the eurozone recovery sparked a debate about how to wind down stimulus. jens wiseman -- jens weidmann ways in. and-- restructuring should in a few months. i am bloomberg -- i am jonathan ferro, alongside alix steel and david westin. futures on the s&p pretty much dead flat, the euro headed for a third straight weekly slide. alix: here is your check in. take a look at the two-year bund yield, still negative 2.8%. vix goes nowhere. crude -- nymex crude at its highest level since 2015. david: it appears we will get some information about the trump

administration's fiscal policy that we have all been promised. they are due on capitol hill by march 13 and today we heard from treasury secretary mnuchin that he hopes to have a new tax plan and acted before congress adjourns in august. joining us is david rosenberg. welcome to the program. give us a sense, what are the markets looking for, what do they need out of that budget outline? david r.: i can only really tell you what i would be looking for. i would be looking for a very clean bill on corporate tax reform that does not penalize foreign producers, risk a trade war, and does not penalize consumers by taxing imports. but rather -- and i'm talking about the border adjustment tax -- anything that does not include that will be a positive. what i do not quite understand is that congress has had so much time to work on this and i think

the cleanest bill would be something that cuts the top marginal rate of corporate taxes of 35%, say down to 20%, and it eliminates deductions and loopholes. cut the rate, brought in the base. there are so many other templates globally for this. canada did this 20 years ago. you get a more efficient tax system out of it, a more simplified system. you avoid double taxation on income in the united states. to me, the cleanest bill and the most pro-growth would be to cut the rate and broaden the base by eliminating deductions. david: we have seen something like this in the united states back in the reagan days. go back to the border adjustment text. matt were to enact would be the only country -- that we would be the only country in history to do that.

david r.: i do not think that anybody would be satisfied with a border adjustment tax unless of course you are in the navarro camp, and much of the trump trade team that believes trade deficits are something that is bad for the economy. i found historically that when the u.s. runs trade deficits, gdp growth tends to be half a percentage point higher than running trade surpluses. i think what is happening, we are trying to kill two birds with one stone. a border adjustment tax, not only will that revamp the corporate tax system but at the same time, we will redress the trade deficit. nothing more than trade protectionism wrapped up in corporate tax reform. i think a border adjustment tax would not be graded well by the markets where the vast majority of economists who have been busy

and are ready to raise their gdp estimates. jonathan: in the view of many people that is certainly not what is in the price but what is in the price is optimism and hope. august to me feels like a long way away. the markets this morning on not really disturbed by that. what do we need to see between now and august, an actual plan to validate the story currently? david r.: i think that we would have to see, like i said, a clean bill, not a bill that is going to be part of some reconciliation but a bill that simplifies the corporate tax system, lowers the rate, runs the base, and does not blow a hole through the fiscal deficit. , we is the big bottleneck have a wide dispersion of views as to whether or not any tax reform bill should be revenue neutral, or whether just to allow the deficit to climb. i think if the deficit is allowed to climb, consider the starting point. a 3% gdp ratio.

thatnk that any tax bill makes the deficit even higher is going to be something the markets will have difficulty with. do not forget the fed is the elephant in the room, and they have already said they are not going to accommodate increases in the fiscal debt coming out of tax reform. that is very critical as to what this does to the budget balance. jonathan: we have a six-month vacuum between here and then, and within that what is going to validate the moves that we have seen? are we going to see a pickup in earnings? a cyclical recovery continue in the in europe and elsewhere? think, we have got to take the information as it has been presented. bottom line, the markets already told you they are going to give the new administration the benefit of the doubt. if you are going to say to me, mr. market, get very impatient,

we will not see anything for the next six months. to say that we do not get anything in six months and the market will become extremely impatient, i think we would have to see a lot more than just that. it would cause the market to rollover. we would have to see a relapse in the economy or a major geopolitical event, or the fed being forced to hike rates progressively. some other things trump will be doing through deregulation and executive order that cuts both ways. there is other things driving the markets than just mere corporate tax reform. alix: august is a long way away. tuesday is not, 96 hours before president trump will address congress. what do you think we are going to need to hear from president trump in terms of specifics, to guide the treasury market to 3% growth? david r.: i think, as i said

before, i am repeating myself, i think anything that shows we are on the road -- alix: do you think we are actually going to get that on tuesday? the risk is if we get the campaigning president trump and not the president, are we then in a position where we will see a short-term correction for the market? david r.: here is the thing, investing around politics is really a mug's game. trump are it he told us to expect something phenomenal so i do not think memories are that short. that was basically a few weeks ago. i expect there will be a lot of meat added to the phone, but ultimately congress, the house has to pass the bill. nothing big gets done, by the way, without 60 votes in the senate. unless it is going to be part of some reconciliation bill. the bottom line, insofar as

donald trump has been the master and welding up expectations for the market -- building up expectations for the market, i imagine he will continue that when he comes in front of congress next week. i am not expecting any disappointment out of the rhetoric. the taxe talked about court. let's talk about the growth part. president trump as a candidate said we would have 3.5% and 4% growth. how much credibility will the markets, or you yourself, give to those sorts of projections? david r.: i am hugely skeptical that we are going to get anywhere close to three and a half or 4% growth. you might get the odd quarter where we get a spasm off of a weak quarter. to think we are going to get a sustained 3.5% to 4% growth rate, we would need a massive productivity boom which is

unlikely, or another baby boom, or certainly a population boom because the two components of the economy is labor force, population, and productivity. i give the odds that we get 3.5% to 4% growth, looking at the demographics it is next to impossible. this is not about economics, this is about politics. at the same time, having these dynamic scoring that will show, we are going to generate this sort of growth and our policies will pay for themselves, that may be part of the strategy. if there is anything close to a certainty, it is that we will not be seeing sustained growth anytime in4.5 -- 4% the near future, despite fiscal policy. david: if you talk to steve mnuchin or people in the white house, they say what you are not

taking into account is what tax policy and spending can do in terms of increased activity, investment, and bringing people into the workforce. do you give any people -- do you give that any credibility? david r.: let's assume we all of a sudden go to this world of 10% capital spending growth. cap -- capital spending is 10% of gdp. meanwhile, would also they doing if they do this border adjustment tax, we import $3 trillion worth of goods. a lot of that is clothing and pharmaceuticals and food, the stuff that middle income households spend their money on. they will get creamed in terms of their purchasing power. when push comes to shove, i have never really found a period where fiscal policy alone can spin the dial like that. i know we like to look fondly back at the ronald reagan era.

that was also the paul volcker area, when the fed was aggressively cutting interest rates. that was a period when we had a boom in the labor force participation rate. the median age of the boomer was in his or her 30's. they were not heading into their 60's. there will be one and a half million boomers turning 70 in the next 10 years, and they are not forming new households, buying new cars, buying major appliances. they might be getting hip replacements, but the demographics alone will lean against those growth forecasts. politicians, they are not business people anymore, 3.5% to 4% is unrealistic. alix: david rosenberg, you are sticking with us. kohl's out with earnings, that stock up over 3% in premarket. sales coming in line with

estimates, and a boosting of the dividend of $.55 a share. coming up, we will hear from jens weidmann, bundesbank president. jonathan: he just met with jpmorgan cfo, america's banking analyst on the bank's outlook. counting down to the opening bell this thursday morning, unchanged all the way across the board and coming in on record highs for the night straight day on the dow. this is bloomberg. ♪

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alix: this is bloomberg daybreak, time for other stories making headlines. glencore's turnaround appears to be complete. the commodity trader and miner reported annual profits that rose 48%. ivan glasenberg turn the company around thanks to cost cuts and higher prices for metals. in 2015, investors dumped glencore shares over concerns there was too much debt. carlos ghosn is giving up one of his many titles, giving it up. he will remain chairman and focus on revamping the struggling nissan affiliate mitsubishi motors. he is chairman of mitsubishi and will remain chairman of the french carmaker renault. the equivalent of 3.3 billion barrels of untapped oil from its

book. it made it mathematically impossible to harvest those fields profitably within five years. that is your bloomberg business flash. i am taylor riggs. alix: if you were looking for clarity and the fomc minutes yesterday, you were disappointed but the markets honed in on this quote. many participants expressed the view that it might he good to raise the fed funds rate fairly san. -- fairly soon. media honed in on that line. dave and rosenborg joins us. what month is fairly soon -- david rosenberg joins us. what month is fairly soon? david r.: i think they are talking about may or june as opposed to march. janet yellen has told us every meeting is live, but there is not a lot of information incrementally coming

out. we will have one more piece of employment data. i am sure janet yellen wants to take a look at how the budget proceedings go so i am thinking they more move, and she seems to be more preemptive in their debt in her narrative, moore made in march -- in her narrative, more may then march. alix: mohamed el-erian says the market is discounting it too much and in may you have an issue because of the french election. david r.: i would not be surprised, i would be at the lower end of mohammed's range on 50 to 60, maybe closer to 40% to 50%. i think we would agree the markets are not priced enough for march. there is going to be more information to garner between march and may, more data points, geopolitically and on the budget side.

i do not think the fed is really that far behind the curve. there is nothing in the market telling me that they are, that they have to go in march. it seems as if they are ready to go again, i do not see the benefit of waiting until june, so made to me seems to be a base case. even their -- may to me seems to be a base case. even then it is not pricing in the rate hikes. march not have to go on to have some sort of surprise or gyration as a result. jonathan: there is an argument the fed is as clueless as they have ever been. the blackout period will be longer and the takeaway, they want people speaking less ahead of the fed meeting and then they will move potentially to franchise. maybe the communication coming from the fed is maybe more, but essentially telling us less because they are essentially communicating, we have not got a

clue. is that your takeaway as well? david r.: it does not really matter so much, because there is just so much noise and it is so evident when you look at all the dissents and all the hawks over the years. they could say what they wanted in terms of the speeches and you could read whether there were many or some or several. the reality is that janet yellen is in charge and it is really what she thinks that matters the most, and the troops that rally behind her. that is why yesterday's minutes to me were practically irrelevant. we already heard her congressional testimony and she has changed her cadence. she is not talking about a high-pressure economy anymore or, since we had inflation so long below 2% we can tolerate a period where it is above 2%. she is not talking so much about the broad measures of unemployment or the labor market.

the benchmark against janet yellen's commentary over the past three years, i think she is sounding more hawkish and that is what matters. what she thinks matters most, and she laid the cards on the table with her recent congressional testimony. even back then i was thinking they are probably going to go in may based on what she had to say and respect on with the minutes had to mention yesterday. david: david rosenberg, thank you for joining us. he just met with jpmorgan's chief executive officer. mike mayo on the bank's outlook. ,ater, douglas holtz it again former cbo director on the white house's budget plan. this is bloomberg.

jonathan: from new york city, this is bloomberg. i am jonathan ferro. shares of berkeley have risen to a 16 month high after it's

corporate -- it beat estimates. we spoke to jes staley on the restructuring plans. >> all the effort last year just means that in june of this year we will no longer have a non-core business unit in barclays. in the second half of 2017 the bank will be what it wants to be in the future and we will look forward. we look forward to ending the restructuring that has been going on for years, in a matter of months. jonathan: joining us from london is jonathan tice. great to have you on the program. , theake away from barclays restructuring will wrap up in a few months. the direction of barclays under his leadership, the right direction? jonathan t.: i think so. they have addressed capital and that is the good thing. then you add in the 75 basis

africa, it barclays puts it at a 2019 sort of hurdle rate. they have done a good job on costs, even with dollar headwinds. the real issue from here is what is the run rate? that is what the analysts were asking and trying to put it into context. 9% year on year growth in macro and the fixed income business, that is a reason to be favorable with europe but where you've -- where do you fit versus the u.s.? jonathan: the takeaway for me is the market seems to be getting -- giving the ceo the benefit of the doubt, and no real guidance on the davey. long will the market give him the benefit of the doubt? david r.: it is definitely tending toward capital return. a couple ofto take years to exit the barclays africa stage. q2hink we want to see q1 and

where barclays talks about taking market share in the u.s. and u.k., and fees and trading, what to see them keep pace with the u.s. and make us understand what the revenue run rate is because the u.k. business is pretty much flatlining. david: how much are investors giving him a pass because he came in and he is executing a plan ahead of schedule, unlike some of his european counterparts? david r.: if you think about deutsche and the numerous situations we have seen, barclays has done a pretty good job and that is reflected in the 90% recovery since the post brexit vote. difficulty understanding that is what is the top line? we know they did a decent job on costs. cost of risk will remain low. business,ational

consumer credit, and most importantly the markets business. jonathan: jonathan, great to have you with us. i remember when they sacked antony jenkins and i sat down with john mcfarland, otherwise known as mack the knife. it is quickly test impressive how quickly he turned this around. -- impressive how quickly he turned this around. david: he has been under budget and under time. jonathan: we hear from jens weidmann, the pundits bring president -- bundesbank president. when the ecb nickel back stimulus. ecbre also -- when will the will back stimulus. also, mike mayo. with x1 you get the best of the oscars.

you're a funny guy. funny how? how am i funny? scorsese finally wins. could you double check the envelope? show me best picture. what's the difference? show me best actor. i do not take tonight for granted. thank you so very much. get all the greatest scripted and unscripted oscar moments on xfinity x1. the oscars, live sunday, february 26th 7eâ4p on abc. ♪ ,onathan: from new york city for viewers worldwide this is bloomberg. with global equities, futures going nowhere, pretty much dead flat on the s&p and dow. the dow closed on a ninth

straight day of gains. higher on thehing margin is futures are anything to go for. , against the mixed euro and yen, dollar just a little bit weaker. a stronger yen and a marginally stronger euro. let's get you some more head -- more news. taylor: austria's chancellor says it will not be cheap for the u.k. to leave the e.u. he discussed it with matt miller. >> it is going to be costly because there are a lot of financial obligations, but my thet concern is what is right of european people living .n places, living in your one aspect is for sure, we should not punish the british because it was a decision taken at their sole discretion. taylor: he says the u.k. should

not be punished that negotiation's not be as easy as they think. has brokenn media their silence about the killing of the half-brother of kim jong-un. they say the case is full of inconsistencies. two women coated there hands with toxic chemical goals and wiped them on his desk chemicals and wiped them on his face. trump will not announce his new immigration goal until next week , addressing legal objections that blocked his original plan. that restricted travel from seven predominately muslim nations. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. alix: most analysts and strategists say that they are bullish financials.

jpmorgan up 34% since the election, 52% on the full-year. what of that is policy optimism from washington and real earnings? mike mayo. you have the analyst day coming up on tuesday. you call jpmorgan the lebron james of banking. what does that mean? i am not a basketball -- is it basketball? -- it is is best to go basketball. alix: help me. michael: lebron james is probably one of the best basketball players and he is good not just on offense but on defense. , jpmorgane analogy has been fantastic through the financial crisis but also the good on offense, gaining market share in almost all of their

business lines. have 34% rise since the election and a defense angle, what will the offense look like, how do they play that? mike: higher interest rates are good. have the conversation earlier about when does the fed raise rates, march or may. who cares? higher margins are good for the bank in general. capital markets, you see more of a risk on attitude. half of jpmorgan as traditional lending and the other half is capital markets. what i am seeing for jpmorgan is turn on the offense. their revenues have been flat the entire decade and we think they are poised to take off. jpmorgan is a microcosm of the banking industry that has shown the worth rev -- worst revenue growth in eight decades and is now showing growth. jonathan: he is the ultimate

salesperson. what is this about? mike: i am a bank analyst, i bring my bank. the banks and jpmorgan have been very inward looking at the regulations. jonathan: do we have a visual analogy? mike: i brought the red tape. so we have red tape and then we have more red tape. jonathan: and you are matching today as well. mike: more red tape and red tape and red tape, so what i would say is no more red tape. i do not think we will have more. too much red tape in the banking industry which causes less focused on customers and too much focus on internal system. my suggestion to regulators is, do not sacrifice one iota of safety and stability.

having said that, eliminate as much red tape as possible. that will allow banks to turn on the offense, not just jpmorgan. jonathan: i was just wondering how necessary this actually was. it was not actually necessary at all. we often delve right into a conversation about wall street and investable banks, but it is the retail arm that a lot of the ceos want to spend time talking about. in the u.k. you go into a bank branch you will not be met by an individual that a machine. in the united states i do not see much of that happening. how quickly will it happen? mike: that is why we are so bullish on banks, it is not just the top line but the bottom line . u.s. banks have 87,000 branches. if they had the same level of the 1950's, he would be around 52,000 branches. but is too many branches

now banks are getting traction with mobile banking. a level ofrica has transactions through mobile devices equal to over 800 branches. as customers have greater acceptance of the mobile banking channel, that allows banks to close more branches. you will probably see a reduction of 10,000 branches over the next several years. the days of brick-and-mortar are giving way to more clicks. talk about bank of america and contrast it with jpmorgan. let's go back to lebron james and basketball. switching from defense to offense, that is not an easy switch. a ceo is very good at defense and has to be. positionedf america as well to switch to offense now that the world is different? mike: the returns at j.p. morgan are leading among the global banks.

wherean has a 13% r.o.e. bank of america has a 9% r.o.e.. that is a huge difference. jpmorgan has the job done, bank of america is not there yet. we think they get there in the next year or two. bank of america has led the way in reducing the number of branches. the had 6000 branches and are now down to about 4500. contrast with wells fargo that still has 6000 branches. they have done a good job at retooling the retail distribution so that is something to look forward to with bank of america. your questions on revenue growth, bank of america guided for a 6% higher spread revenues during the fourth and first quarter. if you want to took it does talk about interest rates and their benefit on the banks, look at the first quarter -- talk about interest rates and their benefit on the banks, look at the first quarter. david: that does not require a

lot of offense of play, that is the rate going up and you are making money. can or should of eight -- should a bank of america switch to a risk on strategy? can they make that transition? mike: do not confuse brains with the bull market. it is a better market that will help the banking industry as a whole. bank of america is not getting market share the same way as jpmorgan. we are not suggesting banks take much more risk on. slow and steady wins the race for banks. you have the red tape, no more red tape, but just by having no more added on it allows bank of america and others to focus more their customers. they should get better growth as a result. whether it is bank of america or jpmorgan, they are gaining shares in capital in the european banks. take the big u.s. banks, they are getting big shares.

they have the strongest balance sheet in a generation and are able to levered those -- leverage those. alix: are you able to quantify if we do not get any more capital raisins from banks, and if we do get it -- raises from banks -- mike: our theme is that u.s. banks the last decade have destroyed value. they are going from value destruction to creation. they have had single-digit r.o.e.'s and are on the cusp of showing double-digit r.o.e.'s even without the benefit of a ratesbump or much higher or lower taxes, we have u.s. banks going from 9% to 11% r.o.e.'s, and that gets banks to value creation even before adjusting for the strongest talent sheets and a generation. jonathan: i wonder how many people are worried that we will hit the top because you are so

bullish and bringing props. david: jumping the shark, to mix animals. jonathan: mike mayo, great to have you with us. coming up, we hear from jens weidmann. a firmer euro economy starting to fuel the debate of whether they will reign in stimulus. will jens weidmann of the bundesbank support that act? a lot more coming up, as well as douglas holtz eakin. ♪

taylor: this is bloomberg daybreak, i am taylor riggs. coming up, former commerce secretary carlos gutierrez. ♪ from new york, this is

bloomberg. i am jonathan ferro. i am pleased to say we can bring you an important conversation with the bundesbank president and crossover to manus cranny. .anus: a very good day we are joined by the president of the bundesbank. they have raised their provisions by one billion euros. policy with dr. we idmann. the provisions you have made are probably not going to be the last. how big good the potential losses be for pundits bank? jens: that -- for bundesbank estimate --. jens: we are taking a conservative approach and that means there will be further provisioning next year. these provisions are for

interest rate risk that we did not have on our balance sheet before, but because of the asset purchase program and some other policies, the size of our balance sheet has increased quite considerably. also the structure of the balance sheet has changed. that is what we are pushing for. manus: would it be prudent for the market to assume a similar amount of provisioning will come through next year if the past is not change aggressively? jens: i am not sure how interested they are in our provisions, but if you would like to forecast i think it would be a similar step with respect to interest rates provisions. also other forms of risk like credit risk, and the sum of those might change of the last year -- next year. manus: in your news conference you referred to comment about the ecb should make communication more symmetrical. when, in your opinion, is it appropriate to lobby for a shift

in the language of the european central bank? jens: two points with respect to that. first of all, we had a discussion in december last year to extend the asset purchase program. given the outlook for inflation and also the balance of risk and the fundfor especially purchases, i was not very supportive of that step. thatonetary policy stands i would have been willing to accept a less expansionary than the current one. second, of course the governing council has to ensure consistency in its announcements so there are decisions there. we also have to a knowledge that of course we do face a slight change in our forecast in the sense that the balance of risk might be more favorable today

than it was before. change.nd risk can you talk about new risks as well. what is the biggest new risk? jens: i'm at risk in a positive sense, in the sense that i think the global economy as well as the economy of the euro area has shown a certain robustness vis-a-vis surprises that we felt before were risks to our forecast. and we believe that the upswing we have already seen before will continue. that means of course also that domestic price pressures will increase over the forecast horizon. manus: we were just chatting before we started. i said, i want to talk to you about the adjustment and the p's and you said they are quite -- capital keys. he said they are quite small. is it a squeeze in short -- in

terms of a short -- government bonds, does the shift in the p ease the pressure -- in the capital key ease the pressure on bundesbank and the pressure in the market? the app orplementing cpp is the decision that we also by short now and lower deposit rates. i think that is the main changes that allows us to implement the program as decided. that is for one. the other parameters that limit the universe of the program i think are pretty important to ensure the necessary distance to monetary finance. it also holds for the issuance limits that we decided. question, the market

assumes there will be a rate hike in 2019. is the market behind the curve in terms of where we might go, is that too simplistic a view? jens: i would say the expectations sound absurd so it is in the possibilities that i see, but i do not comment on market forecast. manus: we have the world of g-20 defending -- descending. is that g-20 going to be the tough war of currency wars in 2017? jens: my assumption would be no. we are looking forward to getting to know our new colleagues from the u.s. we are eagerly listening to what they have to say but apart from that of course, the german g-20 presidency has its own agenda. it is composed of sustainable growth, managing the digitalization, but also

ensuring investments in africa. ande is plenty to discuss our new colleagues in that one aspect we are looking forward to. manus: what is the biggest wildcard? what is your biggest wildcard? is it something from the trump administration and its economics? lambasting the euro is one approach. or is it italy? where is the biggest scale of risk? jens: i never compare risks in a sense, i stress also in the press conference that open markets are in all our interests. so a competitive environment, competitive markets are key for our well-being. of course we perhaps have neglected the negative side effects in the past and have to explain that and cope with that. that is one aspect. part of, this is also

the g-20 discussion, to form the consensus about the benefits of free trade. so i see this not as a risk but as a chance. manus: we also heard from you very clearly, as i would risk -- expect, i do not get involved in terms of what will happen in france. is marine le pen an existential threat to the euro? her potential ascension to power, is that an existential threat? jens: i am a central banker first semi first goal is to cash first -- i am not predicting political outcomes nor do i talk about political parties. we will cope with the next french government, and i'm sure it is one that is open towards

europe, friendly towards europe, and supporting the common currency. manus: can i ask you whether you see the need for extraordinary measures between various central banks as potential risk management running up to the french elections as you did with brexit? centraludent to expect banks to communicate in some kind of way that we are prepared for? jens: you can assume you're always prepared to cope with emergencies. i do not feel it would be necessary nor appropriate to preemptively react to political outcomes. that would be a strange monetary policy. manus: not so much in terms of policy but to reassure markets, the same for rough and tumble times. jens: markets can assume we are prepared. manus: one thing from where i

sit in the london vantage point, the great debate at dallas was where will the banks relocate? where will the banks relocate? you have the weight of the german administration on her shoulders. do you want to have that level of balance sheet risk in germany if the bankers decide to come here? jens: frankfurt is an attractive place. i think it has a lot to offer and we of course also welcome the banks, but i think the realistic view in all of this will be that banks will relocate to some extent, and relocate throughout the whole euro area. frankfurt, these are the paris paris or -- vis-a-vis major it, you will have different decisions in different banks. from a risk perspective, there is a certain spreading of that

but i do not see this business as a risk. that is why we are here to regulate the business. manus: dr. jens weidmann, thank you for joining us. let's see what next year's full results bring. that is the conversation in frankfurt. jonathan: manus cranny sitting down with the pundits bank president jens weidmann. i can bring in check blast -- jeff black. you know the ecb inside and out and the bundesbank president as well. very diplomatic on the political headwinds that may come about in europe this year. how does the ecb prepare for those kind of things? prepared, as dr. we idmann, for any turbulence. it

have shock lines, liquidity facilities. terms ofwide open in how they can respond to an existential question about the euro, that is not really their job. jonathan: at this point in the market, the front and of the blend curve is right around 90 basis point -- bund curve, right around basis points. -- jeff: i think they have a knowledge by making some small-scale tweaks to the way they buy in the market, but they have got a little bit of a problem. what you have seen today is pretty interesting from the bundesbank, in that given where a lot of the short ends is, they are putting so much aside for the risk that rates are going to go up. we are talking about forward guidance at the ecb for the minute, language for when rates are going to change and when stimulus will be dialed back. bundesbank is voting with its

wallet and putting money aside now for that eventuality. alix: at the same time we have those political risks. they are preparing for rising rates but you do have the black swan event. in particular, that puts the bund is bank in a tough spot. how do they deal with those opposing forces? jeff: if you look at the ecb's mandate, near duty-bound to concentrate on inflation. we could have a situation in the euro area where you have rising inflation and political risks materializing at the same time. as happened in the u.k. do they choose to keep policy easy to smooth out political risk or concentrate on their mandate? initially they go for their mandate but there is a trade-off between those. david: talking about black swan events, we had an election where president trump got elected. -- to whatanus asked

extent does that make jens weidmann's job more difficult to have the trump administration in place? jeff: the world where there is a greater level of protectionism on margin make the ecb's job more difficult because growth is a concern. they also do not want unpredictable events or job running on currency. that is something that will be looking out for. jonathan: we always appreciate your insight. daybreak, j.p. morgan asset management cio on global uncertainty, the fed, and its investment strategy. from new york, this is bloomberg. ♪

>> the federal reserve crawls to

a rate hike. the euro zone is firm. the ecb, the advisement, assumes the french government will stand behind europe. restructuring could end in a matter of months. the markets, another record high. nine straight days of it. in the last 45 minutes, the dollar rolling over. the eight euro up. .- the euro up alix: a record low continuing today. negative almost 89 basis points. gold catching a bit of a bid up why five dollars. highest level since july, 2015. there -- at of a fee

little bit of safety there. >> the president is going to address congress on tuesday. today, we heard from secretary mnuchin. he will have the tax bill through, he hopes, by august. joining us now, head of the global fixed income ethics and commodities group. i love your title. left in theime segment? we will see. bob is also with us. need tolk about what we hear, want to hear from the president. frames want to hear tom -- time frames. what are the deliverable dates? how is he going to prioritize?

there is a lot talked about in infrastructure spend. they lookwhat will like, what will they mean for corporations, individuals? what will the impact be? there are things we need prioritized and we need deliverable dates. we are starting to hear some of that today. : how much detail to the markets need to hear? bob: they will not give him a pass at this. new president's state of the union address. he needs the details. tot is important to him understand as they are running out of time. midterm elections are about a year and a half away. they need to roll things out and

jack up gdp. >> it is a stretch. you need to see a pickup in the growth rate of the labor force. it is a very tall order. see something happen that causes a significant rebound or opens the door wider to legal immigration. alix: the bond market does not -- betterlieve economic data has been coming out. it seems the market is in a

holding pattern. postelection you had repricing. is a fairly large probability the stimulus policies will work their way through congress and be enacted. we get more clarity, it is difficult for markets to move. central banks are still in to buying commodities on a monthly basis. it has kept the bond market in a narrow range. jon: bring up the bloomberg. the index on the top right. shows a series of upside surprises, which means data beating economic estimates.

the bottom line shows the breakdown of where the upside surprises have come from. business surveys and cycle indicators capturing the hope and optimism. left, it has not translated in a significant way. with one exception, sales and cpi numbers did top expectation numbers. it is not showing up in the hard data. the fed acknowledged as much and noted on the business side of things, there was great optimism for what was coming. businesses were taking a wait and see approach. a big variable is tax reform, which may come by august or later. watch and wait and maintain enthusiasm for

several months. the infrastructure plan has to be paid for. it is $1 trillion. infrastructure spending and tax reform are linked. there are big agenda items we have to wait a wild to see how it will impact. the impact is coming 2018. moves to fan fed charts, what is the signal? it doesn't add additional value to the forecast. it is a way to create noise and , they around forecasts are concerned that the market is too obsessed with those. you create noise and bluster around that to get investors to withback there up session the forecast. john says it is another way of saying we don't know. me as a bitck

childish to say they were going to act soon. i agree with the things charles said. should move in march and they should not wait. the data is on the inflation side. if you look at the 10 year, 2.4%. it does not make sense. when i listen to the fed and they talk about seeing what trump policies look like and the pressure on the dollar, you would almost assume they are at some neutral level. notink that is around 2%, .5%. why wait until june to continue to normalize? medium-term, if we look at the balance of those who

view upside inflation risks versus though who viewed downside risks appeared to outnumber those who look at the upward trend in inflation. it makes me wonder if policymakers aren't taking consideration of what this tax could do to the strong dollar and cap off goods inflation. historically, they should be around 240 two to 60. i think they are on that journey. david: you know the reason why they should back off. -- why would you jump in and risk the possibility of messing things up? why isn't janet yellen rational

and saying ok, mr. president, you take it. past decemberhis and there is some level of gdp and a lot of data that is improving and some momentum picking up globally. i am not sure what you gain by , skip marchember and go in june, september, and december. let's consider -- let's continue the journey. let the markets deal with it. i like to breakevens. it does not seem to be fully priced in the market. you would be surprised how few big investors have the position on. corporate credit looks good.

we don't know what the policies look like, but they are corporate american friendly. outorate america has taken costs. finalsee aggregate demand, emerging markets look good. seeing, with the bank of mexico, there is a response that comes. goinghat news is, we are to get fan charts. i don't know what to say about fan charts. gutierrez, theos former secretary on trade and immigration. treading water. up about a 10th of 1%.

we switch up the board, the situation different. equities pushing high. yields are lower by two basis points. a stronger yen story in the fx market. the euro pushing back to $1.06. ♪

alix: time for other stories making headlines. r: morgan stanley may move 300 workers from the u.k. because of the brexit though. scouting for office

space in frankfurt and dublin. they reported they would move about 1000 of its 6000 employees in the u.k. no decisions have been made. trader reported -- rose and beat estimates. aroundpany was turned and 2015. a boeing fighter jet has made a startling recovery thanks to some presidential tweets. the super more net was on life support. there were few orders for the factory that built it. trump says the pentagon is looking at a big order and tweeted it could be an alternative for a different jet.

in the markets, political risk in europe has some investors worried. we spoke with the bundesbank chief. he spoke about the strength of the eurozone. and economieszone of their euro area have shown robustness. these are surprises. upswing we have seen before will continue. it means domestic price pressures will increase over the forecast horizon. a previouse can take conversation and apply it to a different region. the economy is good and farming. -- and firming. what does it mean for your world?

it makes it difficult. we are surprised at how well the bond market has held in. if you assume the elections hold out as the polls, you have to remember brexit and the u.s. election to say there has to be a bigger probability. it seems unusually rich to us given the potential for a political dislocation. the buying is coming in from overseas, out of asia, japan, who still view france as part of core europe. argument there is an that a -- lost drives that higher. what is the outcome in all of this in the next six months? bob: not much.

you will have some sort of rollover and growth or more disinflation. otherwise, you have the ecb talking about additional tapering and pulling out further support from the mark richt -- the market and the adjustment has to be higher. the risk may be higher that it happens than the polls indicate, but the effects may be less. are they pricing in the political risk in europe appropriately? think so.'t i think the market went through this experience and has forgotten. the risks are real. the markets are not appropriately priced. is a lot of support around it. it is difficult for markets to sell off. david: is it possible markets is veryng marnie le pen

important, but even if she were elected, it is not clear she could get done everything she is talking about. school ofis the thought. if she gets in, you will not have a frexit. that france will not remain part of the eu because parliament will embrace the eu. alix: you could have made the same argument in the treasury market. you have a fed raising rates, stimulus coming down and better data. that has not played out well. the demand for income, no one is more surprised than i am. logically, when what should happen doesn't happen, what do you do when you have to put money in? had somehave

re-pricing of these markets. it is not fair to say there has not been repricing. the market is trying to digest with the policies could look like. as they are digesting that, we both the sellers and the buyers are starting to reduce the position. crowded trades are becoming less crowded. the underlying trend in this is that the world is re-fleeting -- re-flating. all of the discussion from the central banks is about the time frame to reduce their support of the market. it is taking longer than everyone anticipated postelection in the fourth quarter.

alix: are you betting against bundesbank? yields and the kind of tapering they have to plan in the coming years and how looks at reducing its balance sheet, there will be bonds around. you don't have to crowd something overvalued, particularly if you see more tapering. there are other areas i would rather be in. european high-yield, that looks good to us. bob michaels will be staying with us. coming up, carlos gutierrez. it later, we will be joined by ben cardin. this is bloomberg. ♪

alix: we look at what key banks are watching. steve mnuchin saying you can

have tax reform by august. this is a normalized return. -- and thene is white line is treasuries. what happens if the tax exemption part goes away or is devalued? does a tax exemption go away? >> that is not our base case. will continue to benefit, it is just out what value do they hold the tax advantage? in the past, we have seen the rate lowered. possibly down to 33%. in the early to thousands under

george w. bush, it went from 39.6 to 35. it would be modest. 45 to 50 basis points in the long end. purchase.not just they hold other qualities. the high-quality nature, the lower volatility and the ability to diversity -- to diversify. let's assume you keep the tax advantage. there is a different way the tax revision could affect munis. pressure one put state and municipal governments? >> it would. the federal government would not find themselves with any advantage to have state and local governments fund

infrastructure and create. it would put pressure on yields higher. you have to pay for the tax reforms and tax cuts you are looking for periods him one has to give up something. think the one affecting munis will be the last to go? >> deductions are ahead of thinkexemptions. the muni tax exemption has been around for greater than 100 years. it is a way to access the market through low-cost. both the tax-exempt market and we see some reintroduction of a build america bonds. alix: bob, do you like munis? bob: not yet. i think they got oversold. people thought tax rates were going to come down so far they would have to adjust higher. there are uncertainties out there. sure how the

infrastructure spend is going to be finessed. a public/private partnership, will it be privately finessed? once we see how those things occur, we will have an idea of where this up lie will calm. come.re the supply will if corporate tax rates come down, that is valuable. great to have you with us. coming up, carlos gutierrez the former commerce secretary. futures, a marginal moved to the upside. ♪

jon: from new york city, this is "bloomberg daybreak." the treasury secretary speaking to bloomberg at the moment -- no china-u.s. decision to come before the april fx report. thehe campaign trail,

president-elect at the time, now the president of the united states, donald trump, said that he would call china a currency manipulator. david: i think on the first day. jon: that hasn't happened. "the wall street journal" conducted -- in "the wall street journal," he raised the issues of currency manipulation and whether it meant you had an unfair trading advantage. you can call china a manipulatingbut their currency to be stronger than it otherwise would based on the data coming out of china, where they get an unfair -- but whether they get an unfair trading advantage is unclear. david: those two things are not necessarily the same. they could be unfairly trading with us and not necessarily manipulating the currency. or vice versa. list that you a

can checkoff boxes. if you -- those countries appreciate the currency like japan, like china, to offset that rhetoric, and there you go. david: saint wilbur ross, this is your job. this is trending lower, lower, as the weeks progress. the high-frequency data, on the 244,000.mes in at 238,000, a revision from 239,000 previously. the ft market is holding up against the idea that maybe you have to wait until august to get the tax reform plan and maybe the stimulus that comes from the treasury. is pricingarket something else in. the dollar is rolling over. alix: the short term, with that

growth, and several interviews this morning you hear that growth will be -- there is nothing they can do about short-term growth either. the equity market is not factoring that in. david: it feels like we are reducing expectations. that is what it feels like the administration is trying to do. they need six hours before congress. rex tillerson and john kelly are in mexico city, where they will be meeting with mexican president nieto, as well as others. michael mckee joins us. i would love to be a fly in that room. echo -- whatg any is pain and the echo -- what is pena nieto going to say? mike: it is not going to be the friendliest of conversations. political tensions are rising,

and kelly's memos on deportation this week have not helped. that they are going to expand deportations and maybe force mexico to take non-mexicans back from the united states, which was angrily rejected by the foreign minister last night. he said the government of mexico and the mexican people do not have to accept revisions that one government wants to unilaterally impose on another. they might take the whole issue to the united nations. if kelly and tillerson are here to calm the waters and talk about trade, they are starting off on the wrong foot. alix: is the polarity going to be immigration or nafta, and what kind of leverage does mexico have in either of those situations? mike: we do not really know what the administration's priorities are. donald trump has never said what he doesn't like about nafta or what he would like to change. the immigration seems to be --

the immigration issue seems to be front and center for him now. talking about ideas like reducing or stopping cooperation with the united drugs, interdicting keeping terrorists out of the united states. and the migrant flow from central america into the united states has been very heavy in recent years. mexico has been turning back hundreds of thousands. they might like them go on. when it comes to -- they might let them go on. when it comes to nafta and trade, there are a lot of things they could work on. for example, e-commerce, the whole image at -- the whole internet. they would like to talk about things like that along with worker rights, environmental protections, investor protections, energy. there is a lot they could talk about on the trade side, but they are not giving an inch on immigration at the moment. alix: michael mckee, thank you for joining us. david: joining us now is carlos

gutierrez, cochair of the stonebridge group in washington. he served as secretary of commerce with george w. bush. welcome back to the program. good to have you. last time you were with us, you said if you were in the white house, you would want to do with nafta quickly, right up front. yet this administration seems to have led with the immigration issue. what do you make of that? going to make things more difficult for investors and for doing business across the border because everyone is essentially waiting for a decision, waiting to see what the future looks like, waiting to see what the renegotiation of nafta looks like. this seems like a positive thing. nafta was put in place before the internet had taken over and is 23 years old, so there is a lot to update, a lot to modernize. e-commerce for the u.s. could be very big. that was not around

when nafta was negotiating. so we could have a very interesting new chapter in the nafta history. that is being held up by the immigration. i think that we are trying to create linkage between the two subjects, and i am not sure that that will lead to a quick conclusion. actually benefit mexico, in the sense that we really need mexico on the security front, dealing with drug interdiction, a whole raft of issues. does mexico have a more powerful itgaining position when comes to border security than perhaps with nafta he? carlos: i agree with the first point you made. this could be bilateral. i was part of a report with former president -- million lownd a skilled workers and seasonal

workers every year. where are they going to come from if we deport everyone? it would be nice to have a bilateral agreement with the government. joint accountability for border security, for drug interdiction. those are all very positive things, and i think we need to be careful that we do not diminish those because this conversation over immigration emotional that it puts immigration back several decades . david: they did not do this bilaterally. they came up with an executive order, followed by a memorandum saying essentially we are going to start deporting people without a hearing, and we are going to dump across the border, whether or not they came from mexico.

carlos: that is exactly what the foreign is saying. we cannot be forced to sign up to a unilateral decision if we have not been part of it. fromusly accepting people other countries. this is going to be very complicated. you know, who do you deport and what do you consider a crime? falseeone is using a social security number to get a job, that is enough to claim it a felony and to deport them. if we do that, we are going to be deporting the people who are working. i think what we want to do is deport people who are here as criminals who are part of gangs, who are really causing trouble for our communities. at, you know, someone without drivers license, they can go. what happens to the parents of dreamers? this is going to be a story told with images. told what are we going to do with the people we deport?

are we going to drop them off at the border at some town and that is it? are we going to see hundreds of thousands of people in deportation cap's -- in deportation camps? that imagery is going to be very powerful. we need to step back and understand we are writing history and people are going to be reading about this in 10 years. we need to show -- are we going to be positive and show wisdom and compassion, or will he he a blemish on our historical record? -- or will it be a blemish on our historical record? david: how important is it that the president has dispatch the secretary of state and homeland security to meet at an early stage? is that a show of respect? carlos: i think that was a very good decision. people of that caliber, sending them is the right thing.

what we have to continue to remind ourselves is that we cannot humiliate a country to the negotiating table. to work on that because at this point, the mexicans are up in arms. i have not seen such tension between the two countries since the 1970's, the 1980's. when mexico was very nationalistic, very protectionist. it was a different country. now we run the risk of backtracking. mexico has a presidential election in 2018. we could be creating the conditions for an anti-american populist taking over mexico. that is not in the best interest of the u.s. i think we need to have some wisdom here and think of the long-term and not be so

aggressive about having a short-term victory that impacts the long-term. carlos, you not only were a secretary of commerce, but you also ran a big company, kellogg. from theout to hear president tuesday as he addresses two sessions of congress, as well as hearing the budget he comes up with in early march. what are you looking for in terms of the plans from the trump administration for programs? carlos: there are three things that the president has mentioned that are extremely positive third one is tax reform. the other is energy reform, and the other is regulatory reform. those three things right there could be the basis for a great economic surge. the problem is that we are focused on other things, and we run the risk of having other priorities, other events

overwhelm this very positive economic agenda that we do not get done because we are immersed in a lot of these issues that should not be happening, whether it be mexico or with some other the repeal andn replace of the affordable care act, which is overwhelming everything else. i would be looking for those three things. speaking of business, i can assure you a lot of u.s. multinationals are looking at this whole nafta thing. mexico is an amazing market. it is a great market for u.s. companies, and they are not going to want to see anything that impacts their position in mexico, their ability to grow in mexico. all of this is tied together, but if the president sticks to those three economic factors -- and immigration, of course, is another economic factor because our native-born workforce is not

growing fast enough to grow our economy. so we need immigrants. that should be on the side of economic strategies. david: the first thing you mentioned was tax reform, which it appears takes us right back to questions of mexico, with the border adjustment tax. something that the speaker of the house said is really important. a lot of people in congress are saying we cannot afford tax reform without it. what are your thoughts about what that would do with trade with mexico or with other trading markets? carlos: if you look at the numbers only, there is a case to be made that the reduction in corporate taxes can be offset by a border tax. taxing imports has never proven to be a good idea because countries can do the same. are alle know it, we

taxing each other's exports. it is not glued for global trade or each economy. i just wish -- it is not good for global trade or each economy. i just wish we could study the smoot-hawley tariff. it is a bit frustrating that every generation seems to forget it. that is the last time we tried this logic, that if we tax imports, we will save jobs and therefore grow our economy and do right for our people. what it actually did was take us deeper into the great recession. the great depression. so we have to be very careful. this isn't more -- this is more than just numerical. we have to look at it conceptually and think about what other countries' response will be. david: smoot-hawley are fighting words to those who follow international trade and economics. is there a risk that we could get that extreme? carlos: border tax is a first

step toward that. what you are telling -- you are making it harder for mexican exports to come into the u.s., making it less competitive. there is the exchange rate, and there are a lot of considerations, but that in is a step we have not seen, especially coming out of the u.s., because we have been sort of a champion of free trade . so i would expect that if we did that, other countries would feel the need to retaliate or to respond in kind, and then we are going to find that the trade pie is just shrinking. that is not good for the global economy, it is not good for our economy. we just have to be very careful about doing something in a vacuum and not realizing that it is a big world out there. and other countries also have leverage. david: many thanks.

that is carlos gutierrez, former u.s. commerce secretary. jon: in the last one he four hours, the treasury spare -- the treasury secretary has spoken with bloomberg news. steve mnuchin, the treasury secretary, saying that no china lending decision will become -- no china lending decision will come before the april fx report. it jumps out to me the suggestion, the thoughts around the u.s. dollar. on the one hand, it is good, and on the other there are short-term negative consequences. alix: there are certain issues with the dollar being too strong, which begs the question -- does the injured -- does the administration want a strong dollar or a weak dollar? no one actually knew the answer. he does go to say that steven mnuchin did show a conciliatory tone toward china, begs the question, will we see some kind

of indirect accord? david: this is the u.s. treasury secretary's job. at the same time, he has a boss in donald trump, who has said is hard to go and say it is strong, strong, when you have a boss saying otherwise. jon: a tax plan will come in august. hopefully that would be enacted. there is no real sign as to whether appetite is -- where the administration's appetite is on historically low treasury yields. the bond markets are like, show me the money. david: it is so true. the budget plan he is supposed to present to congress by march 13, needs to show long-term growth deficit -- long-term growth plans and a long-term deficit. alix: you know what, i am done. i am over it. formercoming up next,

cbo director will be speaking on the white house budget plan. this is bloomberg. ♪

jon: from new york city, this is "bloomberg daybreak." a cautious treasury secretary is dominating the headlines this morning. you have to wait until august to see this stimulus plan enacted by congress. the equity market is a patient one right now. looking at the steven mnuchin comments, yields are lower by two basis points on the u.s. 10-year. much weaker dollar. after the treasury secretary came down and said there are

certain issues with the dollar being strong. maybe there is a sense in the bond market, the fx market -- that you have to wait until august, one, and two, that there has to be patience in the bond market and the equities market. david: we ran away too fast and now we are coming back a little bit now we are going to the white house. wered those doors, they hard at work even as we speak on a budget outlet that they promised to congress by march 13. providing the details from some of president trump's growth plan. holtz-eakin isas head of a conservative think tank. under george w. bush, he headed the -- welcome back to the program. exactly what are we looking for? : the starting point

is a bad one for the administration inherited from barack obama a fiscal outlook that begins with large deficits, and within eight years of what they hoped would be the trump presidency, the deficits will rise to $1 trillion, be over 5% of gdp, and about 50% of it is interest on previous borrowing. interest cost will be the second largest government program. only social security will be bigger. that is not a very appealing starting point, and this is an administration that wants to display an aggressive growth rate. there is tension between the big tax cut that the president proposed on the campaign and the pledges of speaker ryan and chairman brady, the relative neutral tax reform. they want and infrastructure program. how big that will be, how fast what willt, and things look like on the defense spending front?

tough starting from a starting point. doing those things will be a real challenge. david: how do you reconcile those two things? on the one hand we have a high deficit that is getting higher. on the other hand, there is a progrowth agenda that is getting higher. how do you come up with the money for it? douglas: tax reform is key. i am interested in seeing what the white house is looking for in tax reform. the white house has put together an aggressive blueprint. it is a great place to invest, innovate, and grow. will the white house embrace that vision? if so, it is the best route to a jumpstart and a long sustained improved performance. they are doing the right thing on the regulatory front. people have not really noticed that the executive orders on the regulatory front have put agencies on a budget. congress has been stripping out some midnight regulations, and

this past out of the house -- reform. passed the question is, can they piece it together in a systemic way echo alix: cost-cutting is one thing. the border adjustment tax to get tax reform done? if we do not, is tax reform that in the water? : this is a common practice in 160 countries around the globe. not interfered with trade, it will not interfere with trade. its primary purpose in the tax proposal the house put out is to reject the integrity of the u.s. tax base, to keep companies from shifting offshore and repatriate. alix: president trump has come out and said that he is confusing.

there is confusion in the administration versus a house plan. if we do not get the border adjustment tax through the senate and the house, what does the adjustment have to be? is a 25%? ?5% -- is it 25%? 15%? douglas: you great leadership on tax reform. is focus on the border talking about one tree when we should be talking about the forests. the forest is getting the tax rate down. the focus has been on one little piece. that peace is not essential. you need to get tax reform done, though. will the white house say, and how forcefully will they put their political line on to get it done? david: it will not get done and blessed the president gets behind it 100%. this? douglas:d

the white house is already behind the curve in saying what it wants for tax reform. i do not think the border adjustment is the key. the notion of getting a dramatically improved corporate tax code is the key. is that going to look like the for the event,al which has a 15% rate? a tax onre going to be the territorial circuit? david: thanks so much. douglas holtz-eakin. the market open is -- the opening bell is just 30 minutes away. this is bloomberg. ♪

jonathan: from new york city, a

warm welcome to bloomberg daybreak. 30 minutes away from the opening bell. equities are stable and futures after a nine-day winning streak, the longest since july, 2016. treasuries are down by three basis points. market, it's a weaker dollar story emerging over the last couple of hours. let's get you some movers. quiet inre is relative a premarket the big movers on earnings. quare had earnings beat with participating.s you have the eight straight quarterly loss extending the worst money losing streak for chesapeake since 1993.

on the flip side, you had earnings that beat and the company is expected to grow and add rigs this year. they have been front and center in selling assets to help their debt but now it will be about growth. kohl's is up by 2%. the fourth quarter topped forecast and the sales were weaker because of the declines of consumer traffic at mall stores but their online business was better. down by almost 13%. they will also exit from the swim and apparel category. that will hurt same-store sales. david: our chief washington satespondent kevin sorrelli down with steve mnuchin this morning. when will the white house go after china on currency? i just left the treasury

department and what he said regarding china and currents of is that no decision is coming at least until april. this is one of the two reports that the treasury department releases in april and october every year regarding nation and currency manipulation. they will wait until at least april until that happens. 2 other points he mentioned -- there is the potential for a partial government shutdown at the end of april. the government needs to get some type of partial funding bill passed by april 28. useold me that they will extra neri measures so the government can still be open but he hopes we overt any kind of showdown we have seen in the previous administration. the last point i would make is that i asked him where this

administration's stance on the border adjustment tax. we just heard about how controversial an issue this is within the republican party. he was not committal. he said there are aspects the administration likes and aspects it doesn't. what about the timing? it was 2.5 weeks ago when the president said we would have this tax plan within 2-3 weeks and time is running out. they will have to make some decisions, won't they? >> absolutely, president trump is scheduled to visit capitol hill to have a joint address to congress on tuesday. tomorrow, he will address conservatives at sea pack. another thing secretary mnuchin told me is that they are filling out this team. they will be naming, over the course of the next month, council ofchair the economic advisers. that is a key post that a lot of economists view as someone who

looks at economic indicators as they craft policy. secretary mnuchin told me that after that person is named over the next month that this administration views its economic team is being complete. david: thank you so much. treasury u.s. secretary says to have a little patience. you might have to wait until august to see tax reform and acted. the dollar is suffering its biggest decline in one weekend gold is pushing to a three-month high. futures are pushing toward session highs. borish us now is peter and joe. fascinating session. stocks are kind of resilient. you kind of feel like it was a risk off day. thevery day you wake up,

stock market is up 20 basis points. we should go away and come back december 31 and do it again next year. clearly, there are complex in the market. the euro continues to be week and stay at its lower end of the range and the yen is a risk off trade but the bond market -- people are not just talking about german two-year yields. alix: we have talked about it for two days. you clearly have not been watching. >> it's a lot of pressure to stay up on this. that's a low so there is a disconnect. we have talked repeatedly about trends going to the next year. we had a range of 21,000 on the dow between washington's birthday and expiration but we are here and volatility is contracting. it makes sense that if you flip this chart upside down, everyone would be saying down nine days in a row, it's a buy. it has been up nine days in a

row, no momentum, complacency is not good. the one thing that was missing before the election was sentiment and now that's off the charts. it's very concerning. jonathan: we've got a six-month vacuum between now and august. people will keep an eye on trays that have been linked to trumped policy. he hopefully will be outlining his tax reform and tuesday in front of congress. ofre is a growing chorus wall street strategist that may be looking for alternate explanations as to why stocks have been rallying. it has stood on its own across asset classes as a beacon of strength. there is a growing legion of strategists who have notes about this in the past week. across wall street, they are

theng economic expansion is reason for this and this has been happening since last march. trump as may be getting a little too much credit for his suppose of policies. boosting the market. maybe we have been underestimating the power of this earnings time. alix: other asset classes are reacting to the macro. do you buy that? living in at we are little bit of a fantasyland and , the beanstalk does not grow to the sky. i think risk management is more important than anything. if you look at retail sector, growth, the fed minutes -- there forecasts have not gone. the trump administration so far said let'sy mnuchin put tomorrow off the next am that's not a great policy. alix: goldman sachs has the

market pricing at 11% and in reality, they see 5% growth so we are at peak opposite -- optimism. are you shorting the market? >> i would say not now but soon. one to try to pick the top. we will look for individual signs of weakness on look at individual equities that have started to roll over and have consolidated and look like they are breaking down. we look like there can be more strength between now and march expiration. because we have gone up to sell it is not a good strategy. we want to wait until the fundamental conditions are there from the fed minutes and the fact that there is low growth in germany and the euro and the yen are telling us we are near an inflection point. alix: you have the divergence between the hard and the soft.

there -- does the survey data roll over and do we see a different kind of shakeout? >> people are delineating along those lines. data mayeeing the hard be leveling off a little bit. we have some pieces of data that .re being decided consumer confidence is the highest since 2004. nonfarm payroll is the best in four months. anyone can say those are the ones everyone looks at. those will still be the main drivers going forward. if we see continued strength of their, the bulls will double ofn and continue buying even trump does not deliver on his policies. that does notset give credence to his policies

unless push comes to shove. at correlations historically, survey data is coincident timing with the market. the market is up and people are optimistic in the surveys go up. you have to look at the real data because that's what people do with their pocketbook. jonathan: you are looking for but also forward indicators and sentiment is a forward indicator. >> sentiment indicators are far more coincidental. you have to do your homework. a lot of research is about disproving old wives tales. ok,than: >> be careful what you ask for. markets inore on the 20 minutes away from the open with futures a little firmer. treasuries are big this morning with yields pushing by two basis points.

the weaker dollar story is emerging, a stronger euro which is a novelty as well as the japanese yen. from new york city, this is bloomberg. ♪

under 12.vix is yesterday, the fomc raised the question and expressed concern that the low level of implied volatility in equity markets was inconsistent with considerable uncertainty. oliver renick is joining us now and still with us is peter borish. i talk about this all the time. how does this make sense? it's interesting when they choose to comment on the

equity markets. may be part of it is the idea that they are still expecting to go to a rate hike trajectory where they move interest rates up continually from zero. i think they know that when you look, at least in the past couple of years, the market has moved inversely to expectations to what the fed will do. that has not been the case recently when you have the backdrop of this promised stimulus coming from the administration in terms of fiscal stimulus. previously, the talk of rate hikes was not great for the market. lotorically, there is not a to be concerned about. at the a chart looking past three rate hike cycles and what happened with the vix during that time. there is an average vix of about 13.5 during this 27 year period. in 1994 then in 1999 and 2004, there was no shakeup.

apart from 2000 were you had volatility high, the average is this -- is about the same. it's interesting they would find reason to comment on it. we need to watch what's going on in the markets. they are not questioning the volatility but the overall optimistic -- optimism and questioning it. a strong japanese yen but i don't see the optimism and hope in equities. i don't see it in the curve come i don't see it in the japanese yen and i do not see it in bullion, why? part of the volatility is you have to get into the weeds of market structure with the development of new derivative products, the growth of the cboe, volatility type products and make it easier for people to trade and hedge. unwinding lead to an

and a bit of a spike that may not have anything to do with the fundamentals but just market trading and structure. rule of markets is when something is not sustainable, it will end. the issue for all of us as risk managers is trying to figure out when it will end. game plan andin a we have been working on this for a long time since the election and we said we think we will get to this level and we were bullish and then when it's there, there is always 1000 excuses not to do it. you can talk yourself out of anything. the key is to be disciplined. if you reached your price targets, let's not go back and say where we were at other peaks and say we will just raise price target. these it -- be disciplined, take profits, go to cash and when you are there, you are unemotional. the best way to make these decisions is unemotional.

you can go on the political aspect of it but the real thing on the short run is a supply and demand for money. we are all must of the 21,000 on the dow and you talk about risk management -- go to cash? why? >> for us, we look for opportunities to potentially get short and trade and do those things. if you are a normal investor, there are times to make money and times not to make money. to 2009, theack dow cannot go much lower but if you took four or five components and put them at zero, the dow cannot go down that far but now it's the opposite. the financials have taken up of the yield curve has gotten flatter. what his right? we believe the bond market is bigger, the fx market is bigger and they believe the equity market in that's why we are near this inflection point. is a: i wonder if this

semantics problem. uncertainty is not the same as volatility. lookshere janet yellen there is uncertainty but that does not necessarily translate into volatility. which do you pay attention to as an investor? uncertainty is the fact that if i am an investor and volatility is a backward looking aspect, the markets have been narrower and performed well but uncertainty is a forward-looking aspect. the discussion this morning did nothing to alleviate that uncertainty. is the business of risk management. it's not the business of trying to be right. we interview every traitor and that's the first question i asked -- are you interested in making money or interested in being right? i am interested making money. david: thanks very much for being with us. peter will be staying with us. coming up, retail stocks on the move again and today it's kohl's a mixedands and it's

bag of results. we will discuss that coming up next. this is bloomberg. ♪

david: this is bloomberg. we have a busy week of retail earnings are here to give us the overview is jefferies retail analyst dan binder. ofll with us is peter borish quad capital. who did well this week? >> so far, we have seen good results out of walmart, home companies, those are the top three. lumbar liquidators bounds to back a little bit but expectations were kind of low there. in the case of walmart and home better sales, better earnings and outlook for the coming year that was in line

to be better. not surprisingly, those stocks responded. david: is there a common theme through those stocks question mark >> i think each company is facing different issues. i would not say there is necessarily a common theme other than they all beat on sales and earnings. with mall more -- with walmart, it's more of a turnaround mode. they have investments in stores and people and training and i think home depot is clearly seeing a continuation of from the housing backdrop and a reversion to the home-improvement spending. tjx companies which a colleague seeine covers, continues to momentum from value seeking american shoppers that are choosing off-price over traditional department stores. many people remember president trump on the campaign trail holding up a chart about homeownership. how important will that be to

this administration? what does that mean for home depot? >> homeownership ownership is bouncing off the bottom right now. it is amazing when you consider homeownership levels have come down so much. home improvement has done well but i would add it's been interesting to see home-improvement do well despite loan balance is going down. you are seeing home price appreciation which is driving most of that positive psyche for the american homeowner. there is a willingness to invest in an appreciating asset versus what had been a depreciating asset. we are multiple years into that now. interest rates will matter over time but right now, we are still at low levels and affordability is quite strong. brands --s and l kohl's was up and l brands was down.

is there something going on that's having a disproportionate a fact? >> if you look at the discussion we just had, stocks like home depot, it's part of what we talk about when we are trading. they were in positive trends and a market was strong and l brands was on the way down and coal is going up a little bit. it's very consistent -- and kohl's is going up a little bit. kohl'shat white line is and the blue line is al brands. >> brands. if you believe in the sentiment of the markets and if you're going to move toward cash and take things off the table, you want to get out of those which are already showing signs of weakness. walmart ernie's came out and they were trending up and followed through on that. listen to the markets. it's hard to do because we like to listen to ourselves because we think we are smart but we are

not. the market is far smarter than we are. david: you also have to talk about the border adjustment tax. what does that mean for retailers? tax i thinkjustment would be devastating frankly for the industry. there are theories about what offsets there could be if you put that in place, particularly foreign-exchange rates rising potentially are allowing retailers to buy overseas. when china and vietnam are pegging their currency to the dollar, you will not see a lot of appreciation there. would end of the day, you end up having a lot of inflation and that would be bad for the consumer. there has been conversation around this but my opinion is that this is a no go in does not make any sense. those that import the most would feel the biggest detriment,

names like best buy or macy's and kohl's. the electronic and apparel retailers would be hurt the most. jonathan: what is the valuation that has been discounted on this stock at the moment? what is the upside of it does not happen? >> there has been a lot of news around this topic from one week to the next. it seems to change whether it is more favorable or less favorable. there was volatility in the stocks around that and if it went through, the stocks would come down quite a bit. i don't think it is fully baked in. thank you very much. from new york city. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg daybreak. we are moments away from the opening bell. morning,re up this nine straight days of gains on

the dow so far. another record at the close yesterday. it's the longest streak since july of 2016. you look at this, you would think it's a risk off day. the dollar is weaker and the yen is stronger. optimism is not in the bond market which is trading over 20 basis points south of where it was at the peak in the middle of december. let's get to the market open. have another record high for the s&p 500 and another record high for the dow jones. this would make it to attempt straight record close for the dow. you have risk off another asset classes and more risk on in the equity market but will it hold up? oil is on a tear and we have earnings that trickled out this morning that is helping to boost

equity prices. square is up a whopping 11%. square is killing at this morning with sales topping estimates for the fourth quarter. larger merchants are working on square that is helping their volume. we want to keep our eye on technology. -- on tesla. it's trading right there in the market. million dollars in cash and yesterday it was about the hope and optimism but today looks more about the reality and the cash burn. wrapping up with banks, barclays and jp's morgan -- barclays is off by 3% despite the fact that in london, they were up the highest in more than one year. the capital ratio exceeded expectations by divesting its african unit, making some progress but the question

becomes -- how do they really grow? jp morgan is relatively flat. an analyst dayn is coming tuesday. jonathan: he is not just opinionated, he is super bowl it. >> half of jp morgan is traditional lending and that's a kid says that gets a boost from rates and the other is capital markets. turn on the offense for jpmorgan. we think they are poised to take off. jpmorgan is a micro cousin of the banking industry because the industry as a whole has shown the worst growth and eight decades but now we see revenue growth accelerating. jonathan: for more on the markets, we are joined by eric .chottenstein --shoestein the situation in the banks, the

improvement for earnings is one thing but the optimism is already in the price. get improvement or is it already priced in question mark >> i think it's probably a bit of both. is nonancial sector different than other sectors out there. the reality of what's going on with earnings versus the optimism as far as what's happening in the markets is creating scenarios that are pretty risky and a little bit unsustainable as far as how investors should think about it. the financial sector has been pretty beaten up. it's a sector that we typically of not have a lot of exposure to within the jensen quality growth fund but that is not necessarily a mark against the financial sector but more something about how those companies don't necessarily meet our qualification standards for consistency in the revenues and earnings. that maybe this is the time for financials. if it is, that could help the

economy but we will just have to see. jonathan: optimism about story of ad then the steeper yield curve. i have not seen that story. will he get that steeper curve? >> i don't see that. the definition of an economist is someone who sees something that works in reality. and questions whether it will work in theory. right now, i like to listen to reality and not theory. the reality is the yield curve has not gotten steeper. you look at jpmorgan, the markets are discounting a factor. record --they are at at a record high. >> anticipating everything that was said, that does mean -- that does not mean it is a buy. if i'm sitting at jpmorgan as an

employee, i hate dodd-frank. come on, now i will unwind? look at reality, don't look at their he. the reality is that you can value these banks on today's numbers. you have to value of them from 15 or 20 years ago if we get that rollback on regulations. what is the counter argument to that? take 22 guys and put them on the football field and there are no referees, they will kill each other. when we had unbridled competition without regulation in these markets, they rolled up their sleeves and they took more and more risk and the end was bad. if we unwind all of that, we will have a similar ending. investor, you think about what's going to happen as best you can. the strength of the financials we have seen since the election,

do you see encouragement over where the overall economy is going? they have already made their big move. we have come from an economy off of the 2009 lows. we have had record months in a row of employment, inflation has been low, the consumer is much better, the financial situation in terms of debt on individuals is better. then there are creaking warning signs whether it is sub prime auto -- you look at that amount an area where it's weakening. you look at student debt so they are -- so there are starting to be size. jonathan: jpmorgan hit an all-time high and bank of america is pays to close at a 2008 hi. that's where the optimism is. it has not been in health care. there has been a discount applied to the health care

sister -- sector. are you bullish on health care and why? inwe are still bullish places where we think health care can function without price risk. you mentioned pharmaceuticals, in places where there is good market dominance, there are areas where there will be -- where they will be continued consumption. is becton holdings dickinson, making needles and syringes. it's a first line of defense in terms of how people begin to consume health care particularly in emerging markets. it's less costly and it's a scale play as far as making -- making syringes and needles and that kind of market will thrive in an environment where there is still a lot of uncertainty about what will happen with the affordable care act and how that will potentially be changed or

replaced. you need to find places and we look for companies that can survive and thrive regardless of what might be changing within the regulatory environment. jonathan: do you have to ignore who would be the tax winner and loser? do you look at the sectors that will give you longer-term strength? how patient do you need to be? as far as being patient, it's understanding what it is you own and why you on it. that's how we build our portfolio of 27 companies. right now is a time there we have seen highs in the market every single day for the last nine. things are starting to feel a little unsustainable. complacency is high and volatility is low. this would be a time where we want to manage risk. the way we do that is about making sure the companies we own our on sound, fundamental financial footing so that they

can to continue to produce a business returned that is attractive regardless of what might be happening in markets and the economy. then what we need to do is make sure we are paying attention to how much we are paying for those. we can still find opportunities even in a market where it continues to feel like it is hitting highs every day. you have to do more due diligence these days than perhaps just investing indiscriminately because you fear you're missing out on what's going on in the market. companies,ve got 27 theou take into account policy volatility with the trump administration? will it change the environment that those 27 comp and he's will operate in? do you take that into account? into account.that it's part of the overall consideration for all of our businesses is what's happening from a policy perspective. the unfortunate thing now and

the difficulty for a lot of in verys is that we are much a rhetoric phase rather than a reality phase in terms of what those policies will look like. consideration.to we have to be cautious where there might be regulatory issues that could harm our businesses. it might be some of the immigration issues particularly v1 companies. we have to take that under consideration but ultimately, it's the franchise -- if the franchise or business is strong, they should have the ability to overcome that. it will be just how we manage that risk within the portfolio and how we position the companies that will make the difference as to whether we want to hold onto them for the long-term. in one word, what's your favorite pick right now? >> our favorite pick right now

is pepsico. alix: awesome. thank you very much. jonathan: that's shorter than i expected. alix: what a pleasure to have you here. are about 11 minutes into the session. at the dowlooking for a 10th straight session of 1% with, up 1/10 financials pushing higher with jpmorgan at record highs. elsewhere, the optimism is not in the price of treasuries. year isd on the u.s. 10 up but it's a weaker dollar story. from new york, the coverage of markets continues. this is bloomberg. ♪

taylor: this is bloomberg daybreak. coming up, democratic senator ben cardin. alix: the dow is hitting a record high for the 10th straight day, mapping its longest winning streak since march of 2013. the banks are higher as well. jpmorgan is seeing another record high and bank of america is on pace since -- for its highest close since 2008. on a terror and you've got the 10 year yield lower, under 2.4% as you have buying across the curve.

how do you buy banks with the curve falling question mark >> i would suggest that investors are looking over the next 12 months. since the financial crisis, the banking sector is one of the most oppressed sector within the s&p 500 from a regulatory standpoint. there are big changes coming to the regulatory environment for the banks over the next 12 months. addition, if the economy responds to the trump administration's economic policies as many people expect they will, we will see higher rates. that's the reason people are buying the banks. jpmorgan stock is up 113%. how much more growth will be see if they roll back regulations? >> it's a question investors are wrestling with all the time. one of the biggest areas for jpmorgan as well as the industry that has been under assault since the financial crisis is the revenue line. interest revenue is generated from the yields on their assets

less the cost of their funding of those assets. if rates rise in the yield curve remains steep for the next 12-18 months, this area which used to ago, it's.7% 10 years currently under 3%. as this rises, profitability will go up. alix: which bank is in the best position for that kind of samaria -- scenario? >> bank of america and it's also a play on the u.s. expansion and that's what investors are looking at and that stock is up over 100% over the last 52 weeks. which stock reflects optimism that will not see reality? to identifyicult those names because the rising tide will lift all ships with banks. rates is the primary driver of profitability which we believe it is, it will affect

all the banks favorably because all the banks will benefit from wider spreads. it's hard to identify somebody that will be the fish that does not swim with the school. all the banks will go together and it's tough to identify someone that will not join the other banks. alix: we have seen stocks roll over a little bit. a brief moment of optimism there. nonetheless, we are trading around record highs. is wells fargo a little behind the school of fish? >> that is correct, it is the laggard and you have identified the one that if one wanted to look at a bank that is not done as well as the others, it is wells fargo because of the issues they are dealing with with consumer banking practices. over time, those issues will be that is is a stock lagging, no doubt about it.

jonathan: great to have you with us. about1/10 of 1% on the markets. the weekly consumer confidence index is little changed. it set a highs since 2007. alix: then you have nfib sentiment at an all-time high as well. that's the survey versus the hard data. jonathan: when will it translate into hard data? let's go to mark barton. what's coming up on your show? cio who manages $20 billion will join us. cerilli willkevin

talk about the gathering of .rump and others barclays shares have been up for percent but are down right now with investors trying to figure out if it was a good or bad set of earnings. we will see you in a minute. if you missed anything over the last three hours, you terminal tvgo on your and click on the charts and interact with us directly. this is bloomberg. ♪

jonathan: from new york city this is bloomberg. 24 minutes into the session. march 2013 was the last ten-day winning streak on the dow. we are up 1/10 of 1%.

optimism is in the equity price which is at record highs in the united states. it's a different picture in the bond market. yields are lower on treasuries by two basis points and it's a weaker dollar story across the board. we may be getting clues as to when we get the tax plan instituted. david: our new president is loving the semis getting ready to take the podium next tuesday and everyone will be watching. alix: it's a strong dollar reflecting that optimism. front and center here with jpmorgan trading around record levels. mike mayo was on earlier and made his case for why he continued to be bullish on banks. >> u.s. banks are going to value creation. they have had single-digit roe's

and now they are on the doorstep of double digits. without the benefit of much higher rates and without the benefit of lower taxes, we have -11. banks going from 9% percent and that gives banks the value creation. you can take out the last eight years. jonathan: if i was running the investor conference, i would ask the same question. ago, you are the last person who would have gone. the bond is bank chief president weighed in on politics but pointed out the strength of the euro zone economy. >> i think the global economy as well as economies of the euro area have certain -- have shown a certain robustness. there are surprises we felt

before where the risk is that theand we believe upswing we have already seen before will continue. it means that domestic price pressures will increase over the forecast horizon. jonathan: there are similar it -- there are similarities and differences between europe and the united states. there is upside risk coming from politicians in d.c. but in europe, the economy is good but you have significant downside risk coming from politicians across europe. david: you are not sure who the leaders will be over the next few years. alix: also, where is the strength we really say. they say is the peripheral countries showing good data but are not asuntries -- strong. you have an environment where it's about exports and not demand growth, what does that say for long-term? jonathan: there is the idea that france delivers better pmi than

germany for the first time in a long time. david: another country is mexico because the secretary of state and secretary of homeland security will be down there and there is a lot of conflict going there. the former commerce secretary thathe has not seen things is bad with mexico since the 1970's. >> i wish we could all go to school and study the smoot-hawley tariff. that everyating generation seems to forget it but that's the last time we tried this logic that if we tax imports, we will save jobs and therefore grow our economy and to write for our people. was take isally did deeper into the great recession. -- the great depression. we have to be very careful. david: some tense discussions have been going on in mexico city. the border adjustment

taxes looking fairly distant. doesn't seem to be obvious who wants this or not. jonathan: there is very little conviction coming from that. 26 minutes into the session. all-time highs to discuss in the equity market. the dow is up for 10 straight sessions. treasuries are looking resilient with yields lower and the dollar is weaker. full-color's continues right here on bloomberg. thank you from new york city. you are watching bloomberg tv. ♪

vonnie: from new york, i am vonnie quinn. mark: live from london, i mark barton. welcome to bloomberg market.

vonnie: from new york to london in the next hour and cover stories out of washington, d.c., mexico city along with frankfurt, germany. top stories we are watching. in politics, president trump is due to meet with ceos from manufacturing companies this hour at the white house. will they come up with any big solutions to pressing problems so just tax reform and job creation? mark: in new york, starting to take hold barclays. the chiefar from executive as the come in to make progress in its efforts to unload unwanted assets. vonnie: in the u.s., stocks hit new highs. why is the bond market having trouble latching onto the reflation trade? krishna memani will join us to talk all things markets in the age of donald trump.