deals, but we will do one-on-one and if they misbehave, we terminate the deal and we come back and make a better one. no more quagmire deals. take a look, take a look at nafta, one of the worst made by any country having to do with economic development. mark: the president blasted the news media for using unnamed sources and promised to start building the wall between the u.s. and mexico soon. authorities cleared the last holdouts from the dakota access ineline camp on federal land north dakota club it will be sometime before the region returns to normal. there is debris to be cleared in a bridge that is remaining closed. there is a court battle lingering and protesters remain in the area. and a victory for the british demonstrating,

her dominance over the political landscape in a special election in northwest england. the conservative party taking a seat from the opposition party, the first time the conservatives won this area since the district was created in 1983. malaysia says killers used a chemical weapon to murder the exiled half-brother of the korean dictator, kim jong-un. the nerve agent was found in the face and eyes. he was killed last week. it is believed north korea has one of the largest stockpiles of chemical weapons. ♪ global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. ♪ lisa: live from the world

headquarters in new york. joe: we are 30 minutes away from the close of trading. lisa: u.s. stocks lower along with the dollar and gold extending its rally. joe: the question is, "what'd you miss?". lisa: the president spoke earlier today about a number of issues, including trade. he signed an executive order on regulation. we take a look at what it means for the markets. and on monday, he will meet with executives from the u.s. health insurance at the white house, according to people familiar with the plan. we dig in to how it could impact the plan to repeal and replace obamacare. and blackrock's portfolio manager joining us at the top of the hour. talking about if gold is used as insurance. >> we will take a look at where the major averages stand

appeared and we have abigail -- stand. and we have abigail doolittle standing by. abigail: we have the three major averages down going into the close. and something else, the three major averages, the dow, s&p 500 and nasdaq at session lows -- at ighs, excuse me. it will be interesting to see if they can push toward -- as we go toward 4:00. if not, the dow right now is on pace to break a 10 day winning streak, the first time that the dow could close down in 11 days. ending the streak of records. the nasdaq right now on pace for a third down day. and a weekly decline. so again, a bit of bearishness, but we are off of the lows and it will be interesting to see if we see another reversal. although, this is not as close to the close. and the dow, it is higher on the

week, near 7/10 of 1%. it is interesting, most of the gains came earlier this week. and something else, the dow opening higher yesterday, then a leg lower after the presidents had a press conference with some of the heads of the manufacturing companies. not as much of a reaction today during the speech, but the average did open lower. we will see. and as for some of these sectors this week affected by president trump, we are looking at energy down this week. and less of an effect from president trump. and the financial sector is down 1%. reflecting the fact that the 10 year yield is down this week. and we are looking at a rally for bonds, the biggest since the number -- sin september. and this was lower before. and infrastructure comments, a

spending bill put off until 2018 bid it so we do see a recovery. and consumer discretionary getting a boost. ying retail -- sa could be affected positively with the economic advisor, the chief of the economic staff saying a border adjustment tax, what is suggested right now is not really palatable to the white house. and questions as to how long these records will last. at the bloomberg, we are taking a look at this, morgan stanley putting out an interesting note saying that the credit investors are mispricing risk. this is a long-term chart of the corporate bond spread, the amount of the investors pay above the treasuries. and 1.2% right now. and the lowest over the last 20 years, where it was in 2008 around 6%. investors paying a lot more to

be rewarded for taking on risk. some say with lows like this, it could be a signal to watch. a tell on risk action ahead. joe: thank you. c: stocks are going higher into the close. joe: "what'd you miss?" the president signed an executive order on regulatory reform and policies, coming after he spoke this morning to the conservative political action conference in maryland, where he discussed the future of trade deals. >> we are going to make trade deals, but we will do one-on-one. if they misbehave, we terminate the deal and we come back and make a better deal. none of these big quagmire deals that are a disaster. take a look at nafta, one of the worst deals ever made by any country having to do with economic developer. joe: for more, we bring in kevin, the chief washington

correspondent who was there earlier. is thedoes -- cpac central event for the conservatives, are they on board with trump? daylightst, there was between them. does he have them now? kevin: it sounds like there was daylight. we were there a couple of minutes ago. i caught up with the president of the americans for prosperity and mrs. a dominant tea party group. take a listen. to be optimistic about, others to be wary of. we like rolling back regulations, especially the obama era regulations. we like tax reform discussions going on. and we like the keystone pipeline actions. some are optimistic. but nafta has been a job creator for the country, not a job destroyer. and government spending, many times the republicans in congress and so far with this

administration, they have a wish list to spend money on without coming out with how it is going to come out. kevin: this from the tea party conservative leader phillips who says he is against the administration's position on nafta. lisa: kevin, can you talk about -- isdraining the swamp, there no more of that. the taxpayer dollars backing some of the richest corporations in the world, they do not need it. they have access to capital and they do not need taxpayers funding the risky ventures like those with russia and venezuela you. it is cronyism at its worst. also the import and exports, so there you have it. a couple of the issues that tim phillips of americans for prosperity, the organization he cofounded, having some issues

with president trump. lisa: kevin, i have to ask about the news we are getting about u.s. health insurance. the ceos meeting with the president in upcoming days. what do you think they will be talking about and who are they? and what is the main reason for the meeting? kevin: on monday, the president is meeting with the leaders at the white house. it comes as he has criticized some big pharma leaders. this is the first time in this administration he is meeting with these in the industry. it fits the pattern of the ceo conferences he has had. he met yesterday with ceos of several manufacturers. this is one day before he goes to capitol hill to deliver the joint address to congress. eric: what will he tell them? the whole country is waiting to find out what is going to replace open the care. do we believe the white house

has details it has not shared with the public, which the president might share in the meeting with the health insurers? kevin: the party is divided. people like rand paul, a republican from kentucky who is aligned with at the base of the republican party has advocated for a much more ultraconservative alternative to repealing and replacing the affordable care act. but there is a centrist route, opposedusan collins who the president on other nominations. so where the president falls on that and if he will align himself with people like phillips, or senator rand paul, or the moderate more centrist approach, that remains to be seen. the house is waiting on the nonpartisan budget scoring office to get back how much their own alternative plans will cost, because again, any plan

that they put forward is going to face pushback from the conservatives for how much it is going to cost taxpayers. joe: what is the deal with the executive order today? another thing about regulations, is there any significance to it? kevin: not really. online, what this does is it forces the agency heads to create a regulatory review position for each of the agencies. at the end of the day, what exactly are these new positions going to have to enforce? they will be taking directives from the administration and cabinet and not everybody in the cabinet has been approved yet. joe: thank you. thank you very much. and coming up, why a virginia governor says that time is now for tax reform. that is next. this is bloomberg. ♪

♪ virginia saysr of the time is right for massive tax reform. erik: appearing on bloomberg daybreak, he said it was an issue that both parties can come together on. gov. mcauliffe: i think the time is right to come together. we need to put more money into the people's pockets, get consumer spending up and create more jobs and that is how you turbocharge the economy. give people more money and keep taxes low. and i think the time is right to bring people together to do this. >> the last time this happened, the deal was cut rates and eliminate deductions. to simplify it. and that requires everybody giving up something, particularly when you limit

deductions. are the democrats prepared to address tough decisions on deductions? gov. mcauliffe: it is on both sides, david. i think you have to go into any negotiation saying we will have a discussion on all issues and everybody have to give. it is unfortunate today that nobody seems willing to compromise and nobody comes together. i consider myself a fiscally conservative pro-business democrat and you know, you need to compromise. i work with republican legislators, we work together on a mac -- on economic development. we come together at the end of things and what is good for the state of virginia. let's start out by saying put everything on the table. let's begin from there. if you go in and say we cannot touch this or that, the negotiation will not go far. i come from a place where we can talk about anything. and some things we may want to preserve. obviously as a governor,

deductions, and state income is a big issue. it does not mean we cannot have a discussion and everything should be looked at. and the number involved is what we could put on the table and have a discussion. david: the border adjustment tax , have you taken a look at that and the effect it could have on virginia? gov. mcauliffe: i am concerned. i am in agriculture state and we are exporting all over the globe. we need to be very careful. i come from a place where i am all for fair free-trade and i happen to have been out and i supported president obama on tpp, those 11 countries, about 63% of my exports went to those 11 countries. and i am concerned today that of those 11 countries, china will negotiate a deal with each one of them and the united states will be left out. and virginia will be left out. give me a trade deal and we will

protect workers rights and environmental rights and make sure it is a top trade deal. i will compete against anybody around the globe. let us have a deal where we can negotiate and trade around the globe. it is a global economy. at 5% of the world's customers live outside -- 95% of the world customers live outside the u.s. i have traveled so much. our unemployment went from 5.4 and now it is at 3.7. and unemployment claims are at their lowest levels since 1973. we are selling all over the globe. i'm concerned with the border taxes that they will come back and bite us and cost us jobs. how do we create more jobs? jobsve created 185,000 new since i have been governor and $15 billion of capital investment, that is because we are trading and it doing business in a global way. david: you have also talked

about immigration policies and whatever written to secretary kelly to express concerns. as the governor of virginia, tell us how it affects your citizens specifically? gov. mcauliffe: on two issues, the executive order on the travel ban has had an impact and i have lost several site visits from folks outside who wanted to and in for manufacturing agriculture. one said it is not the time to come. i am concerned about the chilling effect for the businesses. and as it relates to the immigration policies. and i reached general kelly and i want to thank him, i will meet with him on sunday morning with the ice officials. we are changing course in america and can we now just randomly stopped anybody we want? we have a situation in virginia, individuals coming out of a sanctuary, they were in there for the night to get out of the

cold and then ice officials randomly went up the people. i was concerned. what will happen is it will be a chilling effect. those with commit a couple diseases will not seek medical care. it will drive people underground. and take a northern virginia, 32.5% of the economy, small businesses, they are foreign-born owners. we have to be careful that we do not have a stifling impact on the economy. it comes back to jobs and we need to be careful we are not having a chilling effect scaring people. we are the land of opportunity. we are all immigrants. unless you are a native american from 1607, those ships came to america. they do not go to maryland or pennsylvania, they came to virginia. and we do not say at the water's edge, you are not allowed in the country. we are cranking in virginia

today because we do business on a global basis and we treat everybody with dignity and respect. erik: that was the virginia governor on daybreak america earlier today. lisa: time for a bloomberg business flash mode looking at the biggest business stories right now. the fcc is moving to modify requirements imposed when agency approved charters acquisition of charter cable. the commission demanded that tartar build broadband connections to 2 million new locations, including one million already served by competing high-speed internet providers. according to an official, the sec has proposed -- sac has proposed to drop their requirement on the already established places. and germany's federal statistical office says it trade between germany and china totaled $180 billion worth of goods. import and export trade with france is second.

the u.s. fell from first to third with $174 billion for overall trade, but remains the largest market for exports for germany. and now able to trade with clients for jpmorgan without legal backing from a parent company. j.p. morgan securities, about has been building capital in recent years and is able to stand alone. in the past mother trades were guaranteed by the u.s. current. -- parent. that is your business flash update. joe: coming up, corporate america looking at the economic prospects of a trump presidency, what do american consumers expect in the years ahead? we have a chart you cannot miss. this is bloomberg. ♪

♪ lisa: "what'd you miss?" let's turn to spain. the producer price increases

jumped by 7.5% in the year ended in january. this is interesting because it could serve as a leading indicator as to what to expect for the euro area data we are expecting next week. it is important, because atb is considering tapering their stimulus and it could ignite inflation. it does appear like inflation in europe is starting to pick up. joe: a key chart for the ecb. and here is remarkable data about the u.s. by one measure, the u.s. consumers are more optimistic about the labor market than at any point since 1984. this white line is the percent of consumers in the survey that think that the enemy limit rate will be lower and has further room to fall. look at that massive spike at the end, so many people think that the an opponent rate can

improve -- unemployment rate can improve credit you have to go back to the 80's to see a jump like that. -- improve. you have to go back to the 80's to see a jump like that. but we are already at a low level. it is not hard to go lower when you are at 10%. right now, there is not a lot of room to go. it is an interesting thing, this in about eight years into an economic expansion, there is a surge in optimism. we get these from time to time. they are usually coming out of a recession. this time we have a shift at in unusual time and we will see of the data cooperates it. -- corroborates it. erik: stock market records, is anybody talking about valuations? have a look. this is the address to price-to-earnings -- i adjusted price-to-earnings ratio. it is not a snapshot of the market or the stock price relative to the past 12 months

of earnings, it takes into account 10 years of earnings history. and bob schiller who developed the index is questioning the rational exuberance from the 1990's, wondering legitimately if the market is overvalued. averageook, this is the going back to 1995. for the ratio. this is where we got into crazy land and we know what happened to the stock market after that point. it was on the way to this that we were last here in 1997. we will talk about this chart with black rocks global application portfolio manager in a few minutes. lisa: the market close is up next. you can see stocks are trying to reach the green. the s&p 500 is there. at the dow jones is trying. the nasdaq is up. joe: a heroic comeback. lisa: you can see them shooting

up on the s&p 500. and the dow jones. we will keep an eye on that. this is bloomberg. ♪

♪ lisa: we are a moment away from

the closing bell. the dow is turning positive. it could be another record. "what'd you miss?" erik: i'm erik schatzker. joe: and i'm joe weisenthal. we want to welcome you to our closing bell coverage every weekday on twitter. ♪ erik: we begin with the market minutes. benchmark industries as you just heard, individual, indy mostly higher. the nasdaq trading lower. if you take a look at the dow, it went over the positive line in the last few seconds. lisa: and the nasdaq? erik: he did as well. the dow closing higher around 7.5 points. .14%, a gain of 3.3. roughly speaking. and two stocks i want to highlight underneath the activity that is the benchmark. you saw yesterday the new

attorney general jeff sessions reversing in obama administration order that the justice department stop using private prisons for federal purposes. and two stocks you might think would be active on the news, what is now called -- or formally the correction system of america. and the reason these are not up more, they sold off to the tune of 25% the day that the obama administration order came out. and they have been climbing, almost a straight line up since the day of the election. it was a widely held assumption that the moment donald trump was elected that it would be reversed and you we are. lisa: and i am looking at bond yields, the differential between the 10 year and two-year treasuries. at the lowest since november.

and this is significant to me. we saw those 10 year yield go down significantly today, despite optimism in stocks, with those making another record for the 11th straight daily when. -- win. why? i want to take a look at the two-year german yields, going to another record low. take a look. going down to negative 1%. a lot of questions as to why this is, especially when we see inflation picking up. those yields keep going down and the citigroup expects them to go down below the -1%. joe: incredible. take a look at currencies. taken a look at the dollar, up a little bit. not a ton of action for the dollar or the euro. euro down a little bit. butin earlier in the week, it has not moved a lot. check out the brazilian riau,

weakening against the u.s. dollar. weak information out of brazil. brazil was supposed to make a comeback, but the data is not that great. it is underwhelming. up moreployment is than expected. and we will keep an eye on that. and commodities, interesting stuff to into the week. oil giving back a little bit. still above $54 a barrel, higher than the recent range. iron ore gaining, usually sensitive to china. it is an interesting move. gold is gaining. some of the safe haven assets coming back. and keep an eye on gold and that it is very close. it is interesting to keep an eye on. there you can see the six-month goal chart. and -- gold chart.

and it is not where it was on november 8. it is racing. many people don't -- dumped gold. and a silver has been on a tear, several straight weeks of gains. up again today. lisa: gold defies my standings. and now we are taking a dive into the markets. dake a look at which fun asset classes have been winning over the past two weeks. this is going into equities. it has been strong, waning in the yellow this week. darker yellow is from last week. you can see the pace of flows in equities coming down. and the high-yield bonds waning. em is strong. and you know, this is fascinating because it is an indicator across the board -- i mean, you normally do not see people going into government

bonds and equities at the same time with incredible zest. when youeminds me of could buy everything and it was all green and that is what is happening right now. "what'd you miss?" here to tell us what he is telling investors and how to , ade is russ koesterich portfolio manager at blackrock's global allocation fund. great to have you. it is interesting, in the immediate aftermath of the election, the equities where rallying and everything else sold off. and now, other things are starting to join in. gold is coming back and flows are going into everything. is the new normal already gone and we're back to the old normal? russ: it is looking for new reasons for the glass half-full. so this is after the trades, now we are looking at the bond

market. and we are reporting on a strong dollar. and back to where we were in 2016 where the rates were modest and the dollar is not a big -- and the yield are low, so the equities look at again. lisa: i imagine you talk with people around the world, so are you looking at money from japan, china, from private investors continuing to come into the u.s. equities and credit? four weeks in italy ago and for the last five years, when i go to europe or asia, regardless of valuations, people like the u.s. they like it at the best house on a bad block them a but now we hear concerns. trading at as premium we have not seen since the late 1990's. and there is political uncertainty. it is not just europe or china, the u.s. has uncertainty. lisa: where are people most concerned? what nations have you heard the

most questions about? not so muchk it is more pronounced in asia or europe, but there is a question around the what is the trade policy and will we have a trade war? we have not had action to precipitate that, but it is a question that comes up when i speak with international investors. erik: at what point do the questions or concerns about equity valuations begin to affect your model? you have a model that is still mostly equity, 60%. and 25% fixed income against 40% -- because you have given the rest to cash. russ: and gold. erik: let's stick with equity. at what point did these excessive valuations or higher valuations -- russ: stretched, elevated.

erik: higher. russ: higher is a good one. global allocations, in the fund we have a higher allocation to stocks rather the in bonds. equities are not cheap. it reflects the value biased. arefrom our perspective, we underweight in the united states, we see better opportunities in europe, japan and other emerging markets, so it is not as if the entire world is stretched, it is the u.s. equities market. for many years, the u.s. has outperformed in multiple expansions and it is taking a toll. erik: is it stretched? russ: should we go through the euphemisms? i think that stretched is the right word. if you look at any long-term measure, we are in the top decile, take your pick depending on how far you look back. we are at a level that over the long-term suggests u.s. equities are likely to have lower returns

over the next 3-5 years. joe: go back to the administration and what investors are pricing in in regards to policy. we saw this week nervousness around certain sectors that are exposed infrastructure spending, doubts coming in. i have seen some people including some guests on this show talk about next tuesday's speech as something that investors are honing in on. if there is more information, people could think or maybe push back the calendar significantly on these policies. will there be investors paying attention to that? russ: we have gone from an environment where we parse every and nowe from the fed, to one where we are looking at the administration. the power of the market in late 2016, we had a belief that we are going to get stimulus, tax reform. if investors feel like that is

getting pushed back on the agenda and there is a lot of consensus among republicans, the market will react. joe: parsing donald trump is different man parsing -- than parsing janet yellen. russ: a little bit. lisa: you said bonds are more expensive, which ones are the most expensive and would you call them stretched? russ: i think the u.s. treasury market is stretched and extended, but having said that we would have said the same thing a year ago or two years ago. the nuance is there are structural things that make it unclear what the fair value is. we are in a world of an older population and where the central banks have trillions of sovereign debt. in that environment, the treasuries are expensive but it is not obvious how stretched they are in that context. lisa: how about high-yield bonds ? russ: it is a reasonable source of income if you are comfortable. for the next 9-12 months.

we do not see signs of recession, we see expansion accelerating. in that context with high yield in the portfolio, that makes sense. erik: let's go back to the cash application in the model. is that a piggy bank to reallocate assets because cash is not learning anything today, when the market resets? or is it a cushion against losses on the other assets you are look way to do? -- click weighted to? russ: there are not many cheap asset classes, so you want to have something for the market correction. and the other issue is more subtle. if we go into a world where the u.s. monetary policy starts to normalize for the first time in a decade, is that an environment in which the bonds provide as good of a hitch as the risk over the last 7-8 years? there could be more cash in the

portfolios. joe: another area of the market that has come back is em. it got clobbered in the immediate wake of the election, part of it was the dollar, some of it was protectionism. but they have come back, more than a raising the losses. what do you see their and easy enthusiasm or a willingness to go abroad and take risk? russ: i do, for the first time in years. i think there is a willingness to talk about it again, it is one of the few reasons we have those asset classes left. the issue is, which em? butgo out and buy broad em, some of them are commodity importers, you have countries that are backsliding, so em with the copy at of you pick your spot -- caveat of you pick your spot. erik: we will continue the conversation. we will take five.

russ koesterich is a portfolio manager for blackrock's global allocation fund. he will give us his take on why gold should be looked at when hedging against political risk. joe: and a reminder that if you are on the bloomberg, you should check out tv , the best way to watch tv, because in addition to the tv you see all the charts we are looking at, headlines, quotes on the companies and the asset classes we are talking about. it is the future. this is bloomberg. ♪

♪ mark: time for first word news. the white house correspondents

association has released a statement protesting strongly the decision to deny reporters from cnn, the new york times, the los angeles times and politico injury to press availability -- entry to press availability. reports that time magazine was invited to attend a small meeting with the press secretary, "but out of solidarity chose to set up a meeting or cup -- meeting." john kasich says there is no animosity between him and donald trump. governor kasich says that he and donald trump, now that he is the president, "it is sort of like being on an airplane. you want to root for the pilot." he says he shared ideas for the health care law with donald trump. ohio is among 31 states that expanded medicaid under the law and john kasich says that donald

trump listed carefully to what he had to say about it and had a positive response. the u.s. ambassador to the u.n., nikki haley, slamming moscow's defense of syria's use of chemical weapons ahead of a vote that the russian diplomat have promised to veto. the u.s., u.k. and france will propose a resolution that will sell helicopters to syria and places sanctions on 10 entities linked the chemical attacks. after today's post session of the security cap so, ambassador healy accused the russians of "babysitting the syrian regime." firstill be her resolution since taking office last month. and capturing more ground from the islamic state in basel. the iraqis say they have gained full control of the airport, and are entering occupied areas. this was the last urban stronghold of the islamic state

in iraq. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. erik: thank you. "what'd you miss?" russ koesterich is with us, a portfolio manager of blackrock's global allocation fund. i might go back to talking about equity valuations, because i am obsessed. i know that you brought something with the cash allocation, and it is a gold allocation. there is equity, fixed income, maybe more balance than the typical portfolio. you have a 3% allocation for gold, explain. russ: it is a couple of things. gold is a different asset class because people have strong opinions about it, what does it do? is an buffett says it

barbaric relic. but it does provide a hedge against the risk for paper assets like stocks and bonds. it is useful when volatility is rising. if you go back and think about the environment right now, volatility is low and since political risk is in the market, if you see that volatility rise, if the political risk is priced in the market, what will work, it is usually gold when the vix is rising. joe: that makes sense. but here is why i have a problem with it or what i do not get. if it is only 3%, what can it really do? let's say there is a crash, everything loses and it doubles. it adds 3% of the gains. can you get insurance with that little bit? russ: you have a certain amount of money and insurance, relatively small. clearly if you have perfect

foresight and you know the crash is coming, you probably have more gold. over the long-term, you need to bounce it out. tradeu say gold often with real interest rates. when thosep, -- drop, gold goes down. joe: the blue line is the inverse of five-year interest rates. explain. russ: this is a good encapsulation of what we were talking about. why would you own more gold or less gold? when the real rates are high and there is a gap, there is an opportunity for holding metal that does not do anything. if the real rates are lower, as they have been for the past five years come in that environment the opportunity cost is lower and gold performs better. lisa: people are talking about how it is negative yields and it is the cost of stashing money in your mattress, it is compared to

gold and it could work out. russ: this is why in the 1980's you saw the collapse in prices, because real rates were high and it was a high cost keeping gold as an allocation. erik: so it is a snapshot in time or is reflecting what could happen over maybe five years. but many fixed income investors are long-term holders and when we look at the performance, this is a battle the charts, excuse me. but if we look at gold against the actual 10 year yields here, funny things are happening. you would think at times when inflation concerns are flaring, and yields rise, prices selloff, the gold should be trading on the same trend line as the 10 year treasury. but for the last five years, it the reverse has been happening -- years, the rivers has been happening. so why is gold going to function

as an insurance policy if it has not been? russ: this is the square in the circle, what is the fed going to do? one reason gold has worked well for the last five years whenever there was a shock, it was a growth shock or political shock, pushing down the real rates. so you raise a point, if the next shock happens because inflation is raising to suddenly, we get a hawkish fed and gold probably is not the best hedger. erik: i see. we could find out a little but more in a couple of days. thank you. russ koesterich, a portfolio manager of blackrock's global allocation fund. twists inrecent france, how are investors viewing that country? we look at the data. this is bloomberg. ♪

♪ lisa: "what'd you miss?" we will take a dive into the bloomberg. you can find the chart using the function at the bottom of the screen. joe: ok, i will kick it off looking at europe. we have elections and we are talking about political risk and the common explanation is that there are economic problems in people want to vote for the populist. but people are feeling better. if we go into the bloomberg, i have a chart looking at consumer sentiment in france and italy. the white line is italy, the blue one is france and they are trending higher. france is at its highest level in a long time. so if you think about what is happening in europe, if it is based on economics, you are

probably missing part of the story. erik: we are out of date. joe: exactly. or the idea that growth is necessarily going to pull back notpopulist ties, that may work either because these numbers are moving higher and contrary to what people could be thinking. lisa: i love your optimism. growth shows that even cannot keep the politics out of it. lisa: there you go. n, the biggest dkl leverage loan etf. you can see the solid green for the past many months, since last june. and it is interesting to me because leverage loans were out of favor when everybody was getting antigovernment bonds and high-yield bonds, but now there is floating rate debt that is risky and it is a sweet spot for investors. and others.mer,

joe: it does not rise the same way. it is turning around in the summer the same way the rates turned around. erik: and a chart inspired by the news jcpenney closing as many as 140 stores. and i spoke to an investor who thinks that they have given up on the operating business at sears, so why -- here is a good reason. no matter what jcpenney does, the goose is cooked. look at online retailers, the white line, the retail sales, they are tracking closely. the department store stocks, the yellow line, it is all over but the crying. speakingext, the fed on next week. we hear from officials on monday. what we will learn from them, after the break. this is bloomberg. ♪

♪ >> it is time for first word news. the president signed an executive order imposing additional oversight on government regulations. mark: he explained the intent. >> this executive order directs each agency to establish a regulatory reform task force that will ensure that every aency is a team of dedicated, real team of dedicated people to research all regulations that are harmful to the economy. mark: several chief executive officers join the president, including the dow chemical chairman and the lockheed martin ceo.

the french financial prosecutor's office has decided to open a judicial inquiry into the alleges fake parliamentarian jobs that francois fillon gave to his wife and two of his children. he had been one of the front runners for the french presidency, but his candidacy has a stumbled after allegations. he admits he hired his wife and children, but says the jobs were real and to the practice legal at the time. and over 60 people killed in two attacks near a syrian town recently captured by turkish forces. most of the dead were civilians. to turkish soldiers were also killed. and in envoy is holding a second day of meetings looking for a political solution to the civil war. hosted.tion was and diplomats colleagues and relatives gathered in moscow today for funeral services for

russia's longtime ambassador to the united nations who died on monday at a new york hospital. the foreign minister praised him as an exceptional professional and a people's diplomat. medical examiners in new york and performed the autopsy say more tests are needed to determine the cause of his death. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. joe? joe: thank you. now we will get a recap of the market action and major industries closing in green. it was a heroic comeback. you cannot keep the market down. and what is interesting come on this streak, we have not seen huge gains, but it is one day after another in green. erik: who are these? are they running backs?

lisa: it does seem like something is going on, going into close the rallies just accelerated. and you saw the indexes shoot up. what kind of algorithmic something is behind this? erik: who knows? joe: next week, we will hear from fed officials including stanley fischer and jeff lacker. janet yellen will be make remarks in chicago next week. and the minutes from the last gathering showed them wrestling with uncertainty ranging from issues from the fiscal stimulus to the headwinds that the rising dollar could pose. here with us to discuss the fed, economicsnews' reported and you brought us three charts to help us understand what we will be seeing over the coming days. let's start with this one, the fed futures' butterfly. you will have to walk people

through this. what are we looking at? >> we love to do the butterflies. mike's a backup pointed this out to me and it shows that after the election, which is where this chart starts, we started pricing in more tightening for this at the half of 2017, and that is where the line goes down, showing the difference from the first half of the year, to the tightening of prices for the second half. and we have come all the way this was at the election. basically what is happening is we are no longer expecting the acceleration and the fed tightening in the second half of the year. we are getting back to the state we were in in the markets before the election were as the next hike will be the last one. the one and done mentality is coming back into the market. joe: it speaks to the asset price moves, the selloff in bank

stocks, gold, made popular trade pulling back. of all thatt activity. lisa: and the next chart, if you take a look, it shows inflation expectations are creeping higher according to the university of michigan, the expectations survey. matt, mystifies my understanding -- this defies my understanding. everything was going to be gangbusters growth from here on out. markets, ucbncial distribution shift to the right and we are not as worried about those outcomes as we are anymore. when you look at interest rates that is all you see. but the surveys, the consumer surveys have not caught up to reflect that reality. so these on the michigan survey are at record lows and many people say that is not that

concerning, it is a lot of people who were expecting high inflation outcomes in the right tail now disavowing those notions and now they expect to percent inflation. and that is what the fed should want. but some of those people are actually moving into a category where they either see zero inflation or negatives, not just in the short term but between 5-10 years from now, so it is a long-term psychological factor that the fed worries about. lisa: it is fascinating, but it makes me wonder consumers are maybe not prepared for what the market is seeing as far is inflation. -- as inflation. erik: let's bring up the third chart. illustrationis an of the dimensions of uncertainty, the beige book, the fed's survey of regional fed presidents. lisa: it comes out next week. erik: and we got used to hearing the word uncertainty, that it

almost became white noise in the backup. what is this telling us? matt: go back to 2012 and can see the fiscal cliff, the spike at the top. and the next one for the government shutdown in 2013. we are not quite at those levels, but it is interesting because before the election the number of mentions of uncertainty did spike up and you can see it came back down. i think it will be interesting to see where we are at, how the businesses are perceiving this. we learned on wednesday that they are telling the fed officials they are not sure how things are going to pan out. they are waiting to see the details of the trump proposals, so that is probably what the fed will do as well. joe: great context for the line of next week. thank you very much. lisa: coming up, the u.s. dollar funds in aing hedge

major way. we take a look at the dollar volatility. this is bloomberg. ♪

♪ lisa: "what'd you miss?" it is getting tougher to predict the path of the u.s. dollar, the rubicon was down 6.3% in january. why? because of short positions against the greenback. for more on what is next for the u.s. dollar we will bring a missing your fx strategist -- bring in a senior fx strategist. what do you see and have you ever seen the u.s. dollar more affected by potential political risk then you do right now?

>> it is odd, because usually you think of the u.s. dollar as a source of stability, but now it has become the focal point of political uncertainty. or the source of volatility. i think what we see right now is there is a trump discount factor phoning into fx markets and certainly since the start of the year, we see the pullback in the broad index. if you compare relative to the yields, therehted is a wedge between the rates market and what it is the picketing for the u.s. dollar and i think that is really referencing the confusion and low conviction levels over what will happen in congress. erik: what is most of honorable vulnerable? -- bu >> the dollar-yen.

typically over the past several years, particularly with the sovereign debt crisis, that has been the pair that has been susceptible to that. and you look at the options market and the sovereign debt market, they are all taking a little bit more of something that is concerning in the eurozone and we are moving into the french election where it will become more topical, so i think the market here is we have more downside. joe: how much downside? how far can the euro go down? 112-115 area. the i think there is greater risk where we could test the cyclical lows. with the euro-dollar, the macro dynamics from the rates market is something that the ecb is doing over the course of the next several months, it places the balance of risk down. we are looking at 102 initially and i think the risk of an

overshoot or undershoot is something that will be more nontrivial as we get into the election. lisa: what could push the dollar higher? mazen: it is congress, quite honestly. if you look at it from a macro point of view, the u.s. enjoys cyclical divergence with the rest of the majors. on that basis alone, it is justification for -- lisa: be clear on what that means, the economy is growing faster? erik: policy is tightening. mazen: yes, we see the fed hiking twice this year and if we do get something out of the congress, then the risk could go toward 2-3. but for now, from a cyclical point of view, the dollar remains. joe: one possible currency story we could get in the future is a board at adjustment tax and -- border adjustment tax and the

degree to which any tax on imports would be offset by the rising dollar, and there is very thatultimately -- theory ultimately it would wash out. what is your opinion on how much it would adjust if we get a radical change in tax policy? mazen: if we do move to that academicsustment tax, would argue it would be dollar neutral, or at least the increase in the dollar would offset with the tax system. model. it is still a that would assume perfect information, perfect competition as well, and certainly i think if you have to think about the faulty production process, it will have more of an impact on the dollar. products, you. may see less demand on those products. lisa: modeling on uncertainty is a thankless task.

thank you for joining us. sa, thank you. joe: donald trump infrastructure plan is almost a "free lunch," says one professor. more of his thoughts on donald trump and trade, next. this is bloomberg. ♪

♪ joe: "what'd you miss?" is considered by many in the economic establishment to be completely wrong or out of -- with trade. michael pettis has written about at, a senior fellow

carnegie. and i asked him in a recent interview what navarro gets right and wrong. micheal: ultimately there have to be is in a begin change in the global trade machine. the way that things work now, the trade imbalances, there is a misperception that trade and balances reflects pricing differentials and things like that, but it does not really. it is driven primarily by these huge capital flows, which leave capital and balances that need to be balanced by the trade imbalance, so as long as money is pouring into the u.s., the u.s. is going to run a deficit, no way around that. the ironic thing is all the talk about trade and tariffs etc, has caused even more money to leave countries like china and to go into the u.s. my guess is that this year we are going to see an increase in the u.s. current account

deficit, because there will be an increase in the amount of capital coming into the u.s. joe: interesting. you wrote about peter navarro, one of the advisors for trade. he is somebody who the economic establishment while he considers to be wrong, out of the consensus. what does he get right in your view? what does he say that would be important to listen to? micheal: i think the idea that trade deficits do not matter, which is really more a matter of faith or ideology, it is not borne out by history. i think that view is completely wrong. i think that navarro and donald trump and other people too are right to be worried about the permanent trade deficits run by the u.s. largely because of capital imports. so that have to be addressed. and i think that navarro is

right to say that something has to be done about it. where i think he is probably wrong is by focusing on the trade side rather than on the capital side. we need to be clear about where these imbalances originate, and if they originate in the capital flows i'm that is where we need to look at the problem. joe: is there something that donald trump can do to basically deliver the goods to the people that put him in office? you wrote during the campaign about the rise of the jacksonians, the idea that he is coming with the new populist message. what can he do to sort of live up to the pretty extraordinary promises he made? thing, if he, one shakes of the elite opinion makers, of which i think you and i are part, i do not think that is a bad thing. i think we have gotten a lot

wrong and i think we need to be shaken up. there are problems with the existing markets regime, the capital flows regime, those need to be addressed. one thing he said he would do, which in my opinion is almost a free lunch, the infrastructure spending. the u.s. needs better infrastructure and the ability to fund it is at an all-time high, the cost of funding at an all-time low. and this is a great time to do that. it would be almost a free lunch, it would pay for itself in 10-12 years and it would be great for the u.s. and good for the u.s. trading partners. you know, inhink, terms of we all got it wrong, i think you wrote during the campaign you thought donald trump was going to peak at one point, but obviously he did not. he won. do you think there could become a moment where people say,

enough is enough, he is not able to deliver on the promises to the degree that we thought and people become disillusioned with him? or are you not inclined to make predictions at this point? toheal: it is, we have disentangle our evaluation of his actual policies, and we do not know what they are yet, with our evaluation of his personality and culture and everything else. that is not easy to do. i would say until we know very specifically what policy he is going to implement, it is a little bit unfair to be overly critical. there are issues on immigration etc, where i disagree strongly. with economic policy, we need to wait and see. joe: what are the interesting things or maybe surprise since he won, the rally in u.s. market, we see business leaders

very excited about the tax cuts and the regulations -- dere gulations. do you think it is possible that those in the elite are underestimating what this populist wave means? the rise of the jacksonians. micheal: yes, but when you look at the history of the jacksonians factions, they are anti-elite but they do not end the elite,ing they create a new one. and they are not really bad for business. if you exclude academic economists who are confused about trade, i think a lot of people have correctly interpreted the impact on the u.s. economy of both infrastructure investment and action on the trade front. joe: from a policy standpoint, you say infrastructure is the

closest thing there is to a free lunch. what else should donald trump be pursuing that would allow him to change the economy in a productive way based on what he has promised? micheal: you know, i do not think it is very difficult to figure out what the problems are. we have a problem with demand, there is insufficient demand in the world, so we need to find sources of demand. and there are only two good sources, one of them is infrastructure spending in the united states and europe and other places, and the other is a revival of consumption and the only way to revive consumption is a redistribution of wealth, that has been the problem in my opinion. i do not think that is a policy he is committed to, but it would be a good policy if we could take steps to redistribute wealth downward, we would see a boost in consumption and

investment, because businesses are not investing because they expect weak demand on the consumption side. joe: that was michael pettis, a professor at peking university. that was yesterday from beijing. erik: the bloomberg business flash, a look at some of the biggest stories right now. the race to cut fees and intensifying. the second-largest provider of exchange funds lowered expense ratios for 68 etf's today, the third set of reductions since december and it comes after similar moves in the past year from state street and blackrock. and choosing frankfurt for the hub after brexit, we have the full skill operations going to germany. that is according to a board member that says they are eliminating fly and a drive banking when the bankers come in from london and they will crack

down on exchanges from a subsidiary executed in london. that is the bloomberg business flash. lisa: coming up, what you need to know is next. we are gearing up for next week. this is bloomberg. ♪

♪ lisa: "what'd you miss?" in record-breaking day in the stock market again. the s&p 500 and dow jones breaking records. what are we looking for? we are looking for berkshire hathaway publishing the annual letter to publishers. do not miss it. joe: tuesday, i am looking at the president's address to congress. a lot of interest from the market about whether we will get real policy news. erik: and from the president, perhaps a new order on immigration and travel to the u.s. from those seven predominantl

>> you are watching "bloomberg technology." president trump spoke at the conservative political action conference telling supporters construction of the border wall will begin soon.

he blasted the news media for using unnamed sources. trump told conservative activists there will be no more big of the national trade deals and promised to take a tougher line on trade. seven g.o.p. governors are calling for changes to medicaid. they are also urging washington not to scrap obamacare without a viable alternative. they want congress to adopt an alternative to change medicaid from an open-ended federal entitlement to a program designed by each state. the proposal saturday. authorities have been the last holdout from the protest camp in north dakota. there is tons of debris to be cleared. a highway bridge remains closed at a court battle hundreds of protesters remain in the area. democrats invited immigrants to president trump's first address to congress in an effort to put a face on people potentially hurt by the administration's policies. they include an iraqi american doctor who discovered elevated levels o