and says tax cuts are coming. yields grind down to lowe's. investors brace for speeches. the president addresses congress, chair yellen gets the final word. from new york city, a warm welcome to "bloomberg daybreak" alongside myself jonathan ferro, alix steel. it is a market held hostage by policies. it is a new trading week, futures unchanged. the euro stronger, yields up to basis points. alix: i'm looking at the safety check board. -94 basis points on the german two-year yield. nonetheless, we are watching that record it hits on friday. the vix goes nowhere, gold se and wait and

see for donald trump. to learn starting about what the trump administration's plans are. we go to our chief washington correspondent. we argued a reporting about this budget outline and when it may come out. take us through that. later today, the white house is respected to release a two-page summary of president trump's proposal. this comes one day before president trump addresses a joint session of congress tomorrow in prime time where he will lay out his policy proposals. i'mt of the sources speaking with want more specifics. here's what i can tell you so far. for the cut spending state department and the environmental protection agency, but it would boost military defense spending. >> we have reports that they may trim back their expectations of growth.

that is something terribly important to people watching this program. what is behind that? precisen't have a reason for that estimate. that would perhaps show a slight re-assessment this administration has in the economy. economicput through .timulus morebecomes much interesting, but we will have to wait to see if this administration puts forth specifics. the president is meeting with insurers, particularly health care insurers. take us through that agenda. he will meet with the ceo of blue cross and blue shield. he will meet with the blue cross blue shield association, health care industry group. between moderate

centrist republicans and ultraconservative people. in addition to them, meeting with health care representatives, he will meet with republican governors, and they have concerns. john: the head of all of this is the bond market with yields grinding down to lowe's. what is the bond market looking for from the speech tomorrow? >> good morning. looking for more details indeed about fiscal policy. you said earlier that markets land, and i agree

because there is a lack of specificity and because we are seeing flight to quality given the political uncertainty in france. we are seeing on yields pullback and getting close to key 2.30 inl levels, 0.15%, treasuries. those were the lows we had in late december come in mid-january. if we break through that, that would be quite a strong technical questioning or bearish view on bonds. so we need more specificity tomorrow, but the fact that they reduced the growth forecast and bring it down to a level that seems more realistic, that suggest that maybe they are less concerned. john: there appears to be a disconnect. at what is happening in equities, all-time highs, but the bond market not pricing and

optimism to what you make of the disconnect between stocks and bonds right now? >> for bonds, the fact we have strong growth and good earnings has been enough to push prices higher. the surprise if anything for me is that given the strengths of the global economic data. partly it is positioning, some of the shorts being reduced, some the speculative shorts in particular. quality, butt to we seem to be sitting in a -- on an unstable equilibrium. something will eventually have to give. i think that will be bonds. i think bonds are very rich, but again, let's wait for the speech tomorrow. alix: do you have to have a short-term outlook to trade around these juxtapositions, versus a medium to long-term outlook, which would be your bond thesis? how would you trade that? rityhis is a particular

indeed. if we break through those levels, the market will be bullish. last week, we reduced our shorts tolast week, we reduced our shos to minimal because the confidence is not very strong. medium-term bearish view on bonds. 3% 10 year treasuries, 1% 10-year bunds. the near-term outlook is definitely not there. alix: if you look at dollar positioning, the lowest level since september. what will we need to see? specifically, what will we need to see to get bullish on the dollar? >> probably some repricing of the fed. price thiso hikes

year, two hikes and next year. there is room for that to be revised higher, but for now, we need ongoing strength in the data, probably at pickup and wages for the market to really start to reprice the fed more aggressively, and i would push the u.s. dollar. right now, we are in a way to end see mode, and effectively the unwinding of this thicket of longs have caused a pullback, nothing too aggressive come but it is not moving a lot. some: you said we need specifics from the speech tomorrow. stand in the position of the markets for a moment and say what specifics will be most important, tax reform, helicopters they are on trade, fiscal spending? what is it? >> the tax definitely, we need overall taxat the reform is going to be bullish for growth in the u.s., but even better globally, and that is

less clear depending on what a do with the border tax. we need some talk also on spending. i don't think the congress would except there is a plan that implies a sharp increase in public debt. private-public partnerships, but also some signal that something is going to be there. signals out now the of the white house seem to indicate that infrastructure spending would be put off until 2018. will the markets be disappointed in that? probably a bit disappointing, yes. again, that is where the technical levels i mentioned could he exposed. alix: thank you very much. coming up, repealing and replacing the aca, a top priority of the trump administration.

new york presbyterian ceo will join us for what the changes could mean for the health care industry. later, martin feldstein with his latest off at on what he says are the the flaws of the border tax adjustment. this is bloomberg. ♪

>> hello. welcome back. to rich a bank is trying

recover from legal expenses that might cap profit and a road capital levels. se says its type is unlikely to happen. a new regulatory hurdle has signaled an end to the struggle to get the deal done. lse said it could not to the did vestment. general motors has intensified prices. gm boosted incentives on its pickup trucks after its biggest rivals gained ground. discounts average $7,000 for the chevy silverado. jd powersa from indicates that ford and fiat chrysler have dialed back incentives. that is your bloomberg business flash. john: europe, markets held hostage by politics, french bonds gather for a fourth day, the pound to sinks to a two-week low. reports of a potential scottish

referendum, another one, sank the pound. is headus from london of european fixed income vanguard. want to start with the fx market. fantastic piece in the new yorker about how facts don't change people's minds. what i see on the screen is the pound reacting to the news that maybe we get a second referendum in scotland, then another headline that says prime minister may is clear there should be no scottish referendum, and the pound does nothing to what you make of the asymmetry there? >> the market is starting to price in the possibility of another referendum despite the denial. that supports our view that any recovery on sterling would be limited. article 50nk the itself is going to be much of a shock to the market. it is all priced in.

risk put some? about the stability of the u.k.. in won't see any rebound sterling, especially against the dollar. john: looking at the gilt market, relatively stable over the last couple of months what do you make of that? >> that is what the boe has done for the markets. a swift market response to anything that could get out of control, so the pound has taken the brunt of the brexit concerns, and the bank of england is stepping in to support government bond markets and keep -- try to be the down stop for any -- backstop for any downside. alix: headlines versus markets,

france for example, yes, macron gaining in the polls, but then you still have the german two-year yield at -94 basis. had you understand that? i think you have a lot of contradictions in the market because for a few sessions you have seen it pullback in the bund spread, but the bund continues to be superstrong. to be honest, the pullback in boones has been fairly limited, fairly consistent for the past two sessions, but very limited. i don't think this move is large enough to influence the global market dynamics. the market will stay concerned about the french election. show a slightly smaller risk, in particular

seems to be le pen by a wider margin. again, the price reaction, the market's reaction has been fairly limited, and i think the risk will stay around for some time there. year we have french 10 yields trading around ireland, and they have a higher credit rating. would you go long france? is starting to look relatively compelling at this point. you have not seen any other risk asset start to price in any french political risk. it has been contained to the french sovereign and french corporate's. reflecting that there are worries in the market, but not a worry that the pen will be elected and the second round is where she will lose. what about risk premiums

built into spreads and political risk, when we should be talking about the potential for a candidate to boost growth and a place like france, a country that faces economic decay, then we would be talking about yields for a positive reason. are we going to escape the world of negative interest rates in the eurozone anytime soon? >> negative interest rates are probably in the cards for the foreseeable future of the next 2-3 years. goodthough we have had pickup in growth, especially spain and other parts of the takes quite some time for this stimulus to be pulled away from the markets. david: are the two really link? boe step in and prepare -- protect the markets? it's not a put, at least in ballast in the markets over there? >> it probably contributes to the la la land environment we

were talking about. in terms of the ecb, i'm not sure they will step up much. temporarily that they might deviate a little bit, but i don't think they will be massive buyers of oa tease. when we talk about the ecb, the political risk, once it is behind us, if we don't have any accidents in the french election, i think we will be talking about taper two. that will be a factor for a sharp increase in bond yields, but we are not there. for now, we know we have a lot of political risks in the system, and they don't want to do anything. regarding oat's, there is credit, equity

volatility. provideng said, oats some liquidity and is the obvious way to play that risk. would agree that 75-hundred basis points on bones is a buying opportunity. do you want to change the tightening now? i'm not sure. i believe the risks stay there a bit longer. much. thank you both very coming up, republicans have vowed to repeal and replace the aca. we talk to one of the men who were runs one of the biggest hospitals of the country at new york presbyterian on what it means for the business and the patience. this is bloomberg. ♪

bloomberg. is i'm david westin. health care accounts for a fifth of the u.s. economy and is at the center of the republican agenda.

next guest runs the new york presbyterian hospital and joins us now to take us through what repealing and replacing the aca could mean for his business and the patience he serves. let's start with obamacare. it has not been working perfectly. the republicans are right about that. what is the main thing that needs to get fixed? >> the individual insurance market. you have areas where there are only one ensure your, people are worried about premium escalations, so it is the individual insurance market that has had the most trouble. the medicaid expansion has worked very well for those states that expanded medicaid. david: you talk about medicare and medicaid. that's what they are talking about changing, saying let's do a block grant. states, you take care of that. what would be the effect in your view? >> devastating. you would take about $1 trillion

out over 10 years. there is no question that block rants would result in less people getting medicaid. just reversing the expansion alone in york state would be $5 billion, and that's why he see governor kasich of ohio saying don't take back medicaid expansion. in west virginia saying we have 150,000 more people on medicaid rolls, and you really want to roll that back? that would be highly problematic. david: one of the effects of obamacare was that more people got insured. the percentage of those uninsured went down. implements basically. americans.26 million what would happen if a good portion of those came off insurance right now? difference between access and insurance. access means if you get sick, you can get care, but that is part of the problem, if the first time you come into the

health care system you have had , heart attack stroke, diabetic multiple issues with yourself, that is extremely expensive, so access to care does not mean insurance. insurance means you can get preventive care and hopefully over a long time can bend the cost curve. people smoke less, drink less, and so on and so forth. a greatou run not only hospital, but a big business. what would be the business affects of these reforms on your hospital? >> first, you have to think about it in human terms. we want to take care of everybody. 30% of the patients we take care of our medicaid. david: really? around thethis country. when we are talking about the quality or any quality, access to insurance and health care is important. for those states that did not expand medicaid, to me, it is appalling. you haveike alabama, to make less than $4000 a

year for a family of three to qualify for medicaid. at some point we have to say we want to do that. that 30% of patients we care for, that is only 10% of revenue. medicaid is not cover costs. that is an issue. is a lot of talk in washington right now. are they talking to you? are you consulting with them about what makes sense and what doesn't make sense? >> all the time. divideublican-democrat is not as big as people think. i believe behind closed doors that people of real patriotism come real americans, can figure this out. david: does that suggest it will not be as radical a solution as we have been led to believe? >> i think gutting it and plans the republican house wants to put in would got it and take us back to square one, which is unfortunate. david: it will take a while to

work this through? >> absolutely. david: thank you very much. up, harvard university professor with his flawless ad on within the border adjustment tax. on where, david herro he is finding opportunity. after five straight weeks of gains on the s&p 500, futures dead flat. in europe, a marginal move to the upside, the ftse up .1%. from new york city, this is bloomberg. ♪

jonathan: this is "bloomberg daybreak: europe co let's get you up to speed on the markets this monday morning. it is the calm before the speech from the president.

are pretty much unchanged in the united states in the early part of the session. of gains forays treasuries, it is a day of marginal losses. the dollar a little bit weaker against the euro this morning. we are up 0.2% on the single currency. up to speed on some of the news elsewhere. emma: thank you. exit go is warning it will cut off the negotiations on nafta if the u.s. imposes a new tariff. the moment the u.s. says it will put a 20% tariff on cars, they say they will quit the bargaining table. president trump has said that nafta is responsible for a massive trade imbalance that favors mexico. asia, north korea has executed five senior security officials because they made false reports that enraged dictator kim jong un. that comes from a south korean spy agency. in 2011 and he

has reportedly killed and purged a top number of officials. warren beatty and faye dunaway announced the winner for best picture was "la la land" only it wasn't. by the mistake, they were given the wrong envelope. by the time the mistake was recovered -- uncovered and corrected, the team was already making their speeches. "moonlight" was the real winner. pricewaterhousecoopers is investigating. this is bloomberg. alix: thank you so much. man, talk about a letdown for "la la land." [laughter] alix: gold is a little bit weaker this morning. ubs saying it could rise because of rising debt and real interest rates turning negative. citi also says there is a chance to reach 1300.

under what conditions do we get to 1300? >> well, we have seen a lot of renewed outside pressure in the last couple of weeks and partly that is related to a reversal of the view of the trump reflation trade. we expected to see the u.s. economy motoring along. suddenly, this week, we see concerns about whether the policies will be pushed through this year or not and they may be delayed until next year. we crossed the atlantic and then we look at what is happening this side of the water. we see the political concerns in france, in the netherlands, obviously we have our own brexit negotiations that are going to kickoff in the next couple months. europe.l concerns in risk concerns and upside momentum. alix: i was a gold reporter in

2010. if this situation had presented itself back then, the call would have been for $3000, $4000. positioning is still relatively light. why is that based on the list of things you just said? seeing theot still same momentum in gold. if you look at the etf positioning, it is much lighter than it was a couple years back. in the last week, we have seen 63 added to its positioning, but it is much lighter. that is a much wider view the global economy is motoring along. china is doing ok. a lot of the u.s. economic data is ok. there does not yet seem to be the confluence of risk issues to drive it dramatically higher. we still have to perhaps wait for that. for the route, we are expecting gold prices to find further

upside momentum into next year. that is a longer inflation related story. --x: if you take it the look a look at the bloomberg, the white line is the real yield in the u.s. the blue line is the gold price. real yield is rolling over just a touch. what is your call on real yield when you tie it into the fed? >> we still think real yield is going to be under pressure. that again should be supportive for gold. we do think gold is going to go higher. 1250 at theg on at moment. our house yield on the dollar had been to see extreme dollar strength. to a certain extent, that is dissipating. we will see gold go higher for sure. alix: thank you so much, david. david wilson, the head of metals research over at citi.

david: the trump economic team is hard at work on a budget. we may see it as early as today. details are leaking out. those include increasing military spending. here to give us his views is dr. martin feldstein. dr. feldstein has served as the chairman of the white house of economic advisers and was the advisor tomic president reagan. >> nice to be with you. david: give us a preview of this so-called skinny budget. looking at what candidate trump and now president trump has said, it looks like a long list of progrowth policies that could be expenses. how do you square it? >> i think some of the spending increase in defense are long overdue. if we look at defense spending

, it isa share of gdp about 3.5%. the laws that are on the books would bring it down to about 2.5%. all of that is way below historic averages. the world can't believe we are serious about defense, serious about protecting ourselves and others, unless we get the number backup. i'm very pleased to see that the trump team is going to move in that direction. but as you said, you've got to square that with what is going to happen to the long-term deficit. the national debt to gdp has doubled in the last decade. even without these increases in defense, it is projected to keep rising. i think there is no choice but to slow the growth of some of the major entitlement programs, particularly the health programs and social security. david: but we know that that is

not a particularly popular thing. donald trump himself has said that he really does not want to cut into entitlements. we had steve mnuchin go on tv over the weekend and say that they are not going to be talking about entitlements thus far. are they making a mistake? dr. feldstein: they are making a mistake if they mean they are never going to talk about it. the key thing is looking further ahead, they will work with the congress, as president reagan did, to slow the growth of social security. currentut anybody's benefits. not to cut the benefits of people getting close to retirement, but over the longer term, to slow the growth of those benefits, so that the program can continue without a very big tax hike. jonathan: at this point, there is an argument that has existed for decades that the deficit is only a problem so long as the bond market would be unwilling to fund it. if the bond market is willing to fund the deficit -- and it has

been in a big way -- do you think we get to a position anytime soon with the bond market is unwilling to fund the budget deficit within the united states? dr. feldstein: of course that depends on what the fed does. the fed has been a big buyer of those bonds. i think that the long end of the curve, if the fed is not in their continuing to buy at the long end or if it starts to lighten up its holdings of long-term bonds, we will see the long-term rates return to a more normal level. david: one of the big issues, martin, that has been discussed is tax reform. does that have to be revenue neutral given the concerns about the deficit? dr. feldstein: i would like to see it be revenue neutral and i think that is the view that the house republicans have as they have developed their plans. jonathan: professor, you are sticking with us. martin feldstein joining us as we discussed the adjustment tax.

he was named morningstar's fund manager tax of the year. david herro. from new york city, this is how the stage is set monday morning. 11 straight record closes on the dow. this morning, relative calm. the marginal move to the upside in london and in frankfurt. we are up by 0.14 percent. you are watching bloomberg.

emma: this is "bloomberg daybreak." coming up in the next hour, harris associates david herro on

where he is finding opportunity. alix: welcome to "bloomberg daybreak." will become the economic advisers head. who better to talk about that than professor martin feldstein? is he the right man for the job? dr. feldstein: first, it is important that there be somebody in the job. cabinet has not filled the council of economic advisers. kevin is a good economist. economics,ofessor of he has done a lot of research on important issues that are relevant to what the administration was going to be doing. he will be a very good appointment if he is the man they choose. made a lot of hay has been

about president trump and how he looks at economic data, including looking at different ways to look at the trade deficit. does it help them look at the data through his eyes or are we going to see the dichotomy between the alternative economic facts and the facts? dr. feldstein: it is very important for the president to have an economist that reports directly to the president and presidentat the cea does. he reports directly to the president and will help explain some of the complicated data that comes out day by day. i think it will be a very useful thing to have kevin in that job. alix: a near and dear thing to your heart, marty, the new york fed issuing a warning about proposed trump's border adjustment tax. if the u.s. dollar does not appreciate by the full amount of the tax, we argue that the

effect will be to lower both u.s. imports and exports in the short to medium run. you disagree. in an op-ed in "the wall street journal, code you said that the border tax adjustment has been under siege by critics who misunderstand the effects. but it would raise over $1 trillion over the next decade from foreign exporters and the revenue was enough to finance the corporate tax. are you taking on the new york fed? dr. feldstein: you got it just right. this is the most misunderstood tax proposal i've ever seen. people seem to think that it is going to raise the prices to consumers. not true. that it is going to lower profits of american businesses. not true. as you said, what it will really about $1 trillion

over 10 years, basically enough to make it possible to have the big corporate tax cuts that the administration and the congress are talking about. without the border tax adjustment, that would mean $1 trillion of additional national debt and that would be a mistake. it is important for congress and the administration to get together on this. , the new i understand york fed had two things to say. there is no immediate adjustment in the price of the inputs coming in. insofar as there is an increase in the price of the united states, the competitors will also increase the price as a practical matter. are they wrong? i think they are wrong in thinking there is not going to be an adjustment in the prices. even those who are currently pricing products in dollars

will, if they see the border tax adjustment and acted, will want to change those, otherwise they will be priced out of demand. i think we are going to see the kinds of adjustment that i and most economists expect. alix: but the issue is also retaliation. if you get the retaliation come you don't get the prolonged 20% rally on the dollar. dr. feldstein: i think you do get that change in the value of the dollar. otherwise, as a result of the border tax adjustment, we would see an ineffective increase in the tax on -- and effective increase in the tax on imports. but that is not the purpose of the border tax adjustment. the purpose of the border tax adjustment is plain and simple, to raise a lot of revenue. that revenue does not come from american taxpayers. what it comes from is the fact that foreigners selling to the u.s., foreign companies selling will be getting

dollars that appreciated and therefore less in the way of your rose or yen or chinese yuan .- euros or yen or chinese yuan foreigners would bear the tax. alix: sticking to it, professor. i like a man of conviction. [laughter] alix: good to see you. watch the sideline. interact with us daily. you can even send us messages during the show. this is bloomberg. ♪

david: this is bloomberg. i'm david westin. at the top of the trump trade goal is renegotiating nafta. michael mckee sat down with mexico. , this is not the

only thing you have to look at. you have to look at the current account as an economist. there are many other areas of the country when you engage internationally. first of all, you should not be worried about this trade deficit. you should be worried about your overall integration into the global economy. trade the world does not in goods, we trade in production processes. in that way, you need to have deficits to countries because that supports offering other regions in the world. , you have tohand look at the balances. the strength of the u.s. economy is in patents, trademarks, there are advantages for the u.s. economy. we pay for patents, trademarks,

financial services. now, if you add the cities on the border and very important cities, that counts for $30 billion. it is not registering as trade accounts. there is nothing to worry about about the whole trade balance. have trump administration officials told you what they want in a renegotiation? basically, the ability for the administration to talk to foreign officials is regulated by very strong laws. i have a chance to visit the white house and i have a meeting with the new chief of trade advisory. by following up with the hearings, you get the sense that there is a way where we can find

a landing pad. how to strengthen regional confidence in north america and to bring back some of the investment we let go in the past to other regions of the world. i think there is a way to find a very good agreement that will be a win-win for the two countries in nafta. giving: you mentioned donald trump some political victories to be able to sell back in the united date. can you be -- give an example of what that might be? get there are rules of benefiting kind of from special treatment in tariffs, that strengthens the rules. createdo so, you incentives for new investments in north america, which means new jobs for americans. even if a dollar comes back to mexico, by itself, we reduce the u.s. deficit.

mexicans, we have a much higher to consume -- propensity to consume u.s. goods than any other country in the world. we have 10 times more propensity to consume u.s. goods than china. for every dollar we export, 40 cents of american content. michael: as far as mexico is concerned, does it have to be a three-way negotiation over nafta or mexico except bilateral treaties separately with the u.s. and canada? >> when you are talking about ,rade, it was well understood visiting the minister in toronto , we had a good bilateral meeting. she posted her tweet, nafta is a trilateral agreement. losing theot risk integration we are doing today in north america. michael: we talked about with

the u.s. might want. what does mexico want? >> my president gave his mandate for this new dialogue to the u.s. there are too many things involved. has to this dialogue adjust many items. david: mike mckee joins us. i said he was the finance minister. he is actually minister of the economy. terrific interview. there is a real shift in mexico's attitudes toward negotiations of nafta. michael: right after the election, they were very scared, they are very dependent on the u.s. 80% of their exports go to the united states. the fear is that the economy could collapse. now they have rethought it. maybe they will have mature voices in the white house. turn our like we can

economy and little more away from the united states, a little more toward other export destinations in south america and we can make this work. david: is that true or is that brave talk? we had a dominant trade partner. michael: there is truth, but also some bluster. they feel the national dignity has been insulted by the president and they don't have any other choice but to have a plan b. they've got to have a what to do figured out if it does not work out with the u.s. plan b is to expand trade to south america and maybe look to china and the asia-pacific area. david: what would it do to the mexican people if there was a real rupture, it's nafta went away? michael: in the short run, it would be a real problem, especially in the north. the issue is what do you do over the longer term? is expand their opportunities, don't just look at the u.s. anymore. david: one of the going to start

negotiating? michael: probably not to late spring or early summer. we don't have u.s. negotiators in place. wilbur ross is set to be voted on today. alix: ok, so what is not over, basically. thanks so much, mike. coming up on the next hour of on where," david herro he is finding opportunity within the stock market. and hourhere we trade and a half before the open. futures on a softer foot. dax relativelye flat on the session. much more coming up. ♪

alix: it is an 11th consecutive record close on the dow. president trump cheers the gains

are coming. tax -- big tex breaks are coming. contact.dent addresses happy monday to everybody. i'm alix steel. here is where we stand in the markets. futures are softer on the morning. we had the dow closing for an 11th straight record high, the first time we have seen that kind of street in 30 years. little bitope a softer. the dollar. despite reports that scotland would not be initiating another referendum on u.k. membership. the two-year bund yield running a little bit higher. still -93 basis points. a little bit stronger dollar arsus the yen and gold on

softer foot. not a lot of fear reflected in the market this morning. david: we are all eagerly awaiting to hear what president donald trump has to say tomorrow night. kevin has made his way over to the white house. give us a preview for tomorrow night. kevin: i spoke with one senior white house official who told me that tomorrow president trump will be out lighting again in that joint address -- outlining again in that joy -- joint address to congress's budget plan. this budget proposal will include budget cuts to the state , to the epa, but also an increase in spending for the military. policymakersnd looking for the white house to put forth specific.

the white house says they will get specific. david: just picking up on the couple you mentioned, it is all fine and good, particularly to the base of the republican party to say they're going to cut the epa and the state department. there is a practical matter. the portion of the u.s. budget devoted to defense dwarfs everything else. how much can you cut the epa and the states to make up for the defense budget? kevin: the white house will face questions from the tea party faction of the republican party. groups,y organizational including groups of americans for prosperity are already organizing ways in order to combat what they view as reckless government spending, potentially from even this republican administration. david: that is from their own party. we keep hearing about obamacare, they want to repeal and replace

obamacare. where does that stand? kevin: later today, president trump will meet with the ceo's and top officials from groups like blue cross blue shield, as well as some other groups. they are going to be looking for how exactly president trump and where he will fall in terms of legislation to repeal parts of the accord a bull -- affordable care act. there is that republican policy does you going on in congress -- .ispute in congress also, the governors are now involved. later today, president trump will be meeting with republican governors, many of which you are in town for the republican governors conference happening this weekend, as well as today. they are concerned about cuts to medicaid. fractions -- factions clearly on display here.

alix: joining us on the market reaction, chief market strategist at ab, and the director of global economics at city research. if we get the campaigner donald trump tomorrow instead of the president, what is that going to mean for the markets on wednesday morning? markets are always driven by surprise. markets have started to anticipate stronger growth. election,the trump there was next to boost about bringing on stronger growth. the promises have remixed steadfast, the detailed seven lacking. needss point, the market details to get another boost. alix: a selloff in stocks or a cause? >> a pause. alix: then we have the hard data versus the uncertainty.

i've charter the global economic uncertainty and that, that it -- index, that is the white line. how long can this make sense to you when there is so much political uncertainty? >> as you said, pretty much as long as the uncertainty may last. we are getting a sense that uncertainty is not holding back activity as much as we feared. -- don't get do actively some discouragement, that the think sentiment data will start feeding into some of the macro outcomes. governing is a matter of choices. thus far, the new administration has not had to make many difficult choices. the time is rapidly approaching.

will they react favorably? >> i think we certainly have a fair amount of good news. falling of been late. a fair amount of the good news has been priced. we have not had that much detail. when we don't have much detail, markets tend to be somewhat skeptical. i think there is still room for the administration to provide reassurance that we will see significant action overtime in the area of deregulation and tax reform. david: how do you square the equity and bond market right now? we have record after record after record. the bond market went up and yields, but it is now off some. how do you square those going in different directions? >> u.s. yields are among the highest in the world. put too much

emphasis on the fact that you had a little bit of a trade-off. it is associated with uncertainty and the fact that u.s. yields are high. we have seen utilities taking off. we have had record highs, but it has been at the expense of that -- certain sectors. >> one of the most important thing since the beginning of the year is that what the rest of the world continues to see improving earnings revisions, improving expectations of earnings growth, in the u.s., you have seen them come down in february. that has driven the pause in the reflation date death rate. mnuchin said 3% growth won't happen until 2018 and there is nothing the administration can do about short-term growth. be 2.4odel is going to

percent growth. talk us through the potential tax reform and growth. treasuryk that the secretary is very right. all that can do is boost confidence right now, though that can have a big impact. i do think there is an element of reassurance that can boost growth will but the expectation should be that it is going to take a while before the measures kick in. i generally think we will be around the 2% growth trajectory with a pick up toward the end of the year and into 2018. with the measures we can expect. david: let's talk about trade for a moment. what are the risks that the president could say something that might scare people on trade? i do think that is probably the main risk we watch out for

in the speech and in the weeks after. however serial our trade relationships -- how adversarial are the trade relationships going to be? room for theere is administration to worry people this week, but what is going to , whath more important will they actually do in the next few months to start the agenda of redressing developments on international trade over the last few decades. alix: pairing this altogether, what is your strongest [laughter] u.s. conviction trade? >> in the u.s., the cyclicals will do well. financial, energy, industrials could do well. as we move into the latter part of the year, i would think they would trade up. onid: coming up, david herro

where he is finding opportunity. later, democratic senator dick durbin. this is bloomberg. ♪

deutsche bank has cut its bonus pool by almost 80%. the cut will affect about a quarter of deutsche bank's 100,000 workers. the bank is trying to recover from legal expenses that wiped out profits and eroded capital levels. in detroit, a federal judge will consider takata's settlement.

takata is scheduled to enter a guilty plea for falsifying data and reports filed to carmakers. general motors has intensified the most hotly contested segment market..s. they boosted incentives on pickup trucks after rivals gain ground. discounts averaged about $7,000. both ford and feel chrysler have dialed back incentives. that is your bloomberg business flash. alix: thank you so much. political influence running high in european markets. french bonds gaining. the pounds sinking to a new low. you had reports of a space -- potential scottish exit affecting the pound. the times did report that we

could see another potential scottish referendum and then that wasndicated that not happening. markets not paying attention. why is that? so, i think all the u.k., there are many reasons. i think the most important one is the one of late. i would not say the scottish referendum is the biggest mover. alix: as long as you have a conviction trade, that is all you need and then you surpass the risk. why are we not selling off more on the french bonds? >> i think part of it is the polls are still indicating that marine le pen has a very low chance of winning and, in much of europe, you are seeing strong economic growth. as a result, until you have certainty that there is a hugely disruptive political event, the

net for movement for these european equities is up. david: do you agree that the economy is strengthening in europe to whether the political storms? >> that is the view the economy is taking. get to the closer we french election in particular, which could be a critical event, i think equity markets will find it difficult to shake off growth data inif the eurozone remains encouraging. david: is that because the fx market is more sensitive to global risk or because it is more sensitive to positioning rather than fundamentals? >> i think it might be a bit of both. i would not say risk in general, but macro risk. i would point out rate markets in this case. a lot of the capital will be in the eurozone going from france to germany. fx is not the single biggest

indicator for the french and european worries overall. it certainly seems to be the case that we are watching macro closely than we are on the equities side in europe right now. alix: give me her strongest conviction trade. one do you go long france? shortng into may you go u.s. markets come along european markets. better growth prospects, which are not yet discounted in europe . valuation is more attractive. divergent monetary policy that tends to favor euro over the u.s.. given i expectations for the u.s., you are much more prone to disappointment. higher labor slack in europe gives you more room for growth. for the u.s. to meet the 3% are going to need to see significant increase in labor participation, which is not yet happening. there are way too many hurdles for the u.s. market to do much

better. there are lower hurdles for europe. david: alix: if that scenario plays out -- >> that would be the same trade, yes. alix: do you feel it we will have the ecb taper debate into the back cap of the year? >> i certainly think if we do get the expected outcome in the french election, there is plenty of reason to become optimistic about europe, cyclically on monetary policy, as well. the event can make a strong impact, as well. in may well be that france dodges a bullet, but is there any reason to believe that there is fundamental reform coming, fiscal reform? >> no. momentumee any reform in europe at this stage. there were a number of things done over the last few years.

is that we are seeing the cyclical recovery. an element of a cyclical recovery. that is a diplomatic way of putting it. [laughter] jonathan: my question would be sell french bonds, but at what point? you finally get fiscal reforms, you finally get real growth. real prospects for inflation driven by a tighter labor market. it isgermany, i think going to be happening this year, given that that is where the labor market is tightest. france is really tricky. that will depend on the outcome. , you couldcron potentially see stronger wage growth by 2018 and the bonds would start to as they that. the ecb could be in petition -- position to start to tighten sometime later this year. david: thank you both very much

for being with us today. on where, david herro he is finding opportunity. this is bloomberg. ♪

david: republicans in congress and the president said they want to tackle health care before anything else in the new administration, but it is turning out to be a bit more difficult than they first thought. here now is the man at the center of the drafting of the affordable care act. john served as the chief of staff when obamacare became law. welcome to the program. >> thanks for having me. david: let's go through some of the details of what is likely to happen. what we are hearing from the hill is that block grants --

right? and doing away with a median age in some of the subsidies. what would be the effect? let's put up a chart showing the percentage of the americans who do not have health care. it plummets. why 3 million americans have got health insurance -- 23 million got healthave insurance that they did not have before. what is the consequence of putting those people off health insurance? >> for those individuals, it could be dire. it could mean losing access to care when you are at your sickest. for the economy and for health care providers, it could also be quite significant. before the affordable care act, many of the care when the companies.o after the passage of the affordable care act, those with the lowest incomes were able to provide payment to the hospitals

that were treating them. those hospitals will once again be facing uncompensated care. david: my understanding is that roughly half the people who went on to insurance were because of medicaid. >> that's correct, that accounted for half the people who went on. david: a white house can yourson was asked, guarantee no one will lose their coverage? she declined. that is their goal, but they would not guarantee that. what are the consequences if there are a lot of people that go off insurance? >> they could be very significant. the affordable care act went through a period where it was not terribly popular. there were adjustments before making to the program, but i think now that people have health coverage, they don't want it taken away.

in particular, now that many people have coverage that they like and are able to depend on the fact that they can have access to coverage and feeble to afford it at the same time is very significant to them. david: you were there for the drafting of the aca, obamacare so-called. you were there when it got past. you agreed that it was not perfect. there were things you could do to improve it. had a guest on earlier who said, i don't think they will be as radical as they have said, but there are reforms they can make. toyou were to advise them fix it, what would you propose? >> i think there are really two areas that could use some improvement. one is stabilizing the insurance market. , in some ways, some markets are working very well. people are able to get insurance

that is very affordable for them. one of the features of the affordable care act is to provide stabilization payments for the markets to ensure that premiums did not spike. those have been held back by congress. clearly, funding those stabilization programs would make the marketplaces function much better. david: but that is going to cost money. >> that is going to cost money, but it is already money allocated under the affordable care act. it is just going through with that. the other thing that can be done that is significant is that there are a lot of measures in the affordable care act to make the care delivered more efficiently. to make the care better coordinated. these are areas where republicans and democrats agree. place where you can get more buy-in from democrats than radically changing medicaid. is this c4 for results

rather than fee for services? >> that's exactly right. that is coordinating between providers, so that there is a more seamless process for taking care of patients. david: thank you so much. jonathan: coming up on the program, an important conversation. picking up the pieces one mining stocks were getting battered. david herro joins us coming up shortly. later on, andrew mackenzie, the chief executive on metals and mining. from new york, this is bloomberg. ♪

jonathan: this is bloomberg daybreak. i'm jonathan ferro. let's get a check of the markets. futures pretty calm at the moment. and marginal move to the downside. negative about 0.1%.

, afterwitch up the board three days of gains for treasuries, yields rising this morning. treasuries lower. the data breaks across the bloomberg terminal. alix: the durable goods are really killing it. you did have december revised lower down to -0.8%. in terms of capital goods orders, nondefense backing up aircraft. disappointing, down 0.4%. that is a very interesting fact. orders for capital goods rose for three months in a row, but now off by 0.4%. the durable goods number had been hammered over the last two months, but now making up some of the lost ground, up 1.8%. it is kind of a mixed bag. if you want to read into it in a negative way, you can. if you want to read into it positively, you can.

david: the president says he is going to spend a lot more on those aircraft carriers. alix: you look at the market reaction. jonathan: makes the data, read it as you want. treasuries pretty much dead flat. transportation, 0.2%. a significant upward revision to the previous month of 0.9% from 0.5%. if you are looking for conviction in the bond market out there, you are going to struggle to find it from the data this morning. conviction would mean significant upside to prices across the board and we have not been getting that in the hard data like goods. alix: is this just a lot of short covering? are we seeing a capitulation short? what is that going to look like? jonathan: i wonder what the differences. if you are bearish coming into this year, essentially you come into the year with hope and optimism, you thought we were

going to get this big stimulus package, you are light on detail , and you don't know what impact it is going to have. the bears are looking for some really hard data and a significant upward surprise. perhaps one of the most important pieces of data, how much are companies allowing in? alix: i just can't believe if there is an enormous shift in how you are viewing the bond market -- if you are going to see a real washout, i can't imagine it is a 2.3%. is it more about the fed? is that going to be more important? jonathan: i will say there is a big difference between someone that runs the executive office of the company and someone who runs a bond fund. if you have a bearish bond fund manager, is looking for the data to validate. he thinks inflation is going to come, yields are going to rise

fine. the hope and optimism, for them , their pointade on is to invest in. m putting thehe trade on. david: i think that is exactly right. they are feeling optimistic, but they are not writing checks. jonathan: that is what we heard in the fed meeting last week. alix: most of them were in a wait-and-see attitude. they are not doing it yet. therein lies the rub. jonathan: a slight upward revision. a slight surprise to that number. if you look at durable x transportation, -0.2%. that is the upward revision i was talking about. if we look atread the preliminary read for the month of january. capital goods order down. offset by an upward revision to the previous month.

this one is so mixed it is unbelievable. that is the story in the data. let's get you up to speed on headlines. mexico is warning it will cut off renegotiations on nafta if the u.s. imposes new tariffs or quarters. the country's economy minister tells bloomberg the moment there cars, hetariff put on is going to quit the bargaining table. thatdent trump has said nafta is responsible for a trade imbalance that favors mexico and he has discussed taxing imports. north korea has executed five senior sigourney desk security officials because of a false reports that enraged kim jong un. took power in 2011 and has reportedly killed and large number of top north korean officials. in the u.s., there was a big oops moment at the oscars. the winner for the best picture

was announced as "la la land." only it wasn't. there were given the wrong envelope. by the time the mistake was discovered and corrected, the "la la land" team was making their speeches. "moonlight" was the real winner. price waterhouse coopers is investigating. this is bloomberg. alix: someone got a real nasty phone call about that last night. [laughter] jonathan: we were talking about it this morning. i would not have been talking about it otherwise because i really don't care. david: you know the academy, they do not have a sense of humor. [laughter] jonathan: lloyds does not have a sense of humor. or pwc. alix: here are individual movers we are watching. london stock exchange and deutsche. london stock exchange says the merger is unlikely because it does not want to sell its electronic government bond trading program. the eu officials made that a

condition. tesla getting hit in the premarket. downgrading the cell neutral. ,oncerns about model 3 execution, and cash needs. warren buffett is fine apple aggressively. over 133 million shares. david: president trump gains the white house by promising a progrowth agenda that would create jobs and improve the lot of the average worker, especially in states like wisconsin, michigan, and ohio. with us now is someone who has expressed hope about his ability to do just that. david herro is at harris associates, which has nearly $100 billion under management. welcome back to the program, david. my question to you really is what does donald trump have to deliver to that core audience, his core voters to say, you've got more money in your paycheck, you have more money in your paycheck, i made

your life better? david h.: i think what he needs to do is exemplify with programs the typer actions that of things necessary, policies necessary for there to the growth will actually happen. he needs to go into a little bit more detail on some of the things is going to do. we've talked about lower taxes and tax reform. i think getting into some of the specifics, some of the details will help. david: when he gives that's -- that it just to the joint sessions of congress, what do you want to hear from him? david h.: i want to hear some of the specifics. of whathe few negatives he has been talking about is this whole notion of some sort of trade restrictions and import taxes. i'm a believer that the free movement of goods, capital, and services is good for the global economy and it is good for the u.s. economy.

hopefully, he will acknowledge some of this and maybe back off some of that trade rhetoric. on the other end, he should hit the accelerator on some of the deregulation and tax reform because our tax system is a max, , theorporate -- the mass corporate tax rate is eisen the world. we need policies that enable business people and risktakers to go for it and this is what we lack for the last eight years. it has been a sin to make money over the last eight years and we need to say that making money and growing and employing people and investing, these are all good things. david: how much do you want to hear about obama care? are you concerned that repeal/replace could get in the way of some of the things you are talking about? david h.: they are definitely related if you hear the noise from washington. i think they have to work hand-in-hand. where's the plan, where's the plan? you know what?

if they are carefully looking at this and analyzing the impact, they should be taking their time. there is no need to rush. you do need to make progress, you do need to move the ball forward, but there is no reason to throw a bomb right now. of the optimism around the situation with the white house, the trump administration has been priced into financials in the united states in a big way. the prospective regulation being cut. your biggest position on one of them is in credit suisse. have you off that the optimism in u.s. financials with the pessimism that still exists in european financials? david h.: yes, i think the pessimism in european financials is unfounded. it is unfounded. the valuations are too low. things are starting to turn from an economic growth perspective. we are seeing it pickup and lending growth. the financial businesses in which we are mentioned all i

rain of costs.od the income is taking up. they are selling your single-digit and price-to-earnings ratios with decent dividends. the european financial sector is one of the more undervalued sectors globally when you look today. even in the u.s., you could find certain financials that have had quite a run. but at citigroup in particular. there is still room in financials and i think in european financials in particular. the fundamentals are there, valuations are playing a role. for the value investor, this is what we look for. jonathan: i know that is what you look for, but i wonder if your faith was shaken when you hear reports breaking a couple of months ago. what were your thoughts? david h.: they are looking at making a big acquisition, big acquisitions are not easy.

you have to look at the price you are paying, you have to integrate. all of the distractions that come with it. we were hoping that management would carefully look at it. if it was a huge deal to be made in terms of the ability to create more shareholder value, maybe they should have done it. in fact the difficulties and risks are too high, they should back away. to me, this is a positive indication that management took a look at it and realized that this was not right for them, that certainly the cost exceeded the benefits and then backed away from the deal. ultimately, that was a good sign of what management did. they did their job, they looked at it, they objectively determined that this was not the deal for them. alix: david, you are the 12 largest holder of citigroup. that stock is at a huge run since the election, of 23%. how much of that is based on regulatory reform of the trump

administration? david h.: i think some of it definitely is. had biglatory issues headwinds in the financial sector. a citigroup, you also have slow evolutionary improvement and restructuring of the business, refocusing of the business. you still have very depressed valuations for citigroup and you have an improving u.s. economy, better for lending growth, better for lower-level losses, a better regulatory environment. then you have the yield curve. there are still a lot of good things in the future for citigroup. alix: does that mean you are adding to your position right now? david h.: we really never talk about what we are doing currently, but it is still a stock with you as attractively -- we view as attractively priced. david: citigroup is still exposed cross-border.

are you concerned that there may be difficulties in store for them because of trade? again, anything that inhibits the free movement of people, capital, goods and services. anigroup does have international kind of flavor to its franchise. that may be why the trade is that it fairly healthy discount. talk about one of your other great calls, glencore. that has had a killer run and you are one of the fourth-largest shareholders. last year, we were talking about whether they would be will to pay on their debt. can you tell me if it is properly valued? david h.: again, this is one of our top two or three positions despite that ron. n. ru

it goes to show you how oversold the stock was. it is a very good company that made a mistake a few years ago, a little too much leverage going into the low-end of the commodity cycle. 40% is in the trading business that is almost annuity-like with a decent growth rate, by the way. there are four or five main commodities that have bounced. the largest has not bounced all that much. the largest commodity is copper. that is up, but it is not anywhere near iron ore or some of these other things. this is what we are so excited about. copper is still below it read we think it is in normal price. ,he top two or three others they are in good cost positions in the cost curve, demand is holding up, especially for coal. we still think his company is selling at a significant -- this company is selling at a terrific

value. the ceo of the company is someone you have stood by and supported when the company went to -- through difficult times. upcoming about the time. is glencore ready to deliver in the dividend in 2017 or is that too soon? david h.: if commodity prices continue where they are today, i think they will generate lots and lots of free cash. with leverage levels exactly where they should be, they should be able to give more back to the shareholders. in terms of a dividend or whatever way is most appropriate. i think if you look at where have done a, they great job, this has been a textbook turnaround. it is one of the things that was puzzling to me in september 2015 when they announced the balance sheet repair, the market did not seem to believe it.

2016, january and february, there was a huge buying opportunity and we were already three or four months beyond the balance sheet restructuring program and the stock was still heading down and we thought it should be going up. there is a lot of trust that we haven't management. ivan is the biggest shareholder of the company. there is very good alignment between management and shareholders. we would concur with his thoughts. jonathan: just quickly, you talked about glencore and a textbook type turnaround. do you see a glencore authentec opportunity that exists -- glencore type opportunity that exists today? if so, where? david h.: i think there is a lot less dispersion. you saw a huge gap in valuations between industrials, consumer

discretionary and financials, and the safety stocks. bit gap has closed a little , but i still think european areacials is probably the around the globe that is yet to be property revalued -- properly revalued. .ou mentioned credit suisse this is still 60%-70% off where it was. they have done a lot of work to make themselves a better company. companies like credit suisse. some of the key european banks like lloyd's. even some of the insurance , or yous like allianz see they have so much excess capital, they are still selling at really low valuation. all a part of this whole euro phobia. last year with the u.k. referendum and this year with

the french and german elections, people get so obsessed with these elections, they just lose focus on companies' ability to generate cash regardless of the outcome of elections. alix: do you want it protecting yourself? the french election is a risk. do you hedge your bets in any way? david h.: no, what we do is we really try to measure how the impact of a french election would have on her company cash flow streams. a lot of the companies based in france, most of the business is outside of france. businesses. huge they have bank of the west in the united states. perhaps what a lot of this instability does cause is , which isn the euro where you take that hit upfront. you take a currency hit.

then you get an earnings enhancement from the foreign-based earnings if they have a weak local currency. the is one of the ways volatility manifests itself, which is in a week and rope. if currencies are way overvalued , we tend to hedge. generally speaking, a bottom-up long-term value investors, we try to identify companies that are out of favor and that reason is often these political events. we try to take advantage of what these markets give us in terms of low valuation and right through the cycle. sometimes, you have to sweat a little bit. if you're disciplined, you will make a lot of money for your shareholders. alix: great to get your perspective. david herro, cio of international equities at harris.

let's go to hollywood, florida with a special guest. >> thanks, very much. i'm joined by the vhp chief executive officer at the metals and mining conference. andrew, thank you for making time for us today. i want to start with what is most front of mind for markets these days regarding your company, which is the state of the events in escondido with the strike going on. how far apart are the two sides at this point? what are the next developments you would hope to see? >> i would rather not say too much. a lot of these negotiations are quite confidential. we have local people who will try to keep the media of today as we think is appropriate. the good news is that we are starting to come together in some 40 of a negotiation. let's wait and see and others will update you on the progress.

>> some of the issues that are on the table are ones that other minors are experiencing -- miners are experiencing, as well. forecastmore guest -- the market returning to a deficit in 2020. should workers not be entitled to see that reflected in their pay? >> the workforce is already extremely well-paid. i would be pretty certain that whatever the outcome of the negotiations, they will remain reasonably high. they get a lot of the benefits from being one of the most successful copper mines. what we are asking them to do is repair themselves. as things get tougher in the years to come, they still are very investable.

jobs in antee appropriate form. is clearly a business of ups and downs. one of the pieces of country risk you may have to look at comes from the united states. you have been quite vocal about change inrn that the administration could have an impact on global growth. what do you see the impact as on bhp? >> i think it is two-sided. benefit foride, the business confidence that comes from the trump administration, based on what is promised, his desire to cut through some of the politics to get more investment going on in infrastructure, his general commitment to get growth going in the united states can only be good for us. we don't sell a lot of product .n the united states

on the other hand, we are very anxious about the possibility that instead of that being the -- instead of there being good leadership in the united states, there could be bad leadership. , we can seeof that broader economic growth. 3%.-term economic growth is if we are going to continue on the journey, we have to get that to 4%. that won't happen under a protectionist regime. some good, but some pretty bloody awful. >> you are obviously quite diversified. one of your newest big investments is in mexico with the development of the oil is forecast at its at least $10 billion. how much can you cut that back by? >> i can't comment on that,

danielle. we have just reached final agreement with the mexican government. friday andhere on then we will look at how we can use our best practice to see how we can make that more efficient. >> are you relatively confident there will be cuts that can be made? >> we're going to try. have efforts to shrink your portfolio been completed or you just to you still have marginal smaller assets that would make sense to sell right now? >> our portfolio is focusing on tier one bodies and oil and gas in the commodities we like. small number of

operations at the margin. i won't comment on individual conclude some did investments worth about $700 million in the half year we did read -- we just reported. we are always open to business. in some cases, people come to us. i would not like to comment beyond that. coal -- >> iron ore and coal are less likely to receive investment than other areas in the coming year. is that a clue to your priorities of the company going forward? >> broadly. we has said that we would prefer and we see better opportunities to invest going forward. partly because we have those opportunities. partly because there is an

actual decline. that production has to be replaced, as well as catering toward demand. iron is about the same. >> we are going to leave it there. andrew mackenzie, thank you very much. back to you in new york. jonathan: great work. coming up on the program, we count down to the opening bell in new york city. us.n harris will be joining later, democratic senator dick durbin on what we can expect from president trump's bestie to congress tomorrow. this is bloomberg. ♪

♪ >> the president cheers on markets and says big tax and regulation cuts are coming.

u.s. starting the week once again at record highs. la la land, treasury yields grinding down towards lows. investors bracing for a week of speeches. the president addresses congress. chair yellen gets a final word in the march meeting. stephen harris will be joining this program to reveal how much is on the line when the president addresses congress. a warm welcome to "bloomberg did ."eak -- daybreak counting down to the opening bell, state of markets like this, held hostage by the politics in many places. the future goes nowhere, the calm before the speeches in the united states. equities in europe, a similar tone. switching up the board, the bond market, three days of gains followed up by a day of losses with yields up to date -- two basis points.

a mixed the session for the dollar, stronger against the yen, weaker against the euro as we approach a dollar six cents on the single currency. let's drill down into the movers for you as we count down to the open. alix: doubling down on his bets on apple, upping his position to 100 33 million shares from 61 million at the end of the year. berkshire now owns about 2.5 percent of apple. lease,flipside, longer no backup -- monday lays -- mondelez. shortly before the election, airlines were big buys for the election as well. 9.3 billion dollars there. retail getting hit in the market. under armor, down by one percent, getting a price reduction over more than $16 per share. the company saying that it has matured past its high growth stage, hurting that stock. jcpenney, relatively flat,

despite a price cut, i just set it, up by 1%. there is sales and margin risk there. lots of retail as we head into the open, david. david: the white house has a full day planned before the speech to congress. to take us through what we expect, kevin cirilli. let's start with health care. this used to be a consensus, but they will have to sort it out before they get to anything else . what is going on with health in just under an hour, the governors will be making their way to the white house to begin talking about a health care plan. several republican governors are concerned about cuts to medicaid, they are against that because there are competing policy proposals in the u.s. congress from a more conservative member, like senator rand paul, as well as susan collins, who is advocating for a more moderate approach. all of that is the back story for a meeting later today with the top officials at the health

care insurance companies, who will also be meeting with president trump. people from humana, as well as blue cross blue shield, beginning to lay the groundwork ahead of president trump's joint address to congress tomorrow night. it strikes me that all of us, business and the financial markets, are expecting a lot of specificity -- specificity. are we setting ourselves up for disappointment? you thatcan tell they're are hoping for more policy specifics the on the alleged timetable that we have seen emerging over the last couple of weeks. health care will be their first priority, followed by tax reform and the regulatory policy. now, he is going to be meeting president trump with the house speaker, paul ryan, as well as senate majority leader mitch mcconnell, late this afternoon. he is also expected to release a two-page budgetary roadmap ahead

of, again, that speech tomorrow night. we are anticipating that he is cuts to advocate for the environmental protection agency, as well as the state department, and increase in military spending. david: thank you, kevin. that's really hopeful. jonathan question mark jonathan: -- jonathan question mark jonathan: -- jonathan? ethan, i want to begin with you. to what extent is the state of affairs that some market participants and investors are looking ahead to a speech from the president as if it was a keynote address from the chair of the federal reserve? what does that tell you? ethan: well, it tells you that the world is changing. for six years the fed was the only game in town. any little word out of the chairman got the markets excited. but now fiscal policy has taken over as the dominant risk factor driving growth. i don't think the fed is going to do anything that interesting in the next year, but what we

could get out of fiscal policy in washington, particularly on tax reform, is extremely interesting, which is what the markets are correctly focused on. the federal reserve, unlikely to lose its patients anytime soon, lori. the equity market seems to be giving them the benefit of the doubt. enthusiasms a lot of over the triumvirate of policy, whether it be tax reform, regulatory rollback, infrastructure investment. you are already starting to see concern that maybe those things won't happen as quickly as was anticipated in november. you are seeing the trump administration officials talk about 2018 as the timeframe for when those things will take hold. the market really is grappling with where, from here, in the short-term, given that this may take longer. fond markets, saying 2018. maybe it might take longer, forget about it. feel ons ethan harris the time horizon for when this

could impact the economy? i think the skepticism in the bond market is warranted. we're looking at changes in policy that are extremely complex. replacing the affordable care act? that the hugely complicated issue. tax reform is complicated. infrastructure spending creates a big split in the republican party between the deficit hawks and people who want to increase spending. i think a lot of this stuff will get water down along the way and if we do get tax reform, it probably doesn't happen until very late this year, so there should be some questioning going on in the markets right now. alix: headache at some point there is, lori, if you take a look at the best performing sector so far, health care and then utilities. yes, you can make the argument that the next leg of the rally will be different than what we saw after the election, but are you of the mind that perhaps the market is starting to factor in the skeptical end? the: what's happening is market is becoming a bit more

differentiated. it's not just winners and losers based on fed policy, for example. the really is a lot more underlying. energy, for example, you're seeing some policies that are already supported. in the u.s. they are expanding by six straight weeks. it's after a very strong rally and be with think that there would be a little bit of tempering as you start to hit 55 on crude, that becomes a ceiling. does that mean that what we are seeing now is a valuation pause or not a huge reversal of what we have seen in 2016? seeing is of a we are the rotation from sector to sector as the market tries to digest who is the next winner and who is the next loser. each sector very dramatic the changing and their pricing over the last couple of weeks. as you mentioned, who is going to take the lead here is very much of a question. health care, typically, at this point in the cycle is one of the best defensive sectors. the best lead volatility. yet we are seeing more

volatility in biotech, managed health, those are all becoming -- those are all coming to serve as the bull's-eye of obamacare reform. david: overall, the equity market staying up there, new records being set. indistinct into what's going on in the bond market, which reflects what you were talking about, the uncertainty. is that possible? because there are underlying factors like earnings growth supporting this valuation. not that we will have genetic new initiatives, but it's not going to get worse. steady growth with some deregulation. we don't need that much out of the white house. well, i think at the equity market is mainly being bygon -- driven first fundamentals and second, deregulation. the idea that regulatory pressure that had been building over time and then easing is a big factor behind the optimism of equity investors. certainly in the small business world, small business leaders are very optimistic. in a sense, the deregulation story explains why the stock

market continues to rally, even though the bond market is more focused on fiscal policy and is becoming a little bit doubtful about the trump rally. nodding youryou head, lori. do you agree with that basic thesis? it doesn't have to go way, but slowing down will help equities? lori: i agree wholeheartedly. it really the easiest to impact. infrastructure is harder, tax reform is harder, but regulatory relaxation is one of the tools that they can easily use. think about interest rates, that's the other piece of it. while it is true that we are seeing a bit of a rally here, the backdrop in europe is incredibly low. and you have also got a fed that continues to be sort of measured in their policy imperative. march may even be off the table now. final question, for this segment, at least. if i was going to give you a one-off, pick the fed chair speech on friday or the address to congress and the president tomorrow, which one do you want?

ethan: which one do i want to focus on? i actually think they will both the -- jonathan: i know you are an economist, you're not allowed to do that. [laughter] ethan: on the one hand. but on the other hand -- [laughter] i mean, the trump speech, especially what he says about border adjustment is very important. that creates a very big winners and losers in the markets. i'm focused mainly on that. jonathan: six months ago i imagine the answer would have been very, very different. yourn, lori, great to have the program. you are both sticking with us. coming up, senator dick durbin will be joining us around the table for what to expect from the trump speech tomorrow night and the proposed budget. markets, 20 minutes late on the open. the combo for the speeches this week. global equities going pretty much know where. you're watching bloomberg. ♪

♪ alix: well, this week, a big one for the fed. a slew of speakers ending with janet yellen, speaking on friday. kicking it off, you guys, robert kaplan speaking today. tomorrow, james bullard. and in philadelphia, jim harper. stanley fischer speaking on friday as well. ethan harris and lori heine, still with us for morning meeting. lori heinel, still with us. is the fed doing their job by trying to keep margin play? ethan: i think it -- march in play? ethan: i think it is important. there is a good case for the fed to hike at their match meeting.

-- march meeting. the reason that we don't expect the hike is the policy uncertainty in the rest of washington. better to wait until june to see how it plays out. based onhat again, economic fundamentals and things being quiet and the rest of washington, there's a good case for hiking at this meeting. alix: before the break we asked if you would rather get a transcript of trump or yellen, who would you pay? lori: i would pick yellen, i think that is still the most important story this week erie of trump tomorrow, everyone will be anticipating his policy statements and where we are in particular, but i think we are likely to get a lot of clarity out of that speech and the fact that there may be things that he puts out that scare the market of it. -- a bit. how is it going to play and how do we position against that? alix: does a market have veto power over the fed, still? lori: it does in the sense that if there was an extreme event, a replay of early 2016, the fed has already said repeatedly that

they think the risk is on the downside. they have been quite cautious. although they are starting to see more on the upside. if you did have some sort of dramatic impact, i think you would see the fed being influenced by that but barring that i don't think so. david: a percentage like 40% right now in march, i'm aware of never seen a move like that. janet yellen has had the opportunity to talk that up. she hasn't done it yet. what will change her mind for friday? lori: again, we are not thinking that they will move in march either. they have better policy tools if they get right away inflation or sort of upside surprise. but they don't really have a lot theo -- tools, even with most recent kind of moves on the downside. we think she is going to pause. the hasn't been much pocket sentiment from even the most hawkish in the fed. -- david: don't they want to get the interest rate a question mark -- rate up?

lori: they definitely do, but there is a stronger dollar in the forming a policy. jonathan: even if you look -- ethan: i don't think -- jonathan: please, carry on. ethan: i was going to say, i don't think there's any rush year for the fed. pretty muchis at full employment, inflation is higher, but things are moving very slowly. the unappointed rate has been relatively stable in recent months, inflation moving up gradually. we are not going to get into a position where the fed is worried about inflation for two years or three years. the cost of waiting is very low. waiting isvalue of you learn a lot more about what is going to happen in the rest of washington. so, while they want to get rates up and at some point they have to speed up a bit here, i don't think there's any imperative to go in march. jonathan: so, how much do they need to speed up question mark

how much of the inflation data will be flattened by the effect of data that isn't there in a real way by the back of this year? ethan: i think what has them speeding up is that you do get fiscal policy in washington. again, i don't think that happens soon. i think it is more of a twist as an 18 story. -- more of a 2018 story. if we get one third of what is on the table right now in washington with significant stimulus, you will be looking at a 2.5% economy next year and at that point the fed has got to start speeding up. jonathan: the federal reserve, a room full of phd's, boiling it down to go on the bloomberg and it is whether they get the green light north of 50% or not? ethan, what does that say to you? the idea that here is just a body of research that gets boiled down to a market that either says yes or no, can or can't? what does that say to you about leadership? ethan: it just tells me that the destination with these very low probability stories is so high.

there is an obsession about the fed. i mean, is it really the end of the world if the fed hikes 25 basis points? the markets, in a sense, over the years, have become too addicted to the fed, here. fair point. i remember talking but the first rate hike that would throw the markets out of bed. lori, what is your strongest one? lori: the strongest trade right now is still u.s. equities. you are seeing pretty good comps on earnings and we think that will uptick. certainly, there is nervousness about valuation. but we do watch that. as we start to see any kind of tax reform, that could basically be 1% on earnings, which would be meaningful and putting valuations back in line. how does the rate hike influence that call? lori: it is supportive and driving us -- in driving us to be better on a great. jonathan: looking at william dudley in the room, at the table, walking to the bloomberg [laughter] . lori: no, not doing it. jonathan: market says no, short

meeting. will come back. alix: just to wrap it up here, ethan, you see to hikes here. there's an election four days later. ethan: i mean, the simple thing to do is to go in june. when the fed has three dots for this year, what is the simplest half? hike in june, watch things play out. if you feel comfortable, you go in september, then december. it doesn't make sense to immediately speed up. rather, first go to to hikes per your, then hikes for three. i think that's the natural course. alix: so mellow, thank you. [laughter] david: thank you very much to both of you for being here. now, coming up, the first tech ipo crisis of the year, this week. do the numbers support the numbers they are talking about? cory johnson joins us, next. this is bloomberg.

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♪ david: this is bloomberg. i'm david westin. snap inc., the first tech ipo of the year, set to post on wednesday. the management team will continue to pitch the company to investors, but the progress of their business is slowing at the same time. cory johnson joins us now from the san francisco bureau to discuss the numbers behind the business. is there a sense as to whether they are having a little bit of resistance in this roadshow question mark cory: -- roadshow? cory: there is a sense of resistance, it's an amazing product. youngerographic, the user of snap has been important to advertise two. people tend to pick brands at an earlier age, even the sharing generation of the snap users. advertisers want to get to those people. the time that people spend on it, those are the statistics

with the graphic growth, something they are trying to emphasize in this roadshow. the problem is the user growth is slowing. slowing, as you would expect with the law of large numbers, but also dramatically really in whichst six months or so, is a concern to the investors on the roadshow. we have spoken to a few and that is their issue. it is not just that the business is great and that the product is -- i should say it's great, the business is crummy. the product, a lot of people love it. [laughter] david: it loses a lot of money, which you me -- is what you mean, but it ramps up the revenue pretty fast. it hits $1.50, it's going to be real popular. the company has negative gross margins. not operating margins, negative gross margins of for every year of its existence it has lost money at a gross margin level. so, the cost of providing the service has been dramatic.

that has been a big issue for investors as they have looked at this ipo. one of the interesting is that is happening, it looks like mnuchin when you compare the initial filing to the slightly amended s1 filing. adding some numbers. but there is a interesting addition from about two weeks ago or so, whereas concerns are being raised on the negative gross margin issue, they announced a new contract, not with google, which traditionally supplied services, but with amazon. listen to what they said. we have a direct vote from the ipo filing. they go on to say -- we have committed to spend $1 billion over five years. for a money-losing company, the commitment to spending a billion dollars is a serious one, but it is less than they spent with google. they don't mean to say they will spend it only on amazon, but the suggestion being that they will lower the cost of operating as it has been so high for the service that they provide. does that indicate that

they ultimately want to sell to amazon? i don't think so, it is a stock offering with rising costs. what worries me the most, i'm a glass half-empty guy, even for the negatives here. user growth is alarming, but it is really alarming compared to what they's book has done with the instagram feed, when they have the same story. instant ram stories is a pretty blatant ripoff of what snapchat does, but it's going to send a big success and it is combined with a dramatic slowdown and you just and user growth you have storiessnapchat. so, rise, snapchat slowdown, it cannot be taken in isolation and it must be considered in the hive i -- high valuation of that ipo. alix: how important will it be to other tech sectors?

cory: really important. this is a unicorn company with a lot of venture money and early money in this name. it is also, it is a consumer facing ipo. 70% of i.t. spending is spent on enterprise technology. as an early indicator for future ipos. a lot of tech cap these are waiting to see this deal go out. alix: thanks so much, great stuff, cory johnson on snapchat. jonathan: disappointing pushback on the roadshow. "bloombergn daybreak," worldwide, we are treading water with futures flat in europe as well. from new york, you are watching bloomberg. ♪

♪ jonathan:jonathan: from new york city, to our viewers worldwide, this is "bloomberg daybreak." moments away from the opening bell, futures treading water, the calm before the speech,

maybe the speeches, with president trump tomorrow and the fed chair on friday. futures negative, down on the dow by 1/10 of 1% after 11 straight consecutive record closes. [opening bell] jonathan: a streak we haven't seen since the eddie's. 87, i believe. friday closing a fifth straight week of gains. will we get another one? the other asset classes i like this. treasury, blasted with heels up on two basis points on the u.s. 10 year and crude catching a bit , 9/10 of 1%. 20 seconds in, a lot of people shouting this morning. why is everyone getting so it's monday, man, we get excited. think of the s&p in the nasdaq, this feels like a pause. remember, friday, 3:59 p.m., it was in negative territory and then shot up the positive territory in those last 50 seconds of trade. nonetheless, the s&p house five

straight weeks of gains and hasn't seen a kind of thing since march. the nasdaq has had 19 record closes this year. a ahead ofss president trump speaking tomorrow. in individual names, we wanted to highlight defense stocks. lockheed, off by 3/10. general dynamics, too. thatthe weekend we learned president trump wants to seek a sharp boost in defense spending accord -- according to the -- "the new york times," cutting spending to agencies like the epa, where social security and medicare will be left alone. be trickle through would positive, of course, if it comes at reduced prices, but that's a whole different feel, i should say. haslast leg of the rally been very different from the first leg of the rally that we have seen. yes, i'll 11 record closes on the dow, but look at what has happened, utilities have really

led the charge. utilitye line is the index and the blue line is the s&p. just a few weeks ago we saw a divergence where utility started energies andhere materials were the laggards when it came to the dow. what does that performance tell us? a shift in the leaders back to the safety stocks? an oversoldust bounce because they were so hit after the election but a worrisome sign for the health of a rally in the s&p and dow, john question mark -- john? interestingally stuff, and we are joined now by sarah hunt. also around the table, holly ran it -- rennick. on the surface it looks like a disconnect, but underneath in equities, some thing else is happening. what do you make of it? sarah: just talking about utilities, right? going around.g

rethinking where the fed is going to go. if the fed is not going to go in march, utilities are back on the table as something interesting. that's just a rate play. on the anticipation you'll get a rate hike. if it looks like you're not, you see is such a shift. you are seeing a lot of sector rotation in the market. they are pricing a lot more than the bottom markets are pricing in in terms of what is going to happen going forward. jonathan: looking at the situation right now, is it too early to say regime change? oliver: i dig it's interesting, because there is partly a good low-volume with dispersion higher in the markets and some of these sector rotations without any trading and you do candidacy that when the markets move higher, right? i want to address the utilities thing real quick area jumping in my terminal, i have got a chart here. two things. top panel, white line, the utility sector on a weekly basis. right next to it, breaking, showing the same thing is if you are looking at 10 years ago with

where they expected yields to go, but it's clear that those have come down quite a bit since november, so perhaps there is this idea that maybe inflation will not happen quite as quickly as people expected. check out the bottom panel, this is interesting, outflows, outflows, outflows, for really the past six months that has been the case, so it doesn't seem that there is this big rush into lower volatility or protection. perhaps it is clearly a rate or rebound play. to that point, the short interest on the spider etf has been rising. does that mean you have to distinguish between the short-term position for the next 30 days versus medium or long-term? how do you do that? tricky,t is really you're getting contradictory information between the administration, congress, and all these plans that people are looking for. now we are at the point were people are winning for speeches and waiting to see what is extra going to come out of that and what you're going to count on. i think there is accommodation of some longer-term people

waiting to say -- i think we need to short some of these sectors in the short term that will move in the next to the days because of the fed doesn't do anything, the utilities are going to move. i think there is a lot of different time type positioning that makes it tricky to navigate. has also helped equities has been the micro-macro data in equities, right? but the hard data has not really held up when it comes to the survey data. what is your call on that question mark which one leads what? again is tricky. what you need to be doing is looking for sectors are areas where we think that you can see growth regardless of what happens in the economy and not have only the macro backdrop to count on. i think you have some real contradiction about when the growth is going to come and you need to be careful about where you are positioning and find the big dividend people. alix: so, tell us where. in the defense sector is a thing we have been looking at more. you saw the big defense firms moving quickly.

see sra, lighthouse, firms that outsourced of the government. things they are talking about is saving money. hiring more. less people for these government agencies. what youareas you have think you have been on is flat to down turn spending for the last seven years and all of a sudden you are seeing discussions of picking that up. now, it's not going to happen that quickly, but they were prepared for this a couple of months ago and that they were not prepared a couple of months ago and they are catching up a little bit. jonathan: sounds like a 2016 game of it, ali. -- ollie. oliver: it does, it does. perhaps there is a bit more in play there on the fundamental aspect, but it does play like that when you look at the fed. we went into 2016 looking for four rate hikes and we went of getting one. this year we came in postelection with the expectation that would be a slew of hikes again -- that there would be a slew of hikes again.

so, then you start to look at may. when does that game in? you have a market that is not waiting on the fed, it is instead waiting on all this political stuff. feels like a similar environment that has jonathan: shifted catalysts from the fed the politics. jonathan:sarah, -- has a shifted catalysts from the fed to politics. jonathan: confirmation bias, sarah. deeply embedded of this -- in the psychology is a confirmation bias. investors here the stuff they want to hear and hope the optimism is down in d.c. and ignore the stuff that the treasury secretary says. wait until august, that is when it might be enacted. 2018 is when it might start to bite. what do you make of the psychology of things right now? sarah: you have a time when there is so much a political uncertainty right now. the fed, europe, elections coming up. last year, brexit derailing of potential june hike. you are in a situation where the

equity markets believe we want to get all this stuff and they are pricing it in. pricing at him for 18, instead of 17, ok. and then, i don't know, we have to wait to see what we get, but right now they are diverting because the rates are going up. david: you raise an interesting point that had not occurred to me. whatever else happens in washington, you can be sure that they are going to find a way to make it look like they are spending money. get people off the balance sheet, right? besides the i.t. sector that you identified, where are other opportunities in terms of sectors commenters of contractors, who could step up, in terms of the halliburtons of this world, so the government can say -- we are not spending so much money. sarah: how do you finance this question mark if you go back to some of the things before the crisis, private public partnerships and areas where you can get private money to come in and build toll roads, there are a variety of different things that they do in europe that we don't do here. that goes back to construction,

which has already run, because there has been a lot of action -- discussion around infrastructure plans and how they would work. if we are going to do something like that, it's the folks that would not be on the government payroll that would end up doing more of it. alix: all right, the worst day for the dow and eight wakes. all quite 38. the vix is finally over 12. it's getting real. in all reality -- [laughter] how are all reality, investors hedging? there are signs in the market that they are picking up in the margin. how is that being shown? two kind of go back to my point that i brought up earlier, it has been shown in a lack of participation. one, looking at the actual flow, where if you look at what has happened in the past six months there have been -- guess it's more like three or four months -- there has been a move back into equity markets. a move that has been happening a lot passive lines. where there is money going into ,tf's, tracking benchmarks still not quite a vote of

confidence in the active manager. that is just kind of showing up when you look at volume that is muted, despite a you have gone in record highs. jonathan: welcome to both of you to the program. 9, 10 minutes into the session, market on the downside of the dow, but off 11 straight conservative -- consecutive record closes. this would be the first down day, if we close this way, since february 8. 2/10 of 1% move, that will be the worst of this month, a fairly. david: but we have to wait till this afternoon. we know that in the last few moments, it always comes back. jonathan: treasuries, yields, a little bit higher this morning. up this morning on the u.s. tenure. three days of gains, potentially a day of losses, but still, the bears love that conviction, david. thed: coming up, second-most senior democrat in the senate leadership. senator dick durbin takes us through what he is looking for from the president tomorrow night and whether there may be places where he sees the democrats working with public

and counterparts to move legislation. that's next. this is bloomberg. ♪

♪ bloomberg.is coming up, an exclusive interview with gary goldberg, ceo of newmont mining at 12 p.m. eastern time. jonathan: this is bloomberg, kicking things off this morning, a session that looks like this, marginal moved to the downside with one quarter of 1% on the dow and the s&p 500, closing on what would be the biggest

one-day slide so far this month given the 11 straight days, consecutive, with record closes on the dow. a big winning streak, the longest since 87. will it continue? early signs or maybe not. switching on the boards, assets like this, treasuries were big for the last three days, yields are up on a u.s. 10 year. that's the situation cross asset. david? much, thank you so jonathan. richard durbin has served for 21 years from illinois. senate minority whip, making him second only to chuck schumer. i'm delighted to say that he joins us here on the set. welcome, senator, good to have you. there is an event tomorrow that you may be attending in washington. an address from president trump to the joint session of congress. what will you most be listening for in the address? i expect him to explain and defend his first

five and have weeks as president area that has been tumultuous. he dismissed his acting attorney general, his executive order on the muslim ban and travel was at least delayed, if not stricken, by three different federal courts. and his national security adviser resigned. attacked the press. he has attacked the judiciary. it has been a nonstop tweet war and i assume that he is going to try to convert that experience into what he has characterized as a fined tuned machine. david: he certainly has come to office with an agenda that he wants to advance. of the things particularly interesting to our audiences tax reform. there is a lot that you can disagree with with republicans, generally, specifically with president trump on, but surely the democrats in principle are in favor of tax reform. is there some place were you can beat him, work with him, to enact tax reform for all of us?

>> are looking for his plan to conform with his campaign promise. he talked a lot about the struggling, working family in america in terms of trade, and terms of taxes, terms of government regulation. if the tax reform plan is going to help the struggling, working family, there's room for democratic support. if it goes back to the other theory, that if we give tax breaks to the wealthiest, somehow it will trickle down to the working families, that's the same old script. david: in fairness, he would say that if that -- if he was here he would say that the working class elected him, not the upper class. assuming we can get past the class warfare issue, are the democrats willing to take on some of the difficult issues around eliminating deductions in order to pay for reductions in the rates? sen. durbin: now you get into tricky territory, even for republicans. the most important deductions have strong constituencies within the personal tax code. whether it is state and local

that we are paying, genital contributions, each of these has a strong constituency. not easy to touch. now, candidate trump talked about eliminating carried interest. for most democrats. it is a lucrative way to bring resources and tax reform. other questions are about repatriating foreign profit. how will you do it? at what tax rate? what impact will it ultimately have an the economy? there are sources of revenue that democrats can support. when you get into personal deductions, that's tough territory. time we hadast fundamental tax reform was bill bradley in the senate who was willing to work with the administration to get it done. are you in the leadership willing, in principle, to say that everything is on the table? things that we love, things that we love, so that we can reach a compromise? sen. durbin: i think it's a starting point, but the first starting point for us is back to

the income inequality that candidate trump spoke about over and over again. we want to make sure that working families in this country have a fighting chance. the tax code can help them achieve that. david: one of the things that has been said repeatedly since it was enacted, republicans want to get rid of the affordable care act. that is clearly high on their agenda. again, is there room for reform of the aca that the democrats could work with the republicans on? law thate only perfect i ever heard of was brought down on the side of a mountain by senator moses on clay tablets. i'm proud of the fact that it has reduced the uninsured in america to the lowest levels in recorded history, but yes, it could be improved. the fact is that the reason that many insurance companies are whyping out, the fact is premiums are rising, is we need to engage more people into buying insurance. especially healthy, young people. that part we should work on together. well the nasty things

right your job is that you have to come up with the money to pay for these programs. as you look over all at an outline of the budget that we will get today, do you think we should be prepared to increase deficit spending, given how much deficit we arty have? sen. durbin: that's a painful choice to make, but you have to ask some fundamental questions. it to providease it -- provide for the security and defense of the united states question mark absolutely. what i increase deficit spending to provide for education, training, and research? absolutely. those of the fundamentals of economic road, as far as i'm concerned. adding infrastructure into the list. can the white house work with congress on both sides question mark republicans and democrats question mark you have republicans in the majority in the house in the senate, but there seems to be some disagreement come even division, between the white house and the republicans on the hill, having to do with russia. what is the likelihood that that will become a divisive issue between them on pennsylvania avenue? unless we take

seriously what the russians just attempted to do in our last presidential campaign, i believe it calls into question our sincerity on a lot of fronts. i just returned from a visit to poland and ukraine. a polish leader said to me -- if you won't take it seriously that vladimir putin tried to upend your election and influence the result, how will you take it toiously when he tries invade our country? this is a test of willamette whether we want to protect our sovereignty. david: there's a senate committee investigating. sen. durbin: intelligence committee. david: is that where it's going to be handled? not as well as a could be. they might have had a hearing last week? we are not sure. they might have brought in the fbi director? we are not sure. we need answers. it needs to be an independent contrast and process. the intelligence community is the place for that. david: thank you so much, senator dick durbin of illinois. alix? alix: if you missed any of the

interview, you can type in tv on the bloomberg terminal, interacting daily, starting at the beginning of the interview and catch it all right there. john question mark -- john? onathan: we are -35 points the dow, down by a couple of tenths on 1%, down by zero .14%. you are watching bloomberg. ♪

jonathan: so, as you kick off the trading week with all eyes on a speech or address from the president tomorrow, the market last week was in part held hostage by politics. earlier today we spoke with david herro. waiting on just that. take a listen. >> last year, with the u.k. referendum, the initiative of the french and german elections, people get so obsessed with

these elections they just lose focus on a company's ability to generate cash, no matter the outcome of the elections. jonathan: let's use a couple of examples, taking brexit as one. in 2014, bhp had 2% of its revenue from the united kingdom. what percent of the revenue is owed? on morning of brexit, down the lows, bhp down 9%, lossesing all of those just like that. it goes to show that politics just completely takes over and all of a sudden you don't realize the actual fundamentals of the country -- of the company and for the tax flow comes from. alix: i wonder if it is also the truth on the upside as well. banks,m for the regulation rollback, are they parsing between the big ones that will get a lot of benefit? city has such a large business overseas. i wonder if it is just more of an asymmetric risk to the

downside? david: people like david herro, they see opportunity. earlier i spoke with dr. stephen corwin, ceo, on president trump and obamacare. , ceo, oneven corwin president trump and obamacare. you haverwin: if multiple issues with yourself, that's extremely expensive. access to care doesn't mean insurance. insurance means you can get preventive care and over a long. of time you can bend the cost curve. this is a key to station being made right now, the distinction between reversal access and coverage. we will give you access, doesn't mean we will give you coverage, so politically that could be very difficult. things are complex, they

take time, and when you are distracted you don't focus on the things that the market actually wants, like tax reform. how will the markets wind up being? really optimistic in november? how long do we have? jonathan: we will find out tomorrow. big speech to congress, 24 hours away. 26 minutes into the session, it looks like this, market on the downside after 11 straight record closes on the dow. and on thet index s&p 500 as well. for the daybreak team and my staff, thank you very much. from new york city, for our viewers worldwide, good morning. you're watching bloomberg television. ♪

♪ vonnie: it is 10:00 a.m. in new york, 3:00 p.m. in london, and 4:00 p.m. in hong kong. i'm vonnie quinn. mark: i'm mark barton. welcome to "bloomberg markets." ♪

vonnie: we are going to take you from new york to london and cover stories that a washington d.c., paris, and germany. before we get to all of those stories, we have breaking economic data or pending home sales for january. here is julie hyman. julie: pending home sales declining coming in much worse than estimated down 2.8% month over month in january and revised down for the month of december, cut in half for a gain of only 8/10 of 1%. by this measure, not seeing very positive news. again, the unexpected decline of 2.8% perhaps suppressed by higher mortgage rates. we have seen prices go higher. that is one of the things that has been weighing on the numbers. we're not seeing stocks much change after the winning