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tv   Bloomberg Markets Americas  Bloomberg  December 27, 2017 12:00pm-12:30pm EST

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>> we will bring you the latest. >> at how should wall street firms respond to the new u.s. tax regime, we will explore what options are on the table. what is in the stars for the year ahead in mergers, the makers who appeared destined for m&a and 2018. -- in 2018. halfway into the trading day. in the green.
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>> paring back some of the gains, we knew this would be a light trading week and volume all 50%. that's why them off 50% -- volume off 50%. volume on the off 30% for these small-cap stocks that benefit the most from tax reform. some green on the screen. some of the individual members we are looking at today, natural resources update. , all of theser natural resource mining companies hire today after china ordered their top copper producer to scale back production, halt the output and stamp out winter pollution and some of the natural resource prices game with the price and copper. -- in copper. we will look at the run that copper has had. our eighth straight quarterly
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copper --opper you in gain in copper. someone noted the price of copper is testing the key resistance level and if you break the resistance level from the bottom and go up top, a bullish sign. let's look at the london metal exchange index, a two-week period, not only copper but aluminum, zinc, nickel, industrial metals are up for eight straight days, the longest streak going back since 2009. that would be your metal update. shery: a few days left in 2017 and the focus is on the fed. reports say the white house has pimcoiewed someone from and an economist for the vice chair position. what it may mean for monetary cac 4 conrad bring in
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dequadros. we see a few names, will it matter to how the fed operates next year? >> it does not mean they will necessarily operate their family next year. be comfortableld in the position of vice chair which is usually a position held by economists, people with phd's in economics. that will be an increasingly important role in this fed with jay powell as fed chair without the economist background. i do not think it changes the way things will work with the fed next year. if you listen to the comment of both of the names that have been floated, they sound like they are pretty much middle of the road and policy will be determined by the data, the employment rate and what happens on the inflation front. shery: the unemployment rate continues to decline which will
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cause problems for the performance of the phillips curve, were you surprised at how much more ability the economy had? >> there has been a little bit of surprise in that. declines in and limit rate are not entirely surprising when you ofing -- we will have more the same next year with the economy above potential and 2.5% growth once we close the books on 2017. we will probably have similar pace of growth next year with a little bit of an extra booth -- boost from the tax cut and the pace of growth at 2.5% is above the economy put into the girl and unemployment rate will continue to decline. i think we have seen some pressure on wages, particularly if you look at certain segments of the weights picture. we will see more, how does that feed through to inflation? i think an environment of highly accommodative monetary policy, businesses will pass on higher wage costs and we will see some
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modest upward pressure on inflation. >> the pace of rate hikes? >> probably four rate hikes versus the fed three rate hikes. more of a hawkish you in my view -- view in my view than what the fed suggested and what the markets are pricing based on my expectation that inflation will move towards the target. not that far off. we will see inflation move towards 2% by the end of the year and combined with the declines in the unemployment rate which, for those with a phillips curve you of the inflation process, they will process -- it will make people a little bit uncomfortable about the more medium-term inflation outlook which will keep the fed gradually pushing rates higher. talking about a fun rate low by historical standards and still some room to go before the fed gets to a more neutral rate where they see some were a little bit below 3%. shery: the unemployment rate falls as more jobs are created, how beneficial and helpful is it to offer a buffer, if there is
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outside or external shocks to the economy? >> the unemployment rate is a considercator as we the potential for a turning point in the economy which we do not think will happen in 2018. as the rate begins to rise, a signal that the economy is approaching a turning point, that is not something that is in my forecast for the next two years. i do not see that as being a buffer. the labor market looks in pretty strong shape. we are likely to see some slowing in the pace of job creation in the next couple of years because the pace of job creation is unsustainable with the employment rate as low as it is an with the lack of available labor resources that can be employed. we are about to see slowing in the pace of job creation, about 170 thousand jobs per month which i do not think a sustainable through the next couple of years. shery: how big is it of a possibility that the economy in the u.s. could be rocked by
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geopolitical threats across the world, not to mention a big political year for emerging-market. we have presidential elections in mexico, also in columbia, brazil general elections, so many elections. midterms and the u.s. >> i do not think it is a growth effect on the u.s., any external risks will depend on the magnitude of those events. the u.s. is a large and relatively closed economy, the trade does not -- is not a huge part of the economy. next year, we are likely to see the trade deficit widened. i do not think we will see a big impact from extra limits on the u.s., unless it is unexpected. the midterm elections, it is important, what will play into that is how the economy response to the tax-cut that congress has delivered. my view is that it will be
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modestly added to growth but the elections will be important in november of next year. shery: we had a guest yesterday talking about the potential trade protectionism arising from what this within the tax package, especially anti-trade provisions. european firms have complained about. will that have a negative impact on what could happen on u.s. economic growth, especially when expectations are so high. >> some of that, a lot will depend on -- a lot will be rhetoric, it will be interesting to see how the rhetoric of all was -- evolves and economy that is likely to see wider trade gap next year, something that this white house is not going to become people with. it is hard to get around the reality that the economy potential to grow is probably somewhere around 1.5% at the present time.
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maybe that moves higher as we see greater amount of capital -- over the next couple of years but now we are operating above potential. we are close to full employment. maybe we may be beyond that with the and employment rate a little about 4%. that and -- above 4% and in that environment, the trade gap will widen. there will be a lot of rhetoric involved with the trade situation. shery: thank you for that. conrad dequadros, rdq economic senior analyst. let's check in with emma chandra. >> former president obama has given his first interview since leaving the white house come his role as a guest editor on bbc radio, prince harry asked him how he felt about -- at president trump's inauguration, he said it was a sense of satisfaction for a job well done. mr. obama: all the work still
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undone and concerns about how the country moves forward. overall, there was a serenity. more than i expected. >> he did not mention president trump by name and president the use ofd about social media by world leaders and it was broadcast today but recorded in september. vladimir putin has submitted his nomination papers, required for him to run for reelection. his visit to the central election commission came one day after his supporters signed up to endorses candidate. russian law requires independents to secure endorsements from 500 people and he is seeking his fourth residential term as an independent candidate with an approval rating of about 80% towards the march election, it looks likely he will win. beijing has declined to confirm a report that it ships have been transferring oil to north korean vessels in violation of un security council resolutions.
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as first-person for the chinese foreign ministry cites a lack of solid evidence and this is after a south korean tanker reported u.s. satellite allegedly spotting chinese ships transferring oil to north korean vessels in the west see around 30 times since october. liberia national elections committee is expected to releasing provisional results from its presidential runoff today. are choosingillion between a former soccer star and the country's vice president. get enoughte did not votes to win outright in the first election. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am emma chandra. this is bloomberg. billionaireg up, leon black is facing a tax overhaul the limit, the decision
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he makes could alter the whole private equity model. details next. this is bloomberg ♪.
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>> this is bloomberg markets. thatew u.s. tax regime private equity firms make an -- consider changing from an llc to a corporation thanks to lower corporate tax rate and that could alter the model on wall street but what are the trade-offs? our team leader for u.s. investing has some insights. publicly traded partnerships, apollo global management, taxed differently from corporations. >> that is right, considered
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pass-throughs with lots of privately held businesses across the u.s. are taxed as. llc's, lps, partnerships like law firms, and when you have a partnership like that, the owners have the income from their firm pass through to them and it is taxed at individual rates in most cases. first is a corporation -- versus a corporation publicly traded, that income is taxed at corporate rates and with the new tax bill, the corporate rate went from 35% down to 21% at the top bracket. now you see some publicly traded partnerships like private equity firms like apollo starting to consider and doing the calculus, does it make more sense to convert into a corporation and forgo the pastor partnership model in order to get the benefit of being a corporation of the lower tax rate? there is a delta that there could be benefits from converting. it is complicated and not easy to do. shery: if you change into an
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inc. or from an llc, you could get the benefits from the funds, investment from mutual funds. >> one of the big things they are considering, at apollo that a structured at a partnership and publicly traded, it means that investors in that, stockholders of apollo get a k-1 form at tax time, more obligated and firms send them out at different times and oftentimes stockholders are waiting to file their taxes and do not know when they will get the k-1 form. it is a bit complicated and it means a lot of asset managers who run mutual funds are in a lot of 401(k) plans have foregone investing in that, and including that -- then in indexes because of the tax implicitly and if they shifted to a corporation, that may enable them to easily include in an index and have more access to shareholders 401(k), mutual funds. shery: private equity firms
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would win from this tax bill and their management fees would be taxed at a lower rate. >> that is right, two big wins for businesses, whether a pass, an additional 20% reduction, if you are a corporation, the tax rate is dropping from 35% to 21% at the top rate and for private equity and hedge fund managers, carried interest, something on the table during the president's campaign and for much of this year, once again did not get touched. they got shifted slightly in terms of a one-year to a three-year time rate horizon but essentially carried interest to lives as a tax rate for private equity and hedge fund managers, a surprise to a lot of people. shery: president trump said hedge funds were getting away with murder and it stayed with the loophole. investors themselves, what are they saying, what is apollo global management saying? >> leon black, the head of apollo set earlier this month they were looking at whether or
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not they would convert from a partnership to a corporation. they had not decided and they were still doing the calculus. it is tricky to know how much their stock may win in terms of how much it went up in value with the convergent and hard to be the first mover. if another firm did it and it boosted stock price, lots of private equity firms which are structured as partnerships and may follow but hard to be the first one to do it. shery: you do not know if you can go back to being what you were before, a complex issue. >> absolutely. shery: thank you for joining us, peggy collins. time for the bloomberg business flash. the recently passed u.s. tax overhaul, which we have just talked about, will cost barclays a one-time charge of $1.3 billion, a cut in corporate taxes requiring some companies to recalculate the deferred tax assets that have accumulated in their balance sheet.
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barclays said it expected benefit from the bill long-term but its ultimate impact is under review. tesla's fourth quarter store checks indicate the model three deliveries are tracking below the sale site estimates according to a analyst who wrote that delivery estimates were cut from an estimated 15,000 down to 5000 and also wrote that the cuts are "likely acceptable for the buy side as bullish investors focused on whether the model three has minimal defects and favorable consumer reviews." chinese automaker has a great to buy a stake involve oh -- in volvo. the new volvo shares to more than just a merger 8% of capital. people familiar with the matter says the deal is very that $3.86 billion. $3.86 billion.
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while 2018 be a stellar year for m&a, a company that appears destined for m&a in 2018 next. this is bloomberg. ♪ ♪
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shery: this is bloomberg markets, i am shery ahn. bloomberg's gadfly out with her second or compilation of dealmaker horoscopes, 12 ceos and top executives over a variety of industries matched with their zodiac signs to appear destined for m&a in 2018. tara vuitto always been in the zodiac signs? >> something fun, last year we look at who would be the top dealmakers in the coming year
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and we thought it would be fun to do something different and write it as what do we think their horoscopes would be like if we wrote it at those terms. shery: one has to be jeff bezos. amazon has made so many headlines, whole foods, huge. >> after that deal, people are taking them seriously. heard rumors about amazon buying retailers, it has not happened as they have not had big acquisitions. halted came out of nowhere and says they can do large-scale m&a, whatever industry they go to will send shockwaves. talk about interest in dish network. it is a takeover candidate and will finally see it's day next year. amazon -- reports of a partnership. do not know if it will translate to a full takeover and dish network sitting on spectrum that could be useful while his networks, $40 billion worth by bloomberg intelligence estimates and it is worth a lot to a
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buyer, amazon, verizon, comcast, t-mobile, companies try to build up for five g technology and dish network will be an important player in this. viewers, jeff bezos is a capricorn. >> a disciplined sign. we will see what people zone next year. shery: talking about dish more, lost thousands of subscribers and why would they be appealing? >> a hard year for dish network's. a lot of consumers are cutting the cord. i'm over theng tv, top service which has been very popular. they have a lot of competitors but it is a great asset for other companies. t-mobile joining with dish, joining their wireless spectrum to bolster their network and also maybe rebranding sling as a
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t-mobile service. a lot for a buyer to work with. shery: a lot of opportunity in the media industry. what can we expect from cbs and viacom. viacom still losing ratings. >> sheri redstone still issues of her father and -- fill the shoes of her father. she decided it was not the right decision to do that but now with disney buying significant assets from 20% free fox -- 20 century fox, the time warner deal a gently going through, and a lot of other companies -- it makes copies to make cbs and viacom stronger, whether it means putting that together or cbs getting bought, a lot of opportunities for them and she will not want to sit it out. shery: a jim and i --
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pfizer and thes talk has been about taxes. they want to do a megadeal but when there is regulation on the tax front because they have overseas cash they could use for m&a. we are getting to the point with resolution on taxes, it is likely we will see pfizer step into the m&a rang. shery: this was a fun article. thank you tara lachapelle. q is the onlyf i show solely focused on etf. that is next. ♪
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♪ julie: julie hyman and for scarlet fu. this is "bloomberg etf iq." the assets, risks, by tradeds offered funds. ♪ julie: 2017 saw a record year of low volatility. as we look at 2018, our guest


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