anti-terror forced said that he was detained for interrogations. before his arrest the father said his son was innocent and had been planning a trip to saudi arabia for a coverage. speaking to a bash rex tillerson -- he would like to see u.s. join nato -- week's terror attack would strengthen the resolve in the fight against terrorists. i think the discussions we had in israel and today around this threat -- the leaders of these three faiths -- the horrible attack reminded us while we have to do this. it reminds ussaid why we have to win this fight. mark: to listen added -- he added, we can't leave it for

someone else to do. the president is in belgium. , thee philippines president of the philippines is striking back. all of the island under martial law. it is likely to include the setting up of check noise, curfews and the ability for the government to jail suspects without having to take them before a judge. global news 24 hours a day powered by more than 2600 journalists and in more than 120 countries. this is bloomberg. ♪ >> live from bloomberg's world headquarters in new york. where 30 minutes from the

close of trading in the u.s. "what'd you miss?" >> minutes from the last federal reserve meeting show officials judging rate hike will be soon. we're still winning the budget announcement of the republican rittenhouse bill and what impact it might have on health care coverage and consumer cost. china's -- we will hear where he sees opportunity in chinese markets. let's look at where the major averages stand as we head towards the close. abigail doolittle is standing by. abigail: we are looking at methodist -- modest gains. all trading higher at session highs. gains are relatively small. this is a continuation of what we have seen. very small moves for many sessions with a few exceptions.

he thinks this is the tension between the uncertainty around president trump's politics versus the possibility of tax reform. very interesting take. it will be interesting to see. right now we have gains. more action in the 10 year yield. we saw an initial move higher. the idea that the fed will raise rates. now we see the 10 year yield driving lower. what is interesting is that the minutes indicated they are on track to raise rates in june. function within bloomberg shows 86% probability that will happen. an interesting tension. could be the idea that the rate hike is already priced in. in this case, because price is inverse to yield, we are seeing action. it is having an effect sector-wise. materials had been the top

sector. we're now looking at real estate and utilities trading higher. these are high dividend yield stocks which do better when yields fall. on the flipside the financials initially around the time of those minutes took lower. nonetheless, one of the few sectors to be trading lower as those yield dropped down. -- yields drop down. we hopped into the bloomberg and take a look. this is a long-term chart in yellow we have the fed balance sheet up that nearly 4.5 chilean dollars. -- $4.5 trillion. very low rates. it appears to have clearly held the s&p 500. some talk about that is the really inflation trade.

-- re-inflation trade. -- rates willce rise. me is thes out for fact when you take a look at the 10 year yield the trend is down. he thinks it is going below 2%. that might suggest the balance sheet would stay up there longer than was talked about by the fed. time will tell. >> good things to keep in mind. let's get more analysis. here are key takeaways. officialsal reserve judged it would soon be appropriate to tighten monetary policy again. they added it would be prudent to wait for evidence that a leases -- recent slowdown had been transitory. they would consider gradual balance sheet reduction by year-end. where joined by the chief economist from los angeles.

thank you for joining us. the minutes were dated. we got data that shows inflation is suffering. what did you learn about policymaker's conviction and expectations of faster inflation? guest: i think they lost conviction. meeting, it has been to confirm they likely will be below whenever trajectory they had in the previous meetings. looking forward they're going to have a tough time understanding how to normalize policy. ohat you set up before -- d they use rates or the balance sheet? they should consider more easing rates than the balance sheet because i think everyone would agree the balance sheet is huge now. when everyone knows exactly what it is. also everyone knows how to calibrate interest-rate increases and their effects on the economy. no one knows how to calibrate $1

billion of balance sheet reduction. what impact did that have on the economy? we don't know. that uncertainty, the board will be discussing between now and the end of the year. joe: let's talk about that balance sheet. we are getting more detail on how they think about it. talking about starting the runoff very small than increasing the potential cap every three months until it hits a new level. when you see that discussion about the balance sheet, what does that tell you about how they are thinking about it? bill: it means they allowed technicians to come out and say look, the principles are there but we need to talk about how to implement normalization policy. here on the tools available to you to do a gradual tapering. the question still remains -- they said in the minutes -- yet to revise our principles for normalized the balance sheet. what is normal? those big decisions are still to be made.

theoretically there is no clear answer. there's nothing wrong with leaving the balance sheet as it is. the fed to raise rates more than they would otherwise and that is something that will be great for the financial markets because it relieves the distortions of low rates around the world. >> the problem is they want to communicate, they want to make this so open and obvious that the market doesn't have a temper tantrum over the balance sheet reduction. yesterday, he said he could envision a situation in the second half of this year where the fed realizes that have a problem that inflation expectations risk becoming entrenched on the wrong side of 2%. then they have to do an about-face. you agree they could have this problem? bill: i think they could have the problem but i don't think they would do an about turn. that is something central banks in general don't do.

toy don't admit we have change our minds because that destroys the credibility. that is the one thing they have to bank on, credibility. what they will probably do is delay the balance sheet tapering and allow the rates to take the brunt of the policy normalization process. scarlet: are there any benefits to holding off? he said there's nothing wrong with it but are the concrete benefits to doing so? bill: there are phenomenal benefits and people don't talk about it enough. what are we facing for the last 10 years? low rates that have distorted private portfolios. every guest tells you we are looking for yield. we are loading up portfolios full of risk. so all these private portfolios now our way out of mandate, full of risk. i think by reason rates they can earn more normalized, high returns without having to load risk. that means a de-risking of portfolios. riseina, there is a huge

in debt. in the u.s. we have seen a huge rise in corporate debt. back togiving it dividend stock buyback. we need to allow rates to go up. joe: i want to go back to what we were talking about, some mediocre inflation prints we have seen. setting aside the fed and how they might react this data, what is going on in your view? bill: a lot of it is special situations. wireless prices coming down. when you get through the special situation, underlying all of this is there is a ton of slack in the labor market. everyone is talking about how the eci's journey upwards. but what numbers are we talking about? we're nowhere near the inflationary. we do know the lack of pricing power. every time prices go up, within

a few months ago back down. there is fundamentally a lack of aggregate demand him a sustained rising prices. or now, the slack in the leg -- the labor market -- my reply is the unemployment rate has been a lousy measure for a long time because of changing demographics. a better measure of slack i mentioned several years ago and which i keep pedaling, -- ped dling, is labor turnover. the pace of hiring is much slower than job openings. choosy on picky and who they are hiring in what they are paying. >> some exciting changes to come. i wonder if you were a part of the reason why the fed is so open and willing to communicate is also the risk of political

pressure. if they don't at least talk about some kind of strategy as far as a balance sheet is concerned, this administration shows they are not shy about voicing their opinion. bill: i don't think the administration has an opinion. for that policy, they don't need to worry. with the need to do is show they are transparent, because the central bank culture is that we're all transparent. going back to the days of milton friedman, there is a lot to be said for constructive ambiguity. notttle bit of ambiguity to let the markets fully anticipate everything. the one thing you know is that when markets are disappointed, they feel you really understand how you're doing, then you do something different, that is the source of loss of credibility and resource of market turmoil. that is something the fed has to avoid. it up transparency is great, but up to a point. scarlet: great analysis.

thank you so much. joe: i think it was interesting what he said about us not being at full employment. more and more economists are saying we're at 4.4% unemployment but maybe we could go a lot lower. >> and worry less. about his point constructive ambiguity. up, we talked to muddy waters founder about his outlook on china. that's next. this is bloomberg. ♪

♪ credit agency cutting china's debt agency since the first time

since 1989. the chinese finance minister says they don't understand china's debt regulation system any country will likely maintain stable and relatively high growth. to the muddy waters founder earlier today and asked him if the cuts were wanted. -- oriented. -- warranted. beit is difficult for me to here in mid-2017 and seeing this not collapse yet. yearse i felt for many that it is in a norma's asset and credit bubble. old orthodoxy it could not be sustained that long. if you look around the world you see that the ecb, the fed are helping to sustain frothy asset valuations. japan has not made sense in a few decades.

china, the question is how long they can keep it going. i don't have a view on this. i think ultimately there will be a day of reckoning. i know that come i just can't tell you if it is two months or two years. >> so you don't know about the timing but you do feel certain about the outcome? carson: yeah. they have been destroying capital for so many years through their fixed asset investment. -- one cushion it china has and this is something that there is a lot of debate about how hard a landing you will get in china -- the one cushion it has is it owns the banking system. china's reaction to the financial crisis in 2008, was to cram liquidity through the banking system. but through nonexistent controls , that went straight into real estate domestically, then a lot fled the country. went into real estate in the

west coast, canada and australia as well. there has been so much value destroyed that my firm belief is you cannot -- at some point, catch up with you. i just don't know when that will be for china. >> if timing is possible to predict, which i don't want to mouth,r -- words in your but it sounds like that is what you are saying. what about those people who are chosen to short china? whether it is through chinese currency or other instruments. that sounds like the kind of trade that has lost people money and the japanese bond market for years -- a widow maker. carson: there are certainly ways that you can play china that our company-specific. there are a lot of chinese companies that are publicly traded. some in the u.s., a lot in hong kong. many of them are very poor quality.

i would not want to take a purely macro-thesis and say i'm going to short china. i would not want to short the hang seng index. if you start with the macro thesis and say there are a lot of credit problems in china, then you start looking at indices -- industries that might be canaries in the coal mine, then you could get it right. but the flipside is there are companies that won't be allowed to fail. there are companies that don't make sense on many levels that somehow keep it going. companies,ng which for whatever reason, have the -- to keep it going, that is challenging. >> what about the bull case? isple say xi jinping determined not to let the economy collapse, determined not to let bad loans consume the

banking system. they has started to crack down and select places. to your point, the government has a lot of control over the financial system and the economy. at the very least, maybe they will muddle through. -- in: see, that is when always crack a smile when i hear western-trained economists say things like that. because there is this tremendous cognitive distant -- dissidents. the moment the u.s. government bought nonvoting shares in banks to capitalize them, freaked out saying this is horrible, the death of markets -- a lot of the same economists than look at chinese leadership and say, oh, this is brilliant. these guys are no more capable -- trust me -- no more capable than our policymakers in the u.s. have been. truth be told, as screwed up as

our government seems at times, our government, the united states government, has the most power in the world to avert a major economic catastrophe. they were not able to do appeared it's because the -- to do it. it's because the laws of economics are able to catch up. pretty much everyone in the chinese leadership is an engineer. i'm not saying they should staff their government full of lawyers, but there is a lot of intellectual -- it is very incestuous intellectually. i am not going to bet that they can escape the laws of economics in perpetuity. a quick check as we head towards the close, s&p 500 approaching the 2405 record. not quite there but we are at the best levels of the session. vix dropping below 10 once again.

joe: a long national nightmare. the vix over 10 is over. up next, when moody's taking us for step in warning investors on china's debt problems. we will show you three ways to look at the nation's financial risk. as is bloomberg. ♪

♪ scarlet: "what'd you miss?" a double with me for investors forhina -- double whammy investors in china. let's look at some issues when it comes to china. it boils down to that. they have $27 trillion worth of public and private debt. you're looking at financing, the blue bar. it has steadily increased since 2009. the white line is gdp growth. it has certainly slowed down since 2007 and has stabilized at around 6.5% now. the question is how they rein in

debt. growing ats economy a rate that keeps social unrest at bay and doesn't threaten the legitimacy. joe: you're looking at trillions of dollars in debt. , it really only matters if they cannot print the money. the one thing they can't print is dollars. it's only $11 billion, not that big in the grand scheme of things. one reason people aren't you concerned, for the most part there is still not much dollar borrowing and they could probably paper over any issues. >> speaking of which, all the --res combined to diversity diversify the focusing more towards the consumer.

somebody is listening. line -- 38%re seeing is a whopping gain for china's consumer discretionary index. the middle class are getting more engaged. china,lion people in there is room for that could -- that to grow. joe: it speaks to the idea towards the tilt of the chinese consumer as the one successful avenue in the chinese market. >> it's a challenge. scarlet: the market closes next. s&p 500 down, nasdaq pretty much at session highs. joe mentioned our long national nightmare is over because the vix is below 10. the dow up by 82 points.

up. this is bloomberg. ♪

♪ >> "what'd you miss?"

stocks pushing higher for a fifth day of gains. i am juliette tapley. scarlet: i am scarlet fu. joe: i am joe weisenthal. we want to welcome you if you're watching from twitter. scarlet: we begin with market minutes. u.s. stocks closing off at best levels of the session. it seems to paved the way, although we should mention, let's not get carried away. we are looking at gains of 73 points for the doubt. modest gains continue to build. s&p 500 did get into sitting distance of its intraday high, but could not quite get to that number. joe: round numbers. scarlet: certainly what we have been looking at. pretty broad based advance here. materials stage a late rally.

up until the last hour of trading, utilities and bond proxies fared the best. they are up by better than half of 1%. telecoms are the big decliners, up 6/10 of 1%. in terms of individual movers, -- unexpected sales drop in the first quarter. sluggish demand in the americas. they will be reporting that tomorrow. the stock is down almost 7%. abercrombie fitch getting a boost after wall street journal said they may make a joint bid with american eagle. 10,vix falling below falling again. you can see after the fed 2:00es were released at p.m. it has steadily drifted lower. joe: let's take a look at the

government bond markets around the world. -- buyingn u.s. everywhere. equities are up and people want treasuries, 10 year yield down to 2.25%. the greek 10 year looking at for the second day in a row, above six point sent -- 6%. brazilian 10-year coming in after rocky days at 11.34%. julia: the dollar softer in light of the fed minutes. argue very gently that the market chose to focus on the concerns of inflation and what that looks like going forward. 80% of ability of a june rate hike. and what this means for the back half of the year? at 129.51.

canada leading rates unchanged today. the market was expecting dovishness from them over the disappointing data there. take a look on the bright side, the labor market saw strength as a consumer. joe: and let's look finally at commodities. a lot of read on there. some buying in gold. oil down modestly. not a lot of action. most of the action and industrial commodities. i and or down 2.25%. 2.64%.down metals takingrial the worst of it today. those are the market minutes. julia: "what'd you miss?" house speaker paul ryan working on changes to his order adjusted tax land, a sticking point in the gop tax reform. todayet with wilbur ross

on their opposition to the proposal. the national retail federation member was at that meeting. he joins us from capitol hill. thank you for joining us. in light of your meeting with the commerce secretary, are you more or less confident that you will escape the measures? >> i certainly would not want to be overconfident. we are a putting an enormous amount of resources and a putting our message to the hill and the administration, that the border adjustment tax would be a disaster for retail. we call it an existential threat. we want to make sure everybody understands the real impact that would have on our industry. i would never say it is dead. things in washington tend to come alive again. we will keep putting the pressure on to make sure everyone understands what is going on. scarlet: understood. julia and i spoke with a former

ceo of walmart, u.s. he is in favor of a border adjusted tax. he says the actual tax, if it were implemented, is not as big a deal as the industry makes it out to be. >> it is a self-serving hysterical perspective to say it is a jobs killer. changer.e a job it will be difficult and challenging for them. but good retailers and business people will figure out there way through it. scarlet: it will be difficult, but with enough time you can find your way through. what is your response? steven: with enough time, anything could happen. you could see a lot of retail go under and go bankrupt in the interim he is talking about. what you have are a lot of ifs. will currencies adjust? will you see changes that go on in terms of price increases? you may not be able to take the price increases. you could find margins get squeezed and profitability turns

to a loss. maybe that tax rate will go down, but you will be taxing no earnings. i think simon is being naive in his comments and a little pollyanna, assuming people will work it out. i think it will be a major, major issue for a large number of retailers. while the industry is very supportive of tax reform and is willing to go do a lot of things in terms of deductions, i do not think the border tax is the right answer and puts much too much risk on an individual industry. joe: stephen, how much specifically would you estimate such attacks would hit your industry? buy said it would take its business from making $1 billion to losing $2 billion. it woulduss indicated take their tax rate up to 80%. what you see is, individual

companies are affected differently based on the percentage of goods they are importing. taking arge, you're thin margin industry to begin with. one that is going through major disruption. you are looking at earnings, where the stock prices are. and make companies very little and the way of profit margins to begin with. by putting on what could be a 20% increase in the cost of onds, they will not pass it in price, what you will see is a lot of profit going through a loss. it could be a substantial loss. we already see many stores closing in the u.s. this year. one out of every four jobs in the u.s. are somehow tied to retail. if you take a risk with this by saying we do not know what the border adjustment tax will do, but we think it might have , we think adjusting it might work out well and people can raise the prices -- i think that is a very high risk with a lot of employment. scarlet: a lot can happen in the

interim period. you mentioned the retail industry would be willing to give a little bit as well. what deductions were you referring to? can you give specific examples? looking at an industry paying the highest tax rate of any industry. most of the companies we are talking about, a 30 5% tax rate. they are not harboring a lot of cash overseas. there is a lot of benefit if you were to see a reduction in the 35% to 50%, 20%. there is a lot of 35% room to r. i do not know specifically in terms of what deduction we are talking about. i do not want to speak for the industry relative to what may or may not give. i thought brian cornell from target described it will yesterday in his comments to the committee. from target's perspective,

anything could be on the table. that is a fair way of stating it. it seems secretary treasury mnuchin has reservations about this. president trump seemingly has concerns about this. who do think ultimately you have to convince here? who do you see as the enemy? steven: i do not think anyone is the enemy. we are all in this together. we are trying to grow the economy, grow jobs. we want to come up with solutions that make sense for everybody. the issue here is, obviously the border adjustment tax, one means that was identified to generate about $1 trillion in terms of closing a budget gap that will be generated by the personal and corporate tax adoptions -- the tax rate changes. we have to look at, what are other ways of bridging the gap? there is no enemy here. --hink there are individuals

speaker ryan is a very big proponent of this as a way of generating revenue. we are looking and saying, maybe there are other ways of generating revenue that ought to be looked at. julia: thank you so much for your insights on this. we have breaking news. scarlet: hp reports, the printer -- second-quarter revenue beating analyst estimates. for less thanng $12 billion. the revenue front, better than expected. third-quarter adjusted earnings per share will be anywhere from $.40 to $.43. second quarter beats, a jump of the 6.6% in the stock in after-hours trade. a quick mention, the s&p 500 it close at a record. , but it was an

all-time high. the it is judgment day for republican health care bill as we wait for score from the congressional budget office. we speak to a former director next. this is bloomberg. ♪

>> i am mark crumpton. this is time for first word news. u.s. airline travelers face more scrutiny over electronics larger than cell phones. the heightened screening, -- comes as the government considers banning such devices on u.s.-bound flights from europe. the tsa says passengers will be asked to store large electronics separately from carry-on bags.

screening may be extended nationwide. british authorities are convinced the manchester suicide bomber had help. police have no arrested five suspects. -- have now arrested five suspects. the investigation continues. -- continues across greater manchester as we speak. >> the british government has raised the terrorist threat level from serious to critical. of that means another attack may be imminent. theresa may is taking unprecedented security steps. she has ordered the military to guard landmarks and sporting events. president trump is spending the night in brussels after talks with the belgian prime minister charles michelle. this is part of his first official overseas trip. he will attend a nato trip

tomorrow before attending sicily with meeting -- with members of the g7. mick mulvaney said president social plan to slash "put taxpayers first." his plan combines $4.1 trillion for the upcoming 2008 -- 2018 fiscal year, hoping to bring the budget into balance in 10 years. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. julia: "what'd you miss?" all eyes on health care. we expect the scoring from the congressional budget of the

american health care act later this afternoon. here with special insights, director, dan crippen. what savings list provide over the next 10 years, and will he get the green light from the senate? the first bill republicans passed in the house had a savings of 150 billion. votes, it willh stay less. we do not know how much less. if it does, the house will have to vote again. it -- iscomplicated is this legislation to score? there are contingencies by which the state could opt out of regulations, the essence of how they got this to pass. for the cbo, how much is a challenge? dan: you have to make big

assumptions. it is up to the state in how this is implemented. the baseline is constructed on current law. if it changes, what does the baseline look like? bill said 14 million people would lose medicaid. 9 million are not currently covered. artifice that is not well understood and can be used by people that want to misconstrue it, as well. scarlet: as we await the numbers we are looking to see how many people would be left uninsured by the proposal at this point. dan: we are. are in the position of having to implement this. if it were to pass, they would have a choice of whether or not to go back to the roles before the medicaid expansion. it could change benefits and do other things.

they have some influence on exchanges, as well. the first bill, according to the cbo, would have covered 24 million fewer people then obamacare. they need a final score. they were pressing democrats to get a final score before they can pass it. but the senate needs a cbo score for pragmatic reasons. they require a cbo score with every report. it may not go to committee. needed topractically know what their targets are, how much certain things save, how much some will cost. , thathis bill at the base will give them their guidelines as to how much room they have to maneuver. scarlet: without the support of democrats. julia: have you done any analysis of this? do have a sense of what it will

look like? dan: it will cost more. some of the concessions made among house republicans were to put more money in. i expect they have carefully crafted it so it still saves a little, so they do not have to go back to the house floor. it will keep more people insured. not quite 24 million. past there has been criticism from the house republicans. andaps you could do with -- do away with the cbo, why do you need it? with yourwe disagree numbers, your assumptions, you're being to aggression -- too aggressive. dan: it becomes a war of numbers between administrations. -- have someum now now.

they believed there would be 3% real growth. cbo says, more like 2%. there are conflicts underway. joe: one of the things that characterizes washington, d.c. -- even with the passage of this bill, there is a lot of pearl clutching that there was not enough -- this goes to julia's question, all this stuff about past cbo scores and reconciliation -- in other words, is there further existing lawmakers could push the norms and procedures than they normally do? dan: not by much. they are limited by senate rules. the senate is much tighter about it. if they do not follow senate rules, they have to go past 60 votes, which of course, democrats do not have. they have to follow senate rules closely. joe: could they blow up those

senate rules? could they say it is a relic of an old time? recently withthat of a supreme court justice. it used to be 60, now it is a majority. it is possible. they would have a rough time doing it. in doing so, they would blow up the whole budget ax. it would circumscribe senate rules. it would really blow up the budget act. micket: you mentioned mulvaney. what is your impression of him so far? dan: pretty good. unaware of how much he knew. he is very conversant on the budget. he did a great job presenting the case yesterday. it may not be a strong case. scarlet: because of assumptions? dan: yes, and more cuts to medicaid then the congress would ever approve. the economic assumptions and a few other things make it a tough budget to justify. a timingere is also

issue. not just with health care reform, but tax reform, as well. what do think the likelihood is of a negotiations and the congressional timetable get completely blown up? we talked about this before. there is a funding concern coming up. when you look at the big picture, how concerned are you? slowed downclearly from what the original was in july and august. the health care bill will take a while. there are such big differences between what the senate will pass on what the house will ultimately agree to, as well. o bills you mentioned are absolutely necessary to keep the congress and country afloat. spending bills and the debt limit bill. joe: what are these rules they are bound by? the idea any bill can add to the deficit over 10 years with just

50 votes -- they would need 60 votes if they wanted to do that. how much does that constrict lawmakers' flexibility? dan: a lot. you may remember early in george w's administration, they passed a tax act, but only for 10 years. it limits how much they can do in a very short timeframe. the important thing to remember about the budget rules in the senate is, if you follow them, it led to do 51 votes. if you do not, it is 60. with the republican margin and no democratic support, they have to follow the rules. julia: it is funny to see steve mnuchin testifying, saying temporary tax cuts are better than nothing. dan: i am not sure that is right. dan crippen, you heard it there, not sure. joe: one bank taking a lighter tone with the announcement of

its new bill. the video for this has gone viral across the web. we explain what they are saying and why they are paying homage. this is bloomberg. ♪

joe: i am joe weisenthal. "what'd you miss?" the norwegian central bank chose to make the announcement of this new c.o.d.-branded banknotes by putting out a new music video. ♪

joe: that is really catchy. i have had that melody in my head all day. you have some of the translation? scarlet: they did a translation. the c.o.d. is your friend and it is worth 200 kroner. we will printed nonstop, hippity-hip. joe: why can't the fed do this? it would be so awesome. i could not get it out of my head all day. go online, check it out. onnext, shedding light stocking currency trends. this is bloomberg. ♪

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delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. >> i am mark crumpton, this is first word news. associated press reports other suicidected manchester bomber salman abedi, ramadan, has been arrested. he was in tripoli for investigations. the father said his son was innocent and had been planning a trip to saudi arabia for a pilgrimage. president trump held talks with belgian prime minister charles michel. afterwards, the president addressed to the manchester bombing. mr. trump: we are fighting very hard, doing very well under our

generals and making tremendous progress. when you see something like what happened two days ago, you realize how important it is to win this fight. and we will win this fight. >> president trump will meet with nato and european union officials tomorrow before flying to sicily to speak with g7 leaders. the president has not decided if the u.s. will remain part of the paris climate accord, that is according to rex tillerson. pressure mounts from pope francis, and democratic lawmakers, to remain in the historic pact to address global warming. secretary tillerson says the president's decision on paris will not be made until after he returns from his first foreign trip. the u.s. ambassador to the united nations is in turkey a ribbon attended cutting for the first u.s. funded school. --ki haley says the u.s.

they are happy they are taking in so many syrian refugees. so many children fled the syrian civil war. it is run by the turkish government. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. scarlet: let's get a recap of today's market action. a record high for the s&p 500, 2404. on the intraday basis, it cannot get up to the 2405 level. session highs, they took off after the fed minutes. policymakers see the likelihood of another interest rate increase soon. they would pursue a gradual effort to wind down the balance sheet. joe: we saw treasury buying at the end of the day. a general, dovish interpretation. scarlet: after the market closed, we saw hp, the printer and pc maker reporting second-quarter sales beat

analysts's estimates. pvh,: a quick take on the one of the world's largest global companies. q1 revenues at $1.99 billion. eps, 165,the adjusted the estimate. no change in revenue. they slightly raised the adjusted eps target for the year. news, headlines from the congressional budget office ordering the american health care act for the first time. cbo releasing score of that just passed health care legislation. we are reading through it right now. we will be breaking the headlines as they cross. it appears first line enacting 628, would reduce

by $119 billion. that amounts to $32 billion less than the net savings of the version posted on the website back in march. reading through this now, cbo estimates that enacting the american health care act would reduce federal budget by $119 billion over the coming decades and increase the number of people who are uninsured by 23 million in 2026, relative to current law. julia: that is pretty impressive. needing to take more than $2 billion. significantly more than that at $119 billion. they need to allow for reconciliation in the senate. the we are talking about number of people that will be uninsured over the next 10 years, that figure was 23 million.

it is actually an improvement on both scores, the two critical elements we were looking for. improvement, vanita have more than $2 billion of saving. yes, it reduced, but it is still positive territory. slightly fewer than anticipated in march, 24 million people becoming uninsured over the preceding 10 years. joining us from the white house, our reporters on capitol hill. this looks like good news for the administration. this is good news. it is a report that means the house does not have to go back and pass this contentious health -- health care bill another time. they only had eight two or three vote margin. concerning to several people who were involved in the process because they were not sure they would be able to get the vote.

this new score means they will not have to go back and vote on it again. at the same time, the fact that 23 million people were not have health insurance, additional people that will not have insurance under this bill, democrats see something they can use in this report to attack this bill, to attack republicans for in their words, taking away health care for almost 23 million people. something in this report for everyone. you mentioned it would not have to be sent back to the house to religiously. can the senate now take it up, because that has not happened yet? toluse: yes, it can now be sent over to the senate. what we have been hearing, senators have been meeting on a weekly basis. mostly not to take up this bill, but to start on their own bill and process of trying to craft the health care bill to get at least a 50 votes in the senate. republicans only have 52 votes

in the senate. republicans are not happy with the idea of cutting medicaid or making other cut second leave constituents without health insurance. it is something the senate is working on. we will get through the final product. it does not look like the house version that just got scored. just a quick mention of another headline on your screen, eighting to the cbo, hundred $34 billion less in medicaid spending over the next decade under this house bill. joe: as you see major cuts to medicaid, even if this is a thele less relative to first bill, we're still talking about deep cuts to the number of people that would be uninsured, relative to the baseline. what are the prospects for things in the senate? >> the senate is still going to write their own bill. cbo score that matters is the one on the senate bill. that bill looks like it is a

long ways away. mcconnell said recently, getting to 50 votes in the senate was harder than he thought it would be. tax reform will be easier. seeing the score come out, 23 million uninsured, drastic cuts to medicaid, at least 10 senators are not happy about these because it will affect their states so deeply. thea: give us a sense of type of assumptions that will have to be made. states to opt out of certain obamacare regulations, certain conditions. you have to make assumptions about how many states to anticipate will do that going forward. is this also going to be a potential weapons for the democrats to come in and say, we do not agree with these numbers? arit: we'll party scene that happening. they are saying this bill allows states to not help people. but we do not know which states will accept those waivers.

we see governor scott walker saying he might look into that. the republicans who do not want the waiver to happen are being told it is hard to get them. freedom caucus members are told the waivers are easy to get and that is why they hung onto the bill. it depends what happens. they may accept the waivers of the bill passes. scarlet: i want to bring up something else in the cbo report. they mentioned the changes would vary. a difference in how they could charge older people versus younger people. it would reduce premiums for young adults, while raising premiums for older people. certainly that will be a concern for constituents, republican and democrat alike. joe: another detail, agencies 6 of the population resides in area where the non-group, individual markets, will start to become unstable.

the market for insurance itself on an individual basis would become unstable beginning in 2020. that sounds like a real structural issue. what is the current stance of industry, of the health insurers, to this version of the bill? you heard almost universal opposition to the bill from doctors, nurses, health insurance companies. in part, because of the strict and significant cuts to the funding that covered all of this. you have to remember, this bill removes the individual mandate which forces and requires individuals to get insurance. once you take that off, you potentially remove a number of cuts from the market and that could affect how stable the individual markets are. if you listen to republicans, they will say the individual markets are already unstable under the current health care system because premiums have gone up so significantly and

deductibles have also gone up and some insurers have pulled out. you could hear from different sides of the aisle what is best for individual markets in insurance companies. that is the politics you see here in washington. that is what we are hearing as this bill goes to the senate and the process works its way through. joe: thank you very much. we want to recap some of those headlines from the cbo. would beeficits reduced by $119 billion over the next 10 years. a big relief for republicans. they will not have to vote on it again. an increase in the number of uninsured, by 23 million. slightly narrower than the 24 million estimated in the first bill they sent to the cbo for scoring. billion less in medicaid spending. coming up, research into persistent stock market anomalies.

we take a deeper look at a controversial new study. this is bloomberg. ♪

joe: "what'd you miss?" study fired amic huge broadside against much of the research going on in finance. it argued a lot of these so-called persistent stock market anomalies people have discovered are flawed. many moneymaking opportunities people support do not actually exist. here to discuss his research, a professor of finance at ohio state university. thank you very much for joining us. you and your colleagues looked at what are called persistent stock market anomalies. the idea the market is not

totally efficient, certain aspects are consistently more profitable than others. you say much of the research is flawed. what is going on? our objective was to use a consistent set of replication procedures and up-to-date market data to check the robustness of the entirety published anomaly literature. we found that out of the 447 anomalies we studied, 286 of 60% -- were than insignificant, after we used robust procedures to control for the impact, to minimize the impact on mike -- impact on micro caps. joe: you are talking about these anomalies -- what are we talking unfamiliar with this idea of inconsistent stock market anomalies? give a few examples. kewei: generally speaking,

anomalies are repeated patterns that make stock returns a predictable aced on either accounting information or trading signals. for example, if someone discovered that firms with higher ratios and higher returns than a firm with a lower ratio, that is called an anomaly. joe: you discovered that in all of this literature, many of the so-called anomalies discovered, you found that they are flawed. tell us a little more. you went into microcap stocks as being one reason, before i cut you off there. kewei: that is ok. past studies, they greatly exaggerated the significance of the anomalies, by giving too much emphasis to these macro caps. these are the tiny stocks that are smaller than the 20th percentile. they represent about 3% of the

total market value. 60% account for more than of all listings. micro caps these where most of the anomalies work best. because of their high trading cost and lack of liquidity, it is difficult to trade on the anomalies. it is hard to scale up. does it mean -- we have seen a proliferation of retail products geared toward this idea that you can harvest these anomalies. whether it is low volatility or or low momentum eps, what does it say about the hottest trend in the industry? kewei: our data suggest that while there are plenty of ,pportunities in the market and so forth,ts

there is also tons of noise. trueey is to separate the signals from the noise and focus on those robust factors. our studies show there are still 161 variables that provide robust stability. some of them have been prominently featured by factor based eps. we are talking value, momentum, profitability, investment. but we have to talk about implementation. not all factors give you the same returns. you need to pay close attention to how these factors are constructed. at the end of the day, we still and smartat investing data are a very efficient way for investors to achieve favorable risk and return

trade-offs. but you need to focus on the robust factors and forced findings. joe: you mentioned there is a bias in a lot of research due to the inclusion of the microcap. he said there is data mining. what has been the response of people in the industry to discover these anomalies at your paper? we are not targeting specific papers or specific researchers. most of this could be done unintentionally. days -- it was not until recently that people started to realize how influential these macro caps are. days, everyone, myself included, was using the conventional test, like equal weighting returns.

we have all done some intentional -- unintentional p hacking in the past. resultsto make sure our are not restricted to these macro caps, but can be extended to the rest of the market. stuff,scinating professor of finance at ohio state university. more after the break. this is bloomberg. ♪

scarlet: i am scarlet fu. "what'd you miss?" the last time most people thought arthur blank was on the sidelines of the super bowl team team blow the

biggest lead in super bowl history. i got the chance to sit down with blank and ask about the falcons's stunning loss. >> we have -- scarlet: you were on the sidelines and saw the lead evaporate. what were you thinking? >> i was thinking it was an out of body experience, not happening to us, happening to someone else. i have gone over it, i would say. completely. you'll learn from these experiences and you move on. that is true throughout life. a wonderful year, it was franchise, team, fans. we have a very young team. i know this team will be back year after year. franchise,to me, it is a celeba sense of the team being now positioned to be a very competitive, highly competitive team for the years to come. months, in the last six

our quarterback wants to play for another six to seven years. we surround him with the talent we have on his side, with young players who drafted in the last couple years. we are regarded competitive. i am not disappointed there. our coach and players and fans were. our goal since we bought the team in 2002 was too great a sustainably winning organization. a sustainably winning organization. scarlet: i know you do not own the braves, but i wanted to get your thoughts. arthur: i almost did. scarlet: i wanted your thoughts on team evaluations. $1.3 billion for the miami marlins. is that overvalued, fairly valued? arthur: it is what the marketplace is.

i am a big fan of michael bloomberg, professionally and personally. teams are worth what people will pay for them. there are limits. 30 baseball teams, 32 football teams. people want to play in that arena. they see the appreciation of these assets over time. they see folks spending more time and more money supporting teams. and the and things of that nature. i think the market will determine that. i do think the financial structure in some cases will be unchanged in the future. the cost of any franchise today in major league baseball or basketball, certainly nfl, has gone up dramatically. you will limit the number of purchases, single families.

you will see more groups come in and buy these assets together. principal ownership has come since 2002. of 50% the percentage of ownership has changed. scarlet: there is limited supply and a lot of demand. valuations are getting out of touch with the underlying asset? do you worry about that? arthur: you think about it. revenuesok at the being generated and the appreciation, the media rights that go along with that. answer is, if that was the case, the market would have come down. think it is a limiting group of buyers out there, no question about it. but there are enough buyers to continue the activity we currently see. ♪

alisa: you are watching "bloomberg technology" let's start with the check of your first word news. the president, the congressional budget office has released its estimate of the impact of the gop's obamacare replacement

bill. it will reduce the deficit over the next 10 years by $110 billion. but the cbo says 23 million people plan to lose coverage after 10 years. the father and brother of suspected suicide bomber salman abedi have been arrested in libya. police also detained a fifth person in connection with monday's deadly attack. british soldiers are providing additional security at major public events and potential soft targets. president trump has not decided if the u.s. will remain a part of the paris climate accords according to the secretary of state rex tillerson, as pressure pope francis top remain in the pact. president trump will spend the night at u.s. ambassador's residence in brussels after meeting with the belgian prime minister. trump is on a five leg