event over the next three to six months? jason: it is possible. i think it will take more time for companies to gain that confidence. i think if you look for example at capacity utilization, we are well-off where capacity utilization was in the 2016 2017 recovery. it is not clear that companies need additional capacity, particularly on the manufacturing side. that is one of the things we are watching. if you dig into the numbers, for example in the u.s., a lot of companies that are dedicated to cloud spending and technology spending -- scarlet: let me interrupt you. we have the netflix results coming out. netflix coming out with fourth quarter numbers at least for revenue that meets the average analyst estimate. $5.7 billion. a little higher than what for.sts were looking fourth-quarter earnings-per-share, $1.30 versus the consensus estimate of $.53. perhaps we are not comparing

like with like. as for the streaming numbers, fourth quarter streaming paid -- change plus $8.76 million 8.6 7 million subscribers. we estimated 7.6 5 million. disney plus and apple plus launched their services and people worried and fretted over whether netflix would lose subscribers, that does not appear to be the case. netflix has plenty of momentum. was eightbscriber ad point seven 6 million when you include domestic and international versus the consensus estimate of 7.6 5 million. joe: so far we see markets liking the response. obviously, up 3.5%. that change to streaming additions obviously, the key number that people want to see. scarlet: as for the first quarter, this quarter right now, netflix is giving a forecast of seeing an increase of 7 million. analysts were looking for an increase of 7.8 2 million. a little lighter than what had

been anticipated. analysts had made a point of noting the guidance for the first quarter faces tough comparisons. netflix added 9.6 million users. pretty hard to top that. netflix still holding out 1.1% pure let's dive deeper into the action with our reporters. abigail, get us started. abigail: we have declines for stocks on the day. fears around the coronovirus. the laggard from an index perspective, the dow transports down 1.8%. the worst day in almost two months. this has to do with the idea that if this coronovirus continues to spread, it could put a halt to travel tourism, loss of transportation companies within this index. this could be a tell of what may be ahead for the broader indexes. that could be true because they had a lot of all-time highs. we see for the dow transports over the last 12 months, a range. right above that range, but suggesting that the dow transports could drop back down into the range, if similar to

the last drop that would be 10% or so. look at that rsi coming down from overbought territory, right down into the rsi range suggesting there could be a drop ahead for the transports on these headlines. renita: thank you. the escalating virus outbreak is sending copper lower. copper is being impacted. because it is stirring up growth concerns in the world's largest consumer of copper and user of industrial metals. copper futures are down almost 2% intraday. record metals output from china also weighed on copper today. the bloomberg metal -- industrials metal sub index, which tracks copper, aluminum, zinc, and nickel flipped today. it is still up for the year. taylor: i am a course taking a look at shares of netflix. looks like they are fluctuating currently between gains and losses. scarlet and joe highlighted the revenue for the fourth quarter,

higher at 5.5 billion. the first quarter revenue guidance, looks like it is weak at 5.7 3 billion versus estimates earlier of 5.7 4 billion. i would note the one key thing we continue to wait on his average revenue per user and international profitability, given the domestic markets mature. it is a more profitable group of users. some of the international market which continues to grow at a faster pace. maybe it is the first quarter revenue guidance, some of the average revenue per user that we are waiting more details on. i want to look at a chart that i'm showing inside my terminal. we have another story out about netflix. it is all about david einhorn. he was raising his short position on netflix and the court -- in the fourth quarter giving the increase in competition. we do know that now 10% of equity flows outstanding is being shored in. beinge getting 10% still

shorted they are even as the stock continues to rebound. today, again, with these earnings, waiting for average revenue per user numbers that should be coming out as well that will really dig into the profitability numbers that analysts are looking for. scarlet: i'm going to pick it up from here. thank you so much. especially with a round of netflix. we have more earnings coming out. ibm is the latest one. fourth quarter revenue, $21.8 billion, beating the estimate of $21.6 billion. also two cents higher than anticipated. you can chalk it up to cloud. cloud and cognitive software revenue, $7.24 billion. the other parts of the business, aside from systems revenue, miss the average analyst estimates. global technology services, global business services revenue, both of those coming in shy as opposed to what analysts for.looking

cloud coming in higher than expected. that has lifted the eps number as well. for 2020, ibm sees operating eps of $13.35. analysts were looking for $13.29. joe: still with us is senior markets editor michael regan and putnam investment cohead of global asset allocation jason voll court. jason, we have been talking about netflix and ibm earnings. how much pressure is there on big tech to deliver in terms of holding up overall market multiples? and do you think that a by a large, they are in a position to satisfy what the markets want given the extraordinary gains we have seen? jason: yeah, i think the contrast is very important. two very different companies. i mentioned earlier cloud spending as a portion of budgets in general with large-cap companies has been important. as opposed to the numbers i have seen, close to half of. ibm is in a good place. where we take a more dim view

would be in the speculative growth names. like netflix, tesla, where there is momentum there, yes, but let earnings quality numbers in the balance sheet numbers and the ability to generate profitability at some point in the future is very much in doubt. scarlet: mike, how do you look at netflix's results? it is not even a technology stock, is it? mike: consumer stock, yeah, if you are worried about tech as a relates to the overall market, netflix can go here or there. it is those big four or five, alphabet, apple, microsoft, facebook, those mega dominant players. especially with alphabet, the growth picture there still looks very solid. all up and down the line for the top four of accounts of the huge percentage. they look like they are in that position for a reason. that the growth is stable, it

will continue. netflix i think can hit or miss and not really sour sentiment for the entire space, where the others perhaps could turn aside. joe: jason, what else are you looking for for earnings season? we have been talking about overall, tech. are there any areas of the market that you think investors should be more interested in than they are now, where maybe things will be surprising to the positive side? jason: i think the big large global industrial names are important to watch as we go through the next couple of weeks. those companies that have been exposed to the frictions of the trade war with globally integrated supply chains and do their sales outside the u.s., to see any evidence that there is -- the bloomberg orange book in terms of tracking commentary will be very important as we go through the next several weeks to see if companies are able to look through that and get some indication of what -- of what the first half of 2020 will look

like for those companies now that we have signed the trade deal. scarlet: we have signed the trade deal, we have not solved any of the persistent problems between the u.s. and china. how come the headline we got today from china that there is no timetable set for discussions on a phase two or further trade discussions, how come they did not hit the market harder in any way? jason: you know, i think so much around this has been about laying out a mechanism. what do we know from the commentary from u.s. trade representative lighthizer is that it is very likely that there will not be very higher-level going through and confirming the metrics of the purchase numbers that were agreed to probably until the first half of the year. that hashat is just -- just removed it from the conversation until we can go through ansi -- and see if the robber has met the road in terms of the size and volumes of the purchases that have been agreed to.

i don't think there is a lot to talk about with respect to trade until that happens. withmike, we are in a lull respect to eco-data. there is no trade deal that needs to be signed imminently. we don't have to worry about that per se. will earnings be the top story for the markets for a while? mike: absolutely. i think we showed that with netflix coming out and ibm. you see the markets move instantly, you see the futures following netflix along the way. this virus story happened on a monday. when there was not a lot of earnings to talk about. i think it does bring the focus back to the fund metals now that earnings are back on the table. scarlet: and it looks like this is a little bit of, if you want to call it profit-taking, but it was not much of one given the lower. closed barely our thanks to senior markets editor michael regan and cohead of global asset allocation jason vallen court. that does it for the closing bell.

what did you miss is up next where we will dig into fourth-quarter results from netflix and what it signals about sending ahead. from new york, this is bloomberg. ♪

scarlet: live from bloomberg world headquarters in new york, i'm scarlet fu. we come off of our highs. the dow off by .5%. russell 2000 falling further. we are still near record highs. joe: the question is, "what'd you miss?" scarlet: netflix hits pause on its host -- on its subscriber

growth. misses analyst estimates. so it begins. president trump's impeachment trial formally started in the senate with senators already locking over the rules. and going green the world economic forum has something new topping it's agenda. the environment. intolet's get right netflix earnings. we are joined by paul sweeney, cohost of bloomberg surveillance and markets for bloomberg radio. you know this company very well. it looks like the market is selling off a little bit after hours, may be reacting to the q1 subscriber forecast. down a little bit from expectations. what is your take on this? paul: a pretty solid quarter. the stock is up 33% from a last september lows. it has had a nice run. looking back, a very good fourth quarter. subscriber numbers came a million above where the street was looking. strong beat on the eps line. revenue was not lying. looking ahead to the first

quarter, the eps guidance is very good about the net streaming subscriber add numbers are coming lower than where the street is expecting. you have a couple of ways to look at this. the stocks trading down slightly. it has had a really good move off of a low. i think the real key issue on the conference call at six or wall street time will be reed hastings, talk to us about how you think the competitive landscape will develop here? scarlet: and perhaps netflix is being more conservative. do they usually come in and lowball guidance the way apple did for years? paul: they typically don't. they say listen guys, this is our best guess of how we think subscribers will go up. there is some seasonality. we try to factor in new markets. sometimes we get it wrong. and on either side. that is with the stock around historically, around earnings since the company has been public. now they have the added uncertainty of competition out there. when disney launches and apple tv launches in this quarter that they finished and next year they

have hbo max and so on and so forth. that will make it more difficult. scarlet: just to repeat the numbers, first quarter streaming paid net change of 7 million subscribers. the first order of last year was an incredible quarter. they added 9.6 million user in that -- users in that period. they said they would see a drop in 8 million users would be more likely. joe: the company note in the earnings that it is still free cash flow negative because we know it is investing like crazy on all kinds of new content. that is an old story. is not improving? is there science that at some point not only is it earnings part of -- earnings positive? paul: though free cash flow negative amount last year, and it will get better and better probably by 2022. the street is forecasting to breakeven on a free cash flow basis. what do they do to fund all the billions of dollars of programming every year? they go to the debt markets.

they have been a big borrower on the high yields and the markets have been open for them because there is 150 billion dollars of equity value underneath the bondholders. they feel comfortable. even though there is no free cash flow today, there is a lot of equity support. joe: something i noticed in the earnings, there's only one man of the irishman, it did not say a lot about it. i'm curious whether you think funding the very expensive future quality cinema style movies is going to be a growing part of the business or will these be rare and we will see more shows? paul: i think they feel like content is going to be a real key differentiator. disney has great content but they are starting to scratch. they write the biggest checks in hollywood for the a-list talent. that has been their strategy, it is generally looking -- working. scarlet: youscarlet: mentioned that most shares are struggling. the worst performing faang stocks, down 8/10 of 1%. what was dragging you down?

was it fears about competition or was it something more substantial to the company itself? for instance, the negative free cash flow. paul: the real differential on the trailing 12 months was new competition. the anticipation of new competition. disney had a good successful launch of disney plus. the fear of competition brings up all the other more fundamental issues you mentioned, like the fact that it is not making money on free cash flow. like that their cost of programming continues to escalate. they brought up those fundamental issues. it will simply be a question of how many subscribing services will the market bear? and will netflix be one of them? most people feel comfortable that never licks will be one. scarlet: how many subscriptions do you have? paul: i'm going to say two or three. i don't even know and i have four kids so i really don't know. scarlet: you do the complete bundle. paul: exactly. and plus the cable bundle. joe: thanks to bloomberg's paul sweeney breaking down netflix. coming up, last week we had five

days of market records and economic indicators. is that data justifying the strong start to 2020? i will talk to neal dunn up. this is bloomberg. ♪

joe: last week ended on a string of strong u.s. economic data. number for consumers sentiment came in with impressive superlatives. houses surges to the highest level in a few years. of this recent data justify the market rally? here to take us through that question is neil dutta, head of u.s. economics at renaissance micra research. thank you very much for joining us. there is this big debate about whether the market is being

driven by fundamentals or whether some sort of balance sheet, qe, repo something bubble, you come down on the ecocide. neil: i think -- there is not much evidence other than ridiculous linear correlation charts about the fed driving everything. i think the fed is a small factor in putting a floor under sentiment. ultimately, if you look at how the markets have behaved over the last year, they have been rallying on days of good economic and earnings news. and also, on days of the towns around the trade issues. i think those have been the primary drivers of u.s. equities. i think the fed has a smaller role to play. joe: people love to talk about innings or late cycle or whatever that is. when you look at the data, do you see any particular reason that we must be getting near the end of this expansion for some reason or another? neil: no. the expansion is old in terms of

its duration. it is still relatively young at heart when you look at cyclicals, components of the economy. you mentioned housing earlier. residential investment is well below what you would expect in terms of longer run gdp. auto buying even. we keep lamenting the weak capital spending environment and inventories that are quite lean. there is no area of cyclical access in the u.s. economy right now. what goes down if you have a recession? i don't really see it. joe: do you see in these cyclical areas on these questions like business investment, do you see any prospect for re-acceleration or is it going to be like what we have seen over the last decade? which is not terrible but not amazing. is all about what is priced in on what the likely outcome is going to be. if you look at your own bloomberg news consensus for gdp, the consensus has growth basically rounding under -- running under 2%. that is a conservative forecast

considering -- he mentioned capex. thirds -- oil prices have rebound. my guess is mining structures will not be as much of a drag this year as it was last year. a headwind that his faith -- that is fading. inventories are likely to swing in a more positive direction. commercial real estate is likely to be stronger. i think 2020, you will see more improvement from the cyclical sectors. pushshowed, i think, estimates for gdp growth higher this year as the year progresses. housing,he residential are we under house? i know that was a big bowl case, an argument from the bulls that there was this inherent tailwind because we hat -- because housing got so depressed postcrisis. is that the natural thing that will keep the market healthy? neil: if you look at demographics, we are sure to several million households. i do think we are in an excess

demand environment for housing and that will continue to underpin construction for a number of years. the housing data in the last week has basically made the recession of 2019 basically dead. this -- last week was the week they died. you don't have recessions with new-home sales running up 20% year-over-year. you don't have recessions with housing starts up year-over-year. not weather sensitive. those are leading indicators. it was not long ago that people use to make the argument that housing was the quince attention leading indicator of the economy. i would like to know where those folks are now. joe: we will reach out to them. one point some of the bears have made, or some people talk about at the end of the expansion, some of the labor data is not turned down but grows in total job slowing. we saw a drop in job openings with last week's report. does that concern you? do you feel we are topping out in that respect?

neil: the data came out for a november data point. we have had job numbers since then. jobless claims are low. i think job openings are basically a proxy for business sentiment. when business sentiment is stronger, you have more openings being advertised and what it is weaker comey they take the openings away. look at what firms are doing. a higher rate is flat relative to last year. even though openings are down a lot relative to last year. it tells you that it is more likely that as business sentiment recovers, you will see pickup and openings. joe: and the recovery you see in business sentiment, is that a phase one trade deal dividend? neil: i'm a big believer in the idea that financial conditions are an important driver of business sentiment and investment. there's nothing about a share price of a company that is telling the ceo if the company something about a firm he doesn't already know. i think it is this macro risk aggregate and the fact that stock prices are up and buoyant on this fading tail risk is a

reason why business sentiment is picking up. . financial conditions are important. joe: something like -- we have the election, that is a major source of uncertainty in 2020. also obviously today with the headlines about the new coronovirus. do you expect that to have an impact of dampening business investment at all? neil: i don't think so. we have had similar scares with ebola issues several years ago. if you look at tourist arrivals u.s., thatinto the has been declining as the share of u.s. tourism over the last several years. i don't expect to have a significant impact. joe: neil dutta, thanks for joining us. scarlet: coming up, a green focus for davos. why the summit is concentrated on an environmental push and president trump's reaction to all of that. from new york, this is bloomberg. ♪ bloomberg. ♪

mark: i'm mark crumpton with bloomberg's first word news. senate majority leader mitch mcconnell today abruptly changed his rules proposal for president trump's impeachment trial offering a modified resolution to make some concessions to democrats and moderate republicans. the changes will ease the frenzied schedule for opening arguments and will accept evidence from the house inquiry. the new version of the rules resolution sticks more closely to the precedent sell -- set by bill clinton's impeachment trial but still allows for potentially quick conclusions. senate democratic leader chuck schumer initially called the rules planned for a cover-up rather than a trial and said they were designed to benefit

the president. a viral long illness that has killed at least six people in china has spread to the united states. officials say an american citizen who recently returned from a trip to china has been diagnosed with a virus. an ammonia like sickness first appeared last month. the world health organization is expected to meet tomorrow to has sparked the emergency. the u.s. supreme court says it will not rush to consider appeals defending obamacare this year. that means the fate of the law will likely remain uncertain until after the 2020 presidential election. justices today declined requests by the house and the coalition of democratic led states to speed up consideration of their petitions. order ofudeau's first business when canada's parliament returns will be ratifying the new north american agreement.

the prime minister says his government will start the formal parliamentary process on monday. the deal has been passed in the u.s. senate and is awaiting president trump's signature. it has also been approved in mexico. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. >> the climate and environment is a hot topic right now. >> what is very clear to us is given the signs that climate change requires immediate action. >> this is a major shift that is just about to happen. >> we want to invest in clean technology, in green new procedures. >> we assess that the teams identify all the climate change risks. >> we will ultimately divest in a company if we think we are not getting the traction we need. >> we will not make the investments.

>> we really believe this is a fundamental reshaping of finance that will entail reading the allocation of capital. >> if you see it from another perspective or pretty much nothing has been done. >> we do neil -- do need a real breakthrough. this -- >> climate change cannot just be tackled by the private sector. >> germany is not doing enough, not spending enough, solving the problems of the future. >> i would love it if the u.s. would embrace what is needed to fight climate change. >> we know there is a lot of innovation behind it that we need to step forward with a european region. the keyse were some of voices from the world economic forum in davos which is focused on the top five concerns on the environment for the first time ever. that is reflected by this year's theme, stakeholders for a cohesive and sustainable world. here with more on the green focus of davos is white house josh gallo. people on the outside, they

listen to all of this and then they read stories about people flying in their private jets and having a greener version of fuel and they get cynical and say yeah, it is this year's thing , what will they talk about next year? do people feel that the comments made at davos this year, so much about environment and sustainability, will lead to something more meaningful than just sort of nice sounding rhetoric? josh: i think it really depends who you ask. obviously, the voices you were just playing from the conference, if you talk to people in the investing world, they seem to be recognizing that there is this fundamental shift happening. they are prepared to allocate capital differently and make that change. there are people from governments primarily in europe who are also committed to policy changes. but when you broaden that out, and you start thinking about other stakeholders, for instance, president trump who

was there who has said for many years that he does not believe in climate change, and despite the focus of this year's forum, he had nothing to say about it that was in common with what we were hearing from the other leaders. instead, he was throwing cold water on the idea that anything needed to be done, calling it pessimism, and the prophets of doom as he referred to people who were calling for drastic action on climate change. from my perspective, and thinking about the u.s. as a major player, it is hard to see -- it is hard to see a lot of optimism from people wanting change, that it would come from the u.s. government at this point. scarlet: the president is choosing to focus on the strength of the u.s. economy and finding optimism there. greta thune berg is one of the davos, one of the noted to guests. was there any response between her and the president in what they are saying?

they offer very different visions of the world. josh: they do. neither of them addressed the other directly during this conference. close towere speaking one another. they obviously offer such different perspectives on this issue, they could not be further apart. again, it depends who you ask. i don't think the perspective of greta thunberg was influenced by donald trump. and i don't think his was influenced by her. these are pretty firm positions that each of them have. i would say based on the commentary like the people that you were airing at the beginning of the segment, more people at the conference appear to fall on the side of greta thunberg get van on the side of donald trump. -- thethey are probably davos crowd is probably interested in hearing what he is saying about economic growth. scarlet: absolutely. one final question, the

president didn't attend davos last year but he did the previous year. he is being received differently this time around, isn't he? josh: he is. as he mentioned, last year, it was in the midst of a government shutdown. it would have been a bad idea for him certainly appearance wise. otherwise as well, to attend an event like this of global out of the country. but you know, i think his story is a little bit different now than it was two years ago when he does, even though he has run a populist platform, then and now, he at least has at this point a sustained record of economic growth in the united states that he can point to on top of that, a couple of trade deals that happened over the last couple of weeks. the phase one agreement with china. the rewrite of nafta the usmca that was passed by the senate. he has a couple of things going for him in the economic sector right now that he can hang his

hat on and he is happy to do it. scarlet: he is going to make the most of it. josh gallu joining us from washington, think is so much. president trump making his second appearance at davos. he faces political headwinds at home. the senate formally open to being impeachment trial into today. mitch mcconnell made some last-minute rule changes to appease some more moderate members of his caucus. haveramework has still proceedings wrapping up in days. for more insight, we are joined by ed mills, washington policy ending -- analyst. give us the perspective here in terms of the changes that mitch mcconnell did need to make. are they substantive changes that will change the contours of the trial that would introduce room for surprise here? ed: i think the big debate on the rules is whether or not we will get witnesses. i think that is the real looming debate that will occur over the next couple of days.

the changes that were made today, i have put into the box of in politics, when you are explaining you are losing. mitch mcconnell wants to keep this compact. he wants to keep the republicans together. he is looking to see if he may be can get one or more of the very conservative democrats onto his side in a final vote. but he can't have anything that is very difficult for some of his moderate republican colleagues, especially those who are up for reelection this year, susan collins, senator gardner, senator lisa murkowski, kind of to have to explain why they would not even look at certain evidence or admit -- things i could be viewed as a cover-up. you have to change that in the rule. and to appear as if you give a little bit to appease that, it removes the concern that this is just a straight up at rush to judgment by the senate. joe: do you think ultimately there will be witnesses or will

most of these moderate or swing state senators find a good reason to oppose them in the end? ed: i think it is more unlikely that we get witnesses here. i think what republicans are pushing for is an argument that if democrats want witnesses, they have control of the house of representatives. they would like to push that forward. democrats, adam schiff the lead manager from the house, made a very good outline of the number of former impeachment trials in the senate. not just the two former presidential impeachment trials, but the senate does impeachment trials for other issues as well. especially for judges. and the history of the senate and the senate rules allowing for witnesses. ultimately, it seems still somewhat unlikely because i don't think that they want to open this up for debate. ultimately, that is where you get any sort of market reaction

is when you add uncertainty to it. they would like to keep this as certain as possible. i will be looking to see if the house decides if the senate does not have these witnesses, what else they can do if we see additional articles of impeachment coming out of the house if the senate decides not to have a full trial the way they would like to see it. scarlet: we just have more headlines that crossed. . the senate has rejected chuck schumer's amendment seeking white house papers this. comes three minutes after senate began a vote on schumer's changes to the trump trial rules. you mentioned market reaction. what could cause the market to care more about this? we already know the outcome, it is pretty much assured. if this trial goes for longer than anticipated, without have any market reaction? ed: it is possible. what the market will be looking for is does anything come out of the senate impeachment trial that would impact trump in his reelection bid?

i think right now, it is a pretty high hurdle to get the two thirds of the senate to convict him and remove. ultimately, what we will be looking for is what does public sentiment look like? is this going to be something that way on so net republican seeking reelection? it could mean more likely that democrats have a majority in the senate. that is something the market will pay attention to. as well as does it make it more likely that democrats would win the presidency in 2020? i think generally speaking, market participants i talked to on trumplikely betting being reelected at this point as well as a republican majority in the senate. i think that is part of the stock market move that we have seen in recent months. once the democratic primary season is fully underway, and we know the impact of impeachment, if those narratives change, that is where the markets will take notice. joe: i'm curious, when you talk

to clients, have they talked about impeachment or is there sense that he will stay one way or another and it is really just -- the only politics is about the election? ed: when i talk to clients, it is much more about the impact of china trade, some of what we have called the series of macro positives that we have seen, especially since early december. the signing of the usmca. getting a budget deal done. dealing with health care taxes adding hundreds of billions of dollars of new fiscal stimulus into the economy. kind of stacking up with the market here's about. it is those macro positives that is giving the market a tailwind. i would argue, the market is getting a tailwind out of d.c. for the first time since the midterm elections starting in december and it will continue until we get any sort of uncertainty or a possible surge

by one of the candidates out of the liberal lane, the it a bernie sanders, elizabeth warren, in the democratic primary. it is when the market would look to politics again as a potential headwind to the market. ed: all right, thanks to mills, washington policy analyst james.ond coming up, we hear from national economic council director larry kudlow from davos about trade with china and europe. from new york, this is bloomberg. ♪

joe: national economic director larry kudlow says attacks .2 .0 will not be in the budget proposal and it is not fair to say expectations are lowered for a phase two deal. he spoke to jonathan ferro about all of that as well as the

impeachment trial. take a listen. larry: i haven't had a single impeachment question. not one. i have been in davos 24 hours or whatever. not a single one. i went to the international co thing that we had earlier, and saw a lot of friends and met a lot of people. not a single person asked about it. jonathan: a message of optimism from the president. is that resonating with people? larry: well, look, i think it resonates to ordinary folks. in that speech was aimed at ordinary folks as well as the ceos. i think it resonates with the ceos. a bunch of them came up and talked about optimism. now is the spirit right better than it has been in a while. and i think that is a great thing. the president was extolling the virtues of a market economy and

a free enterprise economy. he said with great clarity he is not going to permit any radical socialism. that is not his creed nor his mind as you know. along with the well-being and the middle class improvement, the blue-collar boom and so forth, he mentioned people have better spirit and they are happier. he actually use that word, happier. i love that. i've always argued when nations prosper -- nations are prosperous and growing, they are happier. we are all better with each other. jonathan: let's talk about the substance of the phase one trade agreement. we are looking to find someone defending capitalism in davos. the president did that. i know you are very much pro-capitalism. many of us are it or not. the centraltime, planning element to the agreement, to come to an agreement with the chinese and commit to buying a certain

amount of goods every single year, regardless of the market demand for it. larry: well, ok, i see your point. but really, phase one is about breaking down trade barriers. that is a very market oriented approach. we are saying you give us a chance, you give the united states a chance to sell you goods and services and technology and energy and agriculture and so forth, and we will beat the pants off everybody. we will outcompete. just give us a chance to do that. that is free enterprise at its best. i acknowledge your point. but those are not so much a government management as they are targets. that is the way it was always intended to be. hopefully they are realistic targets. exports inet those the next year and year after that, that is a big growth factor for the united states. that is a huge growth factor. china wants them. they are willing to import.

needed, energy came up in the lunch and after -- i'm sorry, i'm sniffling, but energy came up in the luncheon after the signing last wednesday. liu he said we need coal and natural gas lng. both sides are going to win on this. jonathan: phase two has become the phase 2a. it looks like things are winding down. is that a fair assessment? jonathan: -- larry: no, no it is not the president has been vocal. his belief is phase one was the toughest wall to climb. and once that structure was put in place and it took us a couple years as you know, once that structure and framework was put in place, that opens the door to phase two. we can tackle everything at once. exports and the intellectual-property chapter are really important. the ip chapter is a thing of

beauty. because the chinese are willing to make changes, i mean they are changing their criminal procedures, civil procedures, penalties, giving 100% ownership for financial companies for the first time, those are great building blocks for phase two. jonathan: the expectations going forward from here, a conversation about europe as well outside of phase two. it feels like it an about term from the administration with the europeans. what happened? larry: good discussion. very constructive. jonathan: what has changed? six months we were talking about tariffs on european autos. were veryy constructive talks are that was not a negotiation. both sides agree it would be great to produce a good deal. issues ata lot of stake. that is going to go on for a while. i don't want to get into any details on that. jonathan: is the agreement with china something you could carry

over to europe? is at an example of the work you could do with the europeans? larry: listen, market opening is the key. europe has, for example, a lot , medicalent standards equipment, pharmacy equipment, agriculture stuff, automobiles. they have different seatbelts for god sake. that is a form of regulatory protectionism is what that is. jonathan: can you break that down? larry: we will be talking about it. you have a new regime, a new government in the eu. very charming woman, i might add, she has seven kids, two of them are u.s. citizens. it's fascinating. we will see. ambassador -- ustr. jonathan: lighthizer.

larry: ambassador lighthizer is the greatest ambassador there is. he's a magician. we have china, we have usmca, both of them are progrowth. now we will have probably -- jonathan: europe is the next focus? larry: we have more bandwidth now to focus on europe. god, that's awful. jonathan: i want another question in. the progress policies of this administration and the focus into the campaign, on february 10, the president will propose a budget. the middle class tax cuts you are talking about actively, will they be in the budget proposal? larry: no. tax points two point be unveiled sometime during the summer during the campaign. be aare meant to to roadmap for future middle class tax relief and just economic growth in general. do not expect them to appear in the budget. joe: that was national economic council director larry kudlow in

davos. from new york, this is bloomberg. ♪

scarlet: coming up, don't miss this, texas instruments reports fourth-quarter results after the bell. joe: lor housing data existing home sales for december out at 10 a.m. eastern. scarlet: that does it for "what'd you miss?" "a bloomberg technology" is up next in the u.s. joe: have a great evening. this is bloomberg. ♪ s bloomberg. ♪ when you move homes, you move more than just yourself.

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