president trump said to announce large tariffs on steel and aluminum imports. facing theay powell senate after taking stock of his hawkish outlook at the house. does he soften his message? the month where nothing works. traders say goodbye as global stocks and the most in two years. the best trade finished. david: welcome to bloomberg daybreak on march 1. it is march. thank goodness. those are the three traits that did well. hours on this first trading day of march. s&p futures grind lower in the red by about 12 points. it was the worst month for the dow and s&p in two years. the dow closed at its low for two days in a row. decidedly risk off day in the market where the dollar

is benefiting despite the fact we are seeing potential tariffs come in from the white house. buying all across the curve. yields moving lower by three basis points and crude down 7/10. david: best buy has its earnings out in the headline's top store sales. sales are up 9%. you can see on the stock it is trading desk earnings-per-share work $2.42. kohl's is coming in as well. they beat on the top and bottom line. , but are a by 6.3% little shy of the estimates. it feels like a pretty solid quarter. the stock not getting the same kind of boost you would expect. time for the first take. three stories we are watching. top terrace, powell day two and

february is done. david: joining us is mike mckee, bloomberg international correspondent and all the way from abu dhabi, tracy. we will start with that story about possible terrorist coming down as early as today on steel and aluminum. recommendations are on the desk in the president reportedly is now going to impose 25% on steel coming from all countries and 10% on alumina. above what wase recommended. michael: the commerce department gave the president three choices. you targeted sanctions, quotas or brought sanctions and the commerce department recommended 24%. david: and 7% aluminum. michael: it will raise costs across the economy because it will affect the downstream users

more than it will help the steel companies. steel companies are doing well. their profits are not as big as other manufacturers profits, but it is not like they are losing money. what we have seen is the loss of steelmaking jobs down significantly. 85,000 people employed by steel companies in the u.s. and 1.6 million employed by downstream steel users. the impact will be felt downstream much more than upstream. alix: inside the bloomberg as well illustrate this for you. the premiums of aluminum in the u.s. and u.k. as well as china. if you want to buy aluminum today, how much more would you have to pay over the price of the lme and you can see the premium is much higher and that is going to hurt downstream users. >> to some extent we are seeing the market reaction along the lines of what you would that. aluminum prices are rising. domestic aluminum producers have been benefiting. it is still early in the morning. the question is there is an

assumption that trump is doing this to play to his political ,ase, to create american jobs to benefit u.s. corporations even though he is doing and under the guise of geopolitical interest. you have to wonder how many more trump supporters will be affected by higher import cost. you have retaliation factor, that is the big unknown. china could slap some rival tariffs on things like agricultural goods. china is 15% of the market for agricultural exports. we saw them do that after the solar panel tariffs. they started the sword on subsidy -- sorgum subsidy probe. michael: it is not just china. if you wear a desk you don't want to be a soybean farmer -- you don't want to be a soybean farmer in the u.s. right now. is talking about sanctions as well. they want to do some targeted

sanctions. they want to hit things like bourbon whiskey because they want to hurt mitch mcconnell. almost all the republicans on capitol hill have told the president not to do this because of the downstream effects, the free trade of fact. if he goes ahead with it it will be interesting to see how fast countries retaliate. david: it will hurt carmakers. ford already was complaining their profits were being squeezed. michael: all the carmakers put out a statement that said this will put the u.s. carmaking industry at a competitive disadvantage. becauseraise prices every bit of steel that goes into a car will accumulate up and we will pay more for u.s. made automobiles. david: turning to big news in the senate. we will have jay powell having his second day of testimony and this is what he had to say last time. he said this is what i think, i'm not speaking for the fed. >> my personal outlook for the economy has strengthened since december. again, each member of the fomc

will be writing down a new set of projections as we go into the march meeting which begins three weeks from today. i would not want to prejudge .hat new set of projections we will be taking into account everything that's happened since december. david: we are getting used to a new fed chair. shorter statements, more direct statements. people like i can understand them. he is also willing to say this is what i think even though i have not checked with the fed yet. tracy: it might be a reversal over the past few years. s speechesd at yellen' and translated to what grade level of speech you would need. this is totally different. the big differences the personal element coming in. track saidt data

this is an investment banker who is standing up and giving a sales pitch essentially and we for ahat powell did ib while. he is saying this is what my firm, in this case the fed, can and cannot do for my clients, which i guess would be the mandate. to some extent, that is great for market. they have clarity on what powell and the fed care about. he was kind of upfront about talking about what they can do for markets. michael: i was going to say that he changed the way the fed chair talks because this hearing is supposed to be about what the entire committee says. , and that's what led markets to the reaction. if he is going to feel we are going to grow faster and may need higher interest rates, he is going to lead everybody else

there. alix: also taking a look at markets because february did not lead well. you can get a feel for how all the asset classes played out. this is what happened in february. this is the percent change on the vix. this is the percent change on the 10 year yield. their,centage change obviously a big move in the vix overall. equities down, yields higher, dollar modestly higher. the big question seems to be is this the new playbook as we get used to a non--- as we get used to a non-powell for? the thing that a lot of people are going to be watching out for is whether or not the bond shock we saw begins to add away and things are -- ebb away. things are better than the wild week in february.

there is still some evidence of this bond affect playing out in markets. one thing you can look at his bond proxies like dividend stocks. they have had a terrible month and continue to do so. they have had massive outflows. the biggest month for dividend etf outflows since 2016 when the fed razr rate does raise rates for the first -- raised rates for the first time in decades david: this could be the beginning. this is the fed and the u.s. affecting worldwide markets. michael: if they say anything at their next meeting of what they are planning to do in terms of winding down qe, whether they stop in september or go to december, the amounts of money we are talking about is negligible. the psychological impact they are getting will also affect global bond markets and especially european and german markets affecting u.s. markets. this will be a long process. consumer prices are probably

going to rise at a slower pace in february, which is the march figure to influence the market. then there is a rocketing up in april. so we are going to see higher inflation coming, it is a question of what the markets are prepared. it gets more interesting because we will have higher steel prices. how does this affect inflation? michael mckee and tracy alloway, always good to catch up with you. , sell stocks, by bonds. portfolio changes following yesterday's sellout. as we go to break, and other look at best buy up about 4%. the company reported earnings and they came in at two dollars and $.42.

-- $2.42. they see comparable sales for next quarter. theould point out typically stock can move upward 7% on earnings. a 4% move is not out of the norm. this is bloomberg. ♪

♪ alix: president trump said to announce import taxes when he 5% on aluminum. the eu and china considering which american products to slap tariffs on in retaliation and donald trump tweeting now. i want to point out donald trump is tweaking right now "our steel and aluminum industry's have

been decimated by unfair trade and that policy with countries from around the world. we must not let our country, companies and workers be taken advantage of any longer. " what is the response? industryinese foreign desk ministry has responded. it will harm u.s. business and they will -- chinese foreign ministry has responded. they are looking at agricultural goods. but have leverage there, what's fascinating is the top economic advisor to xi jinping is in washington now. the whole point was to diffuse tensions great it would be interesting to see what kind of concessions he can offer to ease tensions from here rather than make it worse. alix: the question becomes how serious is this? is this an opening bid?

is this a bit from president trump or is this being taken a serious law? enda: it is a big question. i talked to a lot of economists about it. from a purely macro global viewpoint they are quite relaxed. we haven't gotten the details yet, but the chinese is quite a small total. we are a long way from a trade war. is this a start something else, the head of business -- it's so important to see what kind of concessions he will offer to the u.s. and whether or not they can meet halfway. it is one of the biggest risks hanging over global growth this year. david: as far as we know, the president is not imposing tariffs yet. he has just tweeted about how he is concerned about the state of the industries.

the wall street journal says he is summoned metal producers to the white house today. we don't know the details. assuming it does happen, talk to us about soybeans. enda: they are the biggest importer of soybean and if china were to push back, it would hurt u.s. farmers and key political constituencies for mr. trump. if china was to go down that route, they risk driving up the price of their own food and sparking inflation in china. in all of these things there is a two way flow. ultimately the two will be the biggest. david: if china were to take action, couldn't they afforded the most because there is been deflation in china in recent months on the agricultural products? enda: they could take the risk. -- there is always knell of always an element of inflation.

p it work, vegetables or soybeans. the last thing they want is to be driving up prices of food and irritating the populace. the bigger point is china can retaliate if they need to. even if it is not agriculture. focus on poor -- target borders, chinese investment in the u.s. and of course financial market assets. china is a big holder of u.s. treasury now. thank you so much. page,come now sebastien head of asset outgo -- head of asset allocations from t. rowe price. we want to get your thoughts on asset allocation but let's start on this trade issue. as you take a look at investments as a practical matter, how much do you need to take into account the possibility of a trade war? sebastien: it matters to us. equitiesabout emerging

-- emerging-market equities versus developed market equities and u.s. equities. what i would say is at the moment we are seeing a small part of the trade aspect from a global perspective. this could escalate and you could see retaliation and that would mean a negative commodity story for emerging markets. we have to look at the asset classes a whole and commodities are only one part of the story for emerging-market equities. emerging markets have become high-tech. think alibaba, we like those companies. when you look at the factors that drive emerging-market equities, it is not just about commodities. i don't want to say trade issues don't matter, but there is more to the story for emerging-market equities. synchronizedbal growth story. i understand that they commodity piece of it, but many are

positive about the global economy. if this was and lamented in some capacity does this change the thesis of a global synchronized growth? sebastien: the global growth has been amazingly synchronized. there are 17 markets, 15 of them are above 50. seven of them are above 55. whether trade is going to have a huge impact on that, many factors. i would say in general, pmi's don't grow to the sky. at some point, expectations are so high, we are still staring down the battle of a nine-year bull market in stocks. there is a tendency for mean reversion and maybe trade will be the trigger. we are in an elevated volatility environment. will we get paid for taking risks this year is a key question. one we will explore in our next segment.

t rowe price is not hold a house view and the views expressed by mr. page are his own. cash is king. this is bloomberg. ♪

♪ alix: it is day two for powell as the new fed chair pairs testimony for congress on tuesday. he indicated the big problems we once faced are now behind us. >> well many factors shake the debt shape the economic outlook, some of the headwinds have turned to tailwinds. in particular, fiscal policy has become more stimulative and foreign demand for u.s. exports is on a upward to decorate. alix: what does that mean for market turbulence?

still with us is sebastien page of t rowe price. sebastien: we still believe in the role of stocks in the long run. to quote powell, headwinds have become tailwinds. i would add keeping to the analogy that we are entering into a period of turbulence. volatility has spiked end israeli happens -- and this rarely happens in isolation. we are in a higher turbulence environment. eight out of the last eight times that we have seen a fed hike cycle, pes have declined. this could be different because we are still in easing mode. we are not tightening yet and you have this unusual pining for this goal stimulus. -- for fiscal stimulus. nonetheless, history is on the side of having elevated volatility, meaning we might not

get paid as much for risk assets. we are on the margin taking away from equities. we are adding to both bonds and cash. alix: where would you be buying in treasuries? where do you feel is safe? sebastien: in treasuries we are neutral in terms of duration, so we think at this point it is unlikely the 10 year will stay elevated above 3%. the interesting thing is on the front end of the curve, on the cash markets, you are in 1.6% on cash and by the end of the year you will earn a 2%. the third asset class is back. stocks, bonds and cash. cash is the ultimate diversifier where you get interest rate shocks. interest rate shocks lead to higher correlation. in particular on the suspect of trek -- subject of

treasuries, give us your thinking about this -- and a break at the same time. the feds a rolling off its ownership of treasury at the same time the federal government treasury has ramped up because of deficit spending. how much of a factor is that? sebastien: broadly speaking it will affect the yield curve. i know we think in macro terms. you have seen inversions of the yield curve typically lead to recession. we look at the yield curve as one of them. increase apply with fiscal policy would probably raise rates. but that would steepen the yield curve. there is an impact on how you think about the yield curve. there are other factors as well. expectations,on, up and the impact of foreign buyers. what if china decides to really pull out of treasuries? that would steepen the yield

curve. what really matters is when it inverts completely. that usually is a signal for recession. lots of factors, into play. we don't expected to invert. all else being equal, we are not worried about the yield curve. we still think bonds diversify stocks. we want to be mindful of interest spikes. up, he manages the second largest pension fund in the u.s., christopher ailman will join us next. majority in equities. this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us."

that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. 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. alyx: this is bloomberg daybreak. what you need to know today is risk is off. bye a look at futures, off another 128 points today. we had a selloff, a closing of

the lows yesterday into the end having the worst month since october 2016. we are continuing that trend today. europe, with in some pmi's coming in a little lighter, raising questions that if europe has seen the peak of its growth cycle? and surprisingly, the dollar is benefiting from the risk off wee, not surprising since have a potential for an aluminum terrorist coming down the pipe. they haven bids totally underway, yields moving lower by three basis points. aluminum is down, before the terror of it had -- terrorists f it had --. >> a warning from vladimir putin to the u.s.. russia has a series of new high-tech nuclear weapons that can overcome any defenses. the russian president made the disclosure at his annual state

of the nation address. the weapons include underwater drones, icbms, and a high-tech system that can hit its target like a meteorite. president trump is preparing to impose tariffs on imported steel and aluminum. those are likely to affect runs and adversaries. according to people familiar with the matter, the president wants to slap a 25% duty on steel and 10% aluminum from all countries. theweeted today that u.s. wants free, fair, and smart trade. and according to the new york times, the kushner company has received more than $500 million in loans from citigroup and apollo global management. after kushner met at the white house with executives from those firms. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david?

david: february is in the rearview mirror, and for most equity investors it could not come to soon. as you see from this chart, this is the value of worldwide going back to december 2016 and that red bar on the right is february. this has taken a toll on pension funds, including california employeed the -- retirement funds, which lost more than $50 million during the recent tumble. joining us now, more than half of that invested in equities. great to have you back. >> is great to be here. david: we want to put up some of your major holdings, it was not too pretty. you will recognize these numbers. to microsoft to amazon, there is a lot of lost going on. how did you do overall in the recovery? >> we do not have things monthly

or put of those kinds of numbers. i was at a long-term investment conference yesterday in new york , and that was part of the focus. stop looking at daily numbers and volatility. tough month,a because over half of our portfolios are in equity. 80% is in daily value of moves up andit down. we are a long-term investor. the daily move, i am not trading on a month like february. youd: you consistently say are a long-term investor. did anything in february make you rethink your strategy? just make you think something that happened over the longer-term? christopher: two things. we have been net selling the u.s. equity markets since december. every time it hit a new high, we would take profits. for the past couple of months, when the u.s. market would touch new highs on the same day, i my staff this is unusual. let's take money off the table

and take our chips away. what february said is that volatility is finally coming back. one of the few steps, when people look at 2017 that they missed, there were no single days where the market moved to percent, even within a day. that is absolutely unusual. you expect to have quite a few of those. we felt we were going to come of moreeriod volatility. february reaffirmed that. i'm not surprised if this stays in a trading range for a while. ourave gone neutral in asset allocation, and rebalance back to the baseline. we are looking at where are there other assets in other parts of the world? what i want to point out david was alluding to. if you take a look at the neutral rate in the u.s. visas -- versus the real fed funds target rate, they are basically net-net, in the same place. the question being if we revise that neutral rate, we see more growth. the fed can hike faster. that is a whole different world

and the end of free money. how do you allocate? christopher: everyone stopped talking about the dot plot, as much as we used to focus on it. for us, it might surprise people that if it was taking a little bit away from equities, we are trying to look at other assets, real assets and things that we will do ok, like variable rate debt, do things -- do ok as interest rates rise. i think they will climb, but i am confident powell is not going to mess up and we will follow yellen,cy of janet raising slowly. that is part of the key. wall street gets surprised, that is a big negative. alyx: leverage loans? what is that? of short paperts options that we can write up ezra interest rates -- right up as interest rates. but we're not trying to shift this portfolio. we are a big giant ship, so we are making subtle course corrections in a world where we think we are going to have more

rage -- more wage, more research, we want a balanced portfolio. you said you are confident that jay powell is not going to move too fast, but what about his ultimate destination? how would this affect your investment decisions? >> we are talking about this all around our office all the time now. is natural rate, and what the natural rate for interest rates? governoral reserve john williams really did some excellent work and has a great paper on that, which really says the natural rate of interest, because inflation is lower in this environment, is probably around 3%. that is, in our minds, where we would like to see them get back to ultimately, which, if it is slow and gradual -- fixed income is not a terrible investment. i know growth says this is a bear market for bonds. it is not a great environment for bonds, but i do not think it

will be a bear market where you have to sell out. betterf we are in a growth environment globally, are you shifting how you allocate in terms of region in equities? christopher: we like the emerging markets. a lot of people have been saying that. alyx: like the fact you are looking at higher rates from the fed? christopher: yes. we are the largest economy, but let's not forget about china and its impact on the rest of the world. we are seeing changes in countries like india. we think emerging markets will hybrid to continue to grow if the fed -- will still have room to continue to grow if the fed raises interest rates slowly. david: you have to make sure the money is there. does that mean you hedge everything, take no fx risks at all? christopher: no, because the cost of hedging is so expensive, but the impact is definitely on our minds. that is something we talk about weekly, and we aggregate all the foreign currency exposure across our entire portfolio into a

basket we can manage with outside managers. but e.m. currency risk will be a major impact on that return. we are confident the dollar will trade in a range for a while. also talking about hard assets of bit ago. david rubenstein from carlisle spoke to bloomberg yesterday, and here is what he had to say. >> investors are willing to accept someone lower rates of return to get the money invested. if you have the money, would you rather have 0% return in cash, or a 14% rate of return, lower than 20%, but higher than zero. want to invested, and we can get further rates of return. alyx: do you like pe? christopher: we are a steady investor into pe. i will not encourage david the put all that money there, but in februaryty creates opportunities, because it reprises and wakes up ceos to say ok, i am not going to wait for higher prices, i have to

talk to someone and potentially sell. we think there will be strategic opportunities for private equity, particularly in a coming like ge and all of its subsidiaries. the companies will rapid allies -- rationalize their balance sheet and selloff some subsidiaries. >> if you look at a historic alstrs, are you about it, below it, or right on it? ourstopher: that is discussion every time we meet. the first thing we discuss is that cash position. we have a negative cash flow, a mature pension plan, 103 years old. so we are sending out half $1 month then wevery get in. so our cap position is 2%, that is our target. we have talked about going up to 3%, which we were at the start of the year. it helps a bit in february, but then we decided to stay at 2%

and not take any conservative bets. as david said, cash does not pay any return. that is something we will watch closely. endowment would only be at 1% in cash, but i need to percent because of the negative cash flow. david: but you deployed that extra cash? it went out part of to pay benefits, but the additional money, we have been ceding some new investments, thinking longer-term. i know it is one of the topics you wanted to talk about. we put some money into commodities, we just started putting money to work in leverage loans and other areas. i do not want to broadcast to the world on all of our trades. play is that an inflation or a commodity play? >> we have 4% allocation to inflation sensitive assets, and that is the big shift over the past couple of years, more asset classes are characteristics, not specific securities.

we want more inflation production. 4% is not much for a portfolio our size. we are only at 2% and inflation has not been a problem, but over the next 3-5 years that is something we want exposure to. alyx: an investor who typically wants to hedge their portfolio would be interested in the -- stocks, 40% bonds, and offsetting losses. but you round up -- wound up seeing yields and equities moving together. how do you see that working out? christopher: risk parity is an test drivingbeen to see how it works, and it has been a challenge for them. and they are not part of the people that are reacting to february's move. most of our risk parity people have three months or 90 day perspectives. for us, it is a matter of diverse a fine into other types of assets. that is why we like real estate and private equity. not that we are going to buy, but we are there. as david said, there is a lot of

cash that needs to go to work in private equity. our hope is that those people are patient. the rush want to see and buy in at these prices. but that is why we are also putting money in things like commodities, timber, other types of assets. and not happy cruise ship making a subtle course correction. i am not trying to turn the ship on a dime and trade. we are investors. alyx: commodities and lumber, my kind of guy. david: christopher aleman will be staying with us. we will get his take on other things, including divesting from firearms manufacturers. you can tune in on the radio and listen to our colleagues as well. can berg surveillance heard in the new york, boston, the bay area, washington, d.c., all from new york, this is bloomberg. over the united states on sirius xm radio.

♪ daybreak, bloomberg and i'm here in the hewlett-packard enterprise greenroom. --ing up, the leader blackrock leader cio of global fixed income. ♪ alyx: we go now to wall street, and three's things they are buzzing about this morning. first off, company gun control. public outcry following the for harvardting, the endowment blows $1 billion betting on tomatoes, sugar, and eucalyptus, and green light read the goals -- green light, read signals. david: three great subjects. joining us now is jason kelly and kris allen's -- christopher is still withns

us. first it was dick was walmart.it christopher: our colleague talks about velocity over time. the velocity of this is pretty amazing here. by a couples fueled of things. these companies are getting immediate positive feedback, both in the stock market. and on social media from their consumers. i daresay, chris, they are getting positive feedback from investors as well, institutional investors. christopher: i am amazed at that velocity. i wish i could get america to focus on a whole number of social issues. i am sorry that it took three more incidents to finally wake this country up, but it is good to see.

and they met with a ceo to talk about this. they saw the news and stepped up to the plate. you were first in on this after sandy hook? you divested. christopher: correct. david: how difficult was that yet but we have the florida state teachers fund with a lot of etf's, how difficult is it to domestic? -- to divest? christopher: it is not of the pension plan. most people who have a 401(k), most teachers have a 403 b plan and have these companies and their portfolio of they own an extensive market. so these are fairly small companies. if you on the s&p 500, you are fine, but if you own a broad dates index with target on, you have exposure. that is very difficult because it is an entire market. they own the market as a block. we separately manage our exposure, but we are so large we on the account ourselves. we can take those stocks out. but an etf, black rock or vanguard, they cannot do it

easily. they have to create a second product for that. with: i want to follow-up something you said. you are willing to get on a plane and go to dick's to have this conversation. it feels like people like you have gotten bolder in making their voices heard, not just to the private equity funds and have funds, but really to louder voices. do you think that is true? christopher: i feel like we have had the same voice. we are more aware of it now, but we have tried to engage and educate. i admit that is a slow process. it takes time. if we had gone to try and meet with them, they would have told us about these products do this, we want to have our stores, so social media took care of this for us, which i am thrilled. that is the outcome we wanted to see, a better managed company. this is a sporting goods company that sold saw her balls and footballs. they do not need to be in the slime. alyx: let's talk about another

top two-story -- top story from harvard. hugers ago, they made a bet in brazil, a huge land agricultural development. they wanted to make tomatoes, sugar, cocoa, and it tanked. christopher: this -- to go this story is going bananas, to use a technical term, in the bloomberg today. [laughter] -- stopher: jason: but it is amazing, because the harvard endowment has been the one everyone has been watching, but not in a good way. colombia, princeton, yale -- and the average are all beating harvard at this point. they have done a big overhaul not just in terms of personnel but in terms of their strategy, and as you mentioned they wrote down $1.1 billion to $2.9 billion of their exposure now. that is bigger than a lot of

endowments out there. it is amazing how off the strategy was here. david: chris, is this something more broader about them trying to get yield? smallopher: this is allocation, as you said. that is an enormous endowment, and they tend to make strategic investments. ago was couple of years seen as all kinds of opportunity, but now -- also all kinds of risk. this is part of their natural resources part of their portfolio, which will have volatility. i would be more blended in my exposures. harvard gets a lot of attention because yale is right there, david clemson is the rock star. he wrote the book. harvard is wanting to compete with them and has struggled with turnover. that is not surprising, because i have been at alister for 17 years. i think stability of management is huge when it comes to an investment portfolio. jim othello did a great job,

tried really hard, but the structure did not work in the performance was not there. jason: and the story does point out that part of it was the management of the talent, the quote that is in the story about some loose cannon managers. i would a man -- imagine there are no loose cannons at mcalister's. david: and now, to hedge funds. another report about how they are doing so far this year, and it is not very pretty. andary was the worst ever, this is now another 6.2% down, 12% down for the year. christopher: part of it is we have, part of what to look at is the relative performance. the indexes only down 2%, the hedge fund index. this really comes down to his longs are down and the shorts are up. so general motors is up, not a huge amount but it is up here yet he is short amazon and netflix, this bubble basket he has described. they are up major double digits,

both of them, for the year. it is going the exactly wrong way here. alyx: this environment and you expecting more volatility is why you should own hedge funds. rethinkinge strategically how should he be investing? christopher: that is his skeptical phase right now. i am skeptical is because hedge funds -- there are 20 different styles of hedge funds. to me, it is an amorphous glob of strategies. there are, what, 15,000 hedge funds in the world? the top 100 have the most assets, which is why they get the most attention. but most of these, like that portfolio, are actively traded portfolios, which is very hard to do. i think there are particular strategies you would call hedge funds, i called them trading strategies, that do help in this kind of volatility to diversify.

our trend following managers are very driven, it makes a lot of sense. global macro has been out of favor and not had great returns, but that will be an area that people can diversify into different parts of the world. this whole market has been driven by momentum. we have tons of high frequency trading in our market, most everybody is in etf's. we want to balance that momentum with other strategies. thank youis ailman, so much, and jason kelly, good to have you as well. coming up, jared kushner has some explaining to do. that is what i am watching next. this is bloomberg. ♪

♪ jared kushner -- that is who im watching today. he is in the news and a lot of ways that do not seem very good. he has lost his top security nowrance, new york state is

asking about some loans that deutsche bank and a couple of other banks made to the kushneroner -- enterprises, and there are now various reports that big loans were made to kushner after some meetings with him. he says i had nothing to do with it, but the timing is funny. alyx: they had a meeting, and a couple of days later it was here is over $100 million. david: and michael corbin also went to meet with him at the white house. it just looks a little bad. alyx: especially when you lose your top security clearance at the same time and deutsche bank is in there as well. coming up next, rick reader, blackrock fixed income cio will join us. his take on europe, fixed income, and corporate credit. mom you called?

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it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. ♪ alyx: to into a trade war.

president trump set to allow its -- tip into a trade war. president trump set to announce large tariffs on aluminum and steel. stocks with the more hawkish outlook on the house. and a month where no longer positions seem to work, traders say goodbye to a top month as global stocks sank the most in two years. the best long trade? finish stocks. break,you said on the the may be the first two stories coming together, trade and jay powell. alyx: usually we get a house and go to and say ok, you can lunch and not worry about it, but something materially fundamental has changed that could affect global growth and inflation. atid: let's take a look headlines outside the business world. warning from vladimir putin to the u.s..

russia has a series of new high-tech new we are that can overcome any defenses. the russian president made the disclosure at his annual state of the nation address. the weapons include underwater drones, icbms, and a hypersonic system that pollutants -- putin says heads for its targets like a meteorite. president trump might be hinting at actions he will take in the u.s. steel and aluminum industry. according to people familiar with the matter, the president is likely to impose stiff tariffs on imported steel and aluminum. action could antagonize u.s. adversaries and friends. and it is a crucial two days of brexit diplomacy for british prime minister theresa may. she needs today with the european cancel -- council president after rejecting parts of the european union's brexit deal. give a speechl detailing the divorce agreement the u.k. wants with the eu. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. alex? are about two hours away from jay powell's next testimony to congress. s&p futures continuing to climb lower. the worst month on the s&p since october 2016. we closed on the lows yesterday for the dow, and our continued deceit the follow-through selling as well. the dollar performing as a safe haven currency today, the euro-dollar down by 2/10 of 1%, buying all across the curve at the u.s. a .2%, and crude getting sucked into the stoller -- stronger dollar, down by almost 1%. david? david: fed chair david powell is pretty plainspoken when he talked about the strength of the u.s. economy. >> law many factors shaped the economic outlook, some of the headwinds the u.s. economy faced in previous years have turned into tailwinds. in particular, fiscal policy has become more stimulative and foreign demand for u.s. exports is on a firmer trajectory. david: we welcome rick reader -- rick rieder, good to have you.

react to jayrkets powell as he was talking, but do investors react? did it change your investment outlook, particularly when it comes to fixed income? rick: a little bit. one of the things that is changing. we have lived in this world where the central banks were everything. it's every word, every piece of information that came from the central banks with everything that you had to focus on for investors. that is changing. the world is moving more for monetary to fiscal policy. while the says important things, but since he started talking, the equity market has gone down almost 3% on tuesday after being up for a couple of days. the markets are still tuned in. i think you did a superb job, but he made a couple of comments about being more confident on growth, meaning you could move your. up another notch -- your dot up another notch.

is in the process of shifting from monetary to fiscal, he did address some of fiscal and say we are not necessarily on a sustainable path. in whatmore interested is happening with treasury auctions and the deficit spending than monetary policy? rick: 100%. when we think about the amount of fiscal coming in today, it is extraordinary. from the corporate tax rate to spending, defense, non-defense, the amount of stimulants -- stimulants -- stimulus is extraordinary. and we will have to finance another $100 trillion a year, which is in a lot of ways it is hard to afford. congress has been operating at a pretty good level and now we are spiking the punch bowl. it will be a lot of fun, growth will be higher, but then inflation will accelerate and we create a dynamic where we have to pay for this. that is why rates will move higher. i think they will pause here, but then move higher after the second half of the year. alyx: will you be shorting?

i know you like the two-year before? . rick: when you think about how different it is, we talked a lot on the show about credit, it used to be you have to own credit and spread products, but now you can carry extremely well in the front end of the you curve, i can get some assets off of that and do not have to go off the yield curve or down the credit spectrum. we like to protect principal and the rates market. you can still make money in fixed income, but you have to be careful about how much rate risk you have. alyx: where is the capital reallocation? with we see an adjustment towards short-term more rates and longer term deficits, what assets need to be repriced the most? going to happen -- and i would argue it will not happen for a couple of months or weeks now, long and interest rates, when we start inflating, the term structure of interest rates is wrong today. the fed has been increasing the

size of the balance sheet, now they are selling it down. you have a dynamic where the term structure of rates, once you start to increase inflation -- let's say we get to two point or so inflation, that will get rates on the backend. that will take some time to repriced, and we could talk about why it might take some time for that to happen, but as you get to the back half of the year, you have to reprice the term structure of interest rate. and part of the reason equities are going to be more volatile, i think they will go higher, but the volatility will be higher because you are in a very different world, a more uncertain place with uncertain growth, and how do you funded? david: if you listen to steve mnuchin, the treasury secretary, economists tuesday do not worry about inflation because productivity will go up so fast because of capital investment, how do you part -- anticipate that? inflation isthe --

accelerating, but it is more complex than it has ever been before because when you use to grow manufacturing in this country, it had multiplier effects. when you are in a service-oriented economy without much pricing power, the amazon affect or others, what happens is you do not create the multipliers when money gets into r&d. oftentimes, that will bring down your cost structure. what happens is inflation is accelerating and we go to 2.25 core cpi, peaking around 2.5%. -- iyou put that over should have brought the charts i showed. if you put that over where we have been running, it is impressive. over 50 years, it is nothing in terms of inflation. but in sensitivity for interest rates, it is a big deal. when you have to push this much financing and treasury funding and, it is a big deal. the idea is you will have more inflation and it is not that daunting. it will not crush the equity

market to get a bit more inflation. alyx: i want to pick back up with you in terms of inflation. we are looking at the dividend yield for the s&p, europe, and the topix. and minus the bond yields. basically we are now negative territory, because the risk it has notthe u.s., had the same effect in europe and japan as well. what are your expectations for this year? i need probably about two hours to talk to you about that. alyx: you have 90 seconds. rick: what will keep u.s. interest rates pretty well contained, we have talked about nominal gdp in this country could be 5%. years --rest rates, 10 it is not going anywhere close. and japanaid, europe is going to be really, really slow in terms of moving rates higher. there are a couple of things that are happening. number one, the dynamic red u.s.

rates to move higher, the rest of the world will move very, very slowly. it will keep our rates down. and one of the things that is important is all of a sudden, when you think about dividend yields and how you can carry in the front end, you can's it in 1.5% toay and earn 1.25%. it is not bad. how you think about risk reward -- and there is one other really big deal. it used to be that long-term treasuries were where you hedged against risk assets, but no more. risk parity or a normal hedge. you think about how do i run my risk? i have to take a bit less risk, because my traditional hedge of long treasuries is not as powerful. in fact, it could hurt my returns even more, because what will hurt the equity market is rising rates. that is part of the reason why people sit more in cash and on the front-end of the yield curve you still take more risk. thoseth volatility,

hedges and volatility are harder as well. many people take some less risk. the equity market will be volatile, but it will still be less than they have been. david: rick rieder -- alyx: rick rieder sticking with us, and we will get his take throughout the hour. this is bloomberg.

>> this is bloomberg daybreak. best buy's turnaround plan appears to be gaining traction. the consumer electronics chain forecast first order and all year revenues that beat evidence -- estimates. best buy also reported that same-store sales over the holiday rose for the first time in three years. exxon mobil is abandoning joint ventures with russia because of

international sanctions. exxon says this will result in a after-tax loss of $200 million. drill -- agreed to from the black sea, which was rex tillerson's crowning achievement. and a victory for uber and one of its bigger markets. in brazil, the lower house of congress has approved water down rules on white healing out -- ride-hailing apps. sao paulo and rio de janeiro are the busiest cities globally for uber. and that is your bloomberg business flash. alyx: we have a big weekend coming up for europe. potential coalition government with the spd and merkel's party as well, and italian elections. still let us to give us his perspective is rick rieder, who manages their strategic income opportunities and funds. first of all, what are you

expecting this weekend? what is the biggest risk? rick: on the italian election? alyx: germany, italy. rick: obviously, the italian thing.n is going to be a it is not nearly as profound in terms of the impact it has had historically or cause as much disruption. we think it has been a bit overdone. the things we are looking at in europe, the biggest thing in europe is the data has started to turn, and europe has been growing. it has been showing roughly 3.5 to 4% growth. alyx: but which way is the growth peaking? race that is why the market has started to stabilize, and potentially growth in europe is 1%. and now industrial data is softer, retail sales data is softer, but if you are in the race market and equity market, you have to think about the next primitive of growth, seems to be a bit softer than it was.

it is not concerning, but it is something we are watching -- particularly trade data in germany. your report about the trade data and tariffs is a big deal today. if you think about what this means for inflation, it is a big deal. much of this is the euro? it has gotten stronger and is starting to show up. rick: a lot of it is the euro. huge portion of what that trade is, particularly into asia. the euro has had a significant impact, and some of it is the data in china has turned down, and that retail sales in china or industrial production has a big impact. commodities, as you said earlier -- aluminum, steel, copper, iron or. people do not focus enough on that paradigm, and that is why this trade agreement, as you said, has much bigger ramifications for inflation,

growth, etc., than people give it credit for. i think that is why the equity markets and other things are having a tougher time lately. that trade is a big deal. alyx: if we come inside the bloomberg, it shows italy corporate credit versus sovereign yields. what is the best opportunity set over the next 72 hours? rick: italian banks. we think some of the banks in they have had some real stresses in terms of and the l over the past couple of years. some of these banks have gotten reasonable. there are a couple of the bigger ones that are actually in very good financial shape that have come under pressure, some of the subordinated debt, we think there is an opportunity there. sovereign debt is ok, it is not that interesting is the spread 2% can buy and relative to the u.s. above 2% without taking any rate risk, significant rate risk.

but the italian banks are pretty interesting. david: what happened to the italian banks? halftime i looked at it, we have to clean up the balance sheet, grow through -- go through brussels, how do they get it fixed? rick: it is very far from fixed. we like to get some of those names dragged down into it, but they do not have some of the significant businesses, better capitalized that can work their way through some of it. there is no doubt that it has definitely not been cleaned up. and there is that issue not just for italy, but across europe. it will still persists. one conversation that is youolating that is -- if come inside the bloomberg, this basically tells you that. basically, the cross currency swap is so expensive it is eating away at your return. the white line is 10 year treasuries zero hedge, and the ields. how do you

deal with this? people focus on this. it is a big deal, particularly for japan. when you look across the currency basis, you look at swapping back. bunds are more attractive than treasuries are, so it is a big deal. that is also why european rates, even though they are through the u.s., given there is a different dynamic around demographic and potential growth, in terms of what could come under more pressure in the near term, it is u.s. rate that come under more pressure for a variety of reasons, with technical to cross currency basis. u.s. -- and we will flood the system with an incredible amount of debt in the u.s. treasuries. do you like them? rick: hate them less. alyx: if you were short, would you pare back your short? rick: that is a good assessment of what we have done, well done. we think those rates have been

ridiculous. 10 year bonds were recently at 30 basis points, with a high impact morning. it makes sense to pull back some of your short or reduced exposure, but i think they are definitely closer, and there is not as much pressure coming there. david: rick rieder will be staying with us, because next we are talking about the u.s. and credit. live from new york, this is bloomberg.

alyx: ohio hedging costs are taking the shine out of owning u.s. treasuries, but it is doing for the same -- doing the same thing for u.s. corporate debt as well. some of the biggest international buyers are stepping back from the market as it becomes expensive to buy that u.s. corporate debt. rick rieder and lisa abramowicz. how do you handle that if you are a european investor? what is the trickle-down effect?

rick: in terms of european credit? the demand for u.s. credit -- there is still a big demand, because the pension insurance demand is a big one. once you move the price back a bit, you see there is a lot of demand. however, like you said, the hedging costs for places like japan are more expensive, and frankly the incremental spurt you are getting when treasuries are doing these sorts of yields are not that interesting relative to where you can get other yields in the marketplace and relative to where you can get data in the market out of equities, which what i would argue is more complex. that one foreign investor has been a big seller is u.s. companies, because they are liquidating their overseas holdings of u.s. corporate debt, and you have seen this distorting the market in interesting ways. one of my big questions right now are at what point are people going to take advantage of some of these distortions? you are seeing yields on shorter dated u.s. credit blowout and

actually -- right now, 10-15 year u.s. investment grade credit is offering the smallest 1-3 years since 2009. my big question is is blackrock getting in? are they buying up corporate -- short-term covert -- short-term corporate bonds? been picking away at the front end of the curve, because like you say why go to the backend in some of these assets when a, something very different is happening. when rates move higher, traditionally spreads tighten. but when rates move higher, you do not need the incremental right anymore, so you pushed is out at a certain point. we like being on the front end, and i has been because of repatriation. there is a dynamic about companies selling debt to buy back their equity, which has been immense on the other side of it. we are picking away at the front-end of the corporate curve and other secured assets in the front-end, 100%.

about clo's, and rolling back regulations in the terms of what banks can lend to? loans, floaters generally make sense in a portfolio. there is part of a market where people are surging in to buy floating-rate debt, no matter what it is. lisa: the ailment is buying floating-rate debt. rick: by the way, you have to look to find the diamond in the rough. we like loans today, but covenants are coming off quite a bit. we like loans, we also like other floating-rate debt. parts of the market like commercial mortgage market, people are paying up like crazy. i cannot hedge it organically, and many times we will buy corporate bonds and hedge the duration so we do not have to play -- pay for a floater. alyx: one of the interesting things to me is that we were talking a lot about overall

broad market trends in the past few years. this year it is a story of corporate credit, very much so. i am curious about names like general electric, which has more than $120 billion of debt. ratedan investment grade company, but it has had a lot of troubles, as we have documented on this show. some of the bonds are trading as junk. what does this mean? what if they get downgraded, with the one hundred $20 billion flooding into the high-yield market? what about selling $3.5 billion the first time it is rated junk? the lastte frankly, two years has been buying almost the worst credits, and the worst has done the best because of quantitative easing. over the next couple of years, it will be how you make money in credit, and avoiding the ones that are going to hurt you. as you described, some of that we are not worried about, but the size relative to the investment grade market is much, much smaller.

the fraction of the buyer base is much less than what it was from capital guidelines, so if there is a name that will drop -- particularly a big, capitalized name, it is an issue. we are thinking about who are those crossover issuers that can go the other way? absorbeld mark cannot it. and the same thing with em. when you have things like brazil or names that go down. rick rieder will be sticking with us. in the latest -- the next few minutes, we will get the latest on the feds inflation gauge. this is bloomberg.

♪ bloomberg is daybreak. about 30 seconds away from some new economic data, like pce. it is risk off. futures down by triple digits. another asset classes -- in

other asset classes, you can feel that treasury market lying all around the curve. 10 years down by three basis isnts, 2.83, and the dollar looking to be the safe haven of choice today, despite the fact that we might have steel and -- tnum terrace -- terrace arriffs. beaten, and were personal spending, bang in line. inl personal spending negative territory, down 1/10 of 1%. the number we are looking for here, particularly the fed, look at the pce core. coming in 1.5%. not a lot of movement in terms of going sequentially. and initial jobless claims continuing to climb lower as inflation cannot get a handle. in the market, the dollar

hanging onto the highs of the session. if you take a look at what is happening with yields, it is buying across the curve. some asear is down well. david: this is the survey numbers, with the exception of personal income. as you look down the list, they were all spot on with what the survey said. no prizes. alyx: no surprise there. joining us as michael mckee, and rick rieder of blackrock is still with us. mike, did we learn anything? michael: tax cuts help your wages go up. less personal taxes, 3.3% taken out. their -- gaingain in there from the tax loss. this gives people something to spend their money on. another interesting number was that the savings rate went up. it dropped significantly in

december but went up in january, so that is some good news for the idea that people can keep spending, that we are not going too far into debt. we have seen credit card link when season start to rise, and that was a concern about the sustainability of the expansion. pce -- this is no surprise. the fact that we are not seeing any real change here in the inflation numbers, i tried to call up my chart here of that, numbers move the up just a little bit and stay there. that was expected because of the nature of the year ago effects on the numbers. that we are going to see a lot of the numbers fall out. we will not get some reports till april. and then you will see the numbers go closer to 2%. david: what about the fiscal stimulus? mike says we are starting to see the tax cuts. is this fully expressed in the

economy or will it take some time? how long? rick: it will take some time. whenever you get a bunch of the data that comes through and this traffic of data that comes through, you try to parse through it. inflations a favorite metric for the fed. when people say the fed is behind the curve, the fed is doing the right thing. they will move three, maybe four times this year. is% core pce, and the target two. it is moving up, and the base effect from a year ago, of course cpi will head up to two 2.25, 2.5%. alyx: inflation -- steel and rriffs coming down the pie. how do you start thinking about that? that is one of the things that is going to way through,

because it is not just here. it is an inflationary dynamic and has ramifications for nafta, for global trade, and china is .2% of global growth when you talk about global trade if you take her, iron, aluminum, zinc, and so on, and to the extent you aggregate sum of that global trade has a much bigger influence on inflation and growth than people are giving credit to. michael: what we are going to see right now is with terrace -- being applied, downstream users will have to pay more for their raw everything will cost more money. some scope to do

that, and in their is the scope of retaliation. what happens? i brought along this chart. china, after the sola panel arrace, initiated "investigation into the u.s. which is howng," we got invested in u.s. steel. there are soybean prices, and they have suggested that we been might be next. do we had farmers with that? that would be deflationary, but it would hurt incomes and spending. a lot of factors at play here. david: china is the second largest economy in the world, but there is nafta. they are on their way down there right now and negotiating in mexico city. but one thing we overlook is that canada's exports of steel to the united states. rick: they are the biggest exporter. we put sanctions on china over the past couple of years, some ,ig sanctions in january 2016

so we do not import very much from china anymore compared to the rest of the world. china floods that the world with steel so it depresses the world price, but we are actually importing from all of these other countries -- china, the eu, brazil, south korea, canada are all much bigger than china is in terms of the imports that come into the u.s.. so how do they react to all of this? the eu has already said they want to put tariffs on bourbon whiskey to bother mitch mcconnell and harley davidson to make paul ryan unhappy. alyx: to pivot off what you are saying about global growth, i look back to germany's trades data. their export, their internal demand, with imports that roundup being stronger than exports, and that was before any kind of tariffs came down the line. how do you view em then in light of this? we like em quite a bit. we are always looking for where befixed income should we

buying debt? we also think em equity is ok. obviously, the emerging markets are significantly sensitive to the commodity markets, but it is a big deal to think about these tariffs, and whether the nafta countries are included or not, and how to we think about mexico and other parts of north america? around thing i will say emerging markets, they are very, very different than they were five or 10 years ago. they will not move with every dollar price of copper or commodities, oil price move. they are much better in terms of their leverage and liquidity, etc.. what will it affect growth and e.m.? for sure. is china the biggest driver of that? by far. david: rick rieder, thank you for being with us. michael mckee always good to have you here. up next, the former saks ceo will be joining us to discuss the changing retail climate. you can listen to our colleagues, tom keene and jonathan ferro, on the radio.

they can be heard all across the united states in sirius xm radio. from new york, this is bloomberg. ♪

>> this is bloomberg daybreak. coming up, democratic senator joe manchin of west virginia. ♪ and now to your bloomberg business flash. once again, qualcomm is saying no to what would be the biggest tech takeover ever. the chipmaker's directors say that broadcom's $117 billion offer materially undervalues the company. next week, qualcomm shareholders

will vote on six broadcom nominees on the board, which could actually give qualcomm a majority. spotify is trying to get investors to buy into it than usual listing strategy. the way it uses data to help it 71 million subscribers find new music. spotify is skipping the traditional ipo and price settling process. the opening public process on the new york stock exchange will be determined by buy and sell orders. world'ses of the largest advertising company are falling the most since 1999. wpp reported a slow start to 2018 and a no growth outlook for the year. this comes after a top 2017. is -- said it is developing a strategy to cope with slow advertising sales. david: we were talking about retail, amazon, and that effect. we have talked before about

this, and you have to wonder that with digital, will it have a depressive effect on the price of advertising? fine,he said no, we are but -- but we will david: have to rethink that. google,have facebook, amazon, they are taking all of that. there is a big price pressure on the other side. alyx: kohl's and best buy out with their latest earnings today, and book stocks are trading higher. best buy might be one of the few bright spots in retail, actually seeing the best holiday sales and's 2003. joining us now is the former ceo hs.sac macy's reported some solid numbers as well. do you feel like this with a blitz, or can this continue? washe holiday season extreme a strong. you saw over 4% growth in consumer spending, and the

results coming from macy's, , they werebuy, ross all beating expectations. i think it will give you a bit of a reprieve and breathing room to take the changes that need to take place in these retailers in the new environment. you had a weak year ago base. 2016 holiday season was very weak. and use our recovery. it does not mean you are out of the woods. the fundamental issues of retail, the changing consumer, the amazon affect, the switch to digital, those are all still occurring. these results indicate that the major players are responding, the consumer is responding positively, and yet they still have to make lots of changes in their business model. david: let's talk about those changes and the money you have coming in to make the changes. how much real estate is devoted to storage? shows square feet per

capita and what has happened -- in theountry country overtimes, and it has skyrocketed. back in 1960, 4 square feet per person. now it is 23 .5 square feet per person at a time when you have amazon coming in, and it is an outmoded way of doing retail. it is certainly not an outmoded way, but you have far too much retail. to -- absolutely. consumers want products and are buying products, and wanted anywhere, anytime, and wants to be able to get it. the amount of square footage is far too much. if you compare not just that chart in 1960, look at the square footage for capital relative to other countries. just go to europe. it is multiples of the amount of space that you have in europe. you have exploded in terms of the number of stores and the amount of space. so last year you had 7000 stores close in the united states. pretty hey, that is a

good number. the problem is you opened up 4000 or 5000 stores. you are nowhere in terms of rationalizing the square footage, so you have to close malls, companies will have to close the amount of stores. it is not so easy to close the store. if you are a healthy company with a long-term lease, you have to honor that lease. it is not so simple, let's just let the switch and close the store. tox: there is the small i go in the berkshires and there are three stores and everything else is empty. how do you monetize a space that is going to stay? we talked to the american vice -- here is what he had to say about what to do with that space. >> they are bringing in a lot of more restaurant concepts and non-apparel concepts to the malls, because that is where the demand is, as well as tesla stores, apple stores, the samsung store, projects of those natures. it will be a process, because they have to weed out weaker

retailers who have been losing to e-commerce. alyx: do you feel like that will be the next step? is talking about be a malls. they are reasonably healthy. you go to short hills, bal of miami, they are healthy and will do the kind of changes he is talking about. brands,g in stronger hot internet players like warby parker, and they do find in this environment -- fine in this environment. they will continue to grow. you will see a lot of those , maybe twice as many malls in the united states as you need to have. i would not be surprised if you see 400 or 500 of these c and d models closing over the next couple of years. it will not be about just stores like tesla, but it will be gyms, health centers, education. you will have to totally but theed these malls,

a malls bring in movie theaters and payment complexes, you go to dubai and see skating rink and ski slopes. david: will that be doing a favor to the three stores left in your mall? should they be closing the stores anyway? with the berkshire example you only have three stores left, probably because of the adjacency, if the department store goes out, the smaller stores can start going out as well. my guess is those our local stores that are in that mall at this point. at some point the mall closes, they turn into office parks space or do something else with it. thank you, steve, for being with us today. coming up next, senator joe manchin joins us to discuss the legislation. alyx: and if you can -- and you can check out tv , interacting with us directly. questionlso send us a on twitter.

to ♪ check it out. this is bloomberg.

david: president trump met at the white house with a group of lawmakers yesterday and pulled no punches in saying that he wanted to be the president to got something done on gun legislation. president trump: at think it is time that a president stepped up. we have not had them -- i am talking democrat and republican presidents, they have not stepped up. david: senator joe manchin has been a long-standing defender of the second amendment, but has also favored stricter background checks. welcome back to the program. it is great to be with you. sen. manchin: great to be with you. david: were you surprised at how adamant the president was yesterday, how far he went on the question of gun legislation? sen. manchin: i was surprised that the intensity he kept reinforcing it with.

that was great to hear. the public is saying we want some guns cents. i think you all know that i come from a gun culture and i was raised hunting and fishing and doing all the things that a boy who lives in rural west virginia would want to do. with that, i was taught properly how to use my done safely and -- gun safely and respect others, and that is what the nra used to be. we would like to see them go back to that position. when president obama was there, the bill that i introduced, we introduced a bill that basically the nra did not -- i think for a while, they looked at the bill, worked with us on the bill, understood what we were trying to do. all we did in that bill was a listen, when the terrorists of the world say hey, if you want to do harm, go pick up any gun show -- anything at a local gun show you want to accommodate us want to sell guns, we thought that should be stopped. most of the dealers selling at gun shows are federal firearm dealers.

they have a license. they have to do a background check on everything they sell by law. we just said everybody and every commercial transaction should have a background check. you do not have a knowledge of that person, and 70%, 80%, 90% of people agree. alyx: i just wanted to point out that the new york times pointed out that kroger will peopleop selling guns to under 21. david: is the private sector taking over the government on this issue? they seem to be having their own form of gun control. sen. manchin: thank god it kicked in. i always said follow the money. when the market starts reacting and either consumers -- see their consumers say enough is enough, but some common sense to this, they will put the pressure

, in a dysfunctional, very toxic political atmosphere. they are able to push things that we were not able to do, but right now we have the momentum. with the push and help that we have from the florida children not letting this guy, there is going to be a massive rally march 24, which is sorely needed, they will put pressure on it. we need to common sense do the right thing, and that is all we have wanted to do. i will protect the second amendment rights and the law-abiding gun owners that i grew up with and hunt with and are still my dearest friends, but on the other hand i want to make sure that i protect their from criminals, terrorists, or someone who is insane, and make sure no one is able to get a gun and do harm to them. understandnt to where you think the congress may be going, because background checks are one thing you have on, and alsoen the 21 age limit, which is what

the companies tend to be doing right now. do you favor both of those things? sen. manchin: i said this -- i agree with the president and support that. that is a no-brainer. if you have to be 21 to buy a handgun in america, it does not toe sense if you are going buy and ar-15, a weapon that is going to do that much mass destruction, you should have the same criteria of 21. other people have said ok, wait a minute. goesbout if an 18-year-old through the classes, passes and intense background check, and goes through all the responsibilities you have to have to be mature enough to know what this weapon can do and what the purpose of it is? there is going to be talk going back and forth, and i assume all of that will come out as we negotiate. but it is a no-brainer to me. i support the president on raising the age 21 on ar-15. alyx: do you support the 25% tariff on steel imports and 10%

on aluminum? in west virginia, we were annihilated. we had a tremendous aluminum industry at one time, and china has run us out of business. they have basically stole the business. , thenk it is horrible dumping that goes on, and they disguise that dumping by coming through different countries on very small input and trying to disguise it is not coming from china. china is the culprit here. we have talked in the past about the difference in your past roles, and the president wants to be a leader on the question of gun control. there are no other issues we need his leadership on. from your side of pennsylvania avenue, is the curve awful -- kerfuffle at the white house getting in the way of that? control, about gun jared kushner, background checks -- does that have any effect on the leadership coming out of the

white house? as --anchin: what we look what we see as disarray the president might function as on a daily basis. he is pushing and shoving and counterpunching and everything he does. that is who he is. who was elected as our president, and i want to work in a realm where i can bring common sense, i can be an honest broker and they i'm sorry, i don't agree. here is my reason for not agreeing. that is what we are trying to do. alyx: senator, thank you for joining us. that doesn't for bloomberg daybreak. the market open is next. steve wood of russell investments joining kathy jones. this is bloomberg. mom, dad, can we talk?

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jonathan: coming up, it is risk off, u.s. stocks snapping a 10 month winning streak. investors waiting to see if j. powell displays the same optimism over the senate, and china is sending one of its top advisers to washington d.c. as president trump is close to unveiling -- the weakness continues and when we turn high, up about a 10th of 1% on the s&p 500 futures. is still sticking in treasuries down by two basis points on a u.s. 10 year. the main event, stocks cap in their biggest month of decline in two years with back-to-back losses, larger than anything we have seen. fed chair powell sparking market having by