trade negotiations as president trump is eager for a deal. investors flood back into equity markets. this even as u.s. recession fears are said to be overdone. the first guidance from lennar. the opportunities in real estate and an exclusive interview with the ceo of kayne anderson. david: welcome. i am david westin. this is the day after, the night .efore president trump asked for time to address the nation. the federal government remains shut down for one reason and one reason only, because democrats will not fund border security. simple, mr.stion is president, re-open government

and we can work to resolve our differences over border security. >> sadly, much of what we have heard from president trump has been full of misinformation, and even malice. david: a fair amount of drama, but i'm not sure it advanced the ball. glib, chuck be schumer did not blink for the first two minutes. ok?ere like, is he what is wrong with his left eye. david: you cannot frame that response well. the two of them facing the camera. alix: not well produced. some calls to buy equities are continuing even as strategists outlook foreir 2019 the s&p. futures up by six points.

it has been a monster rally, small caps gain 13% and nine days, the best day since 2011. euro-dollar marginally higher. the aussie dollar catching some steam. a little selling on the backend. supply coming online for the 10 year. it was of bad bid to cover yesterday. crude over $50. brent over $60. david: what is this, day eight and counting? alix: day 19 of the shutdown. time for the morning break. this morning, fed speak with the atlanta fed. 9:00 a.m., charles evans from the chicago fed. the mckee will interview fed president's morning. auction $24 will

billion in 10-year note's. hopefully they do better than the auction of the three-year notes. this afternoon, fed minutes from its december meetings. right now, bloomberg first take with lisa abramowicz and marty schenker. we are not talking china talks. they are over. the chinese government said they were serious. there will be a statement. we don't know what happened. >> i will say bloomberg reported a story that is important. president trump once a deal to juice the u.s. equity markets. s that when there are optimistic stines -- signs, stocks rally. this is important, because if trump and the fed are held hostage to stocks and i bet on stocks because they will be trying to make policies to get stocks going again. david: what struck me about that

report is this is not trump style. i don't care at all. i am not hostage to anything. this is weakening his bargaining position. >> potentially, it is. no one is talking about technology transfers or ip, the most complex and difficult parts of the negotiation. i don't see how you can have successful trade negotiations that don't address those issues elevated donald trump's intent on having an agreement, it looks like they are throwing technology under the bus. alix: does that mean the soybeans will not be enough to pacify the markets? trumpmight pacify donald as an agreement. the chinese have a huge amount of reserves. they can move money around any way they want and get donald trump of victory without having

to concede anything. i feel like were getting more calls to buy the dip. peter oppenheimer from goldman sachs says if as we expect global economy slope but avoid recession and u.s. interest rates peak, there should be room for a risk rally, and there is investors could lose out on the bulk of returns issue. that is a threat. >> i think people are seeing value after a big selloff when you don't have earnings falling off a cliff. we have gotten some worrying signs from apple and some some there is -- samsung there is a slowdown, but things are still actually good in the u.s. the concern i have is there is a feedback loop between stocks and bonds. the more stocks rally, the more yields could rise, and that will stymie the rally.

people are positioned for yields to remain lower. it might be good for a while, but it will cut itself off by the natural evolution of this market. david: what is interesting is how much the markets are reacting to the upside and downside, and that is because we have a president of the united states stirring the pot, as it were. >> that is true. we haven't even talked about the shutdown. i think things will get serious next week when this first paycheck is missed and we see economic effects on people's lives at airports and everywhere else. gave a warning that they are considering downgrading the u.s. because of the government shutdown, because of what it says about the debt ceiling talks and the impasse in washington dc. that does not necessarily

reflect what deserves aaa rating. david: home building, you might think that is not related, but realtors are saying it is affecting home building results because people are reluctant to buy housing. out result of this, lennar this morning with earnings, and they missed on eps in revenue. they said we will not even try to forecast what will happen next year, because it is so soft. this is pretty remarkable. they are saying, we don't know. premarket,p 1.3% in so people are not viewing this as a negative sign. let's be clear, were not getting housing data, housing starts, a lot of the indicators that might get them until to make -- intelligence to make an annual forecast. regardless, mortgage

applications for the last week jumped 23%. it will be interesting to see if shutdown becomes the new weather as the excuse. david: right. alix: that may be the case. >> i love that. , this also feeds into the narrative that ceos need the clarity to make investment decisions and have clarity for themselves. not puttingsses are money to work because they don't know what to do. >> there is a lot of uncertainty. that said, you have to worry that people are getting too pessimistic. that is why people are buying the dip. they jobs report was good. it came down a bit, but still solid levels.

the u.s. economy is still strong. alix: thank you very much. apparently, real estate may be up for sale. david: the iconic chrysler building is now up for sale. that is a big one. alix: who owns that? david: i was trying to figure that out and i didn't have time. alix: we are also paying attention to the u.k. prime minister questions with theresa may facing off with parliament. she does say she condemns the harassment and intimidation of lawmakers. she is suffering a revolt from yesterday when 20 pro-eu tory members voted against her. the she tried to leave open idea of crashing out. david: there were demonstrators who called her a nazi. it was a big issue. tempers are flaring in the u.k., understandably. alix: to save the least.

we will continue to monitor those headlines. equities the start to the year and a decade. our guest will be joining us next. this is bloomberg. ♪ is bloomberg. ♪

>> this is "bloomberg daybreak: americas." herbalife has quit. he has resigned over comments made before becoming chief executive. her herbalife called -- her herbalife called the comments in with its business practices.

fiat chrysler is close to settling aqs criminal investigation involving diesel vehicles that would include a financial penalty in line with guidance to investors. million set aside $810 for legal matters. it is accused of selling diesel vehicle it knowingly violated rules. sales fell in china last year for the first time in two decades. sales were down 6%. the trade war with the u.s. and a slump in chinese stocks are putting off buyers. that is your bloomberg business flash. david: i am fascinated by chinese car sales. sales were down in their stock took a hit. china saying we would do something to get this going again. alix: oil also of strongly, copper of 1%. once you have stimulus come into

china, it will be an overnight stabilizer for metals. this is part of that story. david: another company, great wall, went way up, in part because they anticipate the stimulus, just like oil and metals. let's talk about china in the broader sense. were waiting for a statement under the extended trade talks withust ended in beijing, indications the parties may be making progress. we welcome now enda curran. thank you for being with us. why don't we know more about these talks? >> we are waiting on that statement. my comics reported it may the adjoint statement. -- a joint statement. -- my colleagues reported it may be a joint statement.

i don't think there is any real surprise. factu step back, look, the that happened, a third day, an extra day of the fisa premier signaling -- day, the vice premier signaling that we will go to the next level in washington with high-ranking officials come so that -- officials, so the take away his positive, but the details remain to be seen and we are far away from a truly comprehensive deal. david: if there is a positive indication, is there a next step coming to washington and kicking it up a notch? we have a march 1 deadline on all of this. >> and the chinese lunar new year holiday coming up, when china shuts down for an entire week.

you have to look towards will there be a planeload of senior officials heading to washington to meet robert white heiser and steven mnuchin. -- robert light heiser and steven mnuchin. meett's see if they do during the davos discussions. david: the plot thickens. thank you so much. alix: joining us now from pittsburgh is the senior equity market strategist. do you want to be buying into the rally now? >> it is easy to buy into the s&p 2700 is where you will find serious resistance. be in a trading

range all year until we get through some of these big uncertainties. alix: you mentioned that. hipping have some w action. slow him about avoid recession and interest rates peak, there should be room for a risk rally, and any investors who miss out could lose out on the local of returns. -land again?mo >> it's not so much how much progress they make, because the big progress that needs to be made will take longer than a march 1 deadline. particular, avoid a recession and have a soft landing? if it were to fall into recession, it could drag in the

breast the world, if not the u.s. that is not emphasized enough and that is separate from these talks. recession andthe you can have a soft landing around the world, yes, interest rates are low, the u.s. looks good, and we are bullish for a year that finishes over 3000, maybe 3100 based on 18 times multiple. david: why are you bullish fundamentally? you are confident about china? because the fed has backed off and we have more tax benefits coming? what drives your mission this? on the strength of the united states of america, a fully-employed economy, lots of good news, corporate and consumer balance sheets are in great shape, even if the 25%

growth in earnings is coming off the boil, that does not mean we are anywhere near recession. bay, we don'tat have an inflation problem, and that is goldilocks. on united states can grow its own even if china were to fall into recession. we are the consumer for the whole wide world. witness what is happening to apple in china. david: what about those pesky purchasing managers in the u.s., germany, even in china? we have i assume'♪ 's and pmi's disappointing across the board. >> i am team usa. you should be owning usa right now. where are we in the economic cycle? it has been that long economic

, the longest in our country's history. without a recession, you should be bullish on stocks. when we had that huge tax cut, us all in the place of saying where are we in this economic cycle? ofay we are on the back half an elongated cycle, and it has implications for how you invest. it might not be emerging markets, per se, that neither the consumers like the u.s. to buy their goods. earnings, you look at we have a chart that shows earnings revisions this year. we will see a slowdown. we know that. what pe multiple at you be comfortable with with an earnings slowdown, and which sectors are appealing? you cpe multiple contraction

happen, but we took that into account last year. the pe market averages are back to where they were, so we have been punished that way. if you were to say i don't see a recession on the horizon and i don't see an inflationary problem, you could make your way to the 18 multiple. , but notat sounds high unreasonable as to where we have been in this cycle, so we like s&p, so that 3100 is why i say we are on the list side of things. where should i invest on the back half of the cycle. -- i am team usa, buying stable value and growth stocks. it is about defense or cyclicality, and a moving towards the fence. david: please stay with us.

we will be coming back. in london, theresa may is answering questions. she has said they will have an assurance out of brussels about what the backstop will be before they vote. she is reassuring lawmakers they won't know what the deal is, although we have heard from brussels they don't want to change it. let's listen in a little bit. >> the eu has made clear it is the only deal. you should back that deal. question 11, mr. speaker. >> prime minister. >> thank you. i was pleased to meet the mayor when the chancellor and i visited the group. opportunities apprenticeships can afford. that is why we are seeing

investment double by 2020. an opportunity to see a west midlands company do its bit to give young people a career. 276,000nt has risen by since 2010. david: that is a taste of what prime minister theresa may is going through right now. she has five days to get a vote at a parliament. she is trying to persuade them to come around to her way of thinking. ultimately march 29 is the big deadline, and the eu summit between here and there. still with us is our guest. brexit?you make out of you take it into account had all? obviously far more important for those investing in the u.k., living over there. brexit is like her own concerns

of a u.s.-china trade war. it is a binary question. does this work out or not? there are deadlines, and we push the deadlines off here at markets love it when you kick the can down the road. it is a binary question that nobody knows how it will work out. toan investor, do i want place a bet on that when nobody knows how it will work out? yes, we knowap, that, but when we were talking about the pmi's coming off the boil, they are coming off in the u.s. come up but still among the strongest in the world. i'm still more interested in germany. alix: how do you protect against that? gold playing, volatility, more cash? the research that

comes across my desk this year's sake the best thing you can buy this year is to that on volatility. sure i agree it has to be an extremely volatile year, but we have to ask ourselves, where am i in this cycle. when you get laid in an economic cycle, we tend to move globally. you want to get more defensive. i realize it is more expensive, but you have geopolitical questions all over europe, china, and the middle east we need to concern ourselves with. why do i need to play with that now? weh is more king now, but like a lot of the fine, high quality dividend-paying companies in the u.k. that have

global businesses. we diversify and look for those high-quality dividend stocks. you could do a lot worse at this stage of the cycle. alix: thank you very much. , it is to look at brexit hard to make the case you will have the impetus to get something done. the markets are not pressuring politicians enough, italy, the u.k., the u.s. coming up, lennar the first guidance, waiting for a clear market picture. more on that sector and opportunities with the ceo of cain anderson real estate next. this is bloomberg. ♪

place, the xfinity xfi gateway. and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. alix: this is bloomberg: daybreak. it is wednesday, we are seeing some risk fading as we work through the session. futures are up by about 60

points, dax is one of the performers of over 1%. there is some optimism on trade talks, there was a roaring rally in chinese equities. spreading a little to the u.s.. we have a weaker dollar story, there is zero dollar is flat, but we get a tiny boost of 1/10 of 1%. but it's really about the aussie and new zealand dollar which are doing well. and sterling is holding steady as theresa may speaks in london, answering questions in parliament as the five-day vote traveled -- drags on. the vote to the vote. crude, a nines in dollar rally, i wonder how much of this is going to be china. the trade deal is done, they're pumping money into car sales, or how much has been oversold will be determined. david: china seems to be heading

towards the stimulus. let's find out what's going outside of the business world. we are here with first word news. has declaredtrump there is a crisis at the border with mexico, and he's is a wall is needed to end it. in a speech last night, he has main and offers to break a stalemate over the partial federal government shutdown. >> democrats in congress have refused to a knowledge the crisis -- acknowledge the crisis . and they refused to provide our brave border agents with the tools they need to protect our families and our nation. the federal government remains a shutdown for one reason, and one reason only, because democrats will not fund border security. >> i appreciate the opportunity to speak directly to the american people tonight about how we can end the shutdown and meet the needs of the american

people. sadly, as we have heard from president trump throughout the shutdown -- >> the u.s. and china have wrapped up talks on what appears to be an optimistic note, their agreed on areas like agriculture and energy, but negotiators were further apart on tougher issues. the talks were extended by a day, this shows both sides are serious according to china. another sign of sales slowdown. -- apple said they were going to cut production of the new model over the coming quarter. they made their a class -- the request before the last week's shock reduction in their sales. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. rotondaro, this is bloomberg. david: we are taking a look at the chrysler building, according to the wall street journal, it

is up for sale. article,ording to the it's -- they say that part of this is because of high cost, but check out some of these numbers. therently to rent -- building's owners paid $7.7 million in rent in 2017. it will rise to $41 million in 2028. the annual lease fee jumps to $32.5 million. rise to $41still million in 2028. that is steep. david: there must be a premium, the chrysler building is iconic and there will people who want to be in their, and h&h is sailing -- selling a skyscraper by trump tower. alix: the question is who will have a deep in a pocket to buy

it when a chinese have pulled back. david: it's a lovely day in manhattan. staying in the real estate realm, the largest u.s. homebuilder is now reporting its fourth-quarter earnings, and the guidance.ferred is alcome michael dow, he outperform rating in lennar. it's good to have you. one of the questions is if they had a miss on revenue, why did the stocks go up in the premarket? >> thank you, it's good to be here. i think a couple of things, this is where weakness and demand has been anticipated by the investors, more so than the street after a couple of recent data points. that is not necessarily a surprise. i would not necessarily trust the premarket data.

we think the stock, and the builders in general, could pull back on this. and it's more about margins than sales. some of this was due to growth's -- growth margins. that's probably what were looking at now. david: so what is going on for margins? is that a cost issue or a price issue? >> we think it is both. on the cost side, we have had an environment of rising land and labor costs. last year builders were getting hit by high lumber cost for the better part of the year. of that there was pricing to offset that. given the weaken sales environment, i you can start to see some diminishing and margin compression showing up. they did not want to give guidance because of the markets, you had the ceo saying due to the uncertainties, we are

deferring guidance for fiscal year 2019 until markets defined themselves. what did you take that to mean? i'm not sure if i've heard of the ceo of a homebuilder talking about the markets and not wanting to give guidance because of it. >> right. i think more clarity is needed there. we believe he is referring to the housing markets, and waiting to see how the spring selling season's start. with anotherappen company when they chose to retract their full-year guidance a couple months ago. to givethers chose not 2019 guidance. i think they are following in those footsteps and say giving -- given what we have seen, there is a wide range of potential outcomes as it relates to where demand and margins could end up. it's not really prudent to give guidance for the full year until we are in the heart of the selling season and we know what is going on. alix: talk about uncertainty,

michael dahl works for capital markets. thank you. we'll two dozen 19 be a lackluster year for housing? home purchase sentiment fell to the lowest in two years and confidence is down because of higher home prices, we spoke to robert schiller about the state of the housing market. >> we have seen big increases in housing prices and stock prices. index has shown one of the biggest booms in history. pointing out it was the third-largest housing boom since 2012 and since 1890. at this sets us up for an that is a substantially speculative. bill -- thatray

was him in an exclusive interview. robertagree with what shiller said? >> absolutely. on sectors we are focused our senior housing, medical office in student housing for the primary reason that i would want to be smart for eight years than dumb for two years. but we have seen a permanent us -- a tremendous -- alix: what is managed-care make you smart for eight years and dumb for two in residential? we have gone in 10 year real estate cycles where we have seen smart prices and a lot of people for eight years i did see a decrease in pricing and a downturn for two years. why we are in the sectors we are

in is because they are recession resistant asset classes that perform tremendously well during -- that perform to tremendously well during the 2008 2009 downturn. retail, industrial, office, etc.. david: give us the scope of the extension, medical usage is growing, how dramatic is it? americans a1,000 day every day turning 65, in absolute numbers were going from 40 million americans to about 80 million americans in 2030. are on the downside of the baby boomers, so you are seeing a tremendous demographic shift that has not been fully recognized by the markets. that plays out in senior housing and medical office. david: how is it playing out? new construction of real estate for that purpose or conversion

of existing things? >> new construction. both medical office and senior housing are nascent sectors, plus or -30 years of age. we have not seen supply keep up with demand and i think that is a demand that we will keep seeing. retail, inurchase general i'm assuming you do not like retail? place, i'vecro never liked retail, it's dependent on the overall economy. , i would say health care is the new retail because a lot of retail that is going to need to be repurposed is actually going to be, i believed, used for medical office uses because we have a dramatically changed health care system in the u.s.. you're no longer going to the hospital for the vast majority of things you're getting treated, i call it a retail

delivery system, you are going somewhere convenient to your home or work. david: we have a lot of sears stores that are going to be empty. >could we see a lot of that converted to medical clinics? >> i could see that as part of the answer. david: would you invest in it? question, weoaded would certainly look at what the dynamics are. the value that we bring to the table is that we have strong relationship. toknow where tenants want be. repurposing retail to medical office uses not really our primary business. we purchase existing medical office buildings and improve those through operational efficiencies and relationships. david: is that because there's too much risk when you are repurposing? that -- is there a lot of risk in that investment? >> there could be. our model is to make sure that our worst yields are 10% return

deals and that our best deal is a lot better than that. we are always looking at the downside. in my view that would be a have ative play, it may higher upside, but it would be harder to predict the outcome. screen, have on the you're tough calls, acquiring debt from freddie mac, could you tell me how? >> we launch our first debt fund in 2016 and we just finished raising our third that end -- debt fund of a little over billion dollars. we acquire debt from freddie mac, in a nutshell we are purchasing support in pieces of the senior loan pools, and this is how they capitalize governmentsince conservatorship took over freddie mac in 2009. we are purchasing the first loss positions in large loan pools.

while that sounds risky, it's risk ise, because the the 70% loan to value and freddie has been a strong underwriter. david: [indiscernible] [laughter] thank you for being with us. coming up, a dismal year in cliff assets results in some job cuts. this is bloomberg. ♪

alix: -- >> this is bloomberg daybreak, .oming up, sir martin sherell

♪ and now i have your business flash, aurora is an advanced top in the investment that would put value into the company at about $2 billion, sequoia capital will lead an investment round of at least 500 million, aurora's had sub driving programs for google, tesla, and her. there is a new electric car, the company delayed the launch, it narrows the driving range gap. tiffany will begin revealing the origins of its diamonds to show that they are conflict free. starting today the country of origin will be explained alongside a selection of diamond rings, customers can ask employees on all newly sourced

stones we spoke to the ceo. we hope it will drive more traffic, but first and foremost, we want to have customers that feel good in buying tiffany diamonds, not only for its beauty and value, but also for its better supply change -- supply chain. alix: thank you. in a broader sense esp is interesting, it's becoming a stronger trend in public companies and where they are in sept did and how they are spending the money, and also in that's why. you want to feel good about the diamonds you are buying. alix: -- david: and this has been an issue, exactly what is going into the diamonds, who is getting them out of the grounds and what sort of labor conditions they are in. it's interesting that think they can sell more diamonds if people

know they are coming from a legitimate source. theirthey get most of diamonds from south africa, botswana, russia, canada, and nimby a. but how educated what i be on this. -- nambia. but how educated what ibm is? david: i suspect -- but how educated would i be? david: i suspect they would tell you about it. alix: there are three things we are buzzing about, goldman's the million share man, largest internal shareholder is ready to step down as the bank's as lawyer, there were cuts two of 41 posted positive returns, and life capital markets like the trends that he is seeing. david: joining us now is peggy

collins, and greg palm. craig was the justice clerk a few years before i was, but he is the last partner from when they were a private company. >> it's an eye-popping story. david: that's why he has more shares, he was a partner before it went public. 1990's, and in the this is a great read by our colleagues on the finance team, they spoke to a lot of people who have crossed paths with him over the decade he has been with goldman. he has really led the banks legal defense for many years, since the financial crisis has not been an easy job. david: i thought an interesting part of the piece was brought -- raj cullen. , bank had toay

rely on outside counsel, and greg was the front runner for inside counsel to take over the business. >> that has changed. a lot of people look to the general counsel jobs is a great place to be. back then it was something unusual for someone to do. david: it has been a huge shift. let's go to our second story, hq are is going to cut jobs after the firm had a busy -- dismal year. two out of 41 new -- mutual funds had positive or ferns -- returns. in the single digits and the firm is still giant, but it is one of those firms that has been a pioneer in the quantitative strategy area and we have seen a lot of those a struggle because of the volatility in the markets, it has been so sharp and not on the trendline.

this is news that we broke last sign that with the hr mutual funds really struggling and seeing $5 billion in outflows through november, they may be adjusting. david: where are the -- where they going? alix: you just have to deliver, you just cannot be bad. david: the question is if it's a change in market structure? alix: or are there certain things you have to a debt shoe faster, or d need different types of talent to go into the future -- or do you have a different type of talent that you need to develop faster. toid: the third story, i got sit down with jeff ahead of barclays, one of the issues is investment bank, he has an activist investors saying that he needs to sell it i asked why not.

he said there was going to be a shift from bank levy corporations to capital markets. here's what he had to say. the amount of bank balance sheets in europe, the united states, used to fund corporations is down 9%. in the same 10-year period, there is a lot of debt capital to fund corporations in europe, it's up 78%. that is a trend we want to stay with. david: you can watch the entire conversation. i did not realize it was that big of a shift in capital markets. >> we have seen a lot of shifts in the banking industry overall since the financial crisis because of regulation. investments and become more important and wealth management has become more important, trading has been harder. you can see a lot of the bank ceos tacked to a new area. and as you pointed out, you can

see the capital markets is the place to be. up, delayedg mergers and ideas as we are watching the fallout of the u.s. government shutdown as it enters day 19. this is bloomberg. ♪

watching the shutdown fallout, there are a lot of people who need to pay their mortgages, and federal agencies are affected, including ftc merger reviews, initial public offering reviews, there is a lot of business that will get held up at this does not get resolved. david: but oil -- alix: but a lot of oil and gas will not be held up. the interior is still issuing for oil companies to drill on federal lands and the gulf of

mexico. a great article in the bloomberg talking about how the oil industry is being less affected than other industries. david: is that by coincidence? alix: that's what they're investigating. there are a lot of workers who may not get paid. not in their rents and mortgages. david: a lot of people are hurting. up, a wells fargo strategist will be joining us. this is bloomberg. ♪

the federal government

remains shut down for one reason, because democrats will not fund border security. shutdown showdown continues, president trump refrains from declaring a national emergency as the government remains gridlocked. the shutdown entered 19 days, the bulls russian, in that -- the bills -- bulls rush in. and morgan stanley warns on banks,-- warms on analysts are cautious on slower net interest growth, we speak to the woman behind the call of morgan stanley. welcome to bloomberg: daybreak. we are watching constellation brands that came out a couple of minutes ago. disappointing. alix: the market is not liking the results. the big thing we want to look at is the guidance, on the high-end they reduced their guidance from what was expected.

i'm trying to pull it up, there you go. net sales are coming in at 1.97 billion dollars, that was higher the estimates, but it's earnings outlook that seems to disappoint. the full year earnings are coming in at the high and and .he -- and -- end it looks like they disappointed on the high-end. you assumeig deal, it has good performance, they had product launches, and the outlook is not yet reflect their multibillion-dollar investment in canopy growth. david: the two things i know about it is corona and cannabis. they are out in the front of investing in cannabis, they are trying to develop a new beverage that includes cannabis. alix: that will be coming out in october.

in the markets you had a solid rally in china on potential trade conversations that went ok. u.s., there was a bit of fading. futures are up by nine points. of 13%as a strong rally in a couple of days, but helping to perform the base for the bottom. is pretty much flat, it's a dollar story, there is a risk on currency trade and a little bit is selling on the back end of the 10 year yield, we are getting supplies coming , the larger the options get, the sloppier they get. that is what we have learned. crude is up by over 2%, it may be trade optimism or a weaker dollar, or possibly supply issues. david: and the options will get bigger because we are borrowing more money. alix: $21 trillion? david: extraordinary.

alix: that was another record that we hit. david: time for the morning brief, today we will get a lot , asaid streak -- fed speak 9:00 we will hear from the chicago fed's charles evans and mike mckee will be interviewing eastern time. and we will have another option, the treasury will be auctioning $24 billion in 10 year notes. and we will get fed minutes from the december 18 to 19 house meeting. whatet's get an update on is making headlines outside of the business world. qaedar, -- vivienne al -- vivienne is here. negotiators were further apart on hard issues in trade

talks, china says this shows that both sides are serious. the white house will roll out a bill that will expand president trump's power to increase tariffs. the president is expected to unveil a proposal at the state of the union address. president trump has declared that there is a prices -- crisis at the border with mexico and he says a wall is needed to end it. in a speech the president may know new offers to break a stalemate over the partial government shutdown. >> democrats in congress have refused to ignore knowledge the crisis. our have refused to provide border agents with of the tools they need to protect our families and our nation. the federal government remains and one for one reason, reason only, because democrats will not fund border security.

democratic congressional leaders, nancy pelosi and chuck schumer, accusing the president of manufacturing a crisis and holding the american people hostage during the shutdown. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. this is bloomberg. we have a red line crossing, and it is for oil. saudi royal -- saudi arabia has increased oil reserves. reading this there are a few things. conversationys a of how much the capacity is. we have learned in the last six months that the saudi's have more spare capacity than we assumed. so any increase will help in my conversation. and i wonder how calculations are done in terms of the price.

when you calculate on reserves you're talking about the price. at some point it will become economic. i wonder if this means they will have some lower costs that they can add. a little bitet into the release it would be interesting. it makes sense, how much oil you have depends on how expensive it is to get it out of the ground, if it is cheaper than you can get more out of the ground. alix: to be fair, this is an estimated reserve estimate for the end of 2017. a lot has happened since the end of 2017. david: give me a comparison with venezuela, are their oil reserves going down? this doesn't affect it'sves, just production, at 302 million -- 302 billion

it iss and as of now still number one in reserves. which makes the situation more difficult when you see how much oil they have and how much they can get out of the ground. david: does it affect the price of oil on the people who are buying or trading? alix: i would not think so, just because they have it does not mean they will develop it. some reserves are different as well, it depends on the kind of reserves, if they could get out of the ground and his happened to have it is another question. atould also like to point that the energy minister in saudi arabia has some commentary saying every barrel we produces the most profitable in the world. and it is their most valuable but when you have defined your fiscal budget, that's another story. they could get it of the grant

for eight dollars but that's what they need. david: and they need all of their money for that budget. what we have seen and what they are cutting has been a part of the question. david: we are going to turn away from oil and back to washington. president trump to the airways to describe what he described as the national emergency at the southern border. but the big news may be the trade negotiations with china in beijing. greg, thank you for being with us, taking a look at these events, i did not get that much news. i do not get much out of what the president had to say, but more out of beijing. you're right. we still have a draw when it comes to pelosi, schumer, and trump. i think this goes on for several days. there will be progress next week because some of the shutdown

applications will start to bite, lines at airports, farmers not getting subsidies, in the more immediate term, i think the news that a beijing is more encouraging. david: what do you expect? resolve not going to everything in these meetings and we have not gotten the statement yet, is it a visit to washington from beijing? >> the chinese have agreed to purchase more u.s. products, agricultural products, that there's going to be more talks at the end of january. we are a couple of months away from even a vague agreement in principle. , wednesday, wey have finished their now, and i think when they come to washington -- they have finished there now.- 's it's a couple of months

away, we don't have a couple of months -- if it is a couple of months away, we don't have a couple months before the deadlines. -- how likely is this? can be extended by a month or two, i think the chinese have to worry about the weakening of their economy, could that lead to layoffs? could that lead to social unrest? and trump has to worry that he needs a happy market to win reelection, and if we do not get a deal the markets will not be happy. david: thank you for joining us greg. alix: many strategists are downgrading their forecast for the snp, are at least saying to investors, to invest if you want to buy in. do you want to purchase the rally? >> we do, valuations are more reasonable than we saw last year, you don't have to make

heroic assumptions to realize that stocks still be wants and cash.- beat bonds and alix: this is one of the quotes from yesterday, if we expect the global economy to avoid recession and 2019 in u.s. interest paid -- interest peaks, there is a risk. it could lose out on the returns on offer, what are the returns on offer? >> we think you could get close to 15% upside from here, our target is 20 million, but a lot of the work we have done suggests that at last couple of years of the bull market were pretty spectacular, the first in the last couple years tend to be the most spectacular. for that reason investors should stay balanced, it's not the time to lean in over your skis, there is no free lunch, but you should maintain your allocation equities. a nice trend, what

will the curve look like? how bumpy will it be? >> it will probably be a little slow, you mentioned the certainty surrounding trade and shut down, it's a slow start to the year and the fed coupons, -- could pod's. -- could pause. maybe the second half will be better as things play out. alix: when it comes to earnings that's the other questions, you see an earnings of slow down and you know that is happening. me is what isor the correct evaluation you want to be using? what kind of multiple does that deserve? what kind of multiple does that deserve? >> that is the question. there is some agreement on earnings, within five to six dollars -- five dollars to six dollars of each other. as far as the multiple goes, rates have ticked up and spreads have ticked up, that demands a

lower multiple than investors were willing to pay in 2017 and 2018. we will use a conservative multiple, around 16 times, which coincides with history. use a reasonable multiple, you see a healthy return for the markets. is that 16 times forward or trailing? >> great question. it would be 16 times the estimate for 2019, so this year's earnings would be a forward number. alix: how much of the allocation has to have cash? we were talking but the fact that you need to be invested in equities, there is so much money pulled out, but cash is competitive and you need to up the allocation. >> we are telling people to make sure their financial plan is up today and make sure the liquidity needs are met through cash and cash alternatives. we are a leader in the cycle. 2019 as a wayview

to takeaway from the cycle. if you do not want to be a -- seller in stocks or bonds. with cash yield fielding, it's a great time to make sure the needs are met. david: let me ask, you would like to be a volunteer buyer or seller, you think it will go up, what is the biggest risk to your projection? >> the fed has already made a mistake, all of those rate hikes that are still working their way through the system and as people refinance their mortgages and high-yield borrowers refinance debt's -- their outstanding, they are getting to a point where it's uneconomic to continue functioning with the way they are, so they pulled back on spending and business operations. the one after that is probably trade, if there is something that companies cannot mess around with right now it's redoing their supply chains. with us fore hang

just a moment, we want to turn now to bottom line where we look at three companies worth watching, the first is i ag, the parent company of british airways. there is a report that brussels has sent them a chilling message that if there is a no deal brexit they should not count on being able to fly to europe. iberia,y merged with they separated out voting from ownership, so if you own the financial interests predominately by spanish people, but brussels is saying we are not sure that works for us. so they have problems with potentially flying. but grandstanding versus reality. pr. but what isn't pr is what is happening with a bank in italy, the e.u. took over it -- sorry the ucb took over, and we are

getting questions about what will happen. finding said to be credit, and they are reducing the poor performing loans. and the ceo is saying they're going to try to sell more npl's and it is too early to talk about a merger, and they are trying to eliminate a risk. and their situation with clients is tranquil. that seems like a positive stand for your company being run by the ucb. and you have the deputy prime minister saying the aim is to bring the bank under state control. ,avid: what i find interesting if you like nationalization. ok fine, we will take it over. alix: and europe says that will be fine, they will allow italy to nationalize the bank. david: and they don't have any

issue with that. the third company we are era --g his apple, some sameera, countries on the news ont apple has cut back ordering iphones. tim cook says that we are optimistic on china and trade, what do you make of this? >> it shows you that the trade war is starting to take a toll. the narrative in the first half of 2018 is that u.s. companies would skirt trade can flag rations. are -- configurations, and we found out that it was a slow moving train. and it's affecting businesses fedex, and companies that are suppliers to apple. we would reiterate that the trade issue is one that we think will get results to the positive, and it's a large part of a lot of people's outlooks. if it does not get resolved, that probably one thing the

economy cannot handle. david: i thought it was interesting that there was a sentiment aspect and a realist aspect, like there is the tariff issue about the increased cost of the phone, but also the chinese buyers are not purchasing iphones because they are angry at the united states and concerned about what is going on. there may be a magnifying a fact that may go beyond the amount of the tariff. justsolutely, it's not consumer sentiment in china, also in the u.s., those numbers are tapering off. business confidence in the u.s. is ticking down. remembere big things i you talking about post the election was the divergence between the soft data and the hard data and how the soft data on launch this animal spirit on the business, and consumer side, and now we're seeing that go in reverse. we saw there was a lot of good news to come in 2016 and then going in the opposite direction is concerning. like on thats

basis you don't want to be in you want to tech, be in small cap, but that fell out on a bust. what now? focust we're trying to more on is going up in quality. the standpointom of those balance sheets are cleaner and growth is cleaner. it will not be as good as it was in the last couple years but we like the quality of tech. , ande playing cyclicals there are some discretionary financials in health care, that's an area we value in the overall forecast. to the extent that we see the rally coming from now until year-end, the best way to play it is through quality and through the cyclicals. alix: what does that mean for the dollar? >> we think it means it depreciates a little bit, it doesn't mean the u.s. does not continue to do well, but we

think the surprises will be more positive outside the u.s. than inside the u.s.. if you look at the surprise indices, u.s. cities have held better than -- thank you for joining us, we are getting some headlines. there is going to be solid u.s. 2018, in 2019, but not there is some uncertainty over outlooks and they point the finger at some of the trade issues. alix: on monday he favors raising rates once, but what struck me about these headlines is that he said a december hike likely listed -- lifted rates to neutral, and there was little need to engage in fed policy. that feels a little like not even the one, maybe we are good

where we are. we know he is the most dovish. say theome would balance sheet approach is restricted in and of itself. alix: we have more on the federal reserve later on today rosengren at 1:30 p.m. eastern time. went onresident national tv last night from the oval office to explain why the federal government to shut down with democratic leadership taking the other side of the issue. >> the federal government remains a shut down for one reason, and one reason only, because democrats will not fund border security. simple, mr.sting is president, reopen the government and we can work to resolve our differences over border security. what we haveh of heard from the president about this shutdown has been full of misinformation and malice. from capitol hill, david

purdue of georgia, who was a ceo with a different perspective. welcome. >> good morning. david: how are we going to get past all of this? is there a way forward? >> of course there is, we should have done it last year, let me remind your viewers that we are in the fourth month of this fiscal year that we are talking about. because we stayed here in august last year in the senate we funded 75% of the discretionary budget. as outrageous as that is, it's the first time in 22 years that that got done. this smacks of the dysfunction in the funding process of the discretionary budget. but what we have is an impasse. i think it heads will prevail in the short-term, i hope, to get past this. let's get border security funded and move on to funding the government and next year's budget will be due september 30 of this year. that weemocrats agree

need border security, nobody says we should just open up the borders, where is the leadership going to come from to really get past this? fingersg to point my that senate republicans, don't you have a role that could really be very positive? does look like nancy pelosi and donald trump are going to have a coup by a moment. i agree, we need to step forward and force a compromise. president trump has demonstrated that he is willing to negotiate. lastrats in the senate year actually voted for $25 billion for border security with of the suzanne collins immigration bill. and the president has moved on to 5.7. and i think even before christmas agreed with democrats that 1.6 would be an acceptable number to get started. and the democrats agree to that and then backed away. i think it's time for the senate to push forward and put pressure on both parties to get this

concluded. remove thedo this to uncertainty in the markets and get people settled. but let's remember, this is about security. it's not just immigration. we have 750,000 people a year crossing the southern border. we bring in 1.1 million people legally. that's three times the hundred year average. have a700,000, we tremendous problem in the last two years alone, 235,000 people have crossed the border illegally who are already convicted felons in the united states. and democrats agreed to has to be something done about security, the question is what will the compromise look like? we chart -- we spoke to joe manchin and he suggested that we should make it bigger, go back to the deal that includes a lot of money for southern border security but includes dealing with things like the dreamers,

fundamental immigration reform, and he warned that this is starting to affect people not just federal workers but also stamps. here's what he had to say. >> right now we have 800,000 people and 800,000 government workers who will not get a paycheck that we have hundreds of thousands of children who will not be getting food. this is unbelievable that we are going down this path. went onhat joe manchin to say is that he thinks a bigger deal is the way to go. is that what i compromise would look like? let's take her of issues on both sides? >> what we heard from the democrat response was that their idea of compromises give us what we want and we will negotiate to give you what you are asking for. point isight now the that we have a national security crisis on the southern border. president obama said it's time for the people in washington and in the administration to act like adults and get this done.

david: no question there is a need to deal with this, is declaring a national emergency the way to go? we have had various people suggesting if we do that congress may take away the power going forward because it has not been done for domestic purpose before. >> prior to 9/11 we never lost 3000 people due to an attack on the outside after world war ii. we have seen here is that this is a new day and the new issue and the president is trying to deal with something that angress will not give him solution for. this should have been solved last year in our normal budgeting process. this was an appropriation issue, democrats worked with us, we should have got missed on. my point now is that american people expect us to get this done. president trump -- what you saw last night was the president talking to the people about what they want done. i think you'll see that get done. david: if i could turn to something else you know a lot about and feel strongly about,

that's the federal reserve. there has been a poll and tug -- twin thetug the president of the united states and jay powell. you were a ceo of a company, where are you from the perspective of the perspective of the economy, what is the right approach? >> this is what i'm concerned about and thank you for continuing to call this out, with 21 chilean dollars in debt, we have had nine increases in the last couple of years in the up 220 five basis points, that's $450 billion in new interest that we are liable for, and because under president obama they took the duration of the bond portfolio down to under three years, those changes are now rolling through and those increases in interest are hitting us in the federal budget. $450 billion in new interest this year. we have to wake up and deal with this debt crisis. the interest rates are the manifestation of the turnaround,

probably the greatest economic turnaround in u.s. history and the fed is responding to one variable, unemployment. as an expense guy, i think there are other things to look at -- as an ex business guy, i think there are other things to look at. there is a gap between availability and demand. fitch saying they might consider downgrading the u.s. credit rating and a debt ceiling limit coming up in march. people are not comfortable with the possibility that this could get worked out. what is the danger for the credit worthiness of the united states of america? it has happened under prior missed rations, my point is that i have been talking about this since 2013. this debt situation is real, not only the credit worthiness but the ability to go out on quarterly bond auctions and purchase bonds based on the good faith of the federal government.

it's time we get serious about doing the five things the president has talked about. the good news is, nobody is talking about by growing the economy more than a hundred basis points a congressional budget office us as we can add about $300 billion a year on federal tax revenue. we see that happening now. the cause of the turnaround in the economy next 10 years we have lowered the debt term by about $3 trillion. on the other hand we still have to save social security, medicare and medicaid, because these are entitlement programs that are in jeopardy because of the entrenchments. we did not get to entitlement so you will have to come back again because that's a big gorilla in the corner of the room. always great to talk to you. david: we have more on the federal reserve later today. that's coming up at 1:30 this afternoon. the markets are on the highs, s&p futures are up by

4/10 of 1%, a monster rally over in china as chinese stocks hit a three week high and potential trade talks betweenthe dax the . the u.s. following suit by about .5%. other asset classes are seeing a weaker dollar story. a lot of the carry trade doing well. euro-dollar pretty much flat. theresa may starts or five-day process of trying to convince --liament to vote for the the spread a little steeper in the u.s.. crude picking up more steam to the upside, up about 3%. we heard that saudi arabia's 266erves for 2017 rose to million barrels.

266 million barrels. what i love about strategists is they want to downgrade the year but they don't say buy it. you still have upside. 20% of global equity return for the year. ing has tot re-rat happen? alix: it is not just the upside. david: let's get an update on what's making headlines. viviana? ana: president trump says the wall is the only solution to the crisis. the president demanded congress provide billions more to prevent people from entering the country illegally from mexico. he blames democrats for the partial government shutdown. congressional leaders nancy pelosi and chuck schumer responded by accusing the president of manufacturing a crisis and say he is holding the american people hostage with the shutdown. the u.s. reportedly has been warned the show effectively to a possible cut in the country's

aaa rating. fitch is concerned about the shutdown and the debt ceiling becoming a problem of you must later. the firm may have to consider whether the policy framework and inability to pass a budget are consistent with a top rating. in the u.k., prime minister theresa may is restarting her stalled bid to win support for her brexit plan. she has five days to overcome political opposition to the agreement she has negotiated. parliament votes on the deal january 15. if the plaintiff defeated, the u.k. could face a potentially damaging no deal brexit. global news 24 hours a day on-air and a tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: thanks so much. thanks earning season kicks off with citigroup. the result has moved significantly lower. that's according to betsy graseck, head of banks and diversified finance research who

cut her price targets but still says large-cap bankshares may outperform this earnings season and has an attractive you in 2019. betsy graseck joins us now. betsy: thank you so much. alix: on one hand you are cutting some of the targets and earnings season maybe a little mushy, but the pricing is pretty good. betsy: earnings is a little bit of a backward look right now. why do we say that and why do we cut our numbers as much as we did? we had that sharp pullback in equity markets in 4q. in addition significantly higher high-yield spreads, 200 plus in the quarter. we have not seen that kind of move in three years. what that means is that institutions have to market their books as the spreads are widening. 1 youod news is june

start off with a clean slate. what we see in the underlying up,omy, loan growth picking jobless claims still very low. you have got fantastic numbers of the employment sector. we do think that 2019 will shape up to be another solid year. i think the stocks are priced for a recession. that is the difference. alix: the question for me becomes if you wind up having to yield curve that is flatter and an economy bumping along and there is more competition for the loan growth, how do you make any real money? betsy: i get this question from a lot of people. the points i like to remind people of is that banks 25%, andbout 20% to

some 30% of their average earning assets with low-cost deposits. will be called non-interest-bearing deposits. even if the yield curve is flat, you are making money from your loans because you have a net funding advantage with the bank with deposits. as if rates as much were continuing to rise in the curve was steeper? no, but you can still earn a good spread in a flat curve environment. --id: connector one forever? cannot go on forever? betsy: of course not. alix: especially when the nonbanks are offering higher rates. betsy: no, it can't last forever obviously but it does last for quite a long time. what i would highlight is interest-bearing deposits are sticky.

it is a way that consumers and corporate's are paying for services. it is like a soft dollar payment. do manage theons fee rate down to encourage you to keep deposits sticking around. alix: your call about weariness for the fourth quarter, that mayo was to be -- mike on a couple of weeks ago. here is what he had to say. >> the dividend yield for buybacks are at record levels. at least the large-cap banks can buybacks stocks at cheaper valuations. we think the earnings should be fine. during underperformance, you know what happens to the consensus bank earnings forecast for this year? it has gone up. and for next year it has gone up. the bank stock prices have become disconnected from the bank fundamentals. eventually stock prices will

follow earnings. alix: no doubt, but how much is the upside? earnings byside to stock prices. alix: if what he said is true how much can we get? betsy: i would highlight from our perspective we have got a world where investors are concerned about the next recession. when is it going to come and how big is it going to be? this is a debate point every meeting spence times on that onnds time on -- spends time .80% of investors are looking for a recession or expecting a recession would hit sometime in 2020 or 2021. but at the same time there is only a modest increase in credit losses in their models or interest rates are more likely to move a little higher than lower. hike not being

fully priced out of every investors model. there is a disconnect. you cut multiples. we have a stock market that is reflecting bank stock multiples that are trading at or below what we saw and 2001 on a pe basis. 2001 recession trough on a pe basis, yet the underlying economy is solid. we expect for the whole group, large-cap a group, 20% upside. businessis is in a with increasing returning capital to the shareholder where for many years they couldn't. they had to build up balance sheets. i talked to jes staley at barclays. what he was going to do with it and this is what he said. >> right now almost all the major finance institutions are

having a covenant with your shareholders that by and large most excess capital being generated should be returned to shareholders. if you take the five large u.s. banks, all are returning gruffly 100% if not more of earnings to shareholders and dividends and stock buybacks. david: that was part of our conversation. you can watch that conversation tonight at 9:30 eastern time. is that being priced into the marketplace of this point? betsy: out of my u.s. large-cap banks, no. there is opportunity there as well. when we get greedy earnings estimates into the 2019 outlook, one think we found was that some of the declines we had from high-yield and the equity market pullback was offset by the buybackss. the stock is obviously a lot cheaper. we saw that throughout the entire route. alix: what you like and what do

you don't? betsy: top picks are b of a, state street. those are institutions we think are driving not only improving operating efficiency, which is critical. one thing you can obviously expect from your management team is improve the performance of the organization. those are three companies we are expecting positive operating leverage. re: lighter on the recommendations -- where we are lighter on the recommendations is subprime and consumer. we don't to be heavily exposed to that group. alix: what is the wildcard? what he was soon in your base case that is the biggest worry? betsy: the wildcard for us is going to be how does the employment picture progress from here. ist is because the consumer 70% of the economy any driver of credit loss volatility more than

any other asset class. that is the most important thing. david: betsy graseck, really a treat to have you here. thank you for joining us. alix: we have romaine bostick speaking again. the impact is not the direct so far but he is worried that the government shutdown impact on the data. -- you will start seeing the impact of it continues to run. there you go. it is not going to make any material difference. two more days every title longest shutdown. that is when paychecks are due. david: it could push that growth or effect gdp growth this year if this keeps going much longer. he ties it back directly to the shutdown. we will have more on the federal reserve later today in an exclusive interview with eric rosengren that will be live at

1:30 p.m. eastern time. martin sorrow he came something of an advertising legend by building wpp into a global advertising company. he is coming back at the business for a different direction. las vegas and the consumer electronics show is where he joins us now with the executive chairman of s4 capital. >> i have been to ces a four. -- before. it has certainly changed all those years. ,000 people around our industry. david: also you have changed in your business has changed. digital from the ground up rather than take a legacy advertising company and move to digital. how does that work? martin: correct.

we are focused on three areas. the first is first party data. data owned by clients, which can inform the second area that is digital content, and programmatic or digital media planning and buying. acquired inired -- the last three or four months two major companies. one is a digital content company and the other is a programmatic company. we are operating with about 1200 employees in 12 countries. we are focused totally on the digital part of the industry, which is about $200 billion of the $1 trillion industry. $500 billion in the old stuff, and $500 billion in new stuff. that $200 billion digital industry is dominated by the plogy of google, amazon and

facebook. that is the heart of the digital advertising social industry is. pushing on annd open door and going where the growth is. david: is that when you are focused on, digital companies? my experience is there has been a stickiness. all of them have stickiness with the big companies. is that not true with facebook, google? martin: what is happened is in a world where growth has been best for, less than inflation has been virtually nonexistent, where pricing power has been difficult to develop, the focus ends up being on the cross line. with the growth of digital, those companies, the auto

companies, all of which are represented here and many of which we have spent the last couple of days with. the remarkable thing, the one thing that comes out of ces from our point of view is the focus ctos, ceos, the cmos, technology officers on the need to change the model. the six holding companies you , they are two of six companies faced with really seismic change. just like our clients. the pressure is building. what we noticed this year for the first time is we increased intensity and the willingness and now the demand for those agency groups and companies like s4 capital to change the model and develop a new model, which we encapsulated in one phrase. faster, better, cheaper.

faster, you have to be faster. it is like running political campaigns without an election date. millennial brands driven by forces are popping up in quicktime and established brands have to react to them. better means focused on the use of new technology in all ways. ai, vr. how to you apply those in the quickest possible way to what you're doing? cheaper means being more efficient. there is a feeling the traditional agencies have been too bureaucratic, too fragmented. our structure was very fragmented at app. -- wpp. s4 is much more unified. good deals are not based on ins and outs for three, 4, 5 years which are based on half shares to encourage the principles of media to be involved in the future development of the company. david: i hope you will come back

and update us on more. martin: i will do it fast. the pmq'sare watching in parliament right now. give us your take on brexit. it appears they are going to vote. is there going to be a brexit? martin: i have no idea. totally uncharted territory. you read the commentators and become away with three or four different views. it is impossible to predict. i still remain a remainder. -- remainer. i hope they will be a second referendum. the odds of it written that maybe going from about 10% a year ago to about 40% or maybe more now. we are in totally uncharted territory. anybody who has to run a business in these conditions, it is very difficult. the uncertainty is a very

significant reduction in --estment,, spokesman postponement of decisions. it is damaging to large, small and medium-sized companies. in the midst of a government shutdown in america there are challenges in germany, challenges in france, challenges in italy and spain. will grandma's -- davos sort these out. all these clouds, these dark clouds will go away. these political clouds are clouding the economic environment. what was a strong u.s. economy in 2018, 3.5% gdp growth, ceos believe that will continue. business council ceos believe that will continue. the big question is trade wars with china. maybe some better news there in the last 24 hours. maybe some progress. with the things i just

highlighted, brexit, the political environment is very difficult. david: you have to go to other things. i will let you go but thank you very much. you have a standing invitation. --e is now the4 primary exec he is now the s4 primary executive chairman. ana: the self driving vehicle startup aurora is in talks for an investment that would value the company at about $2 billion. sequoia capital will lead an investment round of at least $500 million. aurora's three founders used to working to google and tesla. -- nissan's new leaf the range with tesla and chevy volt.

the owners of the chrysler building have put it up for sale. the investment counsel and revelopment has a hired cb group to sell the office tower. paid08, the abu dhabi fund for a 90% stake. david: thanks so much. alix: let's talk about the chrysler building. at leastok at leasing, in the journal article, $32 billion for leasing last year and it will go to something like $41 billion. you are correct, it would be million. million.2.5 million. when thereicularly is a lot of construction going on.

a lot of space is being added to manhattan. alix: and where are the chinese? well thate not in, wind up doing? coming up, a look at brent climbing above $60 a barrel. more on what i'm watching next. you can check all the charts we have used throughout the show at gtv . this is bloomberg. ♪

alix: here is what i am watching and that is loyal. the rally picking up steam in the last hour or so. wti over $50. brent over $60. it relates to the equity market and we are getting a lot of

press boundaries from the major shops. morgan stanley is the most recent. they are also constructive on it but downgrading their forecast where they were upgrading three months ago. david: they are tracking each other. they were going up and down together. alix: i guess that is a risk on, risk off kind of thing. david: there is a discussion on this. alix: assets are becoming more correlated in the risk-on environment. that would explain it. we got the oil reserves estimates up for saudi arabia. they were higher. this was an independent company that came out and did that. 266 billion barrels. the saudi minister saying we are the most profitable company in the world. we produced oil for the least look ever but don't at the budget estimates.

this is the first one. the result of the first independent third-party audit of saudi reserves. they have to do this for the ipo, but that is interesting. what i loved looking at today was a goldman sachs energy conference it happened on monday. darren woods gave the keynote. he had interesting things to say. the ceo of exxon. emp'sd for m&a, here play are too lean to buy. you will not make up for the premium you have to pay. still prioritizing buybacks over dividends and he was firm on that. that hurt the market in terms of the sentiment towards exxon. he sees opportunity at the end of the cycle. the biggest risk is underinvestment. not necessarily something that is as common to hear today at gap.-- as the supply david: the issue is how much

capital investment they make? whether they returned to shareholders are not. alix: the estimates for big oil for what they will have is 20% to 30% to hide because of the oil price. on notbeen so hellbent catering to shareholders. that wraps it up for bloomberg daybreak: americas. coming up, we opened with jonathan ferro. jill carey hall and george bory. risk i cannothe continues from asia, to europe to u.s. equities. this is bloomberg. ♪