streak of records since 1980 amid a major speech by the u.s. president. is the canary in the gold mine? german bond yields break down in unchartered territory. it's a ninth trait loss for rbc. the c.e.o. expects to report the first profit in a decade. to our viewers worldwide, i'm jonathan fero alongside david wes continue and alix. 10 straight records on the dow. the futures are a soft session emerging looking at global equities. down by four points, one full percentage points on the stocks. treasuries coming in today well bid, 236 on the 10-year. alix: the two-year bid with a record low. citi says 100 basis points could be a reality for the german two year.

and the bit coin and crude a little softer on the day. jonathan: president trump has the market on the brick of history. the dow closed in record highs in 10 straight sessions, the longest streak in 30 years and two more days of gains would tie it for the longest ever. the treasury secretary took some of the wind out of the sails, sending yields and the dollar lower and this comes ahead of the president's speech with a conserve pitch political action conference today at 10: 20 p.m. eastern and address the congress on tuesday. to discuss it, the head of strategy and then the head of the office at ubs. jeff, let's begin with the 24-hour roundtrip of the treasury secretary starting 3% growth and talking about a tax plan coming in august. why didn't the bond market buy it? jeff: at this point it's in a world of expectations and you mentioned two factors, the yield and the dollar.

but that does come after three key components in terms of financial conditions. two of them have eased somewhat yield and the dollar could allow the third component to actually offset that unit somewhat which is equities and matters for equity positioning ultimately but we go back to the dollar, it cannot afford to strengthen aggressively from here and will be further tightening. jonathan: what do you make of the actions in the last 24 hours? productive. there were accounts of viewing the dollar strength as a positive report card for the administration we saw the other night and comments about tax plans moving forward, etc. the sprees action seems off and equities held up and the yields and dollars have come down. jonathan: comparing the bond bids to cyclists riding aggressively up the mountain and it's a difficult task at the moment.

alix: it brings you to the attention what happens, jeff, when it comes to the dollar. you can't afford a stronger dollar but does need a adjustment so how does it tread the line between the comments sometimes we like the dollar, sometimes we don't. daniel: it's not the same from monetary devaluation. the swiss bank can tell you how that will affect the swiss farm industry and something we're focused on now and whether it should be a monetary or fiscal responsibilities and brought in asset allocations so let's wait to see what stabs. and he spoke out yesterday at

cpac and tell us what he think the administration is pursuing. >> break out through buckets. the first is national security and sovereignty and is the intelligence, the defense department, homeland security. the second line of work is economic nationalism and that is wilbur ross at commerce, steve mnuchin at treasury and peter navarro, steven miller, these people thinking how we'll reconstruct our trade arrangements around the world. the third broadly line of work is what is deconstruction of he administrative state. >> the one thing you didn't hear is growth. i'm not sure what it means. how are the markets reacting to the fact this administration will pursue economic nationalism, that is america first rather than growth. geoff: if you look at the u.s. allocation not only are we overweight u.s. equities but u.s. nationalism doesn't need

to happen the expense of global growth. that's the key point. if we can engineer bilateral agreements and it starts to lift global demand via goods or services it can be a win-win situation and we say cautiously optimistic. >> is that the way to thread the needle and have america first and expand the world? daniel: the rising tide lifts all boats to some extent. if the u.s. does well the dollar will do well but probably not going to harm the rest of the world. the dollar will go up and provide a little bit of a benefit for the other economies. so that's probably the main transition mechanism to watch. jonathan: a bit of a pushback, economic national cities him, one of the best examples of it maybe in economic history is the post world war push for liberalization by the united states and now anyone -- more than anyone else, it was the united states. now there is a significant rethinking of that. within this administration, there is an argument, geoff,

actually economic nationalism is not longer about equalization but what it meant 200 years ago and that was about protectionism. do you not share that view? geoff: protectionism is kind of a banner now that ultimately it is about employment growth. and again, i go back to the point how it can benefit everyone. if you get in a greater u.s. growth and actually that does generate inbound investment against the u.s. from emerging markets, that can have a transmission of both which is favorable for emerging markets and benefit from globalization and that can benefit u.s. employment as well. we can try to square things around here, of course it will depend on the wi lateral relationships and the bilateral relationships between the leaders of individual companies which trump seeks deals with. alix: to that point we've seen emerging market fx hold up so you're getting your cake and eating it, too. how long until we need to see something practical until that reverses?

yesterday it seemed the fx market and treasury market got impatient and stocks rolling over in premarket. what's going to be the tipping? geoff: at this point we need to look at expectations and e.m. and f.x. in general and respond to short term interest rate expectations. we are still reluctant to push for the view that the fed will go along with a very strong no growth push at this point, i'm willing to count another 15% in the dollar trade weighted basis. i think that's where we need to take the next direction from the fed rather than the administration. >> we have to look what the trump administration is doing and not just what they're saying. the first thing they've really done has involved mexico and been curtailing goods and people across the border. we had actually after mnuchin said we're not so sure about the border tax and then the president saying we'll have some sort of border tax. what does is it make you think about the dangers of protectionism here? dan: there's a lot of noise but not much has happened in terms

of new policy, new arrangements. the renegotiations or discussions on nafta will take a period of time, mnuchin said that yesterday. in the meantime, u.s. data coming in very strong, the fed sending pretty clear message they want to tighten policy in the second quarter of the year. so you know, i think there's going to be adjustment higher in u.s. rates and adjustment higher in the dollar. the trade noise is in the background but not much is actually happening in terms of new information on that front. >> what do you make of the border adjustment tax now the president saying we'll have some sort of border tax. are the markets wishing themselves to success here? geoff: well, really we want to do it on a country by country basis, especially which industries are involved, and i know closer to home what is happening in switzerland right now. for example, if you look at the swiss farming industry, we calculated without phrma, instead of running the 6% surplus of g.d.p. it will run a

2% trade deficit. if you take away swiss farming exports to the u.s., that's 2% of g.d.p., 40,000 value high add jobs. how is it structured? it's not just about the tariffs, but designed to be the supply chains, the r.n.d. and the high value jobs out of foreign countries and back in the u.s. if that's the case, then switzerland alone will need a retire rethinking of its economic model. jonathan: let's set up the trading day the next few days. the market position against what we expect to hear from the president later today and what we expect to hear from the president on tuesday. what is the market need to hear from president trump? him geoff: i would say more specifics. give the example of last year after he was elected and there was a lot of talk of infrastructure and whether we can have asset allocation views. let's see the proposals first. can there be concrete proposals which actually can get past congress and they can be implemented. i think that's needed to sustain the rally and sustain dollar longs because they're

looking tired now. alix: thank you both and you're sticking with us. i want to highlight one stock, jcpenney over 3.5%. the company beat fourth quarter earnings coming in at 64 cent as share. same store sales were light but it's their outlook moving the market. gross margin for the full year could be as high as 40 basis points and they're closing 13% to 14% of their stores and makes up less than 5% of their annual sales and that is going to save them $200 million. interestingly enough, when the c.e.o. got into office he said jeez, when i first got here we got a lot of stores to close and then he said it was the opposite, i got into office and c.e.o. and it's opposite. it's not as bad. he was more optimistic six months ago and now we're seeing the stores be closed, 130, 140. >> he was right the first time. alix: coming up, terry

mcauliffe on how white house policies on immigration and jobs are impacting his state and beyond. later, president trump will make remarks at the conservative political action conference 10:00 a.m. on bloomberg television and bloomberg radio. ♪

alix: this is "bloomberg daybreak." time for an update what's making headlines psm taylor: a preliminary report shows the alf brother of kim jong-un was killed with a deck cal weapon. t was found on kim jo norv nam.

kim jomg nam. they'll step up laws banning the use of marijuanaa, a reversal from the stance of the obama administration. they cut down businesses in the marijuanaa industry even in states where they've been made legal. the republican senator says sudden policy changes aren't likely. and in europe, top advisors to france's far right candidate maurice la pen has met with international banks and other firms to explain their plan to exit the euro. among the institutions that requested meetings, barclays and ubs. such meetings are common for mainstream parties in san francisco. they say this is the first time le pen's party has been approached. global news 24 hours a day powered by 2,600 journalists and analysts in more than 120 countries. i'm taylor rigs. john? nathan: and the le pen aides

met. more developments in europe. geoff, i want to begin with you. it's the thing people are looking at every time they log into bloomberg all the morning, the front end of the curve and negative 95 basis points at one point this morning on a two-year note. what is that telling you at the moment, jeff? geoff: well, i think two things, one, e.c.b. policy probably won't reverse course any time soon but there must be some degree of risk with regard to european politics because for most clients they dust off the notebooks which from a few years ago from greece i've been doing as well, clearly if you want safety, germany is where to go. jonathan: big call from citi that stocks could fall a negative one full percentage point. what will take us down to those levels? guest: i do think it will be extreme fear over what we witnessed a few years ago and

will lead to serious repercussions in terms of policy prospects because opposed to a few years ago, economic conditions and expectations are completely different. if you look at where german inflation is. if you have in real yield approach, negative 3%, how is germany going to counter that with respect to the e.c.b. and will be a dynamic that needs to play out. alix: if you look at the 10-year yield on core c.p.i. is negative and more negative as inflation picks up. dan: it's weighing on the currency. euro-yen pushed lower and against the dollar you don't see it much because real u.s. yields have been coming off the market, inflation expectations have been rising but fed expectations have not and hurt the dollar and neutralized effect of euro. we think the risk for german rates are higher as we move through the year. right now the market is looking for cheap hedges against political risk and is

relatively inexpensive to sit in front of a german front end instrument and relatively inexpensive to buy downside protection in the euro and carries well, etc. thimmings like ebling wit doesn't show a lot of increase or pressure on equities or upside pressure involved because those are expensive insurance policies to take out. alix: fair point. you know, what also is interesting, john was bringing up e.c.b. buying and that was citigroup's call. interesting we end up categorizing it as a safe haven buy because we if we look at the spread we had relatively better news out of france in terms of election in second-round voting. doesn't it tell you it's about the e.c.b. and collateral issues and not about the fear? geoff: don't think it is a combination of the two. politics playing on the mind and we see it on the wealth side of things. also i have to add there is a

view or disconnect in terms of how markets are positioned relative to reality because economic data and expectations are firming up but the positioning isn't there relative to fundamentals and this disparity leads to higher risk and higher scope for volatility especially in the six income markets and that would push people to try to get insurance as well. so i would err on the side of political caution and the news flow will get better today and worsen tomorrow. who knows. it's best to stay on the defense in the short term. david: to what extent is there a growing or reducing divergence among the individual economies of europe because they are in the end individual economies? geoff: we'd have to look at what kind of divergence or convergence we're looking at. if you're looking at pure inflation, it will argue on the risk of convergence and productivity growth and unit

labor cost and things like that, north and south, also no debt sustainability, these issues we have to look at as well. the e.c.b. will say we can't do something at some point and the politicians will have to do structural reform but is that happening in the current environment? probably not. jonathan: a quick question, ever all, when do i want to get long euro sterling, given the data from both countries and given the politics the rest of the year. first to you, geoff. geoff: if you're taking a three to five-year horizon point of view, you want to get in now. tactically, probably sterling looking a bit rich relative to the euro especially in the options market. dan: we don't want to be long sterling levels. we think the pound is quite cheap and we're at levels that take into account a lot of downside from the brexit process. david: daniel and geoffrey from thank you very much. terry mcauliffe from virginia

whether the democrats with work with president trump. and this man is looking at the chances of the pullback. we look at them with the chief economic strategist from morgan stanley. this is bloomberg. ♪

alix: shares of ubs, the worst slide since november. our c.e.o. spoke after earnings this morning. >> we've been actually quite open today that we think we've got another tough year ahead of us for 2017. provided we can get through issues, particularly u.s. and rbs and think we'll be making profits in 2018. alix: we're joined from london. 2018 profitability, is that really going to happen? >> there's a lot we don't know

really about 2017 before we even get to 2018. the bank has got a lot of issues. it's got a litigation bill that it still has to clear up and it's got a whole saga around one of its units called williams and glenn that after the crisis was supposed to sell off to appease competition legislators and that didn't happen and they're trying to submit a new plan and there's a lot to get to 2017 before we know what 2018 looks like. alix: they're dealing with 58 billion pounds of losses since 1999, how long is the u.k. taxpayer going to be on the hook for rbs? lionel: i think longer because of the issues we're talking about here with this bank, it's a bit difficult to put a price on it if you want to sell it and it's also a bit difficult to want to crystalize those losses, which would be in the billions, if it did try to take the current share price on the chin and sell it into the market. so i think a while longer yet

basically. alix: rbs is a specific example but in banking season in europe we've been talking about the cost cutting and profitability issue. a board member from the european banks weighed in on his potential solution. >> if you look at the european banks, their problem is not necessarily that they're two fragmented but the earnings power is too low. as a supervisor, we're interested in sustainable, reasonable earnings. and consolidation may be an one, and i orrect don't mean weak banks getting together and forming a weaker bank lue complement bank and bank with cinergies getting together and making sure there's a path to higher earnings. may well be a solution. alix: back in the summer that conversation centered around deutsche bank and commerce bank. how would rbs fit into that

scenario? lionel: that was an interesting quote from a very bundes bank answer. perhaps the problem is interest rates and their being too low as opposed to fragmentation which we know is a german banking issue. you know, i don't know where rbs fits in. i think rbs was supposed to help instigate those mergers by spinning off the unit we talked about. it probably won't but i do think that brexit is one possible catalyst for some consolidation in the u.k. just remember the u.k. is already quite concentrated in terms of the big banks and might somebody of the smaller startups and challenges that merge first. jonathan: now to andreas' comment, he's looking further south to italy and the branch you see on every corner of every single street and city in italy. when those banks get together, he talks about weakness paring with weakness is that a country he's referring to? lionel: maybe.

it's starting, right. look at italy, we're hopefully getting on past one saga. and uni credit has seemed successfully got its capital increase off and that's a lot of money being raised and in italy again, taser is looking at buying generali. i think that's starting. jonathan: thank you, lionel laurent. bloomberg gadfly columnist. the governor of the state of virginia joins us to talk president trump's policies on immigration. we count you down to the opening in new york, about two hours and change away. futures looking soft. from new york, this is bloomberg. ♪

jonathan: from new york city to our viewers worldwide, daybreak with jonathan ferro. two hours away from the opening bell in new york city, a really soft session emerging and down by about 78 on the dow negative about 10 points and the s&p

500. the dow closing yesterday for a 10th straight record, the longest streak of records that goes back to the late 1980's, 1987 to be precise. treasuries bid, yield lower by a basis point to 236 on a u.s. 10-year and 120 basis points and change away from where we were, the highs of mid december, yields have come right down on the u.s. 10-year and this morning is reflective off of that again. the weaker dollar story for a third straight day against a firmer euro, up .2%. let's get you up to speed on the news and say good morning to taylor rigs. taylor: in europe, the prime minister and conservative party are lashing out at the idea brexit will cost the country $63 billion. in an interview with bloomberg, christian kern became the first e.u. leader to put a price on the british brexit. ian duncan smith said the figure is nonsense, conjured up

by officials behaving like children. iraqi troops captured more ground from the forces from the western part of the city of mosul. the iraqis say they've gained full control of the mosul airport and identified parts of the city. western mosul is the islamic state's last strong hold in iraq. in the u.s., it's a sign of the times in the labor movement, the acl-cio is restructuring and dismissing members. the union membership has been declining. less than 11% of u.s. workers belong to a union and half the membership in 1983. global nice 24 hours a day powered by 2,600 journalists and analysts in more than 120 countries. i'm taylor rigs. david: the republicans may have a majority in both houses of congress but history teaches fundamental reform particularly of the tax code required some bipartisanship support. joining us now is one of the leaders of the economic party,

terry mcauliffe of virginia and he took office two years ago after a long career that's spanned both democratic politics and business. welcome to the program and bloomberg, governor mcauliffe. terry: thanks for having me. david: let's talk about it. last time we had fundamental tax reform was in the reagan administration with a senator named bill bradley, a democrat from new jersey who was essential to getting that done. is there a possibility of the democrats coming together for tax reform? terry: the time is right for massive tax reform. we'd be supportive and the one thing i'd like to see is repatriate the money overseas and we ought to bring the money back here and create jobs in the united states of america. i think our tax code is outdated so i think the time is right to come together. our goal get more as the governor and put more money in the people's pockets and let them spend more and create more jobs and how can you turbocharge our economy. give people more money, keep taxes low and that's how you can stimulate an economy.

i think the time is right to bring people together to do this. david: last time you do this, oversimplifying was cut rates and eliminate deductions, simplify the whole thing and requires everybody giving up something especially when it comes to eliminating the conductions -- deductions. are the democrats prepared to address tough decisions on deductions? terry: it's in both sides in fairness but you have to go in any negotiation to say we'll have a discussion on all the different issues. everybody has to give something. it's unfortunate in politics today, no one seems willing to compromise or come together. i consider myself a very fiscally conservative pro business democrat, socially progressive. you know, you got to compromise. i work with republican legislatures, i have a republican legislature in virginia and we work on economic development and all come from a different point but come together at the end, what's good for the state of virginia. that's what we have to do in this country. let's start out by saying let's put everything on the table and have that discussion.

let's begin from there. if you go into a discussion you automatically say we can't touch this, we can't touch that, the negotiations won't go very far. i've come from a place, we can talk about anything, we ought to be able to do it and some things we may want to preserve. obviously as a governor, the deductibility and state and local income is a big issue for states. but it doesn't mean we can't have a discussion in everything we ought to be looked at and the number involved and percentages, we ought to be able to put on the table and have a discussion. david: one of the things very much on the table because of speaker ryan is the border adjustment tax. have you looked at that and the effect it might have on your state of virginia? terry: i'm very concerned, i'm a big agriculture state. our trade last year was about $33 billion. we're exporting all over the globe. we need to be very careful. i come from a place that i am all for fair, free trade. i happen to have been out, i supported president obama on t.p.p., those 11 countries, david, about 62%, 63% of my

exports in virginia went to those 11 countries. i'm very concerned today that of those 11 countries, china is now going to negotiate a direct deal with each one of them. guess what? the united states will be left out and virginia will be left out. listen, you give me a trade deal, we protect worker rights and protect environmental rights and you make sure it's a tough trade deal, if it's a fair trade deal, david, i will compete against anybody around the globe. let us have a deal where we can negotiate in trade around the globe. it's a global economy. 95% of the world's customers live outside the united states of america. that's why i travel so much and i've done 22 trade missions to dozens of countries, our economy, our employment went from 54 and got it to 37 and sitting at 41 and initial unemployment claims are now at the lowest levels since 1973 because it's a global market. we're selling all over the globe and i'm very concerned with these border taxes they'll come back and bite us and cost us jobs.

for me at the end of the day, how do we create more jobs? i'm very proud since governor we've created 185 new jobs since governor and almost $15 billion of new capital investment because we're trading and doing business in a global way. david: you expressed your concerns about the immigration policies coming out and have written specifically to the department of homeland security secretary kelly and expressed your concerns as the governor of virginia. tell us how that affects your citizens and your state specifically. terry: i can tell you first of all on two issues, the president's executive order on the travel ban has had an impact. i already lost several site visits to virginia from folks outside who wanted to come in one advance manufacturing and one agriculture, it's not the time to come to america. i'm very concerned about the chilling effect as it relates to our business. as it relates to these new immigration policies. i did reach out with general kelly and want to thank him, i'll be meeting with him sunday morning with the ice officials to talk about this.

my concern is are we now, have we changed course here in america where we can now just randomly stop anyone we want? we had a bad situation in virginia and individuals coming out of a church, how far a hypothermia sanctuary to get out of the cold and were six or seven ice agents randomly went up to people and the first person they talked to was an illegal resident. what will happen is it will be a chilling effect, individual with communionicable diseases will not seek medical care and works will not work with law enforcement and drive people underground and take northern virginia, a booming economy, 32.5% of the northern virginia economy small business is foreign born owned owners. we have to be careful we don't have a stifling impact on our economy. and it all for me comes back to jobs and we need to be very careful we're not having a chilling effect, scaring people. listen, we're the land of opportunity, we're all immigrants, david, unless you know we're native american in 1607, you know, three ships

came from england and they didn't go to new york or maryland or pennsylvania, they came to virginia. we didn't stay at the water's edge, no, you're not allowed in this country. open, welcoming, dynamic economy, we're cranking in virginia today because we do business on a global basis and we're open and welcoming and we treat everybody with dignity, respect and respect civil liberties. david: let's talk about finally something perceived as not cranking and that's the democratic party and where we're going and where the leadership is coming from. we've seen president trump come in and really steal part of your base and traditionally democratic parties appeal to organized labor and the afl-cio is cutting staff dramatically. where is the future leadership taking us particularly at a time the d.l.c., the old democratic leadership went to the center and we have the center of american progress going to the left. where is the democratic party headed? terry: i'll tell you this is where the democratic party better be headed.

we ought to be the party of economic expansion, jobs and opportunity. that's why i focused, i'm happy to say, all the polls, i'm popular in virginia. why? because i focus every day on economic development to grow and diversify the economy. our party, we've had a great history of economic development. if you look at what president obama inherited and the 18 million new jobs created but no one talked about that, david. the idea that we did not carry michigan in the last election when literally president obama saved the auto industry. well, shame on us. our party and i would say it's got to be driven by the governors because we're in the front line of economic development every single day. we're responsible for job creation. if we have jobs we have economic impact and money to invest in an education system to build our work force. that's our message and nobody wants to hear anything unless they want to hear a politician tell them how will you make my life better and how will you get me a high paying job? i've spent so much time in the last three years, david, diversifying the virginia

economy, human genome sequencing. we've got a build a work force in america for the 21st century and that means building a great work force which starts with education and invest in education, you'll build that ork force and create jobs. democratic party. a lot of people spent hot air talking about is absolutely meaningless to the men and women sitting home now worried about their child's education and are they getting quality health care? david: you've season why you're so effective and hit my home state of michigan and my wife's home state of virginia all in one answer. that's perfect. thanks very much to governor terry mcauliffe of virginia. jonathan? jonathan: saudi arabia's vision for its aramco i.p.o. may be running into reality. the chairman who advised saudis on energy development joins us next. nd later paul atkins, former f.c.c. commissioner will be on. you're watching bloomberg.

taylor: this is bloomberg daybreak. i'm taylor rigs in the hewlett-packard greenroom. morgan stanley chief asset strategist coming up. andrew sheets. taylor: time for other stories making headlines. i'm taylor rigs with your bloomberg business flash. struggling department store chain jcpenney gets a little smaller. jcpenney will close 140 of its roughly 4,000 stores and represent 5% of its total sales. two distribution centers also will be shut. boeing has a vote of confidence in the u.k. the planemaker will open its

first european factory in northern england. the plant in sheffield will supply parts for the boeing 777 and 737 and the company will spend $25 million on the factory and employ 30 people. it was another record week for u.s. oil exports producers and tradership down an average 1.2 million barrels a day last week, the most since the government started keeping records, almost a quarter century ago. prices for west texas crude averaged $2 a barrel. and makes u.s. oil more attractive to refiners around the world. and that's your bloomberg business flash. i'm taylor rigs. this is bloomberg. alix? alix: the u.s. fighting for market share and the saudis fighting for cash. saudi arabia said saudi aramco worth $2 trillion but does the kingdom have to settle for less? a person familiar with i.p.o. talks place the figure at less than $1 trillion. a person in the saudi government, $500 billion with

mckenzie, $400 billion. with us is tom petri who joins us now of petri chairman. what is saudi aramco really worth? tom: pinning that down will be a market process but my view the wood mack analysis strikes me as somewhat low but do think the market test will be the answer to the question you ask and i think it will be somewhere between some of the other numbers you've heard and that prediction that was made, what was it, six months ago by the saudis? i want to add one thing, we're not involved, i'm not involved with this particular transaction. we've advised the saudis in the past on their gas initiative and on some other tracking matters. your o think what reporting is really pointing out and really helpful is the

saudis may well have to make some adjustments in how they approach this either on taxes or on some of the other -- how much they choose to sell to establish the sovereign fund. alix: give a shoutout to javier who did a great job on the article. when you have a corporate tax rate of 85% and saudi aramco is playing 20% royalty makes it hard for a investor to get involved with that valuation. do you have to lower the tax rate or raise how much they're actually going to have the i.p.o.? tom: maybe a combination. but i think -- i do think what it speaks to is that here's the situation where saudi aramco has 10 times the reserves of exxon but because the tax regime is so heavy, that has a real bearing on the comparability. so some combination of those two, and i wouldn't be surprised to see ultimately

each of those being addressed as they move towards this. the key point is that the saudis are embracing the notion of significant changes in their economic structure and this is a key driver in achieving that. so, you know, i don't think this is necessarily as devastating as it might first appear. it does require, however, sound judgments about how to address what will be market concerns vis-a-vis the current structure. jonathan: we've covered a range of issues with the south already and is it the ultimate issue the saudis would like to value it based on the reserves and no analyst does that with the likes of exxon or total or the likes of b.p.? tom: i'm sorry, what was the question? jonathan: the question is, is the ultimate problem the saudis would like to base the valuation of this company on the amount of reserves and traditionally that's not how

you value an oil company? tom: well, that's right. there are other measures that are really critical when it's an operating enterprise. and i would also say the wood mack analysis really doesn't address what the integration benefits might be. and that could also contribute to some narrowing of the gap, more so i think than was identified in that article. alix: before i let you go real quick, oil at 54 for w.t.i. are we at the top end of the range here? tom: what we're seeing is even at middle 50 oil, we're getting a supply response in the u.s. that's going to be a market reality. until we have more confirmation that the global demand growth is above a million barrels a day, the answer to your question is yes. alix: great to see you, tom petrie, petrie chairman.

if you have a terminal, check out tv go and watch us online and click on our charts and graphics and go to tv go on the terminal and wind up going back and looking at the interviews you might have missed. it's cool. this is bloomberg. ♪

jonathan: this is blerling, i'm jonathan ferro. time for today's trading where we'll hear from president trump this morning at 10:21 average time and again he'll speak on tuesday. all eyes on the fed explode with fed speak. kicking it of off monday and then on tuesday the san francisco president and then i'll just bring in matt. who is speaking next week. yellen will be on friday? . matt: it's easier to count on the people not speaking. we have 10-17 who will be appearing in various venues and a lot of them have spoken so

we've heard from them and we'll probably get a little bit more of the same, waiting for clarity on fiscal policy, you know, the usual. jonathan: these guys seem to be desperate to introduce two-way risk. throughout this week the march meeting is looking less likely it will deliver a rate hike. do they have a job to do next week? matt: it's debatable what they want from march at the moment. they haven't yet really come out and said we really want this to be on the table or anything. we know the market probabilities are low, about 1-4. it seems like they're ok at the moment. one thing that i normally wouldn't flag but i'll flag today because it might be interesting next week, we get the beige book on wednesday and we learned in the minutes of the february meeting we got this past meeting that business contacts are telling the fed that, you know, we're expecting higher growth economy now that we have a new president and new administration. these things should lead to better growth but we're not doing any actual hiring yet until we see how the details pan out. so to the extent that's what

the fed is hearing from their business contacts around the country, they'll probably take the same approach with monetary policy. jonathan: what do they say about the fed debate we now have to look ahead to a beige book from the federal reserve because that's something many participants would ignore. matt: given the context, we're at three months following this election, it's really important to see what business leaders are saying because we're trying to define what comes next and this is a unusual stage in the business cycle to have this surge in business and consumer sentiment like we've been seeing and we'll get another read on consumer sentiment at 10:00 a.m. with the university of michigan and then a whole slew of business sentiment indicators next week with the p.m.i.'s and see how it pans out. jonathan: what's been interesting the next couple months is the market moving closer of the fed's view of three hikes in 2017. i get the feeling maybe we'll see the front end of last year play out. will we start to see a market that pulls back from the fed's view with three hikes and maybe

a little bit more of a material way, matt? matt: i think that's a really interesting question now because we saw that big rise in interest rates after the election and it's kind of really stalled out. so you know, people aren't willing to bet on that second leg of reflation or what have you, especially when they're looking at the way the administration is playing out so far in some of the policy circles and doesn't look like we'll necessarily get any major stuff until next year at the earliest so in that case, you know, maybe the fed doesn't have much urge to go. jonathan: think about what we've learned in the last 48 hours or maybe the last week, we had the treasury secretary do the media roundtrip the last 24 hours, speaking to everyone and talking about growth to 3% saying the tax plan won't be enacted until potentially august and the impact for growth in 2018. when is the federal reserve get to have a look at the fiscal still has package that comes from this administration and when will we see it in the summary of economic projections? matt: at this point it's anyone's guess. a lot of people are asking the fed when you go on the trail

and listen to these speeches and see the audience q&a's after the speeches, a lot of questions about why aren't you incorporating more fiscal stimulus in the forecast? i think jay powell put it together pretty good this week, we'll wait and see if you guys and if you have a better way of doing this, let me know. they're feeling as much in the dark as we are. jonathan: great to have you with us on the program. in the whole of next week, how do get excited. it's a who's who of who is speaking next week. how exciting. alix: sarcasm from john. you know you hate looking at those speeches. we have breaking news real quick, we're learning in vale they won't renew the contract. in individual movers, jcpenney, a fascinating story, was up over 3% and now down 3%. you did have an earnings beat come sales were down and then jcpenney closing 140 stores,

only 5% of total sales. the banks you have to hit, rbs and standard charter are struggling. standard charter missing annual profit estimates and rbs is cutting an additional $2.5 billion in costs after its ninth straight annual loss. rounding out the earnings bonanza, hp enterprises reported after the bell yesterday getting downgrades at b.m.o. revenue missed by 5% and cut its full year forecast and kind of sets you up for how the market is trading as you look at futures. the s&p is off by 10 points and the dow jones with a little steam on the downside, off by 87. coming up, oppenheimer funds portfolio manager will be speaking on where his best investment opportunities are. ♪

jon: after the dow completes the longest break in records since

the 80's, the rally is still ahead of a major speech by the u.s. president. the canary in the euro: mine. german on yields raking down. more to come. a nice straight loss for british bank rbs. the first profit in a decade next year in 2018. this is bloomberg daybreak. i am jonathan ferro alongside jonathan -- alix steel and david westin. attempt straight day of record-breaking on that out this morning, s&p 500 futures down one half of 1%. it is a weaker dollar story. year.gain, 2.36 on the 10 alix: you have to look at the two-year yield, other record of 95 basis points, you could see 100 on ecb buying. gold is catching up by eight dollars an ounce.

it is continuing to affect itself in the market. david: we are using bitcoin now? alix: it is at a record. bitcoin is on the board. david: yesterday the conservative critical -- political action conference got to a start outside washington with steve bannon taking the stage outlining the goals of the new administration. >> i down the three buckets. national security and sovereignty, intelligence, homeland security, and the second line of work is economic nationalism which is wilbur ross at commerce, steve mnuchin at navarro, people who are rethinking how we will reconstruct our trade arrangements around the world. the third, oddly, is the construction of the administrative state. >> it is now from seatac is kevin cirilli. i went on the internet first , i looked uprning

economic nationalism and never but he is talking about it. what does it mean? c-pag, it means he will have to unify a republican party that has a long posing the type of economic fiscal spending plans that chief strategist steve bannon was talking about yesterday. of course, mick mulvaney, when he was in congress, he was against some of the federal stimulus spending plans that people like steve bannon are advocating for. is the couple of days before president trump is scheduled to join the conference on tuesday, the omen of his policy specific plan, he is going to have to unify the party to get them all on the same page. david: i always like you better with the background music. it is a nice touch.

as you suggest, when you look at a lot of people who consider themselves staunchly service -- you haveservatives, people like glenn beck saying we are not into economic nationalism. can the president move this forward given congress? >> we are going to see this play out on a host of issues, whether it was yesterday at that ceo meeting. several ceos said this could in back to the states, a caveat for them to bring in more public and -- republican support. we will bring in more information including the court export and in sport -- import ban and whether the tea party is going to get on board to allow groups like boeing to begin to finance loans. people like top financial services chairman jim henson have been read opposing.

david: thank you so much, especially for pushing your way through. alix: joining us now is alessio de longis, manager and chief u.s. economist at bloomberg intelligence. it was my favorite note that says our animal spirit got shot by poachers. this was my favorite of the morning. do you agree? >> since the election several of the classes have been -- namely the dollar -- foreign-exchange, the dollar in particular, and the markets have really reacted more to the anticipation of a lot of economics and fiscal policy. it is also not entirely possible to attribute these entire moves to expectations because at least to our models and indicators, the global economy was already in a relatively synchronized growth momentum a

couple of months before the election so that has continued. when we break down the u.s. data, we notice you tend to see more positive momentum in the soft survey-based data. consumer confidence. what is still lagging at this point, not accelerating, is the hard data. labor markets, housing indicators, manufacturing. alix: that is why goldman says we are at peak optimism when it comes to that. and as highptimism a level since 2004, you got consumer comfort highest in 2007. does hard data actually have some time to pick up? >> you have the isn ending last year with a two-year high climbing further in january so there is tremendous optimism but what we see from these industrial surveys as well as from the fed minister is that businesses are encouraged by what could be coming that they are hesitant to change their

course of action. the challenge here, maybe we are at peak optimism but if it looks like there is a substantial stimulus coming down the line by orinfrastructure spending specific reform of the tax code which august seems to be the target date, that could push optimism higher. at own to that that we see this improvement in the global economy and we are looking at faster global growth and the u.s. economy potentially shrugging off flawlessness -- sluggishness that you could see optimism push higher. alix: you saw that said officials were saying, look, we like it and we are into it but we are not putting money to work it. jon: and the bond market question as well. about 60 basis points at home since the election. now, where do we go from here? it is 3% growth. >> it is an interesting distention between equities and bonds. one of the usual suspects i will bring about to explain the

bond's strength is the ongoing economic uncertainty that has moved on to europe. why are boom yields coming down to new record lows -- lower on the two-year than germany coming down to new record lows at the same time we are anticipating the potential for tapering. we had a very heavy calendar in europe for elections. .nd the uncertainty around it in france, the news flow is very sluggish. remember, we have gotten it wrong twice. i think markets are attaching a toh heavier discount consensus views around the election outcome. it is clearly understood that we got it wrong a couple of times and we are not really sure on how to recall and whether there is a heavy calendar coming down the road. >> and there are the comments yesterday from president trump where he expressed more than

citrus support for the border adjustment tax than he has in the past. he was facing border tariffs and now he seems to be lightly signing on to that. if that is the case at the border, if the border adjustment tax is coming, you have to look at these trade partners that have significant trade surpluses . places like canada, mexico, china, and germany. the fact that we see this move , it isy in german yields no accident that that is coinciding with the present clamping down on will trading partners. david: for the longest time we heard about lower for longer but now we are hearing about higher for later because all the messages out of the trunk white house is it is not going to be right away. steve mnuchin says the tax report by the august recess, we hope. we are not sure. the president says we may have to deal with obamacare before

taxes and we have various republicans saying "that stimulus plan, infrastructure is 2018, not this year." why aren't equity markets reacting to that information? these delays would argue for disappointment and a rate lower than the markets unless the economic story was somewhat self-sustaining independently of that. back to the earlier point. we have seen substantial disappointment on the immediate miss of some of these policies and risky assets continue to do well. the dollar hasn't really given back everything of its gains. seems the economic story is really self sustained and going on its own. again, we need the hard data to confirm some of these things. one thing that we argue, one data point, one type of data

that is disappointing or could provide risks, look at the lending service. printing for the full fifth quarter in a row just marginal yet persistent tightening in lending. that is at odds with the rest of the picture we are seeing. it is a reminder that the credit in the business cycle is very advanced. leverage may be curtailed so you need another source of growth. jon: two major thesis for the president coming up today. where are in a position one individual from the administration has more impact on financial markets now than any official over at the fomc or fan i -- or janet yellen. we are not going to get what we expect from federal reserve officials. , do you need to put

hope to one side? >> you have to do name carefully to these speeches and see what is being prioritized. carl: yesterday's mention of the border adjustment tax, that was not insignificant. how aggressively is he going to push towards that august timeline that you mentioned. you mentioned the administration officials are saying we hope august but we will let it slide. other officials are saying that behind the scenes, president trump has a maniacal obsession with delivering these campaign promises in a timely fashion. jon: i would just like to see the fed chair come out and do a rate hike this year, bigly. >> [laughter] from bloomberg intelligence, thank you very much. mr. the longest is taking with us. trump fromresident the conservative political

action conference, coverage begins at 10:00 a.m. eastern on bloomberg television and bloomberg radio. this is bloomberg. ♪

>> this is bloomberg daybreak. time for an update on headlines outside the world of business. i am taylor riggs with your first word news. in asia, malaysia says killers used chemical weapons to kill the exile half-brother of kim jong-un. authorities report the agent was found on the face and eyes of kim jong nam. it was believed that north korea has one of the largest stockpiles of chemical weapons. in the middle east iraqi troops have captured more ground from islamic state forces in the western part of the city, most.

mosul., ul is their last urban stronghold. to french candidate marine le pen have met with international banks and other onms to explain their take the euro. among other institutions, blackrock, barclays and ubs. officials from her national front say this is the first time their party has been approached. 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. jon: the french election is one of many that comes up in europe this year. in the markets, it really used to take the temperature of the euro's future. it is a two-year note and the yield hits 95 basis points negative in today's session. we are trading -94 at the moment, now for basis points

this friday morning. euro the canary in the coalmine. it used to be that. mr. de longis: right now, it still depends. we are seeing demand for a safe haven whenever things look on clear. let's not underestimate the importance of france. france,he weak links is which is the other big aaa safe country. debt,supply of sovereign given how much the ecb is buying, the boom yields are really telling you what the demand for safety is. jon: arguably french bonds are not much in market safety at all. the market has been very well bid over the last couple of days. look 10 prospect of a victory is becoming increasingly

likely compared to six months -- butt not very likely not very likely. mr. de longis: but at this stage, early in the process, the right way to look at it is the relative spread. remember, just like germany, france is also affected i incredible amounts of buying on the part of the ecb and an incredible amount of duration demand. on a relative basis, french to germany spread is really where the risk premium or sovereign risk premium is being priced. alix: in the equity market, european equity funds saw influence this year. every strategy we have is buying european stocks because they are undervalued but morgenstern is ued at they could be val 1.6%.

is that the right call or is that underpricing risk? mr. de longis: i actually think it is the right call for a couple of reasons. it is important to remember that the european equity markets, one of the most globally diversified. europe is one of the largest -- is the largest in terms of economic blocs in the world. the european stock market is the exposed tolical and global growth so you are not necessarily exposed to too much domestic risk but at the same time, you are also receiving a discount on cash flows from this incredibly low bond yield. whether you are chasing potential for earnings growth which is the right call at this multiple well as expansions because of low discount factors, you have room to run. david: so we don't know what is going to happen yet in the french elections. we do know, within reason, i think, there is going to be a

brexit. jon: yes. david: but how the markets pricing backwards? that is a sure thing although the consequences are not quite sure. mr. de longis: i think it has taken a backseat for a while because most of the short-term impact has really been positive due to the beneficial effects of currency depreciation. brexit will impact more certain factors in the market but it will probably be more detrimental to the british stock market rather than the european stock market. until we need to see how the european political risks pop onto it. are so many overlapping events with different deadlines to it, when the brexit process still has this two-year window -- an article 50 hasn't even been triggered yet -- the market

will focus on what is more immediate now and certain out and i don't think from an investment standpoint it is the best strategy to be right to early. that equals being wrong. i mean there are political risks on the european political calendar down the road which can keep up for the next two years that you don't position for those events at a moment where global growth is accelerating on a synchronized fashion. if you were to just look at global growth it has not looked this pretty in a really long time. david: alessio de longis of oppenheimer funds. coming up is paul atkins on whether the trump administration hosts a big financial regulation. this is bloomberg. ♪ ♪

jon: it is the ninth straight annual loss for the british bank rbs and it continues to fall

daily after fourth-quarter earnings. the rbs cfo spoke with bloomberg a little earlier. >> we have been quite open today that we think we have got another tough year ahead of us for 2017. we can get through issues, particularly u.s.. we will make profits in 2018. jon: you can take that one line and you could apply it to every year of the last nine years and it is going to be another tough year. a bloomberg columnist joins us now from london. is a focus onant the u.k. part. a decade ago it was trying to be a global powerhouse and now they are choosing a massive global m&a deal but now they are trying to be a complete opposite. that means we have these nine years of losses. even if you want to

be a u.k. bank, it is tough to compete. jon: for the government stake we break even in the united kingdom, north of four pounds, .aybe around seven pence are we ever going to get there? what does the government need to swallow? lionel: i think it is to their now. -- toos too better bitter now. you don't want that headline lost in the billions to hit the headlines so it will be a bit longer. it could mean an even lower share price. still a bit too early, especially compared to being free of government control, to wish the same for rbs. do we even know what they have on this bank until they get rid of this? david: they got some conduct

related programs. >> absolutely. shares of the pound, despite management promising they will cutting costs, we don't have answers to those questions. that theyets been off promised as a condition of their taxpayer bailout. we won't get answers until the end of this year. david: why is that? it was only a year ago we were saying about deutsche bank, get it behind you and they did that. why didn't rbs do that? lionel: firstly, the case is slightly different and also because the u.s. administration go through things on a case-by-case basis. slightly out of their control re and with the other issue as well. they are proposing alternative plan and it takes time.

this is out of their control and the stuff that is in their control doesn't look that easy to juggle. jon: great to have you with us on the program, thank you for your insight. the idea that this bank in recent weeks started setting aside more money provisions was coming for a long long time. david: i want to know why the u.k. government is putting their feet to the fire. jon: this is what happens. david: that is absolutely the danger. jon: a nice straight annual loss for rbs. next, andrew sheets joins the program and as we count you don't the open bell, bob doll. from new york city, you are watching bloomberg. ♪

jon: this is bloomberg daybreak. i am jonathan ferro. let's get a check of the markets. the scores have fallen. futures down by one half of 1% ahead of the s&p 500. after the dow's ten-day winning

streak, the longest winning streak on a daily basis since march of 2016 but on a record stretch. records go back to the late 80's to see those kind of figures. let's switch up the board. elsewhere, a weaker dollar story. a stronger japanese yen and a stronger euro. lower on yields by three basis points to $2.35. not many people saw that coming, going into march. alix: and three and a half was what everyone else was using. jon: once again, the bonds are tough. it feels lightweight 14 all over again. that is some of the market action. let's get more news. >> in the u.s., president trump lost a twitter attack against the fbi, saying they are unable to stop leakers even inside the agency. he says that could have a devastating effect on the u.s. europe had a big night for

british prime minister theresa may who demonstrated her dominance over the political landscape in a special election in northwest england. the conservative party took a seat from the opposition labor party, the first time the copelandives have won since 1933. there is evidence that tokyo's housing boom is coming to an end. the number of unsold new apartments reach their highest level in seven years. one from six inquiries from investors have fallen in half and deutsche bank forecasted apartment prices could drop more than 20% in the next two years. 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: now to morning media where we are meeting with small caps. this is a normalized stock. the large-cap index is yellow, the mid-cap is blue and that

massive outperformance has come from the small-cap. versus the others. is there more to run? steven desanctis joins us from new york. 2018,don't get more until 3% growth, reform until august. what happens to that? >> we have started to see it. small caps are underperforming large caps. unfortunately, i think it continues. have trading at 20 times earnings. that is the highest it has been .ince the tech bubble you do need to see the earnings growth trickle in and come in better. if we don't get that, you can easily get a pretty nice cold that -- nice pullback. alix: let's look at what we heard for the fourth quarter. earnings guidance for large caps were written at about 53%.

that is versus 62% of small caps. we will take a little bit off the table and look at fourth-quarter earnings but going forward, it looks like they are pulling for more growth. mr. desanctis: the is a question of whether or not that is going to be a reality. we are looking at earnings growth for 2017, and i think there is a difference around the sectors, where financial actions are seeing upward revisions, and a few other groups seeing downward revisions so i also think that companies really don't know what is actually -- what to actually do for 2017 earnings. are we getting a tax cut or not? analysts are holding this and you are kind of looking at 15% earnings growth. to get 50% earnings growth for small-cap companies you need the economy to be growing more between 2.5 and 3%. look at the jeffries forecast. we are at 2.7.

but that does include some physical stimulus to get you to 2.7. david: does it make sense that the small caps and mid-caps might do better? one of the initiatives has been deregulation. it is thought that would benefit smaller companies more than larger companies and that is more within the control of the executive branch. mr. desanctis: that is absolutely true. since the election, forecasts are up 21%. what gets priced into the stock? earnings,s forward you have a lot of good news priced into the stocks and you have a little bit of a holding or a time where we start to see the earnings growth come through. some tax cuts start to make their way through and companies can figure out what they want to do. i don't think we have seen that yet and again, you have this big run. we have volatility really low, that starts to pick up.

the recentof leaders, banks, utilities, pharma, all within the russell 2000. what do you want to sell on this rally? mr. desanctis: frankly, the big .un is valued the value stocks are moving on the banks and financials, which are still like banks and financials. i do think some of the grow thier groups are still going to grow next year, so tech is another group that we really like. got good balance sheet, m&a activities, estimates going higher. we like the industrials and last year, they got a little bit more juice left. consumer discretionary has been so bad for so long, these stocks are looking cheap. if you want to blame lower taxes on the individuals by having

people having more money in their pockets, making more money, so discretionary might be a contrary group to look at. alix: thanks, so much. john, that points out the differentials when you have valuation and micro, you don't know what your tax rate is going to be. jon: for me, coming into 2017 with this once again, buy stocks, short treasuries, wait for blowout. look at this chart. wcrs go on bloomberg. it is against the emerging market currencies. in e.m. was going to be ugly 2017. but this is every single e.m. currency. all that green is stronger against the u.s. dollar. oppenheimer funds portfolio manager is still with us. because of this protectionist trade administration, we were going to have it but that hasn't happened in the market.

>> that hasn't happened because valuations have really played an important role. emerging market currencies as you might remember , i have been on the show many times since last april. we believe valuations are still attractive and a lot of these emerging markets are not directly exposed to a risk of border adjustment tax. the ones that are exposed -- and yet they are still outperforming -- korea, taiwan. mexico sufferedmexico suffered y last year and now valuation clearly sees this year, .aluation has started

excellent question. we believe that actually, the lights of korea and singapore and taiwan, these currencies are more expensive. in my opinion, korea is one of the more overvalued currencies and the reason it is rallying here is more of a disappointment ,n, in the case of korea excitement about the adjustment tax the in the late and the delay on global growth. david: you are on emerging market currencies. is that a bet against the dollar getting stronger? stronger the dollar gets the stronger pressure gets for all sorts of reasons on em currencies. mr. de longis: it can sound a little bit contradictory but we are actually over with the dollar and over the two markets on two times. our over winning the dollar is developed currencies, the euro, yen, the pound, the swiss franc, australia and canada. there is more of an embedded

debt on overweight emerging markets than developed markets and we think the reason that is attractive is we see this interesting convergence of carry advantage combined with valuation advantage. it doesn't happen often and we think it is a very attractive opportunity at the moment. dollarhe fed hike, a 20% depreciation, are we on track? mr. de longis: i would say five to 10% dollar appreciation. the dollar is already very overvalued. it tends to overshoot by 25%. alix: your call is it can handle 10 to 15%. mr. de longis: on the dollar, let's break on the euro and then we will see. i think we will have five or 10%. i don't subscribe to the view that it is 20% over adjustment taxtkins, the former sec commissioner on

whether the trump administration posts financial regulations. and edgar -- andrew sheets, for morgan stanley joins us with a call it may make the move to the downside. look out for that. from bloomberg -- from new york city, this is bloomberg. ♪

>> this is bloomberg daybreak. i am taylor riggs in the hewlett-packard enterprise grain room. in the next hour, a former jcpenney ce oh -- jcpenney ceo. stories,for other

making headlines at this hour. i am taylor riggs with your bloomberg business flash. jcpenney will get a little smaller. it will close up to 140 of its roughly 1000 stores. they represent less than 5% of its total sales. two distribution centers will also be shot and 6000 jobs will be cut through early retirement. saudi arabia has said it's oil worth saudi aramco, is $200 million but investments say it may have to settle for less went aramco closes its top leg. mckenzie came up with a rough valuation of $400 billion, less than 20% of what they hope for. that is according to plans to attend a private meeting. boeing has kept the post brexit vote of confidence in the u.k. on the factory and employ 30 people. that is your bloomberg business flash. i am taylor riggs.

david: one of president trump's top priorities is deregulation, particularly of small business. he reportedly has focused specifically on the sec's role in facilitating new company from going public. with us now is a former commissioner, paul atkins, who was appointed by president george w. bush. he has worked with the trump transition team and is a member of the business advisory council. he joins us from washington bureau. mr. atkins: thank you very much for having me. david: we had a piece by a column in westbrook talking about the appointment of jay clayton to be the nominee for the sec chairman. the report was that when mr. clayton sat down with mr. trump for his interview, the entire discussion was about the role of the sec. is this a problem? mr. atkins: i think it is and i'm glad they are focusing on that. i think jay is going to be a

great guy to help lead this say,t but if you look at, 20 years ago, ipo's were about 700 or 800 a year. that was the heyday of the ipo. over the last few years, especially when it was enacted in 2002, ipo's have plummeted per year. last year, it was maybe a little bit more than a hundred. if you look at the number of public companies that are listed today in the united states, it is half of what it was back in 1996, 20 years ago. , why ishat points to all this happening in our capital markets? companies like uber, for example, they don't feel the need to go public. one is the cost of regulation and two, the fear of litigation and that sort of thing. doesost of going public

not outweigh the benefits and private markets are now so robust that people don't really need to tap into the public markets. david: there has been one of the development since 1996 which was the development of venture capital money. you mentioned uber. they have access to a lot of capital they didn't have in 1996. is that possible sioux nation? no question -- is that a possible equation? >> if you look at the way that companies have developed, compared to apple or microsoft or some of the more recent companies that went public here in the last couple of years, starting with google and going popif you look at the that the insiders got versus the investors, it was more weighted towards the investors in the 80's and the 90's. today, there is a tiny little pop that goes to the

insiders. the insiders get the gains of the company and basically, the ipo becomes an exit strategy. goodis not indicating the and healthy capital market, at least not one that we have that was engineered for a lot of our growth in the u.s. david: one of the hallmarks of a healthy capital market is protection for investors. in that same piece by mr. westbrook, it says investors are ambivalent on cutting back on the regulations, the disclosures required for ipo's. commissioner,c are you at all concerned that we could be jeopardizing investors? mr. atkins: i think there is always a cost in the benefit. talking about investors, investors are not monolithic. some investors are much more politically active than other

folks who are more economically driven. if you look at -- i dare you to -- read through some of the disclosure forms on prospectuses and mergers, it lasts for hundreds of pages and nobody thaty wades through all of . if you look at some of the things in dodd-frank like things these dohe pay ratio, not deal with information for shareholders. we have to get back to the basis disclosure regime that gives our investors meaningful material information so they can make a decision to buy or sell their security. david: i would be remiss if i didn't ask about a possible role for you in the new administration. you have been talked about for the vice chair position of the fed but there were reports you declined.

are you out of the running for some role in the trump administration? mr. atkins: i really like what i am doing now. it is a great spot with great people, some great clients and all of that. i am happy to help where i can but i think there are other people who could probably do those jobs in a very confident way and i think the job at the fed is extremely important for many reasons. confidencethey have that president trump can find something good for it. david: that is former sec commissioner paul atkins from washington. alix: if you have a bloomberg terminal check out tv online, click on our charts and graphics. it is my favorite feature. if you miss a conversation, you full.t it fo we are talking about that play for safe haven. of goala year to date spots, the highest level since

before the election. silver is up for nine weeks. we have not seen that kind of run in 11 years. we are watching a safe haven rotation as we head to the open in the u.s. this is bloomberg. ♪

david: i am david westin. toublicans have been eager repeal the affordable health care act from the moment it was enacted. but now they are in the majority in both houses of congress and finding it a harder -- finding it harder to replace. in town halls, members of congress are hearing loud objections from constituents about their possibly losing health care. covered by health insurance. to, joining us is zachary her, bloomberg's health care reporter and you are reporting on what we a replacement plan might look like. tell us what we are looking at. hear are just starting to

what these plans would be. one of the key things that republican lawmakers are grappling with is just how quickly people are going to lose their coverage. we knew that repealing and replacing, with any number of another number of alternatives would increase the uninsured rate to some extent. when we are trying to understand is how much. david: a congressman has become the secretary of health and human services, tom price, who has had a proposal to replace the aca for some time. he makes a big distinction between access and coverage, and basically access is you can get it if you can pay for it. is that when they are headed? zach: one thing republicans will sayzach: is our plan increases access and here is why. we will give everybody who doesn't get insurance through their jobs some sort of tax credit. don't know how much but some tax credit for 20 million or so to help them buy insurance. that is more than under the aca.

the difference is under the aca those tax credits give more help to poor people and that would not be the case under the republican plan. david: there are restrictions about how much more you can charge older people. is that likely to go away? zach: what they are probably going to do is wide and how much more you can charge of old people but this is going to be unpopular so this is something they will have to walk by the aarp. they don't want old for to me who need insurance more to be charged. david: we have the town halls. what is the popularity at this point of obamacare? zach: if you service this week came out. obamacare popularity is going up. in one survey, about 50% which we haven't seen for the last few years so it is sort of the saying that once something is going away you start to appreciate it more. david: what are the consequences for the budget?

the sort of plan you're looking at for the republicans? at a they want to come in lower cost than the aca. the key is the aca has a lot of taxes that the republicans want to repeal so it is going to be tough for them to do that, fund subsidies and keep this budget neutral. the aca raises money taxing health insurance, pharmaceutical companies and investment income so of those go away it makes it tough to balance. david: that is zach tracer. jon: coming up on this program we count you down to the opening bell with andrew sheets of morgan stanley and later, bob doll of new dean asset management. when presentrning, on the s&p 500. that is 10 straight days and records on the dow. the longest streak of record dating closes since the 1980's. they could come to an end today. -81 on that index this morning. elsewhere, treasuries bit once

again, on the u.s. 10 year. to 45, we have granted lower, as many people caused the yields to go higher. that is the story in the bond markets. the opening bell is coming up on bloomberg from a beautiful new york city. you are watching bloomberg tv. ♪

jon: dow and out. of recordt streak since the 1980's, the rally ahead of a major speech by the u.s. president. mineanary in the euro coal . citigroup says there could be more to come. snapping back the most highly integrated tech ipo since twitter. it is snapchat. some tough questions. coming up is morgan stanley's andrew sheets. she has a message coming up. it is a warm welcome from a beautiful new york city.

i am jonathan ferro alongside avon weston and alix steel. a little bit of a bearish market. futures softer, down one half of 1% on the s&p 500. italy negative in the european session and a strongly on treasuries this morning, 2.74. your yield is lower. alix: i am taking a look at folly. the ceo will not be renewing its contract in may. he has been ceo since may of 2011 when its first annual shares gained. he is giving up that post. ands all about the haves have-nots, jcpenney, restoration hardware and foot locker. off, it was up closing at max 140 stores. they are trying to push spending towards online units. restoration hardware, earnings better with big buybacks. 30% of their market cap. we don't have the timeline for

when that rolls out. foot locker closing on profits. in tech, hewlett-packard enterprises, cutting its full-year forecast up to 6% on the low. brace for pullback. andrew sheets, chief asset strategist at morgan stanley says there is a 30% plus probability of a 15% pullback over the next 12 months. he is looking at the year-over-year changes in oil, real yields and the level of jobless claims. andrew joins us now. walk us through your call. at 40 different indicators across both economic and market variables, what you get is that given how these things look today on average, over one period of time, there is a chance that

stocks will be lower over the next 12 months. the important part of that message that i hear a lot talking to investors is that given how strong things have felt, there is very little risk of a pullback or downsize. looking at what the hard data suggests it is a bit higher. >> what me through the hard data. it could be good for the economy. higher oil helps the energy sector and jobless claims are at decade low right now. mr. sheets: in many cases, you have a time to be nervous, it is actually went oil has been up in real yields have been up and jobless claims have been down. think back to the early 2000. that was a period where rates .ere quite up year-over-year 2006 and 2007 had a similar environment. indicators,ll these they don't give you much indication about what will

happen over the next week or month. , giventhe 12 month view the case that it is a wider distribution of outcomes, many investors are set jon:. let's talk about why that is -- what that dissolution of outcomes is. talk about that. >> the first strategy is that we think volatility is pretty attractive. it is on the equity side. i think that works actually to the upside as well. environment that we think is a late cycle environment and you can have realistic scenarios where the market booms more. at the same time, if we look across these indicators, the indicators that are the most relaxed, that are giving you the most benign signal in the equity market, they are credit agencies. sense, or thats is one of several reasons we think it makes sense to hedge credit exposure. hedge credit exposure at the moment.

you are hedging with the instrument and you are walking in the instrument. the levels give you the most benign readings. --: let's get pacific specific on what the trade is. you want to cap equity. how are you going to do that? zach: we are buying volatilities and equity markets and buying protection on credit indices. credit cbs indices are on short high-yield bonds. that is a pretty attractive combination for an environment in the late cycle and dominated by this idea that distribution of outcomes are, to the upside as well as the downside, wider. you said late cycle for credit. david: what are the data points you are looking at? >> there are a couple of things that we are looking at. the first is that you are seeing leverage levels and balance

sheets already quite high and continuing to climb. which again would be representative of late cycle aggressive activity. m&a activityg picking up and buyback activity quite high. you are seeing levels of corporate confidence also getting back up on cycle high type of levels. all of these are indicative of a corporate space that is more taking more risks. as well as, at the same time, economic indicators suggest the u.s. economy is that close to full employment and that capacity is getting used up. david: apart from the leverage that you are looking at, does the leverage give you a different indicator, of the absolute number on what is owed the interest rates so much lower than it has been expertly -- has been historically?

mr. sheets: that is a fair point. you have this divergence between ae fact that companies owe large amount of debt with roasted a cash flow, but the cost of paying that is historically easy so it is a tug-of-war. is the factee that that the debt cost is low means that the risk isn't that the fed hikes 25 basis points or that rates rise half a percent. that is not going to be what causes trouble but the fact that leverage is high means that if there is any economic slowdown or weakness, i think that creates, potentially, a bigger cycle that people are anticipating. we are also humbled by the fact that markets have a hard time predicting the timing of the next recession more than a year out. it is a message that feels good right now but 12 months from now it could be different. jon: we are 23 minutes away from the open. it is a soft session emerging,

down 90 some points on the dow, the s&p 500, down 31 on the nasdaq. we are rushing to call the end of the rally and a rollover beginning. over a trump disappointment, it is overdone. we are going to hear from the president in a clear speech -- many people hope -- today and on tuesday in front of congress. what are you looking for with him specifically as the market looks a little bit softer? mr. sheets: sure. i think we are focused on really, three different things. supporting the market in the first quarter and at the moment, we are not making that call that we are on the presidents -- precipice of a downturn. we had easy comparisons improving confidence around earnings. that will not change over the next month or two. we had easy financial conditions with yields lower today.

the third factor is policy. on the part of the policy cycle, you are at the part where anything is possible. there are no compromises having to be made and no disappointments have happened. in some ways the market might actually like a speech a little bit more vague because it allows everybody to fill in the version of tax reform or tax cuts they have in mind and the more specific it gets about the potential offsets, things like order adjustment, the more nervous the market could be. jon: looking this morning, it echoes what you just said. fears of a major pullback as president trump is outlining a tax program on pedroia 28th. boardueness is what the ultimately needs, are they disappointment -- disappointed with the reality of what we get in office? mr. sheets: this is the challenge the market faces.

year-over-year comparisons, easy financial conditions and policy help. by august, those could get more difficult. the year-over-year comparisons right now are very easy because a year ago the market was in terrible shape. by august it will look different , and as well, by august, you will face a fed under much more pressure, which will put on tighter policy. point,think that by that you will be starting to get or needing to get more details, a real give and take that we won't get out of any tax proposal. either you get things like order adjustment where you lost injures -- interest and duct abilities or you won't get those but you will face a tax plan that is much more expensive and could increase the risks that the fed will have to tighten more to offset all that additional physical stimulus -- additional fiscal stimulus.

what is your biggest u.s. conviction call? mr. sheets: i'm sorry? alix: your biggest conviction u.s. call? mr. sheets: i think for the moment it is to be a long upside on the u.s. equity market through options and to hedge underwayugh the credit. to us, that is a balance that we think makes sense. we think that is something where it factors in well to a late cycle environment. it takes advantage of the fact that credit valuations are increasingly rich and the fact that volatilities are somewhat low. jon: andrew sheets of morgan stanley as we counted on to the opening bell, potentially the biggest day in about a month. .e will hear from bob doll on the way out, 29 minutes away from the open, this is the situation cross assets. futures are softer with one half of 1% on the s&p and on the dow. a negative in europe.

it rolls towards the end of the day this friday. treasuries are well bid. it is a weaker dollar story. from new york, this is bloomberg. ♪

jon: from new york city, this is bloomberg. it used to be a story of eurozone breakup risk and it was captured by a chart called the german two-year yield, crashing down to all-time lows. we are crashing down to all-time lows on the german two-year but the story is quite different. here with us is andrew sheets,

chief strategist at morgan stanley. i have this conversation a few times. that chart used to tell the one thing. what does it tell you now? mr. sheets: investors expect the ecb to err on the side of the number of political risks and the heavy political calendar occurring in europe. from our perspective, that is a reason why we think the euro weakened over the coming quarter , as we think there is a strong incentive, easier than what is justified by the recent strength in european data, given the uncertainty of these events. jon: we are not crashing into euro disintegration, by any stretch of the imagination. but they are saying they want a bigger insurance policy based on up?e we in the other half of this year, clear of the mainstream parties

in france and germany and italy as well, we look at the fundamentals. what is the potential for that? goodthink that is a really point. thatn't escape the fact this is a heavy calendar where a lot to go wrong and obviously, 2016 was dominated by unexpected political events but the most likely outcome in our view and based on detailed analyses that our economists have run is that so many -- somebody other than in theis likely to win french elections and you will get a moderate outcome in the netherlands and a more moderate outcome in germany and that you will get a combination of those factors, will be probably most likely market friendly. there is quite a bit of money that, for understandable reasons, is staying outside of europe at the moment and choosing to stay with the policy optimism in the u.s. or maybe

some of the stimulus that is occurring in japan or elsewhere, but i think that when your election factors, the equity end up higher as more money starts to flow in. we saw inflows in the european equities so far. is onhow much more money the sidelines when you have ever strategist coming on and saying "by european stocks because you are not getting a le pen victory." mr. sheets: there is a division between strategists like myself who think this market is attractive and under owned and a lot of investors who are saying interesting information and that there is more election certainty and i think that is fair. but i do think that means we could see significant inflows from the rest of the world into europe if the election outcomes don't produce a big surprise. the other thing that is important in europe, and i think it is a real difference in the

u.s., is that there is a stronger validation argument to move money out of bonds and into equities than in europe than there is for the u.s.. putting money into the two-year german bonds is guaranteed to lose you 2% over the next two years. relative to equities, which traded a much wider risk premium, that asset allocation was very different than an s&p times earnings. i think that there is -- we talked about in the prior segment the next 12 months in the short run -- but for money in europe that needs to decide what to do, there is a arguments to move money out of bonds and into starks -- into stocks. . we aree rotation looking at the 10 year and yields are down by five basis

points. so, why? mr. sheets: i think there are a couple of factors. the first is that 08 tease in particular have probably reacted more to the election uncertainty than any asset in europe. levels they last saw in the end of 2012, underperforming italian bonds and moving more to the euro and a lot more than european equities which are still up there, but one arguments -- and this was the subject of a report that i wrote with our european economist and a number of other theyagues -- is that probably make sense to be things to own against things, other things they say are pricing. david: election risk is one thing. what about lost opportunity? don't have anybody saying,

let's talk about reform and deregulation and fiscal stimulus , unlike the united states. it is it possible markets are saying, fine, we might get through this but we are not getting any place good? mr. sheets: i think that is interesting. if i take a look at the leading french candidates, i think you can make an argument that both n agendas. they differ in how they do that but they are both internationalists and reform driven holocene proposals. i think le pen, where there is more market focus, you could argue some of her policies in being both in favor of restricting immigration but also more domestic fiscal stimulus and fiscal spending, it is something may closer to the current u.s. administration in some ways. i think that the market is, again, probably adopting a take on too downbeat

different outcomes and the odds favor something that will be more market friendly. jon: you don't have to promise less government to the reform candidate in france, you just have to say we are not doing much more. david: we have to slow down. jon: but you know what is going to be left is an economy made up of -- what, north of 50% of egp? tie.heets: it is a i'm not sure the exact figure but it is higher than the u.s.. jon: i think a lot of people would like to see the reform candidate. andrew sheets from morgan stanley, thank you for being with us. coming up, shares of jcpenney are moving lower than in the premarket. the company will shut as many as 140 stores. later on, former ceo allen questrom. this is bloomberg. ♪

david: this is bloomberg. i am david westin. shares of jcpenney are moving lower in the premarket after the retailer announced plans to those as many as 140 stores. joining me now is a retail analyst. welcome. the first question is, is this it? is this a beginning of a longer process of closing more? >> i think it is just the start of closing more stores. they're closing 140 this year and that brings them to about 850 plus stores. that is still too many. in america-500 malls that you would want to be in, so at a hundred 50 plus, there may be more climbing. david: digital continues to take share. what is their digital strategy? walmart was actually starting to get some traction on their online shopping. is jcpenney? more. the added more online in the

first quarter of this year and they will be upping their count by 140% compared to where they were last year. it is getting more items online, making it easier to shop online, whether online or on your mobile , and integrating your stores or shipping from stores. they shipped 77% of their transactions touched the stores. that is a big number. the combination will be a big focus for jcpenney and other retailers. alix: we have target coming out next week but this was a huge week for retailers. which one came out strongest? >> nordstrom. nordstrom had good earnings after the market close. their gross margins were up thanks to really good inventory management at 500 basis points of spread. i think nordstrom tops the list of the department stores. zach: this despite losing ivanka trump's line? >> yes.

jon: you went there, right? alix: a little snarky at 9:30. jon: about form and it's a way, futures up for the 10th straight day of gains on the doubt. the 10th straight day in records on the doubt. the longest stretch in records since the 1980's, the longest streak in gains since march 2013. this morning, the soft recessions globally. we are down globally. switch up the board. bond yields are very much lower. we trade down three basis points . from new york city, this is bloomberg. ♪ 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. jon: for our viewers worldwide this is bloomberg daybreak. i am jonathan ferro. deeply negative, off by 83 points on the dow, after 10 straight days of gains. the s&p 500 is softer as well,

down by four tens 1%. potentially still heading for a fifth straight week of gains on the s&p 500. on the weekly basis, the longest since march of last year. as we reach the opening bell, the dollar is still weaker on the session. very much so. down three basis points on the 10 year. let's have a stage is set this morning. let's get the market opening. alix: we are seeing stocks across major equities, the dow off 70 points, not as bad as we saw but down 3/10 of 1%. the s&p stocks on the nasdaq, it looks like a 10 straight record close will pair its self today as we continue with this session. we still have not seen a 100 point move in the dow on all of february. will he to that level today? we've got treasuries, the vix and gold today as well.

speaking of treasuries, what that means for the banking sector is the 10 year yield is at its lowest level since the beginning of january. it has been down the last three days. under 3%. look at what it is doing to the banks. jc morgan is off by one and bank of america is off by one so you pay banks -- so u.k. banks were earning a weaker rate market. you have a 1-2 punch when it comes to the banks. where are we here? we have attributed the rally since the election to animal spirits, a lot of hope and optimism of lower corporate taxes and deregulation but through the beginning of the year, here is the sector breakdown of what performs the best. at the top is your grr function, at the top is tech. if the s&p -- if apple contributed 13 points to that and facebook, five point. it is not a broad story. you've got health care and

consumer discretionary, and utilities, you think they would have been beaten out of bed if you have a rotation into that environment they are up by 4%. that doesn't say to me we are in an animal spirit world. spiritsberg, our animal just got shot by poachers. jon: he is an excellent writer, isn't he? two minutes and the session, a slight moved to the downside. down on the doubt in the s&p 500. joining us to talk about it is bob doll, chief equity strategist from princeton. out, they have outperformed in 2017, not the sector many people thought would. at the start of the year, barons with the big cover and all the s&p strategists have an long financials and for consumer staples. in terms of equity markets and the direction of the ultimate level, the perspective of getting there, does that surprise you? mr. doll: not really because i

think you have to juxtapose the first two months of this year with the last six months of last year. the last six months of last year, financials beat utilities by 33%. there is some correction in the other direction. the groups you mentioned are more likely to be the leaders as the year when thes but soon economy continues to do a bit better, maybe we will get some fiscal policy reform. jon: at this point it is a fragile consensus in the bond market. the fragility has extended to your conviction around a better american economy. mr. doll: we think the economy will be a bit better. markets are reflecting that as we continue to your question. we put a piece out saying we are still constructive but not as constructive. since are up roundly 5% the first year, 10% since the election, 30% in the last 52 eak optimism, goldman sachs was talking about

how they were only pricing in 5% earnings growth of the market is pricing in 11% and their main thesis is the hard data versus the soft data. how do you square that with the optimistic outlook? mr. doll: we are more cautious on the market. we think the target was 23.50. we are past that. theview is that we can get 23 .50 from 21.50 just three months ago. that is 10%, a massive gain on the back of better economy and better earnings. from here we see visibility on some things out of washington, d.c. and right now, a supreme messed up pattern. i think we will pause alix:. what about earnings growth? for 5% whereoking do you stand for the year? mr. doll: our number is seven. i don't think the market portfolio managers believe the 11. as you know, the consensus is

usually on the high side and comes down during the course of the year. but there is uncertainty about policy in washington, and part of that is about timing. how long it will take to get things like tax reform, much less infrastructure spending. how much of the present value of the s&p is anticipating unrealistic deadlines? mr. doll: if the market is up 10% since the election i would say a little more than half of it is economy and earnings have done that are already. the rest of it is around fiscal policy. that is at risk if these things fall apart. my guess is we will get legislation but there will be times when it doesn't look like anything is going to come together which is typical for these bills. it could be a bumpy process. david: it is one thing to talk about the economy overall and the s&p but you also have individual sectors. yesterday you saw some sectors -- sorry, there were sources that were republicans who said -- it would be 2018

before we get infrastructure spending and we saw the interior will's -- the materials and the industrialists take a hit. how much will there be depending on the progress and policies in washington? mr. doll: i think you hit the nail on the head. policy creates differentials among sectors. if you look at, as i mentioned, utilities versus financials, a massive change in the last six months of this year, which followed the opposite direction on the first part of the year. that is what is going to be focused on. the financials have been taking a bit of a rest. care, despite the uncertainties or the cause of the uncertainties, creates an opportunity and we still like technology. alix: let's get some specific names. that the top performers. the individual banks are jumping. we saw jpmorgan hitting record highs this week but falling

roughly 1% today. what do you do. what is your strategy? 6 we want to add to the big global banks, bank of america would probably be the highest on our list. necessary conditions for the banks to do better, better economic growth and higher interest rates and rollback in regulation. we have been moving in that direction and taking a pause and .he banks are too the market little bit softer this morning. jon: we are down couple of tenths of 1%. we are waiting to hear from the president today and on tuesday again. you are looking for something specific from him? mr. doll: i would love to hear the prioritization. he makes a list of all the things the president wants to do . it is a long list, like most presidents. it is time for him to begin to focus. number one, number two, number

three, here is what we do to get them done and the rest will get through next year. alix: part of that is also where obama care and repealing it falls in that list. you mentioned health care has been the best-performing sector this year. what kind of names would you be buying? within products >>, we begin with biotech over the pharma companies. bio genworth be a name we would use. --bob doll, chief equity strategist. coming up, tech ipos snapping. snapchat seeks to buck the trend of whether itary will live up to its valuation. that is up next on the markets, eight minutes into the session. we are seeing the biggest declines so far. the s&p 500 down by one third of 1%. the dow up by 64 points. from new york city, this is bloomberg.

>> this is bloomberg daybreak. i am taylor riggs here in the hewlett-packard enterprise greenroom. coming up, former jcpenney ceo allen questrom. alix: this is bloomberg daybreak. snap continues to try to win over investors as it prepares for its ipo next week. all eyes on the first major tech ipo of 2017. ipo is alex, bloomberg reporter. how is it going? they have gone through their

london, new york and boston stops so far and it seems like a mixed bag. talking to investors who have gone through the yields before, a lot of them are saying, i don't have how this is going to play out. i did at twitter and facebook but this is one where, how it -- how does one start trading next thursday? a lot of that seems to drill down to these questions about flow and user theth, which we saw down in fourth quarter and this overarching idea that anyone buying into this ipo has no votes so they have less of a voice. alix: of bloomberg gadfly, we picked out what an investor said before twitter and facebook. for google they said they were overconfident that only the number of shares but also the price that people would be willing to pay. in facebook, the value is less than most investors seem to think. i am sittingears and then did really well.

twitter tried to do well over the next year ended poorly. these are definitely the dynamics that we are watching but in terms of looking at the broader market, we have had 15 months of deplorable tech listings markets. ofre is an increasing amount importance being injected into this, listening rightly or wrongly to determine how things shake out. david: this isn't the first tech ipo that has gone out. with the founders have held the control? the real issue is the subscriber growth and participant growth. >> it is and they have no voting rights. really, it is going to be on user growth but also on management division. i say that because snape is trying to differentiate itself from facebook and twitter. those two are out to increase user growth. goings where the chart is to come from. snapchat is focusing on what we

have and we want to continue monetizing them. the issue and the complaint i am hearing from investors is that there is not a lot of clarity as to what comes next. you have them trying to sell more of content creators and advertisers and you have the spectacle but in terms of additional innovation or more product portfolio, there have been no real clues as to what the ceo and his management team have in store. is that the essence of it? david: it is him as the opposite of twitter, they won't have as many people but they will be deeply engaged. how many users are generating content? typically, we think that will lead to money. alex: right. they talked about their second stage of development. now they are into innovation and engagement and the third is monetization. they are not at monetization yet and that is what they are talking about.

for have been making money two years but they still lose upwards of $500 million and 400 million in revenue so you can see that. ipo,whenever you get a big one of the investors has to buy this issue. rotating out of that to buy snap? facebook? twitter? >> those are some of the names you expect them to>> ask about. it is about, how much risk can i stomach? saleslots of growth but they haven't made money yet and many people remember the growth -- the ghost of twitter past. linkedin is off the table because that deal is in process but some of the smaller names as you look down the chain -- you had go daddy go public, consumer companies where you think about where can i find growth and what kind of industry do i want to be exposed to those are some of the

tickers i would look at? questions about why and when you become public, it has become difficult. about someone who talked the impediments to going public because of the regulations. >> it is the insiders and the early investors that get the cruel of the gains of the company and basically, the ipo becomes an exit strategy. access does not indicate, necessarily, a good healthy capital market, at least not one that we had that was an engineer of our growth in the u.s. david: paul actions says something that many people think, that it is an exit strategy. alex: you bring in millions of dollars, but when you think of the lifecycle of a public company, if you want to be the big bad facebook you have to get out and go public even though private markets are really amenable to giving money. valuationd a massive

applied to snap and we could say that the market is frosty and it is still frosty because of the exit strategy. what do you make of the ipo activity we have seen over the last 12 months? we were just talking about where the ipo's were. david: investors are so excited. alex: it is an interesting supply and demand issue. investors want growth and are ready for it but we don't have companies that have gotten ready to go out, so when you think about the supply, it's snap goes well we could have mourners meant for these investments. -- more nourishment for these investments. alix: last year it was of something like 46%. so if things do well you want to go ipo. david: i wonder whether the facebook ipo helped them a lot. when facebook went out the big question was, it is a shift towards mobile and they couldn't monetize mobile advertisers. facebook took that hit and look where they ended up.

does that mean snap can figure it out? the dream is scenario. that is a similar question. it is still mobile but can you win the content war which is what snap is looking at? facebook is the ones a hopeful will compare them to and also, my sources tell me if snap wants you to think about them like amazon, lumpy, financial, thin margins or negative margins. another dream scenario. jon: that is a sales with vonnie quinn and mark barton. we kick things off at the conservative political action conference. t-lyanne conway called it pac. we will be analyzing that and all of the different speakers. we will be speaking with the former jc penny ceo allen questrom. and of course potential new

policies under donald trump will come up. we will get thoughts on the future for the beleaguered retailer in the last couple of years. john, a hugeou, story. he goes out on a high as the most successful city manager of all time. jon: i was just talking to david about it. they said the stadium should be named after him. >> it might be. david: they could get a year or two for that. jon: looking forward to the program. 20 minutes into the session, we about a quarter of 1% on the dow and 4/10 on the s&p 500.

jon: from new york city, this is bloomberg. let's get you up to speed about 22 minutes in the session. a softer session emerging. andre down on the s&p 500 still deeply negative in germany . in frank for, the dax is off by 1.4%. it is the u.s. dollar, weakest in the earlier session. you don't see it as pronounced on dollar-yen or at all on euro-dollar. treasuries still with a marginal bid by three basis points. this bond market just hasn't been buying that. david: they have made their vote . they know where this is going. the conservative political action conference got off to a big start outside of washington. we heard from steve bannon and reince priebus. the main addition was president trump, himself, speaking. june is now for more is bloomberg's chief wathe preside?

kevin: the white house has kept a tight mouth on what exactly president trump is going to say in just moments when he addresses this rather boisterous crowd at the gaylord convention center in maryland. he is taking a helicopter from the white house to this center. this comes at a time when he is facing reports that his own chief of staff, reince priebus who addressed this crowd yesterday, personally asked fbi officials not to engage with reporters on allegations that the white house campaign officials were in contact with .ussians during the campaign later this afternoon, white house press secretary sean spicer will address reporters in the early afternoon hours. this speech comes at a time in which several days before, president trump will address a joint session of congress. david: members of congress want to look into the allegations of what happened with russia, actually. is this unprecedented to put a

gag order on the fbi? kevin: i can tell you that the political playbook this administration has taken before is, of course, to blame the media as well as attacking democrats. and is interesting here, the nuance which is very important is that this joint u.s. intelligence committee in the senate is also made up of key republicans like senator bob corker as well as senator john mccain from arizona. these are folks who have vowed to continue to keep pressure as well as people like senator marco rubio who are echoing that. look today for president trump in this address to try to unify this republican party as he, again, try to lay out a legislative agenda with congress next week. david: and he is speaking to the conservatives within the party who tend to not like russia that much. this is a crowd that is not going to be sympathetic to being soft on russia. kevin: it is also a crowd that is facing tough questions about

government spending. on several of the president's policy plans from infrastructure as well as, to some extent, tax reform, this is a president who has vowed to kickstart the economy and economic programs about whether or not he is able to unify the tea party wing of his conservative base remains to be seen. david: in just a few moments we will take president trump's remarks to seize back -- to c-pac on bloomberg. jon: when was the last time the market was gripped as well? david: never. -- thatt rubs this wraps up this week. futures worse off, equities opening softer as well. the s&p, up by 2/10 of 1% on the dow. elsewhere, the dollar has been stronger against the euro and just pushing back against the

yen as well. from new york city, this is bloomberg. ♪ . . . .

vonnie: potomac what a.m. in new york, 11:00 in hong kong. i am vonnie quinn. mark: i am mark barton. welcome to "bloomberg markets." vonnie: we are going to take you from new york to london in the next hour and cover stories out of washington, germany, and japan. breaking u.s. economic data. let's get to the numbers with abigail doolittle. relative to new home sales for the month january, a slight miss. 155,000 new homes in the month consensus, below the survey. the purpose of 3.7% growth over month of investment -- investors surveyed had been looking for bigger growth.

there is one bloomberg strategist who is saying that this may suggest that this is trumpmp can't from -- tantrum, that the rate rises