senate republicans send a message to corporate america: you can have a tort -- corporate tax rate, but you may have to wait until 2019. adjusting for august. this is china's big bang. the nation will have limits on banks, allowing people to take stakes of up to 51%. good morning, and happy friday. this is bloomberg: daybreak. let's begin with market action, as we grind towards a weaker profit after it straight weeks. once again this morning, falling by 4/10 of 1%. euro treasury market, this resumes. 247 is the 10 year yield, alex. >> flipping into positive territory, this mentality seems

to be writing this morning. it's a similar story as it comes here. the selling pairs some of that ferocity. up 7%. 11 over this, the whirlwind has exploded. unbelievable. it's huge. >> let's get some headlines outside of the business world. we turn to emma chandra. emma: president trump was in vietnam for the asia-pacific summit, talking tough on trade trade the president that he will let the u.s. be taken advantage of. he said the u.s. will only enter one-on-one trade deals. secretary of state rex tillerson said he can save the u.s. and north korea could agree to talks at some point. atlerson told reporters that first, it would only be a conversation with kim jong-un's regime, not formal negotiations.

north korea hasn't launched a missile in almost two months. it's the moment financial institutions around the world have waiting for. china has agreed to lift limits on for -- ownership -- foreign ownership of banks. the would get access to world's second-largest economy, and reform credentials of china's president xi jinping. this is bloomberg. >> yesterday, republicans made houses.gress in both the ways and means committee finalized its bill on the house side, and the senate finance committee had an outline for a somewhat different approach. kevin cirilli will report on where he had next. have the house side for a moment. they've got a bill now they are pretty confident they've had the boat -- they have the votes. >> they are. yesterday, this bill advancing, sending it to the house of

representatives to face a larger vote as early as next week. that puts it on paper, advancing out of the house for next -- thanksgiving, and continues the sun the past -- path of getting this done by the end of the the year. the senate finance committee, republicans releasing the outline framework of their bill. it differentiated significantly from what the white house and house had proposed, most notably two things. it would keep the level of tax brackets at seven. the white house and house of representatives called for three or four tax brackets respectively. the second thing it would do is delayed by one year the lowering of the corporate tax rate from 35% to 20%. that's a one-year delay. it wouldn't take effect until 2019, versus the immediate effect of what the house has called for. that's a mechanism to pay for things. said that they do

not have a problem with anything that they proposed on bloomberg television as well. mick mulvaney suggesting the same. >> the question is, does the senate have a problem? how confident percent republicans -- are senate republicans?i interviewed percent -- a democrat from virginia, who looked at the results earlier this week as political headwind. for republicans to put forth this tax proposal is do or die politically speaking, for the 2018 midterms, a lot of saying,s are pushing this is not the best bet for the middle class. republicans say they are all in the comedy need to get something done by the end of the year to keep those games in 2018. >> you said there are two

different proposals. they will have to reconcile those. is the senate have to win -- does the senate have to win with the berg rule? >> you're right. the senate is trying to show here -- we saw this on health care, and there's a lot of differences of how the two policies were crafted -- one of the similarities is that the senate, because of procedural and structural rules in congress, definitely driving this. this will make a lot of folks in the white house. -- angry. >> wonky with senate rules. >> this is the market reaction yesterday. the s&p had its biggest selloff in over two weeks, the russell 2000 falling to lowest levels since september. thanks falling to lowest levels since september as well.

deutsche bank high taxes paid index up 1%. we are joined by the global head of fx strategy and asset strategy. good to see you. >> good morning. >> is this a true panic about tax reform? >> we don't think it's at a true panic. what we're seeing here is, when we look at our analysis of what's practical in the market -- this is important -- there's not much optimism. there's an unwind to pessimism, but nothing will be done. is not to build. this means that combined with the fact that we are a long way from something being put together means we expect a surplus. that's -- it's key, the size of the surplus. these are small, based on limited flows. put that ins perspective. going forward, it's not about

tax reform. it's about what delay would mean for the 2018 midterms. you also have a schedule road should candidate who has resign. is that a risk that it's to be started bursting -- that needs to be started to priced in? >> these are risks>> people need to start taking into consideration. investors, equities have been such a key driver of performance this year. they are cautious about reducing the amount of this in portfolios. we are seeing more hedges. we are seeing options, looking for hedges and classes like fx. you are citing concerns, but not yet to the stage where it is our right and taken off the table. >> michael, his the 20% corporate tax rate, is that a disappointment? >> in one respect, but it's more likely something will get delivered.

that's one policy, specifically. the others foreign profits. 10% cash, 5% non-catch. for a big company like apple, they have a big fund. am trying to work out what is cash and isn't. multinationals, putting profits forward. the personal status somewhere between 2-4,000,000,000,000 dollars -- the personal amount is somewhere between $2-4 trillion. cap expenditure has been too low. that has been weighing on growth. we need to encourage this investment ethic. we are in convinced that what is being proposed is enough to deliver. >> can the markets handle a crack in on that, in the -- into the end of the year? low, this isso

encouraging risk assets. investors that run value it risks will know when hedges low, that pushes volatility lower. that encourages risk making. the concern for us. if you get a break in the suspicious cycle, the momentum we haven't stocks, declining, you get market positions. that causes a correction in the market. >> how long do you think equities and bonds and stock together?what's important behind this is >> that's important behind this is earnings growth has been strong. if that story continues, you can get a correlation between bones. >> coming up on the program -- on thi -- bnds. >> coming up, we will look at the biggest falls since august.

a buying opportunity or a warning. that's next. 20 minutes away from the open. losses down 4/10 of 1%. this is bloomberg. ♪

>> a concern to margin over the sun's ability to cut the corporate tax rate. $600 million in the seven-day period, according to bank of america meant -- merrill lynch. our guest this still with us.

michael, i want to go through the journey of the last week or so. this started with the company .tory than a sector story, on the chart, mainly telecoms in farmers over. a high-yield index, lagging the overall sector move. this is moving quickly through the asset class. story of the building up of leverage, the amount of debt that has been taking on -- taken on. these concerns haven't yet fed through to investors changing their application. asset classes continue to do well up until recently. is the talk about what's going to happen in tax interestout index -- deductibility. although growth is good for high-yield, actually, being able -- not being able to a duck --

adjust your index expenditure is going to be a problem. >> a few things happened this week. --re sprint deal collapsed and thus sprint deal collapsed, so that was country specific -- company specific. situation the wider for the credit market, what i see throughout 2017 was a selloff in the spring, summer, and now. the previous two have been opportunities to get back in. don't be greeted with the jpmorgan message, get back in. what's the message now, and what the third direction? >> our interest, we need to be much more selective. out there,ill value value and some equity markets. some markets -- value and markets. we need to be much more selective. europe still has good

opportunities. we think there's still opportunities in asian equities. there's still a lot of opportunities and em, particularly this. --when comes to high-yield although clearly this has risen yields in the last few days, if you look at the average over time, they are still attractive, low. when will we be concerned that this will be a longer-term problem?- >> we will look>> at what's happening to the u.s. 10 year treasury yield. that's the cost of being in an asset that gives you a natural security.t for less if 10 year treasury yields don't go up dramatically, investors are still going to be encouraged to move further up. with u.s. 10 year treasury yields, that brings our expectations of the fed. we think the fed is going to be taking the easy path. we think the path of production will be easy. we still have the ecb and bank

of japan, qe. all these things argue that yes, yields might go up. but, that rise might be at a slow pace. -- doesmean it's >>, not mean that it's only for companies that might be in over their head? >> precisely. you must be selective in your asset location. >> this is more for anyone in the market. credit typically leaves equity. we can bring out the s&p 500 versus high-yield in the united states. what would go for high-yield?it's small compared to where we have been.asset markets have been resilient . yesterday, we had a big fall, then we directed most of it. how resilient is it in the face of credit?

>> it's interesting looking at your charts. in therection earlier year, he had credit getting spooked. that led to equities stalling. then, it picked up later on. i think the reason for that is the equity come of key drive been a positive earnings story. that had a backdrop to equities, earnings expectations have been hired this year. we willhe story continue, given the global growth backdrop. similarly, if you are selling out of high-yield, where are you going to go into? will it be less bad junk? is a going to be equities? what's your take? >> we have a lot of tourists who have moved from investment grade into high yields, taking advantage of those slightly higher returns. you would probably see a

rotation back into investment grade. >> how would you know if it is a peak or rollover in a high-yield market? that was a distinction you are making before for 10 year treasury yields. >> what's happening with asset classes, treasury yields, also with the growth outlook. the growthnest: outlook recently has been improving.when you look at the indicators of data , these have all been very positive. this makes us comfortable that you should be continuing to look for opportunities for market moves. will stay withd us. an investment from didn't -- disney, we will look at disney's results from a senior research analyst. this is bloomberg. ♪

♪ "bloomberg:

daybreak." i'm emma chandra. tribunal has ruled that overdrive or should get benefits, such as paid holidays and minimum pay. bloomberg is already fighting a regulator's revoke an operating license. billionaire patrick draghi will have the home of a cable company rt. in the has resigned midst of growing concerns about the company's debt load. they are expanding in the u.s. and europe. the company issued a profit warning last week. does they planned system -- to system and its way out of problems. they are below quarterly profits , due to people in the tv and film business industries. they will get a billion dollars more on the theme parks into next year. they are working on a new series of star wars films. that is your bloomberg is this flash.

david: we're joined now by stan .yers, a research analyst really illustrate the story here, stand. i will put up a chart that shows that intraday trading overnight. you see earnings come out here. explain that. >> i think for having me on the show. it's a tough quarter. it's impacted by investments into platform, hulu. ratings from is -- from hurricane irma, but more importantly here on the call, a company applying its new strategy, the shifting of strategy with consumer demands. theirre rolling out platforms, they fleshed out roots tons and pricing netflix. they announced the biggest news of the night, which is a new trilogy, star wars trilogy,

which should private -- drive profits going forward into the next decades. >> they knew they were going to , but itreased costs sounded like this is going to continue for a while. going into 18, they will have investment costs. why should you hold this back over the next two years? when i just wait around and see if they make it out the other side? >> right. under, sort is that of, the pressure on the stock, it remains in an interesting place. as disney's ip in there, they thete products over year is going forward. there isn't a lot of support for the name. we are seeing decelerating growth at espn. hadrecent renewals they

come in the upcoming ones they -- that we expect, they are delivering higher affiliate fees, and better subscriber trends. you have the core business looking better, then you have the new businesses coming in supplementing growth. >> an important part of the growth -- core business is sports. we talked about what's going on with the nfl. listen to what roger goodell had to say. >> the issue is the medium length -- the media landscape. the changes so rapid. -- the change is so rapid. we believe to the network model. thatexperts will tell you most viewership will continue on television, but there's no question that there is a shift read david: you just heard roger goodell say it: there's a shift

going on. will disney handle that? him and espn is so important to them. whyep, and that's partly they are investing to capture that incremental viewership. at the end of the day, the cable operators are reaching less than 90 million households. the rest are getting something like 20-20 plus million households that don't have cable today. you need to be on these new platforms. preferred ---- is people prefer to consume content outside of their home. espn has the brand to deliver and to capture those viewers. morejust need to build a robust platform that has better highlights, more games, less posturing -- less buffering issues.

david: they said they want charge much for it, they will undercut netflix. is that an opportunity? >> they are launching two different platforms. one is espn related, which, there was no discussion of pricing. the other platform, disney branded netflix-like platform, that one they will price below netflix. that's, again, is a matter of volume of content. david: thank you. jonathan: it's been a great year for emerging markets. bank african reserve governor on efforts to stabilize south africa's economy. this is bloomberg. ♪

♪ jonathan: this is "bloomberg: ."ybreak futures a little softer today after intraday losses.

, infutures -52 points europe, heading for the biggest point -- biggest week lost since august. absolutely hammered over the last five days. story of the bond market something like this, with treasury yields pushing high. the dollar failing to catch up to the euro. dollar-yen flat at 113 .45. ,lso some weakness in equities followthrough from yesterday continues. markets getting headlines outside of the business world now. here's emma chandra. emma: president trump wants a trade deal with asian nations. president's in vietnam for the asia-pacific summit, and says the u.s. will no longer join multinational deals like the transpacific partnership. he said he wants a one-on-one agreements with countries that will not take a vintage of the u.s.. meet withtrump will

vladimir putin this week. both leaders are in vietnam, but rex tillerson said there is no point have a meeting if there wasn't progress. senate candidate called allegations that he had a sexual encounter with a 14-year-old decades ago garbage and fake news. mitchnate majority leader mcconnell say the click -- claims are not true. reported then post allegations. over to alex with breaking news. alix: jcpenney has earnings, not bad, beating estimates, adjusted loss per share beating estimates up $.40. a solid quarter for jcpenney, profit that we will break down later in the show. jonathan: let's get to emerging markets. it hasn't been safe for everyone in em this year. in south africa, economy bouncing from a recession.

the rand is a significant risk for outlook of inflation. the south african reserve bank governor, i'm pleased to say he joins us here in new york city. great to have you with us. >> great to be here. jonathan: it's good to see you. if you've talked about capital for supporting growth. your governor has come out and said it's unclear how much, if it all, is set to cut rates. him?u agree with them -- >> i do. it's time of the july meeting, the npc. the inflation was different. at the balanced risk time, to be balanced. our projection is that inflation .ill still remain within this at the time, we also indicated that there might be surprises on the downside, with respect to inflation.

but, the situation changed. by the time we got to the september meeting, was clear the bounce had shifted. the balance of risk to inflation , looked to be on the upside. significant production trade in july, we had four members lowering rates come and two remembers -- two members discussing rates. the balance of this is roughly 3-3. since then, the situation has changed significantly. higher.es are there's still a risk, with respect to terrorists. 0.0 -- >> the window is closed this year?

>> the problem is, you say the window. the forecast should be, what is inflation going -- when is inflation going? we are targeting rates, inflation. what would lead to us changing this? the inflation outlook has changed? that adds risks -- that means risks in the inflation outlook are different. jonathan: in the near term, the last time you and i spoke, we talked about rate cuts. the prospect now is rate cuts. >> the last time you spoke to you was before july. in september, we didn't cut rates. looking at recent data in the last week, it's looking week, governor, soft. it's not looking good trade i sit here, and you painted inflation picture. growth risk is on the downside. how will you manage that

situation? >> there's a dilemma. at the beginning of the year, when we look at that situation, without the dilemma was alleviated. we expect growth. we expect -- 0.6 for the year. then, they somehow bend with responsibility for price stability. will providet they something for the economy. we could do that. we did it in july. environment remains. the risks for outlook remain on the upside. we have looked at of -- growth outcome to also be on the downside. that's something we bring here, the global economy, we thought

it would be at the beginning of the year. -- issuesfferent from to of growth in south africa. j we have to look to politics. --jonathan: we have to look to politics. i wonder if we will have political risk reduced. is that something you anticipate? > not only do we expect risk to be reduced, but we expect there to be less policy. once you are clear as to who there, thereng should be pronouncement about where the country is going. be ifestion is going to they carry at the national conference.

they might not hang around until december. there seems to be a risk, at this point, governor, that they can cut south africa to investment. you anticipate that happening? is that something that you prepare for? >> you prepare for the worst, and hope for the best. if this downgrade takes place, what would be a good education ns?weouth africa did publish the results in september last year. it could withstand the shop of a rating downgrade. -- the shock of a rating downgrade. to the east and outflow, what does it mean for the exchange rate, for inflation? you have to look through that can see if the sharks on the

downgrade -- sector would affect inflation. jonathan: you have warned about the prospect of state owned enterprises in south africa. katie be specific where the state owned enterprises are, which ones they are, and if you have identified them to click? > i didn't identify them specifically. significant state in supply, what would it mean for financial stability? what is the exposure? we think that this one is going to default. jonathan: central banks next year, the ecb, federal reserve, they started to unwind. the ecb will pay back stimulus. we had a conversation a number of months ago about 2013, with her we could -- whether we could see a repayment about.

is there withdraw stimulus from the ecb from the federal reserve, compared to what was two years ago, or has it been any more fall to a position. ? >> we are in a better position. inflation, interest rate at 6.8%. the twin deficits were over 10%. where are we today? the current count -- account deficit has adjusted to 1.7%, growth of around 2%. inflation is risking the target. there's a shock own for us. inflation, being within this, it's any closer to the inflation target rate.

jonathan: is this the third consideration ? you said rates have been reduced somewhat. this for anit -- upside risk to growth. must tire hands somewhat on how much accommodation you can provide. >> of course. it would tie our hands down. now, you see accommodation that is provided. governor talked about rate cut. >> i want to get a final comment on central bank independence. there has been a big conversation in the federal therve about this, and united states as well. what is your message to south africa, as a man that leads and emerging-market central bank?

how important it central bank independence for you? and two, what do you see is on the mind at the moment? >> if there's any attempt to undermine the independence, i predict that will fight that back. we could fight that battle. our independence, for south africans, i would say in the constitution, they foresaw and decided that you need it an institution independent of the political cycle that has a risk and stability to promote price stability. we do that in the interest of sustainable growth. changeody attempts to this, but change will be consistent with constitutional .rinciples, inclu

jonathan: governor, it's great to see you again. you, sir. the south african central bank governor. michael, what is your base case for south africa? >> we are focusing on what investors will look for -- opportunities. we have already seen a dramatic selloff, when you look at the external financing of south africa. a much -- they are in better position than they were seven years ago. potential downgrade is priced in. >> why has south africa been both behind in the global refreshing?we heard the governor admitted that . they don't seem to be going forward. why? >> it's difficult to get inflation moving higher would

you have such structural shifts. there's a need for higher wages. that, coupled with the fact that beentors, externally, have cautious on economies, with a large commodity base, has also prevented cap ask for moving into south africa. alix: an update on jcpenney earn it. -- earnings. a nice pop in these numbers, $.33. the expectation was a loss of $.40. sales stronger than expected. the quarter in inventory down almost 9%, solid numbers. we will discuss throughout the morning. china's big bang. the company makes a major step towards opening its financial business to phone her -- foreign ownership. what it means for the economy. this bloomberg. ♪

emma: this is "bloomberg: daybreak." coming up at the next hour, john raymond, this is bloomberg. ♪ bigd:, -- college china's moment -- big bang moment. companies will be a lot to take control of chinese security business. you spoke with jpmorgan's ceo fraser.

>> this is going in the right direction. of course, it's good for international relations, to have that market, interesting, attractive markets. >> still look us -- michael, explain to us why this happened. it coincided with trump's visit, not entirely unexpected. why do china do this, and why did it do it now? >> with regards to trump's visit>>, we have seen one of the criticisms trump has had across china, that it's easy for china to do business in the u.s.. it's not reciprocal. it's difficult for u.s. companies to do business in china. been that china is trying to resolve some of that. >> this is a point of time when banks will be eager to go in and control?

a lot of people are not performing alone, there's lots of questions about the amount of debt on the balance sheet. >> i think the terms are real from foreign investors. we have this great loan, with regards to the bond connect, where it became very easy for foreign investors to start buying on chinese bonds -- spying on chinese bonds. we are concerned about the need for china to deleverage, and concerned that china's approach to deleveraging was by carrying more foreign ownership of domestic assets. as an economy of a whole, they may not achieve what they want. david: that raises the question: is this liberalization the way trump would like? or, is it saying, recapitalize our banks for us? your return is quite limited, to get up in interest rates, and also moves and currency. it is perhaps more opportunities and equity states, where, particularly if you have controlling stake and more

control over the business. end?: how is this going to we've talked about how china is growing, but growing debt faster than its economy. that can't go on forever. >> tilt interesting about china, you have to look at it with a different model to when you look at western economies. an interesting example is how china has deflated its property market bubble. that's been the western model -- the western model would be encouraging developers to have assets that need to be cleared. the state buys the assets and turns it into a central housing. that's a key example of when you have a more controlled economy, the way in which these resolutions come about as much more different than how you will look at things in the western world. >> david: they also control the numbers, to some extent. if you are a western financial institution and wants to buy a majority interest in the bank, how do you know about the

numbers? in the bond area that you refer to, they're going into ratings of the bonds.there is some assessment there are some assessments are on the numbers. china wants to open itself up, be a big global player, and have investment coming. they will move towards greater transition. we've seen that happen over the last decade. >> thank you very much. jonathan: let's go to markets, now or 40 minutes away from the opening trade we will get you up to speed on market action. equities at the moment on the back for future something -- suffering by 1%. higher. yields grinding not much action in the g10 space, likewise for commodities c.

crude hanging on. i know you miss my special because you were in bad, but you can watch it over the weekend as well as online. check it out. it will run at sunday on 4:00, 12:00 p.m. in new york, 4:00 p.m. sydney time. shale has been incredible over the last five years. what will the stage look like in five years? can shall continue its explosive growth? joining me now as a man with oil in his blood, the son of the former exit -- exxon ceo, and the minerals group, one of the largest investors in mineral resources. he was also audrey blood's biggest backer before he passed away. you saw there -- one of the titles he holds -- some of the title he holds for companies in the u.s.. >> pleasure to be here>>. >> thank you for joining me. what's the next five years going to look like?

>> the last five years is about strategic positioning. the next five is really about tactical execution. it's about going now to these resources that people have identified, and going into what we call -- prosecuting a large-scale development program. >> when i was researching, what i learned is everyone thinks is is great. technology will get better. they'll is have the best geology. what's the real there to? .> i think it's, you had on it people have the tendency to think about the oil and gas business in the context of oil and gas. when you get into the domain of the unconventional, there's much conversation around technological evolution. when you point out technology, typically, it's deflationary. you've seen that over the course of 3-5 years, technology continues to advance. the idea that that just stops today would be naive trade to

the contrary, or feel that -- and we look at this through the ,ens of our portfolio companies we look at those continual advancements in technologies, and you will see that for the next 5-10 years, which without a doubt, will have profound change in the margins. >> we have a great map to pull up where all the major areas are in the u.s.. on where get your take that is in the best execution is, and where the opportunity is for you. >> if you look at the map on the screen, you go between crude oil and natural gas. ,hen you look at the space those are areas mostly focused on crude oil. when you look at the northeast, the appellation shale plays, that is prominently natural gas. when you think about the marsalis in the marsalis in utica, that is a gas field that

can effectively produces over 25 billion -- of natural gas. that's about one third of what we consume in the country each day. 10 years ago this didn't exist. if you think about what's happened, you're now one of the largest gas fields in the world. 10 years ago, it didn't produce anything, by virtue of technological evolution. alix: where do you see opportunity right now? >> we own a large position. over 90% of what we have invested is in shale. both the upstream as well as the midstream, deliverability of pipes, processing facilities, that type of thing. we continue to see in opportunity, but it's more about execution. we are in a couple hundred thousand acres of land. i believe where the second largest producer in units of shale, but we have a decade plus, we sit on top of 15 trillion feet of gas reserves.

their 200 million specials each date trying to raise some of the best results in the industry. alix: and oil? >> at the permian in conversation. there are other areas, but the main driver is oil. alix: what about outside the u.s.? i visited us shale fields in argentina. the president has been trying to open up the country, especially for labor reforms, to move capital, like you to argentina. you going to go? >> i've been in the past couple years. we spend a lot of time looking. often this goes to the geology. comeenefit argentina has up is a fantastic shale resource. now, it's a question of how they apply modern technology, proper cost fractures to make it, not just a shale plate, but something where you can do it profitably. alix: what would you have to see to want to get in there?

global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. >> >> of historical issue down there has been unions. you need to continue to see structures, where you can employ without exorbitant costs on the labor side, then the ability to bring the most modern lymington there to make sure you are driving the cost structure. alix: appreciate it. you're knee-deep in geology. i appreciate your perspective. john raymond. i am not going to miss it. deutsche bank, and blackrock members will talk about credit. don't miss it. ♪

♪ jonathan: senate republicans

send a message, you can have a 20% tax rate but you might have to wait until 2019. and investors facing increased supply, we are tracking junk debt falling to the most in august. is this china's big bang? firms allowed to take stakes of 51%. for new york city and our audience worldwide, good morning this is "bloomberg daybreak." . i am jonathan ferro alongside david westin and alix steel. futures are softer. we are down a third of a percent for the s&p 500. and will we get a week of losses? we are subdued versus equities and bonds. dollar going nowhere. and the unwind of the treasury yields stocks, up three basis points. alix: action and europe, dax flat. selloffhave a continued in the bond market, particularly

in the core, you have the german bund yields up . the vic up. gold unchanged. david: we turn now to emma chandra with first word news. emma: in china, the government taking a historic step to liberalize the financial industry. they will remove limits on foreign ownership of banks and companies, plus overseas firms can take controlling stakes in securities businesses. that gives them access to the world's second-largest economy. president trump is in vietnam for the asia-pacific summit where he is talking about trade again. he has said he will not let the u.s. be taken advantage of. enters the u.s. will only one on one trade deals, not multinational ones. oorelabama, ray m refuting allegations he had a

sexual encounter with a 14-year-old decades ago, calling a garbage news. mitch mcconnell and others saying if the allegations are true, that he should withdraw from the race next month. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. david: thank you. we now have versions of a tax reform bill from the house and to the senate with actual language up for a vote next week, and an outline for the senate side. what comes next? we are welcoming isaac from compass point research and trading coming to us from washington. welcome back. start on the house side. is a done deal? -- it a done deal? isaac: they cleared in hurdle yesterday on the house. next week, it looks like they will clear it off of the floor and the focus will be shifting over to the senate. so the house's movement

yesterday was an important mom marker -- mile marker and it lets us move on to the next phase, which will be a focus on the senate and the conference committee. david: you have 65% probability this will get done in the first quarter, how do you go from 100% the5%, how much of it is senate not taking care of it and how much of it is the conference? isaac: the vast majority is the senate, there is pessimism attributable to the high tax state republicans in the house, those from new jersey and new york and california who are very concerned about the state and local tax reduction. that issue will be handled. but the majority of it is in the senate, where you have a fair amount of republican deficit hawks who do not look like they are ready to budge. and you have uncertainty regarding the alabama senate election and that is why the senate is the hardest hurdle to

clear. david: explain, because you say there is a small margin on the senate side of for the republicans. why are the deficit hawks still concerned? i thought they had agreed. isaac: the senate has a procedural problem, and that is related to something known as rule, namedbyrd after the late senator from west virginia. in its most basic terms it says you cannot use the budget reconciliation process if the plan increases the deficit in the first year outside of a budget window. put it in english, if the bill increases the deficit, then you cannot use the simple majority process. so that hurdle, that procedural hurdle is a multiplier on the difficulty when it comes to the deficit hawks. david: it sounds tough. isaac of compass point research,

thank you for being with us. alix: it is tough. you are killing me. take a look at the tax bill impact on the market. here is what happened yesterday, you saw the s&p 500 down by 4/10 of a percent, russell down 5/10 of a percent, financials also getting hit and the high rate tax companies in the deutsche bank rate index also hit. rosenberg, chief income strategist here. with the bondmes market -- in europe and the u.s. can. seems like you surprised am actually that the stock market going down is seemingly leading the bond yields going up, that is an unusual situation going on. i do not think that will be sustained. people are looking at risk parity trades going off kilter,

i do not think it is a sustainable situation. i think bond yields will be coming down if they go up sharply. to your point -- if we get a physical -- fiscal stimulus that people see as good, bond yields will go up and stocks will go up. alix: that is fair. jeff, what do you make of the fact that you have learned how important tax reform is for the market? yesterday we learned how important it is for 2018. isf: we know tax reform important. i want to be pushing back a little bit on the over reading the very small reactions to the play-by-play. alix: the vic says at 11:00. -- is that 11. jeff: that used to be really low, now we are saying it is shockingly high. these are small moves in the context of very large moves, and we have seen dramatically fast, as isaac was saying, progress on

tax reform, so there are difficulties and the differences in terms of what we got from the senate, pushing back the implementation date, maybe the market red that -- read that. i think what you are looking at here is a better progress in times -- in terms of timeline and raising the odds this could happen this year. i think next year is more likely, but what we are really honing in on is not the timing, but the content. hanging on to the 20% corporate tax rate, the senate has pushed the implementation date back, but this is a much more aggressive progress in terms of the corporate side and i think it is a big deal. jonathan: it was an interesting market dynamic that was touched on, what was happening in the bond market. i wonder if you look at the bloomberg, what were you thinking? alan: these are not huge moves. jonathan: are they not?

what about the correlation? alan: i understand the correlations are there. jeff: if you had more sustained development on that side, you would pay more attention. we have had those episodes before, i do not think that this one is enough to really conclude that there is something bigger going on, beyond something moving on the rate side and a small move on the equity side. jonathan: alan, you saw the reaction in boones and it was not planned out for treasuries. as the spread it narrowed, you started to see the euro strength come through in a significant way. reform,alking about tax but at the same time we see the weaker dollar story playing out. will that be the story over the next 12 months as they introduced the bill? alan: i do not think so. it was interesting yesterday. today we do not have the excuse to blame bunds. they are doing their own thing.

we are getting back to the reality of things now. match.asury spread does we go to the correlation as going in and out a little bit, but the spread matters. i think ultimately, at least for the risk of the first half of 2018, there are definitely -- they are definitely on the side of the stronger dollar, yields going up. alix: if we wind up having volatility rise, i know 11 is not a big deal, rising nonetheless is relative, what does it mean for the fed? the hawks have been worried about asset bubbles. if you want to see less complacency, does that change the narrative? >> not that quickly. initially it will be a good thing. alan: it is remarkable how will the bond policy has been and i think low bond of volatility goes with -- i think from the standpoint of the fed they have lost control of the back end of the curve, it is not the worst thing, but the

yields have been low. and before they were too high. i think they have lost control with the curve, they are tightening without getting tightening coming through with financial conditions. so a little bit of volatility is a good thing i think, but the stocks spiking above 25 or 30 -- alix: if we get to 15, people will think it is crazy. if we take a look at the curves it is steeper today, but how much flatter can we get? jeff: the curve gets a lot of attention because the flattening is often a warning signal. if you are looking at charts of what the curve has done, it is important to make sure that you start the date of the chart before the beginning of 2017. if you run it from 2017 it is looking like a massive flattening and it gets people excited. maybe you are pulling it up. jonathan: yes. he is the only one i can pull up a chart? [laughter]

jeff: this begins after the steepening. if you pull it back. jonathan: we will go back five years. jeff: pull it back a little bit and you will see what happened was you had a big steepening in the curve, far right hand side of the chart, that is the movement in the curve after the election. what we have done most of the year is we have unwound the steepening and we're back to where we were. jonathan: you are looking at this year? jeff: yes. it looks like curve flattening, but more recently you have to nichols on the market -- the technicals on the market, expectations around, and patterns shifting. we talk about the impact of the fed, but we have to look at the flipside of what tax reform means for the supply side of treasury issuance. in the currently -- quarterly refunding we had a move toward a more issuance in the belly of the curve, where they define that about 2-5 years, and it

added to flattening pressure. that was a week or so ago. some of the movement has continued. jonathan: jeff rosenberg from blackrock. good point. alix: dismissing the vic like crazy. jeff: we should put the longer-term chart above the vix for a moment. jonathan: we will do that. alan sticking with us as well. coming up, important conversation on credit this week. junk-bond this week. from new york city and for our audience worldwide, this is bloomberg. ♪

alix: take a look at jcpenney, it wound up beating on the

earnings, as well as sales. they announced sales, but the number came in at 1.7%, partly cold weather and partly sales. the question will be how much went to demand versus clearance. we will update you throughout the morning, but it has been a monster move for jcpenney, it was very shorted coming into earnings, but nonetheless it was a solid number. jonathan: i have never been. i did not go. [laughter] jonathan: i am pretty sure they do not have -- and i'm not sure it would be the game changer. credit market, concerns over the senate's ability to cut the corporate tax rate anytime soon, growth assets moving in a seven-day. and still with us alan ruskin from georgian bank and jeff rosenberg of blackrock -- from deutsche bank and jeff rosenberg of blackrock. this started company specific,

then it came to the sector and blood through another sector -- bled through another sector and got wider and wider. david, you had a question. david: we are now denying vietnam is where we are. here is the dinner. everybody is just up, donald trump walking up in the tunic that the other heads of state are working. alix: it is working for him. david: this was the center of the biggest airbase during the vietnam war and now we have the u.s. president being hosted by the president of vietnam and all these heads of state there for the asia-pacific cooperation. jonathan: you would have guessed he would wear a suit. you are surprised. david: i've never seen him without a tie. alix: i like it. jonathan: i'm not sure he looks happy about it. he looks very calm about the situation. are you calm? the yields saying

curve is not to be worried about. [laughter] jonathan: august through the credit in the financial market -- walk us at the credit in the financial markets. jeff: you are spot on. earlier this year we had oil concern, top-down concerns, and this is really about it is inatic news and an environment where you do not have a lot of margin for error, so spread are closer to the tighter end of the range. and you have some idiosyncratic news. in that kind of environment of volatility, you are looking at repricing. and in the grand scheme of things, these are not huge moves, but in an environment of very low volatility, a small move matters. the same kind of conversation from 9 to 11, feeling like a big move, similar to the credit spreads. you see reaction in terms of returns and with the lag you see it in the flows and the narrative feeds on it. jonathan: you can see where the pain has been, it is coming from

telecom and we have specific reasons, it started to bleed across the whole asset class. when a client calls you and says, what do i do with this? the message from jpmorgan is do not get greedy on the high-yield side, that is from bob michael. the message with mike collins all year has been paring back risk and we want to get out of here slowly and we are cautious. where does blackrock sit between the two views? jeff: we have also been cautious. october 3, we downgraded u.s. credit from an overweight position to a neutral position. it was not to highlight a huge amount of negativity, because actually our position shift was the move more into equities and out of high yields and it was a valuation call. what we are seeing in terms of some of the spread from idiosyncratic risk to a broader market is because of the vulnerability when you have tight spreads. it is not to say that we see a

lot of economic and fundamental risk, you have idiosyncratic risk that is spreading through and the valuation side did not give a lot of push for that, so that is our recommendation. jonathan: the market this year has been wide open for anybody that wants to do mna, and some people are siding -- citing -- as my we had to open more broadly on credit. whatever you wanted to do, this market was wide open, even for the likes of tesla. is the window closing? or will it be wide open again in a month? jeff: there is a distinction between open and open at what price. the characterizing it as open at any price and tightening the price in terms of what the impact of the idiosyncratic events are, the issuers are going to have to pay a bit more for those. it is still an open market in

terms of the amount of demand far exceeding the amount of supply. you have seen the imbalance with regards to investor need for yield and issuers not providing enough, so the balance is in the favor of issuers. maybe when you get repricing with the idiosyncratic risk, the price will go up a bit. jonathan: take a look at tesla. remember we talked about this in august. $.93 on the dollar. at the time, so many people were looking at the offer and if they were saying it was overpriced and overvalued, yet so many people bought into it and some aggressively. alix: they said, if i do not buy it, someone else will. now look at where it is trading. could it be the junk market is not priced in? the interest reduction within the junk borrowers pretty hard. it is a macro area hitting high-yield credit right now? alan: it might be.

but if you look at the high-yield indexes, they have been rolling over even as stocks go up, so these are warning signs with the sort of evaluation story that has been in the works. the other elements that is in my world of expertise is credit is not looking good, not looking good for a a while now. it is a tax related story as well. there is a broader credit element creeping in and risk in general for both. probably going to be in both for some time now, because of the liquidation. alix: energy. 870 million offering because of the market yesterday, do you expect more of that to happen? jeff: it depends on how long the indigestion occurs. you do not want to issue into what is on the year basis one of the lower points in terms of prices, higher points in terms of yield, so it makes sense to

delay, because what we have seen recently is the episodic selloffs that are followed by better and more stable environments, better environments for issuing. the length of it in terms of issuing, where we see others, it depends on whether this one has bigger followthrough in terms of the deeper re-entrenchment with pricing, or as we have seen this year, this is episodic and in two weeks you are back into the very good issuing environment with tighter spreads and lower yields. jonathan: jeff rosenberg, great to have you. alan sticking with us. david: the walt disney company, they announced third-quarter earnings yesterday and have disappointed across the board with softer revenue. where they did not disappoint is the announcement they will produce a whole new series of star wars movies. to take us through what we learned, paul sweeney. we just put up a chart showing

what disney stock did yesterday, it fell like a rock after the announcement, then it went back up like a rocket -- why? paul: star wars, you can never have enough. what people are focusing on is the fourth quarter that they reported last night was a mess, they missed on revenue and on eps. not a lot to like in the quarter numbers, but people are looking for the fiscal 2018, where at the very least there will be more movies coming out of the film studio, including a couple of star wars, several from marvel and from pixar, so it should be a strong film slate for the come prepared media business, they provide a more data on the direct to consumer offerings will be for espn and that the disney product, what those will look like. investors are starting to get a bigger sense that this could be a viable product. david: that could be the case down the road.

you said there will be a lot more movies in 2018, but there will be more cost and investment, they say they will directin hulu, and the to consumer platform, so will they have a couple of rocky years? paul: they just completed in september 30, this transition year were there will not be profit growth, and that was the case, but they said 2018 would resume the profit growth, and they may even push it out one more year as they ramp up expenses and close of those operating expenses for hulu and the new offering. as well as the capital expenditures for the theme parks in particular, that will get a billion dollars of cap x. looks like they are pushing growth out probably buy another year. but i think most investors are saying this is money well spent

and a move that the company probably have to make if they want to be relevant in a more direct to consumer media environment. david: and of course netflix and amazon is competition, can they take them on? paul: absolutely. i think disney has going for it better than any other media company is they have arguably the best brand in the business, when you think about some of the content may have from the traditional characters all the way to pixar and the marble and of course, lucasfilms. they announced they will start another trilogy of star wars movies starting in fiscal 19, so when you think about content they are as content rich as anybody. david: briefly, bob iger. if 2018 will be rough, that will be his last full year, so will it be good for his stepping down? paul: no. the plan they had in place several years ago was making a

time to step aside, but this is where we are and the next, one of the next big issues for the company will be to identify a successor, which is obviously big shoes to fill. david: very big. paul sweeney, thank you. jonathan: coming up, china takes a historic step, paving the way for western companies to take ownership of their banks. we will discuss what it means for investors. from new york city. the story yesterday, weakness. today, continued weakness. down a third of a percent on s&p futures. this is bloomberg. ♪

♪ >> this trip comes at an exciting time for america. a new optimism has swept all across our country. >> despite risks and

uncertainties, global trade and investment are picking up. >> we are not going to let the united states be taken advantage of anymore. >> we should continue to foster an open economy that benefits all. openness brings progress, while self seclusion leaves the one behind. david: china has been front and center for investors, with president trump's visit and of the overnight announcement it would open the door for western companies to take majority positions in chinese banks. we welcome somebody who has spent time in china learning about the risks there, steve ratner helping to manage assets of michael bloomberg. good to have you. >> thank you for having me. david: you know china well. what do you make of the announcement? is this really liberalization, which the u.s. has been pressing for, or is it an attempt to get the west to bail out banks?

steve: probably a little bit of both and other things. i think the question really is going to be how much the american or the non-chinese banks play in this game, because at the end of the day china favors chinese entities. so yes, you can own 51% of a bank, but how much business will you do, how much pressure will there be to do things commercially in your interest? i think the american financial firms will move slowly and edge into it. david: there was a time when american firms were eager to get into china. if anything they were pulling back. steve: exactly. david: it is a matter of valuation, or is it a question that you raised, i have to compete against their own companies? steve: i think it is the fear of a market that is a market economy, but one in which the heavy hand of the state will

come down. what was interesting is that in the course of the party congress, there was less talk about market reforms, and less pulling back, so i think many non-chinese financial firms will sit back and say, wait a minute, is this the moment to go in there? david: there was talk about the party, but not much talk about markets. steve: and of course tangible steps in taking those companies and what they are doing with the soe's that seem to be modest for entrenchment. david: but it is a vast market, so can those western entities deal themselves out? steve: they do not the deal themselves out, but they do not want to lose money, so each case they will look at differently. david: tax reform back here at home, much in the news on the house and senate side. in a piece that you wrote for the new york times, you said the gop tax bill will help me and

that is too bad. you said, "we know they have fashioned this to help individuals, but carried interest provides more depressing evidence that this is not about helping the middle class." why is it important to help the middle class? steve: because the middle class has been hurting. when you look at incomes over the last 10 years, those at the upper end, present company included have been fine, the people in the middle have been squeezed. we have now only gotten back to where we were in 2000. there has been no forward progress for them, so i think they are entitled to something and they are getting almost nothing. the house bill added a provision, but the house bill did not address the interest. and the senate bill does not address the carried interest. it is more symbolic in terms of money, but the fact the provision is allowed to persist shows you that this tax process

is in the hands of the plutocracy. avid: is that important as matter of social justice or for the economy itself? steve: social justice. the amount of dollars is small and it will affect a small number of people, but the idea that is moniker of people can pay taxes at 23.8% to do the same that we do -- this is not justice. david: if i was a republican senator or congressman, i would say, we will help the middle class and we will help them by growing the economy faster. there will be more jobs and that is what the tax reform will do. what do you say to that? steve: there has been argument that this will trickle down to the workers, i think that has been disproven. and the second thing, as you see now there are a lot of independent analyses, wharton came out with one come on what the effect of the overall economic growth would be from this tax bill, you are talking small tenths of a percent, maybe. there will not be much economic

growth from this. if you want to help the middle class, you need a bill more oriented toward them. i think corporate taxes need to be reformed. we are not competitive on that side. but you can do that without the giveaways to people who happen to have pass-throughs. david: does that mean cutting the corporate rate is important? i just interviewed michael corporate earlier this week and he said if he spoke to his customers, the company would say, we cannot compete because of the tax rate. steve: it is a problem, but i do not think you have to go to 20%, that would put us at the lower end. i think what if i percent would be ok. then you will get money back by eliminating deductions and things that the corporations get that are abusive. you also tax other problems. there are other things you can do to keep the cost at a reasonable level. david: what about repatriating all of that money into the united states for potential investors? steve: i have a different view,

i do not care if it is repatriated or not. there is a couple other million dollars sitting on the balance sheets of apple and google and all these companies they are not investing, so it is not something that will be driving me. david: -- jonathan: the money on the balance sheet of some of these companies, it is hard to understand whether it is cash or not, because it is invested in short-term debt. these investments for apple, what do you think it could mean for credit? jeff: one of the big implications of moving away from this system the territorial system, is the impact on issuance. when you have trapped cash overseas, what have companies been doing? about 20% of all investment-grade issuances come about because you are issuing bonds in the u.s. the cash is netted against the cash overseas, but that allows companies to use the cash in the

u.s., the cash they raised through funding without having to trigger tax provisions. if you do away with that system, then you do away with the necessity of having this artificial amount of issuance, which it turns out to be a lot of issuance for the market. it turns out to be a pretty good support in terms of pricing and valuation, because you are removing some of the supply on the market. jonathan: is that a dynamic you see as well? it ise it is -- steve: true, there is a level of inefficiency of raising money. but it is now sitting in london. so there is a little bit of friction in the market and it would change the dynamics of issuance if you brought that money back, but my point, it will not change investment in the u.s. because there is plenty of credit availability in the u.s. for companies who want to invest. alix: broaden into what happened over the last 24 hours. the democratic wins on tuesday,

you had all the reports about potentially the nominee for alabama, the allegations of abuse for roy moore. what is your base case for how it will unfold in what it means for the 20 18th elections, and what it will mean if democrats can take control of the senate, maybe a reversal the tax reform. steve: let's talk about the most immediate effect, those results in virginia will cause a lot of people to stop and think before they vote on the tax bill, because they are the ones that will have to face reelection. there will be dichotomy between the administration, which is desperate for the bill, and the individual members of the senate and house who are running for reelection it will have to face the voters. i think it will make it happen for the -- harder for the tax bill to happen. alix: do you think the senators will want to go back and say i passed a tax break for you guys, don't you think they want to say

it? steve: i think they will want to say it, but i think this will see the same thing that happened with health care. not just what comes out of the partisan side, but the committee for responsible for the fiscal budget, the issue of the reports, i think it will be like health care. president trump achieved something that president obama could not do, he made the affordable health care act public because he made people focus. he said, which plan to you like better? the same thing will happen on taxes. david: your day job is to invest money, correct? and get return. how much difference does this tax bill make to you? larry summers said, i do not like the way they are doing it, it will not stimulate the economy that much and it will not really create much. it does not matter that much. steve: it does not matter that much.

there are obvious implications for the stock market, whether it is right or not people say that the market was moving the last couple days because there was a question on this and when it would it occur. we have money managers looking at this. these companies and of these different prepositions -- but on the macro side, things will be reshuffled. david: do you know where they will be reshuffled to? which industries will benefit? steve: probably, the companies that are essentially u.s. companies will see a significant tax cut. those operating overseas may see some tax increase. but i think we have to wait for more details to figure out what it means. david: steve, thank you so much for being here. today you can in tune into our colleagues on the radio. bloomberg surveillance can be

heard in new york, the bay area and washington dc, all across the u.s. on sirius xm radio. live from new york, this is bloomberg. ♪

♪ >> this is bloomberg daybreak. i'm emma chandra in the greener. coming up, michael collins, the founder and chairman of -- company. this is bloomberg. ♪ brexit negotiations wrapping up today and the pound rising on optimism that an agreement as possible. >> there is no doubt we have made and continue to make, including this round, significant progress across a range of issues. across the board, we have made

progress toward resolving difficult questions. and that will continue between now and december. jonathan: that was david davis. for more on brexit, we are bringing in alan ruskin and jeff rosenberg. what are your thoughts at the moment, the politics and economy , and of policy -- what does it mean for sterling? alan: when trading, i think you are getting sore from the headlines. they are fighting it hard to trade off of brexit related headlines. i think the sense is things are moving in the right direction. it is a question of whether we get some sort of agreement before the middle of december. ishink the sense there is it good for sterling. on the flipside, the economy does seem to be slowing and this last rate hike could be the last one. jonathan: does it make sense? first hike in a decade, does it

make sense? pushed think they have themselves into a corner where they did have to hike, but no, it was not a good moment for central banking in terms of hiking and at the same time thinking about signaling that maybe this is the last. jonathan: i think we are still in there. alan: i think the bank of canada got caught up in this, and the bank of england, where we are explaining it along those lines. jonathan: i have never seen a central bank governor in the west unveil a rate hike and follow it up with a 60 minute news conference, talking down the economy that he has just hiked interest rates for. that did not make sense. alan: i know. it is not good to be in that position. sometimes i guess central bankers find themselves in tough spots. the important point is how you go forward from here. there is a sense you could make

a policy error by doing the same thing again. jonathan: is this a policy error? alan: i do not think it is egregious. i think we get excited about it -- jonathan: when you wait 10 years for one, you get excited when it arrives. alan: right. the important point is, there are some economies like this, but the u.k. has sensitivity to the sense that there is effective mortgage rates out there and cannot hike too much. you can make policy mistakes quickly i think. jonathan: deeply negative -- how will that situation evolve in the coming months? jeff: they could go higher. it is an environment not just about the u.s. yields or the ecb yields, the global impact on each of those markets -- one of the big stories following the ecb move was how dovish the

market received it and the impact on u.s. rate. go back to the move, i think it was about the removal of the emergency measures and they got themselves into that position, but going forward you are again at valuations where in an environment you have normalization and indeed the narrative was normalization although we will not normalize it all going forward, in an environment where the rest of the world is doing something smaller, it is vulnerability. jonathan: we are talking about fiscal stimulus in the united states, tax and credit, then the headline on the bloomberg, it was coming out of spain -- the spanish treasury feeling good about the situation for the bond markets. is that out of spain, something you would be advising your client to have in their portfolio? jeff: whenever we see these

ated issues come out, it gets lot of excitement on because who would lend for such a long time? the economic implications of extending the maturities because of the discounting function means the marginal amount of risk you are taking between 30 years and 50 years, from a duration interest rate perspective, is not that much. what countries are able to do is, if we look at the big picture of how low the financing rates are, it makes sense. in terms of the investor side, again, the difference between a 50 year and a 30 year is not a huge difference and do have a tremendous amount of liability management, they need the long dated assets against them. jonathan: you do not think on the 30 year per real debt -- ? jeff: i am not saying it is not material, but when you talk about duration risk being material, that is only looking at the asset side. for many investors, the duration

of the assets is balanced with the liability, so interest rate going up is not eroding the value of the asset, it is also doing something good for the liability. so the risk is less of a concern if you are putting it in your own -- jonathan: i know that somebody somewhere at blackrock is going to buy that fifty-year debt next week. jeff: no,. jonathan: alan ruskin and jeff rosenberg, thank you. alix: on the bloomberg terminal, you can check out this is tv . interact with us directly. tv go and watch a segment you may have missed. this is bloomberg. ♪

♪ alix: it is a narrative we keep hearing, the synchronized global growth. emerging markets not participating. does it create opportunity? earlier we spoke with the governor about growth in his

country. >> there is outpatient -- inflation outlook which we have assessed to be on the downside. i think it is important. but what we look at is the global economy is -- we thought it would be at the beginning of the year and south africa has -- from the economy. the issues of growth have to do with our own idiosyncrasies. alix: joining us is jeff keller, who oversees $232 billion for j.p. morgan asset management. that is not small. how much risk will you take on, whether it is emerging markets are developed markets? >> the overarching theme for us has been on the synchronized growth with the tide lifting all boats. what has been good for the u.s. economy has been good for non-us markets as well. it is a shift that began last

year, and we accelerated in january and february to increase our exposure in other markets, being exposed in japan and others. alix: the high-yield market rollover in the u.s., what do you make of that? what is your read through when you are looking at emerging markets? >> when we think about high-yield it is from the perspective of a multi-asset class as to what the choices are. given we are positioned for progrowth and we are assigning low probability to recession risk over the next 18 months, and we do not see a catalyst that would drive that, our perspective has been we want to be pro-risk. and given we are later in the cycle, we want to take it to equity, rather than credit. if i was a bond manager, our choice would be to hold high-yield in credit versus bonds. given that we are multi-asset classes, the shift has been if we are going to take more risk we would rather take it through

equities opposed to credit. david: talk about the cycle. does the high-yield give you any sort of warning shot? jeff: it is similar to the sessions -- the discussions we had last year. we were asking ourselves why with a higher yield. a lot of it has reflected the opportunity cost of holding high yields versus higher assets. with treasury bonds having 235, 240,to around and you believe inflation will remain moderate, then treasuries is between 2% and 3%, and holding high-yield is between 5%-7%. we are holding high yield, so the risk you are taking -- given treasuries. alix: are you provided in the field to take on the risk. we have a question asking about south africa and whether it offers value or not it if you have a strong be about investing there? jeff: i do not think we have had

a strong view of south africa per se. the way we have played emerging markets is through diversified portfolios, we have leaned more toward asia. again, the view on emerging is much more linked to the view about synchronized growth, and quite frankly the view on the dollar in rates in the u.s. if you are looking at inflation being relatively moderate in rates are going to go up gradually, that is supportive of a much more benign environment for the dollar, which is better for the emerging markets in general. alix: in asia, did you buy the nikkei on the crazy weird dip on thursday? jeff: we did not. that is probably even before the election we have been holding overweight positions in japan. we began positioning there in the second half of last year, but it has maintained and added to the overweight spirit alix: you need a strong dollar --

overweights. alix: you need a strong dollar for that? jeff: we came in thinking every central bank was going to being -- lean toward a more -- stands. so we were thinking we would see a weaker yen. i think what has evolved with japan is much more the fundamental story. i think it is looking at the fact you have more earnings upgrades in japan then you see for the rest of the world. alix: we have to leave it there. i think 1992, then you get the highest level. thank you, jeff. opening bell coming up in a half hour. this is bloomberg. ♪ is this a phone?

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america, you can have a 20% tax rate but you might have to wait until 2019 to get it. now investors getting indigestion in the face of supply, don't debt the most in august. and is this china's big bang. they will allow firms to take stakes of up to 51%. for our viewers worldwide, good morning. this is "bloomberg daybreak." i am jonathan ferro alongside david westin and alix steel. 30 minutes away from the opening bell and we have some softness after yesterday's pullback . the first weekly loss since early september of the s&p 500. p.m. -- and standing front and center is a high-yield story with three basis points. and closing out a week with movers. alix: earnings is the highlight and disney is up by 3/10 of a

percent, excuse me, 3% in the premarket. the downside was earnings have been mixed. revenue missed by $500 million, net with revenue missed, park revenue was better even though they had storms. nevertheless, the optics seem good when you talk about star wars. they want to have a tv series, they want to launch another franchise, they will spend $1 billion on upgrading parks, they are building star wars theme parks as well. so that is helping disney on the upside. nvidia is up. this is a killer quarter, earnings and revenue both hitting records. raising dividends and fourth-quarter guidance.and price target raised everywhere by analysts. really solid from the chipmaker. and jcpenney up 18% premarket, this is an expectation game, because two weeks ago when a

preannounced they said that sales would be up 7/10 of a percent. today they say that it is up 1.7%, a monster move. inventory down by 9%. part of it was weather and part of it was discount. we want to get a read through on what the margins will be as they are cutting inventory because they want to go toward things like appliances. a beat is a beat when it comes to retail. nordstrom did not really help the space yesterday. david: now we are turning to tax reform. we now have versions of a bill from the house and senate, so what comes next? kevin cirilli will join us. what comes next on both sides? kevin: a couple of differences between the house version which came out yesterday and will face a house vote likely next week, if not shortly thereafter before thanksgiving. the difference between the senate framework and the finance committee republicans that we got are twofold.

they want to keep seven tax brackets. the house version wanted four of them. the senate version would keep seven and actually raise taxes on the highest income earners. yearuld also delay by one the implementation of the reduction of corporate tax rate from 35% to 20%, that would not go into effect until 2019 under the senate guidelines. the house aversion keeping it for -- house version rather would want it immediately. publicly yesterday, the budget director stating they do not have a problem with anything the senate is proposing. as you know, the senate is driving the show. david: whether it is the senate or house, what is the consequence of the elections held on tuesday? steve is a well-known investor and well-known democrat, but he strongly believes it makes it less likely to move tax reform because individual senators will

be thinking about getting reelected. what is the sense of the consequences of these elections on capitol hill? kevin: a lot would agree with steve. mark warner yesterday, it them a cap from virginia, we are -- all are deciphering the results from virginia. what they're saying is when you look at what happened in virginia for example, that republicans will be facing pressure because of how unpopular, at least the democrats trying to frame it that way, that this is for big businesses and the wealthy. republicans argue they have to get something done before the midterm. again, the midterms are already casting a shadow over washington. and the allegations against roy moore very much the hot topic of conversation in washington. david: thank you. jonathan: thank you. markets after the senate unveiled news of a delay of corporate tax, the dollar dropping to its lowest level of

the mark. and we saw a widespread selloff. it is the small caps that got hit the hardest. joining us in new york, mike holland. great to have you. mike: happy friday. jonathan: happy friday. we are talking about execution risk, then the composition of the bill. what does execution risk, where does it stand for you? mike: it was interesting to hear steve described it, his wish would be that republicans do not get the tax bill through. ven for thebe hea democrats because it would be destructive to the republican party, i present. as -- presume. i can tell you that my taxes will go up number out or what they do, but i expect they will have to come through with something and donald trump will sign it. if it does not happen, i think

-- will have a not happy reaction. jonathan: what is a not happy reaction? mike: it would go down big time. jonathan: some people say it is in the market. all you have to do is -- mike: i have actually at 1.i planned that would be the case -- at one point, i had planned that would be the case. as soon as they said a one-year delay, we are talking about this right now, one-year delay there was a bad market reaction. jonathan: on composition you think it will be significant? mike: it showed the wariness of investors. it will upset a potential tax package. you have the s&p earnings reflecting some decline in taxes, so it is straightforward. alix: is there any company you would want to buy if we do get tax reform as is? any company you are looking at

now because of the tax reform? mike: no, absolutely not. i think overall companies have done well worldwide, despite politicians. whether they are in the u.k. or in the u.s. or in china. we have made lots of money, companies have made lots of money and it is despite competition. alix: is there any company you would sell? mike: no. i do not pay attention to the politicians. i lose money when i think like that. alix: that is the point. we talk about tax reform and the details and you are saying you have money with individual stocks, disney, jpmorgan, microsoft, and you are like, i am not playing it. mike: i avoid it. as i think many people do. they pay attention to how it may impact their earnings and what they do, but in terms of how they move forward to build their

businesses, that is not their primary thing. i am looking for good companies selling at reasonable prices, that is where i continue to go. and they will adapt to whatever silliness the politicians have. jonathan: who is best positioned to leverage an increase in growth, who has the pricing power, because it seems to be elusive for a lot of companies? mike: the obvious is what i am going with, technology, companies like microsoft will continue to prosper irrespective of what the politicians do. it is technology, that would be the main focus. there are others. but that one jumps out. david: you talk about wariness on the part of investors, do they have reason to be wary. i will pull up this chart, basically comparing the price, the white line going up, with cash flow yield. that is comparing the cash flow with the company to its price. i worked for a ceo it was always

concerned about cash. should we be concerned? maybe stocks are getting highly priced. mike: i saw the chart, the yourr is yes, i do -- what mentor, i have always focused on the cash. david: [indiscernible] mike: one of the great business people of the world. i could not agree more. things are expensive. which is why, like you said earlier, you had a point like yesterday where you saw the highly priced market, which is more mobile -- vulnerable, you get the excuse to go down 85 at the excuse. yesterday it was tax forever. -- fervor. david: so when people are -- they will overreact. get to the investor signal to the noise?

mike: if you find a good company selling at a price that is a little expensive, and you see a silly reason for the stocks to go down, then that is when you say, i would buy it at this point. jonathan: ignore the politics and run a marathon. mike: yes. jonathan: there is a rumor around here, number 44. alix: really? >> he is a good reporter. mike: well done. jonathan: i could never run a marathon. alix: unbelievable. do you run or you walk? is a combination? combination? mike: i do not to give away my secret. jonathan: he will be sticking with us. more cracks in the credit market appear, we will look at investors. funds this week. 20 minutes away from the opening bell. features staying softer --

futures staying softer. this is bloomberg. ♪

♪ jonathan: investors tried to cash junk-bond over the concern about cutting the tax rate. losing $600 million in a seven-day period, according to bank of america and merrill lynch. my college still -- mike holland

still around the table. we rolled over in spring and in august, and a little bit now, but this time you can pick out some very specific company stories and follow the bleed over the last week. this one feels more real. what are your thoughts? mike: it is back by the facts. there are a couple of high-yield companies that have reported disappointing results. their cash operations are not what people expected them to be. the high-yield market is all about cash flow. if companies cannot fund their debt, then investors have a problem. there is building concern things are slowing down for some sectors, health care and telecom are the two ones this week. jonathan: and that is it, high-yield rolled over and equity market dropped yesterday, but it stayed resilient in the face of what is happening with

credit. what are your thoughts on that? mike: i am watchful. the high-yield market i think has good predictive character to it and i am watching to see if this has any legs behind it. jonathan: do you think it does? mike: maybe. alix: is there a distinction between a peek in credit versus a rollover? mike: yes. for sure. we do not know where we are yet. alix: what are the signs you will look for? how much momentum do we need to see before the downside gets worried about your holdings? mike: i think what has affected the high-yield market over the last several days is something, if you say, you have to give me an answer, what do you think it is? i think it is probably temporary. that is my guess. i learned a long time ago, do not think about predicting that. overall the tenor of business seems to be ok around

the world. so i think it is probably temporary, but that is why i am watching. if it is not, then i will have something to do. jonathan: we had a guest on yesterday talking about treasury getting to 260, creating a problem for high-yield. it is counterintuitive, but the prospect of more inflation and growth, treasury yields go up. that makes sense. but it would not make sense for a credit to go tighter. he is saying because of how supportive the treasury yields have been for credit, pushing investors into high-yield, that growth could be bad for high-yield. that to me would make sense. it is not a dynamic you can see playing out? mike: it is possible. i learned a long time ago that the futility of me trying, or anybody else, trying to predict things, the markets will do what they do. it is counterintuitive, but it

is possible. the markets have done so much, 14% over the last years in junk-bonds. it would have thought. david: what are the indicators you will be looking at the see if it will become a problem? is it postponements, is it defaults? we would know because the lawyers would come out and he would know early on there is a problem coming. mike: it is back to the fundamental businesses, looking at the results we had this week, was it temporary? our company is looking at a decline. take a look at ge, they are in outlier because their industrial business is having problems with cash flow. many companies are doing just fine with cash flow. your friend bob iger at disney has good cash flow according to the report this morning. over all, the cash is there. the extent that we see fundamental declines in the

vector of earnings and cash flow, they do not have to decline, they need to slow down simply for people like myself to say we have a problem. david: does it make you worried about capital attentiveness? businesses have to invest a lot each year to keep going, because as cost goes up, maybe they are in more trouble because it is more of a cash business. mike: you have to be more careful, so that would speak to going to companies which have less, potentially less -- back to what we talked about, those technology companies. david: mike holland staying with us. coming up, call it china's big bang, the country taking a step toward opening their financial system to foreign ownership. we take a look at what it means for that country's economy and for investors in the u.s. this is bloomberg. ♪

♪ alix: call it china's big bang, the government taking another step to liberalize the financial industry, removing limits on foreign ownership of banks and companies. we spoke with the ceo for asia of jpmorgan. >> this is going in the right direction, this is very good for china. and of course it is good for international players not want to have a part of that market, which is an interesting market. alix: michael holland, banks are top holdings. do you like this? mike: it is a hard question. i think the answer is yes. this is actually a big deal. for bloomberg the call this a big bang, i think that is appropriate. i have been going over there for years and we have been investing

over there for many years. the financial system has been closed and they have opened up a little bit year after year, the securities market, the relationship between shanghai and hong kong, they have been doing a lot of little things. this is a very big thing. 51% is much more -- the jpmorgan than 49%. i think overall what they have done is give a goodbye kiss the donald trump with this, because i think this is a major deal. if jamie dimon was sitting here, he would be very happy. alix: and you know he did not not come up with it in the last 24 hours. mike: the timing was well done. alix: what was the impact be on something like jpmorgan? mike: you just had the ceo from asia, he is trying to conceal his glee, because he can now do business there in a serious way. you had steve earlier talking

about, do not go too fast. chinese will be mindful of their own self interests. and you know, this is not for donald trump or for the u.s., this is for china. xi sees this is a major step forward for him to become the major player in this business alongside the u.s. so i think what guys like jamie dimon will do, those people in their various large firms around the world, will be going into china saying, we are here to take advantage of this new open china's self interest. they will make a lot of money. alix: default actually happening back ina, there was one 2014, but 20 this year. do you question that? nowrisk of opening it up when we are finally starting to

see the government let those companies fail, we will have the government propping up the soe's and the amount of debt is still enormous in china. mike: i have been traveling there for 25 years and we have seen major changes in the country, the economy and the financial system. by thes always been a -- bears, a cry from the bears knew would say, look. and those on the other side say, you understand this is a different financial system. they have no external reality, this is totally self-contained. the government does have enough money to pay off all of the problems and more. people say that is crazy, but for 25 years that has been the case. they will continue to have places where they have to clean up in terms of bankruptcies, but that is not a reason jpmorgan for example one not make a lot of money with this. it is a good time. alix: interesting.

david: but they could also lose a lot of money. the government could bail the whole thing out. we do not know the size of the credit problem. what is the chance that the government will say we do not want to spend the money, westerners, you come and take care of the excess credit. you could lose a lot of money. mike: it is possible. i know jamie dimon and i know he would never do that. if that is the game, i will go back to new york. xi is not going to do that. xi and donald trump, it was interesting to watch them, these are tough, smart business people. xi understands it, what you just described will not happen. smart businesspeople will not be buying that. david: how is he going to take care of the credit problem because it is growing so fast? mike: he has to grow out of it. that is an important question. he understands the economy have

to continue to grow at several percentage points a year to keep people employed. if people are not employed, they will have revolutions in people will die and they will not have jobs. if they continue to grow out of this they will get the cash to pay the debt. jonathan: what then? mike: it has worked in the u.s., why would it not work there? jonathan: michael holland sticking with us. four minutes away the opening of the markets. retreat from our all-time highs set the continue. we are softer, down by a third on the s&p 500. down on the futures. this is bloomberg. ♪

♪ jonathan: the last time we had a week of losses on the s&p 500, september 8. we have had six straight week of gains, poised for a marginal fall back. softer,nt, futures are

-31. red. a third of 1% in the it is right across the board that the story across asset go something like this. treasury yields higher by four basis points. an interesting divergence we can talk about, yields are higher but the dollar is not catching a bid. the dollar is flat. let's get to the cash open with alix steel. alix: weaker stocks across the board. dow jones down by 12 points and s&p up by .2%. the nasdaq is down by .2%. the dow was off by 153 points yesterday, and ended the day 100 points down. the dip was the thing yesterday. see how strongly the dip could support equities this weekend. individual names still tumbling

out. nordstrom down by 2% and sees no change in its pattern. bad news for the company before holidays. third-quarter sales beat margins, but sales fell. hertz is up by 3%. their earnings came in better. and disney, star wars, under the hood, it was more of a challenging quarter. it comes as investors are looking at direct to consumer video service. it is a little late in the game. third quarters -- third quarter was lower by $.70 a share because of video issues. under the star wars hood, there are concerns. here is a chart that will show them to you. the white line is the total revenue for disney. you wind up having the blue line , sorry, the blue line is total revenue, and the white line is media networks reveille.

--networks revenue. since the fourth quarter of 2016, the theme park revenue has bullied the disney earnings. overall income has slid in the last few quarters. the question is, is that sustainable? jonathan: let's bring in someone interested. brian has icl rating on disney. -- brian has a sale rating on disney. let's begin with the earnings. what were your thoughts on that rollover we have seen under the hood almost across the whole business at the moment? brian: they are telling times for the industry. the market really looked past some of the issues. the fact is that the cable networks, which are still the most important piece of the overall company, are experiencing decelerating margins. revenue growth will decelerate.

that is not favorable. i don't see an end to that anytime soon. the positive reaction for the over-the-top services is misplaced. they are going to have virtually no customers for the espn product if they don't have meaningful content. whatever operating costs associated with that will not make profits negligible if there are. i think the other direct to consumer product will probably quite successful, but it will not be quite as profitable as the incumbent business models they have had because you do have a lot of dedicated marketing costs. you have new operating costs for customer service, and the lost revenue that you don't get from other players in the industry. so, you know, it is a question in the market. jonathan: michael holland, the market responding favorably.

rationale you hear from brian. our a stockholder. do you buy what he is selling? is describing the fact that he sees them and is focusing on espn. point, the espn numbers continue to be underwhelming, the less underwhelming than the pessimists have thought of as of yesterday. then mr. eiger very definitely pointed to the parks and to the studio as let's talk about what you are going to do for me today and in the future. what have you done for us lately? both of those look pretty good. is brian still with us? brian, in the parks, were you surprised by the opening of the shanghai park? is it showing a profit? brian: yes, that was definitely positive. i am no parks analyst, but you can look past that hurricane and

say, oh yeah, these were decent numbers, but you can also say it is kind of negative that will spend another $1 billion this year on expanding the parks with the star wars features. it is good for the long-term business, but for the financial modeling, it is negative. it is mixed in that sense. david: michael, they may be able to replace the growth of espn with something else, but that is a tall order. will we know if this parks in movie strategy is successful before bob iger leaves? michael: yes. i think he is smart enough and is so good at what he does and he is a friend of yours, so not just blowing smoke paring david: former boss. and the results that he has attained go way beyond anyone's expectations overall. point and the key phrase o'brien used is this could be very good for the long-term of the company.

what he is doing is positioning himself. the market yesterday said after the close, we are buying that. he actually did a masterful job of shifting the conversation from what is wrong to not only what is right today, but maybe right in the future. this is pretty cool. markets are not known for being incredibly patient. what i heard from bob iger is that it will be roughnecks year. rough next year. we will be investing a lot in hulu and it will have a lot more cost. 20 may be rocky. that your take? brian: yes, i heard that, too. investors are saying, they like a lot of the long-term elements of the disney strategy. they are making the best of their position. the question is, what is the value of the dollar, right? and what will those cash flows be?

problem,e bigger whatever happened in this one quarter for espn, i mean, they're going to face ongoing pressures. that will hurt them regardless of how successful the parks have been in regardless of how successful the studio can continue to be. you know, the problem is, the math will be with the math will be. investors can be plausibly disposition towards a company based on their strategic choices, but it is going to have a lower value essentially. we don't know who will be running the company in a year and a half time. alix: we won't know if the company will look like. will incorporate fox into the company? favorablet will be a transaction if it occurred. it is still a bit of a mystery as to what exactly was contemplated there. would james murdoch replace bob iger and this is a trade of assets in something like that? i don't know. it is hard to fathom why fox would even buy into the

conversation. but if they can pull that off, that is a good thing. alix: michael, you did not look happy when that was floated. [laughter] michael: who says james murdoch? alix: fair point. would you want disney to buy it? michael: i would defer to bob iger in the board because i think they have a very strong board as well, and if they are looking at pieces of fox that would be creative to the success of disney, i think come as a shareholder, i am delighted. david: how could that be created? basic cable is a -- business. where would the growth come out the? been an having executive in the industry, you tell me? david: i would say to take on netflix. but i am not the guest, you are. [laughter] michael: but you know what you are talking about when it comes

to this business much more than i do. you heardsation that yesterday, people getting excited about star wars. the whole streaming thing, that i heard thet, and word netflix in a conversation yesterday from disney. i think that is exactly what they are looking at. alix: to be fair, i do have a yoda hat that is felt and super, super warm. [laughter] alix: it is so warm. by far, my warmest cap. -- my warmest hat. what would disney have to do to get more positive on the stock? brian: that their margins will be depressed over time, right? they can drive revenue growth with a netflix competitor and a bigger scale version of this disney product. but the profit margins would be substantially lower than what they have today. that is the thing that baffles my mind.

investors can get excited about the potential for growth, but the math is what the math is. it will depress margins. map: the math is what the is, but that has not hurt netflix investors. michael, why when you want to own disney versus netflix? michael: valuations for one. i would like disney to have a netflix valuation. but that will not happen tomorrow. i do believe that the company iger is one that i have been happy with. if he takes a successor and the board picks a successor, that will be one that we all smile about because that will be the one important thing he does in the future. jonathan: we want multiples for earnings. we all want some of that. [laughter] jonathan: great to catch up with you, sir. 11 minutes into the session. a slight pullback yesterday and a smaller pullback today. some resilience in the equity

market in the face of credits around much of this week. down .1%. this is bloomberg. ♪

♪ >> this is bloomberg daybreak. i'm emma chandra in the green room. republican senator pat toomey of pennsylvania is coming up. this is bloomberg. ♪ jcpenney is having a banner day for the company to start popping that beat estimates on losses per share, beating its own forecasts from two weeks ago and shares were up 17%.

joining us from new york is oliver chen, a market perform rater. let's start with you. an expectation game for jcpenney, oliver? oliver: the comps were better than expected in the best in the department's sector. what is happening is that we kill is not great, but this whole earnings season has been about expectations being better. these comps and earnings were better from very recent guidance. that is true, but they are doing things that aren't working in terms of beauty, home, and applying strategy come as well is on the channel. jcpenney does deserve kudos for a lot of things going right in a very tough environment. the number one factor in retail is store traffic, just getting physical foot traffic. but jcpenney's comps were up 1.7%. may see was down 3.6%.

they deserve credit and customers are getting their penny's worth. alix: that is funny. [laughter] alix: and some of the video, you are seeing signs saying clearance, clarence, clarence. -- clarence, oliver: they are clearing out a lot of women's closing -- clothing and apparel. that is a great decision because the next chapter of jcpenney is really addressing the apparel trend of capitalization, active lifestyle, health and wellness. the way women dress in america, and around the world, is really changing from a more formal look to a casual. they are restructuring their brand and private label. jcpenney on top of thinking about how they should move with respect to apparel. apparel is a deflationary tough category. with amazon, we have in the

text. consumer behaviors have shifted in jcpenney needs to end well. alix: michael, do you like jcpenney? michael: i would've liked it yesterday. [laughter] michael: i think jcpenney, with all due respect, is unfortunately part of what looks tsunami of creative destruction. people a situation where that changed. people who are under 50 years old are not doing what people who going to the department stores today over 50 are doing. walmart,hat we have -- management willing to figure out the future and survive with online stuff, that is what walmart is doing. sears in jcpenney is, i have no interest in them good alix: my grandmother still

shops by catalog. she is 98. she still shops by catalog. michael: does your mother going to the department star. alix: grandmother. michael: is your grandmother going to the department star? alix: t.j. maxx all the way. i lived there. [laughter] alix: oliver, would you make of michael's argument that you want to run walmart in terms of management? why would you bother wanting a jcpenney? oliver: we love walmart. there are is a lot of aggressive innovation, thinking about shipping, grocery pick up. michael is right. there is a revolution happening in retail. , 15 to 25 years old, they will be 40% by 2020. this is a very different generation. the simple answer is the mobile phone. over 15 to 20 hours per week, and social media. the consumer engagement rattle --engagement model has radically changed and things need to change.

what millennial scare about is a value -- what millennials care about his value. we like walmart. a dividend yield plus aggressive online. we will see on jcpenney, but i am encouraged in terms of what they are doing because they have a loyal customer base. and they have trusted brands. and they have so for a. beauty is a big deal. beauty is a mother and daughter trend. there are a lot of crop currents in retail, but you cannot forget jcpenney has $4.2 billion of debt. furthermore, they are in a store closure cycle and there are not too many malls in america. david: that is a terrific point. you really have to have a lot of money and wherewithal in order comake this move into dot because walmart has invested a lot of money. michael: i think size matters when it comes to this kind of transition. when you talkthat

about the mobile phone, even my department store is my iphone. i go to amazon prime immediately whenever i am thinking about anything. most of the time, none at a 10 times, i am on amazon prime. alix: do you own amazon? michael: yes. alix: what about the valuation? michael: i own it for myself, not for other people. it is too expensive. 150 times earnings is a crazy thing. i am happy to lose my own money. not yours. alix: fair enough. oliver, wrap this up. we have talked about the big retailers, what other names have been the strong deliverers of earnings season? there is a lot to come in terms of walmart and target in the next few weeks. this jcpenney cop has been strong, but the story has been better than feared. kohl's and macy's better than feared. negative comps at macy's and slightly positive at kohl's.

very good inventory control firstly. animatione digital here as well as loyalty programs. the future of retail in my view is about merging bricks and >>. ks.bricks and clic the bottom line here is value. customers love value. and how do you invest in the age of amazon? we like hyper luxury, louis vuitton, tiffany, hyper value, t.j. maxx, ross. that is food for thought with this revolution and disruption an opportunity in retail. puns oliver bringing the on a friday! you andhen, thank michael holland. pleasure to have you on set with us. if you have a bloomberg terminal, check out tv . you can watch us online, click on our charts and graphics. just go to tv on your

terminal. this is bloomberg. ♪

david: president trump continues his first official trip to asia. he will be to vietnam on saturday, then he will travel to philippines for a summit. for more on the agenda, we have kevin cirilli, our chief washington correspondent and michael mckee in washington --in new york. it has been fairly eventful so far. what will we see winding up in vietnam and heading to the philippines? kevin: tax talk. next we come all about taxes and the house of representatives and the senate. the hearing will be underway in the upper chamber in the senate. and we are anticipating the vote on the house for advancing this to the senate. next week, the president traveling to the philippines as well as vietnam. it comes as there have been some significant questions about the economic ties of their governments. how the president handles that and how he addresses that, we

will be watching. david: mike mckee, it strikes me that the president had a deal that he negotiate with tpp. president trump walked away. michael: there was an announcement that they agreed with the 11 other countries to go ahead with the deal. it seems like it has been on hold, but they had made progress on it. if that goes ahead, that is a significant blow to the u.s. in terms of its long-term prices -- process. the president says that he does not like multilateral deal. there really is no enthusiasm. david: come back to tax reform, kevin. we asked you earlier if this tax reform would trickle down to the economy? he said no. all, there has been his argument that cutting the corporate rate trickle down to the workers. that is been thoroughly disproven. the second thing is, you have seen a whole bunch of independent, economic analysis.

wharton came out with one on the effect of the overall economic rose would be from this tax bill. there is not going to be that much economic growth out of this. david: kevin, as we work our way through the house and senate, how important that they deliver a message that this is helping the middle class? president trump has said that repeatedly. kevin: so important, so that is why senator marco rubio is putting things out on this. this is an ideological battle. is about trickle-down economics and whether or not trickle down economics work is something the democrats and republicans have continued to spot on politically. that said, this, in order to get battleground republicans to collins,his like susan we are going to have to feel this is a tax plan that will benefit ultimately the middle class. the result earlier this week in the election in virginia suggest otherwise. there are middle ground points

that centrist democrats like but they cannot get on board with the totality of this plan. things like capital gains and raising taxes on the top income bracket. they don't like the rest. david: kim is a, and mike mckee in new york. thank you very much. jonathan: 26 minutes into the session. let's wrap things up quickly. heading forr, but the first with the s&p 500 since early september. a lot of that has to do with credit and we will be talking about fixed income on bloomberg real yield later today at 12:30 eastern time. don't miss it and don't miss the special, too.

10:00 a.m. in new york, 3:00 p.m. in london, and 11 p.m. in hong kong. from your, i'm vonnie quinn. >> and i'm nejra cehic. welcome to "bloomberg markets."

vonnie: we are covering tax reform in china. tomorrow is better wednesday and will be celebrating veterans day today on the show, so stay tuned. we stopped -- we start with breaking news. julie: university of michigan sentiment indicator for november, this is a preliminary reading coming in at 97.8. that is low the 100.8 estimated and below the 100.7 rating from the prior month. the current index are as expectations. we have seen most of the consumer sentiment numbers recently strong. this is an unexpected drop here. that drop is the biggest drop in a year. interesting here that we are seeing this blip. we wilif