alix: jeffrey dunlop says the s&p will have a negative rate of return this year but commodities may be the best investment. and trump card. the world economic forum thought couple u.s. cabinet secretaries would attend davos. president trump is heading there with his america first agenda. i'm alix steel all alone in new york city. david westin is in washington today. david: i miss you. there's a lot going on here in washington. later this hour we are going to talk with greg valliere. we will talk about the government shutdown and the issues looming on capitol hill. we will talk with david perdue about the shutdown and trade.

we will talk with the former department of energy secretary ernest moniz. elizabeth warren and mark warren have some new legislation they are proposing security for data. that's all coming up from washington today. alix: really looking forward to mr. moniz. here is what you need to know. sell u.s. assets. that's what happened when china came out and said they would be not buying any more u.s. treasuries. s&p futures took another leg lower on that news. the dollar took another leg lower since november. treasury yields took another move higher on that news as selling persisted. 2.6% is how we trade on the 10 year. a stones throw away from what jeffrey dunlop says will make the bear market in bonds final.

crude over $63 a barrel. really skeptical if that can hold. time for our first take. jeffrey dunlop warning on the s&p and finally oil and 80. i say no way. i don't understand it. is is cory johnson and lisa abramowicz. let's take a look at what happened to 10 year. a huge move as i'm leaving yesterday and then we kind of moderate and then you wind up having china say they might stop treasury purchases. 11 basis points in two days. is a pretty big move and there has been a shift in sentiment from sort of jittery to very jittery on the news that china might be considering pulling back its purchases of u.s. treasuries. china is the biggest foreign

holder of u.s. treasuries with about $1.2 trillion of the securities in their coffers. there is a question if they stop reinvesting the proceeds and pulled back at all what does this do? even a marginal withdrawal of demands&p right now has an effet on treasury yields. that central banks globally are withdrawing stimulus and stopping bond purchasing programs. this is definitely a big threat. have 10 year and 30 year treasury auction both today and tomorrow. alix: actually really excited about that. at this rate things start to change. after a tax bill is passed with the notion of gdp -- i read this great book called fantasyland how americansout start to believe things that may or may not be true but it guides our behavior in lots of important ways and some of it is really stupid and it's a wonderful read.

we see expectations for capital expenditures and so on rising with this tax bill. we had the ceo of quest diagnostics on the radio talking about increased spending. ratestion that finally kick -- tick- up. alix: it's like the market setting the narrative. jeffrey dunlop out. talk about the s&p. all recession indicators are flashing no recession which means it is priced in. i like this flash backward to january of 2017. it's like the same thing. >> he believes that if the tenure treasury yield breakthrough 2.63% -- alix: how do you come up with

that level by the way? >> he's old-school. >> if treasury yields rise above a certain point this will start to negatively impact the s&p 500. we are already seeing 10 year treasury yields climbing above dividend>> yield on the s&p 500. at what point do people stop buying stocks and just say we can actually get value in bonds again? he's one of the few market prognosticators whose predictions tend to actually redeposit investment results. >> you mean who is right. who tends to be right. >> that was my fancy way of saying that. alix: what i'm really excited about is oil. $63 a barrel. brent almost $70. i don't buy it. i don't understand how you will not have a surge in u.s. production and i'm worried about the potential shakeout. of citigroup came

out with this perception -- prediction that crude could go to $80 a barrel. he talks about the conflict in iran. he's concerned about escalating expectations for korean conflict. what does that do to oil demand? it's kind of a scary reason to think oil prices would rise but it is the narrative. alix: it was like a 6% chance. would the deck to move it take this trade to happen for a long time. the glacial pace of dekes moving is -- we will see. the thing i'm looking at is the sec. the sec finally taking action against bitcoin in two ways. one significant and one laughably literally laughably insignificant. saying we are contemplating adding a blockchain to our name

so it will increase followers by 70,000%. >> hold on a second. this particular account is hysterical. they are notorious for being very much tongue-in-cheek and having a big personality. i would just catch it that way -- couch it that way. >> i am all for comedy. what we are talking about for almost all of december was these crazy stocks would change their names or change their blockchain's. >> kodak. >> we will get to that. companies with no products whatsoever. i took a dive into one of these companies. and founder expertise was not in blockchain's, computer networking, currency trading, processing blockchain's. >> kodak. it was in bed wetting. of information. it wasn't even in bitcoin. the executives of this company had an expertise in bedwetting. alix: how do you have expertise in bedwetting? urine stopper, it

was allegedly a radioactive patch. the patch in fact was not radioactive. there was never a product. the stock collapsed from a billion dollar market cap to nothing. the same company saying that they are going to invent blockchain technology. the sec stopped trading the stock after our story came out and that's the only thing they have done thus far that we can see about the trading in these equities. one halt of trading, one funny tweet. i am all for funny tweet. i would rather see tweets really looking at what's happening with investors and how they might be taken advantage of your. -- here. the biggest increase in trading

in kodak yesterday. one hundred 20% increase after the company announced a licensing agreement with a company in germany that's going to create a blockchain like device to follow photographs and see that photographers get paid for the use of their photographs. interesting idea. we will talk to the ceo of kodak. kodak is a serious company. kodaklark, ceo of , amerly of hewlett-packard serious technologist looking at a way to use this interesting technology of blockchain for an interesting problem that kodak has wrestled with for nearly a hundred years. we will talk to him. awesome stuff. really great to have you. thank you very much, bloombergs cory johnson. coming up, breaking the bonds selloff. 10 year treasury of continuing

to climb today. 11 basis points in just the last two days. is it finally the end for the bull market? this is bloomberg. ♪ awesome stuff. really great to have you.

>> this is bloomberg daybreak. i'm emma chandra. alabama has won a multistate competition for a new toyota car factory. the japanese automakers will announce the decision today in alabama. north carolina was the runner-up. the factory is scheduled to open in 2021. two u.s. senators are calling for an investigation of the stock sale by intel ceo. competition for a newthere are d more than $20 million in intel stock before the company made public that its chips were vulnerable to hackers. jack reed and john kennedy call that troubling.

is about to finalize orders for 184 planes. that's according to emmanuel macron who met with china's is about to finalize president xi jinping. china accounts for almost a quarter of airbus's sales. alix: bond bulls beware. the 10 year yield inching closer president xito 2.6 percent. we preach that for just a moment today. the bond bears are out in full force. tweeting yesterday, bond bear market confirmed today. 25 year long-term trendline. saying as wello everything is going to change. take a look at this chart. this is where we stand on that. these are the levels we wind up seeing. we are a stone throw away from

that level. will that be the end of the bull market? joining me now is richard jones as well as ira jersey. do you agree with dunlop? >> i think the long-term trend is probably over and it probably has been over for the last three years. certainly since the big selloff after donald trump's election. calling this a bear market and thinking 10 year yields are going to go to 4% or 5% is probably a bit premature. we don't have the economic fundamentals that should drive us there. 3%tainly yields could hit before finding a new level and stabilizing before that. yields could hit 3% but you want to sell the dollar. i don't get it. >> the interesting news that we had today in addition to the gross and dunlop interjections overnight is the china news.

china might be pulling back from the treasury market and to me i think this has implications for the dollar that might even trump anything else which is to say china starts to diversify its fx holdings away from the dollar it could be that we see them substituting with other currencies and one of the standouts and possible substitutes they could look to is the euro. the euro could be the one that benefits from this. alix: fair. what we noticed yesterday was the dollar-yen was also weaker as the yen was climbing higher. is there some de-hedging going on in japan that is also responsible for the dollar weakness? >> that could very well be the case. i think it's a combination of things. the getting of the year always links to some volatile markets.

are settling into what should be the longer-term themes this year. dollar weakness i think is something that will play itself out. 2017.not as much as there is scope for some further dollar weakness. alix: china maybe paring back there treasury holdings. it shows how much china has added to its treasurythere is sr dollar weakness. alix: holdings throughout most of 2017. the latest data is for the end of october. what does it do to the 10 year and 30 year auction over the next two days and where might we see any pressure on the curve? >> you know what's interesting move, foreign reserve managers places like china and foreign official holdings tend to be in the front end of the curve. they tend to own two to five-year debt. it's very interesting that the curve is steepening. part of that has to do with the auction dynamics. in general if china and some other reserve managers were to

reduce their purchases of treasuries it should really be a curve flattening or not a curve steepen her. as opposed to what ultimately would happen if china were to take this step. alix: great distinction. flat or curved. richard jones and ira jersey of bloomberg, thank you for joining us. david? the presence as everybody should put country above party. is that going to give us an immigration deal? move, foreign reserve managers places like china and foreign officialwe will talk abt right here on bloomberg. ♪

david: bipartisanship was back

in fashion at the white house yesterday. the same day that one of the president's most partisan supporters, stephen bannon, left breitbart news. to explain what this means we welcome horizon investments chief global strategist greg valliere and josh green. also the author of devil's bargain, the definitive book about steve bannon. welcome, gentlemen. let's talk about this meeting. pretty extraordinary meeting with the cameras in the room with the president saying what put country above party. is there going to be a grand deal? >> there could be. i think two big angles came out yesterday. number one, he was engaged. that's kind of a low bar to clear what he was engaged. he could be willing to antagonize his own base. he said i will take the heat. he is known for scapegoating. if he is willing to antagonize his base to get a deal that's a big deal. david: what about his base because stephen left breitbart news yesterday.

is this in part because his base is splintering of it? maybe he has to move to the center? >> his base wants him to do what he said he was going to do. towardhe wall and illegal immigrants. there is not going to be a bipartisan deal if trump sticks to those guns. and what theyse do is going to depend on what kind of deal the strike. trump didn't seem all that fluent in the material he was talking about and had to have the republican majority leader kevin mccarthy correct him and say, don't agree to that you're that's what the democrats want. we want something else. david: it looks like he was giving up on lottery and chain immigration. what is the meaning of wall? welcome, gentlemen. we thought it was a big structure. now including republicans on the hill are calling it a virtual wall. >> he clearly equivocated. are somehere mountains, there are some

streams. maybe we can't have a total wall. he can survive if it's just and coulter ranting about this. if it's the entire radio crowd that would hurt his base. david: what does he need to give to say i got you what i promised? >> it's not clear because there isn't a clear set of policies demanding. difficulty for the base all along is they are so enthralled hard to is that it is believe they're going to break with it unless he does something really egregious. what is a wall? is it money to build the wall? a lot of gray area for trump, democrats and republicans to work with. david: the wall about the border is about people coming back and fourth. there's also trade. we have meetings on nafta later on this month. a lot of rumblings i'm hearing

that congress is getting pretty nervous they might actually pull out of nafta. is that what you are hearing? >> the most heavily lobbied issue in town right now is nafta. you got the chamber of commerce and foreign groups saying we can't pull out. you've got trump and his core supporters saying you said you were going to pull out. these flexible. he dropped the offshore oil drilling in florida yesterday. i think trump is willing to be flexible if it serves his political purchases. david: his base saying we really need to restrict trade. on the other hand the business community. a lot of the business community including the chamber of commerce is getting pretty nervous about this. >> trump's greatest achievement is just the state of the stock market. if you want to trade war with china presumably that's going to fall away. trump's great difficulty

and advantage is that he really doesn't have a fixed set of principles he's trying to it here too. he is willing to get a deal done. reform it was tax more or less easy because republicans all wanted to get there and it was pretty clear he wouldn't need democratic support. now i think he is going to need democratic support and that's a whole different ball of yarn. >> he literally said yesterday i will sign anything that lands on my desk. it doesn't show an excessive level of principles. david: you're talking about that ham sandwich? fascinating editorial in the wall street journal yesterday about trump going to talk the farmers and the president really appealing to them. the extent to which the agricultural community in this country really depends on canada and mexico. as much of a third of all exports in agriculture go to those countries. the farm bureau would be very upset. they would be extremely

upset. they would be extremely upset in canada. naftally we should keep and maybe fix it a little bit. emotionally he still has an attachment to people in and bethlehemo pennsylvania. she feels they want it would be a great mistake. david: is there a pathway for the president to say i got you what i promised on trade without alienating the business community? >> yes. that is to just assert that he -- has done it or has done some great deal. he is famous for his hyperbole, not locked into the substance of his agreements. he could do something that didn't load u.s. trade deals and then go out to his base and thesethat i fixed terrible deals, things are going to be great. just look at the stock market is in much the same way he has been doing over the last few weeks and months. david: and just a button it up, davos. is he going to be a free trader

or america first guide? -- guy? >> i think he would love to be the skunk at the picnic. david: greg valliere and josh green, thank you for being here. up, crude's monster come back. to rise incontinue 2018. i am skeptical. oil $63 a barrel here in the u.s. brent almost touching $70. we will break it down. ♪

alix: this is bloomberg debris. i'm alix steel. if you're an investor this is what you need to know. everything u.s. related. dow jones up by 102 points.

potentially china will slow or stop their purchases of u.s. treasuries. you also have a little bit weaker european stocks as well. the action is in the bond market. is the bond bull market over? is bill gross finally right and the bears are in control? yields backing up three basis points. once preaching 2.6% on the 10 year. about that 50 basis point level as well. the dollar not getting a boost from the bonds selloff. dollar-yen in particular down around a november low. part of that potentially is the boj. part of that is the broader dollar weakness story today. crude on its own up 1% irrespective of anything else happening in the market. on what'san update making headlines outside the business world. ofhundreds of thousands

young undocumented immigrants in the u.s. have gotten a break for now. the federal judge has temporarily blocked the trump administration from scrapping the so-called dreamers program that keeps them from being deported. president trump since he is willing to negotiate a deal that might eventually provide millions of undocumented immigrants with a path to citizenship. in southern california deadly mudslides and flooding have killed at least two dozen people. heavy rains turned hills stripped of vegetation by last month's wildfires into rivers of mud. heth korea's president since is willing to meet kim jong-un under the right circumstances. he vowed to never except north korea's nuclear weapons program. the comments come a day after the first high-level talks between the koreas in more than two years. that theea complained south raised the issue of its nuclear program. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries.

i'm emma chandra. this is bloomberg. alix: i am watching oil prices. the monster move up 5% so far this year. jeff currie gave his call earlier on bloomberg television. >> there's two offsetting dynamics. one is that we look at the underlying economic backdrop. it's one of the strongest growth backgrounds we have seen since the 2004 era when commodities went sharply through the upside. the offsetting force is the new oil order. the shale revolution is still very much under way putting downward pressure on long-term oil prices. have upward pressure on the front, downward pressure on the long-term price which has created a rotation in the curve that has created a term structure. while we expect oil prices to remain flat the investment returns we think are going to be significant really being driven

by the shape of the forward curve. investors buy at a discount and role on the front end. upside returns driven by curve shape. how long can that last? -- francine: how long can that last? could drive crude to $80 a barrel. >> i think the key is to get up to $80 a barrel you have to have that back into that forward curve become an anchored. you'rethink about when out a string around $61 to $62 a barrel on the brand basis is still in the 50 to 55. that gives significant returns to producers who are going to sell that back in. we think the upside from these disruptions around the world will be captured in the shape of the curve, not in the price itself. alix: that was jeff currie at goldman sachs.

also speaking out on his webcast saying commodities will outperform in 2018. i for 1 am a bit skeptical. on the bullish friend is dan vicker. he taught me everything that i know about oil. you are bearish. alix: i am a little. are you on the citigroup $80 potential? >> citigroup is at $80? alix: they are not at $80. they outlined their risks and one of the risks could see oil going to $80. >> we can talk geopolitics.

clearly libya and nigeria adding barrels is not going to happen again this year. then there's what's going on with saudi arabia and iran. we have a fundamental thing going on. nobody disagrees with the global outlook in terms of demand. is on thatf currie page. everybody is somehow worried shalethis bugaboo of production coming back online as if this was 2013. it's not 2013. it's 2018. the money is not there. the acreage is not there. we have oil that has been screaming for the past eight weeks, what have the rig counts done? we are not getting the kind of screening of new production that going to come online like we were in 2013. the eia is looking for a hundred thousand up -- 800,000 barrels a day. don't think there's anyway we are going to see that kind of increase in terms of shale

production. alix: there's two sides of this story. one is demand. what do you make of the rig count? >> let's take a step back. we can hone in all of these individual bearish or bullish arguments but at the end of the day what matters is where inventories go. your supply and demand balance taking all of these things into effect risking them out that's what tells you where prices are going to go. we expect prices are going to build this year. they are still going to build. liquids are liquids. you are going to see a bunch of new crude supply coming onto the market this year from the united states. you're going to see a bunch of new natural gas plant liquid supply as well. overall we don't see the kind of shortage to bring us to $80 for a sustainable basis. you make different assumptions and assume that venezuela goes to a million barrels a day and trump doesn't

recertify the iran deal and nigeria protests and other sabotaged rings production down to can certainly build the scenario where prices go up to that level but that is not our base case. alix: this is a chart that we might have the most debate on. it's the baker hughes rig count. the purple bars. the white line is oil prices and the yellow line is shale oil production. you don't think the rigs are $63 wti?come back with the expectations are based upon a base case of $65 or even 2013.l circa the they go back and progressively build on a case of where oil was and where rigs were at a time in the past and that's the way they forecast for the future. it's a new age right now. over the last

three years. in terms of stockpile the reason he's not looking for a build in 2013. they go back and progressively build on astock files is 2018 ie the idea there's going to be this fresh influx of production coming online. if you look at the stockpiles chart for 2017 you would want to ski on it. it's dropping so fast. it's not somethingit's not someo work against terms of where the trends are going in terms of stockpiles. it's not something you want to

work against terms of where the trends are going in terms of stockpiles. if that's your metric for understanding whether oil is going up or down you would be buying and you would be buying big that most of the hedge funds where we demand season. we're moving into another shoulder season. we have this perfect confluence of events. bunch of disruptions over the course of december. the question we have to ask ourselves is do you see that perfect storm continuing over 2018 and the answer with the exception of what's going on in venezuela is really no. even if you include what's going on in venezuela which is a serious disruption you have to ask yourself how does this stack up compared to everything else that's going on in the markets this point. would say this. we have made a very strong move and in many ways there's a lot of sour grapes forecasting of people who didn't catch that date dollar moves over the course of the last four weeks with my subscribers did. shameless plug. get your free newsletter at dan dicker.com. the point is -- we are at a oil hasght now where

made a very big move very quickly and is likely to take a break. at this point the way that all the trends are moving every dip is to be bought here. that's what i believe oil prices will see $85 this year and i am the only person outside of -- int is independent at least this oil market who is looking for that kind of price in 2018. alix: michael, you are at a $55 -50 eight dollar. $58. >> yes. that's a really steep move. what would it take for you to capitulate from $55? wti >> we have highlighted the key risks. venezuelan production is at maybe one point 5 million barrels a day by wti >> the ende year. they are already at 1.7.

if we assume they go down to one million barrels a day by the end of the year that takes up half a million barrels out of my balances and overall we are not going to see the bill we have seen beforehand. venezuela is one. the second is shale underperformance. we don't think that's the case. --think the idea of castle capital discipline is going to lead to management changes. you will not just see growth for growth sake. from our perspective that still means you're going to see strong growth in shale supply this coming year. you can deliver that capital discipline the investors want that you are still going to see very strong growth in production. something that struck me is we talk a lot about hedging when oil was at $50 and a lot of producers coming in 80% hedge for this year and then you have the outliers like continental not hedging at all. what do you do with the shale producers when you see $63 wti?

do you hedge, do you take the risk? >> i look at it as a trade. that's what i do. i look to make money on these stocks. if somebody is fully hedged into not the guy you want to play in a rising oil market because he's not going to benefit. harold hamm like who has seen the cycles before -- alix: he has gotten hurt by not hedging before. >> he has gotten hurt and he has made a lot of money. he decided not to be part of this hedging wave and he is waiting for this wave to play itself out. those are the type of guys the ones who haven't jumped into this hedging freight i want to play going forward into 2018. those are the ones who are going to benefit the most from a rising oil price. alix: so much to talk about. this has been a lot of fun. kind of leading with michael.

that's why i am not be trader -- the trader. michael cohen and dan dicker, thank you. coming up, speculation growing about who will replace berkshires buffett and now there may be two contenders. as you commute in today tune in to radio. tom keene and jonathan ferro 7:00 to 9:00 all over the bond selloff. pimm fox joins the conversation from 9:00 to 10:00. don't miss it. bloomberg radio can be heard all across the u.s. on sirius xm. this is bloomberg. ♪

>> this is bloomberg daybreak. i'm emma chandra. moniz in thenest

next hour. there's a report that the weinstein company is close to being sold. according to the los angeles times the troubled film studio founded by harvey weinstein is likely to be bought by a group of investors. that group is led by a former obama administration official. with credit working suisse just -- to explore strategic options. one of those could be a sale. struggling. nestle has emerged as the lead bidder for the consumer health business at germany's merck. something other potential futures have dropped out including bain capital. the unit could fetch up to $5 billion.

we turn now to wall street beat. first up who's going to replace 87-year-old warren buffett at berkshire hathaway? it's the question on wall street for decades. has a new hire and colson's merger headhunter crashes with 70% losses in four years. trump goes to davos. david westin is in d.c. trump goes to davos. who's in the running? >> this is so exciting. we dragged peggy off of her desk onto the tv set because she has been working on this this morning. world's most famous investor and who is going to take over? >> our bed is greg abel. there's really two candidates that have been mostly in the running the last several years and the's greg

moneymaker and brains behind the insurance operator who has given buffett all the money he has needed over the years to by other companies and become this giant conglomerate from dairy queen to battery company. >> what feels interesting about this -- the news is that both of these guys were put on the board. so even if the derby is not so close anymore it does sort of really increase their influence it feels like on the direction of berkshire which again this is a firm that probably is watched i more than any other. it's copied more than any other. alix: have all of these firms like it berkshire, blackstone that start off small. you have these guys who worked their way up from previous nothing and now they are so big and at this time you have to think about succession. what does it wind up turning into? at what point are you too big and can't make changes?

>> with a really interesting point. several of the private equity guys have said to me over the is this idea of succession is hard in part because these are so much build in the mold and personality of their -- these guyslso working for me, they have worked for me. i started this by myself. there are different mentalities between being an entrepreneur and starting your own thing and running something that someone else created. alix: speaking of, john paulson. >> womp womp. to 49% in 2016. how does john paulson get out from under these headlines? these numbers blew me away. >> it was an eye popper yesterday.

the hedge fund industry is essentially maturing and in some ways almost aging out. some of the biggest names that 1990'seir money in the and 2000s are really getting into their 60's and even 70's and it is hard to create a succession plan and paulson is one of those people that has basically said even if i am only but mostion in assets of it as mine or my employees i am not throwing in the towel. we have seen a lot of other hedge fund managers particularly at the end of the year say the whole game has changed. we are going to throw in the towel and become a family office and just trade our own money. becausen the watch these numbers are huge in terms of decline. alix: his credit opportunity was 11% last year. it wasn't all 70% in four years. >> it wasn't all bad. it feels like the headlines have

been negative. alix: it was the gold bed that went wrong. she could not recover from that. >> he has had some success in other funds. partners are really what is bread and butter was soaked to see him struggle after making his name off the hasn't been during the financial crisis is pretty stunning. .> and puerto rico alix: let's talk about what we are looking forward to in davos. >> i did not draw that card. sending many other capable people. alix: who is going is mr. trump david walk through this crazy thing. america first in davos? david: they are going to get together in davos this year because presidents historically have said i don't want to be with the power lead of wall

street and the business community which is really who goes to davos. we normally have people like xi jinping show up. his president trump going to be the skunk in the garden party? >> from what we are hearing he is going to be a proud skunk. i don't know if that's actually a thing. trump was in and the midst of preparing for his inauguration and the now deposed steve bannon was even invoked davos as the opposite of what trump was going for. this is a president clearly who ultimately is a dealmaker. he's going to see a lot of know andfaces as you i'm sure you are hearing down there in washington. catching theis zeitgeist here. alix: i have to wonder if he

goes there and kind of reads people the riot act it could actually wind up being pretty good for him. david: he likes the center of attention is my impression of the president. he doesn't want xi jinping to be the star again this year. coming up we are going to continue to talk about trade. what caught my eye, those nafta talks. we will talk about what that could mean for american farmers. and if you have a bloomberg terminal you want to check out tv . you can watch is online. you can interact with us directly. go to tv on your terminal. live from washington and new york, this is bloomberg. ♪

david: all the way down here in washington this is what i'm looking about today. it's about trade and particularly nafta. new negotiations going on.

it may be high noon in montreal later this month. one of the interesting things is how it might affect farmers. the wall street journal had a fascinating editorial the pointed out the extent to which u.s. farmers really depend upon exports to canada and mexico. to show how it has increased since nafta came into existence. his he going to undo it with nafta? that's what i'm watching today. alix: i am curious because didn't they help elect him? david: exactly right for and the business community is very concerned. in new york.u coming up, we will speak to jeff rosenberg on the bond selloff. this is bloomberg. ♪ in new york. coming up, we will speak to jeff

>> bond bears now spread to

calls thephil gross incident the bull market again. the s&p will have a negative rate of return but commodities may be the next best investment. they couple u.s. secretaries, president trump shows his hand heading the country with an american -- america first agenda. -- >> several important guests in the next hour. the republican senator from georgia in the meeting. we will talk with the man who negotiated the rock -- the iran deal and was the secretary part of energy.

>> here in the u.s. on wall street, all of the talks happening in the bond market. here is the trading here in the u.s. equity futures around the low of the session. china may be slowing the treasury buying or that hit u.s. equities also had the dollar, continue to hit the bond market as well. about four basis points, 11 in the last two days, dollar-yen the lowest in the -- since november. still up 1% and inventory numbers come up in 2.5 hours time. beware the bond bulls. trading, highs since march of 2017. bears tweeting yesterday, a bond bear market confirmed today at 25-year-old trendline broken in the five to 10 year maturities.

goes two pointre 60%, accelerate higher and that hello, the cocktail that welcome to my lonely set. where do you stand? >> we will not weigh in on the bond business. has been telling .hem where they should be there is global savings, but the vulnerability of the market is we're seeing worldwide a change in backdrop and this is happening in the u.s. for some time. debate about whether

it changes -- china has been a huge buyer and if they fire of the back end. a lot of flattening that we saw last year. we may have talked about it, the flattening was all about. look at the markets today. you highlighted the 10 year. impact is at the back end of the curve. this is about pricing in the technical demand. the back of the curve did not make a lot of sense for what in the economic development higher inflation, a steeper curve and that is what you should see today. >> this is the most since 2000. the concern is they sell or they don't stop buying, etc.

at what point do you become a buyer? or never is an appropriate answer. forhere are two big issues bonds in terms of interest rates. closer and weus think that makes more sense in the kind of environment you are talking about. law -- the back of the curve had been the place to be. that is a shift from 2018 where you priced in a lot more potential moves from the front of the curve and there is greater vulnerability. and it has really restored some end, -- the front theou know china is in front end?

>> we do not know anything for sure. so the issue on the china news is pretty clear in terms of reflection market reaction. some transparency. to china's movement in 2017, if back end of the curve, and there was support. selling off the front end of the curve, that is much more about said vacation and the back end of the curve. what we are talking about is not necessarily selling the exposures but slowing purchases as the chart is already highlighting. the big story of aggregate demand in terms of increases and purchases, that was a 10 year old story. when that curb was increasing, that was a conundrum.

>> what is the pivot for the 10 that is where jeffrey said it is going to get dicey for equity markets. in your mind, what is the breaking level for you? >> i am not sure it is a level but the breaking point, a rate of change. if you go from 242 22 -- 275, it is a lot of time for the markets to jude -- digest. it is a very different story. much prices do not have as time to adjust. a lot more consternation about that level and whether you extrapolate that out. and itpends on the pace, has been a bit aggressive in the last couple of days. you have issues for how, in

credit markets, spreads react to that. are spreads absorbing that? you have a better case and you can get absorption. a rapid pace, it is hard to justify the credit and you get a positive reaction in terms of spreads. it is a vulnerable position for risks -- risky positions and equity markets. >> jeff rosenberg of blackrock is staying with sp or david? david: thank you. coming up, i was beat with a strong supporter of president's economic strategy. the formere is also ceo of dollar general. he will join me next. this is bloomberg. ♪

>> this is your bloomberg business flash. competition for a new tire to an massive joint car factory. according to a person familiar, japanese automakers will announce their decision today in alabama. north carolina -- north carolina was the runner up. factory is scheduled to open in 2021. pressure hathaway has named successors for warren buffett. the vice chairman of the noninsurance business will be vice-chairman of the insurance unit. buffett once a success for -- successor to be torn from the ranks. that is according to emmanuel

macron. china accounts for almost a quarter of sales. >> president trump made an economic growth priority. speaking with an authority. -- joining us up on capitol hill, welcome, senator, good to have you here. you were in a meeting on immigration -- immigration. where are we on this? can democrats and republicans come together and do with immigration all the same time? >> the president accomplished

two things. he brought a diverse group of people from congress together .nd we agreed on the scope we agreed on the daca situation, wall, andurity on the also to eliminate chain migration and eliminate this lottery. the president went a long way to bring a diverse people -- group of people together. >> there seems to be a widespread agreement. sense, increased numbers and workers. inhave declining workforce terms of the number of people and demographics. don't they want to encourage immigration? not just a political or social issue but an economic

issue. the people determining future immigrants are current immigrants. that has brought in low-wage and low skill workers and what we are recommending is a merit-based system that gives us an opportunity to be sensitive to the family structure. what we have got is a confluence of interests between the democratic and republican side to solve the daca issue and solve the real causes of some of these problems we have to deal with in the last 20 or 30 years. >> we talked about growth and taxes were an important part of it. growthre you expect real to come from that. what are you expecting? >> we have already seem real growth. the president said job one was growing the economy. the same thing was energy.

powerplant,.s., the and a third thing was taxed. the president accomplished all of the taxes he thought was important to grow the army. we are about to have one third in my opinion and now that we have tax in play, we will see a continuation in 2018. the president has gone a long way to get us jumpstarted for the economy. if weade is the next step want to continue to see 3% growth. >> that is what i am hearing in washington. up have negotiations coming later this month. concerned are you that we may pull out of nafta? >> of course trade is important to the economy. the president knows it. i compared nafta to what happens in nato.

during the campaign two years ago, he said we will pull out if they do not carry their own weight in terms of self-defense. .e accomplished his goal we want equal access to or there are things that are problematic with regard to the nafta agreement. the president is focused on that and his immigration wants to do that. the president wants equal access to all of these markets. our poverty rate has not changed since the world poverty was instigated in the mid-60's. 6%bal poverty is down because of the trade loss we had. >> from your talks with the white house and the administration, one degree of competency you have at this will come out well with nafta come we increasingly here there may be a showdown and it will all blow up.

possible and everyone needs to be aware the president is willing to take a risk and stand up for american interests. i frankly applaud it. this is the first president in a long time who says we know what is support to the rest of the world because they have been telling us. >> as a former ceo, to what extent are you concerned about the long-term debt for the united states and the effect that could have on businesses like the one you ran? >> we do not have enough time to tell you what i think about the debt. we are in a crisis now. our>> national debt is the greatest threat to national security. five increases to the federal funds rate in the last 15 months. in the last eight years of the past administration, when ourrest rates are zero, debt portfolio, $20 trillion,

the duration is years. this will calm rolling on our back. if interest rates will at -- were at a 30 year average, we would pay $1 trillion a year in interest. it will not happen on a $4 trillion budget. job one, the president said, is growing the economy and now we have to work on some other difficult issues to get out of this crisis. >> thank you. great to talk to you. alix: turning to the markets, this is how they seem to be pricing potential growth. take a look at the 10 year break, all seeing a big jump. .eff rosenberg still with me >> it has been one of your favorite asset classes for some time. inwere focused on that again 2018.

a main theme is inflation come back. a story not necessarily surging ahead. spending provisions for the u.s. may's dart to press on that a bit. inflation expectations may go higher for a bond portfolio, tips and tip pricing is still very attractive. >> how do you relate that to a fed that goes faster? collects ours is an estimate. it is a perception. >> at the rate increases, they have more room to hike. thats dear this is a fed wants to be gradual. this is a fed where we will theirg eckley more about willingness to wait for inflation to show up rather than be in foot -- the fed is very

that they're planning a three-did as a distribution between two hikes and for hikes for us. three to four hikes possible in 2018. hard to see a scenario where they will get much in front of that outlook. the pivot point for global interest rates is coming from market expectations perhaps fueled by expectations in the news yesterday with the boj, around expectations. that is where a lot more of the component and contribution will come from. fed will stick it to a three to four hike base. and there is curve exposure, a textbook reaction to inflation expectations should be longer and interest rates increasing .ore than shorter and

inflation tomorrow. that is the other kind of component. supply andchnical demand. if you hold the technical story constant which it will not the, shouldon expectations benefit themselves in steeper rather than flatter curves. >> 61 basis points, a big move in the last couple of days. we will get his take on the resilience in the corporate credit market. can that continue if you wind up having higher yields? down.l break it this is bloomberg. ♪

>> the treasury selloff is underway but the corporate credit -- market is showing resilience. high-yield corporate bond, a treasury bond, the etf is that pink line. jeff rosenberg of blackrock is with me. when does this not happen?

when do we start to see underperformance rise? >> first, we are talking about the sensitivity of credit to treasury yields. weifferent comment than when fundamentally see going on in credits. what we are talking about is the reach for yield attraction. i need to go to credit not because of the issues and credit, but because there are not enough yields and safe yields. the is very much more about tightness of high quality yield. where you see a bigger correlation there there is a tight level of spread. most of the yield is coming from treasury yield. that is in interest-rate story and a relative yield story. when thelnerability yield increases in treasuries are accelerating much faster than the credit risk can absorb it.

there is just not enough credit risk below 100 basis points, not enough for that to compress. vulnerability that spreads are widening and it is not a reflection of credit but a relative yield. if you look at the broad space, where is the biggest myths price? >> there is not a huge mispricing. look at the credit segments, whether we are talking high-yield, dollar, you see the creditether securitized loans, every market and credit is at a compressed level. that is a reflection of where we are. the expectation is that it will take lower. that is exactly what these should be saying and what they

are also saying is if you are expressing that level of andcation in the portfolio, for yield purposes, the front -- of the curb -- curve is that brings a different vulnerability. could see cycle positive correlation between spreads and rates and it has nothing to do with credit risk but it is more about relative yield. >> are you overweight on any corporate credit? >> we are. we like the of u.s. consumer related credit. look at housing and consumers and securitized credit and it tends to be areas where we see resilience to the interest rate move. the kinds of exposure that institutional access exposure -- there is a credit spread. it moves a lot of vulnerability.

both on a spread basis are reflecting this dynamic but you have a lot less vulnerability in a floating rate asset class. that is something we think about credit exposure. thank you for joining me on this loan is -- lonely set. david? david: coming up, we will look at the future of the future deal , dr. ernest is a former energy secretary under president obama joining us next. we will have sensitive information stone from equifax, mark warner and elizabeth warren will join us next. this is bloomberg. ♪

alix: u.s. assets is the story after china will be reinvesting or buying more u.s. treasuries.

dow jones futures now down only 89 points. other asset classes, it is the story of the last two days. the selloff picking off a little more steam in germany. in the u.s., a little calmer. level slightly below that or the dollar yen, the dollar not participating in the yield rally. weaker dollar across the board. upparticular, the dollar-yen by 1%. mallets get an update on what is making headlines in the business world. hundreds of thousands of young and undocumented immigrants in the u.s. have gotten a break for now. temporarilydge blocked the trump administration from scrapping the dreamers program which keeps them from

being deported or president says he is willing to negotiate a deal that would prevent -- -- with citizenship. the trump administration is backing off of plans to sell rights off the coast of florida. rick scott angrily denounced the could ruinggested it the state passes natural resources. he is expected to run for the u.s. senate. he is willing to meet kim jong-un under the right circumstances. he vowed to never accept north korea passes nuclear weapons program. the comments came into after high-level talks between the koreas in more than two years. north korea explained the south him -- of thesue program. 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. is presidentay

to certify theme deal, saying as i have said many times, the iran deal is one of the worst and one-sided transactions the united states has ever gone into p are we welcome the man who negotiated a good part of the iran deal when he was secretary energy p before going into government, the theoretical nuclear physicist, ran the department at m.i.t. and is now part of the nuclear threat initiative, dedicated to avoiding the use of weapons and mass destruction. obviously, president trump is not a fan of the deal. why is he wrong? why is this a good deal? passes objectives are to make sure, verifiably, that iran does not have a nuclear weapons program. international community has

a great deal of distressed historically. it imposes significant .onstraints on what iran can do peaceful nuclear program for 15 years. the heart of the deal, and this is not understood enough, the heart of the deal are unique verification measures that go well beyond those that any other country a subject to. that originates in distressed that we had. these go on forever so even ,fter nuclear descriptions sunset, 15 years. we are not back to where we were because we have a regime that goes on forever in terms of verification. a history withen iran of them saying one thing and it turns out they go right around. how do we know they are living up to their side of the deal? >> we have unique tools to international inspectors.

with tools they have, because of dramaticallyy have ramped up their presence in iran, they can use cameras everywhere, 24 hour access, and they have the ability to follow , nuclear fuel, if they ever make nuclear fuel, etc., they had tools they do not have anywhere else. >> if the agreement went away tomorrow, how long would it take for iran to have nuclear weapons capability? you know the answer to the question. >> the deal put in place is such that for at least the first acade, it would take them year, even if they went all out, not hiding anything, going all out, it would be a year to assemble the nuclear material. long time to know

what they are doing and respond with whatever tools. asking if we actually stop the deal, how long would it take? >> that is the question i answered. if they were to break the deal and go all out, it would still take them a yield to a sample -- a year to assemble the nuclear material. trump said went should have stopped them forever. this only proves -- postpones it. few go back to the beginning of the century and to the bush administration, the idea of going cold turkey, iran can do nothing in the nuclear arena and led to nothing but 20,000 centrifuges, that is what happened. a much better deal in that sense was on the table. this remains a good deal. for 15 years, is a pretty nice piece of time to extend any

capability for them to grow their program substantially. i again go back to the same theme. verification. they have made commitments with no time limit in terms of verification. on saturday, we will find out whether the president agrees. currently, ceo and cochairman, thank you for being with us. senator elizabeth warren of massachusetts and mark of virginia are working on a built-in -- to create -- credit agencies. at capitol hill with senators warren and warner, kevin? kevin: you have got a bill that would expand power and in boland -- embolden to find companies like equifax for the data breaches. why is that important? >> you remember last september when equifax was careless with

its data and more than half of all americans, the data was stolen. your credit card numbers and social security numbers and birth a in all of that information is out there in the hands of thieves. that reallypart clenches this. equifax makes money off of the breach. we had a hearing and had the ceo , the former ceo of equifax, by the time we got through asking about the credit products they were selling, it turns out equifax may do ok. senator warren and i think that does not causend equifax to invest in the security it should. we are introducing a bill that says there would be substantial, atomatic penalties when credit reporting agency lets and that get stolen there will be payments back to the people when their payments

are stolen. >> in our muslim -- grown ability. i was one of 103 americans who had my data stolen. in the case of credit reporting agencies, there is not a direct customer relationship. do not sign up for equifax services. they take our data without getting our permission. we have seen a history with other firms in the area, data breaches as well. top withus over the the need for this legislation, they had virtually no penalty. the stock price took a hit but has recently recovered. known vulnerability. they could have passion that months earlier. for them to notify consumers. to add insult to injury, when they try to have consumers come in, by going to the site, you were often times signing away your rights and that had a whole set of vulnerabilities.

we went as recently as yesterday and the service said please don't go on this site. when you are that sloppy with data, there has got to be a price to pay. and we will send that signal across the country. >> i remember during the target data breach. it seems there has not been a new regulatory framework created do you think the private sector make this framework that the government sector does and social security numbers were also obtained. warren: what we are proposing for the credit reporting agencies is automatic penalties. we are not proposing a new regulatory framework around it. the area changes very rapidly. we are trying to have bright

incentives in place for credit reporting agencies to say you better protect the data. apartould break the data so if it did breach, they had a sliver of data. >> there is a bigger problem. i believe we need common an across-the-board data legislation. we are dealing with 48 different laws. not know what kinds of timelines there will be in terms of orting. in many ways, it has been down to individual industries. the retail industry and the banking industry, they all want special deals. we have got to make sure the legislation is flexible got --, -- flexible, but --

>> you talked about it being bipartisan. daca, itation and looks like there could be a deal. >> we only have this crisis because the president ended a program that was working. people brought here as children, 97% of young people are either working, in the military, or in school. productive americans. the president arbitrarily into the program and enormous chaos into their lives. now they are saying we have to do legislation and we are prepared to do that in a bipartisan way. the president has actually got to be a participant, a positive participant.

yesterday, he was. >> and keep in mind the urgency of the moment. by, some ofat goes these young people lose their status. beingre subject to deported and it means no longer can they legally work, go to school, be in the military. , family bysis family, across the country are i talked to young people from massachusetts. i met with them here in d.c. and i meet with them back at the state. this is the only home they have ever known and they have done everything we asked them to do. out of the shadows. they have been vetted. they are working. they are in school. of of the consequences failing to pass the legislation is we created a whole group of who are double to

exploitation. one of the young women i spoke with talked about the fact that because she does not have legal was makingn her boss sexual advances toward her, she knew she had nowhere to go and onceould call immigration she was protected by the dream act, she could walk away from the job and get another job. we need to empower these young people. >> the business community has a role to play. the russiaears on investigation, your committee, the senate intelligence committee having frameworks on how to protect the upcoming elections. there has been a lot of fire and fury about the resident's fitness for office and what do you make of that? >> 21 states had electoral systems attempted to be hacked into by the russians in 2016. the russians did not stop on election day.

is we my biggest concerns trying to improve protections around our systems. the fact that we do not have someone in the white house, that the president still denies the validity of these attacks, attacks that russia has pome a gated against france and other nations, concerns about russian intervention coming up, the fact that the president does not technology it means there is not someone out of the way has providing a government approach. that makes it vulnerable going into 2018. warren: the problem is with the president actually does. this has me deeply worried. the president was just part of a republican tax plan to give away $1.4 trillion to giant corporations and billionaires

and make america's working families pay for it. he has now thrown 800,000 rumors and saideamers out they are subject to deportation and maybe he is willing to negotiate and let them stay. for me, it is about what the president does every day. it is not good. >> i cannot let you go without asking about oprah winfrey and the president. >> oprah is terrific. >> she brings enormous energy to anything she brings on. a lot of other folks i think would be great potential candidates. the more the better. >> we have to leave it there. back to you in new york. >> i love that senator warren loves oprah so much. we will hear from the global head of real estate, with a focus on -- in the u.s. and today, you can toy meant -- tune in to our colleagues in new york. we are joined at 9:00 with tom

and in new york, boston, across the u.s. and sirius xm, this is bloomberg. ♪

>> i'm here in the enterprise greenroom. coming up, tim armstrong live from the conference in las vegas. this is bloomberg. ♪ >> commercial real estate is still a hot spot for private equity. --2 billion deal to acquire it is a play on space in canada. today, also capitalizing on the trend, a second commercial real estate fund. the fund aggressively targets profit and offers a potential

for concern. here with me is the head of global real estate with ralph rosenberg. what will differentiate your funds. >> across the private equity >> i also hear a lot of outsourcing. >> we have really strong drivers

for demand. >> major cities in the south where there is low tax jurisdiction and great weather. >> you are playing the boomers and baby boomers and millennial's. >> there is an element of that. is thattional comment obviously feeds into the housing theme as well. >> if you are going to stress. >> a great opportunity to combine real estate echoed --

expertise with retail expertise. i think we should all expect that. in industries declining. value isway to create to knock out trade synergies. >> what does that mean for your opportunity sets. theundamentally, shortening stocks is not for the faint of heart. in an m&a environment, you can be hurt doing that. it is not what we focus on what going alongactually in investment opportunities and taking advantage potentially of retail assets. sold out of a combination of other companies and take it vantage of selectively buying individual retail properties. alix: what is also interesting

is the macro backdrop -- backdrop. the reason the white line in the blue line and the s&p, and we have tax reform how do you factor in the backdrop as a risk? >> a good question. they are responding the way they are responding because people are concerned that higher interest rates will affect real estate valuations. when you have higher interest rates that have not meant property values decline, because the inflation component in the rate rise is what is driving the rate rise, there are interesting opportunities to take it manage have notct that they really responded favorably to the tax legislation whereas the s&p has. the private real estate markets, i think you will see people take there areof the fact

demand drivers for the real estate. it is there any issue with the big headlines we have seen that could pose an issue for you? >> a tax legislation is a net strong positive for real estate communities. the fact that corporate spaces for gone down is a catalyst the expectation that more foreign investors who invest in the corporate structures have more appetite because the corporate rate is so low. about a real-time -- retail investor months ago. when you talk about commercial real estate, it becomes less attractive when supplies increase. 387,000 will to family units in the country.

a lot of things are being bought here at i do not think supply that reduces demand is necessarily a bad thing. >> i think sam is correct. ofhave seen certain aspects the real estate industry and i think the multifamily space targeted to millennial consumers is an oversupply area. the senior housing space also, there is a lot of supply in the market. focus is taking advantage of that supply and discounted prices, and we see focus on thed we real estate market where there are checks and balances in place. multifamily products we are buying, the entry-level garden style 1980's or 1990's vintage apartments, where there are no new supplies in those locations, targeted at the lower middle income consumer.

>> where do you look, then? >> i think sam is right that you look for bubble signs on the supply side, typically driven where there is access to what actually stimulates the developer appetite to build, and the second place to look is credit markets. you start seeing aggressive by theunderwriting shadow banking community, and you see what we call light transactions on the real estate space, cough -- comparable to the private equity space, you see loans that are commonplace in the market as opposed to those that have a lot of checks and balances. we really appreciate it. thank you for joining us. the $2 billion real estate fund really focusing here in the u.s. david, that does it for me here. you have great conversations i'm

super excited about. >> yes. we will talk to tom steyer. he would rather pay for other people to run. he is trying to turn around the house of representatives. alix? alix: i am looking at the bond market option. looking at that at the same time. that does it on this wednesday on the bond selloff day. joining us at the open, asset management joining jon ferro. take a look at the market. broad story for selling. celts stocks, dollars, and bonds. that is the theme wednesday. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. jon: 30 minutes until the start of trading. this is the countdown to the open.

coming up, the global bond market showing signs of fragility. traders bracing for the end of a three decade-long bull market. chinese officials recommending slowing or halting the purchase of treasury's. the record winning streak on the s&p 500 facing its first real test of 2018. a picture of the markets,. a little something like this futures negative nine. dominates g10. a big dollarof buyer pulling back a bit means the dollar story is a weaker one. up foures on offer, basis points on a 10 year yield. let's get you to stocks on the move ahead of the open. abigail: we are watching shares of apple trading lower in the premar