tv Bloomberg Daybreak Americas Bloomberg May 23, 2017 7:00am-10:01am EDT
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jon: a suicide bomber leaves 22 dead and 59 people injured. has a trip to rome. a budget plan is unveiled with cuts over 10 years. rises business confidence to the highest level since 1991. from new york city, our thoughts are with the people of manchester. i am jonathan ferro alongside david westin and alix steel. we will hear from the president of the united states, donald trump, from the israel museum. we turn to our top story. britain is reeling from an attack last night, they killed 22 people at a concert. children are among the dead. no one has claimed responsibility. we heard moments ago from theresa may. is customary for leaders,
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politicians, and others to condemn the perpetrators and declare the terrorist will not win. we have been here before and we need to say this again does not make it any less true. now, bloomberg's executive editor. what have we learned so far? most likely a suicide perpetrator.gle the police are keeping details to themselves. we don't know if the attacker acted alone. no one has claimed responsibility. it was interesting to note theresa may condemned the attacker and the ideology behind it. that is pointing in a particular direction in terms of
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motivations behind it. bit, but, we know a there is more we need to find out. jon: who radicalize them, who trained them, who funded them. a 23-year-old male has been arrested in south manchester. it is related to the attack. is it too early to assume this was part of a wider group of individuals? john: you never know. small cell.ty the key question is, was this a lone wolf attacker or two lone wolves? was it part of a tightly organized campaign, such as the attacks we saw in paris and of aclanad a clan -- bat attack? if it is one person acting
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alone, it is difficult to uncover a wider plot, which would be more difficult and disturbing for the security forces. has beenthreat level at the second-highest, severe since 2014. it indicates an attack is likely and imminent. how do they respond to these situations? how do they try to contain them when the shape of it is involved -- is evolved into the threat we saw last night? france is still in a state of emergency after the batacl an attack. in france, there is a deeper whichn about these cells, prompted francois hall on --
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hollande to put those measures into place. they feel it is more likely to attack,e wolf type instead of a much more elaborate attack. have world leaders coming out in full strength for the u.k. trump out in force earlier today, saying the ideology must be obliterated, civilized nations must join to protect human life. what kind of reaction have we heard from european leaders? john: a predictable reaction. an interesting thing to look at is the nato summit. everyone will be there, including trump. he has been putting pressure on leaders to turn nato into a
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terrorist-fighting organization. one of the difficult things he will have to do in this trip is how far he will push this summit. if he says i told you so, he will lose the room. he needs to decide how this point about turning nato into a terrorist fighting organization, how far does he push that? jon: thank you. isning us on the phone larry. of the threat, let's begin there. it is growing at home, coming places likees and the united kingdom. how should security services respond to that type of evolution we have seen? to get betterve
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intelligence and share it. you cannot -- security. they probably had security procedures allowing people to get in with these destructive weapons, so they planted it outside. they are going to adapt. you cannot buy perfect security. you do not want to change the cancel do things, concerts, don't have people from the united states because we are the leader in the fight against these people, because then, they win. this is most probably a lone wolf type of thing. the president says you want to undermine their ideology, you have to do that by showing this is not the future of the arab and muslim world. do we know we are making progress in the struggle? president obama said we were making progress and candid in
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trump said we are -- candidate trump said we were getting nowhere. larry: general kelly has said this a couple of times -- how many plots have you stopped? that is the key thing. many others have you stopped? have we not shared intelligence, gotten our agencies together? information,the they just did not share it. we are doing better they are -- there. happens like last night, they say we don't know what we are doing, we are not stopping these people. you need to say how many people you stopped and get to why people are doing this type of thing. why they want to send this message that they do not agree with the way we are dealing with the threat in the middle east.
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outlook we learned a 23-year-old arrested inn relation to the attack. wouldind of instruction someone need to carry out this type of attack? stuff.you can buy this in the u.k., you have stricter gun laws. in this country, we do not. how did they get the explosive? did the people who sold them suspect anything? should they have turned them in? lot inbably hear this a the united states, if you see something, say something. that is the way we have to deal with it, recognizing this will be with us for a while. jon: you talked about security and intelligence sharing. that would concern break down after the u.k.'s
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decision to leave the european union and the veiled threat to break down intelligence sharing? up as toion has come whether intelligence will be continued to shared from a country like israel with a country like the united states. and natohe world of g7 with that in mind? about this we know intelligence, we were told by the israelis, in this city, people were going to use their laptops and other computers as a bomb. wouldu imagine what happen if this was a bomb that blew up on a flight from the u.k. to the united states? the president and his people, general mattis, general
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killy, secretary tillerson will say we made a mistake and we are not going to do that again. you have to be able to share it. needs to said nato focus on russia and these other things and hopefully that will -- hopefully they will work together to do that. just because you are not in the eu does not mean you are not in nato. but not inn nato, the eu. they are two different things. you don't have to have a formal alliance to share intelligence. alix: thank you. coming up later, we have a lineup of guest for you, including mohamed el-erian and richard haass. to the middle east for live coverage shortly. ♪
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alix: nations must join together to protect human life. that coming from trump in response to the 22 killed in the u.k. manchester attack. we are waiting for more comments from trump and will bring them to you. in washington is getting set to release its first budget. an important focus of the budget is going to be on fighting terrorism, with a request for more funding for the department of homeland security and department of defense. give us a sense.
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we heard the words the president said. give us a sense of what the reaction from the trump camp is. kevin: he said he wants to obliterate the ideology. he also said those responsible for the manchester concert attack should be held responsible and called them "total losers, evil losers." this was the first unscripted moment in which the president had to respond. beeneetings in israel have centered around scripted moments. the events in manchester giving the president the first opportunity to respond, coming on the same day he was meeting with palestinian leaders. he has avoided the difficult topics publicly, a two state solution, or moving the u.s.
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embassy from tel aviv to jerusalem. he did have several strong moments publicly, looking to reassert his support for jerusalem, particularly when netanyahu was standing beside him. david: we are going to get this budget later, a 11:00 eastern time. netanyahu wasa lot of the focun the cuts, cuts to medicaid and food stamps. there have not been a lot of focus on the increases. how central is that too trump's doctrine on how to fight terrorism? .evin: huge there are significant increases to the defense community. over the weekend, the president accompanied by u.s. ceos of .ockheed martin, boeing
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as they look to announce the $110 billion u.s.-saudi arms deal. negotiating a contract with fighter jets. while there is behind the scenes negotiationn, this with the leaders of the countries, i can tell you rex privately -- his concerns, about the proposed cuts to foreign aid. the president is proposing significant cuts to it. this whateverance pass the budget, so to speak, but it is a blueprint, laying out the president's agenda. david: you cover the hill as a.
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the tragedy such as manchester changes the discussion on the hill when it comes to increasing defense and homeland security spending. kevin: any time you have a terrible tragedy like this, this will re-spark conversation. in terms of intelligence sharing and needing to bolster addnology, this could something about how nations, nato nations, are going to be able to share information. after president trump meets with the pope on his third stop of his first international trip, he is headed to brussels for the nato summit. for natovocated nations to pay their fair share within nato, he has shifted rhetoric following several
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developments, most notably what happened in syria. david: this may change. -- you may change the discussion in washington. jon: the g7, he has been banging the drum on this, they need to spend a certain percentage of their gdp on defense. only a handful of countries have been doing that. david: it makes the obsolete natont he made about ironic. this is why the u.s. elected him. it was security, border security. we focus on jobs and growth, but at the end of the day, it was about security. reinforces that. david: a lot of coverage about the trump base and the extent to which they voted for him.
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they are worried about their security. whether it is legitimate or not, they have those worries. jon: terrorism was at the heart of his speech. we have a g7 meeting at the end of the week, a nato summit as well. the events of the last 24 hours are going to take over the g7 and what is on the agenda. people expected it to be about trade. i think it will be about security. david: on the trade front, mr. trump: he is bilateral list. when it comes to terrorism, he is a multilateralist. he is multilateral when it comes to terrorists. everyone is taking their seats in anticipation of his
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speech at the israel museum. the broadk at conversation in terms of the middle east versus iran, that was front and center yesterday. palestinians and israel, do we have a common enemy against iran. has sponsored some terrorism in that region. if they can put the two together, the president is trying to identify iran with state-sponsored terrorism. jon: the first lady walking into the room. to your point, how unified some of these leaders are going to be when they talk about security divided theyw would have been if trade was the common and part of the discussion. even for someone like theresa
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, he can talk -- she can talk about something she is more comfortable with. likewise, emmanuel macron. donald trump walking out. himre awaiting remarks from . let's take a listen. >> this museum tells a story of israel. , you have gone through a fast-paced visit through our past, present, and we work together to fashion the future. biblen see text of the
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over 2000 years old. you can see the seals and coins that bear witness to our 4000 years in this land. you can see the synagogues we prayed in during our long exile. notstorythat bear witness of is simply the story of the past, it is the story of a nation reborn of a barren land brought back to life, an ancient language revived, and exiled people who returned, jewish sovereignty returned -- jewish sovereignty restored. the state of israel lives on. ever.as a thriving democracy, a powerful one, and innovative, free economy, and a proud, resilient people. israel has had many friends, but israel has ,ever had, and will never have
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a better friend than the united states of america. [applause] that friendship is reflected in the overwhelming support of the american people, bipartisan support of the american congress, and the support of american presidents from harry truman to donald trump. [applause] thank you, trump, for your support. it is deeply appreciated. i believe the alliance between america and israel is more important than ever. we must defeat those who glorify death, and protect those who
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celebrate life. together, we can defeat the forces of militant islam, who seek to destroy the civilized and must, defeat the forces of terror. it must be equally condemned and fought, whether it strikes in europe, america, or in israel, or anywhere else. funding and rewarding terrorism must end. standing next to you, the attacknt condemned the in manchester. i hope this creates change. -- that law must be changed. [applause]
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i hope the president heeds the that you've enunciated today. stop rewarding terrorists. stop glorifying murderers. this is the first and crucial of peacerds a road that israel seeks. together, with you, we can achieve that. you, i believe we can advance a peace between israel and its arab neighbors, as well as the palestinians, because of the common danger we face from iran and because of to thisership you bring process. ultimately, around the world, i have no doubt freedom will defeat fear, that light will
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vanquish darkness. that is the story of america. a nation that has defeated the forces of tyranny, that is the begin and hope of all humanity. that is the story of israel. a nation that has overcome horrors and impossible odds, and is the hope of the jewish people. thank you for your historical visit, for your unbelievably moving gestures in a concentrated 36 hour period and israel -- period in israel. now, in our wonderful museum, , your family and delegation, you have shown a great commitment to israel's
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future and security. it want to thank you for standing up for israel at the united nations and everywhere else. [applause] i thank you for your unrelenting support and the friendship that comes from the heart to the jewish people and the jewish state. thank you. god bless you, god bless israel, and god bless the united states of america. [applause] mr. trump: thank you.
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[applause] thank you very much. thank you to prime minister netanyahu. i want to thank sarah for hosting us last night in an unforgettable dinner. very,ked about a lot of very important things. thank you to ambassador and mrs. friedman, joining us with friends who come from our country to yours as we reaffirm the unshakable bond between the united states of america and
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israel. [applause] i would like to send the thoughts and prayers of the american people to the victims of the terrorist attack in manchester. watching, youeen have seen a horrible thing going on. i want to send our condolences to the many families who lost their loved ones. horrific, horrific injuries. terrible. people,f innocent beautiful, young children, savagely murdered in this heinous attack upon humanity. we must drive out the terrorist's and the extremists , obliterate this
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ideology and protect and defend our citizens and people of the world. [applause] all civilizations must be united in this effort. this trip is focused on that goal. nations together around the goal of defeating terrorism that threatens the world and crushing the hateful ideology that drives it so hard and seems to be driving it so fast. it is a privilege to stand here thehis national museum, in ancient city of jerusalem, to a dress the israeli people, and all people in the middle east, who yearn for security, prosperity, and peace.
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jerusalem is a sacred city. splendor, and heritage are like no other place on earth. [applause] what a heritage. what a heritage. peoplees of the jewish -- the ties of the jewish people to this holy land are ancient and eternal. [applause] they date back thousands of years, including the reign of king david, whose star now flies proudly on israel's white and blue flag. yesterday, i visited the western wall and marveled at the monument to god's presence and man's perseverance.
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i was humbled to place my hand on the wall and pray in that holy space for wisdom from god. i visited and prayed at the church of the holy supposed or holy sepulchre. wreath, mourning the 6 million jews murdered in the holocaust. there, what i pledged today, the words -- never again. [applause] israel is a testament to the unbreakable spirit of the jewish thise, from all parts of
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country, one message resounds. that is a message of hope. the jewish people have suffered. even those who have sought their destruction. all, they have in jordan and they have thrived. all of the -- in awe of the economist runs of the jewish people. my administration will always stand with israel. [applause]
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thank you very much. through your hardships, you have created one of the most abundant lands anywhere in the world. history,t only rich in coulter, and opportunity, but especially in spirit. culture, and opportunity, but especially in spirit. we see an incredible story of .aith and perseverance that faith is what inspired jews to believe in their destiny to overcome their despair and to build here, right here, a future that others dared not even to
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dream. jewsrael, not only are free to till the soil, teach their children, and prayed to ancient land of their fathers, and they love this land, and they love god, but muslims, christians, and people of all faiths are free to live in worship according to their conscience and to follow their dreams right here. gathered with friends, i call upon all people, jews, christians, muslims, every faith, every tribe, every creed, to draw inspiration from this ancient city, to set aside our secretary and -- our secretary etd -- s so the sideet -- s
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aside our differences. i spoke at aweek, summit in saudi arabia. solomon.ted by king a very wise man. in the our friends muslim world to join us in creating stability, safety, and security. i was encouraged by the desire of many leaders to join us in cooperation towards these shared and vital goals. conflict cannot continue forever. whennly question is nations will decide they have had enough, enough bloodshed, enough killing. offers the opportunity to
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extinguish the fires of extremism and find common ground in shared responsibility and making the future of this region so much better. come from within. it can only come from within. no mother or father wants their children to grow up in a world where terrorists roam free. no child is born with prejudice in their heart. no one should teach young boys and girls to hate and to kill. no civilized nation can tolerate the massacre of innocence with chemical weapons. my message to that a summit was the same message i have for you.
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we must build a coalition of the aim ofo share stamping out extremism and violence, and providing our hopeful a peaceful and future. a hopeful future for children in the middle east. [applause] on behalf of the united states, we pledge to stand by you and defend our shared values,'s a weekend defeat terrorism and create safety for all of god's children. [applause] experienced the hatred and terror of radical violence. israel ease our murdered by
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andorists wielding knives bonds. hamas and hezbollah launch rockets into communities where schoolchildren have to be trained to hear the sirens and to run to the bomb shelters, with fear, but with speed. isis targets jewish neighborhoods, synagogues and routinely call for israel's destruction. donald j trump. [applause] .
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thank you. i like you, too. despite these challenges, israel is thriving as a sovereign nation. no international bodies should question the contributions israel makes to the region and the world. piece and afor that more -- let us pray for that peace and a more hopeful future across the middle east. some say we must choose between
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supporting israel and supporting arab and muslim nations in the region. that is wrong. all decent people want to live in peace and all humanity is threatened by the evils of terrorism. unite aroundns can the goal of protecting life and promoting peace and stability in the region. my administration is committed to pursuing such a coalition. we have made substantial progress during this trip. israelis and palestinians seek lives of hope for their children. if we putossible aside the pain and disagreements of the past and commit to finally resolving this crisis, for nearlyragged on half a century or more.
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i am committed to helping .sraelis andd a meeting this morning they are ready to reach for peace. my meeting with my good friend, i can tell you also, he is reaching for peace. he wants peace. he loves people, he especially loves the israeli people. benjamin netanyahu wants peace. making peace not be easy. we know that.
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america's security partnership with israel is stronger than everything. my administration, you see the difference. big, big, beautiful difference. [applause] including the iron dome missile defense program, which has been keeping the israeli people safe from short range rockets, launched by hezbollah and hamas. and david's sling, which guards against long-range missiles. it is my hope that someday soon, israeli children will never need to rush towards shelters again, as sirens ring out loud and clear.
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proudited states is israeli air force pilots are , new, f-35incredible planes. [applause] there is nothing in the world like them, to defend their nation. it was wonderful to see these mighty aircraft in the skies over israel recently, as you celebrated the 69th anniversary independence. as we strengthen our partnership and practice, let's remember our highest ideals. bonds never forget the between our nations is woven together in the hearts of our people. hope, andf freedom, dignity for every man and woman.
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future were of a jewish, muslim, and christian children can grow up together and live together in trust, harmony, tolerance, and respect. practiced in israel have inspired millions and millions of people all across the world. the conviction of theodore hers herzel links through today. whatever we attempt their will -- will rebound mightily and beneficially for the good of all mankind. as we stand in jerusalem, we see pilgrims of all faith coming to walk on this hollowed ground. place their prayers in the stone blocks of the beautiful
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western wall. in the pews of an ancient church. muslims answer the call to prayer at their holy sites. reveals the longing of human hearts. to know and to worship god. it is a reminder that life can flourish against any odds. when we look around this city, in the see people reverent worship, and schoolchildren learning side-by-side, and men and women lifting up the knee and forgotten, we see god's promise and healing has brought goodness to so many lives. the people of this land had the courage to overcome oppression and injustice of the past, and
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to live in the freedom god person on thisry earth. we pray and we hope children around the world will be able to live without fear, to live without limits and prosper without violence. me tod that you join protect the dignity of every child of god. thank you. god bless you. god bless the state of israel. god bless the united states. thank you. [applause] jon: that was the president of the united states alongside benjamin nine jan oh -- and jim and then yahoo! -- benjamin netanyahu.
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here is ae seeing more unified approach as he goes to the middle east, two p .aces like saudi arabia david: this is bold. let's bring saudi arabia together with israel, we will have a coalition of partners to fight terrorism. alix: it dovetails what we saw about u.k. manchester attacks. islamic state is claiming responsibility. -- we have toith have a coalition of partners who can share the aim to stand up against that kind of extremism and violence. john says in european leaders have been speaking out since the tragic events of last night,
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united in their results to combat terrorism. angela merkel says this will strengthen our resolve to work with our british friends who plan and execute such horrific attacks. the newly elected french president said we come together in the fight against terrorism. it will be at the top of the agenda at the g7 summit. nelson -- now, eric eric nielsen. will we have a more unified g7 when they talk about security? event, and itgic is terrifying, but it is an easy one. there is no one against fighting terrorism. it is a relatively easy speech for trump to deliver.
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gold, but not one, where you are going to get any nasty questions. they will agree on this. they will also talk about trade, and that will be more complicated. jon: intelligence sharing have gotten murky. at one point, we had a veiled indication from the prime minister she may want to negotiate around issues like intelligence sharing. the president of the united states has come under criticism and allegations against him that he shared israeli intelligence. that may make us question whether we see -- whether we share intelligence. do you see a breakdown in the sharing of intelligence needed to break down these attacks? i would be surprised. when it comes to sharing
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intelligence, it has nothing to eu or nato. the western world share the information. there are different levels of this. we have a situation with -- among the anglo-saxon speaking countries. there are some levels here and there, but i would be surprised if you find reluctance among the western world in sharing --ortant information area sharing important information. after the election, it seemed trump was coming down on downe over not putting their fair share. erik: most of the europeans have not spend the indicators 2% on defense.
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point, however, it is important to separate what is and internal security. the memoirs of the form and german chancellor and his proudest moment was his ability resist the constant suggestions by people to go andide the legal framework he found it very important to resist that. there is an important break militaryld-fashioned and internal security. boostswer is not just to old-fashioned fighter jets and other things in a nato set up.
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david: thank you for being with us. all eyes are on the tragedy of manchester. the focus on security and terrorism extends back to washington when the budget makes its way to capitol hill. of the people with an important say on what happens next is john yarmuth of kentucky. he joins us from capitol hill. we look at the world today, different than the world yesterday, particularly in manchester. does it change the discussion up on the hill? it will propose budget cuts and increases in defense and security. are you more open to that today than yesterday? have we agree we have to
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an effective and strong national defense policy. averse toare not defense.oney for the budget we passed for 2017, in the last five months, we agreed to an increase of about $20 million in the defense budget. economic security and a strong population is essential for national security. proposed this morning, and eliminates all of those investments that are essential to a strong society. to be aggressive in pushing back against these cuts. this came from the farthest flanks of the republican party.
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it does not reflect mainstream republicanism. david: you cannot have all of the, national security, deficit. as you try to solve that equation, how do you do that? do you run up the deficit? there is a deficit and there is a sustainable deficit. the one we are running is considered to be sustainable. deals with ther revenue side of the equation. that is something we have to look at. 1.2 trillion dollars to one point $3 trillion in the budget we have never looked at. isre is the question of what the adequate tax revenue. we need a lean and mean and efficient federal budget. we need to have adequate resources.
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can balanceays we the budget by cutting these important investments that this budget proposes, they have an unrealistic perspective of life in america. as far as you are concerned, are the tax cuts off the table? the magnitude they are proposing, that the president proposed in his plan are totally unrealistic and to lower corporate rates to 15% and allow pass-throughs for anyone who is a business owner is not going to fly. there are changes we can make in the corporate rate. 27%, something in that range would be acceptable to democrat.
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there are compromises that can be made and we ought to look at those. when you are talking about tax cuts that may approach $6 trillion over 10 years, that is something the economy cannot afford. work with your republican counterparts. do you see a path through to a budget people can agree on? john: we just showed we can do that. the on them us budget -- the was an agreeable compromise the administration wanted. washe omnibus budget agreeable. we ended up with defense and nondefense increased. together we can work
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to meet priorities on both sides. i don't see why there isn't any reason we cannot do that in this budget. jon: the government cannot afford the cuts trump proposes. that is the story in d.c. jon: the government cannot affordfutures are firmer in thed states. the euro a touch weaker. treasury yields lower on the margin, down by a single basis point. 2.24%. crude is stable. $31 flat. from new york city, you're watching bloomberg tv. ♪ jonathan: a suicide bomber in manchester, england leaves 22
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dead and 59 injured. islamic state reportedly claims of possibility for the attack. trump says he plans to bring nations together to fight against terrorism and the fight tops the g 20 summit in sicily, italy. our thoughts are with the people of manchester. this is bloomberg daybreak. i'm jonathan ferro alongside david westin and alix steel. the story out of the middle east has been not just about defense deals, but about terrorism and how to address it. for many people that might have been a surprise when i thought things like trade would be the topic at the g7. alix: and how aggressive president trump has been uniting everyone against iran, considering rouhani just regained power. david: it is not lost on mr.
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romney -- mr. ronnie. jonathan: britain is reeling from last night terror attack that killed 22 and injured at least 59 people at a concert in the northern city of manchester. .hildren are among the dead the islamic state has claimed responsibility for the bombing. president trump spoke out earlier on the attacks in jerusalem. trump we must -- mr. trump: we must build a coalition of partners who share the aim of stamping out extremism and violence, and providing our children a peaceful and hopeful future. now, johnjoining us fraher. since we last spoke, we learned there had been an arrest in manchester and reports of islamic state claimed responsibility. walk us through the new
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information. john: it was not necessarily a massive surprise -- the signposts on morning have been pointing toward an extremist islamic attack, and it certainly wasn't a surprise when they came out and claimed it. theresa may was very strong in coming out to pledge the ideology that lay behind the attack. the key question for british security forces and how many people were behind this? was this a loan-wolf attack, a small number of a compass is, or part of a broader and wider network? if it was the latter, it might be a deeper concern to the british security forces. that is the key, missing piece of the jigsaw right now. we don't know how many people were behind last night's appalling events. jonathan: there is an election in the united kingdom. it is not a day for campaigning.
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neither side will want to be doing that today. baucas on where they are on the issue of security and how that has played in the campaign going into election day. john: it has not been an issue so far -- what has been an issue is the issue of competency, with theresa may marking herself out as the only serious person to handle the economy. law and order and security will become much more to the forefront. she was a home secretary for the last 10 years. this is her area. she looks quite strong when she talks about. she articulates the sense of trauma that british people are feeling today, and quite well. that might play into how people look at this. jeremy corbyn, on the other hand -- conservatives have liked to attack him for being fast on
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security issues. an important point to make in all of this, one year ago, creepyto the day, in a echo, joe kovacs was murdered -- ox was murdered, and there was a sense swing the vote, but it did not. it is too soon to speculative this could play out. if you talk to theresa may, generally her main focus and drive is trying to figure out who did this, who is behind it, and are there more of these terrorists out there as part of commit similarht atrocities. alix: i'm wondering how it changes the conversation with david davis and his counterparts in your. a few months ago teresa may was talking about using it as a bargaining chip. how have the conversations started to play out and change? john: yes, you're right -- part
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of brexit, in theory, if britain does not negotiate a new intelligence sharing arrangement with the european union, the u.k. would fall out of that framework. it is a reminder that, yes, you're right, theresa may did allude to the use of a bargaining chip. -- two this been put on the table as a bargaining chip. a lot has happened since then. we have a westminster attack, and last night's appalling events. it would probably be a surprise if she kept pushing on that, but we will have to wait and see. alix: bloomberg third john fraher test bloomberg's --bloomberg's john fraher, thank you. 2 2010, he from 2008 worked for president bush. berry, it is going to get your perspective on a day like today.
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we do have reports that isis is clingers possibility for the attacks overnight. they have arrested one 23-year-old individual in relation to the attack. talk about the kind of network we would have to seek to have that kind of attack to play out. is too early to tell. we do not know if it was only inspired by, or directed by isis or other groups. we have had numerous attacks across europe, sweden, belgium, france, germany, the u.k.. this is not going away until we take a structurally different approach to the problem, and the gloves have to come off, and the bureaucratic obstacles have to go down or more people will die. it is very concerning we are not taking a holistic and structural approach to this continuing problem that seems to be getting worse. alix: what does that mean?
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we heard president trump talking strongly moments ago at the israel museum about a coalition uniting against this kind of hatred. what does a real structural change look like? barry: i think there are things we need to do in the near term to strengthen our deterrence, too greatly strengthen our intelligence sharing. talkard in the last report about the eu and how the u.k. will share intelligence with it. we have nato, other countries -- we have to break these barriers down to leverage technology and share intelligence so we can get much better, much more aware, and much more preventive. you will still not prevent everything. you need to increase homeland defenses, counterterrorism efforts, police efforts, and most important, for the long runs, we need to try to dry up the sources of this kind of alienation that makes people turn to killing innocents to achieve whatever ends they are
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trying to achieve. that means a lot more activity in the middle east, and more activity at home so we can integrate populations, and they don't feel they are, sort of, and infection in our societies. david: you have been hearing this going back to 9/11 -- that we have to break down the silos, use technology, things like that. you have been inside the national security apparatus. what is it structurally -- in terms of the institutions that get in the way of that, because it obviously haven't been done? barry: i think there is a little too much business as usual. i think each time something happens, maybe there is an initiative to move another inch. i think what people have to think about is if there is a catastrophic attack, what would you have wished you had done differently today that you are not doing already? you need to file your own assumptions of business as usual, go forward, break political barriers, break barry
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-- bureaucratic obstacles, and go to a different level of international cooperation, inter ministry cooperation, and we can get this done. but the court is how do we dry up the sources of this kind of motivation for these kinds of attacks. david: drying up the sources is a longer-term process. presidente to advise trump today -- you have been on the security council -- here is the one thing we need to do today, what would it be? barry: it would be a vigorous and centralized effort working with partners and allies in the middle east to, number one, get at how do we counter and dry up violent extremism, and number stop israel.let's a day -- serial -- syria. here is an incubator of extremism flying into your. i am not saying this is directly
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from syria, but that is something that is running and not helping with the stagnation of diplomacy regarding syria -- it is really unacceptable to our public and we should demand more from our leaders. alix: thank you very much for your perspective. barry pavel former national security council official and atlantic council senior vice president. world leaders headed to sicily, and the topic of terror topping the topics in italy. this is bloomberg. ♪
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daybreak. i am, chandra. upfrontll receive an payment from apple. they had accused apple of infringing several mobile patrons. --nair is teaming up with for long-term fight from madrid. the partnership is the latest step in a push to offer feeder flights. world leaders expect president trump to announce this week whether the u.s. will remain in the paris climate accord. environment says the president is except to make his decision known at the g7 meeting in italy. the pass past, he has called global warming a hoax. jonathan: the fight against terror will top the summit in sicily, italy. european leaders spoke out against the attack.
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the suspectedsaid terror attack will only strengthen our resolve to work with british friends against those who plan and execute such inhuman acts. i said the people in britain, germany stands by your side, while emmanuel macron tweeted we come together in the fight against terrorism. now, krishna memani. what we are finding out about security is there is not one approach on all things that can unify on a global stage. krishna: i think the most important thing out of the summit that we can hope for is the fact that everyone agrees that while they might have different political objectives, cooperating on a global basis is just as important today as it has been at any point. the expectation that for some reason global trade will fall
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apart because trump says certain things, or theresa may says certain things -- i think what this will prove is the fact they have a lot to cooperate on. jonathan: what we find out is foreign policy and finance are not mutually exclusive things. in nato, the united states is putting pressure on countries to spend more money, even the likes of germany to spend a certain amount of a percentage of gdp on defense. can he achieve those kinds of things, get these governments to spend extra money if they are not willing to do so? krishna: that is what he is trying. the spending will probably go up. whether it will go up to the level he would like is probably a different matter. the key point from my perspective is the fact that when you look at things like brexit, and the conclusion in the heat of the moment you come to, is the world is ending, and cooperation among different countries is going to fall off the cliff. i think what terrorist incidents
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bring back to us is the fact that that is not the case. we will still have a lot to gain from global trade, cooperation, and the developing words -- worlds and developed words -- worlds collaborating. david: the main story is the tragic loss of life, and having said that, commerce and money are linked to this directly. you saw president trump go to saudi arabia and have $110 billion in arms sales around the world. what are the effects commercially as we ramp up 49 -- -- national security to protect ourselves against terrorism and other threats? krishna: the biggest change could be in the fiscal policy we are implementing in the u.s.. for example, if tax policy and spending policy and it increasing deficits, that would be a reflationary traded -- a trade that we are fading at the
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moment. expectation of reflation has gone down. spending on defense and spending on other policies increase, and it is not paid for -- that is good for growth and global inflation. worldare we still in a where you have to look at the macro, or when you look at the macro and look at earnings, say this will add incremental eps to the bottom line over the next two years? krishna: saying that macro has gone away in this day and age is an unrealistic expectation. macro will be with us as long as growth in the world is lower than where we would like it to be, where inflation is relatively low. while earnings and things like that are important, especially for security selection, i think ignoring macro factors is going to lead to bad results for your portfolio. alix: how are you structuring when you look at the macro in
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d.c. that is still floundering? krishna: macro in d.c. is floundering, but macro is not floundering on a global basis. thiscoming out of europe morning is quite strong. it has been consistently strong for almost a year-and-a-half. growth in emerging markets is quite good. while things in d.c. might look hairy, things on a global basis are looking good. international investing is what the mantra is for 2017 and probably will remain the case for the second half of 2017 as well. david: therefore your floods of -- funds are flowing out of the united states and into europe, for example? krishna: where we have the flexibility, we would like to allocate to europe and emerging markets. those of the places with the best opportunities. the dollar is not strengthening. to why. he will be staying with us. are,g up, daniel kurtzman
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david: this is bloomberg. i am david westin. we heard from the ranking democrat on the bench committee for his thoughts --this is what he said -- not rep. yarmuth: economic security, -- said -- rep. yarmuth: economic security is important. proposals this morning eliminates investments that are essential to a strong society. david: let's go to the other side of the aisle, dave brat, a republican from virginia. he is best known for capturing the seat of eric cantor when mr. cantor was the house majority
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leader in part because he said he was not conservative enough when it came to spending and debt. welcome to the program, mr. representative. rep. bratt: thanks for having me here. brat: thanks for having me. david: you heard from the colic. brat: that is not economic security could deliver markets are a disaster. we have $20 trillion in debt. 100 trillion in unfunded liabilities. medicare and social security go insolvent in 2024. kids will not see those programs. that is not economic security. democrats do not have a budget that balances in any time horizon, not even 75 years out. we're trying to 10 years. that is an improvement.
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what they call costs -- everything is still growing in d.c.. the cranes are still up, fine and dandy. d.c. is plenteous secure. is plenty secure. the rest of the country needs security. david: you mentioned medicare and social security. a lot of people around the country think our president will not touch that. is he wrong? rep. brat: in the out years to find a savings he wants to beef up the military and do investments on infrastructure, i think he will have to look at those programs -- not cut. there are ways to reform those. when it started, the average age was 65 and they broke even actuarially. now the benefits start at 65, people live till 83, and don't have to be a rocket scientist to find out why they are insolvent. democrats will not even bring up
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the issues, much less the solutions. they say we need to do better education. they have no plan. they own higher education, and they are teaching business is bad. supply-side tax cuts is a pejorative term. the supply is you. supply-side his business. they refer to that as bad -- and let's you change that attitude to get progrowth, i don't see any hope for the next generation of kids. agree welot of people have to do something about the deficit -- we cannot just keep going, but is it the right approach to balance or try to balance the budget on the back of the least advantaged ask? you are talking $800 billion out medicaid, $200 billion out of food stamps -- is that the right place to find the money? to seminary went before i got my degree in economics -- you have to take care of the least of these.
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we have able-bodied folks using benefits that should go to disabled. people come in with spine injuries, terrible diseases -- nobody is talking about that. the democrats, on immigration, they want tons of people coming in because we have so many jobs that are open, we cannot find anyone to work, although we have all sorts of able-bodied people on these programs. that sounds like a good fit to me. let's solve it that way first before we add to the expense on our side. i think that is, kind of, and easy solution. david: a secondary publicans before we get to the democrats -- can you all get together because we have talked to some of your republican colleagues who say writing up a bigger deficit might be worth it to get the country going. how are you feeling about that? rep. brat: i am open to a little bit of that dog. david: you are? rep. brat: it depends what it looks at -- in the 1920's, jfk got 5% real economic growth.
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it takes a year or so. you do a cut in cbo land, washington land, and when you do a tax cut and give people money back, we count that as a cost. it is a cost to the government. the person back home business consider it a cost when you put moneyin their pocket and in the hands of business is to put capital in the hands of people. david: this has been great. come back and talk to us again. rep. brat: any time. alix: becky so much. we will be discussing that over the next hour and a half. coming up, more on the budget battle in washington. steve rattner will be weighing in next to the markets relatively calm, as we head into the open. ♪
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outperforming on the back of some really decent data in europe. the pmi surprising to the upside. we are used to that story. german business confidence, the best print since 1991. things in terms of confidence in the outlook in europe looking pretty good. if you switch of the board for the economy, the euro this morning -- we haven't several days of euro strength -- a little bit of weakness on the margin. the best week for the euro this week just last week. a little bit of softness in today's session. yen strength. treasuries off a little bit on the margin. the 10 year he'll down to 2.46%. let's get you an update and what is making headlines outside of the business world. emma: islamic state is putting responsibility for the suicide bombing in manchester in the u.k. at least 22 people were killed and 59 others were wounded.
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the attacks happened in a fourier of an arena filled with young people attending a concert by american singer ariana grande . police say they have arrested one suspect, a 23-year-old man. theresa may spoke outside of downing street earlier. is no doubt that the people of this country have fallen to a callous, cowardice attack that targeted some of the youngest people in our society with cold calculation. emma: it is the worst terror attack in the u.k. said the london bombings of 2005. in the u.s., there is a report that president trump asked to of his intelligence chiefs to help push back against russian investigations. according to "washington post" the president as the director of national intelligence and the head of the national security agency to deny there was any signs of collusion between the trump campaign and moscow. both intelligence chiefs refuse.
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president trump? budget proposal -- some fellow republicans are calling it dead on arrival. it shrinks the safety net for the poor, recent college graduates and farmers. the budget relies on a tax plan for which the administration has released few details. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. emma chandra. hours --o and a half not alix: -- alix: two and half hours from the budget been released. steve rattner, krishna memani with us. give us your thoughts. steve: it is not even include the president tax cuts, and the spending cuts are so massive it
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is hard to imagine even republicans will go along with it. rather than balancing the budget, instantly creates more deficits going forward. alix: a feisty steve rattner. help my british friend over here understand why we're going to care more about what mitch mcconnell set on our air just a few weeks ago. take a listen. mcconnell: we generally -- no matter who the president is, we don't pay a lot of attention to the president? budget,-- president's but defense spending is important. the one democrats had dollar increase for defense committee had to have a dollar increase for domestic -- we have woken out of that already. -- broken out of that already. there will be a bipartisan negotiation. why is that more important than what president trump unveiled? steve: the differences you have
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a parliamentary system, and we don't. there is one of the new wants here with mentioning -- to get a lot of those spending cuts, not he of them -- some of them, ashley nee is the democrats. you need 60 votes in the senate to pass a lot -- he actually needs the democrats. you need 60 votes in the senate. it is still a remarkable document. david: it is not something congress will approve and that is it, but does it really make a difference directionally -- saying we will spend more on defense overall, we will cut social programs, whether it is food stance, medicare, spending --would it make a difference, sort of, directionally? steve: sure. it is a statement. it is a statement of policy. there is a lot of 70 ford. i have to split it into two categories -- stuff that can get done with 50 votes, which means you can scan jam it through, which includes tax cuts, cuts and entitlement programs except for social security.
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defense spending requires 60 votes, which means the democrats, which is why the last budget deal a few weeks ago -- the democrats essentially won because militants could not force stuff through over there objections. david: cuts to medicaid, 60 votes or 50? steve: 50. david: that is a huge budget. steve: there is another $800 billion in medicare cuts here. in total, they want to cut the medicare budget by $1.4 trillion. 20% of medicaid they want to cut. alix: how do you understand health reform when it comes to investing? when i look at breakeven, they are below 2%. what is the market telling you? krishna: the market is telling you we do not believe any of these documents getting thrown at us. effectively, what will come out of it is some modest level of tax cuts at some point -- probably sometime in 2018, and
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it is probably not going to make a lot of difference in terms of the gross project three. -- trajectory. that is why breakevens are falling off, and the entire reflation trade we are putting on since november of last year has been fading slowly but surely. alix: -- jonathan: the market doesn't believe it now. it did. why has it changed? politicallybecame unacceptable that anything donald trump reposes will really get past, and in the proposals were so radical that market faith faded quickly. alix: are we in a place where if 28%hing gets done, a corporate tax rate instead of 50%, that will be a material growth? krishna: we will remark things. if you have a policy proposal growing the gdp
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growing much faster, that is material information that will factor into the markets. if you were the markets, steve, what would you expect? krishna saidk what is what is going on -- the market is realizing what trump said will not happen for any number of reasons, and the likely outcome is a modest tax cut, something to fix the business side, deal with repatriation, and maybe it is $1 trillion, $1.5 trillion, and the rest, party much on the spending side, it is study as it goes. david: even on military spending. you heard reference dollar for dollar. it makes publicans unhappy. you might get more military spending, domestic spending, but you will not get these kind of cuts. david: if your scenario plays
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out, what effect if any does it have on gdp growth? steve: very little, the other problem with this budget, projecting 3% adp growth, which is absurd. jonathan: assuming no recession for steve: 208 quarters. daniel: -- not krishna: if trends continue, they could be the largest business cycle -- jonathan: we could go another 10 years. krishna: 10 years is a long time, but i think it could continue for another 2, 3 years. is continuing for two or three years, what is the treasury market town you -- we had not short -- net short positions in futures, then net long. a violent step back. how do you score that? krishna: but the treasury market is betting on is the fact that u.s. economy is slowing, or at least it is very worried about that. i think if the fed plays around
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with the balance sheet and in turn makes a mistake, overplays its hand, then the u.s. economy is going to slow down. i think the market expects that if the fed on winds its balance sheet faster, rates are going to go up. i would contend that slows down the u.s. economy and race will rally rather than go up. david: it seems to be a consensus about what will happen and what will not happen. what is the lost opportunity? you make people were ready for a change. you had republicans in both houses of commerce. what is the lost opportunity here? steve: the lost opportunity is tragic, actually. there is so much we could and should be doing. we need tax reform. tax code is crazy. it creates all this incentive. desperately need more spending on things like infrastructure, education. he wants to increase
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infrastructure, cut into structure r&d, invest more in workers to get productivity up, growth rate up. there is a long list of stuff. almost nothing has happened in washington in the last six years of a constructive nature, and we have to get going. alix: thank you very much, krishna, great to see. steve rattner, you are same with us. we are awaiting president trump on his whirlwind tour. he will meet with the pope. that is air force one as we wait for president trump to depart for rome. david: a beautiful shot. the blue skies. it is beautiful. coming up, we'll talk with career diplomat daniel kurtzer who served under president clinton and president george w. bush. live from new york and london, this is bloomberg. ♪
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emma: this is bloomberg daybreak. this is the hewlett-packard enterprise going on. coming up, the former director of the cia at 9:45 a.m. eastern time. now bloomberg business flash -- the u.s. hired a firm four years to to issue $4 billion victims of bernie madoff's skiing. investors have not gotten a dime. the government disposed -- exposed payments. initial payouts will take place sometime this her. the ppg industries says there is no reason to raise its offer.
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ppg made its $29.5 billion offer almost a month ago. it was rejected two weeks later. most shareholders want the company to engage in talks. says a new trade deal has not sped up his company's ability to expand in china. china agreed to give prompt access to company such as mastercard and american express. that is your bloomberg business flash. david: there was big news in the auto world as ford ceo mark fields was replaced by jim hatchett. i spoke with executive chairman bill ford about why they made this change now. greatand a time of transition -- that is where we are now. we have not seen a time in our industry where technology, competitors, everything is converging to drive real change.
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it is helpful in a timeout that to have a leader experience in driving transformational change -- change, and we have that in jim hackett. steve rattner served as the lead advisor for the bailout of the auto industries. majorl ford right -- a transformation we see across the entire auto industry? steve: he is 100% right. you have three factors coming drive a to transformation -- right-sharing, driverless cars, and electrification. ride-sharing might be the biggest threat, combined with self-driving cars, because the average car is only used for percent of the time. the other 96% of the time it is in your garage. as the other services become more usable, people are presumably going to have fewer cars. car,might not have a third second car, or even a first car. david: i spoke to the president
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, and he said we would go more to a subscription model rather than buying cars. as you handicap that race, who is behind -- is ford behind? steve: i do not think anyone knows how it will ship out. it is like the cosmos forming. -- pieces ofeful's the puzzle -- you have to have a soft platform to run these driverless cars, you have to have infrared detectors, all these things you need to make the thing work, and the need to have a car. right now, the big 3 -- traditional automakers are the ones that make cars. they can make cars. they have all done a lot of stuff here, but who is going to come out ahead? this is a betting game that i hear a lot. is the west coast ahead? silicon valley says we know the code. anyone can make a car. david: i think --
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steve: i think the latter is more true. not anyone can make a car, but getting a software is a comparative advantage, and you have to say the west coast is further ahead. usernames -- certainly google, obviously, uber, and even apple and amazon. give us a time horizon -- three years, five years, 10 years, 20 years? steve: it will happen incrementally to you have some self-driving aspects -- cruise control, self-breaking. youquestion is when will sit in the back seat instead of the front seat, and i think that is a good ways away. there are safety concerns, concerns about it functioning perfectly in all kinds of weather conditions. years. it is five to 10 david: though out five to 10 years -- is it a good business?
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can you make money off of this? steve: if you are the leader, have the license, it is a good business. let me come back to the biggest threats to the oem's we spent -- billion, you can see that go down by 20%, 30%. you can still see a profit, you have to change your business to accommodate that. there is a change with unions and automation. alix: this happens right as i learn how to drive -- that is unfair. i resisted for decades. if i only knew. jonathan: i lived in london, new for --hat 20 two drive what do i need to drive for? alix: do you know how to drive? jonathan: of course i do. alix: i went to the class. you can go to our terminal and
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from new york city for our viewers worldwide -- this is bloomberg daybreak. an update after the tragic events last night in manchester, england -- an attack, a suicide bomber that killed 22 people at a pop concert in manchester, he would. we have news from the manchester police -- executing new warrants in various areas of manchester, saying arrests have been made as part of a terror probe, but no
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new arrests have been made. controlled explosion has also been carried out as well. just an update from the manchester police for you. david: during his business in the middle east, president trump sought to bring together former rivals, even enemies to work together against terrorism and for peace in the region. as he went from saudi arabia to jerusalem, someone who knows the middle east is here with us now about it challenges and potential, daniel kurtzer. he spent his career as a state department member serving as ambassador to egypt and israel. he joins us from princeton, new jersey, where he is a professor of middle eastern policies at the woodrow wilson school. welcome back to the program. you heard what the president had to say earlier today at the israel museum, where he really did have a clarion call for nations of the world to get against to fight terrorism. is this a major new initiative that could bear fruit?
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: actually nottzer -- it is a continuation of american policy to bring about as large a coalition as possible to fight terrorism, deal with financial aspects, recruitment, and so forth. i think the day in saudi arabia, however, gives it new impetus because 40 or 50 arab and muslim leaders joined together in that call. so, there is a little bit new here, but largely it is a continuation of a very tough stance of the united states against terrorism. david: identifying particular terrorism with islamic state -- i have heard the biggest advantage islamic state has it is not the number one priority for any of the major nations in the region -- it is number two or number three. can the president move that up the list of agenda items so those countries can really make it number one? krishna: it is one to be hard to
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do. for the saudi's, iran is the number one problem. for turkey, it is hamas and hezbollah. unfortunate, events like manchester will remind the world that the terrorism that we thought would be confined to the middle east actually can occur almost anywhere. alix: and speaking of, we are currently waiting for president donald trump arriving at the air force base to leave on air force one. his helicopter will be arriving any moment now. he will depart to rome, where he will be meeting with the pope. this is after an aggressive tour. david: touring the world's great religions here. ambassador, to come back to you for the moment on the question of what can be done -- you mention europe. because of manchester, we are very mindful of it. we look forward to the g-7 summit -- could we put together a grander coalition including
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nato? can nato play a constructive role in fighting terrorism not rain the middle east, but throughout europe ask krishna: certainly, --your? krishna: certainly -- certainly,kurtzer: in europe, they can take the lead. that is a coalition includes european states fighting isis, but i think once you try to make a transition to a more formal role for nato, you will run up against all of the sensitivities and aroused of middle eastern states. i think they have to think carefully about how they organize this grander coalition. right now we are actually doing pretty well. we are degrading isis in iraq and syria. you know, it is morphing into smaller isis cells elsewhere, but it is really a long-term fight, and i am not sure that
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nato in the middle east is going to be part of it. kurtzer,, daniel princeton university, thank you for being with us. alix: you can see president trump's helicopter will be landing any moment and he will take off on air force one to rome, italy. david: the big question is what happens next -- it is great to have meetings with photo ops, but can they follow through? jonathan: what does it look like -- more spending, gdp, things like nato -- that is a discussion for the next top hour. coming up, we will be formed -- joined by then former cia director. from your c-suite, you're watching bloomberg tv -- from new york city, you are watching bloomberg tv. ♪
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jonathan: a suicide bomber in manchester leaves 20 people dead and people injured. for talk trump passes continues with a trip. unveileda budget plan 3.6 billion dollars in cuts over 10 years and optimism about when the next session may or may not come. since 1991.level from new york city, good morning. a warm welcome to bloomberg daybreak. i am jonathan ferro. the talk continues. david: prime minister netanyahu waiting for the president. andident trump will depart on his way to rome, we will meet with the pope. jonathan: the markets about 29
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minutes -- 0.13% on the s&p 500. a really nice session emerging for european equities as well backed up by 0.32%. business confidence really firm. if you switch up the board 11232, ithe euro at has been a week of significant euro strength. moving so far this year in 2017 and the past week alone. treasury yields up by five basis points p or 2.5 on the u.s. 10 year. alix steel. the s&p is up more than three points in the last six days. it has been quite a struggle as we go higher this morning. nokia getting a pop of over 6%. nokia and apple agreed to a licensing patch. it also cut a favorable ruling and will get payments as well as
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future royalties. became really aggressive last december. another weaker read on the auto industry. third-quarter estimates missed even the lowest estimates. part of the blame is due to a shortfall on late irs refunds. it is now all about the irs. this is the best-selling season we have had an 10 years, a be the higher estimates of revenue was up tock log order 5 billion, about four quarters of revenue. stronger read for luxury housing. david: as we continue to wait for president trump, you're watching as prime minister netanyahu waits for the president.
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we will now turn to the white house. one thing we have seen on the tour so far, really focused on .ighting terrorism perhaps a state sponsor of terrorism. is this something the white house had planned all along? >> this was in the plan of the white house. the president wanted to show he is changing the u.s. strategy between more engaged and taking on the terrorist threats that face not only the united states but a number of allies around the world. focusite house wanted to on the religious centers of the world, including, he stopped in saudi arabia and went to israel and is now moving to rome. the overall theme is these
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various countries and regions have religions that all of these countries could live in peace and unite to take on terrorist ideologies. this was something planned by the white house and they are and he has not can't off and made too many ad lips, getting him into much trouble but so far, sticking with the script. the president and the first lady will get out and greek prime minister netanyahu. going on iner news washington. a budget comes up in the white house about two hours from now, i understand. that will include increases for defense and national security.
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as developments in saudi arabia and israel, making it more likely that congress will be open to those sorts of increases in spending? >> largely, congress is on board with increased defense spending. we saw the budget for the rest of the fiscal year increase in spending. presidentesistance will get about the budget has to do with the domestic side. -- those programs are being cut drastically by the budget and that is being met with -- both from democrats were likely to vote in a large block against the president's proposal as well moderates,ans, conservatives who are not happy. the senate majority leader, we heard the senate will take into account some of the president's ideas but largely the overall budget is dead on arrival and
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the house and the senate are going to start from scratch and write their own budget probably not taking the whole thing. still waiting for president trump to disembark from the helicopter as he heads to air force one. he will go from rome to italy. blackrock now is the allocation fund general manager. what is your base case when it comes to budget tax reform and health care? the tropics -- the trump agenda, what are you modeling? >> good morning. probably not much expected for 2017. at some point, there will be a tax cut. i expect again for there to be a .oderate tax cut if you take the trump numbers
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literally, it implies a pretty significant tax cut. counting on economic assumptions for the budget. at the end, more fiscally responsible. modestill probably be a one. i do not expect significant spending cuts at all. is nextnd, maybe it year, but i would not count on the budget today. ,uite the near record highs only model it -- modest 2018? >> i think it does. market record high, part of what it reflects is, as jim said, we will not necessarily get the type of fiscal stimulus the market was hoping for last fall. you have a solid economy and the expansionsee
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spread out and not much evidence we're seeing a significant acceleration. in december, back about 20 basis points lower. president of the united states -- back home, we have a budget with assumptions in it. you are one of the best forecasters surveyed by bloomberg or no recession? >> i am sure there will be in the next 10 years. this is the third-largest expansion on record, this is the third longest ever. i do not anticipate it through 2018, as far out as i am formally forecasting. heightening in response to below 4%, and inflation becomes a problem here and ultimately, rolls over again, ultimately, there will be a recession again.
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there are lags. estimates put it at 4.7 or we dropped below that in the last two months. these things take time. you could see inflation up by half a year. ultimately, that gets too high from a fed perspective. in one year,t up but even if it goes from half a point a year, that becomes a problem. alix: walking up the stairs as they take off on his tour. she comes out yesterday and highlights the distinction between the labor market being good and inflation not being great and weakening in the last few weeks. that was a very different conversation we saw. the messages were on board with the hike and now she is going
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off with her own little bit what does that mean for the near-term rate hike cycle? >> are a couple of things going on which are significant. the first, we not seeing a near-term acceleration rate. difficulthas become a thing to measure. orcan all think about areas prices are rising and there is a lot of deflationary effects. the notion of one number capturing that has become much more difficult than 10 years ago. the other thing that i think is very important is it is not clear the administration will embrace a hawkish monetary policy the way you heard on the campaign trail. probably the administration comfortable with that is one of the reasons the dollar is down 4%. alix: president trump and his wife now on air force one taking off to rome, continuing his tour. .
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jonathan: what is the debate worth? you notice the federal reserve works on this one measure of core inflation. they just have to follow that in the to understand market? >> we're seeing a lot of diversions, a relatively small group -- group of technology companies, and certainly retailers do not enjoy that. investors are trying to discount a fed reaction function in a -- in an unprecedented environment. >> not having a homogeneous labor market this point, that you are seeing inflation and deflation other places. if you have inflation on prices going up and down in other places, will that explain wage
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growth? >> it is not as if the economy -- if it were to stop, would it be a big and broad inflation problem, no. per year 180,000 plus in a world where labor growth is less than 1% per year, unemployment will keep falling. if it is less than 4% in a years time, we ultimately get inflation pressures? the wage numbers are accelerating when you go through the ups and downs. a lot of it is because of a specific item. sector, it has gone from plus 1% to -13 and that has taken it off the number. up necessarily but not down the way the inflation numbers have implied. when you take the weight of
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evidence that the labor market is down, it is only getting tighter. you project forward and there will be more upper pressure non-trust on wages but ultimately inflation as well. house: thank you so much. coming up, europe's economic every show some strength. confidence at the highest level since 1991. blackrock unveiled their top trade next. still a very big week ahead. the g-7 summit still to come. we will discuss it. much more ahead. this is bloomberg. ♪
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economic confidence, business confidence, coming up highest level since records began in 1991. bullish sentiment building in europe. fundrock global allocation portfolio manager, talk to us about the money that decided to finally flow into europe, backup the talk. we got this story and it is time to get in. >> this has been the trade. part of it is a lot of money going into europe so far to into it was enormous flow on spirit there's probably more room for equity markets to catch up. jonathan: that market open is about 40 minutes away. a europe story?
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>> there is a strong bias. the reality here is the economy is doing well. the market is expensive. call it highly valued in whatever way you look at it, is difficult to suggest that this valuation, over the next five years, will be anywhere close to where it had been in the last five years. a bit of a rotation out of the u.s. in developed countries. >> the pushback you might get is that they are there for a reason . who knows what the ecb will do over the next couple of years. we have no idea what the reaction will be in the rate market. we have thisason discount in the valuation. >> it is true and there is a difference which accounts for some of this. have a more favorable monitor environment in europe than in the u.s. in the next few years.
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is not always versus u.s., it is the company there. a lot of the companies in europe, it is not because of the european economy, it is because global economies are cheap. >> who does not love pmi day? eurozone.ut -- i was sincere. i think he is making fun of me. bear with me, this is an important chart. global pmi andis you have the blue line here, the eurozone, and the purple line, which is germany. i want to highlight these two. the greenest turner and the versus u.s. it is clear from this chart you have germany propping up the eurozone pmi. more, hows over even does europe withstand that? >> that is an excellent point
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here to china starts to roll -- , germany you have to watch china carefully. it has to be predicated on the notion that china will do ok. not necessarily accelerate but not decelerate either. jonathan: the whole reflation trade is predicated on the same thing. let's separate a couple of things. we have the euro story in a huge way. whether it is fixed income or equity. on you stay constructive europe if china continues to soften and stay constructive? >> i think this is an interesting point. you can envision a world where it inflict -- in flex a little bit of pain but actually does fairly well. the reason is if you have an environment where the inflation pressures are modest and the fed
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is not slamming on the brakes, that is a good environment and one reason it has done so well this year and it is down four or 5%. alix: we'll talk about the negatives. domestic demand is still not there. recoverycally have a without inflation. it does not bode well for the ecb and their policy decisions. >> it points to some of the structural issues. in the near term, it is not a bad thing for the markets. it keeps the ecb on hold but that is probably not a bad >>ironment for equity goldilocks. to -- isn'to start it inevitable at this point given all the indicators? >> they have to think about withdrawing accommodations.
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the second derivative, you are changing. the question is, you have ofbably a longer horizon accommodative monetary policy in japan than you clearly do in the u.s. it is one reason it favors non-us equities over the u.s. david: so you will be staying with us. coming up, live from new york, this is bloomberg. ♪
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1% and 2/10 on the s&p 500. up one third of 1% and the data so far is absolutely terrific. the pmi is solid. all it back to 1991, that is how high this. >> every part of the world except for one. we cover china but we have not covered japan. >> we like japan. it gets a lot of question marks. i think it comes down to three simple things. one, we are the only place left in the developed world where val -- valuations are relatively cheap. and accommodative central bank, third, improvement in corporate governance of -- a turn on
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over 1/10 of 1%, zero point 16% to be precise. european equities gaining as well after pmi over the eurozone. here's what we have seen in the treasury market. your cash yields up and that weakness destabilizing. market opening 15 seconds in, here is alix steel. alix: the s&p up by about three points. we are about five or nine points away from another record for the s&p. the nasdaq a little firmer as dow and you have the another stone throw away from a record. 2/10 of 1%. what we have seen has been quite impressive.
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will be the longest since february if we could stay with those gains and eke it out. but the s&p five -- the s&p is still up. perspective on this rally we have seen. we have autozone getting smacked, bringing down its peers as well. the earnings miss was significant. a 52-week high for autozone. a dual problem. you have used car prices down for the last six months. irs.are blaming they are blaming late tax returns for putting pressure on the last quarter. this really highlights the distinction of how you will trade the market when it comes to the fundamentals or the macro. and thepens relationship there. the question is highlighted when it comes to volatility. we know it is low. let's look at the distinction.
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to-day volatility is up about 12 or the nine-day volatility, three-month volatility, that is low down by about seven. the dotted white line shows the historic low. we have not seen this low in 10 years. that raises a question in the market. how do you have a market that is called for the longer-term but you still deal with the short-term volatility like we saw last wednesday? it does not feel it dispense know how to trade that yet. they ignored it for a reason. i love this quote. it influences how investors think, it has not mattered one bit to how investors act. the gentleman smiling to the right of me because it is his quote. how we think, yes, but how we act, no. classic sounded so smart.
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every once in a while. when youdown to come look at historic times of such low volatility, they tend to be better than sale signals. over 100 days, you do not have .he s&p 500 down by 1% in a day the only two times that is happened is 1985 and 1995. those were predecessors to corporate tax cuts or proposals for regulatory change. the real story i have found in the last couple of months has not in that companies and individual investors or professional investors are -- theyting pass cuts are just grateful it will not get worst. not have you will increased regulation or increased taxes. animal spirits are not about donald trump. they are about that it will not get worse interrogatory tax base. >> lies is still considered a legal -- a leading indicator --
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when credit spreads, economic data and volatility around that has been incredibly low as well. earnings are improving. that things were about to happen? you do get spike in the vix. a week ago, how many people were thinking i have got to sell because it was all to 14? maybe it will finally get above 20. i just had a meeting before i came on air and one of the comments was all of the wall , just in case the volatility does spy, they are not doing it. they spent about 150 basis points last year, they have been advised, but what price will you pay into that? it is probably time to do it because everyone is giving up on that. >> is a distinction between looking at it and saying alright we are selling out and look, i
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have to protect myself. she is like, you have got to hedge it now. how do you hedge that? a short-term event risk? >> it is a couple of things. i think it was framed exactly correctly. you have to look at the factors that drive it. factors that have normally determine the fair value of the vix. the vix should be low, maybe not 10, but probably 20. to your question, one thing you can do is as people get a little bit less afraid of the bond market, you have seen the negative correlation reassert itself. treasuries are still providing the short-term hedge in the equity market risk. the source off the volatility is not the fed but whatever growth critical --
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political scare happens to be warning investors that day, there is still a reasonable job hedging both equity and credit risk. >> it is a really interesting thing, let's look at the last seven years. have we had a spike in volatility? had an emergency currency crisis for weaker technologies, we have had a brexit, a brazil. all of those buying opportunities. there is one decision you need tomake, how close are we recession? spreads are very tight. no sign of a credit dislocation and an inversion of the yield curve since 1954. jonathan: there are fractures in the credit market. signs it is off just a
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little bit. >> they should do the fed has started to raise rates. the real funds rate has gone up. over the course of the last seven years, we are still early in the last cycle. it is not about duration. it is fed policy. the drives those rates are fed begins to lift interest rates and the people who should never have had the debt campaigned with that. >> an important point. we are so used to thinking longevity in the last seven or eight years. it has been such an unusual thee, we have not seen balance at least as much on the consumer sector as we have on the past, that it could go on for a while longer. it may be a very long-lived cycle. the trade will still be growth over value? even though it should be valued, we should be rotating into fullmer staples versus a
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bet on energy? >> there a great function on bloomberg. i am pandering to my audience. in late december and early january, all of the sectors were underperforming. everyone was on board with the trump trade i have downgraded the market expectation and put the defensive sectors back to neutral. back then, regulation was coming down and the economy would boom. upgraded the, we trump trade. not having to do with donald trump. we are in a global economic recovery. it is accelerating, not decelerating. banks, thed for the materials, and energy. >> we started the conversation andooking at the vix decline at that is any kind of
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leading indicator for the marketer you picked up on the federal reserve. it is the biggest headwind to risk assets and the risk rally, that the data tends to soften up in the united states and the fed continues its sequential rate hikes and marches rates higher? >> no, it is stronger economic activity which will lead to a much more aggressive fed. if that is true, credit shuts down and we go into a crisis mode. the only time i would urge the viewers -- think about what has happened the cycle. do with thewant to volatility that is the question you want to answer. it will happen. >> i agree with tony the credit is the canary in the coal mine. worried aboutore pockets of the consumer and not the consumer overall. on the seen an uptick
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autos -- auto loan market in terms of defaults. that is unusual in the environment a 4.4% with interest rates as low as they are. it does suggest there are parts that are over levered and if things start to change, that adds fertility to the market. jonathan: the labor market was terrible. alix: terrible, a disaster. 4.5% unemployment. jonathan: great to have you with us. let's get you some speed on the session so far. this wednesday morning. or is it tuesday? i am lost already. jonathan: inching toward the futures, stocks are up to we are up 34 points on the dow come up by 1/10 of 1% on the s&p 500. you are watching bloomberg. ♪
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>> we're here in the hewlett-packard enterprise greenroom. coming up, the ceo and president of wells fargo. david: this is bloomberg. terrorism return to the top of the news overnight with a tragic attack in england leaving 22 debt and 69 injured. the islamic state has claimed responsibility but we are way too far -- it is too early to know what happened. much less why it happened at we welcome someone who had the ,esponsibility for tracking
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james, who served as the director of central intelligence under president lincoln in the mid-1990's. welcome to the program. you did have to deal with these sorts of instances. what can we learn and what can we not learn? we do not want to learn the wrong things. >> when you have a group like world,nging around the though we have heard them badly they areand iraq, still operating in 25 or 30 countries. when he gets into a situation like this where it becomes this, clear who is doing you start to look at how you might be able to get ahead of the business and the only good way would the -- that it's very hard. there are technical ways to tap
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encryption.mmercial listening in on them and so forth is not easy. >> one thing we hear time i get -- time and again, we need at a corporation among intelligence agencies, that there are still barriers. is that right? >> there are not as many barriers in the u.s. government as back before 9/11. i think the mistaken notion that they could improve civil liberties, the group spec than thought not only could they are many important matters, the fbi and the cia not be permitted to partsicate, but different of the fbi could not communicate with one another. fromve finally moved away some of the more outrageous to of those -- outrageous of those
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approaches. there is nothing easy about this. do with isis,o one has to destroy the andership and the caliphate be able to do it with clear success. because that is what the people are after. trump is on his way to rome right now. he went to saudi arabia, then went to jerusalem. he is talked about putting together a coalition of partners. is that something that could more effectively go against the islamic state? some but i help think the main impact is the dramatic and political it i do not want to understate that. i think it is important. but the cooperation we would and even between israelis
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the saudi's playing some kind of without can do that having a large organization. the organization is important, i think, politically, very much. >> the president will go after rome to meet with nato leaders. can nato really meet with an effective terrorist organization? james: it has been moving that way. caught by surprise, 9/11 just as the united states was. it has decision-making mechanisms for dealing with military matters. it has strategic plans. moves encouragements to toward various weapon systems, etc. it is mainly to or the last
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four, toward what the russian general calls contact between bullets and people. the next war will be a no contact war. not bullets, but electrons. that creates a difficult situation p we have got to be able to break the codes of the terrorists. there are a lot of things we need to look -- need to do electronically that we are beginning to do. you were back to your old role and the presents a director, tell me the most important tool i have in my toolbox to adjust terrorism to the islamic state, what would you hand him as the tool? >> -- james: i think an essay specialists in the country, if you put together the folks who august,in nevada every
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and some of the best in silicon and the best cyber intelligence operation in the world, and you put all those together, several hundred folks, and get them oriented toward going after the bad guys, they do pretty well. you very james, thank much for joining the program. them -- breaking pmi data. we have the pmi's right here right now. that is the preliminary reading for the month of may. 53.0, 62.8 was the previous number. at 54, 50 3.3. , for the market and the united states. 53.2, on the composite, the
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highest -- highest rating since december of 2016. unemployment, rising versus the prime months, since february 2017, certainly solid and a continuation of what we have seen. alix: and it is relatively encouraging as well. watch us online and click on our charts and graphics and interact with us. click on a chart over here and check it out. up next, president trump's budget will be released in just about an hour. we will hear from prominent lawmakers on the potential. this is bloomberg. ♪
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>> well educated, well trained for national security as well. this budget will be proposed this morning and it eliminates all of those investments. a great deal of those investments that are essential for a strong society. >> a good man and a good friend of mine but he is wrong on economic security. you have 0.7 economic growth last year following eight years of democratic leadership, that is not economic security. >> it is a fantasy document in many respects. does not even include the present's 5.5 trillion dollar tax cuts and the spending cuts are so massive it is hard to imagine even republicans will go along with it p rather than bouncing the budget, it's ugly creates more deficits going forward. alix: michael mckee joins us now. take us through the rhetoric here. what do we pay attention to 11:00 a.m.
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3%we know they expect growth. as steve was saying, there is not an economist out there that would not tell you it is a fantasy number. they expect growth to jump to 3% but unemployment to go up when that happens. .hat would be counterintuitive inflation would fall rather than rise on stronger growth. they are basically best fitting the numbers to tell their story. what is interesting is none of none of the elected people with the possible exception of senator mcconnell, really have a role to play in this. grouper of the tea party -- group, he will be very happy and the representative will be unhappy but he does not count because he is a democrat. it is the house moderates who will hate the bill. they will have to go home and
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campaign in 2018 and there will be commercials running against them that say you voted to run against medicine. it is a difficult campaign document. those are the ones you really have to reach to put those together. >> you will have a lot of unhappy people with them. the housel assumes passed obamacare bill enacted, and has to form enacted, both of those looking very difficult at this point. >> isn't very huge farm subsidies? does what is interesting about it. this attack, a lot of what trump supporters, attacks on many of the programs, or lies on. harder for 2018 budget and the interesting thing is they cannot do tasks for it unless they have a 2018 budget.
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alix: they have got to do tax reform to get any juice out of it, the catch-22. >> unless you could put reconciliation into vote with a majority vote, it will not go anywhere. why they you wonder even put it out if it will not go anywhere. alix: it is fancy. jonathan: let's wrap up the program for you. stocks opened a little bit higher. we tread water now. up about 0.2% in the s&p 500. you are watching bloomberg tv. ♪
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the: we will bring you latest on the terror attack in manchester. in a couple of minutes, an interview with the chief executive of wells fargo. we have economic data. white house we got? vonnie: a big miss. new -- what have we got? vonnie: a big mess in home sales. economists were looking for a drop of 1.8%, so that is a major drop. 569,000 at an annual rate for the month versus an expectation -- 610,000. markets are flat. mark: let's get the latest on the explosion at the end of a popped concert last night, leaving 22 dead, 59
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