prisoners committed of drug crimes. he has commuted the sentences of 1715 people, more than any other president in u.s. history. rick perry once called for the abolition of the energy department, but that was then. today, he appeared on capitol hill before the senate natural resources committee in an effort to leave the very department he once wanted to close. the former texas governor use the opportunity to backtrack on his 2011 proposal. perry: if confirmed, my thought is to lead this department surrounding myself with expertise on the core function of the department. my past statements made over five years ago about abolishing the department of energy do not reflect my current thinking. in fact, after being briefed on so many of the vital functions of the department of energy, i regret recommending its elimination. taylor: the 66-year-old perry

said he would advocate american energy in all forms, including the normals. -- renewables. with this witnesses say some of the -- witnesses say some of the victims in the historic building ran backart of tehran into grabbed valuables. -- will be the ambassador to the u.k.. trump congratulated johnson, and referred to him as an ambassador, and said he was going to st. james, a reference to the london posting. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg.

scarlet: live from bloomberg's world had quotas new york, i am scarlet fu. joe: and i am joe weisenthal to we are 30 minutes from the close of trading in the u.s.. scarlet: u.s. stocks are lower with the dow jones industrial average drag down. joe: the question is "what'd you miss?" scarlet: the hearing for steven mnuchin has just ended. we will look at the tough questions he had to answer on tax reform. ibm reports after the market close. investors are bracing for more decline as the company moves from selling hardware to the cloud. and we have great voices from davos, switzerland. soros, lloyd blankfein, and u.k. prime minister theresa may all coming up shortly.

joe: let's look at where the major averages stand as we had toward the close. abigail doolittle is standing by. abigail: at this point, we'll cap declines for the major averages. this also represents a renewed bout of intraday activity. we have modest the client, a continuation of -- modest decline, a continuation of intraday volatility. we also have the russell 2000, the small index, down even more than the major averages. the growth index is down .9%. unraveling. -- and the s&p 500 is trying to creep higher, but we do see that earlier the s&p 500 had been slightly higher on the day, now lower. intraday volatility is taking place. that being said, the intraday volatility is relatively tight. we go to the bloomberg,, this is

a nine-month chart. the orange lines represent a 1% increase and a 1% decrease to the downside. it has now been 28 days since we have seen a 1% increase after the election. it has been a record for this bull market, 68 days since we have seen a 1% decline on october 11. the white boxes represent period the tour we have seen that theing range -- period -- period where we have seen that trading range. apple is a drag after it was downloaded -- dot -- exxon mobil is a drag after it was downgraded to a sell. we have health care weakness in pfizer and merck. we also have shares of citigroup trading lower after reporting a

solid fourth quarter, but we see a continued selloff in the banks after the big rally at the end of the last year. finally, one more stealth selloff, maybe not so stuffy, the retail sector. the retail etf is down sharply. targeted once again down, after closing down 5% yesterday. the stock is down 2%. goldman downgrades shares to a cell on a disappointing guy down. retailers two other dragging down. joe: thanks, abigail. "what'd you miss?" we sat down with lloyd blankfein at the was economic forum in this world economic forum in davos. he asked him if they got it wrong when it came to trump?

lloyd blankfein: i never thought the markets would go down. again, you're talking about markets -- there are markets, economy, and then there is real. first of all, the markets were trading more favorably anyway, but if you look at the policies that trump has committed himself to, they are quite stimulative and market supportive. you look at spending on it for --ucture, a lower tax rate spending on infrastructure, a lower tax rate, removing regulation, those are all quite stimulative. again, stimulative against the , but far more- stimulative than what people were expecting to happen had the democrats won the election. john: trade would be to -- would seem to be the one area where you would be at loggerheads with what the trump administration seems to be saying.

is that the area you were the most about? lloyd: i read these things pretty carefully. i don't know -- i will tell you, i will say this, if he is anti-trade, i am at odds with him, but at the same time, what his rhetoric and what the spokesmen are around him -- again, he is not a careful politician, and it is all -- hard to get the new wants in 140 characters, but what he seems to be saying is consistent with i want to renegotiate these trade deals, wanted to be more symmetric, fairer, and if not even fairer, more favorable to the u.s. interests, just as every politician will pursue national interest. i do not find fault with that. that is not inconsistent with having free trade. i will take that point of view until i see otherwise. john: you would take that case to the chinese? this is a man you have to deal with? lloyd: i think so, and there is

a core of legitimacy about all of this. if you extrapolate to an extreme, further than what he said, you can find, all of a sudden -- it has been cast in a is where xi jinping endorsing free trade and donald trump is against it. i do not think that necessarily the case. think of the currencies. it cans sovereign, adjust its currency, but it is adjusting its currency against the u.s. dollar. so the u.s. dollar has a point of view of how the chinese currency should trade against the u.s. dollar. it is a metric. i think the pushback that is happening now is a normal give-and-take between two politicians and statement -- statesman looking out for the national. interest i do not find anything -- national interest. i do not find anything wrong with that. john: you know there could be --a reaction of how much they could take -- they took a stance

on taiwan. they swallowed that one. lloyd: people have negotiating positions. erthink the world will be poor and divide a smaller pie if there is not free trade back-and-forth. each country has an interpretation of what free actually means. people find things disadvantageous, and people are pursuing their national interest. that is fair game. two me, i see all of this as a goaliation toward an end of getting a better deal for the country. scarlet: and happening right now, that is president-elect donald trump advise president-elect mike pence at arlington national ceremony -- cemetery. wreath atjust laid a the tomb of the unknown soldier as part of a ceremony honoring veterans. this is one of the preinaugural rituals that trump is participating in today.

than 24iously, less hours to go until the official inauguration. a lot of things last night, a dinner last night in honor of mike pence. here they are at the tomb of the unknown soldier in a litan laying a wreath. scarlet: jessica, with less than 24 -- once again, with weston 24 hours to go, you can watch the -- with less than 24 hours to go, you can watch the whole thing on bloomberg.com. lloyd blankfein was also asked if there is anything he would like to see in terms of regulation being changed. lloyd: people have been interpreted as for regulation, against regulation -- i think in the trauma following the financial crisis people wanted to make sure, at all costs, we never got into that situation again. well, if you are going to guarantee we never get into that situation again, ever, ever,

ever, you put in belts and suspenders, and you reduce the productivity of the united states to the return of t bills -- the treasury bill. nobody wants that. it is not a shock to me the pendulum would swing far in one direction and over time it would come back. there was a lot of reluctance to go back and open these rules for amendment because everybody was afraid that once you opened it up it would be another free-for-all, and nobody knew how it would come back, so nobody wanted to open it up. i think we're going to open it up. it is a long time afterwards. cooler heads -- look, after the great depression, which was in 1929, there was a securities exchange act of 1933, 1934, 1935, 1937, at 239, and over a long period of time, we did this.

we legislated quickly. dodd-frankcould be a of 2017 as well. scarlet: that was a conversation with lloyd blankfein. joe: coming up, more on our conversations from the world economic forum in davos, including, what, if anything, radel you thinks is attractive in terms of global investment -- ray dolly oh thinks is attractive in terms of global investment, and george soros talks to francine lacqua. this is bloomberg. ♪

scarlet: what did you miss -- market opportunities were offered up by ray dalio, who runs one of the world's biggest hedge funds. erik schatzker asked ray dalio where he sees opportunities across the markets right now. ray: right now, stocks, in my

opinion are moderates -- modestly attractive, but not big-time attractive, and whether or not they are going to be in a big bowl move is going to be a function of this engineering exercise. how long does that take -- is it something that fizzles out because it is a good concept, or is it something that become sustainable, and the honest answer is i don't know. erik: so they are modestly attractive, but not very attractive? ray: that is right. erik: is there anything that is very attractive? ray: there is nothing that is very attractive --hardly anything that is very attractive. erik: and bridgewater scours the globe looking for attractive things? ray: yeah. right now it is a time for uncertainty, time for a relatively lower profile. you know, there are possibilities. i don't want to get into our market positions, but i think that between now and six months from now we are going to learn a

lot. there are political conflict issues. let's say the trump policy, as it regards china, it is an adjusting question mark because i think politics in global affairs will have a bigger effect than it normally has. so, let's say the china think -- to take the two china policy and make it such a public issue would not seem to be a good move. in other words, normally negotiations begin -- exist behind the scenes. in a political normal year, you bring that to the four for both sides. face -- donald trump's down, how will this be negotiated? from an outsider's point of view, that would not look like a

smart move. is that a smart move? it is hard to figure that it is. the politics of it, the conflicts of it, will play a much greater role than traditionally politics have played. politics have always been a factor. populism and politics in next year will be a more important factor. erik: if you believe, as you do, in the rise of populism and the force it is going to bring to bear upon the globe, politics, the economy, presumably financial markets as well, how do you express the view? who wins, who loses? aat becomes attractive as result, what becomes unattractive as a result? ray: well, globalism is threatened. emerging countries are threatened. domestic companies are benefited. you know, there is a whole host of those touch of things? that go on, right? the question -- things that go on, right?

the question will be will the openness that began in the 1990's with trade agreements and globalization continue, or will it reverse? scarlet: dallas ray dalio of bridgewater talking with bloomberg's parish oscar in in davos.ik schatzker joe: francine lacqua also sat down with george soros. she asked him if she still thought europe was in danger of falling apart -- it he still thought europe was in danger of falling apart. danger facing the european union is disintegration, and that was a slight exaggeration because wantsr putin nor china europe to disintegrate. each have their own reasons. market.eds europe as a

provideeds europe to the capacity to produce something, because the putin regime is only capable of exploiting natural resources. , and theyt produce need europe to provide that capacity. therefore, europe is not going to disintegrate, but coming as the dominance of -- under the dominance of putin's russia andd be a distraction, undermining of all the values that europe stands for. -- so, it is really not much better coming under the dominance of putin's russia than to disintegrate.

francine: you have also said open society needs defending. why is it under such attack? george: because, basically, it is threatened by a different model. i distinguish between two -- it is a broad generalization, but basically, there are two forms of government. one where the leaders are elected in a democratic process, and they are supposed to serve the interest of the people who elected them. obviously, i say supposed because there is an element of hypocrisy there. than theh preferable other model where the rulers are manipulating the people to serve their purposes. that is the other model, and

currently, unfortunately, that other model is on the rise. , both in --ing because russia, china, possibly, and many other countries, including my own. so, i hope we can get people who --ieve in an open society get it to gather and defend the principles of open society. joe: that was george soros speaking with bloomberg's francine lacqua at the world economic forum in davos. scarlet: it is time for the bloomberg business flash. crude exports surged to aiu november before it led reduction in global

outputs. they ship a .6 million barrels a day, the biggest output for any month since may of 2003. the saudi's say the cash crunch that squeeze commercial banks last year is over and there is little need to take further steps to increase liquidity. many credit will pay the investment bank handling the shares fell about 3% of fees according to people familiar with the matter. they say the top five banks agreed to underwrite about $1 billion each. bank of america, jp morgan chase, morgan stanley, and ubs are lead advisors. bloomberg has learned that alibaba's agreement to sponsor the lyrics through 2028 is said to be worth $800 million. olympice biggest in history and would put them on

the same level with coca-cola and u.s. electronics. that is your business flash update. joe: up next, we will look at u.s. manufacturing data. ♪

scarlet: i am scarlet fu. "what'd you miss?" toufacturing activity seemed end on an upstream according to surveys. you are looking at dallas, richmond, empire state, which is new york, kansas city, and philadelphia. all had expansionary postings in november and december. if you go to the far right of the chart, you see the pickup. they all point to higher simultaneously. the last time that happened was in november of 2014. the problem is even though this is survey data, we have not seen a followthrough in hard data.

in factory orders and industrial production. joe: that is a striking chart. most of the data looks pretty good. here is one minor piece of not as exciting data that came out this afternoon. we often look at the atlanta fed wage growth tracker as another way to look at how much people are getting paid. it had been at 3.9% last month. it kicked down to 3.5%. the trend is clearly higher, but wages are clearly a salient point for inflation and the federal reserve. here is one data point to pay attention to. chart showed, and others, things are going up. keep an eye on this one. maybe it is a one-off. scarlet: it had been on a steeper plant -- steeper footing. joe: something to watch. scarlet: it could be why equities are muted. the dow off by .3%. the s&p 500 losing a similar

amount. , off 13 points. from new york, this is bloomberg. ♪

♪ >> we are moments away from the closing bell.

the dow jones industrial average erasing its 2017 gain. the treasury secretary nominee lawmakers.hin -- to are tuning in live on twitter, we want to welcome you to our closing bell coverage every weekday from 4:00 a.m. to 5:00 p.m. -- 4:00 p.m. to 5:00 p.m. it is inauguration day eve, u.s. stocks falling ahead of that major event tomorrow. nine out of 11 major groups in the s&p declining. pretty broad-based decline with utilities leading the drop. joe: really sort of in a range going into this inauguration. we haven't seen much movement in a while. i think people are eager to see once things shake out once the administration officially changes. scarlet: the industry groups faring the best, you can see industrials leading the way

higher. up 6/10 of 1%. telecom gaining 1/3 of 1%. stocksjust flashing 2 that did move on steven mnuchin's hearing. plunged during the confirmation hearing because he said he would never endorse the idea of recap and release. what he had said is they should leave government control. right now fannie and freddie's profits go to the you as shareholder -- u.s. shareholder. western union will pay a penalty for wire fraud, apparently not doing enough to prevent money laundering. you can see their rival money gram got a boost. at one point it gained as much as 7.1%. joe: let's look at the government bond market. two-year yield unchanged. moves higher in the 10 year yield right down to like 2.3% or around their earlier this week.

now at its highest level of the year. a slew of good data, philadelphia fed, a bunch of other data this morning continuing to boost there. you can see the one-week chart of the 10 year yield. write down by 2.3%. yesterday we got yellen seeming hawkish. right back up there. scarlet: pretty dramatic move over the last few days. what you were talking about the real estate selloff. scarlet: here's a dollar. we had seen it in an earlier. . -- it earlier. it really lose steam after steven mnuchin's confirmation hearing said the dollar was struggling. this followed president-elect donald trump indicating the dollar was too strong for his liking as well. the movers here that we wanted to pay attention to on ecb day was of course the euro. it had dropped after the ecb left rate policies on hold. now marginally higher by 3/10 of

1%. mario draghi said there are no convincing signs of an upward trend in inflation. euro stronger versus the yen. losing ground versus the pound. a quick mention of the turkish lira, the worst performing emerging market currency today. he trading at a one-week low versus the dollar. unicredit said it was a sustained selloff not due to any external shots. because turkish monetary policy is still too loose, the central bank needs to push funding costs even higher if he wants to get its lira to a place where it doesn't keep losing value. joe: let's look at commodities, here is the board. gold falling a little bit today, still above $1200 an ounce. holding in there, crude rallying a little bit after a reported decline of u.s. stockpiles.

off two nickel coming point 5%. some of these industrial base metals have been on a tear lately. they've all just sort of cooled off. up for myold is still 6% year to date. it has gained as much as 5% this year. for 2017, still in the green. those are today's market minutes. "what'd you miss?" the european central bank reconfirmed its intention to keep its bond buying program going until at least the end of the year. resident mario draghi said rising inflation will eventually bring higher interest rates. here with the outlook for the federal reserve is fred heiman. year, he predicted a recession in about five to six years' time. ands start on central banks where they stand. the data in europe has been getting better, yet the

extraordinary stimulus is still in place. are we at a point where we can start thinking about tapering? >> i don't think so, but you are right. i was in london, germany, italy last week. everybody tells you it's getting better. it's not getting a lot better, but it's getting a little better. what they did today in the ecb an incredible mosaic where central banks are still very easy. and obviously since the beginning of the year, telling to keep doing it for a whole year, it's like $700 billion. the bank of japan is doing the same thing. the world economy is picking up, and central banks are still very easy, very accommodating. of tension is this causing, the fact that the ecb hasn't pulled back at all but the economy is doing better, rates have gone into positive german inflation data

seems to be picking up? they typically don't like this sort of situation. what is the reaction to the ecb there? >> you are right on it. they are not happy. ecb to be prefer for a little bit more hawkish. that's definitely the mood in germany. but, you have the elections coming up in france, in italy. isould guess that the ecb trying to have a little insurance policy to keep moving. for whatever reason, the central banks are very accommodative relative to the data you mention that came out this morning. scarlet: i want to jump in here for a moment. american express reporting fourth-quarter adjusted earnings per share of. $.91 that misses the consensus estim ate. as for its outlook for the full year, it's looking anywhere from $5.60 to $5.80. it sees much more room on the upside than the average analyst estimate.

still, if you look at shares in after-hours trading it is down by that are than 1%. joe? joe: we are back here with ed hyman, the ever core isi chairman of evercore partners. aboute just talking inflation in europe. we got fresh inflation data out of the u.s. yesterday, latest cpi data, kind of a mixed bag. some measures are clearly trending up. this is different ways of looking at it, the white light is cpi service and x energy. line is cpi service and next energy. is this another head fake, great transitory period of 2011? >> it looks to me like this is the real deal. you go back to 2011, employment must be two or three percentage points lower. the atlanta fed index today was down some, 3.5%.

or 8bably look at 6 inflation measures per country. as of 10 days ago, i decided inflation is turning up. for example, in the eurozone, their pmi for output prices, not including input prices which are mainly driven by energy, apple prices, their index has clearly turned up for europe, for the u.k. would call it pricing power, more than inflation. economists scalded inflation. if you can sell an airplane ticket or a car or a starbucks for more, you call it pricing power. scarlet: ibm just reported results as well, fourth-quarter -- operated earnings-per-share $5.01. that is higher than the consensus estimate. the top line was also better than it is submitted, revenue of $21.8 billion.

for 2017, ibm is looking for operating earnings or share of $13.80. you could see ibm shares gaining more than 1.5% in after-hours trading. we will be discussing ibm later on. let's get back to our conversation with ed. joe: going back to europe, you say it's the real deal. this is actually happening. companies in europe and elsewhere have pricing power. is this just a matter of the slack ending up, the old phillips curve working in the end, we run out of slack and now people can raise prices? >> that's a fair way to put it. what we just saw on ibm, earnings for the fourth order are coming in generally better than expected. part of that, that's a typical pattern. the ibm numbers you just reported fit with that pattern, which is over the past dozen days. part of that is pricing power,

companies have a little bit more pricing power. they also have wage increases to compare with. it looks as though you generally have an upswing and a little bit of upswing in inflation or pricing power. scarlet: you notice something interesting which is counterintuitive great there is a link between wage growth and corporate profit margins. margins actually rise during the early stages of gains, at least average hourly earnings. that doesn't seem to make sense. >> it doesn't make sense. decades it has happened every time. you have -- one way to think about it is that if a company can raise their prices, by 5%, the revenue goes up by 5%, and if their wages are half of sales and wages go up 5%, it's about a wash. because wages are a part of sales.

in the past, i think also if wages go up, companies do have more pricing power. when they don't have wages to go up, they don't have pricing power. >> wages are going up because it's a better economy. >> and pricing power is going up for the same reason. stick with a straight you will be talking more about ibm and then the first 100 days of a trump residency. this is bloomberg. ♪

scarlet: "what'd you miss?" earnings per share for ibm beating analysts' estimates. scarlet: "what'd you miss?" the outlook topping the consensus, 2017 operating earnings per share of $30.80 at least. joining us now is bloomberg intelligence senior analyst, and

will -- and still with us is the ever core isi chairman. for a while we been looking at ibm as a company in transition, from services to the clouds specifically. how far along in that transition is it? is it completed? >> we are still along the curve. it seems from the numbers they are making decent progress. guidance is a big thing for 2017. as you said, suite was looking at 1374 that came out. the whole question is going to be details around what's going to be the tax rate. to be a lot of that discussion as well. i think it's for the first -- it's a sense of relief for investors that they can generate that much money next year. joe: a company like ibm is connected to so many different industries and so many geographies that it can be used as a read through to the world. can we get any insight about their strength -- whether it is strength or weakness from this report?

>> i think we will get a lot of that on the call. in the first go, if you look at a few companies that reported in the past, there have been some pauses in the u.s., but europe has been relatively strong. the elections have caused people to pull back slight spending, but i think that might change. scarlet: our producer points out there was a surge in software spending specifically according to ibm. i want to touch upon what you said, on the call we will be waiting for details on dividends and buybacks. fiscalwe wait for stimulus to boost the economy, will companies move away from the old way book of spending on buybacks -- playbook of spending on buybacks? >> ibm, one of the things i see is that economies are getting a little bit better everywhere. japan looks better. china, we will get a report on gdp tonight. we talked about europe. ibm is truly a global company. i think they are getting a lift from a lot of different places.

on top of that, now you have trupm coming -- trump coming. there are three channels to which trumponomics works. tax cuts, repatriation, defense spending, infrastructure. deregulation will occur in the first 100 days. increase in animal spirits producing almost all the surveys, small business confidence have shown an increase in animal spirits. one of the things ed just brought up was the regulation. stuff like that increases a lot of spending because people have to go out and fix their i.t. that they do complaints work over the last several years. they have to undo that, so you have to put in a lot of tech work to do that stuff. as far as animal spirits goes, they have an extreme focus on ai

and watson. you could see a lot of startups doing artificial intelligence work using watson and that can help the ecosystem of the ibm watson. joe: thank you very much for joining us. next, we will continue talking about those animals earth and the economy -- animal spirits and the economy. this is bloomberg. ♪

scarlet: you're looking at a live shot of arlington national cemetery, where president-elect and mike pence were laying a wreath at the tomb of the unknown soldiers. this is part of the ceremony honoring veterans, and one of many of the preinaugural rituals that donald trump is participating in today. all of this is available on the bloomberg at live go.

excuse me, at the lincoln memorial. this is the concert at the lincoln memorial. earlier on trump was laying the wreath at the tomb of the unknown soldier. "what'd you miss?" as president-elect donald trump gets ready for an important title change tomorrow, his cabinet getting grilled on capitol hill. one thing that will be important to the incoming administration is growing the economy, gdp. >> we should be able to get to 3% to 4% sustained gdp. i think that's absolutely important. i think that as a country, the most important issue we have is economic growth. joe: still with us, the evercore isi chairman, evercore vice chairman. we just heard about steve mnuchin talking about wanting to crank up gdp. you talked about several channels through which trumponomics would still work. is it sustainable, or would it be a sugar rush? can we kick into a higher gear? >> i think the economy is doing

better than most people think. you mentioned earlier, the of 3.5 fed racetracker, percent. if you add to that employment which is up about 1.5%, you get an income number of 5%. nominal gdp, a comparable measure, is only 3.5%. i think we are underestimating gdp, but the global economy as we talked about earlier is doing better. i think the report this evening, china nominal gdp at 9%. trump is moving into a situation where the economy is already tending to do a little bit better. 4%terms of getting to 3% or growth, that's a real stretch. i'm forecasting 3% growth for 2018, i feel like a hero. i hope mnuchin is right. if it happens, there will have to be an increase in productivity --productivity. joe: you mentioned the entire

world is looking good right now. here's a chart i've been tracking in my bloomberg, all the major surprise indices. aat is really striking, it's five-year chart. every single one is above the red line, every single major region. all the em's, they are all above zero. they are all coming in better than expectation. scarlet: that's pretty zero. remarkable. you said you were in europe last week talking with clients great in your discussions with them on economic growth, profit outlooks, stimulus doesn't come up a whole lot anymore, does it? >> it doesn't, but all. when i look at the things that are most important to me, that is one of them. remarkable. you said you were in europe last week talking withthere a very rn abouttrump, about china, europe, about the vote coming up, about valuations. there's almost no discussion about what central banks are doing. ecb today saying they will increase their balance sheet for the next year is a huge positive for growth, same with boj.

joe: this is pretty remarkable. central banks have been the only economic story, for the most part, since the financial crisis. then it feels like in the last month or since the election, the switch has been flipped and we are onto a new theme for the first time in a while. >> i've been on this theme for a while. when i travel around the u.s., city after city is doing very well. whether i go to denver or portland, oregon, or even places like buffalo, they are all doing well. i think the u.s. economy is on firmer footing that would actually be consistent with 4.6% unemployment. scarlet: you mentioned perhaps nominal gdp may be understated if you look at things like wage again. what other metrics on the u.s. economy are understated? >> gdp would be the main one, which is the overall measure. employment has been strong for month after month. wage gains are now up there.

the things that are driving the u.s. economy are not the typical things. their health care, higher education, sports and entertainment, new tech, like facebook, and ec-ommerce -- e-commerce. when i travel around, those are the things driving local economies. the other thing driving them are young people getting out of school, getting jobs, employment of the millennials is now 3.8%. ex-millenials is up .8%. the place you want to grow is growing. joe: at some point we will have another recession. what could push us back into it? what could kill the momentum? what are the risks? is peoplest risk thinking we are not going to have a recession. i just did some work this

morning on the yield curve. it is still very positive. i think this cycle will end with inflation going up, the fed tightening, and then you will have a recession. i would guess when that happens, people will say it's not going to happen. it's very important to trumpet because he's already talking about 2020. some way he has to stitch 20 without, 18, 19, a recession. scarlet: is there enough skepticism? you can't have everyone to positive because that sets us up for a negative surprise. despite the rallies -- hedgeweek we survey 40 funds. they moved from slightly positive to slightly negative in terms of their positioning. individuals have taken about $6 billion out of equity funds in the past couple of weeks,

didn't put much in before t hat. the consensus for the s&p at the end of the year was 2200. clearly less than it is now. reasons,r a variety of uncertainties on trump and europe and china, valuations, people are still pretty cautious. joe: trump obviously wants to reinvigorate u.s. manufacturing. one thing that could make it particularly tough is if the dollar gets too strong, and he actually talked about that too "the wall street journal," thinking it was too high. is the dollar to strong in your view? how much of a threat this that posed to him? ed:view? i think the u.s. economy is like a bulldozer. it can run over a stronger dollar. it definitely has a drag, but the dollar had a big surge twice in recent times. 1985 it exploded.

all the 1990's, growth went up, and you had the tech boom. of the things i focused on, strengthen the dollar right now is not a huge negative are the biggest negative it presents is through earnings. scarlet: do you think he's focusing too much on the strong dollar at the risk of missing other things? ed: i don't know. he focuses on everything. that's what makes it so entertaining right now. if he wants to tweet on that, it's a dangerous game, but he's having at it. joe: ed hyman, evercore isi chairman. awesome conversation, thank you for coming on. scarlet: coming up, we will the state of small banks and regional banks in the u.s. this is bloomberg. ♪

>> let's get to first word news this afternoon. inaugural festivities get underway at the nation's capital in washington, d.c. at a concert, the entertainers have taken the stage. in a short while the president-elect will be addressing the crowd. you can track donald trump's welcoming remarks there at live go. quite a crowd already forming. take part and observe the inaugural activities. but also protestors. quite a crowd already. we will f all of the events over the next 24 hours. in other first word news, president obama in his last major -- as his last act of commander in chief is cutting short 335 federal inmates

convicted of drug crimes. the president has now commuted the sentences of 1715 people, more than any other president in u.s. history. steven mnuchin on capitol hill in his debut to become the u.s. treasury secretary. the former goldman sachs executive told senators that his confirmation hearing, he will be an attentive steward of the post. >> i'm committed to be very responsible in my position there, and make sure that i properly provide the support from the treasury department, and i would take my responsibility very seriously. mnuchin said he will enforce sanctions against iran. he denied he used offshore entities to avoid paying taxes. woody johnson will be u.s. ambassador to the u.k., according to a source close to the matter, who confirmed the posting after comments made at a washington luncheon by

president-elect donald trump. johnson,gratulated referred to him as an ambassador, and said he was going to st. james, a reference to the london posting. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm a lisa parenti. this is bloomberg. joe? joe: let's get a recap of today's market action. once again, red across the board on the major indices which you see there. but nothing too dramatic, the laggards, the dow, further and further away. we've really been any holding pattern. scarlet: also erased its 2017 gain. we will keep an eye on that. ibm reported a response after the close, it's 2017 outlook beating analysts' estimates. stock with higher, but it has turned around.

no currently down almost 2% in extended trading. american express also reported. joe: province falling 8.2% -- profits falling 8.2% next to expenses. income coming in below expectations. really not much of a market reaction there. scarlet: "what'd you miss?" steven mnuchin taking issue with current regulation, with banks smaller than the wall street banks. the u.s. treasury secretary nominee discussed why current regulation might harm the competitiveness of regional banks. >> my biggest concern is that this regulation is killing community banks. we are losing the community banking business. we are losing the ability for small and medium-sized banks to make good loans to small and medium-sized businesses in the community, where they understand those credit risks better than anybody else. i think that we all appreciate the engine of growth is with small and medium-sized andnesses, and in my role

in working with the different regulators, i would make sure that we did what we could to have proper regulation, but eliminate overlap as well as make sure that the banks are and medium-size businesses and we don't end up with a world where we only have 4 big banks in this country. joe: joining us for more on the state of the banking industry is bb&t ceo. kelly joins us from winston-salem, north carolina. thank you for joining us. we just listen to potential treasury secretary steven mnuchin talking about the need to pull back on some of the regulations that he said are killing community banks. when you look at the regulatory landscape, what in your view are the key changes in terms of specific regulations that ought to change? he's 100% think right. over the last seven or eight years, the dampening effect of

excessive regulation-owned medium and small banks has been pretty incredible. the been a combination of actual regulations themselves which have come out of the amendment. even more importantly, it has been the application of the regulations. that you have is regulations that stay the same but under two different leadership or james they are applied differently. when you take your regulation and you apply it to the extreme in terms of detail and application, you take away all of the flexibility of the bankers to be able to do their job. tot mnuchin was trying explain is that small, medium sized bankers know their communities and their clients, and they can make good decisions about the ability of the clients

to repay the loans. many times the rules that we face on the regulatory perspective and gap accounting perspective do not allow us to make the loans we know will be repaid. scarlet: i wanted to follow-up a little bit on that. you mentioned that they should be applied differently. which specific regulations ought to be applied differently then? kelly: there are many regulations that relate to lending itself. requiregulations extreme accounting information, extreme, precise descriptions and valuations and collateral, and any number of process elements that are required, which are kind of ok for $50 million loan to a large corporation because they can afford to provide the

information and they typically have the information. when you require that same amount of exact information from a small, medium-sized business, they essentially do not have it. small business companies -- they do not have cfo's and treasurers and hundreds of staff members. when the banker is forced to go to them and require the same amount of information that the big bankers require and the regulations require,when it basically bought some down so they cannot comply, they cannot provide the information required. it does not mean they are not qualified. it means they do not have the minutia of detail that the regulations require. scarlet: so they are written with a different client base in mind. i want to switch gears and talk about the overall environment in m&a. sentiment has improved. you yourself have said it's a new day. explain to us where that leaves a bank of bb&t's size. do you want to get bigger through mergers and acquisitions or can you get your optimum size through organic growth?

get to our optimum size through organic growth. organic growth looks much better going forward than it has for the last 8 to 10 years. probability of us achieving double size going forward with organic growth is much better than it was looking backwards. it would still be good to do some m&a. to, we havealluded m&a todayfferently at than over the last 8 to 10 years. the role of digitize a she is changing with blinding speed. the m&a today branches is decliningo rapidly. the preferences of the consumers are changing instantly. and so, it's not that you can't do a bank acquisition. you simply have to price all of that movement in the metrics in terms of a deal that you might try to do. joe: speaking of the economy -- there's obviously a lot of enthusiasm about a gdp pickup. if we look at the survey data that has come out, looks very

strong, everyone is waiting to see if the hard economic data accelerates. from your perspective at the bank, are you seeing that acceleration in the economy already? so, what's happening as we speak is that there is a dramatic shift in mood, and optimism, if you will. there is a definite amount of really robust activity in small, medium size is mrs., -- busine sses, talking about plans to expand their operation, new employees, new trucks, new computers. a lot of that has not taken place as of yet. of surveysone lots with our clients, with our regional presidents. i did that earlier today. thatffirmed across-the-board, across our 15 state market area, there is dramatic improvement and optimism. there is huge pent-up need to invest. the small businesses have not invested in trucks and computers

for 8 to 10 years. they are driving trucks with 20-year-olds using computers. the regulation has potentially been erased. i'm encouraged there's enough enthusiasm that there are people toeady had applications execute on his expansion plans. you currently serve as the president of the federal advisory council. wonder if you have been approached about the federal board of governors. kelly: i served three years on the federal reserve or in richmond and just completed my fourth year and as president of the advisory council. enjoyed the experience.

nor have i --i have a full-time job today and i'm enjoying it. scarlet: would you take it if you were asked? kelly: i would think about it. i'm still working. i believe in serving my country. i love what we do to promote jobs and

scarlet: a hedge fund manager was found guilty, convicted in a fraud case where the manhattan trade deliberated for just over 90 minutes. they found him guilty of conspiring to inflate the price losses fromhide investors straight this was a three year long case that included the suicide of a fellow executive and defendant. vince --und guilty of conspiring to inflate the price of bonds to hide losses from investors. he was found guilty in all counts in the fraud case as well. joe: the u.k. prime minister theresa may joint bloomberg editor-in-chief john mikel swayed earlier today from the world economic forum.

she voiced a reestablishment of trust in businesses, and whether she worries about the pound. may: what we've seen through the economic data we've seen is the strength of the u.k. economy. the imf made the point we were last year the fastest-growing major economy. we have figures which showed unemployment coming down once again. believe that is a good strength. i believe it's an economy people want to invest in. since the brexit vote we've seen major companies like nissan, google, facebook making investments. making very significant investments here in the united kingdom. >> a cheap currency was at least part of the incentive for some of those things straight i wondered whether the point at which that cheap currency becomes a vulnerability. prime minister may: i think what

people will look at in terms of investing in the u.k. is the fundamental strength of our economy. i think this is an important part of our industrial strategy. looking at the economy for the future, looking at how we can ensure the environment in the u.k. is the right environment, the best environment to do business and to invest. >> another complaint from here has been looking at the rest of europe. the rest of europe has not reacted to brexit in the way business might want. it hasn't immediately tried to go to the structural reforms that in the past britain has been a champion of. prime minister may: i set out in the speech i gave earlier this week when i was talking about , that the u.k. for brexit and negotiations for the party -- i said i did think it is important that the 27 remaining states looked at the brexit vote and look to see if there were any lessons for them from that vote or it -- vote. it is important that people feel

the have confidence in the institutions they are dealing with and institutions are making decisions for them. visionput forward this of britain, which is free trading, this new version. i look across the atlantic and i see donald trump, who are least on the face of it takes credit protection. what are you going to say to him on that? prime minister may: i think of we look around the world generally there is a question about free trade, which has been questioned. it goes back to what i was saying earlier about for people. sometimes they feel that globalization has been negative for them. it's important for us to go out and give that message and show, both responsible behavior by business, government is taking the right moves to ensure that economies work for everyone, but also show people the value of free trade. trading around the world. it is enterprise, the energy and growth that is the engine of our economies. >> it seems there is a

misunderstanding around the world, that people blame globalization when technology costs than many more times jobs. prime minister may: it's interesting if you look at technology. technology is changing the workplace, but technology creates jobs and often creates jobs in areas that are unexpected. it isn't quite a zero-sum game in that sense. i think what people feel very often is that sometimes they see people appearing to play by a different set of rules. sometimes there are some companies, or perhaps individuals within them suggest to the public there is one set of rules for those people and another set for ordinary hard-working families. i want to show that businesses responsible that people are playing by the same rules, and that together we can grow, we can develop that prosperity that will be good for everyone. joe: that was u.k. prime minister theresa may with bloomberg's editor-in-chief earlier from davos. scarlet: a programming reminder, tomorrow bloomberg has special

coverage of president-elect donald trump's inauguration. it begins at 10:00 a.m. eastern .ime you will want to stick with us for that. this is bloomberg. ♪

scarlet: for u.s. equity investors, president-elect donald trump's inauguration .an't come soon enough trad erik schatzker asked the morgan stanley ceo about how to invest in this current environment. >> this is a market that screams for you to have a view. prices,rices, bond commodities, with what happened

with oil and what's going on with the currency's last couple of days, you can't as an investor to sit and watch this. investors, hedge funds, and individuals have a view. secondly, the rising rate environment clearly, we have $150 billion in deposits. that's positive for our business. this sense of optimism which is feeding through the markets keeps going. clearly corporations are going to be more active in terms of anything. there's a lot of positives. erik: are we going to see the predominance of that activity in the united states or do you think some of this enthusiasm and optimism we clearly feel in the u.s. is going to find its way overseas to markets that have been more challenged? >> no, i think it gets tempered by what's going on in the environment. looking at what's going on in europe, issues relating to the

migration crisis which has been a true tragedy. the chinese economy slowing down to a more normalized rate. i'm separating that from what's going on in the u.s. k: you say it's a market that screams for review. what is your view? if you look at bond prices and yields as they are today, if you look at relative currency values, what do you see? >> firstly, commodities are normalizing. opec madee cuts that recently were meaningful trade the participation of the russians -- number one, commodities more normalized. you don't want oil around $70 to $100 a barrel. i think the equity markets -- earnings are growing. about how talking expensive the markets are. but by definition, every day equity markets in a growing

economy should finish at a record high. infiniteme model, the -- the economy is growing and they should finish at a high. i think the underlying fundamentals are strong. >> there is so much movement. what's going on with rates -- ch airman yellen implied maybe more than two rate increases this year. seeing lots of movements around bond prices and interest rates across the u.s. but also across europe. joe: that was james gorman, and the morgan stanley ceo, with bloomberg's erik schatzker in davos. scarlet: it is time for the bloomberg business flash. american express says fourth-quarter profits fell more than 8%, as expenses topped analysts' estimates. eps came in a $.88, $.11 short of projections. amex is spending more to recover

from the loss of its largest costco. partner, and we have some breaking news. this is president-elect donald trump making an appearance at the lincoln memorial, where there's already a concert underway. he is with soon-to-be first lady melania, his wife. music earlier at the lincoln memorial, a concert. all part of the inauguration festivities. it will become official around noon tomorrow. scarlet: president-elect donald trump arriving at lincoln center, where they had already been holding a concert. beautiful day. joe: look at that sky. pretty impressive. scarlet: this is bloomberg. ♪

scarlet: tomorrow we will bring

you more interviews from the world economic forum in switzerland. you will want to stick to bloomberg for that. joe: tonight i will be looking at china releasing fourth order gdp, that is out in just a few hours. scarlet: bloomberg politics has special coverage of the inauguration, president-elect donald trump gets sworn in. it begins at 10:00 a.m. the swearing-in is at noon. joe: that's all for "what'd you miss?" thanks for watching. scarlet: this is bloomberg. ♪

"bloomberg technology." >> you're watching "bloomberg technology." hill duringapitol confirmation hearings on a

failure to disclose assets in an offshore corporation. rick perry also in the hot seat, the nominee for energy secretary. he used the opportunity to backtrack on his 2011 proposal to scrap the department he has been picked to lead. president obama is cutting short the prison sentences of more inmates. he's commuted the sentences of 1715 people, more than any other u.s. president. marquis floyd say continued shooting to make sure the police officer was dead. he was arrested after being on the run for more than a week. the countdown continues to donald trump's inauguration. he was joined by vice president elect mike pence and members of the trump