from bloomberg world headquarters in new york, we are covering stories in new york, paris and athens. southwest ceo gary kelly says the airline industry has never been more competitive. he will weigh in on passenger demand. ducati northf america. abigail: the gains may be small, but we are looking at record highs once again for the three major averages in the u.s. they are all trading at record highs. what really stands out is the momentum around the recent rally. these bars represent the number

of days it took the dow to climb 1000 points. back here, to hit 12,000, it seven and a half years to climb. what makes this remarkable is that we, in the recent past, are up 570 points in just 12 days. so that meant -- that momentum is accelerating. the smallest number of days that it's of to climb a thousand points, 85 days to hit 14,000 back in 2007, ahead of 2008. so the momentum is big here. it is also shown by the rsi, which we don't have year. but they rsi, the momentum indicator, the relative strength index, is at a year high. one sector and upper dissipating in the strength is the airlines. airlines are trading higher. havelly, delta is -- we airlines trading lower and delta

is flipping higher. global airline earnings are set to suffer their first annual decline in six years. this on rising oil prices. we do have a five-year chart of an airline index versus oil, that really shows the inverse relationship. when oil tends to trade lawyer, this helps the airlines. their expenses and costs go down. but when oil goes higher, we could see those costs and expenses go higher and could pressure the airline sector in the months ahead. david: thank you very much. let's check in on the bloomberg first world -- first word news. taylor: president-elect donald andp plans to take depression are as labor secretary. he is an outspoken critic of the obama labor policies. theeposit -- he opposes

overtime payroll. and president-elect donald trump is on the road today. he is fine to columbus, ohio, to meet with victims of last week ohio state attacker. tomorrow, he is holding rallies in baton rouge, louisiana and grand rapids, michigan. a federal judge has denied a defense request for a mistrial in the charleston church shooting death penalty trial. thense attorneys claim witnesses remarked that dylan roof is evil and belongs in a pit of hell is inappropriate. in greece, unionize workers are staging a toy four-hour strike. they are protesting planned austerity and labor reform measures that, among other things, would make firing easier.

david: president-elect donald trump says he wants to roll back financial regulations. he talked about repealing and replacing the 2010 dodd-frank act. so what does the future of banking relation look like? i spoke with the superintendent of the new york state department of financial services. appearanceirst tv since she took over. i asked her about how often she is about financial reform? >> the devil is in the details. it is a complex issue that can't be done with shoot from the hip holiday. am i worried? i live to be worried. that's what you do as -- in the job that i have, regulate banks and insurance companies. but i know for sure, in new

york, we will protect our markets. we will protect our consumers. and we will ensure that new york will stand ready if anything changes on the federal level. david: you been on the job for 10 months. what have you prioritized? what do you intend for your priorities going into 2017? >> the job is very large. the agency's very large. we have a number of different matters that affect the financial market. my priority is to protect new yorkers, to protect our markets, to protect consumers, and to ensure that the financial industry in new york is safe and sound, and that new yorkers are protected in their contract rights and in their insurance rights and in their banking rights. that's what we do at dfs. david: this is one mechanism at your disposal, fines. albany has come to depend on the size of those fines in the past. is there pressure to go to large

sums? >> when an institution engages inactive it is that permit money-laundering to incur -- to occur or activities that allow terrorist financing to occur, the job of the regulator and the law-enforcement official, which i am, is to ensure that you punish when needed, that you deter, so that these continued activities don't occur, and that is in the context of which a fine may arise. understand the check -- of >> the way it's been regulated for decades. fintechy uses the term without defining it. regulators, state

such as the department of financial services and the banking department before that, have regulated many transmitters. we have regulated lenders, whether they use a rick and mortar location or whether they use the internet or other electronic -- it's not like the internet just came into existence now. so we will continue to regulate those companies. we will continue to ensure that entities that should be licensed are licensed and that consumers are not victims of payday loans and other predatory activities. so, yes, we do oppose the proposed fin tech charter because this is a province that the states have long protective and the states should continue to protect without any threat up reaction. david: how much limbo is there out there when it comes to something like this? you are looking at a new administration who has come aggressively at some tenets of regulation. it could change course come

january. true and protect ability is something people should be talking more about. what we are seeing is a lot of unpredictability and our markets don't generally function well in an area of unpredictability. take health insurance, for example. all the talk about the affordable care act and we will repeal it and maybe replace it, but we will not you what we will replace it with his a tremendous challenge for the insurance market. in any person with knowledge of the details would not be saying. we are going to have a new administration. i am hopeful that they will think through all these issues deeply, the way anyone would address something, in a complex .arket regulation context and to the extent there are changes with which we disagree because they are less protective of our markets or less protective of our consumers, than the you -- then the new york state department of financials will fill that void. do you think that his

role will be diminished going forward against the rhetoric we have heard from washington? >> i can only read what i've heard. cfpv haspeavy -- the been a great protector of consumers across the nation. conducive be able to -- to do so. to the effect its powers are reduced in any way, where we believe that reduction is unsafe or unsound or unprotected and consumers, dfs will do what it can within new york laws and federal laws that we can enforce to protect consumers. i think the wells fargo situation is an interesting one because, clearly, there was a gap in federal regulation. last question about the

supreme court case opinion handed out this week on insider trading. is that change what you are able to do in your department, having those restrictions lifted by the court? don't really because we -- the new york state department of financial services does not prosecute insider trading. that is left generally to the united states attorney or the new york attorney general. any loosening restrictions on insider trading could impact the markets because, anytime you have lack of transparency or some people having a greater shot at something or greater information, that could certainly impact the safety and soundness of the market. and we will look very carefully at that area -- at that. coming up, donald trump pudzner. tap ed

this is bloomberg. ♪

david: this is bloomberg markets. time for the bloomberg business flash. german regulators may be opening the volkswagen omissions cheating scandal. they are looking into whether manipulatedgally data. british energy network operator national grid has agreed to sell the majority of its u.k. gas distribution business for $4.6 billion in cash. the buyer is a consortium.

39%onal grid will retain a take in the new holding company for the business. stake in the new holding coming for the business. the spanish clothing giant denies wrongdoing. we will turn to politics now. we are looking at donald trump intending to take andrew hudson zner as labor pud secretary. ofhe is a big-time opponent barack obama and a lot of his policies, namely the affordable care act. he says that obama has hurt his company by requiring large

employers to provide health insurance to their workers. david: you look at him in concert with the picks that donald made yesterday, linda mcmahon, the former head of the headrestling company, the of the small business administration. we are now half full in the cabinet. >> it is a very conservative cabinet for starters. zder will bring that she is an opponent of the obama administration overtime rule that requires that workers earning less than about $40,000 --ear be automatically $48,000 a year be automatically qualify for overtime. we can probably expect the trump administration to rapidly roll that back. david: there has been some backlash year on his pick for the epa, scott pruitt. tell us about his background and

what opponents are saying about his readiness to head this agency. >> he is a climate change denier and he has led state lawsuits .gainst president obama i think democrats will go to the mat in the senate over pruitt's nomination. climate change is one of the issues where democrats distanced themselves from republicans. david: you look at who is coming in and out of trump tower every day. we get a list of who the president-elect's meeting with today. alan mullally, former ceo of ford company. -- ford motor company. day. is your sense he is still seeking advice from whoever he can? >> some are advisory meetings. some are -- a lot of them are

job interviews. andld trump now has an administration heavy with generals. so there is some concern, mainly among democrats in congress, that he's arty got too much military brass and his cabinet. so he should probably put the brakes on adding more. david: is this transition team planning to combat any democrats who might raise that is an issue? look at james madison head of the defense department. as we get to 3, 4, perhaps five generals in the cabinet, does this become a bigger issue for the transition team? >> it does. i do think they are prepared to fight. republicans are fast tracking this law that would allow mattis to serve as defense secretary. there will be votes against him when his nomination comes up.

but i think he is probably going to get confirmed. but, yeah, there's going to be more friction as he continues to add generals to his cabinet. there is concern about donald trump flouting the tradition of civilian control of government, dating back on his 200 years. david: the interviews with prospective cabinet members continue all the while there are these thank you rallies. last one was at fayetteville, north carolina. we are looking at one tonight in des moines and another tomorrow in grand rapids, michigan. what is happening at these rallies? what is his goal in convening these rallies around the country? >> president barack obama, when he entered office, did something unique for a president at the time. he created this parallel organization, organizing for known. it became it was a political organization, separate from the dnc, that was really intended simply to support president barack obama, not other democrats. donald trump is good to do some

thing similar when he enters office. he is going to create his own parallel political organization to support his policies and his politics. and i think these rallies are intended in part to build up a grassroots base of supporters for that future political organization. david: so much focus is on new york at trump towers come a few blocks from where i am sitting now. you are in washington dc i wonder if there is a more robust connection between the two cities now. we see new members of these landing teams, members of the transition team who are charged with meeting with their future counterparts at various agencies. what is that it -- that relationship like these days? are you seeing a greater relationship? >> between washington and new york? yes. becoming ahere is focus of government life in the city. setting aside what other topics

of interest may happen with that, there are interesting things happening with that. tedi cruise, -- heidi cruz, cruz's wife was seen there. the rnc is now having -- is planning to hold an annual convention at trump's hotel in the city. so, yeah, the connection between new york and washington has become more robust since this election. david: thank you very much. still ahead, a softening manhattan rental market means potential tenants. we'll show you how landlords are planning to sweeten the deal. this is bloomberg. ♪

david: this is bloomberg markets. manhattan real estate is showing signs of strain.

landlords are offering more incentives to leeward tenants. what are the incentives? these are largely centered on or reducingo rent your 12-month payment to 11. perks, aidden up front monthly rent, a month and a half free rent, payment of brokers fees. so a lot of times, what landlords are trying to do to try anything but to reduce the rent and trying to give that up front. that they are still reducing the rent just a tiny bit. david: why the reluctance to reduce the rent? noti will point do they have enough incentives and they have to reduce the rent? >> you really want to protect the rent because it is hard to climb up it. once you reduce a 5%, it might take you a year or two to recoup that in a slow market.

you don't want to reduce it to the exit you can't. some of thewere other conclusions of the report looking at the rental market in new york city? >> there is a lot to rent. that is what is basically happening, causing all of this. there's been about 5000 apartments that have been added just a manhattan. there has been a big construction boom. that's just the rental apartments that have been built. that you have a lot of people buying condos, a grand strategy that they will rent it out. so you have a lot of choices good and tenants are bargaining. issue andthis more thely than a comment on housing in new york? will there be more construction? >> not next year. next year, there are 5000 other units coming. there is a lot to choose from. but there is a little bit of an economic sector.

rents have been rising 20% in the last five years. incomes have not been rising quite that much, even though things are going well. so people are hitting their breaking point for what they can pay and now they have a little bit of a relief valve. david: for prospective tenants, is it a tenants marketplace? >> yes. a lot of the bigger deals are happening in the more costly buildings. everything that is being the right now is higher in, luxury. there's less wiggle room if you are looking for a studio or walk out. those are going fast. so if you have a little more money to pay for building with a full jim, you probably have wiggle room to talk. david: are we seeing landlords reluctant to put in place these incentives to rent or do they want to see what happens? >> earlier this year, there was a reluctance to do incentives. i think they kind of realized that as the summer was ending,

this needs to happen. they've hit records now the last two months. the next step would be more incentives or eventually lower the price. david: is this just germane to manhattan or in the other boroughs as well? >> it is happening in brooklyn because there is a construction boom in brooklyn. david: thank you very much. coming up, southwest airlines gary caret -- gary kelly on passenger demand emm and fuel hedging.

david: live from bloomberg in new york, i'm david gura. this is bloomberg markets. let's start with the headlines. from ourggs has that

newsroom. taylor: more americans are optimistic about their finances, especially about the u.s. stock market. that's according to a new bloomberg national poll. it shows growing optimism about the u.s. economy following the election of donald trump. the poll says 54% of americans are bullish about u.s. stocks next year. 38% say they expect a better financial year. and about the same anticipate higher household income been half of those surveyed view the federal reserve favorably. president obama is expected to sign a bill that will add billions of dollars to help -- health research. fundingpush for the after his son died of cancer. syrian troops are pushing into the city of aleppo. civilians who want to leave should begin and safe passage. they have also asked for a five-day cease-fire to event with the wounded. syrian government officials say

they are -- they're troops will not back off. the city of lights is in crisis. it is facing the worst winter pollution in a decade. paris has made public transportation free for a third consecutive day. the air quality monitor is blaming a common nation of emissions from diesel and domestic wood fire for the problem. david: a quick check on the major u.s. indexes. we see the dow up .4%. the s&p 500 up about .3%. .05%.e nasdaq of about -- .5%. ofgail: it may not be a lot

movement for u.s. stocks, but enough for the three major averages in record territory. joining the party was the dow transports. now transports put in their first record highs as december 2014 yesterday. ago, it has tos that. so we have a new record high for the dow transports with the index also on pace for a record closing high. our team did reach out for a number -- to a number of technicians. it's not bears. he says it is a continuation of what we have been seeing, this big rally. analysisad a technical at oppenheimer pen he said the dow exports generated a signal back in november. when the april highs were overtaken back in november, that was the buy signal for this index. and katie stockton abbey tig a chart ofwe take both the dow and the dow

transports, there is not really a doubt confirmation here. these new highs are dow -- are undoubtedly bullish. she is also saying that it may allow the dow to extend its overbought territory. the dow is trading at an rsi 20-year we-year -- at a high. the airline industry has never been more competitive. and is stronger today than in any point in modern history. says higher profits and stronger demand for less expensive fares. southwest is working on a five-year, $500 million overhaul. how much of that focuses on technology will change? >> i think what we will see immediately is less visible to the customer. the first release of our new

technology went in this week. it was flawless execution. i'm very proud of our folks. these bookings are for flights after may 9 of next year. at that point, we will be down to one reservation system. step aswill be a key well. it just gives us the capability to be more specific flight by flight with some of our fares. we will have better customer experience techniques, especially when we have delayed or canceled flights. it sets the stage to really the information exchange between the company and our customers with mobile and other applications. part,r the most southwest.com is unchanged. our mobile application is unchanged.

invisible topretty the customer. scarlet: a lot of customers want to travel abroad and you have one route to cuba. two more will launch next week. there have been concerns from american,titors, spirit, and united, that there is too much capacity from florida to cuba. do you share this concern? >> we are just getting started. there is no history from which to make predictions about what capacity is needed. we have a lot of experience developing new markets at southwest over 45 years. in fact, when i started 30 years ago, we had 60 airplanes. now we have 723. so that's just an element of the unknown that one needs to be patient with. we are excited about the opportunity. we make a commitment to the community and we plan to stick with it. scarlet: which airports do you feel need the most important --

improvement? >> we need to do that. the top priority is their traffic control system. the irony is we can spend all the money we want on the ground, but if a don't have a way to manage the flights in the air, it will be off or not. we are spending a lot of money on airports. we've invested in modernizing terminal atw houston lobby and another one coming. there's a half billion dollar makeover going on at lax right now. a major project going on here at laguardia. so the money is there. the money is being spent. we need to continue that. and if there are opportunities to continue to invest in airports around the country, we need to do that. but i'm not as worried about that because that work has been done, has been done well, is continuing, and there is a path

forward there. where we are not making progress is with air traffic control modernization and that is where the -- the real opportunity is. scarlet: what is the biggest obstacle? >> it's compensated. but the women and men who are air-traffic controllers are doing a wonderful job. we are asking them to use 1950's technology to do that. that is horribly expensive to maintain and does not take advantage of current technology. in the simple swarm, airplanes do not fly as efficiently from point a to point b as they could. crow flies. the so there are opportunities to take advantage of satellite-guided navigation systems and vastly improve the efficiency of the flight profiles. form. in its simplest it's replicated because there are so many flights. it's replicated because of

communities where airplanes might fly over. so the devil is in the details there, but we are just not moving forward fast enough. and reforming the faa in terms of governance and funding i think would vastly improve that progress. scarlet: so washington, d.c. has its work cut out for. i want to talk about hedging. hundreds of millions of losses expected next year. what are the conversations -- what kinds of conversations are you having about how to best approach hedging? >> hedging is a long-term prospect. we've in hedging since the first gulf war in 1991. if you look at the program to over that 25-year time period, we have billions of dollars in gains. -- we will have protection in place when we need it the most, which is when prices go up sharply.

we will pay more the market when the prices go down. obviously, if there is a believe that coverage is unnecessary, then we would stop hedging. but i would analogize it to having home insurance, car insurance. the insurance is in place to protect you when you have a catastrophe. have a billionto dollars of extra cost for fuel? of course not. so we have to be continually evolving our program to try to manage the cost of the program as efficiently as we can, but also make sure that we have the coverage. so we want to continue to hedge, but in a way that avoids that kind of exposure that we've experienced here in 2016. i would quickly add that our fuel bill is down, including our hedging program cost $2 billion

a year since 2013. and we are achieving all time record earnings and returns on capital during this time period. thet is just evidence to argument that, when prices go down, we are going to do very well with our hedging program, and we have. the when the industry was really suffering, in the 2000's, we were doing very well. and that's when you really need to have a hedging program in place. if you don't have it in place, you will miss those opportunities. southwestt is ceo of airlines gary kelly. coming up, ducati has unveiled six new bikes, including its fastest yet. we will take a look at it next. this is bloomberg. ♪

julie: welcome to bloomberg. a look at who's investing in russia and what they are buying. julie: the central bank and do more to reach its efficient target. closer look at the congressional review act, what it is and why republicans are eager to use it before trump takes office and why republicans are getting ready to use it. has sold an $11 oilion stake in its largest producer. glencore and cutter sovereign wealth fund is they've biggest foreign invest -- is the biggest foreign investment since the

trouble in ukraine began. bloomberg caught up with the u.s. state department bureau of energy resources special envoy and got his thoughts on the deal. we just learned of the deal in the last one he four hours or so. we are reviewing the deal and looking at how it actually works and what the locations are. and speaking as well with their friends in brussels to see how we all see the details of this. i think we are going to need a few days to look at this and figure out what it is and what it is not. mark: the european central bank said that its bond buying is extended to the end of next year but reducing the amount of the monthly purchases. mario draghi says the latest push weight -- may not be the last if it cannot reach its inflation goal. restructuring will cost more than expected this year. the company is speeding up job

cuts. elon musk's spacex has lost a chance to launch a satellite. is recovering from explosion in september that destroyed one of its rockets on the launch pad in florida. companych aerospace will launch it instead. julie: time now for our bloomberg quick take. president barack obama has fought with congress almost every step of the way since he took office. during that time, he acted largely through executive orders and agency regulation. now he is racing to file a nice -- to finalize new rules before he leaves in january penn in response, republicans are -- inening to yield generate. in response, republicans are threatening to yield a little used rule.

are scurryinges to issue new rules on every thing from air pollution to workplace safety. republicans, who hold both majorities in the house and senate, are warning they will use the congressional review act. legislativegress 60 working days to call in a vote to invalidate it had the act applies on to regulations expected to have an annual effect on the economy of $100 million or more. during president obama's term, republicans used the measure to tell his rules like birth control, carbon emissions and obamacare, but lost the vote or obama vetoed those resolutions. the congressional review act was created in the 1990's as president bill clinton used executive actions to overstep a hostile congress. it's been used a dozen times but has only worked once. argument. it is not just a last-minute

loss on congress chopping block. potential pitfall of use in the act is the fact the regulations have to be rejected in their entirety. congress can't keep parts that it might like. if a review act vote does not pass, the regulating is into effect immediately, often putting it in for sooner than otherwise would be the case. that's your global business report. had to -- head to bloomberg.com for more stories. ♪

david: this is bloomberg markets. i'm david gura. we are looking at ducati

introducing its fastest, lightest and most expensive production bike ever. matt miller is jealous in germany right now. tell us about the bike behind me. 1299is is ducati's superleggera. this is the highest horsepower twin we've ever bell. of aorsepower out naturally aspirated engine. not only the highest horsepower but also in terms of production motorcycle, 343.9 pounds. so very lightweight. that is largely attributed to the carbon fiber chassis. david: how novel is that? and what made you decide to do it? >> because we can. that's a big part of it. carbon fiber technology over the years, whether -- but this is the chance for us to twin.he pinnacle of our

really, it is the flagship of our lineup, and be able to stretch our legs a little bit in terms of engineering. we have two extended to something this never been done. david: i remember when ford introduced trucks made out of aluminum. there was some backlash from. 's. are there riders or collectors who are reluctant to get on this? >> absolutely not. anything that will give them a competitive advantage, that will that not anyone can get. they will gravitate towards it. at the end of the day, the proof is in the numbers. david: you got a run of 500 of these bikes. heavy sold them all yet? >> girly close. the u.s. is the number-one market in the world for the superleggera. david: who is buying a bike like this? is it a collector, a casualrider? -- is it a

collector? a casual rider? >> we encourage people to get out and ride these things. we expect to see these on track days. we expect to see them running around the hills. you honestly will not be able to get a full experience of this motorcycle unless you are writing it on the track -- rid ing it on the track. you will have the experience to tracke to ride this sponsored by our world team in italy. it doesn't get any better. not only do you have the by, but you know how to ride it. david: what are you debuting this week? >> we have the international motor show. we will be debuting the new scramble cafe racer. allows a motorcycle that us to take a nod to the past of a generation of motorcyclists in the 1960's where people would

take a standard bike up a clip on bars on it and run through the canyons in the streets, something with a little bit more character and a little bit more ads than your standard motorcycle. so that will be unveiled here. perfect for our market as well. david: how big is your line? >> the ducati line has grown dramatically. ago, there were three or four models. now we diversified out to have multiple different families, from entry with the scrambler brand, or with the monster. oral the way up to our superbike here. but we also address the off-road that we cruisers launched earlier this year, and with the intent of broadening our range of still always keeping that dna, that sport bike dna that ducati has, but through all these different segments so it -- so we make moser -- so we make more motorcycles for more people. david: our new people getting into writing bikes -- riding bikes?

>> yes, they are. the thing that has really helped it is we have been focusing a lot on safety and utilizing technology to be able to increase the safety on motorcycles through tracks control, abs, really control, the sorts of things that will that people into the sport they might have been opposed to before because they had those concerns. you still can't make up for the drivers on the road. but at least you have an opportunity to be able to improve the safety for the rider. david: looking at this by, what do you intend to take from it and apply to the other bikes in the line? >> you will find in the future that a lot of the technology, specifically the electronics, will work their way into other models as well. when we first introduced tracks control on one of our superbikes, it made its way into most of our motorcycles as

commonplace. you will see the elements like the carbon fiber, mainly the electronics are the big thing that you see becoming more and more common in our entire lineup. david: you been on the job for a year? what's it been like? what has the biggest surprise been to you heading up this company? >> i spent nine years and to cut a before and three years at lamborghini. i remembered why i left it. at first, why came back, excuse me. that's the passion behind the brand. this is not transportation. this is entertainment. people can use these to get from point a to point b, but you get on us for that escape, that adventure. for me, coming back to motorcycling, when you are working in it, you're a member how you connect with other people because of motorcycling. it makes them smile. you roll into bloomberg studios and everyone is smiling and taking selfies with the bike. david: looking ahead to 2017,

what are you most excited about? >> i am more excited about an opportunity as a brand to build awareness. this is something come over the last few years, there are ideas or perceptions about the brand as we have been so rooted in spore motorcycling, the future allows us the opportunity to bring in new people into motorcycling and through our brand hopefully. david: thank you for coming in and bringing the bike. ceo of ducati north america. still ahead, we will talk to one of the most powerful men in health care. this is bloomberg. ♪

hii'm here to tell homeowners that are sixty-two and older about a great way to live a better retirement... it's called a reverse mortgage. call right now to receive your free dvd and booklet with no obligation. it answers questions like... how a reverse mortgage works, how much you qualify for, the ways to receive your

money... and more. plus, when you call now, you'll get this magnifier with led light absolutely free! when you call the experts at one reverse mortgage today, you'll learn the benefits of a government-insured reverse mortgage. it will eliminate your monthly mortgage payments and give you tax-free cash from the equity in your home and here's the best part... you still own your home. take control of your retirement today! david: it is 1:00 in new york, 2:00 in hong kong, this is "bloomberg markets." i'm david gura.

from bloomberg world headquarters in new york, we are covering stories from san francisco to toronto and london. we are speaking with the president of the cleveland .linic toby cosgrove an major averages are hitting new highs today. we dig into tech stocks. bank stocks also getting a pop today. there are worries about a marijuana bubble in canada. a rally could be coming to an end. let's get a check on where the markets stand. very muchcks are at the highs of the session, little changed out of the gate but have been gaining strength as the ecb decision this morning was seen as more stimulative for markets, shrinking the size of its quantitative easing but extending the duration through the end of next year at the least. all three major averages trading and records today. the russell 2000 there as well. if you look at the intraday chart, you will see it bumping

along the unchanged line before a surge upward around 12:30, now a gain of 131%. apple shares have been strengthening as we have seen strength within technology. apple shares up 1%. otherwise, in terms of individual points gained, contributing the most to the s&p 500, it is banks. bank of america and jpmorgan strengthening. speaking of yields, the effect on rates and currencies, take a look at the euro today. initially the movement was up following the ecb decision, but as the press conference happened and there was more commentary from mario draghi, we saw it all down, now down one point percent. likewise, we are seeing a rise in yields in the u.s. as the

selloff continues their. that has also characterized some of the european trading action finally, a bit of a curveball, we are looking at lean hogs. they have been on quite a price run over the past couple sessions. over the past week, one commodity that caught our eye as we are seeing slaughtering rates go down a little bit as the price has climbed up. thank you. let's check in on the first word news this afternoon. taylor riggs has more. picknald trump intends to up fast food executive andy fassero as labor secretary. he is the economic advisor and surrogate to trump on the campaign trail and is an outspoken critic of the obama administration's labor policy. puzder is the head of the carl's jr. chain and says he opposes

the overtime payroll which was temporarily blocked last month. there is a report on what donald trump intensity with his business once he becomes president. according to the new york times, he may formally turnover operations for the company to his two adult sons but intend to keep a stake in the business. ivanka wouldey say take a leave of absence from the company. she may move to washington to advocate for various issues. held talksd russia today on syria and the battle over the city of aleppo. secretary of state john kerry says he is hopeful a siege of the city can be lifted. kerry spoke with the foreign minister in russia. russian back syrian troops have tightened their grip on aleppo which has been a rebel stronghold. a decade-long trend of rising life expectancy in the u.s. may be over. it declined last year and is no better than four years ago.

life expectancy has inched up in most spots around the world but last year it slipped a little bit. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. president-elect donald trump is tapping some of the most formidable business leaders in america for strategic advice after he takes office. a panel chaired by steve schwarzman is comprised of a number of ceos like jamie dimon and mary barra. the goal is to get recommendations on economics and business and also on the panel is dr. toby cosgrove, president of the cleveland clinic. he started there in 1975 as a cardiac surgeon and is with me now. >> nice to be here. david: start with how you came to be on this committee of experts, how did you get the invite, how did you get into it? >> i got an emailed from steve,

talked with him after thanksgiving. he explained what the executives were -- objectives were. i checked with the people at the cleveland clinic to see if this was ok and i accepted. david: so you have not met yet. what is the mandate, as you understand it, to give advice? >> yes, we have no legislative power whatsoever. advice only. david: what do you make of the composition of it? you are there representing health care, a lot of people there from health care and consulting. i'm sure you have been on committees like that before with that kind of diversity. >> i have not before. it's a privilege to be there, it's a distinguished group of individuals from mary's walks of life, important leaders. my understanding is president-elect trump wants to hear from people who that is the way he learns. we will give him unfiltered

advice. a preview, we will give you a chance to warm up. what will you say about the health care economy in this country right now? >> you have to understand health care is the biggest auction of the economy, bigger than any other part of the economy. it is undergoing in our miss change right now, the biggest change in a century. it is affecting 100% of the people. this is a very important issue, not only for jobs him but for the health of everybody. everybody recognizes it has an important part to play. the affordable care act, i think, really was designed to control the cost of health care. hence the name of affordable. affordable for individuals and the country. the concern right now is that it is not really being done well on either one of those, the cost is going up and insurance rates

have reached 5.8% after having gone down in 2008. this is really an issue that we have to deal with. more aboutill talk that, but looking at the sector of the general economy, this is the part of the economy you know best. is what is going on in the health care sector to the rest of the economy writ large? the biggest employer certainly has a major portion to do with it. .t also produces exports health care from the united states is wanted all over the world. it is an important export as well as an internal driver of the economy. david: president-elect trump was on 60 minutes a little while ago talking about what the future looks like for patients with pre-existing conditions. it happens to be one of the strongest assets.

also with the children living with their parents for an extended period. we will very much try to keep that. it adds cost but it is something we will try to keep. david: there was a sense of during the campaign, worry about the future of the affordable care act. both sides technology there were problems with it. how worried are you about what this law will be like in two months, two years from now? >> my guess is there will not be a repeal of everything. complicated big and thing, something the health-care industry has been going on the road now for seven years. to just completely wipe it out would be incredibly disruptive. we will have to see how the transition works out. david: i imagine while the law was being written, i wonder if you are being consulted as well. i remember speaking to the ceo of aetna. he said that the heads of insurance companies were not

talk to as he would have liked. i was consulted but it seems like more of a photo opportunity then listening to what we had to say. an hour of 10 people giving their input is not really in depth to a very complicated problem. david: you look at the rhetoric surrounding financial reform, and impulse to get rid of it completely from folks in donald trump's camp. the same thing is true for health care, a lot of talk of getting rid of the affordable care act. our cooler minds going to prevail, will be get a constructive conversation in washington about what facets of the law should stay and what should go? definitely. you have to understand, regardless of what the president wants, it's only one branch of the federal government. it is certainly a moderating effect when you get into congress. i expect we will see this. there are a number of issues being addressed, a number of

constituents that have to be addressed in the process. this will not be a quick fix. what president obama has said is you are trying to gauge the efficacy of this law, 20 million people have insurance that did not have it before. as you read the successes and deficits of that law, how large does that loomed? >> i think the law was designed to do three things, increase coverage. 20 million more people were covered. it was designed to improve the quality of care. across the country, quality metrics have improved. is one thing that has not the cost curve. there are really only two ways to bend the curve. you can have a more efficient delivery system of people who are sick. two, you can keep people well. there are triggers that you can pull on each one of those. if you look at taking care of people who are sick, i think you will have to understand that you have to consolidate the health care delivery system.

in ohio we have 202 hospitals. if you look at every other industry in the united states, we have seen consolidation of those industries for efficiency. the justice department has not wanted to see that happen across the health care industry. you look at the other side of it, keeping people well, two major things. cigarette smoking and sugar and obesity. we have got to begin to address those as a nation. the number one preventable cause of cancer is smoking. certainly, major contributor to obesity is sugar. there is not a lot of appetite for reducing, addressing either one of those. as a nation, we have to come to grips to that -- with that. david: toby cosgrove will stay with us. coming up, we will talk about the challenges behind the affordable care act, whether resident alike donald trump will dismantle that or not. this is bloomberg. ♪

david: this is "bloomberg markets." i'm david gura. we are buying when dr. toby cosgrove. i want to get his thoughts on tom price to be the head of health and human services. a strong critic of the affordable care act. he wrote this op-ed. let me get you to react to that. i look at tom price and his background, he has proposed changing the law.

do you know him, what do you make of it? >> i don't know him, i don't know his policy. think hhs will play a bigger, different role in this administration? on what thes president allows him to do. if the president allows them to have major influence, that's possible. if the president doesn't, a different story. david: i go back to what you are saying, you were consulted early on, feeling more like a photo up . how does the government get engage in the private sector, through commissions like the one you will be on, or does it need to be more regular? >> menus to be regular input, leaders in the various segments of the economy, society. there are an awful lot of people involved. it involves everyone in the u.s. there are an awful lot of people that will be affected by this. david: we were talking about

preventative care, you are in a position where you must think a lot about the future of health care. the focus for so long has been on insurance pure and simple, but you have to think more broadly than that. what does health care look like in this country going forward? >> we have been talking about sick care most of the time. we need to talk about health care. health care will not be driven out of washington. things that are important, like smoking, sugar are not going to be very popular amongst the people who are being elected to congress. the private sector has an enormous part to play there. one of the things we have done is with our 80,000 employees, 10 years ago, we started with inflation in our health care costs going up. by managing the wellness programs across the organization , free weight watchers, not hiring smokers, we have seen two things happen. we have seen better care of

patients. those that are part of the program have less chance of going to the emergency room. 20% less chance of getting admitted to the hospital. we also had a financial benefit. 7.5% increase in inflation rates -2.5%.e to so we don't have to raise premiums for our employees as part of the health care. ask you aboutto prescription drug prices. an expectation after the election in the stock market that donald trump was not going to do as much as hillary clinton may have costs down. -- have done to bring the cost down. it seems like congress may have some willingness to do something about it. how do you fix this problem? >> it's a very tough problem to

fix. certainly we will not have price controls. very unlikely we will have imports coming into this country. the main thing you can do is encourage the fda to move things through faster so that you get more choices of generics, etc. we still have to deal with the fact that the average increase in drug prices is 10% per year. we are now at a fraction of 1% inflation rate. we have had enormous -- 19% jump in our pharmaceutical bills last year. that is our main concern for a lot of people. it is not the only factor driving health care cost, but it is certainly a contributor that is disproportionate to other things. of the argument that pharmaceutical companies make. we pay a ton of money for research, to get these drugs that work, it costs a lot of money. what can congress do, what can the government do if not oppose price controls? >> we have a tremendous amount

of advertising that goes on. in the pharmaceuticals. there are only two countries in the world that allow pharmaceuticals to advertise. new zealand and the united states. it would be nice if we had total transparency around cost, advertising budgets, etc. then we would begin to get someplace. with us,anks for being toby cosgrove, president of the cleveland clinic. stocks have fangs notoriously underperformed since the president-elect's victory, but now they seem to be roaring back. this is bloomberg. ♪

david: this is "bloomberg markets." i'm david gura. it is time now for the bloomberg business flash, some of the biggest stories in the news

right now. the ecb has extended its bond buying program. the latest in his push may not be the last image does not reach its inflation goals. british energy network operator national grid has agreed to sell a majority of its u.k. gastric patient business. the price, $4.6 billion in cash. national grid will retain a 39% stake in a new holding company for the business. is not on board with a proposal by house republicans to replace the corporate tax with a 20% fee on u.s. companies domestic sales. a 20%republicans also won levy on imports of foreign goods and materials, although exports would be tax-free. plan raises prices

on consumers and could be devastating to the economy. that is your business flash update. stock benchmarks are hitting intraday record highs. are roaring back after notoriously underperformed since donald trump victories last month. cory johnson is standing by in san francisco with the takeaways on the tech sector. let's start with what has led to the turn around here. cory: i think we need to separate what the market is doing writ large and specific business problems. it is true the banks stocks have led the market for much of the year. that separation started to occur a month ago. it has been a month since donald trump was elected president. what has happened with those stocks is dramatic. the underperformance is significant, about 60 basis points worse than the rest of the index. as you mentioned, they are coming back. is tos use will to do

imagine with the business impact of a trumpet ministration will be when you begin to revalue these stocks. the notion that maybe amazon would suddenly owe more back taxes under a trumpet ministration seems silly. with other companies there are serious concerns about changes in policy that could affect operating costs going forward. david: i know you have been focusing on netflix. what are you looking at in their financial future? they are governed so much by the fcc. netflix and youtube together by some measures and on for a third of the traffic on the internet. the notion that their costs may change as the business evolves as fcc rules change, maybe something to take seriously. have more thaner three members from any one party. there are five members of the fcc right now.

beyond that, tom wheeler as chairman will be replaced by someone named by the trumpet administration. that is a concern because a lot of the policies put in place over the last eight years have been about opening up the internet, net neutrality, and taken away the cause from individual providers. that is to say the traffic from hulu or amazon will cost the same as traffic from netflix. that could change under a different fcc. let's pull in the netflix operating margins. you can see their profitability is razor thin. operating margins are so thin, free cash return is nonexistent. if they have to carry their weight and pay their way onto cable systems, distribution platforms, that will change the way their business works. david: netflix was invoked on capital yesterday, the hearing about the at&t-time warner merger.

how worried is netflix about that merger going through? cory: i think if they have to pay a lot more like the other carriers, it's a concern. netflix is able to spread to other internet service providers , into cable companies in particular, the cost of running their business. if they have to bear the cost with a new fcc, that will change their hopes of profitability, ability to spend on content. much. thank you so you can hear more from him in about half an hour when he is joined by carol massar for bloomberg radio. up next, michael lewis on his newest book "the undoing project." that is next. this is bloomberg. ♪

david: from bloomberg world headquarters in new york, i'm david gura. this is "bloomberg markets." let's get the first word news with taylor riggs. >> two democratic senators are

plan to block the confirmation of donald trump cpa nominee. sheldon whitehouse and brian schatz plan to leverage corporate concerns about climate other concerns about oklahoma attorney general scott pruitt. he has been critical of the agency he now is cap to lead, even suing the organization. donald trump is back on the road today in ohio to meet with victims of last week's ohio state university attack. he will then take his thank you roadshow to des moines, iowa for his third victory celebration. tomorrow he is holding rallies in baton rouge and grand rapids, michigan. in london, it's the fourth and final day of a supreme court hearing on brexit. the judges are asked to decide who has power to exit. the government says it can use royal prerogative to invoke the formal start of brexit talks. primes challenging

minister theresa may say she will travel hundred years of british law if she begins brexit without a vote in parliament. undecided inere the case against a former white police officer charged with the murder of a black motorist. that's according to the jury foreman. dorsey montgomery told nbc news he initially wanted to convict michael slater. daysdeliberated over four before a mistrial was declared. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. two psychology professors who met in 1960's israel are the focus of michael lewis'newest book called "the undoing project ." earlier today, tom keene asked lewis how hard it was to make behavioral economics interesting to the reader. wasn't as hard as you make

it sound. i had to spectacular characters who were in love with each other and had this tumultuous romantic story hasual -- the the shape of a love story. it was an emotional chord. that was part of the secret to the ability to write it as a book. the other was, their ideas have had so many consequences in the world. it has touched wall street, sports, medicine, the law. what i wanted to hammer home to the reader, it opens in the front office of the houston rockets, where you see the ideas that they cooked up actually being played with, having an effect on the way nba players are being drafted. >> this happened in israel, to academic psychologist. then they come to america. not really until they came

here. being an academic psychologist in israel in 1969 -- is a different thing than being here. they go off and get shot at every six years. >> one of them was cited for bravery. >> he is a warrior. essentially he does moneyball for the israeli economy. he decides who will be an officer and who will not based on an algorithm, which i still use today. -- they still use today. they are so in touch with the world outside of academia, it is not that hard to make it work. i love what you say on page 342, the exploding of light bulbs. i felt that when i read the finance, the economics part. explain the exploding of light bulbs for somebody in sports. the first place, this is

how their ideas spread. people outside of psychology read it and said, this affects my discipline. everything runs through the human mind. in sports, what you get is moneyball. thatet an understanding the miss valuation of professional athletes, baseball players, by the marketplace is a systematic misjudgment by experts about the value of players. >> so this is not about the boston red sox buying the gentleman from the chicago white sox. overvaluingudgment, others, itvaluing grows out of basic processes in human mind which these guys describe. >> the yankees paid $80 million for somebody. nothing has changed since moneyball. >> well, it has changed. i don't know if chris sale is worth what they gave up for him. i don't know. it's possible he is.

but the bigger point is, the counterweight to the misjudgment of the experts is to have a to actuallynalyst grind the numbers and give you a better sense of the probability, the value of a future player. this has swept sports, for the reasons that these guys describe. expert using intuitive judgment make errors. ago, we had some really challenging views of the market. he was a character in the movie "the big short." did the characters of the big short do the undoing project? >> the one character with whom you can establish a connection between that character and these guys is the michael character.

people know him as the person that christian bale plays. world is saying this and he is doing nothing but looking at thesembers and seeing loans that are being packaged ,nto subprime mortgage bonds being replicated over and over, that thefault swaps, world to of these things is really screwed up. but there is more going on than just human misjudgment in the financial crisis. there are bad incentives. tupide were paid to do s things. >> i love the phrases that you drop, and this is true in every one of your efforts. famous amos. who was famous amos? daniel kahneman, people know him because he won the nobel prize. >> and he did not die. amos was byy lived,

far the better known person. was quirky,skied funny, fresh, not pretentious at all, but regarded by everyone who met him as the smartest person they had ever met, to the point where a psychologist designed a one line intelligence test. the longer it takes you after you have met amos, the longer it takes you, the stupider you are. amos had an ability to see the ideas coming out of danny, seeing that they were extremely important, and gave danny confidence. danny was the idea generating machine. amos just had a clarity of a diamond cutter. to take ideas and shake them so the world accepts them. david: that is michael lewis, the author of "the undoing project." up, the surge of capital

into canada's budding marijuana industry has sent stock versus oaring, but could the ball soon burst? this is bloomberg. ♪

david: this is bloomberg markets. i'm david gura. sears stock is rising today but is leaving investors scratching their heads as to why. they posted a $748 million third-quarter loss, comparable sales dropped again and will close even more stores. let's see what the numbers show today. that the quarterly loss brings

the damage to $9.35 billion in the past eight years. sears needs to raise $1.5 billion to make it through 2017 comfortably, according to one analyst. the billionaire behind sears, eddie lambert, has spent years propping up sears by selling off its household brands and real estate. you can see the decline in store count. today's result of pressure on him to find even more assets to sell to generate cash. the losses are the result of slumping comparable sales. ofrs posted only one quarter positive sales growth since 2000, that green blip. last quarter, sales dropped 7%, including a 10% plunge at u.s. locations. it was not supposed to be this way. lambert merged sears and kmart and investors were hopeful, betting on their underlying real estate value, sending shares above $100 at some point, but sales in this talk never really

picked up. in the meantime, the company may sell its craftsmen, kenmore, and diehard brands along with its home services business in order to stem the losses. executive today said we cannot guarantee when we will return to profitability. we will be following the stock got today's session and will have more. as canada continues its march toward legalization of marijuana for recreational use, the stock exchange listed pop companies could be nearing bubble territories. the valuing of stocks has swelled to almost $3 billion in almost two years. pamela ritchie joins us now for what could trigger a decline in the heated share prices. let's start with the basics. is the legalization of pot in canada a surefire thing? pamela: canada is on track to be the first group of seven country to legalize it for recreational purchases. whoould follow uruguay

also passed similar laws. the government brought out similar legislation that would hit a number of practical issues about how the market would exist in this country. the truth is, how it would be regulated, the details, how it would be taxed, distributed, if on a medical marijuana basis, doesn't go through the pharmacies, or does it go through the liquor control board , and is it regulated that way? all of those details are far from being worked out, so these stock prices are certainly jumping but on a future story. there is a lot to be nailed down. david: a really nascent sector. when you look at the companies involved in the pot economy in canada, those growing and marketing marijuana, are they seen by investors and analysts as quality stocks? there are two different voices on this. you are putting up some charts.

company, the first marijuana unicorn in canadian terms, it had $1.24 billion valuation yesterday in trading. of 50, whichratio sounds incredibly reasonable when i list off the other ones. another producer has a ratio of 737. aurora cannabis, 108 on a forward basis. one of the analysts we spoke to who looks at agriculture generally is likening what is happening in these stocks to a .com type craze. many of the stocks increasing tenfold. a lot of those have insiders in it. if theyhe concerns is decide to take profits, we could see these tumble. those that are very much in favor of this story, betting on it all working out in the future will say erroneously, sometimes

the companies have been compared to a pharma company. we were talking but medical marijuana. quite different lead up times when you think of a farmer company the has to spend so many years intro before bringing some fun to market. pot companies are much faster generating revenue. is this a domestic story, are you seeing these companies attract a lot of foreign investment? pamela: there is a lot of foreign investment, certainly a lot of foreign interest at this stage. that said, the securities administration doing a review last year saw over 20 of the companies getting into this market with serious investor protection concerns. largely around disclosure. a nascent industry, so some investors have been careful. other opportunities around the world, australia looking at a medical marijuana market, as well as germany.

and today is by no means the only one. an interesting piece i will end on, big tobacco, according to some analysts, is one of the big competitors to some of these companies, if they decide to go in and do this on their terms. david: pamela ritchie, great to speak with you. time for the bloomberg business flash. monte dei paschi has asked the ecb for more time to put together the $5.4 billion necessary to avoid a state bailout. italy's third-biggest lender has asked for the deadline to be extended from the end of december to january 20 and hope that potential investors could boost the capital increase. the ecb will likely discuss the extension during meetings this week.

bankers at j.p. morgan chase, goldman sachs, and morgan stanley are working with these. acid agencytural has tab cerberus capital as the preferred bidder for project jim , a portfolio real estate loans, according to a person familiar with the matter, who pegged its face value at 3.2 billion dollars. servers will enter exclusive negotiations to buy at a lucid discount. oaktree capital and goldman sachs were among the bidders. that is your business flash update. let's go to julie hyman for her chart of the day. julie: i'm looking at charts of the date. we examine the dollar rising ripple effect throughout different types of markets, different assets, segments of the economy. this has been a big topic of discussion in the wake of the election as we have already seen a strengthening dollar. it looks like the year-over-year change in u.s. tourism on the white line and then the

bloomberg dollar index on the blueline. we have seen a waning of the year-over-year change in tourism, the red line denotes zero. the drop below it last quarter means there was an actual drop in tourism. interestingly, even though the chinese currency is one that has weakened against the u.s. dollar, we haven't seen a drop in chinese tourism, in part, because the economy there is still strengthening. that has been one area where we have seen this manifest. another area is within small caps. the fact that small-cap stocks have performed better since the election their large caps. you typically tend to see a high correlation between all stocks. the russell 2000 and the dow jones industrial average. that correlation has been going lower recently. the correlation between the russell 2000 and the dollar has been going up. it usually has an inverse relationship but lately it has been rising.

perception that domestically oriented companies will fare better if the dollar does into need to strengthen. one reason why is because these companies do not tend to be exporters. they do not tend to be big multinational companies. so this is one of the more direct affects we see of a stronger dollar, and that has to do with u.s. exports getting more expensive for other countries. we have the bloomberg dollar index in blue and then we have u.s. exports in yellow. this is a moving average. you can see a pretty direct inverse relationship between the two, particularly, as we have seen the dollar wayne, experts more -- exports were booming. if you like it the most current portion of the chart in 2016, exports have gone down and bounced back as the dollar has as well. we will see if this has a little bit of a lag effect. the recent strength we have seen havee u.s. dollar seems to

a lag depressive affect on exports. so something to monitor. david: thank you very much. later today, george magness, at theity of oxford china center will discuss the anti-establishment votes across the globe and why markets have been largely complacent. coming up, can alphabet bring financial discipline to google's moonshot project? this is bloomberg. ♪

david: this is "bloomberg markets." i'm david gura. out of makes a lot of money. google is profitable businesses makes $27 billion a year, but those much talked about moon shots, like the self driving cars, those businesses lose

almost $4 billion. alphabet try to do something about that. it's the cover story in bloomberg businessweek. max chafkin is with me now. perhaps most memorable is the google glass. that which was widely disliked by people who felt like their privacy was being invaded. what did google learn from that? >> it embodies a lot of things that were maybe problematic at google. amazing technology, not so sharp on the business side of that. one of the reasons that may have happened, one of the reasons that my cowriter and i think it happened, basically google operates in these fights dumbs where you are part of google, but not all the way. you build this great thing and then they do a bad job marketing it. google asnization of alphabetic, which happened last year, hiring of this hotshot cfo , was all about fixing that. that is what we investigated. area native, goes

to morgan stanley, comes back to google. she is nicknamed ruthlessruth. she has been controversial within the moonshot sectors of the google plex. in the main part of google, they like her, they think she is doing a good job. there was an attitude in parts that these moonshot people were basically wasting money. she is bringing more structure to the company in terms of budget, making the timelines a little bit more ambitious. on the other hand, it is still a weird place. they are still making driverless cars, trying to make drones, balloon internet. you have tim look at it in the context of how google was crazy before and it is a little less crazy. david: i saw the headlines at the head of google fiber is out, a lot of churn in that part of the business. what is the prospect going forward, how long can they make these projects work?

>> that is what drove us to investigate. there was the loss of the head of google fiber, the loss of the ceo of nest, a bunch of the moonshot people left. it is not like they are giving up here but they are just dialing back a little bit. you could argue that it may help them. best technology on driverless cars, nobody argues with that. but they have been beat to market by tesla and uber. there is a way of looking at it that maybe they were too focused on the technology, not focused enough on bringing things to market. maybe it will help them. on the other hand, there are people who feel this was not the company that it was before, it is turning into a mature, may be company, so they are losing people. david: how is this company different from amazon? amazon now making money off of web services and also spending money on these out their ideas and there is less concern about it. difference, at

amazon, everyone is really excited about the core part of the business. they sell a lot of stuff to a lot of people for not a lot of money and they make as much money as possible. that excites jeff bezos. for larry page, the big part of google's business is boring. it is one of these companies where they have really changed the entire media landscape and they are kind of bored with it. that is the difference, and that has implications for how they go about doing these other things. they are not looking for areas of synergy between driverless cars and search ads. david: max chafkin, thanks for joining us. this is bloomberg. ♪

york,t: 2:00 p.m. in new 7:00 in london. i am scarlet fu. oliver: time oliver renick. welcome to "bloomberg markets."

scarlet: we are likely in bloomberg world headquarters for the next hour and covering stories in brazil and frankfurt. will 2017 be the year we see fundamental shift in the market? the next big challenge for investors. oil is on the rebound once again, snapping a losing streak, while natural gas is building on gains. why this month could prove critical for natural gas prices going forward. and president-elect donald trump is heading to ohio and iowa today. he may be close to nominating andy puzder as the next head of labor. two hours andin extending this record highs. julie: it has gotten stronger and stronger as the day has gone on. interestingly, even though the main catalyst was in the morning, the ecb decision and commentary coming from mario

draghi, it was that commentary that clarified the dovish stance on the part of the ecb, and that send stocks significantly higher. all three major averages are hired. we have been watching outperformance. one of the ways to measure that is a ratio of the russell 2000 relative to the s&p 500. it has been strengthening ambersons the election sort of -- ever since the election. in the strengthened beginning and then went sideways and take another leg up relative to the s&p 500. what has power to the performance today? i have been watching these all caps, those on the index basis that have been contributing most of the gains in the russell 2000. advanced micro devices, upgraded by two levels over bank of america-merrill lynch. the companies say that in video

and gaming and graphics from those shares up 11%. ciena, the network equipment committee, saying that revenue growth is faster than the market rate of mid-single digits. tailored brands, the owner of joseph a bank, lower end of its forecast for earnings-per-share for the full year. last quarter beat estimates. science applications also beating estimates. what is interesting is the conventional wisdom has been that companies that are more domestically oriented will benefit more under a trump administration, and yet you look ena, and those are not exclusively domestically oriented companies. a couple other stocks include express scripts, the latest company to be targeted by citroen research. as he began tweeting about the company, we saw shares fall off. he said the company is, "the culprit behind pharmaceutical

price gouging." he compared it to the valley pharmaceuticals-affiliated drug distributor. express scripts came back in a statement and said that it is "a market force that puts medicine uniquely within reach by improving health outcomes." shares have bounced a little bit from those lows but still down. on top of the s&p 500 is edwards life sciences. this company disappointed in recent quarters with its sales, coming out in a presentation in a conference today and saying that its sales will be at the low end of the forecast, but still, the ceo expressing confidence in 2017 and those chairs are rising by 7%, oliver. oliver: lots of green across the board. let's check on "first word" news. trumpsident-elect donald expected to pick andy puzder as labor secretary.

an economic adviser and 72 donald trump on the campaign trail, is an outspoken critic of the obama administration's labor policies. puzder, who heads the hardee's and carl's jr. burger chains, says he opposes the overtime pay rules, temporarily blocked by a federal judge last month. secretary of state john kerry is calling on his counterparts in to counter authoritarian politics. he said that freedom itself could be in jeopardy because of the escalation of populist movements. europe has seen the rise of nationalist, anti-immigration price as prepares for multiple auctions in 2017. congress is sending president obama a defense policy bill that seeks to give republicans the final word on key national security issues. ofwould reduce the size armed forces. the senate easily passed the defense legislation on a vote of 92-7 one week after the house

overwhelmingly approve the bill. the defense bill authorizes $611 billion to run the military in 2017. the pacific cannot be me warning center has canceled a watch for hawaii that was put in place after an earthquake in the solomon islands. the u.s. geological survey says the 7.7 magnitude earthquake was 42 miles southwest of solomon islands city and had a depth of 30 miles. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. this is bloomberg. oliver: doug ramsey, chief investment officer says the great bond bull market is about to come to an end. here is what he said earlier today on "bloomberg markets." i think fellow was in july of this year and we could back up to 3.5, maybe 4% over the next 12 to 18 months. it is not that far away. oliver: joining us is kathryn

rooney vara. she has been speaking to some of the biggest asset managers. we heard from our good friend doug right out of the bull market in bonds is over. too early, too soon to call it? market seems to think so and at the panel i hosted, that is consensus. the view is that the 10-year treasury is going higher, and consensus at this panel yesterday was 3%. strong dollar, structurally strong move. and that we are at the end of the ball market. short duration in fixed income and a move towards equities, equity-like instruments. scarlet: we have seen that play out across the markets with the way that equity prices have responded and fixed income prices as well. it seems like there's too much conviction in that story. what are people getting wrong? is movinghe market very aggressively pricing in

something that has not yet happened. i do sense, scarlet come that we could see retrenchment in the first quarter if there's some disappointment, which i think is inevitable with regard to these progress policies. in the net -- progrowth policies. in the net, they are good, if we exclude aggressive protectionism. but there will be disappointment with regard to infrastructure spending. in this congress, i just think it is close to zero, the possibility of a trillion dollar stimulus. that will be retracement. the dollar as gone really far, retracement in the dollar and retracement with u.s. treasury's. that said, i think we pick up towards the end of next year. oliver: when there is this big expectation, there is a lot of room for error. what will cause us to see that there is ever? the fed doesn't support higher rates? something else that happens -- not necessarily regarding the structure of the interest rate path? kathryn: the dollar is so strong

that i think that is concerning to the fat and that will manifest in the fomc communiqués over the next year. the two things we're looking at -- we get some concrete view with regard to agenda for the trump administration. it seems we are not going to be pursuing a very aggressive trade policy, which is positive. if we turn to reduction in the corporate income tax, which would be a huge boon for the s&p 500 and equity markets, and focus more on text markets and the repatriation of overseas cash. all that would be positive. of course, there is risk, and those coming out with that the next administration -- those are inherent with the next and administration. scarlet: it seems when we talk about the policy initiatives of the next and administration, we are speaking in the subjunctive tense constantly because we don't know the tales. the chief of sovereign ratings officer in 2017 outlook report

wrote something about the tion of emerging markets. scarlet: you focus on emerging markets through your career. what lessons can you apply from the em's in advance markets and developed markets? kathryn: we saw some retracement after november 8, but huge outperformance. we saw convergence of risk between developed markets and emerging markets. emerging markets looked less risky. developed markets looked more risky. , euro brexit trum, trump skepticism, etc. there has been a convergence. the question is if we have a structural bull market in the u.s. and treasury yields rising.

that is unequivocally negative for emerging-market income. we have seen outflows since november 8. they are likely to slow going into 2017. that doesn't mean there will not be opportunistic trades. 2017 is a transition year. we will go from everyone talking about deflation and recession risk, which as you know, before the election and that is what we were talking about. after the election we're talking about reflation and how much economic growth we are going to get. does the u.s. lift all boats, or does potential protectionism heard emerging markets? oliver: pretty much answered what i was going to ask, but that is the contest now. the market goes up and people say let's get more risk on. involves getting into places like emerging markets that you have -- that do have that risk as well. you mentioned outflows. i guess getting to bearish too

quickly on the emerging-market -- are does getting to bearish to quickly and the emerging-market space? risk is like a lot of in that as well. kathryn: the flows only started happening in the second half of last year. guys are largely underweight emerging markets. in the past three to five years from a big underperform, an individual portfolios have been under allocated and emerging markets. we have to unwind in the inflows, and i don't think we will see an acceleration of contendnext year but i you will see idiosyncratic stories play out and outperform going into 2017. scarlet: such as? what are the most compelling em stories? kathryn: i personally think that the ones that are looking like a new growth trajectory, doing the right thing, brazil, russia come and india come argentina --

russia, india come argentina, i like peru. oliver: go quickly, the u nwind in the bond market. how good of a sign is that? kathryn: u.s. equities? oliver: the markets stay together as the bonds are selling off. kathryn: one thing i noted was the divergence in breakdown in relations. everything was correlated. now we are in a new paradigm. correlation has broken down. year north ofhe 2300. i think you're going to potentially get animal spirits coming to play in the second half of the year. we need some of these policies big enterprises -- baked into prices come to promotion. oliver: kathryn rooney very, thanks so much for coming from miami to new york.

scarlet: is the market getting mixed signals? this is bloomberg. ♪

scarlet: this is "bloomberg markets." i am scarlet fu. oliver: i am oliver renick. time for the biggest business stories in the news right now. bombardier plans to slash another 2500 jobs in germany. the cuts will hit three separate plans. bombardier also plans to replace the head of its germany operation. and the pharmaceutical company astrazeneca is eliminating 700 jobs in the u.s. commercial business, including 120 at its headquarters in delaware.

it will also affect sales and nonsales positions. one of the world's biggest clothing retailers is being accused of tax dodging. has allegedly used aggressive techniques to sidestep $624 million in taxes. the spanish clothing giant denies the claim. that is your bloomberg "business flash" update. central the european bank is cutting back asset purchases that extended the program for next year. ecb president mario draghi was not clear whether he is being dovish or hawkish. theier, bloomberg spoke to head of pimco's portfolio management for germany. >> certainly less than 80. i see this as tapering to the extent that it is open-ended. if there is dovish elements to it, they have put in language to increase the duration, if the

situation deteriorates. clearly, drug he has turned -- mario draghi has turned the tanker towards the exit. move,it more as a hawkish confidence on their side that they are reaching their goals. although we look at the average inflation rates they are forecasting out to 2019. it is only 1.5%. i see this as backing away little bit from their 2% target. 1.5% is the new 2%. accountableold you for the markets in in any way, shape, or form. but why is it that the euro came off so sharply while mario draghi was talking? the more it went down against the dollar -- the more she talked, the more it went down against the dollar. andrew: it is a stealth rate cut. they are cutting rates without cutting rates. they are expanding the eligible

universe for bonds and they are giving themselves the option to buy bonds and interest rates below the deposit facility right. to the extent that they do that, they will become the marginal price center of those bonds in that area. if they are buying bonds at -0.8% that is where the market is going to trade, therefore, they've engineered a rate cut, which weakens the without actually cutting the policy rates. alix: does that mean that the trade is long going forward? andrew: these policies for sure will put us deepening bias onto the yield curve. -- a steepening bias onto the yield curve. it is positive for the banks. a steeper yield curve helps their interest margins. it enables them to finance in the repo markets at interest rates below the deposit facility rate. they can reinvest their qe

-0.4%.ty at the ecb at it helps the banks and will put a steepening bias to the curve. >> i'm curious about what this means for investors. be specific about this question. at the same time we are anticipating a fed meeting next week where they will be raising rates. there is suspicion that there will be multiple 2, 3, 4 rates this year. we have increasing divergent -- a stealth rate cut on that side of the atlantic. what does that mean for investors? andrew: well, it is going to mean the u.s. is the locomotive of growth in the world, and therefore come assets that are sensitive to growth, the ones that will be attractive are going to be those ones that are more located in the u.s. area, the economic area of the u.s. from labonte perspective -- from

a bond perspective, it puts a bias towards a wider spread between the u.s. and continental europe. those spreads, however, are already at very white levels. -- wide levels. today the extent that the rest of the world -- take japan and the euro area as examples -- are still lagging behind, that will act as a bit of a break on the u.s. economy and how far the fed can go. -delivers thet forwards on the policy rate, the dollar will get stronger and noble initiate a feedback loop via financial conditions in the rest of the world onto the u.s. economy and therefore, fed policy. scarlet: that was andrew bosomworth. oliver: still ahead, is it a loophole or a savvy move? this is bloomberg. ♪

scarlet: we want to move on to the battle brewing between big-box retailers and small-town america. shannon pettypiece has been investigating how retailers used a novel tax loophole to lower property taxes. layout this strategy at the big-box retailers are using. shannon: four years and years and years, the property tax appraiser would come to the store and see how much was the land and that would be the value they use for the property taxes. in 2010 there was a lawyer in detroit who felt this was not the best way to value these stores, and came up with a new strategy looking at comparable sales of abandoned -- not even abandoned, but vacant big-box stores hundreds of miles away. you want to assess what the fair market value of these stores is? you should be looking at the once we've sold. in many cases it might cost $10

million to build but it only sells for $3 million. why the huge difference? sometimes the stores have deed restrictions on them. necessarily not want a target moving into one of its vacant stores. sometimes they are in a less desirable neighborhood. sometimes they been sitting vacant for years. there are a lot of reasons these stores the lawyer representing the retailers said it is because these stores are built to suit the need of a specific retailer, and a walmart does not necessarily want to move into a target, like you would not want a suit tailored for me. the rub, though, is that it is in the millions and millions of dollars. these cities are losing a lot of property tax value for oliver --property tax value. oliver: it is interesting. let's talk about the towns they are in. paying fewer taxes to that means

less money. what are the effects you saw and wrote about? shannon: a lot of these smaller towns especially have grown increasingly dependent on retailers, consumer spending to drive their economy, when manufacturing has dried up. i went to these towns in northern michigan. one of them, 14,000 people. market township on the other side. i went there. 4000 people in that township. mining,nally tourists, lumber communities. they were dependent on this revenue. when the big-box retailers started making this new argument, they were losing hundreds of thousands of dollars in property tax revenue. that has to come from somewhere. it comes from police and fire. it comes from the animal shelter. it comes from parks. it comes from schools to some extent can even though the state ends up paying them back for money they lose in the schools. someone has to recoup that

money. we found the libraries that had their hours cut. a group home for troubled teenagers was closed. there was a fire department -- a fire chief i talked to said he really needed to replace his fire truck and had no money to do it because of the money he had to give back to the retailers after the decisions gone on. scarlet: lots of real-world effects from retailers cutting property taxes. thank you so much, shannon pettypiece, with the latest on the novel ploys used by big-box retailers. still had -- haser: today's life, oil been down, but today seeing a little bit of green. this is bloomberg. ♪ generosity is its own form of power.

you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. scarlet: from bloomberg world headquarters in midtown manhattan, this is "bloomberg markets" i am scarlet fu. commodities are closing in new york.

that oil prices are up by better than 2% right now. $50.88 a barrel. we want to stay with the energy complex because natural gas inventories fell last week traders are looking past stockpiles now to a bitter cold ahead. we will dive deeper into that. at the moment you can see prices up, getting to the four dollar level. the, a to look at spike in china's copper imports. this is a five-year chart that shows recent gains and the imports rose by the most in eight months -- the first gain in eight months. china, as you know, is the biggest consumer of the metal, and putting to the country's top metal producer, demand in china is expected to grow 4.5%. the old economy making a comeback in china. oliver: back to natural gas prices. they are getting a boost from the cold snap we are expected to

get this winter as unseasonably warm november bloated u.s. stockpiles. the u.s.guest says should restore withdrawals. joining us is nicholas potter from barclays. --scholar pointed out scarlet pointed out on the truck, inventories have nowhere else to go. nam -- nicholas: we had a little bit of a heck of heading into winter. everyone was forecasting colder winter. lo and behold, october and november came in pretty warm and gas sold off pretty hard. now we are seeing december forecasts that are looking pretty cold and gas prices have taken off from there. it is just a matter of if the cold can hang in there and we can continue to see prices had higher from your. scarlet: this comes as a

surprise because it typically doesn't get this cold in december. people are gearing up for it in january and february. nicholas: if you look at the last few years we have had balmy december periods. a lot of people so the november warm was going to bleed into december. oliver: let me dive into my terminal here. coincidence, maybe not -- the fact that we are seeing this turned up after the election. is this the seasonal effect, or are people looking at what will happen with trump here? nicholas: this is a short-term derivative. the next few months and even through 2017, this is supply and demand-driven. the back of the curve, that is where you see some trump in fact there is people look at environmental policy, drilling policy, different policies that could affect the emp world.

scarlet: i want to get your thoughts on donald trump's nominee for epa, scott pruitt. how far will the go in dismantling recordation and what does that mean for natural gas prices? nicholas: the knee-jerk reaction to trump's election is that things like the clean power plan are at risk. it is a policy that was put into place to limit emissions for the power sector, so a negative for coal and positive for gas and renewables. if trump is not in favor and pruitt goes along with it, there would be less demand destruction for coal. who have appointed pruitt, comes from oklahoma, normally an oil and gas-friendly state. that is the first shot across the bow that the clean power plan and other policies like it could be at risk the next three years. oliver: trump talks about bringing jobs back to middle america.

he also focuses on the energy space. do you see is nearly over he can rejuvenate the industries -- see a scenario where he can rejuvenate those industries as we move towards clean energy? nicholas: it is going to be really hard. it is really not a policy decision, it is market driven. the sector has been price-driven. scarlet: economical. nicholas: even if trump was to come up with hardheaded policy, the pure economics supports gas over cold. unless there was a crazy mandate saying you have to burn coal, it is unlikely on a pure economic standpoint that the shift will actually occur. oliver: great stuff, good analysis. barclayspotter, analyst. we will throw it over to julie. she has breaking news on casino stocks plunging over headlines. julie: china is cutting in half the amount that money account holders of china union can

withdraw from atm's in macau, the biggest family market. the limits are being posed by the monetary authority of macau and take effect this saturday. all of this according to "the south china morning post." we saw an immediate, dramatic effect. wynn resorts down by 9% now. initially and came back a little amount. it is not just wynn. we are seeing effects on other casino operators, including las vegas sands and mgm. las vegas down 3.9%. mgm resorts also seeing a steep tumble. all of them having the same moves, although mgm not down quite as dramatically. what is interesting also is that some of these stocks have been coming back, to delete mgm, coming back recently on the view

that there is more of a recovery of these casinos in macau, despite the fact that we have seen the chinese government tried to crack down on corruption there. the latest headline appears to be quite a significant setback. that is the market reaction to the headlines. scarlet: thank you for keeping an eye on that, julie hyman. we want to get you to the headlines at this hour. >> president-elect donald trump is about to take off for columbus, ohio. we are looking at lightbank pictures of his playing at laguardia. he plans to meet with victims of last weeks ohio state university attack before taking his thank-you tour to des moines, iowa. tomorrow he is holding rallies in baton rouge, louisiana, and grand rapids in michigan. washington that moscow has agreed to call a meeting to discuss the withdrawal of syrian rebels from aleppo. sergei lavrov says after talks with john kerry, they decided

military experts and diplomats will meet in geneva on saturday could he says the syrian army has suspended its demand to have 8000 civilians leave the city. president obama tells cnn that people may have viewed him differently because of his race. he says he "absolutely faced office but does not see racism in the mainstream opposition but on the fringes. the surgeon general says there needs to be more research into the effect of vaping. he says e-cigarettes are not harmless, and too many teenagers are using a. 16% of high school students reported at least some use of e-cigarettes, including some who have never smoked a conventional cigarette. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. this is bloomberg.

scarlet. scarlet: coming up, fast food ceo andy puzder may end up as labor secretary. this is bloomberg. ♪

oliver: we are waiting president-elect donald trump, who is about to take off from laguardia airport in new york. he is heading to ohio and iowa. you will meet with first responders who responded to the attack at ohio state university. trump intends to nominate andrew puzder as labor secretary. he is the chief executive of the company that owns the hardee's and carl's jr. chains.

he is also opposed to raising the minimum wage. joining us from washington is , and our national affairs reporter. let's talk about puzder here. we like to keep track of who is being nominated. what we know about this guy -- obviously come he is a ceo. what we know about his background? margaret: right, well you know these fast food chains, parties, carl's jr. -- parties, carl's jr. these are household names fit if he is not a household income he is representative of a person who in terms of policies already be for the obama administration policies -- whether it is overtime pay, he is opposed to obamacare. this is different than something pick forneral mattis

defense where there is bipartisan consensus. this is a pope to the democratic establishment to say that we will -- poke to the democratic establishment to say we will challenge labor policies. scarlet: against unions, against obamacare against overtime pay. what kinds of conflicts of interest need to be resolved? >> there will certainly be questions. hardee's and carl's jr. have been the subject of numerous investigations by the labor into overtime, minimum wage, other allegations of worker abuse. a lot of those cases have been closed and many of them conclude franchise restaurants that are not -- include franchise restaurants that are not directly owned by mr. puzder's company, but they raise questions of how he will be involved in the investigation

going for. oliver: chris, you talked about this a little bit in your article about his business track record. what we know about the company aside from those sensual burger ads with paris hilton, etc.? he had tot's right, defend those ads, and he was quoted as saying they were american. bikini-clad women eating hamburgers. but in a very trump way we have seen mr. puzder speak directly to people through his own blog, and he has used that as an opportunity to rail against all sorts of obama administration regulations, most notably minimum wage and overtime. scarlet: he is not an obvious candidate to be labor secretary, chris and margaret. he has supported automation and his stores. his job, margaret, would be to boost employment. certainlywell, look,

president-elect trump wants to come out of the gate as a job creator, and this is an interesting message in question to have run for president, talking to us swap of -- talking to a swath of working-class voters across racial batteries, saying i to know you need to earn more money. how voters reconcile these 2 issues -- depending on how the confirmation hearings go -- could be really interesting. there is a short fight with democrats because both the labor democrats and the women's rights democratic coalition --there are some nominations were president-elect trump seems to be seeking to avoid a fight. this is not one of them. oliver: one last question on puzder. i grew up in central america and i remember, parties is this h-- hardee's is this company going

under and all of a sudden it came back. what did you find talking to people about what he could bring to the table that trump and his team are excited about? oliver -- chris: they were aided by the carl's jr. brand for the company. one of the issues we are looking at that he may bring to the table is automation. he has been a champion of automated machines replacing workers and cashiers elsewhere at his stores. he will have to explain that and what happens to those jobs when they go away. an interesting thing to see is the way he will pivot is to move towards worker training, retraining, practice ships, getting people trained for the jobs of the future that will come up as the economy and workplace changes. scarlet: margaret, we want your take on the other nominations donald trump has made to his cabinet. still nothing on secretary of state. margaret: right, it could either be five seconds from now or

sometime in the next couple of weeks. we have seen this ping-ponging of the idea that it has coalesced around one or two candidates and then the surge has broadened. 3 is the trend, and dissemination of -- this nomination of retired marine hs has john kelly for raised the question of too many retired generals for in hisnt-elect trump cabinet or inner circle of advisers, if there is mattis at the pentagon and flynn at the nsc. there is not consensus. there certainly debate about it. there is a difference between an active general and retired general. and there is a move of militarization across all of these post 9/11. there is an area where military experience may make sense. this is a debate that will play out in the coming weeks. oliver: trump ready to hop on a plane to the midwest.

what is he planning to accomplish here? margaret: what we are seeing with trump today and the next couple of days is a jobs message and, again, this thank-you message. he is attempting in each of these stocks to explain the nominations he has made to date in the context of his victory and his vision for the country, and unifying even when they are divisive. oliver: margaret talev and chris offer, thanks so much, guys. scarlet: let's get a check on the financial markets. julie hyman has the report. jules, what are you looking at? julie: hold on just one second. i'm looking at the etf -- the xlf is one of the best-performing etf's we tracked here and it is one of those just consistently one of those we

track among the various sectors. you can see by this gain that it is off of its highs from february 2008. not only is it on this track of hitting a multiyear high, sorry its components. and of america, jp morgan, citigroup are at in today's session as well. what is interesting is because of the recent trend we have seen, you could argue that this etf is in so-called overbought territory, but he keeps going up. take a look at the bloomberg here. i, relative the rs strength index. theoretically come when he goes about that red line, it is overbought and do for a bit of a pullback. and yet that has not happened. we will see how manage and manages to stay above that line. that's how long it manages to say -- we will see how long it manages to stay above that line. the yield curve not just in the u.s. but in europe as well, as

evidenced by what happened to the reaction to the ecb extending its stimulus even though it is shrinking the monthly amount by some extent. what we have is the bund spread between the 30 and the two-year and the u.s. spread. we have had is increasing of the which between the 2, normally does presage economic expansion. on the bottom, the difference between those two spreads. in other words, we are seeing them come closer and closer, this correspondence between yield curves in the u.s. and europe. in fact, it is the closest it has been, close to zero, closest it has been going back to 2012. this is one of the major factors, besides the idea that there will be decreased regulation, that has been fueling gains within financials. oliver: great stuff, julie. love a good double panel truck. coming up, we drive into mario draghi's decision.

this is bloomberg. ♪

oliver: we've got some breaking news with casino stocks falling today. looking into what julie just pointed out, companies dropping nine, 10%. showing you three of the big ones. , las vegas sands, and mgm. these are companies that about a year ago people were short on. they were trying to figure out what xi jinping was going to do about cracking down on spending in macau. some of these traders will be on the wrong side of the trade. you are looking at revenue. scarlet: this is a backup for the casino names. casino revenue in macau has been rising could the trend is to the upside. this is courtesy of our analysts at bloomberg intelligence.

the data just came out the start of the month. the reasons are multifaceted? multifaceted. you did have the impact of xi jinping's anticorruption drive pricking down those numbers. -- bringing down those numbers. joe weisenthal always likes a good casino story. you have been tracking the macau numbers for a while. i love a good indicator and there is a widespread understanding that one way in which people in china get their money around capital controls, get their money out of the country, is to go to macau, by a bunch of chips, gamble at some game, or maybe you are expected to lose 1.5% of your money, then cash in your chips afterwards and you have your money out of the country -- scarlet: voila. on: this report about a cap

how much you can take out of atms in macau suggests -- the application that people are reading -- the implication that people are reading is that china is trying to train -- tighten the screws and make it harder to get money out of the country. scarlet: so it is another form of capital controls. joe: we were literally just talking yesterday on the show that now that china's fx reserves are down one chilly dollars from peak of the summer of 24 -- $1 trillion from the peak of the summer of 2014, one part is the ongoing desire of people with money in china to get it out of the country. it moves like this. in addition to affecting casino stocks directly, you have to wonder what it says bigger picture about china continuing to stamp out various efforts -- scarlet: whack a mole. oliver: some specifics from the story, dealing with the china union -- how much you can

withdraw from atms. $626. does not seem like a lot of gaming to be done. joe: no, it is not. that is not an efficient way to ferry a bunch of money out of the economy. of course, it's a popular way that people in china pay for stuff domestically and internationally and trying to crack down on that. scarlet: we want to get your thoughts on the ecb -- joe: more than just -- scarlet: when it comes to the ecb, was mario draghi hawkish or dovish? -- thee initial read of first interpretation of mario draghi's announcement was that in the future they will diminish the amount of monthly bond purchases. but then people realized that they are extending it longer and had sort of gotten rid of the low cap on what they will buy it

in the end the interpretation is dovish, and the market reaction is expressed in the steepening of the german yield curve. we are seeing curves stephen everywhere in the world -- steepen everywhere in the world lately. you would expect a flattening of the short-term yields and the steepening of the long-term yield. scarlet: joe weisenthal with intimidation of the ecb -- joe: you like my visual? scarlet: there you go. and his interpretation of the macau casino stock decline. coming up, the former chief economist at ubs. this is bloomberg. ♪

oliver: i am oliver in that scarlet: and i am scarlet fu. welcome to bloomberg markets.

oliver: live from bloomberg world headquarters in new york. we will be covering stories and dallas, london, and frankfurt. stocks gaining again today is you is averages are set to close at another record. financials and materials are among the biggest gainers, while casino stocks are plunging. despite increasing competition, southwest airlines is posting some of its biggest profits ever. how the discount carrier is serving higher. donald trump is on his way to ohio to meet with first responders as he continues to fill out his cabinet. we will have the latest on trump's potential picks. one hour away from the close, and records are in sight again. aarlet: we are seeing sort of come down from the highs of the session for the major averages. the russell continues here with its gains. the russell 2000 is at a record.

the dow, s&p, and nasdaq has halvingut a housing -- of the earlier gains. a little bit of a loss of momentum as we get closer to the close. we have continued to see this rotation we have been talking about ever since the election. this looks at the aggregate market cap of the stock market around the globe, the white line here, and the bloomberg barclays global aggregate market value of bonds. we have seen this divergence here at what is interesting is that stocks have added almost 2 trillion dollars in their value since the election, and we have seen bonds lose about the same amount. that is the carnage in the bond int and addition and value the stock market. looking at bonds today, following on the ecb announcement this morning, we continue to see a thumb up in

bonds and yields move a little bit higher, even though the action was seen as relatively dovish. it is a little bit of a reduction in the monthly amount that we're seeing the ecb buy back to the 10-year yelled up by five basis points. we have been talking about his he knows, and they are tumbling. resorts, las vegas sands, and mgm -- we were just talking about it. and report that china is cutting in half the amount of money that money holders in china, union pay, can with draw from atm's and macau. this is on the heels of what has been stronger performance for these casinos. even though these are not heavy in the major averages, the tumble here coincided with that little bit of paring of gains overall in stocks. some late day news at express scripts after it was mentioned in tweets, saying the company is

the culprit the high-end price gouging. express -- express scripts says it is driving down cost of care and improving health outcomes. citroen words between and express scripts, as though shares fall by 7%. scarlet: thank you so much, julie hyman. let's check the highly -- headlines. stopgape house passed a spending bill and will send it to the senate, and it may force a weekend session. endsnt stopgap funding tomorrow, and they may have to pass a temporary one to avoid a government shutdown. more than half of registered voters say president-elect trump will change washington. say that his cabinet

appointments reveal his plans to change things. and 51% say trump is ignoring the d.c. elite while making picks. some earthquake struck pacific islands, prompting tsunami warnings for several nearby island nations. the usgs said the earthquake hit about 120 miles southeast of the capital of the solomon islands. tsunami waves are possible in seven different islands. a federal judge denied a defense request for mistrial in the charleston church shooting death penalty trial. defensee end things -- attorneys claimed that witness remarks that dylan roof is evil were inappropriate. he killed nine black churchgoers after joining them for bible study last year. his lawyer says his mother suffered a heart attack after

listening to the opening statement. no word on her current condition . global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: the u.s. airline industry has never been more competitive, and it is stronger today than at any point in modern history. that is according to the southwest airlines' ceo. earlier today, i caught up with gary kelly and asked about the benefit of the selfless five-year $500 million technology overhaul. >> i think what we will see immediately is less visible to the customer. a first release of our new technology win this week, it was flawless execution. i am very proud of our folks. these bookings are for flights after may 9 of next year. at that point, we will be down to one reservation system.

that will be a key step. it gives us the capability to be more specific flight-by-flight with some of our fares. we will have better customer experience techniques, especially when we have delayed or canceled flights. it sets the stage to really enhance the information exchanged between the company and our customers with mobile and other applications. for the most part, southwest.com is unchanged. our mobile application is unchanged. and it should be pretty invisible to the customer. scarlet: a lot of customers wanted to travel abroad, and you have one route to cuba, and two more will launch next week. concerns fromn american, spirit, and united that there is too much capacity from south florida to cuba.

do you share those concerns? started, just getting and there is really no history from which to make predictions .bout what capacity is needed we have a lot of experience developing new markets and southwest, over 45 years. when i started 30 years ago, we had 60 airplanes, and now we have 723. so that is just an element of the unknown that one needs to be patient with, and we are excited about the opportunity. we make a commitment to the community, and we plan to stick with it. scarlet: which airports do you feel need the most improvement? would that open doors for you? >> we need to do that. the top priority is the air traffic control system. that we can spend all the money we want on the ground, but if we do not have a way to manage the flights in the air, it will be all for not.

we're spending a lot of money on the airports at we have invested in modernizing dallas love field. houston hobby, fort lauderdale. there is a half billion dollar makeover going on at lax right now. a major project going on here at laguardia. so the money is there and is being spent. we need to continue that. if there are opportunities to continue to invest in airports around the country, we need to do that. but i am not as worried about that, because that work has been done, has been done well, is continuing, and there is a path forward there. where we are not making progress is with air traffic control modernization, and i think that is where the real opportunity for improvement is. scarlet: what is the biggest obstacle? >> it is complicated. if the air traffic controllers do a phenomenal job or my but we are asking them to use 1950's

technology to do that, which is horribly expensive to maintain and obviously does not take advantage of current technology. in the simplest form, airplanes do not fly as efficiently from as theyto point b could. it is not as the crow flies. there are opportunities to take advantage of satellite-guided navigation systems and vastly improve the efficiency of the flight profiles. so that is, in its simplest form, and it is obligated because there are so many flights and because of communities -- it is complicated because of so many flights at because of communities where airplanes might fly over. the devil is in the detail, but we are not moving forward fast enough. in terms of governance and funding, i think it would vastly improve that progress.

scarlet: washington, d.c., has its work cut out for it. southwest has been fuel hedging losses about $1 billion this year, hundreds of millions of losses expected for next year. what kind of conversations are you having about the best approach to hedging? >> hedging is a long-term prospect. we have been hedging since the first gulf war, 1991. if you look at the program, to date, over that 25 and-your time period, we have gains. we will have protection in place when we needed the most, which is where prices go up sharply. we would expect we will pay more than the market when prices go down. obviously, if there is a belief that that coverage is unnecessary, then we would stop hedging. i would analogize it to having home insurance, car insurance. the insurance is in place to

protect you when you have a catastrophe. have $1 aspire to billion of extra costs for fuel? of course not. so we have to be continually evolving our for rim to try to manage the cost of the foreground as efficiently as we be continuallyto evolving our program. we want to continue to hedge but in a way that avoids that exposure we have experienced in 2016. billld add that our fuel is down, including our hedging program costs, $2 billion a year we are achieving all-time record earnings and returns on capital during this time period. to the argument that when prices go down, we are going to do very well with our hedging program, and we have. but when the industry was really

suffering in the 2000's, we were doing very well. that is when you really need to have the hedging program in place. if you do not have it in place, you will miss those opportunities. scarlet: that was the southwest airline's ceo. oliver: coming up, the dow and s&p head for record closes after the ecb extends its bond buying plan. we will look and see if the record will continue in 2017. this is bloomberg. ♪

time.t: breaking news on it is jumping on report from dow hire that time is said to to help field interest on perhaps selling itself. about a week ago, bloomberg news

reported that time spurned a takeover approach. this is according to people familiar with the matter. time perhaps looking to sell it self. hearst corp. magazine said to be interested in buying some time publications. guest was our next saying, money is pretty cheap out there. let's get back to markets and talk about u.s. stocks. they are advancing to new records. joining us is eric davidson from wells fargo private rank. he oversees about $180 billion. let's start with what you are seeing from that $180 billion. you have one of the best views into the retail investor. what are the conversations you are having? the typical investor needs to be skewed to the investor class. the investor class and the

establishing class are highly correlated. most investors are establishing left or establishing right. they are perplexed but happy. they do not know exactly why arep won or why the markets rallying, but they are certainly happy the market is at these all-time highs. oliver: are they getting bullish ? >> they are not as bullish as you might expect. from a contrarian signal, that is probably a good thing. at the least, you could probably say they are becoming less bearish. stresss posttraumatic lingering out there, so many have been reluctant to get into the market. they see the potential of things that could go badly. now they are looking at how to get back into the market. scarlet: who is leading this rotation into the cyclicals and defensive's, into equities from fixed income? is it institutional investors? >> more than likely, it is more institutional investors.

the retail investors really are not out there. we have seen a huge move in the bond market. money coming out of bonds and living into the cyclical sector, out of the more defensive sectors. oliver: we talked the day after brexit. you said, look, this is going to rebound right back up, so don't panic. a lot of people were panicking, and you called it. you were right. there have been a lot of these sort of v-shaped rebounds. we have a different industry-leading every day. how exciting is that? >> we might finally be moving into a stock picker sort of market. it has been difficult for active management versus the indexes. we're seeing a lot of dispersion of returns. i know there are a lot of active managers hoping that is the case. we do not believe it is an either/or perspective.

scarlet: how much of an active fund manager position job now is to be -- active fund manager's job now is to be a political analyst? >> with the president-elect, talking about risk on, risk off, moving into a tweet on, tweet off sort of market. if you know with 100 percent clarity what will happen with a political outcome, you do not necessarily know with a market implications will be. some were saying that if trump were to win, it would lead to a big selloff in markets. it certainly did overnight, but look at what transpired. oliver: you said when you talk to clients, you found a balancing act when weighing in on this topic. it is something we're constantly discussing. and there is the role of the in between, the smart beta investing. does the average investor

understand that? >> we have those conversations all the time. many investors are smitten these days by passive investing. many people are now looking at smart beta. there is the challenge that that implies other beta is dumb beta. i don't know. any move away from market cap is a move essentially to a smaller cap bia. -- bias. that may make sense, but you have to realize that you are moving away from a large cap bias. are you willing to make that that? the bond market is a little different because it is weighted by how much money the company or country borrows. scarlet: when we started, you said retail investors are not really convinced by dissertation encyclicals.

when do you see them started to make this move? what will be the catalyst? >> it is between fear and greed. there is a lot of iteration, and a lot of it is great -- regret and envy. i think we're seeing a lot of regret. talking to them about how to get back in and about dollar cost averaging, we like to remind investors that even though the stock market is at an all-time high, the other components, commodities, international, developed, emerging markets, even bonds, are not at all-time highs. maybe some dollar cost averaging is a good way to get in. oliver: of those, which do you like the most? >> we like what is going on in the united states. oliver: eric davidson of wells fargo bank. scarlet: there has not been much volatility recently, but that does not mean there are not moneymaking opportunities when it comes to the mix. -- to the vix. this is bloomberg. ♪

oliver: this is bloomberg markets. scarlet: it is time for options insight. julie: joining me today is the equity derivatives strategist from macro risk advisors. let's talk about the vix futures. it is on the bloomberg. it is to look at the expectations for what is going to happen with volatility in the future. a simple line chart. the application is that there is this expectation of rising volatility. what stands out to you about the vix futures? >> it is interesting that you have a very low spot vix, which really just tracks the cost of volatility over the next 30 days. we have gotten through the elections, through opec, and all

these things are now behind us, so we are now settling into the holiday season. that is why you see the vix print and 11 handle, 12 handle today. it raises pretty steeply. that is what guys like me call a steep vix curve. it says we do not expect too much volatility in the near term, but we expect an increase in volatility going out a little bit further. i think there are two reasons. the first is that people expect the reversion to higher volatility levels once we're past the holiday season. the second is called term premiums, the possibility that some unknown event, could be specific or could be the market blowing up for no reason like it in theoes, an unknown market causing the steepness.

chart you'reher looking at is an etf that checks the volatility of volatility, the vxf. it -- the vxx. it has sort of flatlined. years been popular this and has seen an upsurge in volume, but it looks like a flat line on a longer-term. >> if you look at that chart, it looks like it may have been trading near $30,000 or whatever the number is your but it was never trading that high. vix futures. -- if all these unknown unknowns failed to materialize and status quo continues, we expect the vix futures to just roll down to the spot level. so this is from consistently buying and holding vix futures.

julie: that is what most people do not do. >> but that is what the vxx does. julie: what is your trade? >> go long and profit from the roll down in the vxx. buy the january 25 put, selling put.4 put, sell the 22 we're profiting from a continued decline in the vxx going forward. julie: thanks so much for your time. scarlet: thank you. stephen englander joins us to talk ecb, euro, and the dollar rally. ♪

>> let's get to first word news this afternoon. president-elect on trump is back on the road today and scheduled to speak at an event this hour to think first responders and meet survivors of last week's attack at ohio state university. he then takes his roadshow to

des moines, iowa for his postelection victory celebration. he's holding rallies in baton rouge, louisiana and grand rapids, michigan. are plain tonators block the confirmation of the epa nominee. corporateto leverage concerns about climate change and pressure moderate republicans to oppose oklahoma attorney general scott pruitt who has been a fierce critic of the agency he now plans to lead. more americans are optimistic about their finances and about the u.s. stock market. growing optimism about the u.s. economy following the election of donald trump. of stocks next year, 38 percent say they expect a better financial year and the same amount anticipate higher household incomes.