timing. is it a coincidence we have two senior officials from the russian government coming today and we have a president coming next week? >> it is interesting timing, almost a slap in the face to

mexicans, who say they do not want to bow to the u.s. government. they are not paying for the wall. if the president wants to reopen nafta, they are willing to talk about reorganizing the agreement but they want things from the u.s. the u.s. needs to do more to curb its demand for illegal drugs, stop sending goods into mexico, things like that. mckee many thanks to mike . ive ando took a big d came back up. alix: we bring in the chief economist and global cohead of anti-strategies. with whatant to start we saw with the peso. news big hits? mexico last week, there was a

sense that the wall was secondary. that was not the issue. the issue was getting clarity on nafta and trade. the student that was done, the better for all concerned. that was really where the action is. the wall is highly symbolic. political stress of course. from a currency standpoint, it is secondary. jonathan: very quickly, where is the mexican central bank in all of this? is a continued to intervene or let this settle around where it is? alan: i don't think it was the smartest idea to intervene when ofy did and have some sort obvious trigger points. where at a painful point wher

inflation amends and interest response. in the end, the mexican central bank will have to hike interest rates quite a lot because the inflation is becoming meaningful. saying that the border wall is just the rhetoric that the real deal is nafta, what is real when it comes to mexico-u.s. relations? >> i think nafta has been very beneficial to both sides. just to look at the trade deficits the largely reflect cost. it is too simplistic. if you dig deeper, you see the goods changing, crossing the border. alix: is it a threat to get a better bilateral deal? harm: that is what we are trying to figure out. from a fundamental perspective

you say it does not make a lot of sense, but it has become a bit harder to predict what the political side is doing these days. david: whatever they do, is there a deal that will be done that gives president trump something that i can come back to his base and say i got something out of mexico and nafta. harm: building a wall is not the best way to start. it is a slap in the face of mexico. they are probably some small things you can change. to say we reopened it nafta is tough. thingsre probably small that you could talk about. overall, if you talk about fair level playing field, nafta is as good as it gets. jonathan: we will be talking about trade. it will be headlines about immigration as well.

you have done a ton of work on the labor market, the multimillion jobs they want added. how achievable is that going to be? harm: tough. , there at demographics is a forecast as good as anybody. the labor force over the next 10 years is going at a pace of 65,001 roughly. a month, roughly. people who come into the labor force, it is tough to create more than 200,000 jobs as president trump pledged because at some point you are running out of people. alix: the 25 million jobs wth.res on the ground

i think protectionism is short-term stimuli. if we get a large enough fiscal stimulus, absolutely we can get to 4% growth. whether we can sustain 4% growth, whether there will be a payback is another question altogether, wish that almost certainly will be, but can you get 4% growth in a years time? yes. it is possible. >> when of the things people are underestimating, we went through a slow patch last year related to the strength of the dollar. strengthening, and the stimulus on top of that is putting more fuel on the fire as it were. david: we have some news coming out of parliament. jonathan: you are looking at a live picture of the prime minister of the united kingdom theresa may.

she is expecting demands from u.k. lawmakers to publish a brexit plan. yesterday, they ruled sheets to go through parliament. expectingsting thing, demands from u.k. lawmakers to publish brexit plan. pressure not just from the opposition, but people within her party. that land remains to be seen but at least she is expecting it. david: i am sure we will continue to monitor what is going on in parliament. deficit details in the u.s. trump's nominee confirmed once again he is a committed hawk. what he says should be done to keep the deficit down. that is next. this is bloomberg. ♪

david: some breaking news coming

out of the white house now. tweeting donald trump he will be asking for a major investigation into voter fraud, including those registered to vote in two states, those who are illegal. we expect another tweet. he said he won be popular election if you exclude the illegal voting. yesterday, sean spicer was cornered by the press saying the president believes he will investigate it. he said he may have to. now he is. we will keep you updated on that. in the meantime, let's talk about the deficit. since trump's election, markets have been anticipating the stimulus but there is no clarity on how it will be paid for. mulvaney made it abundantly clear that going further into debt is not the way to go. >> i believe as a matter of

principle the debt is a problem that was me addressed sooner rather than later fundamental changes are necessary in the way washington spends and taxes if we want to help the economy. the long-term path is unsustainable. inid: still with us is alan harm. we have on the one hand this real force for fiscal stimulus. whether it is infrastructure spending more tax cuts or whatever. on the other hand, we have to cut the deficit. are these two things reconcilable? alan: not easily. there is obviously a group of politicians are pushing the reform agenda. i think if i really simple by that, the main realms are essentially getting rid of deductions and taking down marginal rates in the corporate level and the house level. the net stimulus and how that comes out depends on how you score these things.

if you score them aggressively, maybe there is a net stimulus that is actually there. if you look back at the tax reform from ronald reagan in 1986, there was not any net stimulus.it was actually tax reform .there is one group of people talking on those lines . there is another group thinking in terms of there will be some net stimulus. obviously, donald trump in his election campaign was leaving a lot of money aside in terms of net stimulus. i always worked on the premise that the campaign rhetoric with something like stimulus. we get 1% or 2% gdp net stimulus, and it would be sufficient for an economy that is growing above trend. i think there will be some stimulus, but not everyone is talking about the same thing. david: we have the second part of the trump tweet coming up now. we will come back to it. alan describes these two camps.

which one is the market following right now? harm: i think the market hopes for a big net stimulus, which would blow up the deficit. it was all inevitable that we end up here with the leverage in the private and public side. now we try to get better. there is no talk about that anymore. the market is just hoping for deficit spending and deficit finance. jonathan: how do you do proper analysis of what will or will not come? this audience this morning, investors, market participants waiting for some kind of fiscal stimulus. looks very much like they are thinking about a lot of other things. harm: it is tough.

have morely scenarios. more confidence in the baseline if you want. don't talk about left or right so much, maybe as much as we should. in this environment, it is more important to have these different outcomes. there is the one scenario where we get a big stimulus. no downside or protectionism. the other where stimulus is smaller and there is more negatives in terms of global trade and all that stuff. the outcome is not binary but very different. david: telestrate exactly what jonathan is saying, we will be distracted for the rest of trump 's tweet. this is the whole tweet. that is the complete tweet from

the president of the united states. really put it nicely when you talk about you just do not know. it is hard to evaluate what we will see. it is not yet reflected on the dollar. this is my favorite chart of the last four months. normalized the dollar for reagan, bush junior, and the trump election. the issue being how much is currently placed in, what needs to come out. the dollar has peaked because we will have twin deficits in every thing will blow up. alan: i don't think that much is priced in if you look at the rates market. it feels like it is pricing in two hikes this year. is not want to think in terms -- does not want to think in terms of three. you do not have that priced in the rates market. before exchange market will take cues from that primarily.

tax reform, you can have neutral net fiscal stimulus. is not mean that is neutral for the dollar. right now, the market is closely looking at the board adjusted. that could be net when they and they offset effect raise the trillion dollars. you could effectively offset that. it can be fiscally neutral, but not neutral for the dollar. that can be positive for the dollar because it reduces the trade balance. it forces the fed into play. whichithin tax reforms are fairly neutral in terms of what it means for the budget deficit, from the currency standpoint i can assure you there is plenty to play for. david: it seems that is a fair amount of uncertainty about what will happen. at what point will the markets be impatient, move

sideways, or turned down because they cannot wait that long? with i slightly disagree alan on what is priced in. if you look at since the election, the market is pricing the best of all worlds. it seems likely market, since the new administration is here, we are getting the stimulus soon and we want to see the growth affect. even in the most optimistic effect, maybe the middle of the year at the earliest. we see the impact somewhere in the second half of 2017. some point on the way, we havetwo orders or so -- we have two quarters or so. kind of bumpy. alix: understatement there. david: this segment has been a little bit bumpy with interjections. d harm.to alan an

the president released another tweet. he will name his nominee for the supreme court next week. he narrowed it down to a limited list. we will be reporting more on that. more on that, next. the president addressing voter fraud. we will dig in deeper to all of those tweets coming up next. this is bloomberg. ♪

david: this is bloomberg. we have had a morning of the president of the united states tweeting. he has been asking for a major investigation of voter fraud. depending on results, we will strengthen of voting procedures. he also tweeted he will be making a supreme court on thursday of next week -- court

pick on thursday of next week. we now bring in mike mckee. we are still joined by alan. what should we care about? it.: i am struggling with trumptrump in terms of voter fraud, this seems to be about's ego, and you make the statement ego.out trump's 8 instances of voter fraud found around the country from the various states reported. it is important that the majority of states have republican governors so these are republican states that in theory would be on his side. not clear where he is going with this other than the fact that he has been pressed on it. people are calling him a liar, and he does not seem to like it. david: in fairness, lie is a very strong word.

mike: that is the word the "new york times" used. david: we cannot say he is wrong about that. mike: nobody has been able to find credible sources. sean spicer suggested the president had some. this is a let us know what you know. jonathan: you are in front of the bloomberg. these kind of headlines come across. these tweets come out. the you care? -- do you care? alan: not this one. jonathan: which ones? alan: keystone, the market responded. ones, thee auto market has cared. possibly the sensitivity as it relates to auto stuff and individual stuff. that is not really my world.

before exchange market responded a little to those. jonathan: this is the problem. how do you conduct analysis when you look at this and wonder if this is for theater? does it matter? >> he says he will announce his supreme court nominees, and that is something that is actionable. they consider business cases so that is important as well. have it is important.half of it is theater. david: coming up, trump revamps the u.s. trade focused pulling out of the tpp. what it means for trade in asia. that is coming up next. global market focus. this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg daybreak." let's get you up to speed on the market action. yesterday, the dow over 87

points and change away from that line in the sand you have been waiting for over the month or so, 20k. the situation in the fx market like this. the cable rate inching to the 126 handle. you talk about some of the supply and treasuries coming through the week. morning.s stable this here is what you need to know. president trump will unveil actions on national security. they are excited to include steps to build a wall on the mexican border. the news sent the peso to session lows, but they have now reversed. deficit details. president trump's viktor budget director says the national debt has to be addressed sooner rather than later. may the force be with her.

theresa may is battling a rebellion from her own lawmakers to complicate leaving the european union. now to some breaking news on boeing. alix: fourth-quarter earnings coming in at $2.47 a share. estimates were for $2.32. $23.3 billion. it is lifting its core earnings forecast here. on the high-end, $9.30. the estimate was for $9.24. boeing beating estimates for its full-year core earnings. 400 $73 million with more than 5700 commercial airplane orders. -- $473 million with more than

5700 commercial airplane orders. jonathan: nice work. trade now. the tpp off the table. first japan be trump's choice for trade deal? joining us now is michael mcdonald. still with us is alan ruskin. 4 countries, china, mexico, germany, japan all running trades with the united states. is interesting you mention germany because it is obvious how china may have been using some unfair trade practices in the past, but germany has benefited from the catastrophe in the euro area from the very week euro.

in germany was its own country, it would not have a currency where it is right now. jonathan: the conversation we had any commercial break, how many cars went from the u.s. to japan? 19,000. how many went the other way? 1.6 million. what can they do about that? how vicious can that get, that relationship? not with china, but with japan? >> i have a japanese car that was made in the u.s. japan was the first to push through and ratify the tpp, sending a signal to the u.s. to follow through with this. rex tillerson, one of his first trips is going to need to be to go to japan and smooth over some of that relationship. david: this is more complicated than just tariffs. yesterday, the president was talking about tariffs. things like the distribution

system that you cannot break into. it is a complicated system. what will the president do about that? >> feels like we are fighting yesterday's battle to some extent we had the japan auto in the firstry years of the clinton administration. the way it was addressed was about driving japanese industry to the u.s.. goon't think they want to down that route, but the currency becomes part of it. we have to ask the question about, is this really the battle that needs to be fought? japan has had whenever it is the last couple of decades. u.s. has done fine. should we be obsessing about the auto balance? this is one sector. the u.s. coming to visit a little about 2% is relatively stable throughout this upswing. that is not where the problem is. jonathan: one part of the story

when alan mullally complained about this in 2013, he talked about the yen and said it was too weak. nevermind the peso reacting to the trade, let's not call the negotiations, let's call them whatever they are now. with a get a lot more criticism for where the dollar-yen is? >> i do not know if they will get criticism at 110, but if we march to where our target is, 125, which is possible, the bank of japan will hold their interest rates steady. that is the safety valve. that is where the pressure will come out. if we move in that direction, it is likely the currency does rear his head as a political factor. alix: we start to hear the word currency manipulation. you have no tpp. you have an aggressive

president. now he is selling currency manipulation. >> there are two believes in china what will happen. one belief is trump comes in and the u.s.-japan relationship deteriorates. this move them closer to china. alternatively, the relationship deteriorates, causing japan to change its constitution. righit does not improve relationship with china. for china, the same concept. goes up, the dollar starts depreciating, you will more depreciation of the currency in china. we just need to wait and see what happens. trump has come out and said the strong dollar is bad. he has indicated that. you cannot have a robust u.s. economy without a strong dollar. right now, it is at a level healthy for the economy starting

to build momentum. jonathan: can i say how hard it is to get michael on? alix: once every quarter. jonathan: thank you very much. alan ruskin, thank you. theresa may participating in prim questions. take a listen. >> the separate question about publishing the plan that i have sent out, a bold vision for britain in the future. i will do that in the white paper. one of our objectives is the best possible free-trade arrangement with the european union. that is what wil will be out there debating for. jonathan: the brexit plan, she will publish it how quickly? >> remains to be seen. she refused to answer the question on that by the

opposition leader jeremy corbyn, which is publishing a plan -- but she is publishing a plan. efforts from within the conservative party to publish one. is backtracking a little. a sign she has lost a little control of the brexit process after the supreme court decision yesterday. now they hope my publishing the white paper they will have a hard and fast document to which to hold her accountable. jonathan: she has a very slim majority. the critics, how big are they? six of her own party spoke out demanding this white paper, which i realize comes over from the parliamentary part of it, but it is important. you saw the pound increase.

basis thatre on the it will make a soft brexit a little more likely. help being accountable by her own party. jonathan: just very quickly, buy the pound yet or still too soon? >> i think we will see a few things. the economy will slow down. current deficit is as large as ever and still needs funding. around 128. jonathan: thank you. we trade on the cable rate 12597. work if you look at unde under the u.k., i am just saying. jonathan: starting to build. alix: john cryan has spent the

downsizing -- this is bloomberg. ♪

>> this is "bloomberg daybreak." coming up in the next hour, the former office of management and budget director joins us with her take on the u.s. deficit. jonathan: ceo john cryan has spent the past 18 months downsizing deutsche bank's investment bank. now his next task is revising

the asset management business, a key business in boosting revenue. justparticular division, talking about the significance of it for deutsche bank and why they are holding onto it so tightly. >> clearly, they are reluctant to dispose of this business. if you look at the last nine months in 2016, the returns on equity were double those of their global market business. the asset management business provides a steady stream of these and low capital-intensive business just to give you an idea. it generated 10% of deutsche bank's revenues in the last nine months of 2016, but accounted for 3% of their assets. jonathan: we speak to many ceos who say exactly what you said, a stable revenue, but when you look at the headlines of the last couple weeks about the bonus in deutsche bank, if he

wants to build up the business, where is the talent going to come from to do it? arjun: that is a good question. they need to invest strategically in the business in areas where they are strong. for example, they have the big etf business, which is a key growth area a moment. focus on areas of strength. the metric we always look at his inflows into the wealth management business, the asset management business, and how things are going. how hard has that division been hit? kind of outflows have we seen over the last year given the troubles they have had? arjun: fairly consistent with other big players in the asset management space. we have seen consistent outflows over 2016.

obviously uncertainty about management, the strategic direction of the bank playing into that. whether they can reverse that in 2017 is the key question. that remains to be seen. jonathan: thank you very much for joining us. time for other stories making headlines at this hour. good morning to emma chandra. cisco is making an acquisition. they agreed to buy company for $3.7 billion. they snapped up the software maker just before it's time to go public. chuck robbins joins us at 9:30 a.m. today. they are trying to retain the ability to do business in the

european union after the u.k. exit. people familiar with the matter say the move is seen as administrative, less about moving people, and more to preserve access to european investors after brexit. jump has helped them a lot more than $284 million in bonuses, stock holdings, and other investments. the bank is letting its former president collect about $65 million in cash. that is ultimately $220 million .n goldman equity he must liquidate holdings to take his new place. that is your bloomberg business flash. alix: thank you. dow futures up. these are some of the movers you want to me watching.

profit missed but revenues were better and shipments of aluminum products rose 42%. this was the first quarter they represented where the companies were split into two. also take a look at some of the financials in europe. good earnings, 9% better. in the u.k., profit was 43%. the ceo less pessimistic about the u.k. we will hear from the ceo later on in the show. that is driving up other european banks as well. seagate and logitech, they released earnings. 450 on the high-end. they reached their growth market margin. logitech, third straight earnings beat. outstanding. jonathan: thank you. coming up on this program, will the key datesp --

investors are looking for in this week's trading diary. that is next. looking at futures. yesterday over 87 points away from dow 20k close. near another all-time high on the benchmark in the u.s. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. time now for today's diary. we go to data on u.s. mortgage applications. the index rose 4% after rising 0.8% the week prior.

later in the week, we will get a look at durable goods orders. looking at mortgage, here we go. with spoke to professor yesterday about economic narratives. a backup at the long end of the yield curve and people take fewer mortgages. you don't see it in the data. >> not yet. it is a good sign that the consumer is shrugging off this moving higher interest rates. you hear from ceos on the earning calls that have been coming out that they sense more consumer optimism in the last few months, and that seems to be feeding through to the mortgage market and housing market, which is an important driver of the overall economy. jonathan: we talked about it parallels you can draw from 2013 when we had aggressive back up in yields. difference in what we are seeing in many ways? matt: absolutely. the biggest difference being a

lot more people are working out now. more income generating to the overall labor market and that is holding up housing, with has been struggling a little bit over the last year or so. jonathan: we look at these bond at a federalfs reserve that needs to step back. move toa more reactive the cyclical it we have had. -- had? matt: it is not showing up in the consumer oriented data right now. laggard in this recovery has been business investment. central bankers think some of that may be tied to interest rates, what they do with interest rates that will influence that. interesting what we got as the final business data into the election later this week with

our first look at fourth quarter and set a baseline for where we go to forward. jonathan: we have seen the business confidence the birth and consumer confidence numbers. confidence numbers and consumer confidence numbers. matt: the latest data showed a bit of a positive in the upward surge, but there has been a lot of interesting underlying components of that data set showing that consumers have more optimistic views on everything from business conditions in the unemployment rate to the chances of having a good retirement. that seems like a broad-based improvement. jonathan: might take away from the fed chair janet yellen, she does not think she is by the the curve. that you have a more pessimistic view of the economy than the consumer? you are not behind the curve because you do not think things

are that leak in the years to come. matt: i think that's right. they are concerned that they are not going to have much room to cut so that is why they are taking it slow on the way out so they can boost now in order to avoid the situation later. jonathan: a ton of data coming up this week. all of that concludes with the gdp. david: just a recap of the morning so far. been busy onmp has twitter, tweeting about voter fraud. a said he will be asking for major investigation into voter fraud, including those registered to vote in two states, those who are illegal, it does who are registered to vote who are dead. aboute went on to tweet the supreme court. we have been hearing from the president quite a bit. he is squaring off a bit on the

voter fraud. he says he thinks there are millions of people. everybody says we do not see evidence, but he will ask the justice department reasonably, and they are in a tough position. tox: they are and you had think he has to do it. david: a lot of people are questioning, is this really where he wants to be spending his time given all the policy issues? alix: it is a good when we continue to discuss here at bloomberg. what is relevant from a trump tweet to investors? you have to pay attention because you never know. that does the markets over the short-term. what kind of value and premium can investors put on these? david: it is the longer-term, who is on the supreme court can make a difference in the markets and businesses. the other tweet, there is an opening. he will nominate someone on thursday. who that person is could make a difference in the longer term. alix: absolutely.

america, on daybreak discussing the new acquisition of dynamics. the other question is, what is it like to be a ceo of a major international company under a trump white house? we will break it down with him. the focus stays on washington, d.c.. will we see that out 20,000 -- the dow 20,000 points? the global rally continues from asia to europe to the u.s. this is bloomberg. ♪

jonathan: from new york city, good morning to our viewers worldwide. welcome to "bloomberg daybreak."

the equity markets an all-time high on the s&p 500. up 84 on the dow. 9 points on the s&p 500. we look like this. a weaker dollar story. the cable rate just briefly 125, the pound against the dollar. alix: here is what you need to know at this hour. president donald trump unveils actions on national security. the are expected to include steps for building a wall on the mexican border. is set the pace of two session lows but it has now reversed higher on the session. deficit details. president trump's pick provides director says the national debt has to be addressed sooner rather than later. her.the force be with u.k. prime minister theresa may battling a rebellion from her

own lawmakers, say he will publish plans to move from the eu. savid: 4 president trump tweet this morning. yesterday, he told us what he will be doing later today. he said he has a big day plan on national security tomorrow, that is today. among other things, we will build a wall. with us now is our reporter. program.o the tell us about where the president has been going to last few days because there has been a lot of talk about trade, tpp, so many ceos. building a be virtual wall around the country. >> the president started off this week saying it will be a big way from any fracturing. we saw him in with a number of ceos. we also saw him meet with automotive ceos. we saw him signing a number of executive orders.

he said he wants to focus on trade and make sure the american worker's first. first.worker is put now he is talking about building a wall. david: at the same time, his nominee for budget director went to the hill yesterday, miserable mr. mulvaney, and said he doesn't want to run up the deficit. is there a tension between these two? >> he said he does not want to touch entitlement of the major programs touching the debt. hirings to implement a ,reeze and cut the workforce but it costs a lively. looking like he will not cut entitlements, then that will go debt will gon the

higher. david: thanks very much. jonathan: thank you. for more on trump in the outlook bythe markets, we are joined the associate managing director and portfolio manager. roughly 8% to 10% return on the s&p 500 by the end of the year. great to have you with us. some people take it seriously we may not get a fiscal stimulus plan. how dependent are some of the bullish calls on the fiscal stimulus plan? >> policy will help, but stocks are driven by earnings and earnings will be up 6% to 8%. that is the basis for our expected return on the s&p 500. the policy will be generally for growth. we will see lower taxes, and steps in terms of deregulation, which will help growth pick up

in the u.s. and profits pick up, but we are not dependent on that. jonathan: let's focus a little more on the policy for now. you look at the tweets that come out. what is policy and what is not policy? ed: it is very difficult. right now, none of us know what the policies will be. you are so many different claims . it is hard to make them at work right now. we will see the policies over the next few weeks. the market has given the administration the benefit of the doubt. alix: markets already looking at fiscal stimulus. ? how to 6% to 8% growth do anything ed: you look at the history of earnings forecast, usually they dropped by 1% a month. i spent a lot of time with

earnings forecasts. i think that is somewhat bullish relative to if you took the historical average more like 2%, 5% growth. alix: now the conversation is beginning to slowly pitted towards the budget deficit. you have a peak in the dollar and writers saying there is payback later. how do you prevent factor that pivot and factor that in? ed: i think they are focusing too much on the deficit, it is counterproductive. alix: 77% of gdp? that is a lot. that is not nothing. at some point, that will come back. ed: i think the size of the debt

is less important than the flows. i expect the deficit to pick up modestly. is at a reasonable level compared to gdp. david: you talk about debt, the targeted -- mulv aney, that is not a capital investment. ed: i am at an age where i can start to collect these benefits myself. relatively modest tweaks to those programs will keep them solvent. a drastic change is not important. jonathan: we had a conversation around this table about a day or so ago about energy. if you do script that energy and financials, how good is it? ed: earnings have been growing at a pretty decent pace across the market. the volatility over the last several years in the s&p 500

earnings have been driven by energy and energy related companies. alix: energy will have some killer comps, but that will wind up wearing out. the coreof like inflation argument we have from time to time, you do not want to take out parts of the market you disagree with, but if you look at the overall picture, most earnings have been steadily rising. earnings growth at the nominal rate of gdp, which i think we will see a pickup in nominal gdp. you can expect to see earnings continue to be a market trend for years to come. david: thank you so much for being here. now, we went to get an update on what is making headlines outside the business world. emma is here with first word news. says heesident trump will order an investigation into voter fraud. he won the electoral college but lost the popular vote by almost 3 million votes.

he repeatedly made the claim that the election was tainted by massive voter fraud. he said he will be asking for an investigation into voter fraud. least in somalia say at eight people were killed and 14 this morning. they stormed a hotel in the capital of mogadishu. this very chaotic scenes. gentolini says it is wrong to try to escape this now. 24 people died and five remain under the rubble. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. thank you so much.

dow futures up by 71. here is a movie to watch in premarket. earnings were better than estimates. as well as revenue. for its earnings at the whole year, looking at 930 on the high-end. it is really commercial backlog that is impressive. billioncklog is $477 equal to over five years of current sales. taking a look at novartis. earnings coming in one penny better. that maybe all the block. revenues fell 31% last year. potential options could be a wholesale, parts of the cell, partial ipo. wrapping up with brinker international. down on the day here by almost

5%, setting lower guidance. $3.05 to $3.15. we talk about consumer confidence. we talk about holding up the economy. and what does that say about the consumer? david: coming up, theresa may demands,o lawmaker safety will make public her plans for negotiations to leave the eu. next, what the white paper will consist of. 's plane prime minister is plant rejects the deal. this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg daybreak." check on the markets quickly. futures up 75% on the dow.

500, closinghe s&p yesterday on all-time high on the u.s. benchmark once again. a weaker dollar story in the fx market. cable rate kissed 125. -- 126. 2.48 on a u.s. 10 year. did the u.k. come with is battling a brexit revolt. in the last hour, we heard from may saying she will give into lawmaker demands and published her plan for brexit. >> the super question of publishing the plan, a bold vision for written for the future, i will do that in the white paper. what our objectives is the best possible free-trade arrangement with the european union, and that is what will be out there negotiating for.

john.an: joining us is talk about where this is coming from. pressure from the opposition or within her own party? >> pressure from the opposition to the extent that there is pressure from within her own party. conservative party not completely united behind the idea of a hard brexit. this is coming on the back of her defeat yesterday in the supreme court. what we will see his theresa may being questioned on her position that she did not want to be in. she did not want to have to go into the brazen negotiations with anything less in the public domain than a very broad detail. now, this will force her to put a law or on the table that she was initially planning to. jonathan: you have seen a lot of this before. relationships with europe and greece and all of that. weaken herreally reaga

hand? >> no one believes what she will publish in the white paper is the red line of what theresa may wants. negotiation is the process of finding out where the red lines are for both sides of the table. we get back to the point of this very important issue. as many cardskeep close to her chest as possible. that sheot something wanted to do. you look at it from the other side, the eu has said nothing strategy.negotiating all the pressure has been on theresa may. subtly, i have not going to say it massively hurts her negotiated position but it is certainly a place she did not want to be. jonathan: the opposition clearly

not just the opposition in the opposite wrench or within her own party, with the banks are starting to make a lot more noise as well. your take away from a position of some of these banks with large presence in the city of london. are they starting to turn the screw as well? >> there are trying to. in our interview with theresa saying theek she was i city is a big part. amountere is a certain of shadowboxing here where the bankers will make it sound like they are threatening to move huge waves of the operations. as time has gone on, as a hard brexit gets more and more real, it is becoming more reality to a certain extent and bank executives are forced to make these physician positions.

moving some of our people and operations. alix: is there anything theresa may can do to counteract that? a low corporate tax or something to keep companies in the u.k.? was the reality of something like that happening? that is something you can do. we will see her in philadelphia tomorrow morning with the republican party. she will be meeting with the president on friday. when other things she is really going to try to push for is the sense that britain will get a free trade deal with the u.s. right away after the brexit negotiations are completed. that would strengthen her hand going into the negotiations with the eu. she will be able to tell the eu you will try to play hardball with me, but i have somebody in my back pocket. i have negotiated or almost negotiated a pretty good trade

deal with the u.s. in terms of how she can make britain more attractive going forward, the next few days will be quite important for her to project the image of someone capable of getting a good deal from donald trump. jonathan: coming up on this program, we take you to the bond market. optimistic outlooks from corporate executives and asset managers. bond traders paying a different image. this is bloomberg. ♪

forthan: from new york city our viewers worldwide, this is "bloomberg daybreak." let me get you up to speed on the markets. closed yesterday at an all-time high on the benchmark in the u.s. on the dow, 87 points away from 20k. the bond market looks a little something like this. treasuries are on. up two basis points on the u.s. 10 year. we have $34 billion at 5-year note coming to market a little bit later. a lot of supply coming out of the u.s. a weaker dollar story in today's session.

david: another story building as we speak, brian moynihan is speaking about the lamarcus at a council across town in new york. he is saying we will get through post-brexit changes. the banks need time to adapt to what is happening with brexit. davos, when he was at everyone was looking for clarity on the politics, but there has not been much clarity. we got there it will have uncertainty last year in politics and we do all right in the end. we talked about that as well.the regional banks as well . the smaller guys, that could be hugely incremental to them. jonathan: confidence numbers, he wants to know whether they want more loans and to make more deals. david: exactly. talking with midsize companies saying, do you want to borrow more money? alix: all of that if it's on the

growth. on in duringn weighed the last hour. >> if we get enough fiscal stimulus, we can get to 4% growth. whether we can sustain 4% growth, whether they will be a payback at some later stage is another question altogether, which they're almost certainly would be a payback, but can you get 4% growth in a years time if you have a 2% gdp stimulus? yes it is possible. is one part of the story, but if you look at the bond market and a gap yields, that is 111 basis points. what does that tell you? >> the bond market is screaming that we will not get 4% growth. we will not get anywhere near 4% growth. they are factoring a 2% inflation rate over the next decade. if you look at that yield curve,

you have seen it is narrowed. the narrowest point since 2008. we are talking about slower growth over the long-term. there is a fear that if inflation does pick up quite a bit this year, the fed will be forced to raise rates faster, slowing growth over the long-term. you could see shorter-term yields spiked upward at the expense of long-term growth. alix: if you look at the u.s. 10 year yield, that has been coming down. this is starting to transform. lisa: yesterday i was reading the budget from the professional budget office of the u.s. alix: of course you are. light reading at lunchtime. david: me too. [laughter] jonathan: full disclosure, they did was broken. lisa: they were talking about the expansion of the deficit in

the u.s. over the next 10 years. they said one reason why is because of the increased interest expense. in other words, it will get more costly to service this debt. they wrote this book for donald trump came to office. they were factoring in a 3% 10 year yield. it yields go up further, that will increase the deficit and slow growth. there are a lot of factors in the face of 4% growth. jonathan: just a quick word on credit. on friday, she said look at some of the issues in the credit market. how significant has it been? lisa: you can see a record pace. not the same in high-yield bonds. you saw an issuance yesterday downsized, the first downsized

offering so far this year. you have seen some real sinkholes within bond tightens. you are seeing some weakness in the weaker parts of the credit market. alix: does that mean the search for high yields is over finally? lisa: maybe. alix: thank you very much. coming up, we turn our attention to the federal deficit. president trump wants mulvaney to be his budget director, but mr. mulvaney is adamant about the need to get the deficit down. we will debate that next. this is bloomberg. ♪

jonathan: from new york, this is "bloomberg daybreak: europe go -- "bloomberg daybreak." 8 points.sitive about

a ton of supply on the bond market out of the united states and europe. $28 billion of seven-year notes coming tomorrow. in the fx market, it has been the same story all morning. alix: here is what you need to know at this hour. up against a wall, president donald trump to unveil actions on national security that are expected to include steps for building a wall on the mexican border. we will take a look at some of the volatility. pick for economics. may the force be with her. u.k. prime minister theresa may battling a rebellion from her

own lawmakers says she will publisher plans for brexit. david: we want to bring you up to speed on this top that brian moynihan is giving right now across town at the council on foreign relations. he is talking about global markets. he says he has not yet met trump. the same time, he says he wants him to think about the cost benefit analysis. he also expressed some concern about shadow banks, that they are not properly regulated. the question he says is whether the regulation has gone too far. he said that the effect is on middle sized firms that we see with the trump plan. alix: markets have been anticipating all of the fiscal stimulus since trump's election. how will trump pay for that? the budget director nominee nick mulvaney made it clear that going further into debt is not

the way to go. >> i believe that the debt is a problem that must be addressed sooner, rather than later and that fundamental changes are necessary in the way washington spends and taxes. this must include changing the fiscal path, which is unsustainable. alix: joining us now is the former vice chair of the federal reserve. he is now a senior fellow at the brookings institute. michael mckee is also with us. is donald trump have for fiscal policy? alice: it depends on whether you were talking about near-term room and long-term room, where he does not have much at all, if he is being sensible. as the designated or nominated omb director said yesterday and confirmed by the congressional budget office numbers, the

long-term debt is on a very serious trajectory to rise. that can't be good. on the other hand, if you can grow the economy faster in the near term as president trump wants to and in big infrastructure infusion will help that, it is probably a good don'tas long as we also take our right off the long-term debt. alix: mike, how do investors square that? you are starting to hear calls that maybe the dollar has peaked and maybe we can't deal with this. growth is really the key. if you get growth up, you can handle a lot more. the debt projection is that it goes down from 587 billionaires -- $587 billion and then this supposed to go back up again in 2027.

any long-term plans is going to be difficult to fund and it is going to be difficult to sell that type of paper into the markets. the problem that they have is in the increase -- is that the increase is in the mandated programs. you look at where the growth comes from. it is social security and medicare and the entitlements programs. the discretionary spending they talk about cutting in washington is a very small part of it and rises very slowly, which is why you had the fascinating aspect of nick mulvaney saying we need to cut social security and things donald trump has taken off the table. jonathan: you said they need to get growth up. you can do stimulus or reform. if they try to do the latter, how quickly does trump need to achieve his goals that he has set out? this year? next year? michael: the low in the deficit

is going to be in 2018. he has that amount of time. nothing that they passed this year will have an effect on the economy this year. it may have an effect on market perceptions. it will probably not hit until 2018. david: this does sound a little .it like dynamics if you do adjust the discount rates just 1% a long-term -- on long-term, you really fundamentally change things. is that a smart move to make? investing ink faster growth is a very smart move to make if you know how to do it. the president has made quite extraordinary claims that he can raise the growth rate to 4%. it is now around 2%. i hope he can move somewhat in that direction.

it certainly is not guaranteed. the drag of the long-term deficit will hurt, not help. alix: alice, what does the drag on the deficit and up looking like? when is the negative payback? the hard thing about that question is we absolutely don't know. world markets up until now have shown an enormous faith in the united states, faith that we will get our act together, that we will not default on the debt, and we will not keep our debt to gdp ratio rising, so they are happy to lend us money. when does that run out? heaven knows. we'll to be really careful veryse -- we ought to be careful because while we need the growth, we need to be responsible funding our government and, at the moment, and the long term, we are not doing that.

alix: mike, you hear alice saying that the world trusts us, but we have seen china so treasury holdings for five or six months. you could say some of that was intentional asset allocation. are we looking at that? michael: the certain amount may have been asset allocation. some of it is revaluation. some of it was the fact that they were defending reserves. there is no indication china is massive-- spending on a -- selling on a massive basis. the question is how big does the debt get how fast? the united states can all pay -- always pay its debt. it has a printing press. you don't want to do that and they have negative consequences, but default, unless it is deliberate is not something that we have to do. david: alice, one less question. said that we had no discussion of entitlements and now we have mr. mulvaney

finally stepping forward saying, we should take on the question of social security and medicare. isn't this essential? not all debt is the same. alice: absolutely. the real reason for taking on the entitlement programs is to make them safe for the long-term future. we don't want social security beneficiaries to suddenly be faced with a cut in benefits. we would like to put that program back on a sustainable basis, which it is not now. that is going to take some long-run benefit reductions, probably mostly for upper income people, and some additional revenue. it is not a very hard problem. medicare is a little harder, but the same thing applies. we need that program for the long-term future. it has to be solidly funded. it is a very elementary problem and it is not a new problem. we have been looking at the same

numbers for 30 years. david: many thanks to michael mckee. now, we want to turn to health care, a topic at the center of the presidential race. it remains high on the agenda for the trump administration. yesterday, tom price said his goal was to make sure every single american has access to affordable health care that will provide the highest quality health care the world can provide. he was criticized by senators at the hearing for not having the details on how he planned to do that. , take us through this debate going on about repeal versus repeal and replace at the same time. what is at stake? alice: a great deal is at stake. , therump administration president campaigned on trashing obama care, and saying it was a terrible program and he would repeal it. now he has got to replace it

with something and he has not yet told us where he is, but he has made very positive statements about how he is going to have an amazing program that will cover everybody and mr. price, dr. price, was echoing that yesterday. the problem is that we have approximately 30 million people who are newly covered by the affordable care act and nobody in his right mind wants to see those people go without insurance. so there has to be a replacement. the republicans never seriously thought about what that replacement would be. repair of the obamacare, but they have trashed it, so they want to do something different. yesterday, we saw two senators, senator collins and senator

cassidy, come up with a program that would say, ok, let's let the states choose. they can stay in obamacare or they could do something more republican with health savings accounts and contributions from the federal government to health savings accounts. that was not very well worked out and it is not clear how many states would choose it, but it is the beginning of the conversation they need to be having. david: i don't want to get involved in all the reconciliation and the ins and outs, but legislatively, they are set up so that repealing without replacing is a lot easier than replacing, isn't that right? alice: well, they can repeal with only 50 votes. but i don't think there is a majority even in the republican senate to do that because they realized that if they just repeal and don't replace, they

have a human and political disaster on their hands. the republican health leadership , senator alexander and others, have been pointing out that that is a disaster and they ought to have their replacement plan in hand before they repeal. so, that is the track they are on now. is aieve that there possible deal between sensible republicans and sensible democrats that will get us moving forward on this and not have people losing their insurance. but it is going to be hard to craft it. david: there may be a deal, but how much time and effort would be consumed? be the firstt administration to be bogged down in a health care discussion at the beginning and they hardly ever get around to it. they won't get to wall of the other pro-growth plans that they have. alice: well, there is certainly that risk, that it will be very

contentious. my hope is that enough republicans, including the thatdent, have realized they need to have a sensible replacement that will cover a lot of people and not throw people into disarray and not throw the insurance markets into disarray, that they will get on with it fairly quickly, but there is no guarantee of that. alix: take you so much for joining us, alice rivlin, the founding chair of the congressional budget office. coming up, president trump signed an order that revised the keystone pipeline. that is next. this is bloomberg. ♪

emma: this is bloomberg daybreak: europe you coming up in the next hour, chuck robbins joins us at 9:30 a.m. jonathan: from new york, this is bloomberg. let's talk about brexit's impact on the financial sector. still caution on u.k. gdp growth that has no relocation plan. francine lacqua spoke earlier in a bloomberg exclusive. >> in the short-term, the u.k. is wealthy. the last six months have been good and this should be positive for the next six months. inflation will hurt consumers, obviously. we are expecting lower growth in the u.k. 42017. not as low as we expected

before. we still expect growth, lending to grow less. in this context, the u.k. has done a great job this year. we absolutely are totally committed to the u.k. is a very local british bank with loyal customers. it will be less growth, but still positive and this is important. francine: if the u.k. loses passporting writes, does it make any difference to how you operate and manage the u.k.? ana: for us, it makes no difference. what we care about is their customers. it will affect our customers and this is what we need to think about as we work out what is going to be the new wii between the u.k. and the continent because we are very close, lots of exports, imports, and we need to think about that. and the people. there are a lot of british people on the continent. the thing about 50 million last year.

let's think about the people and the customers. the small companies trading between the u.k. and europe. as we work out -- francine: in terms of ppi, are you over the fines in the u.k.? ana: there is still not a final paper on that, but we don't expect much more. francine: we talked to a lot of themin davos and a lot of were saying the big u.k. banks may be moving operations to frankfurt maybe. do you have a sense that a lot of these bankers would move talent to madrid? it is a financial center. ana: well, of course. if anybody is going to move from london, we would very much welcome them in madrid. we have great people, great infrastructure, i think it would be a great place. but london is still the hub for talent. it has critical mass, the markets are there. i think london will remain the most important center in europe. francine: talk to me about the

u.s. bank. it failed a stress test from the fed. the rules are changing a little bit. have you had any assurances that you will pass this year? ana: importantly, our bank has done really well on the quantitative stress test. on the qualitative side, we're making progress. the fed said so in june at the press conference. that was the main goal. said thely, the fed smaller banks will not be subject to the qualitative. that is the news. we are upgrading how we manage the u.s. we have some green shoots in the u.s. as i will say later on. we are growing our transactional customers, our cost income is coming down in the bank. the consumer has a return on equity over 18%. on the turn around, it is really the bank, which is a small part

of our overall business. francine: talk to me about spain. 14% of your revenue is here. can the path for grosbeaks sustained -- growth be sustained? ana: i think yes. spain has made very important structural reforms. we have created 1.5 million jobs in the last few years. the deficit is down. very important, very solid base for growth. what we need is to continue creating jobs and that is the number one priority. jonathan: that was ana botin speaking to francine lacqua. a bit of a reality check for some of the british doomsday crew. the push back against that is that this is almost purely a retail bank. is notpassporting something they are extremely dependent on like their competitors. david: it is also interesting

that it is not a transporting -- transborder bank. i wonder if that is a path to the future. alix: in terms of growth, in terms of inflation, spending, loan growth, that is a whole different kind of story. she did see risk down the road. then it is going to hit you no matter what. jonathan: at the same time, the economy has held up. alix: that is true. jonathan: a lot of people thought it would roll over, but it has not. i think a lot of people are sitting here saying why? alix: when we talk about the risk in the european elections, european data is holding up too. president trump signed the order to revise the keystone project. that is next. ♪

alix: the morning meeting where we hear what key banks are looking at.

let's talk about the keystone pipeline. you had a memorandum coming up from president trump yesterday. what it want to pretend is that the keystone pipeline does get built. what happens to canadian production? >> welcome a broadly speaking, there is a question of timeline. it may be later this decade when it finally gets built and running, so it is not instant change. does, roughly it speaking, it may not lift volumes of canadian oil production by that much, but it should raise the local oil price for canadian producers, which would be welcome. alix: let's talk about that. west canadian select did not have a huge pop on the news. expect if the pipeline does go through? what is the differential? eric: well, it can bring it back down to pipeline cost. it depends on timing.

we have a couple things happening at once. canadian oil production continues to grow even with the price crash. pipelines needed to be built to keep up in order to bring down or rather lessen this discount that canadian oil producers are getting for their oil. when there is not enough pipeline, you move it by rail. to --g canadian oil sense tends to set the marginal price for canadian oil and that is why we see those discounts. until the pipeline gets built actually, you may not see much of a pickup in canadian oil prices. alix: before this news broke from d.c., you guys put out a note about 11 wildcards in the trump presidency, this was one of them. you had a probability of 55% that it happens. what is your probability now? eric: um, well, i think in the wild-card what we wrote with a 98% probability.

alix: excuse me. 98%. eric: i think at this point, the approval is yet to come. there is still stuff in the language, it is really more at the moment a call for expediting some of the processes in place. it is likely to get at least approved from the administration's perspective. there are still things from the company side that they need to do. alix: eric, thanks so much. chris robbins, the cisco ceo, will join us to discuss his latest acquisition and what it means to be a ceo under a trump white house. we are also on dow 20 k watch. ♪

jonathan: from new york city, this is "bloomberg daybreak."

i'm jonathan ferro alongside david westin and alix steel. the markets are at all-time highs. we are on 20 k watch. veryu switch up the board quickly, treasuries. yields up. the dollar weaker against pretty much everything in the g 10 space. david: here is what you need to know right now. record watch. record and nasdaq at highs. dow 20,000 could come right near the opening bell. technical support. take names in the tech sector kickoff earnings tomorrow with alphabet reap porting that's reporting after -- alphabet reporting after the close today. up against a wall. president donald trump signs actions on national security that are expected to include steps toward building a wall on a mexican border.

the news sent the peso to record lows, but it is now reversed. alix: let's look at the dow 20,000 in perspective. it is that nice, juicy round number that a lot of traders and up watching. the dow futures are pointing up 92 points right now and so we would breach that. that would be 64 days since we went from 19,000 to 20,000. that shows the days to make 1000 points. that is the second fastest 1000 point gain. the first one came from when we went to 10k to 11k. this chart shows the speech which we got to 20,000. the heavy upside. boeing up 1.5%. earnings beat estimates. alcoa also up 3%.

up almost a whopping 14%. a blowout quarter. on the downside, check out abbott labs. first-quarter guidance was light. sales on nutrition products were week. united technologies off by 0.5%. full-year outlook disappointed. 8%.ron down by almost an interesting dynamic playing out with the airplane guys, the big defense builders, as well. we will be digging deeper into that in the next hour. jonathan: i can hear so many people getting excited at the new york stock exchange over the prospect of hitting 20,000. one of them is our bloomberg stocks reporter. great to have you with us on the program. yesterday, we caught up with professor shiller and he talked about economic narratives.

we talked about how powerful the narrative can be. is it a powerful narrative? >> i think it has been overplayed in the media, quite candidly. i think there are a lot of important technical signals that are fairly constructive. jonathan: be more specific about the media? [laughter] >> it is a big, round number. those things do have some psychological importance. maybe more for retail and institutional investors. missed in that focus on 20k on the dow is what is happening broadly. there are positive signals. you have had small caps perform well. you have had financials perform well. you have had the dow sectors perform as they are supposed to. i think a lot of that is really quite impressive. jonathan: things have got bullish and very quickly. >> very bullish.

i want to jump onto a chart on the terminal. this is something that is interesting. it is looking at the put calls. we are looking at the 50-day average. what is happening here is something that does not happen outside of market bottoms. the white line shows the 50-day moving average. that is where we are right now in terms of the number of puts her call -- per call. inhappened in 2009 and a 2002 -- and in 2002. it is right to see that when markets are high. does that sentiment start to work against itself? michael: it is a great chart. there are a few other charts you can look at from the options market that have been bullish equities and bearish volatility. all of which is surprising when you think about credit spreads having tightened and higher political risk and the bond yields are higher, which means

the fed is out of the money. the options market is basically saying risk is on and is going to stay on. i think there are a couple of reasons why. one of them is technical. since the trump rally in november, the markets consolidated sideways. the conditions have been relieved quite substantially. and whythe other factor that chart is what it is is that the inflows from foreign buyers , it is a assets process that will take some time and will help smother out the dips. then you have earnings season, take all the trump factors out, and audit on q4, it is coming in pretty good. david: that is when markets usually go up. alix: here is the issue. every single person who comes on this set says volatility is

going to pick up because of the uncertainty. what has happened? volatility is not picked up because of the uncertainty. will complacency wind up being ok? >> i feel like there is uncertainty. versus what it was the read remember when obama came in and was talking about health care, corporate executives were very uncertain. now we are uncertain about what trump is going to tweet or say, at the end of the day, they are going to plan on spending money. michael: i think if he does get corporate tax relief, that is an enormous boost to corporate earnings. it may be a one-time permanent adjustment, if you will, but it is a huge one. i think that is something that people are going to be looking at. burden lower regulatory is going to goose up the margins for a lot of key sectors. then, banks. the higher yield curve, dodd-frank, more trading, all of those things, more market share

for the u.s. investment banks as they gobble up europe. all of those factors are really pretty constructive. i do want to make 1.2 that, which is that even -- one point two that, which is that even if hillary was elected instead of trump is that the outlook would be pretty good still. when you fall back on is really pretty solid. jonathan: here is what stands out for me is how quickly the narrative has changed over the last couple of months. we come out of the election, president trump, that's what you've got. then things rally, then the price fits the narrative. buy because weg, are going to get all this good stuff, the fiscal stimulus, the regulatory reform. they said, don't sell, we are not going to get the protectionism. then a couple of months went on and i was told that when he gets into the white house, it would change because he was still talking about it. he is in the white house, he is

still talking about it, he is doing something about it. the narrative is still being set by the price in the market. does that not concern you at all? michael: sure, it does. to the broader point about when is the volatility going to rise? i do think it is going to rise. the process by which flows come in and the trump presidency unfolds into reality, you still don't have that much more clarity on things. sure, you see some guys getting approved and going through processes, a great number of tweets, but what it really means for the overall economy is something no one is going to have clarity on for quite some time. you work with what is working for you in the meantime. every time you have the market making fresh eyes, it tends to keep the vix lower for some time because people have to catch up with that. momentum traders keep the market grinding higher, which means lower realized volatility and lower put calls. david: thank you both very much

for being here. for an update on news outside the business world, we go over to first word news. emma: thank you, david. theresa may will publisher plans for negotiations to leave the european union. this after lawmakers demand a greater scrutiny in parliament. >> there is a separate question of publishing the plan that i have set out, a bold vision for britain for the future. i will do that in the white paper. one of our objectives is the best possible free-trade arrangement with the european union and that is what we will be out there negotiating for. emma: theresa may was speaking to lawmakers in the house of commons earlier today. border security will be the focus of president donald trump's latest executive actions. he is expected to lay out his plan for building a wall along the u.s.-mexico border and other efforts during a visit to the department of homeland security today.

later this week, he will rollout plans for restricting refugee flows to the u.s. president donald trump says he believes he did not win the popular vote because of voter fraud, tweeting this morning acting -- asking for a major investigation into the issue and may announce measures to strengthen voting procedures. disputed claims over rigged voting systems and has raised concerns over fraud. global news 24 hours per day. this is bloomberg. david: thanks so much. coming up, futures point to doubt 20,000 at the open. -- dow 20,000 at the opening. what can we expect from outperforming stocks? that is next. ♪

jonathan: i'm not sure it is breaking news, but i will bring you the update anyway. futures positive, up about 100 points. the s&p 500 up 10 points. 0.4% up on the s&p 500. many predicting we may finally cross the 20,000 line on the dow. alix: 20% of the s&p are reporting earnings this week. we want to dig deeper into tech earnings. here is the founder and ceo at estimize. what is going to be the big theme? >> so, with facebook, the deceleration in eps and revenue growth is on everybody's mind. the company gets a pretty high multiple. the did get whacked after last

quarter's earnings. it is going to be interesting to see if they can come in above the expectations. if they come in below these growth expected numbers, i think the multiple gets it again. the google numbers are alphabet or whatever we want to call it these days, we are looking for in line numbers on the core business and it is going to be interesting to see what they say about the moonshot, as well as specifically, everybody wants to know about ai. that is the next thing for all of these companies. apple is way behind the ball. it looks like google is in front of it. facebook is somewhere. those are the comments we are looking for. alix: apple has gotten a slew of downgrades for different reasons. china not as strong. fx is going to be an impact. leigh: growth is literally zero here for both eps in revenue on a year-over-year basis.

if you stop the growth engine for apple, all that is left is the multiple expansion. the eps numbers have come up for apple, the revenue numbers have come up from our consensus. that is not going to be enough to sustain this multiple with zero growth. they are going to have to say something about some product that is going to get out of the market at some point because there is nothing on the horizon that gets this thing going again. david: it is not just that there is nothing new on the horizon. my son loves watching youtube videos making fun of the new iphone. they have always been the cool thing, not something to make fun of. right? leigh: i think people have been saying that for how many years now? that android and all of these other -- i don't see that many -- that going away. you can either put up bigger eps in revenue numbers or you can get multiple expansions. a lot of the downgrades is that

the thing has run really far on fumes. alix: earnings estimates or something like 12%. what is going to be the reality? leigh: they are too high. [laughter] alix: by how much? leigh: that is a good question. our consensus numbers will be a little bit more in line with reality going out a few quarters. so, it is a very good question. this is getting oil from tech a little bit, but specifically industrials, they are way too high. there is a lot of this hope in what is going on with the trumpet ministration and regulations -- trump administration and regulations, they are coming down, i guarantee it. alix: is that a commentary on the fiscal stimulus and tax reform if we don't get it? or just, we are not going to get it tomorrow? leigh: the market is betting on two years out, it is not betting on next quarter. it is betting on two years out. you look a year out, fiscal

stimulus, a bunch of the infrastructure spending, it ain't going to happen. not this year. is the market going to care that the numbers come down? thus far, it does not look like it cares. for tech, it still looks really good. there are still pockets of growth. enterprise tech, enterprise software still look strong on an organic basis. david: what is the extent of the vulnerability on a trade front? leigh: i think the amazon issues are overblown across the board. when we see our amazon estimates, they have been taken up significantly. ithink the buy side expects to be incredibly strong. i think everybody looks at jeff bezos to be able to manage whatever comes his way. he always has been. that is why the multiple is very stable for that stock. we will look out for what he

says about amazon go, which everybody looks at taking on another massive industry. i highly doubt that the market is going to negatively discount externalities in potential risk around the trumpet ministration for amazon -- trump administration for amazon. alix: they will put in the positive, but not the negative for amazon. i think apple has a problem with the optics. our thesis is that traders are going to make money by discerning whether the market ores about the optics whether they don't care about the optics. obviously, the market has good a lot about the optics around industrials, some of the energy names. they have not really cared about the tech names thus far. we don't think they're going to care about amazon, we don't think they're going to care

about facebook, google. i think apple is a shiny object for him to rail against with a very specific thing that people understand. it is main in china, designed here, that is an issue. david: it also has a lot of money sitting offshore that they would like to bring back. does that help apple? leigh: if they do a hacks -- tax holiday, money is fungible, so you buy back stock with the money here and you don't fight back with the money that comes in. stock buyback's are going to lead to higher prices. we saw a lot of the rally in the last couple years being associated with stock buybacks and not growth. that can go right to the bottom line of the stock. we definitely think that that is bullish if they do the repatriation. alix: so great to see you, so great to get you back on set. roseg up, boeing's profit last quarter. the dreamliner emerged from a decade of losses.

what is driving the plane maker's growth? ? this is bloomberg. ♪

alix: we are eight minutes away from the open in u.s. markets if we open where futures indicate, we would have a record high, 20,000. we would be opening at a record level for the s&p 500, as well. we are on the dow 20k watch that no one cares about, david. [laughter] david: no because about it, but we keep talking about it. alix: it is a round number. a round, juicy number. david: shares of boeing are up. here to walk us through the boeing earnings and the company's future under a trump administration, welcome back to the program, ivan.

what is good in the numbers? improving global economy is increasing demand for passenger and cargo jets and that is helping boeing. david: specifically the wide-body, where they had been having troubles. ivan: why bodies are being deployed for international travel. -wide-bodyiesy -- deployedstroyed for international travel. -- deployed for international travel. the pipeline for boeing goes out 20 years. david: the 737. ivan: the 737. david: what about the profit margin versus the dreamliner? ivan: the margin is bigger, but the volume is greater in the smaller planes. david: they are doing well on that. as you look forward on growth, military is not that big, less than 50% of their revenue, it is not really in the forefront, do they plan to grow that? ivan: the key for boeing is the

cyber security business. the biggest concern for governments and corporations are cyber attacks, more so than military attacks. boeing is a key player. how big theyknow are in cyber security, but they are a very big player in cyber security and that is an area where trump has said we need to focus on, where the expenditures are increasing tremendously. global communications are a big aspect. we have a continual increase for greater bandwidth to link the systems in cars as cars get smarter and we go to self driving cars, to connect planes for online internet access and streaming video in planes, boats to bring communications to areas that don't have strong bandwidth. then the other area is the unmanned aircraft, which is really big. that is another area where defense spending is increasing. communication, cyber security, and unmanned aircraft. alix: give us a big picture as we head into the uncertainty of a trump white house, or you may

have a pick up in defense spending, where there will be lots of question marks, which big industrial airline guy is best managed? ivan: boeing, because they are leaders in all those areas. they are in big player in defense, especially unmanned aircraft. they are a big player in cyber security and people are not even aware of that. they are the best and largest plane manufacturer. isathan: what we have seen that they want to cut cost. what does that mean for the life of boeing? aan: boeing is still competitive manufacturer. president trump, a lot of his , they and his statements are more of a position of posturing and next not a negotiating position. he comes out and says the planes are too expensive, then the plane manufacturers realize they have to sharpen the pencil, but it does not necessarily mean it

is a pressure on margin. it is more of a posture. jonathan: ivan, great to have you with us. the opening bell is up next. the stage setting like this. futures positive. now at 111 on the dow. up by almost 0.6%. just short yesterday of doubt 20,000 yesterday. many expected to cross that level today. , 11 points ongh the s&p 500. yields higher by four basis points. a weaker dollar session begins the term on a margin. the cash open next. 20k, could beow time. ♪

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the s&p 500 closed at a record high yesterday. we switch up the board. 10 seconds away from the cash open. the dollar is slightly weaker through the day, strengthening up a little bit through the hour. treasuries. yields. in themarket gets open united states, we are all on dow 20k watch. .lix: we got it, jon k. got dow 20 we have been knocking on the door for many days, we got very close a few weeks ago, but could not reach that level. we have now done it. you have industrials, financials higher.it to claw in theory, what does it really mean? but for a lot of my daytraders, particularly my mom at home, it might mean something. this is a look at the dow over

the last few months. up by 5%. it took about 65 days for the dow to get from 19,000 to 20,000. when the dow went from 10,000 to 11,000, that was a 10% move. you have to take this rally with a little bit of a stride. at somet to dig a look of the individual movers. the s&p hit another record high this morning. we have some action in bank stocks. state street off by 5%. jpmorgan up by 1%. from stateill move street to jpmorgan. over $28eet has trillion in custody. a move for blackrock having an impact on some of the bank stocks. looking at some of the cyclical stocks that continue to move higher. is this based on hope and optimism? when does that run out? jonathan: great work.

cio -- we is the crossed 20,000 for the first time on the dow. talk about that psychologically. >> i think it is fair. i think the confidence levels after the election of trump have skyrocketed, whether it is the small business level, the consumer level, the stock market. psychology,arket but it probably would be viewed as a positive. shifts sodence abruptly, one way i always worry that it could shift the other way as rapidly. at the end of the day, we know the v stands for value. we believe that ultimately the key determinant to the outcome of what stocks and bonds may do comes from valuation, not what policy matters. be brighter, but

we have an issue with valuation, bonds. jonathan: there is a global reflation story, there is a global story, there is an earnings story in the united states, then there is the trump story. which is the stronger leg? well, neither, in the sense that there is right now synchronize reflation worldwide, but there are increasingly bad noises coming out of china. the party or the policymakers may do what they need to hold things together to hold their big party meeting in the fall to do with issues with capital flight. in the u.s., the risk is that interest rates may go up or not -- a lot. if the u.s. economy recovers. that would be a huge negative. finally, the big unknown is the u.s. dollar. the u.s. dollar today strikes us as overvalued compared to other

currencies. that is just today. but going forward five years out, especially if interest rates go up more than they go up elsewhere, the dollar could rise a lot more. that is a big negative for u.s. multinational companies. i don't care for any of those, frankly. david: wrapping all that up, if the dow were a stock, would you sell it? where would you buy it again? charles: i would sell it if it was a stock. it inwould want to buy 20% lower. i want to be paid for risk. thatoblem, my conundrum is investors are not paid enough for risk. the good news is that going forward and over the past year or two by the way, stockpicking still works. let's forget about buying the dow for the s&p, but let's look at individual names. one reason why i say that as i'm

intrigued by all the disruption impacting so many industries. retail with e-commerce, media with streaming, our own industry, the financial service industry, and the ability now is there to pick specific stocks. if you do that well, you will be rewarded. alix: i joked when you sat down. you own gold as a hedge, but it does focus my question on do you go and buy hedges if volatility is really cheap? charles: the way we historically like to protect ourselves against unexpected outcomes is through gold. we already own gold. 5.8% gold. we are happy to own it. we think that the key driver, as was mentioned in the journal article this morning, israel interest rates.

the inflation rate, i would not be surprised if it goes up a lot in the year ahead. rates will remain squeezed. they are trying to make it more difficult for citizens to buy gold. that is a headwind. david: thank you so much for being with us. now, we are going to head out to , california. cisco announced yesterday that it will buy app dynamics yesterday. this comes just ahead of the planned ipo. with us is the cisco ceo chuck robbins. welcome back to the program and congratulations on the acquisitions. chuck: take you, david. david: take us through this. you are trying to take the company into software and services out of the hardware. but why did this particular

company help you do that? so david, yesterday was a great day for us. two greatdisplay lovers of how we drive innovation in our portfolio. in the morning, we launched cisco spark board, which will revolutionize meetings and business. one of the headlines was that it was the coolest product cisco has ever built and then we made the acquisition of app dynamics, which we think is a tremendous synergistic acquisition for us. if you look at it, it is a cloud-based application performance management system, but in reality, what they do is they translate application performance into business insights for the customer and they do it across private cloud and public cloud. we think the synergy of what we see at the infrastructure level and what they see at the application layer actually creates visibility that no other company in the industry can provide to our customers. we are very excited about it.

i was there yesterday. 15 minutes after the announcement, i addressed the employee base and i think they are pretty excited, as well. david: good for you. a couple of questions about the deal itself. you paid a pretty high price. the ipore reports that was going to go for something like half of it. it is a startup. it is not making money. is the price right and at what point does it become accretive? chuck: well, when we looked at the company, there are a few things that we looked at that are important for us to understand. they are absolutely the best company in this space. secondly, they are growing twice as fast as their nearest competitor. third, they are growing faster than any publicly traded software company today. i would take you back to many of the acquisitions we have made over the last few years in the software space, as we made this transition, whether you look at the cloud-based security space or you look at jasper and the platform space with iot or you

look at our best example, four .ears ago, we bought maroci we paid $1.2 billion for them. that is a similar multiple. today it is a billion dollar business four years later. we think the synergies we can bring from a technology perspective and more importantly the breath of our sales organization, the breadth of our partnership ecosystem, we think we have the ability to accelerate the success they have already seen. jonathan: chuck, we have talked about the amount of cash you are holding a broad and the potential to bring it home and what you are doing with it. is this connected in some way? if you can bring it home at a low tax rate, are you going to put even more of it to work and not to just buy back dividends, but also for acquisition? chuck: i think, i will tell you this particular move was made

independent of any thought about repatriation. we are a customer of app dynamics and we have been a few years. we were in the midst of talking about a deep partnership and as we learned about their capabilities, the more excited we got. we would rather have them be a part of cisco than just building partnership. as you look at the broader tax reform possibilities and that is all tax reform including lower rates and repatriation, we think that gives us an opportunity to do a multitude of things, including dividends, buybacks, acquisitions, as well as creating jobs. we are excited, we are optimistic, and we are hopeful that throughout some part of 2017, we will see some of that come to fruition. jonathan: there is a change. last time, it was dividends, buybacks, and acquisitions, now we are talking about jobs in the united states. how connected is that potential conversations with this new that you need to

build up a workforce in the united states in the united states and a more significant way? chuck: if you are talking about repatriation independently, that leads you to a certain set of outcomes. are talking about all tax reform in general, including lower rates, that frees up expense dollars for us, which would allow us to increase our r&d and i would assume that some of that would be in the united states. i think it is a combination of all of those. really appreciate your time. thank you very much. coming up, wall street makes history. the dow climbs to 20000 and beyond. just another round number or have stocks broken through a major resistance labor -- level? that is next. ♪

emma: this is "bloomberg

daybreak." coming up, congressman michael mccaul. that is attack clock a.m. eastern -- at 10:00 a.m. eastern. the markets made history once again. the dow jones topping 20,000 for the first time ever. beckwith this is michael purves. just a round number or is it through a major resistance level? it has been there a couple of months now? michael: it has been riding through that higher. we saw the same, we saw things push through to fresh eyes. -- highs. 20k maybe more psychologically important to retail investors that have not necessarily participated in the bigger rally over the last few years as much as institutions have. but i think what is important k is the fact that

large multinational companies are doing well. it is a little statement that all is not horrible outside the united states. we have had such a u.s. center of discussion on equity markets after the election. at equityou look markets in europe, many of them have been doing better. china is not falling apart, either. alix: i'm glad you raised to that. jon, if you take a look at the top three gainers, ge, cisco, and apple. different sectors, industrials, tech, and consumer tech. jonathan: for the retail audience, but for the institutional players, it has always been the lacking ingredient of this mount up that we never quite got in the bull market, the fact that retail never really participated. michael: it is an added pillar of equity support. something that institutions will be looking at

as a potential warning sign down the road, particularly if we don't get followthrough on earnings momentum to q2 and q3. once retail comes in, that is when he won to get out, if you are an institution. there is that top process that many institutions will consider. on its own, it is not an indicator that the market is going to correct violently in the next six months. surprised arump has lot of people in the last year. has he just suspended the business cycle? [laughter] michael: the way i was looking at it before trump was elected is that the business cycle had been hyperextended by the low growth and very aggressive monetary stimulus from the fed and other central banks, really extending the business cycle for quite some time. what trump economics, at least as i interpret them right now, if they are implemented, is going to be fast forwarding a lot of growth on top of that, which might facilitate a

recession earlier than possible. he is thinking reaganomics. reagan was doing it in 1980, the dow was at seven times earnings. the inflation rate and interest rates were sky high, not the other way around. the economic conditions were pretty miserable. it is very different. how that impacts inflation, how the fed processes that is going to be hugely important in the next 12 months. alix: i'm putting money on the fact that we are going to get a speech from donald trump in the next couple of hours talking about dow 20k. what is the biggest thing the markets need to see to believe in this short-term rally? michael: put the trump factors aside. what is the base economy doing? can you on the stock market at these levels? where bond yields are? with the dollar doing what it is doing? do you feel comfortable owning equities without corporate tax

relief, with minimal regulatory reform and so forth? jonathan: david mentioned the end of the business cycle. gordon brown once talked about the end of boom and bust and we ended up with a big boom and a big bust, as well. michael, thank you very much for joining us. alix: we do have a on the downside, off by $.50. we will put oil in focus. to have oil participate in this rally? >> well, right now, with dow 20k , right not? as your guests that, you've got to take out basically all the potential policies that trump is going to put in place. does the demand quotient change? right now, i'm not seeing it. obviously, we're going to wait and see in the short-term. at 10:30, we are going to get the oil inventories. what can we expect?

give me a short-term trade for oil. isright now, the expectation a build of about 4 billion barrels. -- million, excuse me. if that actually occurs, you are going to look at a challenge of the $52, $62 level. -- $52.62 level. i think those numbers will be challenged in the short term. alix: thank you so much. coming up, the dow hitting 20,000 and beyond for the first time ever. we will look at three stocks that have led the push from 19,000 to 20,000. ♪

jonathan: from new york city, this is bloomberg. i'm jonathan ferro. all-time highs across the board 20 minutes into the session. we break through 20k on the dow

jones for the first time ever. us for aoolittle joins look at the last one thousand points getting us to this milestone. abigail: we take a look at the top three stocks. in reverse 19,000 order. we are looking at boeing first. boeing also reported this morning that they beat earnings by 6%. said that was a solid quarter, although he is concerned about the light guidance. as for the second-best, we are learning -- looking at disney. shares are up nearly 11%. thatberg intelligence says this was despite the fact that fears are abating around cord cutting relative to cable and the pressure on espn, basically that espn will stay positive, plus hit movie after hit movie.

finally, the winner, we are looking at goldman sachs up more than 11%. allison williams said they put up a very solid quarter. plus, they had the huge move, helping goldman sachs be the top winner is down 19,000 to dow 20,000. alix: banks, industrials, media. dow topping 20,000 for the first time. oliver is back with us. of the individual movers, but let's talk about some of the other factors. it has been a long way to get to this level. but we have seen gains in the stock market. it has basically been the trump trade back. then it kind of faded. we heard a lot of conversation from strategists and different market observers that some of the companies that had been disregarded over the last couple months and the last quarter were

coming back. past $40, you have financials doing well. you have industrials doing well. tech stocks, as well. if there is all of this industrial expansion, what is going to be expanding that? new technology, innovation. it is very much the trump trade back on. alix: talk to us about if it can't hold. this is a big deal for retail and a big deal for day traders. if we have the kind of situation where we push through 20,000 and we close below it, what does that do to the daytraders? oliver: it is hard to answer because there is nothing behind the level. it is simply a line in the sand that has been drawn and we are overrated. i think the point you are making is that doesn't does encourage people because if you are sitting at home and you're not familiar to much with the stock market and you say, this number has never happened before, fine. but if we continue to struggle around that point, technical

people wonder whether there is something behind it. there is a lot of positive sentiment in the market. that brings money into the market. at the same time, it can act as its own barrier if there is nothing to call off the sidelines, if you will. turn on ayou can program like this and listen to how bullish the guests are or you can look at positions in the options market. walk us through that? oliver: we are looking at the protocols on the s&p 500. you have fewer puts relative to what is happening on the bullish side. that does not happen except in market bonds when people get very bullish. in previous times, where people have had this sort of positioning, the market has risen, but it has been a very different environment, after markets have been destroyed. the second thing is the short interest on the bloomberg. the average short interest in exchange reported companies across the u.s. is now the lowest since 2014. we talked about that a lot last year.

that has basically completely reversed. alix: the vix. what is that trading at? unreal. everyone is talking about volatility picking up. thanks so much. great to see you. day, dow 20,000, guys. jonathan: that wraps things up for "bloomberg daybreak." the market, 26 minutes into the session, it is the equity market that dominates the headlines. we switch up the board. it is an all-time high across the board. the dow, the nasdaq, and the s&p. the coverage continues next. ♪

vonnie: 10:00 a.m. in new york, 11:00 p.m. in hong kong. i'm vonnie quinn. mark: i am mark barton mark barton. welcome to "bloomberg markets."

♪ big day for u.s. markets. the 20,000rossing mark and president trump over twitter just pulling his quote unquote great. abigail doolittle has more. abigail: doubt 20,000, we have been waiting for quite some time, 64 days since the dow hit 19,000, the second shortest time gap, so we have nice momentum for u.s. stocks. also following through to the s&p 500 and nasdaq with lots of green and simultaneous record highs. 5096 and thisbtv is showing all the times on a quarterly basis we have seen the three major averages hit record highs, represented by the blue lines. he we are once again, so a