chinese telecom maker zte. slaps --laps -- china the inner circle, president trump fills out -- netflix nails it. goldman is next. netflix delivered the strongest subscriber growth since going public. banks not seeing big rewards since the financial crisis. david: a beautiful shot of the lower part of manhattan, welcome to "bloomberg daybreak." what a difference a day makes. driving rain. alix: it was terrible. the story is a firmer u.s. dollar and firmer equity market. s&p futures up by about 13 points. euro-dollar pretty much unchanged on the day. it has been an interesting reversal for the dollar that was

weaker throughout the session and flipped earlier in the morning. seeing a little bit of selloff on the margin in the treasury market, yields up about one basis point. crude finding footing again despite the stronger dollar. sterling at the cable rate, this encompasses the whiplash in the currency markets. you had sterling around the highs of 2016 and then you got wage numbers. missed expectations, picky hawks. david: that is what mr. carney has been looking for. alix: not enough wage growth to satisfy hawks. that may hike expectation rolled over a touch. david: it is time for the morning brief. at 8:30, housing starts to the united states for march. at 10:00, the supreme court is

hearing arguments about an important tax case which considers sales-tax collection from internet retailers. at 3:30 this afternoon, president trump and shinzo abe begin two days of bilateral meetings. now we want to return to the bloomberg first stake. karen joined by and the and lisa abramowicz. we want to start with china. the pboc cut their reserve requirement rate by one percentage point and the u.s. dollar is up against the yuan. why did the pboc do it? enda: it is a reasonably significant move. it looks like they are trying to make monetary conditions at you look -- a little bit easier for the banks, to make funding easier. i think the bigger picture is they are trying to slowly get credit in the economy and

tighten conditions overall. they want to take some stress off the bank to make sure they do not get cut off. it is a preemptive easing ahead of slower activity. david: how does it fit together with the economic numbers we got overnight? overall, they were pretty good. enda: i think the numbers were pretty good, but one of the points economists took away from it is they might slow going forward. inputlly, we get a strong from consumption in the first quarter, looking at the industrial activity numbers, they are a bit softer. the factory side of things might slow down and consumption may not be enough to keep the overall story on track. alix: went to the markets make of this? lisa: they always reach china's gdp numbers with a touch of skepticism. people speculate that in 2015, china was doing much worse than i said.

that said, it is comforting to see that china is still doing all right, despite the global trade talk. are focusingpeople on, despite all the concerns we have about a global trade war and another salvo from president trump this morning, the economy still seems to be on track. tanked.he stock has what is that about? enda: there are concerns about a significant clampdown on chinese investment into america, particularly on the tech sector. alix: we literally saw that yesterday. is not what zte is? enda: it was not quite linked to the current trade tensions. alix: but. david: they trade with iran, which we do not tend to like. enda: the overarching movement -- and washington is

they are getting harder on chinese investment. alix: i was covering gold back in the day. is the story different today? enda: this is going to be a fairly modest targeted evening -- easing. alix: and to repay debt? enda: to assist rolling over. it is not a wholesale monitoring of conditions. they are trying to get a grip on it. it is not delivering the economy, it is quite targeted. alix: our next target desktop it has to do with earnings. -- has to do with earnings. beating. the banks are not getting rewarded for that kind of beat but netflix is. lisa: it has been a pretty circumstance for the banks right now.

you have good credit conditions, a tax cut that has given them a ton of money. even bank of america, if you look at the seller report yesterday, it stemmed from cost-cutting. where is the growth going to come from, if this is as good as it will get? that is also the issue, besides which you are seeing a flattening yield curve. thing, there will be more pressure going forward with the deposit rates, with them having to pay people for their money. alix: a whopping three basis points for bank of america moving higher last quarter. what is interesting is if you look at the su rp index, netflix, the normal price changes 13% on an earnings day, which asked the question -- even if they are good, all good earnings could be baking in so you will not get the kind of rally you expected with 20%

earnings growth. lisa: i wonder how much is being baked in based on how these companies are using their money. jpmorgan expecting $800 billion a share buybacks, and absolute record. you have to wonder, are people viewing this as a possible negative, that companies have nothing better to do with their money then buy back shares and pay bigger dividends? david: i am curious from your point of view in hong kong, we spent a fair amount of time in china and the economic data. today spend as much time worrying about our stockmarket? enda: absolutely. the u.s. is the biggest economy and the biggest consumer in the world. it is a huge driver of asia. there is emerging demand that has not been there previously, but the u.s. consumer, u.s. interest rates drives the direction for the entire economy. david: our third story to the fed.

richard clarida has been named as vice chair and michelle .owman has been nominated she is a state commissioner. what does this tell us about the team they are putting together around the new chairman? lisa: that they are real. they are not just people who are going to be holding to president trump and do what he wants. it is frankly, unclear what he wants. he likes low rates but no one knows what he wants. richard clarida was part of the treasury department, he has worked at pimco, has experience with markets and the federal government and monetary policy. he is coming in as a seasoned person, not just some random person who is going to be president trump's agent. david: bridge has been on this program and talked about monetary policy. richard: i baseline view would be two to three hikes. we could get four hikes if the

gross -- growth and the economy is stronger because of tax cuts. you would need some indication that inflation is moving up to quickly for the fed's taste. it would be tough to see four hikes, but under a booming economy with high inflation rising, that could happen. david: he already sounds like a fed vice chair. lisa: when i was listening to that i was like, he was training for this months ago. i am not that concerned. alix: you are laughing? enda: i am, but it is extremely important for emerging markets, if the fed moves faster than anticipated, that will have a significant impact on currency and interest rate levels. it is key, how the fed board shapes up. curran, it is a treat to have you here, and lisa abramovitz, always a treat to have you here.

market,ens up its car what that means for investors. we discussed that with dean curnutt. this is bloomberg. ♪

♪ emma: this is bloomberg "daybreak -- kailey: this is bloomberg "daybreak." united health raised its full-year forecast. they are benefiting from growth abroad. they added customers in south america to offset sluggishness from the u.s.

sanofi agreed to sell its generic drug business for $2.4 billion as part of the ceo's plan to focus resources on biotech and new medicine. netflix is proving it can raise prices without losing customers. they posted their stronger subscriber growth -- strongest subscriber growth ever. they added 7.4 million subscribers in the first quarter and sales soared 40%. that is the bloomberg business flash. alix: when i read 7 million subscribers i was like, that has got to be a typo. especially when growth accelerates in the united states. david: if you spend enough money, you can get some subscribers. they are racking up a balance sheet. alix: trade issues between the u.s. and china front and center. china will let companies like

volkswagen, ford, and tesla open 50% of local ventures. they slapped a 149% tax on u.s. sorghum. put this into perspective, the news we learned overnight. enda: it is kind of a carrot and stick approach. china is dangling this fantastic , we can letng foreign companies grow more freely if you play by our rules. on the other hand, they say if you come after us, we have the fuel to retaliate. china can do this on a whole range of other project -- products and make it painful for the u.s. they do want to open up gradually. david: the minister of finance said, we are ready from our trade action. this could help automakers, because they have been required to have at least a 50% interest with a joint venture. enda: certainly positive for

automakers. china can do this with other sectors as well. these announcements often fall short on detail and execution. alix: how do you map that into your market view? dean: certainly, there is a lot of unknown here. as you look at the market price reaction this year, you had the early part of the market volatility the vix and the second part was the tariffs. the market tells you something by virtue of its reaction, that this is a big deal and it is very hard to incorporate the potential for an escalation, especially between the u.s. tariffs into your investment process. it is hard to disentangle a lot of these things. at least for us, we look at asset price reaction. one of the things i derive comfort from, i look at options on the chinese currency.

on that rosey earlier this year and it has come down quite a bit. that is telling you for now there is a certain stability between the u.s. and china, from an fx relationship standpoint. david: how sensitive are these asset values to the headlines? it felt like last year there was lots of headlines but not much reaction. we had president trump tweeting yesterday about the value of the yuan. enda: i think the market disregarded -- dean: i think the market disregarded that one because it came amidst an 11% decline in the dollar. it is hard to call them currency manipulators as the dollar is sagging. to the otherads us part of the story over the last 24 hours, zte. it feels like the u.s. coming in and saying, we will take a tech were very seriously. that is our carrot and stick. enda: the bottom line is, it is not just the u.s. who have concerns about china's strategy

to move up the value chain and create a high-tech economy. japany difference versus 20 to 30 years ago is that it is state-sponsored. there are legitimate grounds for the u.s. and others to make a complaint. behind the scenes, a lot of asian trading partners agree with the u.s. david: does this have to do with the macro issues like business and tech, as opposed to the allegation that they were dealing with iran, and they said they would take actions. lied toe bonuses and the u.s. enda: it is a little separate from the broader story. the u.s. is deadly serious about these concerns. curnutt -- sorry, that is yours. david: i love it when we talk.

we will get it done sooner or later. dean curnutt of macro risk advisors for staying with us. coming up, johnson & johnson out with earnings this morning. we will discuss the latest with dominic caruso, the chief financial officer. that is coming up next, and this is bloomberg. ♪

♪ david: johnson & johnson reported first-quarter results, with earnings per first-quarter shares beating estimates. the stock is up a little over 1% in pre-trading. joining us is dominic caruso, johnson & johnson chief financial officer. dominic: good morning, david. david: you beat the estimates on both earnings-per-share and the revenue. what are you thinking about going forward? dominic: we were very pleased with our results, and across

each sector of our business we beat assessments and sales, and strong earnings. we have increased our sales outlook for the year, given the strong performance. we maintained our earnings guidance, which is strong at 11% growth. we still plan to have a strong year in 2018. david: how much of that is driven off of pharma? dominic: that is right. pharma had another strong quarter. there was some concern at the end of first just of the first quarter that pharma might slow continuesthe business to perform very well at 50% growth in the first quarter, and we are confident it will -- 15% growth in the first quarter. david: what about remicade? that has been a big driver that is tapering off. what is the rate of decline? dominic: in the quarter, about 22%, a little bit of an unusual

decline because of rebate adjustments. about 15% decline as we expected, that even with that decline, the pharma business had strong, above market growth, and we think it will continue despite remicade's klein. -- climb. david: as remicade climbs, what will take its place? dominic: a number of very important oncology drugs. productsot new approved, and we still plan to file eight additional new medications, each having more than $1 billion in sales by 2021. david: tell us about the launch of the janssen product that deals with psoriasis. dominic: it launched recently, it is a new mechanism of action compared to still laura --

stylara. david: what is the report on actelion? what other products are coming and what are they doing? dominic: they are doing well. they have products and the way of pulmonary arterial hypertension, great products. one product has lost its patent so it is expected to decline, what others are doing very well and will continue to grow. process ofare in the selling medical devices having to do with diabetes. do you expect more paring, more sales in the medical device area? dominic: we always look at our portfolio and decide which businesses we should stay in and which ones we should not stay in . across each of our three businesses, we have had various pairing of the portfolio. we have a deal for our life scan diabetes business. we will sell that to platinum

equity for $2.1 billion. we will continue to look at the right time at the right price for our portfolio, and get into higher growth areas. david: give us a view of how you are deploying capital. how much will go for new investment, whether it is research or otherwise, how much for dividends, stock buyback? dominic: we plan to spend over $30 billion in the next four years in the u.s. in research and development and capital investment. that is an increase of 15% versus the previous four years. we are pleased the u.s. tax law allows more flexibility with the use of our capital, and we plan to put that to work. david: what about the effects of fx this quarter? sometimes they affect johnson & johnson a fair amount. dominic: fx were strong this quarter. we had overall sales growth of 12.6% but on an operational

currency basis, 8.2%. david: as you are looking forward to real strength coming up, what is the driver of that strength? dominic: the pharma business continues to do well. ,t's products continue to grow and new products come into market which have extraordinary benefits for patients. our consumer business is back on track, had good strong growth, and our medical device business is consistently approving quarter over quarter. all three businesses are moving in the right direction. david: i want to recognize the fact that you have come to us several times on your earnings. i am sorry to say that this is the last time for the earnings call that we will that to talk to you. dominic: i am going to retire from johnson & johnson. it has been my pleasure and honor to be the cfo for nearly 12 years. i will miss the people most, but johnson & johnson is in good

hands with alex gorsky, the ceo, and my replacement, joe walker. inm sure it j&j will be great hands. david: thank you so much for joining us. dominic caruso, the cfo of johnson & johnson. coming up, first quarter results for goldman sachs out in a few minutes from now. commodities trading is a big focus. we will take a hard look at fic for goldman sachs, coming up next. this is bloomberg. ♪

alix: this is bloomberg daybreak. it feels like a risk on. the dollar is confused, equities are not. the dow jones seeing a triple digit rally. the rally over in europe as well

despite the fact that investor sentiment felt month on month. in other asset classes, it is a confused dollar story. wage growth was not as hawkish as some people thought and the dollar now mixed on the day. a little selling on the curve on margin. we are moments away from goldman sachs first-quarter results and if they follow other big banks, fixed trading might not look very good. equity trading sword double digits for all three banks -- ared double digits for all three banks. joining us now is allison williams, bloomberg intelligence u.s. bank analyst.

what i find interesting is the volatility we have seen in equities not passing through to commodities. in the bloomberg, this is the commodity return index. the bottom panel is correlation to the s&p and we have come down to the correlation we have seen in the early 2010's. saw think some of what we in terms of that higher correlation in 2016 was the plummeting of oil and all the high-yield debt that has been accumulated in energy markets. oil was actually a driving force of, i don't want to say systemic risk, but was correlated to the credit spreads and s&p. i don't want a say that story is over from a correlation standpoint, but with oil in the mid-60's, folks are very long oil at this point. the feedback mechanism is not what it was in early 16.

alix: allison, if we don't see a pickup in commodities, what does that do to goldman? allison: higher prices helped that we do want volatility and goldman is relatively new to the business. last year was perhaps the worst year for them. it was the worst year in 10 years for the industry. they face a lot easier comparisons. the communitytion for energy analysts is does that wind up continuing? we can pull up that chart that shows volatility for commodities versus cross assets. oil in see how particular seems to be lower compared to other asset classes. do you expect that to stay? >> i think what we have seen in q1 was this elevation of equity volatility versus rates versus currencies and versus oil as

well. for crew, what do you -- for crude, what do you have? as we start to step back and look at the pricing of options, the upside calls that people would buy if they thought there could be a symmetry, those have been in high demand and so you are starting to see this reflection of geopolitical risk as trump and putin have had a back-and-forth on twitter and we have engaged on syria again. despiteolitical side all of trump's tweets have not mattered this year as much as last year. david: you would think the geopolitical risk has gone up quite a bit. it is not just trump and prudent, and possible to -- and putin, a possible tariff war with china.

we see the volatility in equities and not in commodities. dean: it is a little bit of a head scratcher as you review what happened in q1. this etf that blew up was one part of it. this is equity specific. whether it was trump back and forth on amazon. when you're market leadership becomes more volatile, that impacts the s&p. andas very equity centric the geopolitical landscape is something you never want to close the door on because it is sort of the thing that does not matter until it does. alix: the higher prices go, the easier it is to turn on the biggest -- on the spec it. david: that is when of the things i wonder, whether head -- whether shale has changed the volatility for oil. alix: absolutely, 100%.

in termsus to goldman of the risk and bets they made in natural gas that really hurt them last year. the story is that harvey schwartz did not take on a lot of risk. does that change now that he is leaving the co-coo job? allison: you think about some of the comments that lloyd made on the corner -- on the quarter. alix: first-quarter earnings coming in. trading revenue for equities coming in at $2.3 billion, slamming through estimates. investment banking revenue overall coming in much higher than estimated. i am still waiting for fit -- still waiting for fic to come out. blowing past estimates and equities as well as investment banking. the majority of the banks missed

on investment banking and that was a lot weaker. it is interesting that goldman was able to hold the line. we are still waiting for that fic revenue to come out. david: but they are increasing that dividend which will affect the price of the stock. intraday is up 1.9%. alix: right around the highs of the session. what do you think of that investment bank number customer -- make number? allison: i am looking -- bank number? allison: i am looking at the fic number. the other banks came in flat to modestly below a stronger quarter. equities trading also coming in better-than-expected and a new format for this quarter. alix: and the fic number is impressive because they basically doubled what they did in the fourth quarter. this is more than doubling.

allison: correct and we have seen strength across the companies. that is the volatility we have been talking about. alix: but not in fic. david: everyone else has missed on fic. allison: i think you have to bank of america, we got the weakest result, they have more in their credit business and that was a weak spot, this quarter. alternatively, commodities are a strength for goldman sachs. in,aps expectations going that was before the pure report -- the peer report. equity trading jumped. we are going to want to hear about investment banking and what they are hearing from clients, what they are seeing in the pipeline. we have seen weakness across the banks and we're going to want to hear what they have to say about

pipelines and the backlogs. in terms of things looking good, the caveat is as long as the environment remains constructive. alix: i can almost hear lloyd blankfein saying i told you guys. i want to reiterate these numbers because they are big. in,have ficc revenue coming blowing past. equities coming in and investment banking almost at $1.8 billion. all of them blowing past estimates. what is interesting is the stock is rolling off of its highs. we are now up by 3/10 of 1% and the overall trading revenue is blowing past estimates. david: i don't see one thing that they missed on. $4.4 billion. allison: they had some pretty good growth inequity. not something we had -- growth

in equity, not something we have seen with the other banks. that bodes well for next quarter, but some of the slowdown an activity we saw in the fourth quarter beating through. david: about 5% above the estimate. where ae we in a world where unless you are an olympic warrior, you are not going to get rewarded? dean: the markets are discounting mechanisms and i think this is not just for equities, but for the s&p at large. the question is how we already incorporated the good stuff in terms of expectations around growth, via the tax cuts into prices because the results are good. i can see -- i can say in the segment we compete with goldman, it is a good environment. options trading tends to go up

when volatility goes up because people are forced to change their mind more quickly. theuld also say that amidst tumult that was early february, the bid offer spreads widened significantly. standpointet-making for goldman sachs, trying to buy near the bid when that spread widens out, that is an excellent environment for them. alix: do you feel like that is sustainable? allison: it will be a little bit -- dean: it will be a little bit wider. this far corner of the etf universe created a lot of volatility, but then once it ended, the volatility came back in march and as i tried to explain the why of that, there is some liquidity that has been taken out of the market. this liquidity that smothered asset prices last year and created that motionless this in the s&p, some of that liquidity

may have gotten taken out of the market and is allowing for just wider swings in the s&p as we see vix around 16. alix: allison mentioned debt underwriting, equity underwriting topping estimates. decline, allison but so far, the only headlines that might give me a question mark. allison: m&a can be impacted by the timing of deal closings. the other thing i would say is it looks like it is coming in, lower-than-expected. pretty strong growth in the investing lines. start to sift through and that tends to be a source where people give them a little less

credit that some of their other businesses. if the thing is the tax rate, lower in the quarter -- the other thing is the tax rate, lower in the quarter. david: it looks like everything was built into estimates. the futures overall are up. jpmorgan is up, bank of america is up and wells is hovering around flat. alix: you mentioned lending. were you able to check out any details in markets? allison: that is something they will talk about on the call. while the investment lending business is focusing on that lending initiative, they do have a lot of investments they are monetizing and keep in mind that even though equity prices are sort of weakened throughout the quarter, they have taken the opportunity in january to monetize those investments. that may have been a help. then things we will hear about on the call, they made some interesting calls in commercial

lending. that has raised some eyebrows. they have made progress on the markets business. they did close another acquisition related to that business. on the commercial lending side, are they going to get more aggressive? david: allison williams of bloomberg intelligence and dean curnutt of macro risk advisors, thank you both for joining us. let's get to some headlines outside the business world. kailey leinz is here with "first word news." kaliey: a setback for president trump in that fight over his lawyer. theirral judge rejected initial request to keep prosecutors from reviewing information pulled from michael: -- michael cohen. china is getting a boost to automakers who want better access to the world's largest vehicle market. the government stands to remove foreign ownership limits within the next four years.

right now, overseas companies can own no more than 50% of a joint venture with the chinese partner. there was a report that south and north korea are discussing plans to call an official and -- official end to their military conflict. the paper reports that one measure friend in the conflict would be to turn -- return the demilitarized zone along its border to its original state. global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. alix: netflix out with first-quarter results posting higher-than-expected earnings and it really upbeat forecast after seeing its strongest subscriber growth despite raising prices on customers. netflix stock up 7% in premarket. olson who now is mike has a overweight recommendation

on the stock. thanks for joining us. talk to us about the u.s. subscriber growth. we thought it had peaked but it accelerated. how and why is it significant? mike: the domestic number was really strong. basically 480,000 above where the stream was and i think it is a function of the fact that we have two things going on. netflix continues to improve their content library, which is both attracting and retaining subscribers. secondly, we are seeing an ongoing shift in consumption of television, away from traditional tv toward various online distribution channels. as a result of that, netflix is benefiting. david: no question they did really well and their subscribers.

there was a gadfly piece that said they have $28 billion on their balance sheet. they're really paying for the subscribers and sooner or later, they have to take that and put it against some earnings. mike: that's right. it is a bit of a chicken and egg situation. the company has to deliver the content to attract and retain subscribers and as the base continues to grow, netflix will essentially grow into that expense. to account will come for that increasing content expense. that is true internationally as well. we expect to see ongoing price increases, not every year but fairly regularly. subscribers are willing to pay more for the service as that content library continues to improve. alix: international expansion also really key for that.

what is going to be the biggest growth opportunity? mike: they are now essentially in every country they want to be in. there is not necessarily a region or that. they expanded into the rest of the world that they were not previously in. they have been improving the content library in those markets by localizing content from both a language perspective and from a genre and other content specification perspectives. we can expect more of that, where more of the content will be done for local taste. we also expect more originals to be done in each segment of the world. alix: thanks for joining us, like olson with piper jaffray. we turn to wall street beat. rate expectations. libor -- ired to

it's stalled out. suspends modelly three production. joining us now to go over all these is bloomberg's ed hammond's. -- ed hammonds. the fed comes out with this new alternative to the libor and this is going to be trying to compete with other alternatives over in europe and then they discover they included some transactions they were not supposed to be included. .d: i call it so far so far so bad. liborkind of a case that as we know it is not perfect, but this has already gone wrong. what has happened is essentially repoed have come out and

transactions were included where they should not be. everything is botched. they said they are not going to republish but they are going to publish along with it, but it would look like if you stripped out those two -- those transactions. a lot of people still use libor as a benchmark. 2021is going to end in because of that point, it will disappear. how do you get people to migrate across to something if it shows it is unreliable? this needs to be rock solid. alix: it is a derivative product, supposedly. the next-door he has to do with tesla. for the second time at about two months, they are suspending production of the model three. worker, you have to take vacation days or time without pay because they had to stop production. how does that make sense? ed: it is brutal.

it is so harsh. they apparently can get offered paid work to be somewhere else in the factory. they can take an alternative job in the factory or they have to take holiday or no pay. this is fascinating. musk has said they are doing 2000 model threes a week and he says he thinks in the second quarter, they can round up to three or four times that and yet they are stalling. have the logistical muscle to be a true carmaker. they don't have that capacity you need, organizing thousands of parts that going to any auto to actually pull this off. it will be interesting to see if this becomes a trend or if these are just pick ups in this development -- just pick ups -- hiccups in this development. david: maybe they should make golf carts instead.

forong kong, they are going $75,000 a golf cart. there is a limit on the licenses to get them. they are very premium. ed: it's like new york cab licenses. barclaysird story is talking to customers, saying do you think we should be trading and cryptocurrencies? another big bank may be dipping its town in the water -- it' -- its toe in the water. ed: they would not be the first european bank to do this. it would generate huge interest if they were to go into it. bomb, we euro casino talked about barclays yesterday. who says an investor he is very keen to use the investment banking to ramp up. it is a big market, a lot of interest.

a lot of hedge funds would like the banks to do more in crypto. alix: let's see what works. staley -- poor jes staley. the supreme court hears oral arguments in a case that could significant we change sales tax collection in the digital age. long what i am watching, next. alix: and on the terminal, check out tv . you can watch us online and interact with us directly. this is bloomberg. ♪

, taxesthe supreme court which will surprise you. we have a tax case in the

supreme court that president trump himself only paying attention to. the tweet he tweeted out on march 29, going after amazon. there is a big tax case out there right now. can individual states impose their sales tax on internet purchases even if the internet company does not have a presence in the state? there was an old decision from the supreme court that says they can't. if i am a small business in idaho and i sell you some ring in new york, the now i will have to pay state taxes for that. david: absolutely. it is also overstock.com, and even. amazon does pay local sales taxes for their products. for third hold them

parties that sell through amazon. it could be a lot of money for retailers. also just for those small businesses who president trump wants to help. the tax plan was supposed to help them, but then you throw this into the mix. how do you structure growth and business models around this? david: it makes it much more difficult to go online. david has been talking about this for weeks. mckinney,next, burns allianz global investors volume manager. everything beats. stocks are pretty much flat. this is bloomberg. ♪

♪ alix: golden goldman.

goldman breaks from the wall street pack, surging in the first quarter, leaving behind its rivals. netflix nails it, delivering its strongest subscriber growth since going public. other companies not getting rewarded for earnings beats. president fills out the fed, number dating -- nominating pimco -- for vice chair. david: i am david westin with alix steel. alix: goldman getting a boost in premarket but still just up 1% despite blowing past estimates. david: you think the markets just anticipated it and already priced in? pretty much across the board was pretty good. alix: which is making the rally in equities all the more interesting. the dollar very confused.

s&p futures around the high of the session. german investor sentiment coming in a little bit weaker but the dollar has been pretty much -- u.k. wage growth coming in not as strong as estimated. day,ed dollar on the selling still on the margins. crude getting caught between the stronger dollar and weaker trade data over in china. , wed: your morning brief are going to get housing starts. at 10:00, the supreme court hears oral arguments of south dakota versus wayfair inc. afternoon,s president trump and japanese prime minister shinzo abe will meet at mar-a-lago. now to get an update on headlines outside the business world. kailey leinz is here with the "first word news." court hearssupreme

arguments today and a high-stakes case over online sales. traditional retailers and states want overturning 26-year-old ruling that prevents margins from collecting billions of dollars in sales taxes. a federal judge is still wrestling with a way to determine what should be done with evidence seized from president trump's lawyer. the judge rejected his initial request to keep prosecutors from reviewing records taken from michael cohen. she may appoint an outside lawyer to help in the process. china is giving a boost to automakers you want better access to the world's largest vehicle market. the government plans to remove foreign ownership limits for automakers in the next four years. right now, overseas companies can own no more than 50% of a joint venture.

global news, 24 hours a day, and at tick-tock over on twitter, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: shares giving back some of the gains. despite killing it on all kinds of estimates, no matter which way you look, ficc revenue beating estimates. trading revenue up 31%. joining us now is allison williams head of our bank coverage on bloomberg intelligence and also from dallas, burns mckinney, allianz global folio manager. -- portfolio manager. i don't get a read on why we are not higher in the premarket trading. allison: the bar was raised over the last two days and we are all fascinated by this 38% growth in equities.

i think that there was a lift in expectations ahead of the quarter. this goes to the cost comment you made is that there was an accounting change this quarter. most of the banks did adopt the standard. -- banking fees were higher because of that standard. it is a marginal change, but it also does make the cost ratios look higher for the banks. david: burns, what about your point of view? why isn't there more of a reaction because in the ficc area, they really did well unlike the other banks and that is what you turn to goldman sachs for. burns: ficc is exactly what people have been looking for when they look at goldman.

this is a situation where if you look at the readthrough's from other banks, i would've expected that at some point, the ficc business should rebound for goldman. this is something that relies on high interest rates and even higher volatility. based on the readthrough's for jpmorgan, this is going to rebound at some point and this is not the quarter for it. that certainly speaks to goldman. their strength is the fact that this rebounded so strongly. i think it could just be a reflection of the entire market. equities across the board meeting or beating expectations and likewise, it could just be that the market -- this is the markets way of saying this is just one quarter, show me again. goldman should be well-positioned when you consider that for the last several quarters, it has been clicking on three of the four

businesses with the exception of this headwind in trading. it is like watching your favorite passed ball team. if they are losing by three points at halftime but your best player has not come in yet, you feel good about their chances. alix: allison, there is one thing i wanted to highlight. that is their advisory business came in light. to be expected when you have volatility. m&a not doing so well. they really slipped from number one. what does that tell us? allison: there was a rise in megadeals. that could have a shift. the other thing to keep in mind is that even though they are traditionally number one, their revenue is traditionally 50% more than jpmorgan, the next highest ranked. that is why you want to look at the revenue and not just the overall ranking.

the second part of that is related to the timing of closing. we saw a big jump in announcements this quarter. those deals can take different time periods to close. that relates to what we have seen in the fourth quarter. david: we are mindful of the timing of all this because goldman sachs is going through a transition. we are not sure how long that is going to take. what do these results indicate about where it will be heading? or is it going to be heading into different directions? burns: i think the proof is in the pudding. morgan stanley has really already made that transition. they should be thought of a little bit more as an asset and wealth manager. goldman has continued down this path. they are really the best at it. we would expect them to continue to move in that direction.

are dividend investors, we like the fact that they have been continuing to maintain this business and still have been able to keep a strong dividend. they grew it by 15%. alix: what is your favorite bank right now? now, we would say right probably feel pretty good about jpmorgan. slow and steady wins the race perhaps but if you look at jpmorgan, they still trade below a lot of regional banks. you saw them raise the dividends twice last year. they do mistreated during the financial crisis that they had the best management. they got fire sale prices on the best assets and now they are starting to prove they can earn a return that is above and beyond their cost of capital. likewise, you get a great valuation for it. david: looking to tomorrow with

morgan stanley, what does this indicate about what are there are opportunities or challenges. inequity andgrowth morgan stanley is more biased to the equity business. it is great for u.s. -- for ubs and credit suisse. business hasth been doing fairly well. obviously that is positive for morgan stanley. we will want to see what is happening on their advisory front. we will be watching the deposit betas. overall for the banks, very modest but in a wealth management business, we are seeing an increase. out, if weoaden this take a look at sector earnings growth expectations for the first quarter, we have a chart you can bring up. double-digit growth for telecom companies as well as energy companies.

how are you playing this potential earnings growth? what are the places we have been finding a lot of good valuations as of late has been within the energy space. you are seeing some of the sharpest rebounds, but for us, it also boils down to valuations. you have a lot of names whereas theprices have rebounded, stocks have lagged and have not kept up with that and as a result, you have a lot of equities in the energy sector that just don't price in a lot of the oil and gas price gains we have seen. price-to-book valuations are still hovering around trough lows. a lot of the narrative or the dialogue has been you have opec against north american shale. is that shale production has continued to grow steadily, but production has been flat around the world in

non-opec, non-shale places. slowdown in places like mexico and china and as result, we continue to see the supply-demand balance come back in which both pretty well for the sector. david: burns mckinney is going to be staying with us. coming up, a new face at the fed. more on that next. this is bloomberg. ♪

kaliey: this is bloomberg daybreak. the biggest health insurer in the u.s. posting first-quarter earnings that beat the highest estimates. united health also raised its full-year forecast. the company is benefiting from growth of ron. -- growth abroad. -- has agreed to sell its european generic drug business to advent international. the price, $2.4 billion. it is part of the ceo of's plan coo'sus on biotech -- the plan to focus on biotech. tesla is temporarily suspending production of the model three for the second time in roughly two months. tesla says the four to five day hiatus will be used to improve automation. david: thanks so much. fed chair jerome powell's inner circle is coming together. richard clarida is president

trump's choice to be the vice chairman and michele bowman from the kansas state banking commission is nominated to be responsible for community banks. still with us to discuss is burns mckinney of allianz global investors. you, theset tell individuals? burns: this is a great fit. this is something where a lot of the strength that richard clarida brings to the table really complements those of jerome powell. -- j powell powell has a real knowledge of the investment and capital markets, you have someone as the vice chair who has experience from his time at pimco and policy experience with the time he

spent in the bush administration. this is something that should be well received by capital markets. david: as an investor, what are you most concerned about in terms of fed leadership? how tricky is their job right now? burns: i would say their job is extremely tricky. is nice something -- it when you have a playbook or you can look back and say what did prior fed chairman do -- fed chairmen do? at this point in the cycle, you have double-barreled fiscal stimulus being enacted on an economy where you have already closed the output gap. that really should lead to inflationary pressure. a lot of that is not priced into the market right now. if you look at the bond market, they don't believe what the fed has been telegraphing about the fact that it should have to ultimately combat inflation that

is not being priced into the markets. it is almost walking a tight rope to balance that without just throwing cold water on the economy. david: investors have to be interpreters of the fed and so we will play a little bit of what rich clarida said on our program. >> my baseline view would be two to three hikes. we could get four hikes if the growth in the economy is stronger because of the tax cuts. also, you need some indication that inflation is moving up. it would be tough to see four hikes but under a booming economy with high inflation rising, that could happen. david: what does that piece of evidence tell us about where mr. clarida will help guide the fed? burns: it does not tell us a lot. what he said is what has been priced in the markets. if you look at the betting markets and fed funds futures,

they are pricing in three total hikes this year with maybe that one in three chance of that fourth hike which sounds like what he is saying. pickup inrt to see a inflation later in the year, then we are keeping it open for four hikes. there is not a whole lot of change in what he said from what the investment community is expecting. to thet also boils down neutral rate and that will dictate how far above or below we will get. this is the real rate, that redline and the white line -- the red line is the start and the white line is the real interest rates. where does that put us in the next two years? if you don't see that go a little of it higher, than that does suggest where as we had a

flat environment for inflation, you could see an inflationary future. suchact that we have had massive fiscal stimulus at this point in the cycle, the fact that if we do start getting into tariffs and trade protection, that is not inflationary, that is stagflationary. that pulls off the magic trick of cooling down the economy while overheating prices. limits on immigration rages wage pressure in a lot of industries that rely on immigrants. places like technology, biotech, homebuilders and others. the fed needs to be careful. you don't want to slow things down prematurely but at the same time, the old saying is it is like toothpaste, you cannot put it back in. you need to be careful on that. alix: burns mckinney of allianz global investors is sticking

with us. coming up, netflix shares popping as the company posts its best first-quarter results in history. this is bloomberg. ♪

alix: netflix shares popping in premarket, up by 7% after the company posted higher-than-expected earnings and a upbeat forecast. the company saw its strongest subscriber growth ever despite raising prices. joining us now is paul sweeney and still with us is burns mckinney of allianz. we weren't suppose to have pricing power in areas where you are super competitive, especially with amazon. paul: they came in with better subscriber gains and that is where the met -- that is the metric that investors are focusing on.

subscribers came in better-than-expected and that is in the face of a price increase that took effect in the quarter. it demonstrates to investors that this service is valued to consumers and users not just in the u.s. but globally as well. david: they better have pricing power given the amount of money they have on their balance sheet. thebillion sitting on balance sheet. they just keep ramping up the spending on their programming because they are convinced and the data seems to confirm that more original programming drives subscriber growth. they're going to spend $8 billion on programming this year up from $2 billion several years ago. really ramping it up. they are doing it in the debt market because they are still free cash flow negative. they said they will probably lose $3 billion in cash flow this year. alix: really expensive but

anything she produces, i will 100% watch. david: there is no question they can get an audience, the question is how much can you get from that audience? sure there is, but the average selling price both domestically and internationally continues to rise. it rose more internationally. when you think about the growth of this company, the length of growth is driven by the international market, where about 55% of their subscribers are and 85% of their subscriber growth. there is a total adjustable market of about 700 million internet-enabled households around the world. that is the market they are trying to address. alix: netflix was asked some questions on security. here is what they had to say. >> we have been very big on protecting all of our members'

viewing. we do not sell advertising. we are substantially inoculated from the other issues happening in the industry. alix: true. paul: one of the delineations they try to make on the call was unlike a's book that is dependent on advertising, they are subscription driven so they don't have a lot of the variability in the revenue stream you might have with some google or facebook that may in the future may's -- face regulatory control. wrap this up as a prospective investor. do you buy this despite the fact that they are not making any money but they are spending a lot of money? certainly look at this and say it is not just netflix. netflix is up 1000% over the last five years. stocks have gone from making 4% to making 10% of the

s&p 500. some certainly can be potential but as the value investors, we like a lot of opportunities within the tech space but we are focused a little bit more on what you might consider to be the old world tech names that have been raising dividends rapidly and have a lot of cash on the balance sheet. alix: is that ibm? a couple names that jump out that we have been buying have been stocks like oracle. these are the types of companies that have been raising dividends. alix: burns. we have to leave it there. thanks so much. much more coming up. . 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. ♪ an alix: this is "bloomberg daybreak." alix: i'm alix steel steel. a boost from goldman sachs. even though

investor sentiment was lower. in other asset classes, mixed dollar story. sterling an interesting session, higher on wage growth, but not enough for the hawks. down on the session. copper up as well on weaker china data. month on one -- month on month up 1%. you had february revised to be less bad. february was down 7%. it is now down 3.3%. of, but not as much as we thought. building permits getting a boost to 2.5%. for more on the u.s. housing market, we are joined by neil a richardson. she is in the middle of all of this. races -- prices

are raising. .ela: we are in a housing slump there is not enough to meet demand. you see that in new construction where we are underperforming. you also see it in the existing for-sale housing. enthusiasticot so because there is no place to move to. they may want to trade up, but housing stock is low everywhere. you have low inventory in both markets. it is leading to a drought that is hard to escape. david: what is going on with house prices regionally? nela: house prices are peaking. they are getting stronger and stronger. when i say peaking, i do not mean they are peaking and a leveling off, they continue to rise your over year. house prices are going up 9% year-over-year. the market is covered. andwould expect the seattle

san francisco and expensive markets would be strong, but we are seeing strength elsewhere. there are only a few places that buyers want to buy and sellers in thoseell, and places, prices rise strongly. brought a chart that shows the inventory mismatch and new home sales are struggling. numbers,ok between the residential starts were up 2%, but multifamily starts were up over 14%. walk me through what happens in the second quarter as the weather clears up. nela: we hope we see family building. apartment building has been the bread and butter for years. those multifamily starts peaked in 2015. a have been declining every year. where we need strength is in single-family. alix: and that fell. to be 70% of that

total output historically. we need to see that grow over the next two years to 1.2 or 1.3, dare i say one point 5 million starts to satisfy demand. it is way below that. david: if you heard about the housing start numbers which are modest and you heard housing rises are peaking, you'd say that can't be right. supply and demand is not the full story when it comes to new construction very there is a lot of politics. there is hangover from recession. messing when developed because the funding was not there when it was needed. there are immigration issues affecting construction jobs and lack of skilled labor. all of these issues play into a market that is imperfect right now. alix: you talked about demand holding up. origination fell for new loans quarter on quarter and jp morgan origination loans dropped by 25%.

on a short-term basis, what does that mean? nela: it does not mean a whole lot. we look at different numbers. transactinghat is now. if you look on days on markets, the typical home is sitting on the market eight days less than it did last year, and last year was a record. things that are priced well sell fast. in the hot markets, cash is still king and people are not using mortgages because it is so competitive just to buy. david: is this just an accumulative affect? in macroanything big that changed and made hard to build a new house? nela: there was overbuilding during the housing boom. builders are scarred a little by that. they changed the business model and stopped building starter homes. they started building apartments and luxury single-family. we are still dealing with those costs over the long-term. of affordability,

if you see cash of bidders coming in -- one of our life producers try to buy a house in jersey and she kept getting outbid with some people with cash. for people like her and me, how do we deal with that affordability issue and does that crimp demand? nela: patience is key. you have to be stronger than the market. that means not just getting preapproved with getting fully underwritten. that means writing a cover letter and doing your homework and working with an agent. you have to have all of the tricks of the trade on your side to compete in this market. not just with cash buyers. david: what about the demographics? we hear people are waiting wanted to form households paired are they getting postponed longer? is that driving things up or down? nela: we have a tailwind of millennials that are ready to buy. older millennials are reaching peak homebuyer age.

with gen xers who should be trading. we have boomers who should be downsizing. all of that is playing out in the market. definitely, all the trends toward -- move toward more demand. alix: what is the biggest constraint to building a house? where is it most expensive? nela: land, we are not creating more land. something has to give, and that is zoning. we have to change the land the land -- the way the land is zoned. that is scary news that no homeowner wants to hear, density, building out. in the market, it is homeowners. home equity is as high as it has been. homeowners have a lot to lose by increasing density. i do not think it does, but that

is the fear. very: how much does that region to region or state to state because of the tax deduction issue? where i live, it is really affecting people. in troubleseen hundred thousand dollars in just a fast -- in just the past few weeks. nela: we are starting to see the effect of tax reform now. we are seeing the tax caps at $10,000 and eight hardest in new jersey and new york and in the high cap states are you will see it play out in california. it will not be as impactful in the rest of the country, but here, it matters a lot. alix: you mentioned the land, bought about in port costs posing problems? nela: land, labor, lumber. interest rates are creeping up. financing of loans.

there at every kernel of the housing process. there is a rising cost in that is playing out into home prices. that is passed on to consumers. so allison in the control room, write a cover letter and be patient and strong. you will get your house. it may take long. nela: you have to be motivational. david: always great to have you heard talking housing. will get an update on what is making headlines per will turn to kailey leinz. she is here with first word news. there is a report that there may be official into a military con flicked. -- conflict. that could hand -- happen next week. in china, the economic expansion is holding up.

rose 6.8% from one year ago. that was in line with expectation paired retail sales rose that are than expected 10.1% in march. industrial production showed signs of cooling off. primedon, british minister theresa may facing a second day of debate over the uk's role in bombing syria. she is defending herself in parliament over allegations she rushed to war without seeking proper approval. she said there was not time to consult lawmakers before the u.k. joined the u.s. and france. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. me kaylee. bloom -- i'm kailey leinz. this is bloomberg. david: shinzo abe is en route to mar-a-lago for two days of meetings with president trump. we will talk about what is on the agenda with sheila smith. your radio and

you can listen to tom keene and jon ferro. beomberg surveillance can heard in new york, boston, the bay area, washington, d.c., all across the united states on sirius xm tv. live from new york, this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak. i'm kailey leinz. i am in the hewlett-packard enterprise greenroom. coming up later, ims chief

economist. now to your bloomberg business flash. johnson and johnson has opened health care earnings seasons with a strong outlook. they raised its sales guidance for 2018 after posting fourth-quarter earnings that beat estimates. the company announced a restructuring. deutsche bank has called off talks to sell its retail and private businesses in india. according to people with knowledge of the matter, the german lender is considering keeping the operation and may increase investment. the deutsche bank businesses have a portfolio size of about $4.6 billion. walmart is bruising up its website in a bid to capture business from amazon. a redesigned walmart.com will go live next month with a more personalized shopping experience. the pub -- company lost momentum over the holiday period. they grew at less than half the pace of previous quarters.

that is your "bloomberg business flash." david: president trump welcomes start abe tomorrow to today's of meetings. on the agenda is north korea and trade. we will show you right now the issue is trade deficit. here is a comparison. this is japanese trade. the yellow lines are the deficit we have in the surplus that have with us. the blue is showing that it looks the other way for japan with china. they have a lot of trade with china, but china is a net taker rather than exporter. washingtonnow from is sheila smith. she is council on foreign relations for japan studies in new york and bloomberg's chief asia economics correspondent. trade to start with the deficit we both know that will be the first thing out of president trump's mouth after welcome. how open is the prime minister to addressing this? >> i think there will be an

interesting conversation about trade. this is not what they talked about last year. they have been working at this for a year. what the japanese government has made clear is that they do not see a free trade agreement. they do not see an fta as a way to reduce trade deficit. what they are looking for is a larger economic framework that might offer other opportunities for deficit reduction, but certainly not a narrow fta. david: so president trump tweeted out that he is looking forward to his meeting. on friday he was tweeting that we have a problem with japan and trade. from the japanese perspective that you understand, how do they think they can address this?? inhe puts so much capital coming with him on the journey,

mr. trump tweeted out about japan, and then he barred japan and key allies. there is confusion on the japanese side. david: there are two things there. there is tpp. president trump has said we might want back in. on the other hand, they included steel and aluminum tariffs on japan. is there a way out of this box through a tpp 12, if you will? i think that is what the japanese are hoping for. i expect them to come for a larger framework on either getting the united states into tpp or creating a pathway that would make that happen or trying to think out loud with president than theething other fta idea he seems fixed on.

i think the signal that the president sent asking his advisers to do a policy review there isggests to me more wiggle room for the two to that allowse ground both leaders to step back and say they have an economic agreement they can work on. alix: one thing that has changed in the last year is shinzo abe approving. >> he needs to come away with this within it assurance from president trump in dealing with north korea. and on the trade side, they want an outline. it are both on the same path but not toward an fta, but working toward reducing tensions between each other however that can be done. on teaching the p, -- tpp, japan is part of the problem.

sheila, when we had the time, they came away embracing one another. a lot of positive news coming out of that. are we likely to have the same thing there? what a comeback with the same framework that shinzo abe can take back to tokyo? sheila: i think they both need it. if you look at them both, their approval ratings are in the 30 percentile. neither of these two leaders are on strong footing and have domestic scandal at home. a both need to come out from this meeting and have a win or success. neither of them can afford a disaster. more on tender territory. his party has a leader ship race and he may be challenged he may not make it until september. there is a lot riding on this

for the prime minister. the north korea issue is on the minds of a lot of japanese. alix: let's get to the north korea issue. what would shinzo abe win over north korea in this conversation with president trump? sheila: there are two things they worry about. united states is focused on denuclearization and the potential icbm that came jim has been testing -- kim jong-un has been testing. shorter range and medium-range missiles really make the japanese worried about whether or not their defenses are adequate or the u.s.-japan alliance is sufficiently addressing it. the second is the japanese citizens that have been abducted by the north korean regime. this is a sensitive issue inside japan. shinzo abe has been a strong advocate on this issue. he want to make sure the trump administration has that in the

conversation. david: the president has by meetings prestige with some of the families of those of ducted. he has indicated he wants to support them. as a practical matter, there is not much the united states can do to north korea. enda: it is hard to see how much progress can be made there. at the very least, what shinzo abe would need is an assurance that mr. trump isn't going to make a deal that is ok for u.s. security but doesn't do much for japan's concerns. david: sheila, how does that work? how much will be on what president trump will be saying to kim jong-un when he meets with them? is it terribly important for shinzo abe to get assurance that he will raise that in the summer? sheila: yes, i think it is. there is another summit -- summit?

sheila: yes, i think it is. there is another summit before he meets with kim jong-un. another thing to keep an eye on is that we have to be in line with how negotiations with kim jong-un proceed. i suspect shinzo abe will be having a conversation about how to make sure south korea does not move ahead to quickly or in a way that does not take broader concerns about security into consideration. david: finally, sheila, what japan-china? how can he help president trump with respect to getting concessions from china? whether it is north korea or trade? sheila: that is the interesting thing about the tpp conversation. prime minister abe was looking at tpp as a leverage in the andon towards this china trade practices that are more

aggressive these days. conversationiet going on between the japanese and american governments that says you need leverage if you are going to take on china and economic behavior. you cannot have a trade war with china without lighting up allies and economic partners. i suspect the framework we are about to hear about will also be presented by prime minister oa be for mitigating damage on confronting china. alix: thank you so much, sheila smith. so good to have you on set with us. call and more about what i am watching. if you have a bloomberg terminal, check out tv . you can interact with us directly and send us a tweet. this is bloomberg. ♪

♪ watching is am goldman sachs. the call is at 9:30. the headline is the best trading in about three years. stock over 1%. what i am interested is the lending. lending went comes to market. operating expenses up 20%. a lot has to be going into consumer banking division. they are investing in lending and had higher revenues. i want to see how fast they are growing and what the impact is. david: you want to see them because you spoke to individuals and they told you the trade may not do so well but they will grow it. alix: that was the big shift in strategy. askedd top advisers and if that was really can a move the needle for you when you are looking at billions of dollars? the party line there is, yes, because you can go from zero to

50 and that is a big increase. you can move be needle when rates are rising. the net interest margin was better than we saw and other banks. p, it: with the new ap will tell you what to do with your money. alix: they said they will have other acquisitions as well to build. i will look at that on the call. that is it for "bloomberg daybreak. coming up on bloomberg markets will be, diane jaffee joining jonathan ferro and comb through goldman sachs headlines as we go through triple digit rally. the dollar mixed on the day, slightly higher, up to 89. this is bloomberg. ♪

♪ jonathan: from new york city and our viewers worldwide. the jonathan. this is the countdown to the open. ♪ -- worldwide, i met jonathan

ferro. i am a the countdown -- jonathan ferro. this is the countdown to the opening. quarterlychina steady expansion marking a tug-of-war between the old economy in the new one. big day on wall street, not enough to impress investors. awayarket is 30 minutes from the opening. futures a firmer up by 16 points from the s&p and positive by six tens of 1%. 0.6euro is weaker -- percent. the euro weaker, down a quarter percent. off this week with the world economy weaker post 2020. a little more on that story later. as far as goldman