arguing any second referendum will do damage. reserve meets with an increase. obamacare on life support. rules theurt affordable care act is unconstitutional but turmoil in industry.care welcome to "bloomberg daybreak: i'm david westin. >> it supposed to be a quiet week before people go away. >> it's not so quiet for goldman sachs. little problem. from malaysiaal filed criminal charges. if no criminal proceed instituted against the accused they are underlining system.ncial this is not great news for

goldman sachs. lisa: it's unclear what the consequences will be. goes to a fundamental problem that goldman sachs has faced this year. question about its future and about its reputation. if you look at the shears, the are down more than 30% year to date. dramatically underperforming the s& s&p 500 financial subsector. goldman sachs does seem to open the day down. news.eat some questionses where were the check and balan balances. lisa: lot of questions throughout the next two hours. on us get you caught up where the markets are setting up today. theresa may will talk about why there shouldthink be another referendum. the euro is gaining against the

dollar. because of the italian budget plan that they're going to revise and send back the commission. really low trading volumes today. futures down just a touch ahead of that fed meeting later week. david: looking ahead at the entire week on tuesday, china be marking the 40th the economy.f on wednesday, the fed is expected to raise u.s. interest a the its meeting. wednesday overnight and bank of japan and thursday from bank of england. congress toline for shutdown. we're joined by gina martin adam equity strategist and marty back from asia. youome back it's great of here. let's start with brexit.

news.een in the in the news fair amount. we can see that the pound is down. been going up and it's come back up now against the u.s. dollar on news that againstmay will fight this second referendum. a there seems to be underlying narrative for a second referendum. obviously the problem is how do you word such a referendum in a way that people really stake.and what's at that was the accusation on the first vote, no one knew what on. were voting that same problem may rise if there's a second referendum. >> i have to wonder how much damage is done to the u.k. economy. christmas dinner is going to be the most expensive as it has years.r because of inflation these pressures.import what has the effects has been? >> it's damp in confidence. currency feedback and it will impact the equity

markets. look at the footsy 100 it's a good example. all the giant companies in relatively well. small companies are struggling. consequence what's going on with brexit. the population in general has experienced such an extreme of uncertainty with respect where the economy is going. inestors are only invests the largest cap companies that can bent from this currency have little bit more pricing power. but the small caps really so.ggled and continue to do i was struck, i was in europe week, i was struck by the fact that most people i spoke to a second if there is referendum, there's no guarantee that second referendum results to today. seems to be no way out. that's the bigger pressure

economy incting the general. speak toeresa may will parliament today, at 10:30 eastern time. this week,later federal reserve is expected to rates amid at criticism that this is just too fast. the gap between the u.s.-year yield in the marty, i want you to come in here. how political is this meeting is having?d immune is supposed to be from politics. president trump is drum beat to fed, hey, stop, we're fine. don't hike. will contend it is a apolitical organization. are not immune to the world outside of the federal reserve building. it is a political decision or not.they like it donald trump has made it so.

chiming inle are saying, this maybe in fact the deep breath.take a they make in doubt about it. they will raise rates for a week. time this then they may actually moderate their rhetoric little bit. lisa: what are you looking for today. areur straight strategist generally expecting this hike. they hike and then they talk down the possibilities for hikes in 2019. i think that's a pretty reasonable expectation just timing ofg the financial conditions we had over the fall. they do have cover from the from the markets, meltdown in oil prices going into 2019. as much as we maybe concerned potentially little bit politically biased, it's clear that the financial markets are struggling. little bit of cover to more devilish to

rhetoric. when we got to 2% on that two-year treasury, we saw clear in equity market, much more severe than you would expect given the earnings expectation. the equity market are voting to a pointgotten that the feds need to slow down. the fed how much affecting the economy and the markets. end of this week, we have a possible partial government shutdown. markets don't -- then you have a debt ceiling coming up in march. have a shows that the federal is going beyond that debt ceiling. >> especially in an environment where the president of the has threaten government shutdown over wall funding of $5 billion. just think about what he might in terms of raising the debt limit if he doesn't get the kind he wants. i do think the debt ceiling is a

very difficult thing for us to get past and the market will that.ticipate lisa: markets are not responding to the potential shutdown, they will respond and they will use it as it willation how messy be. david: that's the big fear in the markets. third story now, the big ruling out of texas overred weekend. ruleddistrict court judge that obamacare is unconstitutional because it no tax thats that individual mandate. we're putting up here what's bothned with the stocks of insurance companies and hospitals. really a bolt out the blue. it's not clear what the republicans know what to do. >> one thing they want to do is run away as far as they can from ruling. we had a great headline over the a bomb int plateses the lap of president trump and gop. they have advocated for the

of obamacare. guess what be careful what you wish for. clearly at the feet of the republicans what to do next. lisa: how much do and should people trade off of court rulings like this? >> i think it's difficult to trade off something like this. long term investor. short term traders will take opportunities.e investor, the worry is uncertainty with respect to the earnings stream. it's one of the sectors that has most predictable earning stream. of certainty in these stocks. this infuses the degree of

uncertainty. great for the healthcare sector which held up really well and helping to keep 500 flow. it now.it cow can use thank you both for being with us. the charts byll running gtv go on your terminal. coming up, we'll have more on brexit. with j.p. morgan asset management. this is bloomberg. ♪

>> this is bloomberg day break. google will invest more than a

billion dollars in new york city. the company will move into new buildings on hudson street in by 2020 and washington street by 2022. the move could allow google more double the current 7000 york. it employs in new charter has a deal to separate private equity unit. end two year effort by ceo to end that business. it will to londonrred intermediate capital group. bhp glencore all up. make up about 60% resources index. your bloomberg business. david: british prime minster may continues her quest for brexit deal going to against anyo argue second referendum. saying it would do damage to the

politics of our because it would say to millions that democracy does in the deliver. it would further divide our country. we should be working to unite it. joining us now is david lebovitz he's j.p. morgan asset market management. theresa may is hell bent on getting this deal through. what should investors do about this? do? should markets do you say on the sidelines? >> i think until there's a clear signal we're making some forward progress. it does make sense to spend bit time on the sidelines. prettyis struggling with noisy economic figures. u.k. is seeing sluggish growth. into question what the bank of england will do. maybe just sitting and waiting and see. we do think this will be resolved. there's now catalyst for getting market now. lisa: my first knee jerk reaction, this is a gift to her. over.n say, it's

you -- i don't have the whipping blade anymore. wonder, i was talking with pimco's cio, he said this pointng in at to bank bonds, to the credit of u.k. banks. do you agree with that? can see why that makes sense. if you're banking on a resolution. there will be a resolution at some point. i can see you trying to make the inue play there and getting at this current juncture. for us, there's plenty of markets.y across markets in the political spotlight will see that stroll exacerbated.xes david: whenever we have a geopolitical issue, we see it foreign exchange. we'll put up a chart now that theares the euro with pound. it suggest that the pound gotten hit hard. the euro hasn't so much which

euro has morethe to fall. is the euro more vulnerable here because people tend to really go after the pound but they don't think about what it might mean euro.e >> this comes back to the issue of monetary policy. if you think about the message that the ecb sent last week, it was okay. end our asset purchase program this year. bank of england where i think coming back to ratei was saying earlier, hikes are going to happen next year. the question is how many rate see. are we going to slower is this weird growth, maybe this gives pound come back against the euro. ecb willyou think the ever hike rates. do. i wouldn't be surprised. i think the language from last week's meeting is leaving the

open for a technical hike. getting rates to zero out of negative territory. look at the economic forecast, the inflation numbers camedown, growth numbers down. asa: technical hook is now thing. >> it's the other side of the mountain when you decide to move territory. negative irreparable damage. getting things back to zero can put things on more even playing field. david: it's not just the economy. monetary policy it's the policy in europe. they are reviewing another italian budget. expressing some skepticism. you have what's going on in france the yellow vest. can you really anticipate lot of growth and move rates up when uncertaintyal reigns in europe?

>> exactly. that's a similar conversation to one that's probably going to be had at the federal reserve in this week. the fundamentals are going to soften. we've known the fundamentals soften.ng to it's what does that do for volatility. lisa: there was a story existential about the meeting of the west. there's no grown-ups at the table. are policymakers are monetary will they be adults at the table or would they pull back? of adultsxpose lack elsewhere. >> i don't think that's a thesis me.s sense to very cheap money, tons of liquidity that kept markets calm. allowed volatility to compressed.

lisa: thank you so much. david lebovitz of j.p. morgan asset management. coming up how much more does give to trade war? thel be joined by republican senator. is bloomberg.

david: investors in market are focused on geopolitical risk as year.n the new with u.s. and china relations as list.p of the we welcome republican senator cory gardener from colorado. he's a member of the foreign relations and commerce committee. great to have you here. let's start with u.s. relations. talked to wilber ross last thursday. china is starting to move little bit. he said, that's nice, not enough. >> we do have to see more. that's the challenge we face with china.

speeches andt of herd lot of speeches. we will have another big speech in january. speeches are no longer enough. this about two week into 90-day framework period that president trump set. if we don't see concrete action little bit here and there, this is not going to improve. i don't like tariffs. don't want tariffs. we got to convince china their actions on closing markets and forcing joint venture ownership technologyng stop.ers, it has to david: wilber ross said there's 140 items on the list now. understanding r there two or three that are big ones? if they did that, i'm going to start taking them seriously? >> if they go on with properties, they go on denying businesses,s to our i don't see how you can say

move on.e better and look at reciprocity. denying market access to us, maybe we should deny access to that same states.in the united it's pretty simple. rule.ack to the golden we'll treat you like you treat us. company thatuge there seems to be growing about the extinct they are supplying telecommunication. not just the united states but europe. huawei.ew things about huawei.not just we've had conversations with the pentagon about where in the hardwareain software, is that can be infected with

infected with questionable hardware and programming code. the answer is no. as we learn answer is no. as we learn more about huawei as we open up our eyes, you'll see whole conversation about our supply change and critical networks ande our how huawei has challenged today. closed?hy were our eyes over the weekend there's reports about navy contracts. hacking intore navy contracts for top secret information. why didn't we defend this? >> we have some that's our open society. are market economy, there vulnerabilities. you also have just the fact that, there's only one supplier do thise that can particular thing and they are really cheap.

i'm bidding in a competitive process. have something really cheap that works. this doesn't. we just turn blind eye on this. think they're doing anything here. i hear that from people across the country. providing ais product like they are providing at the price they're providing. reason for that. david: do we need to straight a balance? to protect our property. on the other the exchange of information and ideas across borders can be harmful for our own growth. could we hurt ourselves in our own innovation? >> we could. that's why we have to find very balancend able throughout this. we made some advancements on the program. is making sure we're understanding who's buying u.s. businesses and why. look at more global picture. this is what's happening in our economy.nd why is this company making

investments here. idea ofve a better strategic investment. second thing is making sure eyes are open on some of on course -- source codes technologies. i've been working on legislation dealingator mark warner with internet devices creating these safeguards. computerty basic hygiene kind of safeguards when it comes to internet by the united states. government purchases i.o.t.lion worth of devices. if we start driving cybersecurity, that will filter the marketplace. david: you have access to lot of we don't have. do the chinese get it? do you see a fundamental change? >> the first time i went to beijing through the foreign relations committee in 2015, i u.s.ber meeting with the businesses -- we believe president xi is a reformer. give enough time in china

things will correct themselves. weretime i went, people saying time was up. the united states has to change to fix what is happening in china. i met with the ambassador from china to the united states this week delivered that message in person. i don't know that they do. if they don't change, we're going it see things getting worse and not better. for our economy or china economy. david: spend a minute on marijuana. new bill. it's a fascinating bill. i understand, it says, leave it the states. or 50 stateske 49 that legalized some form of recreationaldical, cbd oils. they're all doing something. we have a situation now where a bank.ot put it in you can't governmen go to a bant takellow that person to that check to their bank. they can't get a home loan. is not about legalization. in colorado we have $2 billion

of cash floating around because of this industry. that's going to warehouses and knows wheresses who this military force that's guarding this stuff. look, don't let congress vote or wait for them legalization. let's allow the states to say it not. david: are the votes there? >> the vote registration -- the votes are there. have a honest vote, this pass with majority of voters in senate. david: great to have with us. cory gardnernator .f colorado lisa: new jersey is becoming the to legalize marijuana. this is the last day of voting

if the new jersey state senate. you look at the proposal, include things like having marijuana deliveries door to deliveries and marijuana pops, as well as mom and cannabis operation. definitely trying to lay the revenuesrk to get some in new jersey. it's kind of interesting. i findthe thing interesting, some of my friends illnesses are talking about this. it's not youngsters anymore, it's the old guys. i'm really hurting. this can help me. lisa: people like you david. pushing towards legalization of marijuana. let's get you caught up on where markets up. ofs a quiet morning ahead whole bunch of issues we'll see this week from the fed. bank of england. let's get an update here. we have the dow jones moving just slightly s&p also. this is barely. is down just a bit. europe is down a bit more with

halftock down about percent. look going on across assets in the pound is gaining against the dollar ahead of may's speech to parliament. we expected that today. 10-year yields dipping. three month u.s. libor now changed. commodity index just dropping a touch here with oil leading the charge. update on what's making headlines inside the world.s >> british prime minster theresa may is going on the attack supporters of the second brexit referendum. it willell parliament be a catastrophic breach of trust. you why european leaders turned back attempts to make a brexit deal. top u.s. senate democrat say it's now up to president trump to decide whether there's a

week.l shutdown this he'll sign a budget bill needed to keep a number of government agencies open. doesn't include a $5 billion for a wall on the with mexico. aren'tchumer said there enough votes on the wall. charges filed criminal against goldman sachs to the investment fund. goldman misled investors when the bank knew that proceeds from sales will be misrepresented -- misappropriated. the firm could face fine and $600 million goldman received in fees. and tictoc on air twitter and more than 120 countries. this is bloomberg. lisa: thank you so much. more on goldman sachs, joining us by phone is

own.berg's how much liability does this exposed goldman sachs to this? >> good morning. headache another major for goldman sachs. justice andf regular lay -- regulators have pursuing actions. department of justice is pursuing their own criminal charge. u.s. government trying to extradite him and a senior on leave. been you have five sanctions. could snowball into major problem for goldman unless can to reasonably negotiate and try to be with all regulators. lisa: is your sense this is largely been priced in? we were talking earlier how shares of the bank is down more lagging behind by a

significant margin. >> it's very hard to say all of priced in. they will set aside money saying is what they expect it from the fines. situation where these government approach can show that the bank was more seriously more than we recognized thoughts not just one or two employees, but systematic failure, we really don't know how bad this could get right saying, we have between 1.5 to $2 billion in fines. in the process all these investigations, you find out there was more people involved aware of. not the problem could get worse.

lisa: we know that you'll be following it. you so much. david: thank you. we'll hearhe day from the federal reserve and the general expectation it will raise rates once again. is farmes after that from clear. now dean mackey. still with us is david lebovitz of j.p. morgan asset management. the question is what's to be had an op ed over the weekend, they said the feds it easy.ke we believe the u.s. economy can sustain strong performance next but, it cannot afford major from the fed.ven op ed.you read that something that we haven't been through before where the fed hasn't this big sheet we have not seen

before. my own view is that, i think do both.fed can they can raise rates and unwind the balance sheet. economy is in strong position here. quite as dire scenario as that editorial paints. lisa: two of the editorials point. we're looking at financial conditions weakening in the in tandem withch the increase in breast rates. rates.rest at what point where we weakening much? >> i think the fed are coming around that the neutral rate for the economy is higher than the neutral rate for the equity markets. investors uncomfortable with the process of fed continuing to raise rates. i share the view that the feds week.o go this it will be do more to undermine their credibility. it would help the economy. the fed can do through some of their forecasts and the statement is just highlight that they are becoming more data dependent again.

forwardan emphasis on guidance. the fed saying this is what we'll do. think we'll go from more data dependent like we were when the rates.un to raise david: not so much what they'll do this week what will happen next year. shows the market they're under one rate hike. that's not where the fed is. >> it's a very interesting mediann whether the fed does shift down from two to three. we think it probably will. fed will do more than one rate hike next year. markets bought into some of the things the feds have said and misunderstood what the meant by those comments. lisa: i've got to be very conscious of the credit markets now. we talk about weakening in financial conditions.

i'm struck by the fact that this is the first december, we have issuance inmp on the united states since novembe. right after lehman brothers collapsed. at what point do you start to you seeerned here when shrinking,standings prices coming down are we -- ing towards the next don't know. >> i don't think we should put the cart before the horse. when we look at high yields, those companies have been much more responsible with their the past few years. reinvest in themselves. perhaps this is the caution is and could extend the cycle by firms not getting ahead of themselves. does represent a risk to us as things begin to turn.

downgradede b company down to junk. cdf rose dramatically. market.t priced in the >> to us that's the big risk. we talk to lot of our investors who buy mandate may need to hold investments. thet's not priced in market, you have an elephant through a key hole problem. there.kers aren't they are holding inventory of bonds. investors should be little bit concerned about what's happening in investment grade yield market.gh david: what does it spleen for -- economy and growth? ing growthll anticipate 2.2% growth.d >> the credit markets are very important for growth. if we were to have the credit market shut down, that would affect our estimates. that's not what we're seeing at this point.

most corporations are able to get credit. we are seeing investment happening. the real heart of our forecast quiteer spending remains strong. consumers are still benefiting from the tax cuts and they'll refunds next year. gasoline prices are down significantly. backdrop, we think consumer spending will continue to power the economy. david: how long can that continue? the theory was we're going to lot of capital investment and get productivity up. can we really rely on the consumer to drive the economy? only it's consumption-based and we're not getting the investment follow through. it's not good for long run prospects. when we're looking ahead to next year, what the consumer does is very important for the overall economy. listen to dean, bifurcation of

markets. you have markets saying this is it gets. as good as you better start holding more defensive.t who's right? >> i have an economic background. i tend to lean little bit more in that direction. what the market is dealing with from now is, it's going focusing on better versus worse bad.od versus the data is no longer getting better. that makes the market uncomfortable. not going from 25 to zero. i think that this the market down.icing in a slow i don't think it's as bad as the equity market suggesting. lisa: this is really interesting me. if you hear what david saying, what you and other economist are the market is overreacting. yes, the market has been right

than economist, you have signals flashing if you look at curves.t term yield what give you confidence that the market is wrong and economist are right say that we're seeing recession signals directly from the markets at this point. some of them move in that direction. i think what's happening is aople are getting used to slower rate of growth. that's not great for equities necessarily. >> we've been in the best of all possible worlds. very strong gdp growth. we're slowing somewhat. growth and the rest of the world is slowing. it's just not quite as especially when you combine that with higher interest rates. market isn't a disaster for the economy. david: just to add, political uncertainty represent asthmassive downsize risk expectation is that earnings growth will slow 5 to 7%. you political tension continues to escalate not only between the u.s. and china but

around the world, you can get that number to be flat. i think that the market looks out trying it look across the unfortunately there's still too much haze. size.n't see the other david: those geopolitics. david lebovitz and dean mackie. hear much more on the fed with exclusive interview stanley druckenmiller. mckenzie under pressure. about that next in wall street beat. this is bloomberg.

>> coming up, paul romer and economics.f lisa: we turn to wall street beat where we cover three things buzzing there. then next problem, mckinsey entanglement. they come under pressure of profiles its involvement with the authoritarian regime. five weeks after the arrest, nissan boards fail to appoint a replacement. david: joining us now is jason

kelly. doesn't end for goldman sachs. it.'re in >> it's malfeasant monday on wall street. what's interesting about all these stories, these are all stories that are kind of bigger headlines say in a lot of ways. 1mdb has been trailing goldman around. keep coming.s to it's coming at a difficult time, of tricky time for the bank. change over in leadership. does seem to raise issues compliance and who knew what when. that reputation risk. does come after lloyd blankfein got involved too. continuing with the

malfeasance monday. mckinsey --bout malfeasance. with storywe basically had a on "new york times" yesterday direpainted a pretty mckinsey. one office retreat to fundamentally mischaracterized largerm's presence in part of the world. we also accept the commentary the retreat in china. we'll be more thoughtful about such choices. in china, the photo told it all. it was way out in the west. of detention miles center. carpetse like red between the tents. they have this huge blowouts. favorable.are not about're point

malfeasance has been well taken. there's been a lot of malfeasance committed by their clients. when you go across the world to regimese authoritarian in the lead-in, mckinsey tends advising some, president of the united states, say. a second, this goes the heart of mckinsey operating in a quiet way, the world'se of companies on fundamental changes. that spotlightut for so long. david: it's russia and it's turkey and saudi arabia and things like that. for me as athing lawyer, you always say, everyone entitled to their own legal representation. to theirody entitled financial structure. is it an obligation? >> is there an obligation to advise them or is your own

saying, maybe worth no. lisa: what conflict of interest to disclose.e david: now let's go to nissan. today, there's a big meeting. there's a question, what is he going to do with his relationship with nissan. getsis is where the story bigger than one person or one board. we're talking about biggest car there.e out this has been a little bit of if trouble, kind of rocky here.ge for bit of time bit ofnch, there's a imbalance here. the french actually have a voting stakeake a in nissan. it doesn't go back the other way. the french said, we're not so about these charges. the japanese are saying, absolutely he did something wrong.

thismay end up breaking up alliance. that would have huge notten easys. it's time to begin with. jason many thanks to kelly. if you want to tune in everyday from 2:00 to 5:00, that's eastern time. up, obamacare struck down. i'm watching healthcare stocks ruled thateral judge obamacare is unconstitutional. more on that next. this is bloomberg ♪

david: what i'm watching today is obamacare. federal district court down in struck it down as unconstitutional. they done away that mandate. us watch this max.nating story is what's going to happen today? >> i think that stocks of heavily focused on

the affordable care act exchanges or medicaid is likely to drop and same for hospitals. the potential for the rate go up.sured americans to that's pretty bad news. lisa: crystal ball is here. going to drop the most? is this going to be catastrophic wind?ort of head >> i guess it's insurance like centene and molina is tied up in this law. scary ashink it's as headline is. obamacare maybe unconstitutional. the reaction should be more muted. is most likely will be overturned. no injunction.s hhs said nothing changed. operating the same as it was. usual untilan

rounds of appeals is finished. judge made this decision. legal case here is pretty weak. mandate is no longer enforced like a tax. goingsue that i think is to have trouble is extending that to not only should the mandate be -- but the rest the law entirely. though,have to wonder the current representatives are obamacare in at lots of different ways. now you have the judiciary doing same. evenuch does this do to enrollment. >> this doesn't help. this comes on the last day of enrollment. people have been discouraged from signing up. it's still open in a number of states. there's sort of this fundamental backstop which is the fact that incomes can pay very little for insurance.

peopleill be millions of enrolled. there's a backstop built in the way that the law is designed. to say it is in danger. this is a trump administration effort to allow those subsidies be used for insurance that doesn't qualify and doesn't meet standards. that's another illegal tricky thing. assault as it has been since 2010. david: we're watching healthcare stocks. thanks so much for being here. up, liz young senior investment strategist. she'll be joining us here live from new york. is bloomberg.

david: no do-overs british

theresa may addressing parliament. meet thisl reserve -- crypto on the bubble. talk to paul romo about the coin.ate of by welcome now to "bloomberg i'm david westin and abramowicz.h lisa lisa: it's not everyday that i learn that you bake quiches. on theet you caught up market action today. euro gaining a bit against the appear that a does italy will submit a revised european the commission. s&p futures tipping more into

the red now. yields down just a touch as we prepare for wednesday's fed decision. david: time now for the morning brief. just looking at the entire week ahead on tuesday. 40th marks the dow ping's of opening economy. on wednesday the fed is expected to raise u.s. interest rates at -- fridayeting been congress toe for avert u.s. government shutdown. lisa: let's get the latest on brexit.oing on with british theresa may continues quest for brexit deal. parliament 10:30 a.m. eastern e against a second referendum. saying it will do irreparable damage to our politics. could say to millions that our democracy does not deliver. further divide our country at the moment we should

be working to unite it. joining us now from london with more of the latest david merritt bloomberg news director for emea. what are expected to hear from prime minster may? the that really move needle? >> she's made unusual step to releasing what she's going to say. it's the put down of the suggestion only way out of this now is to have a second referendum. she's doing that? the momentum behind this call for second vote is building. some big led headlines in the press over the weekend, various members of her cabinet, saying this is the only way to break parliament. in she feels that will be a good trend. people voted back in 2016. it on herot allow watch. she will say this again this afternoon. only one pretty much seem to believe that she can get her deal approved by parliament. something is going to have to happen in the next few weeks to

bill. the nature of the europeans said that's not possible. or somehow, have another vote in terms of referendum or a general election. parliament is going nowhere on this deal. david: is she going to have to take that deal back to parliament? time it didn't seem to be a close call. said, european as you they said they will not fundamentally change the script deal.s they might add some addendum or explanation at the end of it. not vote thisill through without a fundamental question what to do. on the surface, it seems like her deal is never going to get approved by parliament. it's therefore dead.

going to have delay and it's been her strategy. closer weng it's a get to the deadline, the europeans will have a change of heart. david: we're getting pretty darn march 29th. david thank you so much for being with us. more how investors are addressing the brexit possibility. we're welcome liz young bny mellon investment. normally markses is priced in i don't know what they were priced in at this point. investors do? >> the markets has priced in no scenario. that has become the most battle and the biggest game of click been the deal that theresa may put like itit doesn't look will happen. what we don't want to see is that if we revote on this and go through this whole thing again,

depending on the outcome, it the democracy. lisa: if you think that the market has priced in no deal, does that mean there's more surprise upside than downside? >> good question. let's back up little bit. market is expecting this to be a bit of a disaster at this point. deadline.ring the there hasn't been lot of positive news that's come out of it. to a point where with going no deal and that is to wreak havoc from a volatility over the short term. if even we end up with a no deal over the course of 2019, it the u.k. economy, it hurts trade with the euro zone and it pound.he eventually i think things level out and it stays contained. david: let's take the european side. people don't have much hope for britain at this point. is there still some range for disappointment on the european side? i put up a chart now that the pound is really taking a hit, the euro not quite

so much. some downside risk europe. just brexit for they got issues with italy and france. euro will probably suffer brexit.ause of italy is willing to be flexible. the big risk in italy isn't necessarily the budget. if the things ripple through the and we have a doom loop that's caused with banks euro. lisa: which brings me to a question that was raised in a what isg story about the west anymore? does it even exist? a ukrainian officer there's no grown ups to sit at the table. if there's no grown-ups. what do we do with the italy

situation? movementsse populous that are percolating up. does this pose a real threat to the euro that is not being priced now? >> i do think there's a downside in 2019.he euro however, if we go through 2019 ecb continues to wait on do this hike and tighten in people, -- policy, i itnk it probably makes through. if they wait, i think we'll be okay. david: might there be a pony this here? or france, istaly seems to be fiscal stem stimulus coming. could that actually help europe pattern?rowth it's fiscal stimulus. >> it could. remember they said whatever it takes. if something comes out and

saying we will support the economy regardless how much we supported the economy and, we took another hard look. we've decided we need to stimulate more. that's a positive. lisa: what do you think has more the u.s. orside, europe actuallyear, i think parts of europe probably have more upside. lisa: which one? a good question. i think the u.k. probably will half ofy for the first the year to figure out what's happening with brexit. if you look at the part of europe that have been beaten down, you can look at european financials if italy thing into a doom loop scenario. you can look at places of europe that have been hurt by that trade. world doesn't collapse. isid: how big an issue geopolitics in europe? >> geopolitics is big issue everywhere. seen that throughout 2018. we came in this here not from ad what will happen geopolitical standpoint. in europe it's been a bigger

issue. movementat populous that continues to not go away is going to really drive volatility year.hout the lisa: i want to talk credit. at european credit, vastlyn credit is underperformed, which is really interesting. cuttinge not started back stimulus in ecb. inif we see a slow down volatility, it should reverse. dependingo remember, on what parts of the credit we looking at, if it's distressed. if we have a risk appetites that torts to increase, we want see more risk-seeking behavior. we see investors go after the been beaten ore go after more risky places even cap and.s. like small credit space, that's a more

durable rally. inesee that start to happen europe, things could turn around. lisa: liz young, we got will the more coming up. liz young of bny mellon. up, china's challenges, out itsepares to lay economic priorities next year. more on that next. is bloomberg. ♪.

>> 1mdb will be misappropriated. the firm could face fines well excess $2.7 million of misused funds. goldman said the charges are misdirected. u.k. isil gloom in the spread from brick and mortar online.o the retailer cutting sales guidance what it calls a significant deterioration last month. the news is dragging down shares retailers. european officials and companies distancingy huawei.es from

david: policymakers are meeting economic. the combination of trade tensions and domestic slow down take their toll on the economy. still with us is liz young of bny mellon investment management. challenges int of front of them now. what do we expect for them to be going forward? how can they plan for the future china,'s happening in trade was not the only issue that china had. issue.as adding to the they had leveling issues. we would expect the central bank of china to continue to from a monetary perspective and even let the currency depreciate. bea: how much china will willing to forego in the whole negotiation with united states, facinglly as they're this uncomfortable transformation from manufacturing agricultural

serve as a economy that has been tough for even the u.s. to deal with and certainly to strains. the orange section is agriculture. middle section, blue section is manufacturing etcetera. red sector is portion of the economy that is tied to services. it's taking over. >> it's a painful transition for them. for a painful transition any country. it's a painful transition for the u.s. and you can look back at theu.s., and you look most successful emerging market of all time. pay attentionto to what's happening in china from a risk seeking perspective andare investors doing where is capital slowing. china cannot absorb of this war as u.s. can. what's happening so far is we've little victories along the way. they've been battled won and not war. it encourages us to keep pressing on with this

initiative. david: at the same time president xi jinping said, one of his priorities was reform. somecularly getting down of the leverage. lot that growth has been fueled by government funds. pumping money in this economy through credit and otherwise. the priorities how high a priority is that? off thating >> he's probably going to have bit andoritize little protect the economy against shocks. look at what china done historically it's a tough road to get awayy trying from state-owned enterprises. for them, it's worked until this point. it's going to be difficult to convince people to do that. lisa: do you think there's more weakness to come in emerging markets next year? china'sweakness in economy that is not being priced now? the trade war escalates, yes there's more weakness in

emerging markets. it spread through asian emerging markets and currency particularly as well. where you will see the pain. china will probably let their currency depreciate. there's also a chance and it on what the fed does and what happens in the u.s., there's a chance that we see a peak in the dollar in 2019. probably not early in the year but maybe mid-way through the in the dollareak or then it levels off. through the first three to six months of 2019, you want to hang out and hold steady on em. if you see a peak in dollar and weakening, it might restate back in. economy.is is a huge it's very big. still growing six plus percent. it curtailnt does president xi's action?

does he have to dial back? have to make major concessions on trade? strong enough?d >> that's a very good point. it's important to remember they are still growing above 6%. that's pretty big compared to u.s. we're at 3%. we're in a different place from perspective. he probably ends up dialing back the spending before he makes trade.ion on lisa: in the united states, there's a feeling that the worse trade has notwith been priced in. pessimisticeing too on equities. willu think u.s. equities go higher from here >> the equity market if it onsn't hold support at 2600 the s&p, there could be another down from there. get that trading that kicks in, fear takes over. onfind a bottom depending where that bottom is then we probably recover.

eventually the economic u.s. areals in the still strong. writenk they ultimately the market. david: what accounts for what's happened already? down as much as we are? >> in an effort not get too it's thecal here, second derivative. it's a slowing in the rate of change. ishough the rate of change still positive, we're still growing, all the expectations going to growe slower. we're going to have slower earnings growth. that's what's happened so far. this forward-looking goings are putting pressure on margins. david: that's interesting. liz young of bny mellon will be us.ing with coming up, latest rule on obamacare has markets preparing jolt.healthcare more on that on today's bottom line. this is bloomberg ♪

david: it's going to be rocky road for healthcare. watching goldman sachs, those shares indicated facedtoday after they charges in themarg 1mdb scandal. from the big question is, a fees perspective, how much are they going to get fined and how much can they be liable for here. more than that, reputational at a time when goldman

sachs has dramatically lagged behind financial peers in the states. they have a identity crises as in a post leadership qe world. david: beyond that, you know once you get criminal investigation going, you don't know where it might lead. stays within this little narrow area. lisa: are you talking maybe like mueller? david: third company we're abb.ing today is big brewing there we're joined sullen. this has been kicking around far while. they will finally it. is, is theuestions price right? it's really pretty high. high.is ab has been under pressur -- abn under pressure. aey have been pushing for breakup for at least 2016. ruled out because

they weren't necessarily sure it. would get the value for they have made productivity improvement there. the's what you're seeing in price today pay hitachi. diversify them away from the nuclear and makes them more viable competitor. lisa: this maybe my simplistic of looking at it. i thought it's interesting this now into theening new year as trade tensions pick up. is that at all a factor especially in this particular industry or is that just my way world?ing the >> i think this is a simpler a japanesee it's company and european company. the relations between them now fairly good. think that makes it easier here.

david: you're too young to remember, -- they had the magic word. the magic word g.e. what does this mean for g.e.? >> if you remember g.e., they splitting up their power sort ofo two businesses bad bank and services that's been the trouble spot for g.e. been okayish bank with steam, the power grid business abbh competes with this unit. people said that split could be paving the way for divestitures. maybe g.e.'s power business also be on the block. david: does that mean they get a higher price? does that mean they got on stronger competitor that's not good? >> i don't know if i look at it steppingin terms of competition. g.e. is not in great position to businesses.ot of

i think it will be interesting to cut a deal and company that maybe trying it look at that asset. are there other buyers out there? tensionsht up trade will they be able to find somebody that wants to pay the money. david: okay, many thanks to brooks sullen. to talk with her. risks to fed policy the economy. professor paul romo from nyu is next. get tot everyday you a nobel laureate. this is bloomberg. ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪ mom.

♪ lisa: i'm lisa abramowicz. let's get a check of those markets. futures down. deeper in the red now. futures .3 one percent.

outsideet's get update the business world. >> british prime minster theresa going on the attack against supporters of a second brexit referendum. parliament today that will be catastrophic breach of trust. explain why european leaders turned back on attempts to make brexit deals more to lawmakers. democrats say it's now up to president trump to decide there's a martial government shutdown this week. he said he won't sign a budget needed to keep a number of agencies open if it doesn't wall on a billion .order

federal judge ruling striking down obamacare won't have an impact on health coverage for now. a judge in texas ruling that the affordable care act was unconstitutional. that decision would need to reviews by higher courts. stay in place. global news 24 hours a day and by 27 on twitter powered hour journalists and analyst, bloomberg. lisa: thank you. the federal reserve is expected thisise interest rates week's meeting. president trump is weighing in incredibleing it is that the strong dollar and no inflation, the outside world up around us, china way down and fed considering another interest rate hike. take the victory. young bny us is liz asset management is here

with us. >> the fed has made it clear not are data dependent market dependent. but that they're doing it with open.ide in order for them to remain data dependent, they watch inflation and unemployment. in december if they don't raise rates as puts intoled, it question, their predictment. hates unpredictability. mentionedhave inflation and employment. you have the sell off in equity markets, you have investments and businesses that are trending downly. all these things indicate a softening. >> the data that they watch, is that pce number and unemployment. when you look at the inverted it's inverted at the two side. the fed watches something different. according to what they watch is inverted.

david: look at this chart now, is financialne conditioning which is tightening. don't they have to pay attention financial conditions. that's early precursor of things to come. the u.s. sneezes the world catches a cold. too far too fast, that's a problem. they need to probably raise in december. maybe pause in march. at the last speech, he indicated there's a lag in policy. you have to wait six months to a year to see how the policy bakes the economy. if he wait foss see what happens, that's okay. but they lose credibility if they don't hike. this if they hike rates week, does that tighten conditions further >> it tightens a little. this rate hike probably priced in. that's just math. it does tighten them little bit. more about tightening too

far. i don't think this would be too far. into 2019, i think the to 3% ifan absorb up they get above three that might tightening. lisa: liz young of bny mellon investment management. thank you for weighing in on tweet.nt trump's david: the day that the fed will be studying this week points in directions with economic growths continuing. economistw a leading who is devoted his career to productivity that drives growth. at nyc.cture let's talk with something that druckenmiller had to say from the "wall street journal" over the week. they had warnings what's to come here. say we believe the u.s. economy can sustain strong performance next year but it can

ill-avoid major policy error either from the fed or the administration. that begs to question, what will be a major major policy error. easy to say it will be good if we don't have any errors. i think to remember, we gave the fed a job. delegated to them responsibility for two things. managing the inflation and keeping output close to potential and also, being kind of last resort when we got a financial crisis. the you give them a job, thing to do is let them do their job. they've get the best data. pastre the ones looking the next election cycle. we want somebody to be doing that. a chance they'll make an error. is it likely that anybody else better? no. they are the ones in the best position to make the decision. we got to let them do their jobs. lisa: in fairness, their prescription was to hold on. it easy thatd take

financial conditions are tightening. especiallyag time, as they roll off the balance sleet but isn't being felt. increasingg to see tightening in the months to come even without additional hikes. say,'s always tempting to later.o the right thing we'll get to it later. act.eed to preempt surge in inflation expectations. ready. to be you got to be back at normal conditions. you can't just go from strong stimulus to suddenly strong restraint. getfeds really trying to back to the normal stance that at.hould be david: the fed has to deal with the economy given. let's talk about the economy given. a theory.stration had getut taxes and we'll investment up and productivity up. has it worked? >> no, the evidence on the tax

cut, it didn't lead to sustained long-run improvement in potential output that is what we ofd to have higher standards living in the future. we need to look back at the history. worked? example, we'reor ambivalent about it. it's reducing coal. a bunch ofed on investments by government lab, government scientists and the now took up those ideas and the united states is on the borderf becoming a next of fossil fuel. that's the paired effort both by the universitiesy the and by the markets that can give want. benefit that we lisa: meanwhile, the head of bridgewater associates he talked about a conflict that he created. this conflict gauge is

now at the highest since the war years, 1930's. betweend about the gap the wealthy and the poor and how that's really creating a huge problem for the economy. do you agree that this creating problem that can sever the economy as we know it? an unusualwe're in time. i never thought we'd end up in a there's sohis where much disagreement, so much mostization and frankly, worry something is so much disregard for facts. facts are our friends on contract,f you sign a and then you're in breach all of sudden, facts aren't your friend you're going to lose the case. on average, you don't have contracts.can't have we can't do anything. the nobel ceremony in

sweden, the guy who won the know -- nobel for cancer, he discovered way to recover immune system on cancer. facts we needd of to rely on science. we can't have these kind of crazy politicians just challenging facts, challenging challenging vaccines and the cdc management of data. tose guys are just going destroy the golden goose. david: you've been a big advocate of innovation as being a driver of growth. innovation that's triggered by both private and public working together. i wonder if we can put together that issue of conflict with the question of innovation. does conflict, whether it's tradeal conflict or conflict. what we're doing now with china tax.it comes to does that get in the way of innovation? gave my lecture in

stockholm, the point i tried to growth from motivation matters not because it gives us makes usbenefits it better people. circle we define as us in us versus them conflict. growth productivity, material partess and optimism are of how we rebuild this spirit we're all in this together and get away from us versus them. lisa: we're all in this together rising debt loads we're a nation.as the debt is increasing $7.50 for one dollar gdp growth. given that, how can there be growth? to sustaine going any growth like that o? don't have growth, then

you're at a much more difficult position. here, is the ratio of debt to gdp. constant.the debt you got gdp growth that ratio goes down and we're all in good shape. david: i wonder whether you might be sympathetic to the administration in its really trying to protect intellectual property. it's one thing to say let's information. people are taking this from you. nervous --ter innovation? >> this gets back to the issue of facts. would make sense for many countries to have an agreement. a contract but at least an agreement, we're not to use spying to get commercial advantage. you got to have some belief and the idea there are facts. you can't have the different parties come to the table and say, my facts showed that i complied and then my alternative facts show you didn't. we got to agree that facts are facts. you can't have -- you can have

your own opinions. us to where i wanted to go which is books you reading. came up.ss david: it's been recommended to me. what are you reading? i read was by physicists. deep issues quantum mechanics and proceeds to try to bring everybody along. ride. pretty kind of hard i like part of my job is to explain the economy. quantumn take on mechanics in relative theory, i got to explain the economy. work. did it

did you come away understanding quantum mechanics? >> i did. david: that's nobel laureate paul romer. he'll be staying with us. be sure to watch our special report, the fed decide on wednesday 2:00 afternoon new york time. coming up we take a look at the ofure of money and the stat crip to currencies.

>> this is "bloomberg daybreak." coming up on balance of power.

dr. ezekiel emmanuel former house policy advisor. david: it's time fur regular monday feature on the future of money. we take a look at different aspects of how the digital world will affect money. we're looking at cryptocurrency technology.kchain cryptocurrency bitcoin. its price is below the cost of the coins. blockchain technology is an important innovation. is a advocate for nobel prize winning economist dr. paul romer. think you got to unpack there. extremelyhy is

important. the second thing is there's lots ways to have digital financial transactions. think of it an accounting system of exchange and for example, credit cards accounting system of change where some banks is what totrack who owes whom. the difference with bitcoin is it's trying to create an system of exchange with nobody you have to trust. there's a whole bunch of who have a people reason based on the idea of mining, to try to keep track of ledgers. it should make you little bit nervous if there's nobody in the system like this. lisa: in fairness it should make you little bit nervous if you government that is its deficit.tional of people don't want to trust the government to backstop a currency regime and living inu're

venezuela, for example, you want something other than your local currency. >> the fear when people were theing bitcoin in beginning, we'd be facing outation that was expirely -- spiraling out of control. we've seen for the last decade, central banks have gotten pretty managing inflation. this idea that the government do it right is overstated. included.ey is not there are exceptions. >> if you live in turkey, you denominatedllar account. david: talk about blockchain. is that a fundamental innovation? guess really, what i want to ask, are the productsivety numbers reflecting those innovations? haven't yet seen full application of the technologies invented.been

just take cryptography. there are ways to secure our communications and keep secret things we want to keep secret. they are not being used. peep like me who are in the idea of business to focus on this suresion, how do you make something gets widely used. there's lots of innovation about learning systems, about cryptography, about using enhance the skills of people. we need to keep producing those innovations. make sure they are diffused and used and used for forbenefit of everybody not some narrow selfish game. lisa: do you think when you're about cryptography, do you think the ultimate beneficiary financial sector? >> something like food security, think being able to trace product on the super market

shelve back to the suppliers that would be a good thing. it's important information to try to have. have a trusted entity that keeps track that information or you can try to all around the world with this blockchain technology. that thisbvious blockchain disperse version will be better. david: one of the concerns for lot of economist is growing wealth on income inequality. is technology making that worse or better? >> well, i think there's probably several things that are causing inequality now. there is -- especially at the upper tail, technology and disruptive innovation seems to creating a few people and a few firms that are doing when everybody else is saying, what benefit am this.ing from we need to be think being adjusting in whole innovation system to make sure everybody from it. benefit lisa: when we talk about bitcoin and cryptocurrency, i have to

wonder, you don't think the threatened at any point. not only cryptocurrency but just in general. problems with bitcoin is it hasn't turned out dobe a very efficient way to large transactions. dollar is an the interesting one. undiversifiedbit to have a single currency through which all the doing the different central banks operates. i would predict in hundred there will be second alternative to the dollar and the fed is declaring bank for the world. lisa: which will be? >> it's up for grabs now. it could be the euro. it could be china could step up. we'll see. lisa: many thanks. here.h for coming in nobel laureate paul romer. pays up. next from new york.

this is bloomberg.

lisa: tesla increased the extra investors ond lower asset backed securitization they completed on friday. interesting really because it's the second asset backed securitization it did this year. also, elon musk said they don't need to raise more money. they are raising more money just in a different market where they debt to leases on cars. i find this really interesting. was a time that elon thought they couldn't raise money. it's good news. lisa: what i find interesting, this chart here. you see equity surge on tesla stock. the companydebt on has trailed behind and lost more months.over the past 12

if you look at credit investors who tend to be the smart money, they seem to be suggesting that there might be more of credit problem. david: that is fascinating. that's very interesting. lisa: lot of people are looking saying -- david: smart money people know better. lisa: that has been the story. again we'll be together tomorrow. markets. on bloomberg j.p. morgan asset global market strategist. this is bloomberg.

>> from the new york city. cannot pay up and start now. -- the countdown to the open starts now.

coming up, global equity markets finding a flood of risk aversion. teeing up a contentious federal reserve decision. economists expecting powell to deliver a hike. --endary investor stand it urging the fed to pause its double-barreled blitz. good morning. futures negative a half of 1%. down about 13 points relative stability to a messy and to last week. bond markets, treasuries unchanged. the big issue this week, central banks worldwide content with slumming mobile growth. >> backing off. backing off. backing off. backing off. slowing down, slowing outlook. the anemic growth rate. markets are right to be concerned. it is very difficult for them to