tv Bloomberg Daybreak Americas Bloomberg November 1, 2019 7:00am-9:00am EDT
confuse the jobs and wage data. in big oil really means big dividends. exxon and chevron will report this morning. and china talks tough. the government says it will take a bigger role in hong kong as the communist party meeting promotes strong leadership above all else. welcome to "bloomberg daybreak" on this friday, november 1. i'm alix steel. happy jobs day. let's take a look at where we are in the markets. -- wee debt huge rally had that huge rally in the bond market yesterday. 0.2%.ures up by about it was a really big move yesterday. also watching the dollar. the dxy fell the most in october since january 2018. weaker dollar now permeating to the markets as well. time now for global exchange.
we are going to bring you today's market moving news from all around the world. our bloomberg voices are on the ground with this morning's top stories. we are going to start with the latest in asia, where chinese officials concluded the biggest meeting of the year in china. the gathering of the communist party's central committee focused on the economy and hong kong protests. going me is and occur in -- joining me is enda curran. what did we learn? ,nda: it was a four-day closed-door meeting. they spoke mostly about rising domestic and international risks, and of course, the backed up domestically being the slowing economy, unrest in hong kong, and internationally, trade war with the u.s. we didn't get any major economic initiatives out of it, but we did get some signals that it is
doubling down on party control, and ensuring much stricter oversight of hong kong. there was no sense of compromise when it comes to dealing with protesters. alix: thank you so much. now we went to head to germany, where christine lagarde begins her term as ecb president, becoming the institution's first female head. she will face a host of challenges as the region's economy slows, not least skepticism over negative rates. that first day checking out for christine lagarde? reporter: it is a little pentacle mektic -- it is a little anti-climactic since lagarde's first day is a holiday. we are certainly expecting a lot from her as she starts her term. we are expecting a strategic review of the policy, and for her to be far more in the spotlight.
we are expecting her to take on a communication style effort to her predecessor, mr. mario draghi. we are also expecting her to amend some of the risks that have emerged within the ecb septembers contentious decision to add stimulus, so there's a lot to look for there. alix: thank you very much. we turn now to retail. jcpenney is one step further along the comeback road. the retailer is unveiling a store to test ideas before rolling them out across its 850 store fleet. the new ceo gave her first broadcast entry exclusively to bloomberg's emma chandra. >> it has been an interesting decade at jcpenney. as i've been very overt on my earnings calls, there's been a lot of fundamental problems to fix. we are marching down that path, but at the same time, we are
running a parallel path of transformation and innovation because we know we have to be more than just a department store. know emma chandra joins me from london. what was your big take away from the interview? emma: you heard jill soltau really acknowledging the problems that jcpenney has faced over the past years. stock performance is down 90% since its 2012 hi, currently trading at about one dollar a share. they've also cycled through a number of ceos. she is really saying it is her comeback plan that is going to work. she spent the last year overhauling her leadership team, talking to customers, gathering data. what she said is this new brand defining store, the fullest expression of what a jcpenney department store could be much should really resonate with consumers. they are going to use it to test ideas. willhings that work
rollout across its 850 stores. there are some concerns because that costs money. how would they finance a big overhaul of all of its stores? a number of analysts i have been talking to question whether or not jcpenney needs quite so many stores in the first place. while this is very interesting along its comeback road, it's going to be interesting to see how this will play out over the coming year. alix: thank you very much. in the u.s., investors focusing on the latest jobs report. analysts are expecting a decline of 85,000, sequentially coming down. joining me for more is michael mckee. what can we expect? michael: it is a report of superlatives, but probably not a superlative report. the 85,000 number, the lowest forecast since 2012. it's because of the gm strike. 46,000 workers outcome of the most since 1970. the chartern
communications strike and any suppliers, you probably see 55,000 manufacturing jobs lost, the most in a decade. it leaves us with very little, but if you add back in almost 55,000, you end up with 140,000, barely above last month's 136,000. is it supplied, or is it demand? are companies no longer meeting to add a lot of workers, or can they not find workers? we will get some clues in the other numbers today. unemployment is supposed to barely change, may be tick up. we will also be watching hourly wages, may be distorted by gm after a flat reading last month. it is expected to rise by about 0.3%. ed.course, watch hours work if companies are really cutting therethey will go first. ism is coming up this morning.
we haven't had three months in contraction in that number in quite some time, so if that happens, that is something to keep an eye on. bottom line, we get ism in payrolls again before the next fed meeting, so probably not a lot of monetary policy applications today. alix: appreciate that. finally, the impeachment process took a step forward yesterday. u.s. lawmakers voted to move to the public phase of the inquiry targeting president trump, putting him on the path towards coming only the third president to be impeached. rep. pelosi: when we have a president who says article two says i can do anything i want, that is in defiance of the separation of powers. that is not what our constitution says. so what does it state? what are we fighting for? defending our democracy for the people. alix: joining me from the white house is kevin cirilli.
now what does the white house do, and what does the house do? kevin: it's business as usual for president trump. my sources tell me they still largely view this as a political matter. they've also used it as a fundraising effort to hopefully rally their base. the next step in this process for democrats are to continue as usual with the private, behind close door testimony from officials, but now the opportunity for several of those committees is to hold public hearings. i spoke with several who said they would like to see the transcripts released with regards to those closed-door hearings. the time on of this still very much remains in flux. there are some sources who tell me they still anticipate this to be wrapped up by the end of the calendar year, but other democrats were openly worrying now that this could drag on into next calendar year, and that would pose significant risks for political contenders in the 2020
presidential race. alix: thank you very much. in other news i'm watching, president trump is warning british prime minister boris johnson on trade. he says it will make it difficult for the u.k. to strike a deal with the u.s. he spoke to brexit leader nigel farage on radio. pres. trump: i know that you and him will end up doing something that is terrific. if you and he get together, that is an unstoppable force. corbyn would be so bad for your country. he would take you in such a bad way. he would take you into such bad places. alix: jeremy corbyn didn't take that very well. we have some breaking news from goldman sachs. the bank is raising its reasonably possible legal losses to $2.9 billion. that changes from the second quarter, where legal losses were about $2.6 billion, so putting
more money away for those legal losses now, almost $3 billion. that stock is unchanged in premarket. also, alibaba earnings are out right now. in terms of earnings, it looks like a really big beat, coming yuan.0 also taking a look at revenues, coming in about 119 billion yuan, plus mobile monthly active users trumping estimates, coming in at 785 million. that stock, watch that into the open as well. coming up on this program, much more on your morning trade and analysis of the markets in today's first take. this is bloomberg. happy friday, everybody. ♪
[laughter] alix: oh boy. we are getting kind of rowdy here. we are joined by our in-house team of wall street veterans and experts. carl riccadonna, vincent cignarella, and with us is lauren goodwin, new york like investment -- new york life investment economist and multi-asset portfolio strategist. ?hat is your call carl: we're looking for a weaker than expected print. if you really want to get some sense of the underlying momentum in the data, you have to look at private service sector hiring, which has been running in the vicinity of 120 thousand, down from about 170,000 at the start of the year.
alix: what about the ancillary effects of the auto strike? if they are spending less, and that trickles down, how do you read that? carl: there could be a spending impact, but the bigger impact to look for his ripple throughout the supply chain. effectould be a knock on anywhere upwards to 100,000, potentially. i don't think that is going to be the case, however. i think the effects will be much smaller, and you will see it reflected in the length of the work week rather than actual payrolls. we saw this in the fed's beige book, where they highlighted they didn't want to lay off workers because it is too tight of a labor market to easily find replacements. rather than lay workers off or furlough them, you some lick up the hours worked down to the bare minimum. vincent: i couldn't agree with you more. he was per number on the street is for 100,000, not the 85,000 consensus. that would make the downstream
risks even larger. if you're looking at this from a trader perspective, the asymmetric risk is a downside risk to this. gulp you wouldr be swallowing. if you've been there, you know what it's like. [laughter] vincent: some guys looking for a miss, a print as low as 30,000 coming into this, but the downstream risk, you can't disagree with that. lauren: i hate to agree with everyone. although you are seeing a little bit of market move towards a more risk on stamps, when it comes to the state of the economy, where we are headed the next 12 or 18 months, this is a slowdown in turn for the employment environment. nothing to be immediately concerned about, but looking a little more defensive for the medium-term. alix: what did we all make of the bond rally yesterday? did that mean anything into the jobs data? carl: it meant something, but
not the reflection of the jobs numbers coming up. it was evidence that the trade talks are not moving a favorable direction. we keep calling it phase one. i think we should call it phase 0.1 based on what is happening here. little agricultural purchases, no improvement in any other structural issues, so we are not moving in the right direction on this. china is now turning a cold shoulder to the talks. probably, president trump will retaliate in kind, which is how we've seen this play out in several prior rounds. so we are not removing tariffs as we look at q4 or the 2020 outlook, which means global growth continues to grind lower, the u.s. economy continues to slow, and three is not the magic number for the fed. it will have to have more accommodation come december or q1. vincent: what happened in the bond markets, we are not moving forward in trade talks. we are actually moving backward.
we are where we where in may. we are at a stalemate, looking at china may be buying $20 billion in ag products, which is where they have been for years. a huge volume in treasury futures over the last few days. you don't turn the paper over that quickly. there's not much liquidity. so you go into the futures market to hedge that that. you cover that risk, and then reassess and say, is the trade i have the right way i want to be, or is the futures where i need be? you take your time layering out that fixed income position, and balance it with the futures market. the block trades going through 48 hoursver the next are phenomenal. that speaks to traders turning or hedging the short treasury position they had going into it. nothing to do with jobs, all to do with trade. lauren: that is exactly why you will see over the next several months probably closer to q1, you will see bond yields,
especially in the 10 year part of the curve, start to fall again. as the global economy recognizes some of these structural risks, it draws down u.s. bond yields. alix: there's another theory out i --, too, looking at msa looking at ms ci world, that actually outperformed the u.s.. our things performing better elsewhere? is that a narrative that traders are actually talking about? vincent: no. i think what that was was hope, if you will. people were trying to call the bottom. the dollar is done. let's get into emerging markets. the trade picture is turning around. if you are in that trade wednesday, thursday you are like, ouch. i've got to get out of this. yields.d a low in bond
that trade is totally shot. you can't look at that any longer with this new trade scenario. carl: and germany probably in recession, u.k. probably heading into recession after the brexit occurs, whenever that occurs in the future, based on our team's analysis. also, china deteriorating, grinding lower and lower in the chinese data, the pmi's, the growth statistics that we are clocking the worst growth figures in at least 30 years, towards the end of this year and into next year. updateshat the imf weeks back. 3% global growth is getting close to global stall. vincent: and latin america is starting to fall off as well. chile, brazil, and mexico. it is not a good global growth picture. lauren: it is unusual that i'm not the bear at the table. [laughter] lauren: but it's true.
lots of trying to call the bottom, lots of hope for cyclical upside. for us, you want to be flux of. some of the selling we are doing at the top, we are taking advantage of tactical opportunities. right now, statistical upside is not here to stay. alix: thank you. and vincentnna cignarella, thank you. lauren goodman of new york life investment will be sticking with me. stick around later today for the interview with larry kudlow, the national economic council director. that is at 9:45 a.m. eastern time. you can check out the charts used at gtv on your terminal. this is bloomberg. ♪
a 2.7 billiong dollars stake in chinese-american drug maker that will clear the way for about two dozen cancer drugs to be developed and sold in the chinese market. percent.l own about fiat chrysler and psa turning to small advisory teams. with a french boutique that has only five partners. sca used goldman sachs. the firms will divide up to $90 million in fees. the world's biggest maker of insulin raising the lower end of its sales forecast. hitting $1betes drug billion in sales. in the latest quarter, the drug beat analyst estimates. that is your bloomberg business flash. alix: thanks so much. on this jobs day, we take a look at hiring and retail in the
health of the consumer. the retail sector is one of the worst in the labor market. it's seen eight months of job losses. emma chandra spoke exclusively with jill soltau, jcpenney ceo. jill: the customer confidence is in a pretty good place because of low unemployment, increased wages. theme is reading the retail forecast around holiday being up around 1% to 2%. similar reasons to believe in that. emma: when you look at the labor market, you are planning to hire more than 30,000 associates. you employee already more than 90,000. we know the labor market is tight. is this something that is creating competition for you in terms of hiring? are you seeing pressure to increase wages? has: our holiday hiring
gone very well. we are ahead of schedule on that. there's something about the jcpenney brand that when people start interacting with our associates, they feel such pride and excitement from where we are headed. we feel confident that we will be able to continue to serve the customer. emma: you don't feel that you have been held back in anyway way by the tight labor market? that wewould just say are really pleased with how we've been able to attract and care for our associates so we can ensure they are caring for our customers. emma: are you having to offer any additional benefits in order to attract employees at the moment? jill: we have a very competitive forfits package at jcpenney all of our associates based on their role. any resistance to that. we've been really pleased with our efforts so far. alix: that was the new jcpenney
-- ceo.ren goodwin lauren goodwin of new york life investment is still with us. where in retail and consumer discretionary would you like right now? lauren: i am not too worried about retail. we got a disappointing sales number in september, and it is pretty broad-based in terms of not just the consumer durables sector, which we've seen weakening for the past several months, but also in some of the extras. things like hobbies. but in the long-term, what we are seeing is the structural aspects of the retail market, high debt burdens, not really attractive. alix: fair enough. lauren goodman of new york life investment stays with us. this is bloomberg. ♪
smaller company space a be stabilizing. the resource sector in europe moves on that news. in other asset classes, that huge bond rally yesterday now taking a pause. it was the worst months for the dollar index last month since january, 2018, also now taking a pause. earnings still trickling out. exxon the latest to come out. exxon earnings coming in at $.75 a share. that definitely beat estimates. is up 17% year on year, want -- 17% on year. i don't necessarily think the market might like that number. cash discipline has been huge for all oil companies. downstream earnings were hit, down 25% year on year. that was a real savior for the likes of p, so interesting to see what happens with that. the real conversation that everybody cares about is going to be what they are going to do about their dividends. still with me is lauren goodwin
of new york life investment. it doesn't matter how good or shell'sr quarter was. it was how they talked about it on the call. what does that say about the oil story? lauren: it is a dividend story. would you look at the way investors have been transitioning in equities to higher dividend yield, more cash flow in equities, bonds moving higher in quality because you need to rely on that cash generation because you can't rely on prices going up necessarily, absolutely a dividend story. alix: even if the evidence are expensives, with dividend proxy stocks? lauren: of course. the markets are hanging on every word about these dividends. it is negative for equities in the short term. what you have to do as an investor is be careful about how dividend traps.
that's what we are focusing on those little numbers, little changes. alix: this jobs day, but we wanted to do was take a closer dive into what the gm strikes meant and what it means for unions. the labor market is the tightest in decades, changing the dynamic between workers and employers. bloomberg columnist conor sen , "it is leading to a shift in the balance of power, giving more to the consumers. pockets of labor shortages are going to continue. the rationale for unions has increased." he joins me now from atlanta. what does this mean on a broader sense of the relationship between wages on the economy? conor: i think we are going to see in an hour that we miss about 50,000 jobs for the last this just because of stunt. weak chicago pmi
number that will hopefully bounce back the following month. what we have seen in the last 15 years, if you come inside the bloomberg, it is u.s. labor share of output has been falling. we've rebounded a little bit in the past few years. is there a range that would be good for the economy to get to come over you would finally see some kind of inflation? conor: we definitely want to see that number bounce back. one part i haven't seen a lot of people talk about is because we are seeing so many retiring, that share of the economy income -- is going to retirees. it is still showing up in household income. just it is retirees spending out of what they are getting every month from the government. alix: is there a material shift back to labor? is that a real story, or worthy
unions from the auto sector off? conor: i don't think we will get back to the levels we saw in the 1960's and 1970's without massive intervention. population, and the entitlements earned over notdes is going to -- is going to workers. it is delayed compensation, if you will. we were talking about how you had huge numbers of work stoppages, and they basically fall off the planet in 2010, and now we have a tick up. what industries are most vulnerable to this? conor: historically, the manufacturing has a big presence. ,e wants to watch our services like fulfillment centers for amazon. they have 750 thousand employees. maybe tens of thousands are
doing high-tech jobs, but hundreds of thousands are working in fulfillment centers. if the labor market leads those workers to unionize, that could be shift we haven't seen. alix: we have been talking about peak margins. does this start to change that story? is that how we see bigger trickle down to the economy? conor: i think so. companies have shifted to this just-in-time paradigm for inventories, things like that. workers have been pretty easy to access. they've always known we can just hire workers and pay a little but ifan we have to, true shortages become more dominant, they have to think it is worth dealing with more unions to lock in that labor supply and not have these pieces. alix: thank you. lauren goodwin of new york life investment is still with us.
the company side is peak margins. it is this symptomatic? was that it sit -- what is it symptomatic of? conor: it is a long-term theme --lauren: it is a long-term theme of the returning companies into labor. i think this will continue to follow. it's one of the reasons we see an increase in populist sentiment, some pushback from labor seeing even though we see markets have peaked, we see owners of capital reaping the benefits of our work. alix: does that mean this is the shift where we start to see more payouts for workers, more worker power that bleeds through in an economic sense, and leads to better output. is that the right thing, or is the wrong one? lauren: the increase in wages would do a lot to improve not just the economy, but some of the political dynamics we see, where workers aren't making a
living wage, especially in cities. over the longer-term, we are looking at technological progress. it is a long-term economic shift that probably is deflationary. alix: on a company level, what sector has the most ability, more low hanging fruit? where can we see the margins continue to be squeezed out? lauren: i think where you will see the most is in companies that are investing not necessarily technology, but companies that are investing in technological capabilities. think about become buddies seeing pressure in their supply chains. -- think about the companies seeing pressure in their supply chains. they are making that investment that increases productivity and allows them to have higher margins over time. alix: always a pleasure to have you on set. thank you so much, lauren
goodwin of new york life investment. coming up, in the future, 100% of jobs will be different because of things like artificial intelligence. that's according to ibm, which just released a new study, the future of work. watson-ibm lab uncovered how jobs are changing, and how that affects wages. ,oining me is obed louissaint ibm vice president of people and culture. the great to get your perspective. i thought the report was truly fascinating. we were talking about marrying technology and jobs. what sectors see the most benefit, but what workers are displaced the most? obed: one of the things we are seeing is every sector is going to be impacted. ai is going to affect 100% of the jobs. what the study did was look at tax, and what is interesting about looking at tax is then you can look across occupations and
see, what are the skills that are going to be shifting? one of the things we are seeing that is impacting the most is areas like manufacturing, areas where there are more routine tasks. where we are also finding it is in areas are skills where it skills or human skills. those are going to increase in value, where you are talking about creative thinking. communication as an industry. alix: which is fascinating because we just showed that chart in the change in salary a year based on this. say, for thegh, manufacturing sector, how many tasks would reduce for them, versus the services sector? and what does that mean in real terms? obed: in manufacturing, there -- for the most part,
across them, there were paths moved from the middle class or the middle wage roles. those of the ones we were seeing that are shrinking. however, it was moving to increasing on the high and the low. but we found is that a ratio of 4-1, they are going into the low-wage jobs and into the high wage jobs. for every five that came out of that group that was squeezing to the middle, one went to the highway. that has driven up the actual wages of high wage workers by $1200 per year. alix: what do we do about this? obed: innovations like at ibm and with some of our other partners, we have to focus on
rescaling and training the workforce. alix: seeking that from the middle wage group, and converting them to high-end or low-end workers? what theis identifying skills are it will be differentiating and building on those capabilities. we've retrained and re-skilled , learning on an annual basis, and used such tools as ai onbuild the platform we call those building their skills. for the workforce, for the employer, it is about noting a culture of learning and rescaling. for the individual, it is about focus on your continuing learning, figuring out where the value is going, and educating in that environment. alix: what skill set will be ? -- whatupted next
will be disrupted next? lauren: we are looking at all of the --obed: we are looking at all of the industries, looking at a type of work. it is thinking about those routine tasks, things that are suitable for machine learning. there's are going to be the things disrupted. a number of our jobs, we are going to continue to solve the same problems come but the way we solve those problems are going to be different. in my environment, the recruiter is going to continue to ensure that they are getting the best talent into the organization, but how they do it, that's fundamentally changing. alix: really interesting. obed louissaint of ibm, thank you very much. are going to stay, right? i can't be a robot. [laughter] alix: now an update on what is making headlines outside the business world. viviana hurtado is here with first word news.
viviana: this is your very human reporter giving your first word news update. stillifornia, buyers are raging, but deliberate blackouts are coming to an end for now. by today, they plan to restore power to virtually everyone. fierce winds are dying down. that means less chance a power line will fall and start fires. last weekend, pg&e blacked out a record 3 million people in the golden state. donald trump has now become only the fourth president in u.s. history subject to a formal impeachment effort. the u.s. house making that official was its vote to proceed with an inquiry. that clears the way for televised hearings, and allows the president to participate in future hearings if he wishes. president donald trump, lifelong new yorker, is changing his primary residence to florida. that's where he owns the mar-a-lago resort. that is a move that could benefit the president's
reelection chances, as well as his tax bill. new york state and city proposed a combined income tax rate of 12 point 5%. in florida, there are no income taxes. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: aside from taxes, the president says the real reason he is leaving is pretty simple, because he's been "treated very badly by the political leaders of both the city and state." one of those leaders is not upset by the president's departure. new york governor andrew cuomo said in a statement, "good riddance. it's not like donald pays taxes here anyway. he's all yours, florida." coming up, this week's "businessweek" feature. if you have a terminal, check out tv . this is bloomberg. ♪
viviana: it was a losing month for hedge fund manager david einhorn. greenlight capital falling 6%. that cut gains for the year to 16%. einhorn is having a resurgence following his worst year ever. he remains committed to his strategy of buying beaten-down stocks and shorting growth companies. shares of arista networks plummeting, giving a sales forecast that missed the lowest projections. the ceo indicated facebook is the source of the decline in orders.
facebook and microsoft account for more than 20% of the company's revenue. shares of pinterest also plummeting. third-quarter revenue fell short of estimates. buterest did add users, primarily in the less lucrative international market. i'm viviana hurtado. that is your bloomberg business flash. alix: time now for our weekly "businessweek" feature. first up, it is using immigration to boost economies. that's how governments are balancing immigration to work for their economies without fanning a political flame. then, the global fertility crash. countries are forced to adopt birthrates that fall. and the superblock revolution. is forming superblock for pedestrians. joining me is bloomberg businessweek's economic editor.
first up, let's talk about immigration. you need the workers. you need the talent. you work on immigration, but have political backlash. how do you deal with that? reporter: we are seeing countries that are trying to make immigration work for them. people are coming and contribute into the economy. we look at canada, which uses a scoring system to grade prospective immigrants. that has been a very effective tool to take in high skilled immigration. in japan, it is the opposite problem. they need more low skilled workers for things like construction jobs, taken care of older people. but that society has been traditionally very reluctant to open the gates to foreigners. only 2% of the population is foreign-born. they've launched a new visa this year that would, over five
years, let in about 550,000 people for industries that have huge openings. alix: interesting. let's get to the superblock revolution. how cities and countries are growing differently. this is basically what we are doing in times square, but on a really big basis, taking cars out and making it a playground for people. cristina: the idea was born in spain, and it is beginning to move to other cities. basic idea is you take nine blocks and chunk them up, and only allow traffic to move on the perimeter mostly, and at very low speeds, so it is frustrating drivers. they basically don't want to drive around these areas. you take the roads and convert them into pedestrian and bicycle lanes. alix: and then you just have to not drive because that would drive me bananas. let's get to the fertility crash.
this also dovetails with immigration. you need workers to fill those jobs, yet they also have to have babies to help the population. cristina: right. for a long time, fertility alone was a driver of growth in many countries. but in some of them, they are moving below. fertility rates have already moved below replacement rates, so what do you do? you have to have productivity increases or immigration. we've also look at countries like nigeria, where fertility rates are still elevated, but recently, growth has moved below the fertility rate. if that continues, that means that country will start growing poorer on a per capita basis. in china, the big challenge now, they've scrapped the one child rule, but women are not having -- there hasn't been a baby bump, which is what they wanted to have because women are still making decisions based on what is the opportunity cost of going to work.
there's been discrimination in the workplace for pregnant women, and the government has tried to address that. alix: thank you very much. really interesting articles this week. go ahead and read the stories in the latest issue of "numbered businessweek -- of "bloomberg businessweek." talking about potential discrimination against mothers, it is some problems for wework. you have the former chief of neumannusted ceo adam -- chief of staff for ousted ceo adam neumann accusing the company of discrimination. called herat neumann maternity leave "a vacation." the company says it has a policy of zero-tolerance. i guess their idea of vacation eating,leeping, not listening to crying all the time. next up is today's traders take. if you are jumping into your
alix: time now for trader's take. joining me as vincent cignarella, voice of the bloomberg audio squawk. you are looking at the aussie dollar, tracking caterpillar. citibanktwo days ago, technical strategists put out an aussie dollar buy trade, so i wanted to look at it from a trader's perspective. maximum looking for the trade to be around $73.94, which i think is just a little bit pricey. i think it is a little bit too much risk. perspective, i
wouldn't let this go much past $68.50 on the top side. on the bottom side, this trade could really struggle. aussie dollar does track caterpillar stock. with that picture changing yesterday, you can see what's happened to the caterpillar equity on the top line. where these resistance level is in cap stock, i'm not really that comfortable with this trade anymore, which is why i bring my stock a lot closer than the citi guys do. in defense of them, they do their strategy on wednesday, not thursday. alix: but your point, technical versus a trader's take. vincent, thanks a lot. about 30 minutes away from your jobs number. all-star lineup for you. this is bloomberg. ♪
i'm alix steel. let's take it right from the top. rep. pelosi: this is a sad day. it's a sad day because nobody comes to congress to impeach a president of the united states. alix: donald trump's presidency is on treacherous ground. kevin: my sources tell me they still largely view this as a political matter. they've also used it as a fundraising effort to hopefully rally their base. alix: the house has voted to approve and proceed with its impeachment inquiry, a sign that a vote to actually impeach the president is inevitable. we will talk with house speaker nancy pelosi ought 12:00 p.m. eastern on "balance of power." >> you leave with the euro more popular than ever. alix: the christine lagarde era is now underway at the european central bank comeau officially becoming the ecb president today. >> we are also expecting her to cement some of the risk that has
emerged within the ecb board after september's contentious decision. alix: the bank's governing council is divided over the latest round of stimulus. we are about a half-hour away from getting the latest u.s. jobs report. economists expect the labor market ruin october at the 2018.t pace since >> confidence is in a pretty good place because of low unemployment, increased wages. alix: that's everything you need to know on this jobs friday. in the market, we have a huge bond rally yesterday. now we are taking a little bit of a break across the board. the dollar had its worst month since january 2018. waiting to see that jobs number at 8:30. going for the hour is megan greene, harvard's kennedy school senior fellow. i have a surprise for you. you looking tore
talk about. you said fiscal stimulus. so did everybody else. chair powell: it is fiscal policy that supports inclusive growth. >> if you want to include potential gdp growth, we need broader economic policy. >> a sound world economy is going to need to depend on much more than monetary policy. >> monetary policy can still achieve its objective, but it can do so faster and with fewer side effects, negative side effects, if fiscal policies are aligned with it. official tool to ease his fiscal. >> governments with fiscal space should act in an effective and timely manner. alix: i mean, how money times can you say fiscal? obviously people want it, but what is the reality here? megan: they are right, we need fiscal policy to a come at a monetary policy, but i would
also like a unicorn for my birthday. love ay daughter would unicorn for her birthday. [laughter] megan: i think the prospects aren't great. in the u.s., we have an upcoming election that precludes any agreement on any major policies. i don't think we can expect anything before the election, and even after the election it will be hard. maybe we get an infrastructure package, but if the democrats and republicans can agree on that in concept, but can't agree on a way to pay for it, that will be tough, too. in europe i think it is even harder. dedication tove a the balanced budget, and even if they gave it up, their debt break makes it difficult for them to spend significant amounts. they are going to have a hard time providing significant fiscal policy. the one country i think we can bet on his china. they've already provided fiscal stimulus in this downturn for them. i think we can continue to expect that, but there fiscal
stimulus has been domestically focused, so is that really going to buoy the rest of the world? alix: which is exactly what we saw in the data with small companies holding up better than the overall large public companies. we are just half an hour away from the latest read on that data, the u.s. jobs report. economists are looking for a limit rate.he constance hunter, kpmg chief economist, and subadra rajappa, societe generale head of u.s. rates. wet do we -- what are expecting? >> we have a little bit of a fiscal fall off because all of that stimulus plan, if you billion ine had $150 fiscal 2018, another 150 billion
dollars in fiscal 2019. that fiscal year ended in september, so we would expect gradually, throughout the next several months, some decline from government workers. that is the expectation. i think the shocker on this number will be if it surprises on the upside. alix: megan, what do you think? megan: i'm a little more pessimistic, not just because of the gm strike, but also because of the consensus hiring rolloff. to constants's -- constance's point, it could overshoot. . in terms of relevance for policy, i don't think this data point mean much in terms of the fed. subadra: for me it is the opposite. i worry about a weak number because the market is going to interpret that is the economy be in weaker than we already know. if we get a consensus number, it could be signal versus noise because of the gm strike.
you could be able to not get a good sense of what the exact job picture looks like. but if there is a significant, let's say close to 25,000 or lower, there will be a little bit more of a dramatic reaction in the market, i think. megan: i think it depends on where. this is definitely one of those numbers where the headline isn't going to tell the whole story. you will have to see if there is a drop. was it in manufacturing, and other sectors? we can parse out a little bit of what is gm and what is not gm. we see a change in retail hiring, for example, if that continues to decline, if we see some decline in business hiring, those are not affected by the gm strike. i think looking under the hood and really seeing what sectors are being impacted i think is going to be the key. also,a: also, -- megan: wages didn't grow at all last month, so we should see a bounce back. if we don't, that would be a surprising signal that i think we should look at. subadra: wages is also an
important factor because that tells me the trend for inflation on wages. wages have been very muted throughout this entire cycle, even though we've been creating 200,000 plus jobs. the biggest concern that came out of chair powell's press conference was inflation. inflation, inflation, inflation. alix: i don't know what serious inflation is. [laughter] subadra: you are not seeing that at all in wages. so again, i think wages are going to be very important. alix: what did you make of the bond rally yesterday? did that tell us anything about where investors think we are in growth? subadra: i think the market is very skittish. i think it is a trade thing. typically what happens, a lot of people waiting to get that fomc meeting and the treasury refunding announcement out of ,he way before they can come in so i think that might have contributed to the rally, but i think it is also skittish about
data and trade. subadra: i think that makes -- megan: i think that makes sense. given there was so much optimism all of a sudden baked in on trade, wrongly, clearly, i think that should be a lesson, but i'm not sure that the markets have learned it. alix: just to pivot to the opening of the show, fiscal stimulus. everybody wants it. does it actually happen? the director of the wto said that when it comes to interest rates, they are lower for a long time. the global economy is in low growth and historically low rates. in the event of a new recession, governments have limited auditory and fiscal firepower to stop demand. the fallout of a serious downturn could get ugly. i thought was interesting here, even if you have fiscal come of that is not the huge bazooka you think. constance, where you stand on it? constance: we've had huge fiscal
stimulus over the course of the trump administration, but it has not been targeted at areas that are going to give you the most bang for your buck, like infrastructure, education, improving the soundness of our electricity grid. it really depends on how you target that fiscal stimulus, so it is not just blanket stimulus. it has to be applied in ways that are going to have a multiplicative effect on your future gdp. subadra: for me, the concern is how much room is there for fiscal stimulus? you are looking at $1 trillion deficits for the next decade in the u.s.. so where can we spend and how can we spend that is effective? in some respects, in germany in china, they have a lot more room. i worry that in the u.s., we just don't have the capacity to fiscal stimulus. even if we do, and each to be targeted where there is a direct feedthrough to gdp. megan: i would disagree that we
don't have us a touch -- that we don't have as much room. we do have the global reserve currency and the biggest, most liquid asset class in the world, so that will give us some privilege. but i agree that a sugar hit really isn't that helpful. if fiscal stimulus could be directed towards things that would boost productivity, it would fundamentally lift potential growth. that would be helpful, but the kind we have seen in the u.s. hasn't been that helpful. alix: we believe it there for now. all are sticking with me. stay with bloomberg television for next was of interview with rich clarida, federal reserve vice chairman, at 9:30 a.m. eastern time. skew. up, the gm we will dive deeper into the strike at general motors and the impact it will have on the payroll numbers. we will discuss with the center for automotive research vp. this is bloomberg. ♪
>> our focus was on getting an is that fromt made a worker standpoint. they share in the success of the company. we retain our flexibility, so we would characterize this as having accomplished the objectives from the employee perspective, as well as a business standpoint. alix: that is the cfo of g.m. talking on bloomberg on a deal with the union. joining us from detroit is kristin dziczek, center for automotive research vice president for industry labor and economics. constance hunter, subadra rajappa, and megan greene with us as well. we are talking about the impact of the strike on the jobs number. going forward, what is the industry?h the auto
kristin: the workers are back in the plants. the suppliers are back up and running, so we should see a rebound in november. ford has reached a tentative agreement with their local leadership, and we'll push that out for ratification in the next two weeks. now we turn to chrysler. megan: this is megan here. just wondering, gm has a clear impact on jobs, but what has been the follow-on effect for suppliers? do you have a sense of what the ripple effect of the strikes is? kristin: the suppliers, first of all, gm kept its business open for the first week of the strike for inventories. suppliers were very cautious about cutting jobs. it is a fairly tight labor market in detroit, and they didn't want to lose people knowing that the gm strike would end, and they would want those people back, so there were some layoffs. it wasn't as deep as it might have been in conjunction with
the production output cuts that we saw. so they were a bit cautious. alix: it must affect gm, ford, and chrysler differently. which company has the room to deal with the higher wages? how much where their workers already getting paid versus what they are getting paid now? do you have a sense of who wins on this? kristin: the workers are getting a lot of money at gm. there was a range of wages at gm from starting around $16 an hour for the temporary workers. in progression workers hired after 2007 had a lower wage scale than people hired before 2007, and a very different package of benefits, especially in postemployment. this wage agreement has equalized those pre-2007 and post 2007 wages to $32.32 by the end of this contract for everyone working production who was on roll when the contract was signed. startinge will come in
around $16.67. they will have a little bit of health care benefits, but not much. they will have to work on most two years before they get a chance at a permanent job. they get an $11,000 signing bonus that largely makes up for the lost wages, and therefore the lost taxes to local and state governments. there's bonuses and profit sharing baked into the agreement as well, so there's a lot of money for the workers. gm got the ability to invest where it wants to invest. there was no pullback from the product that was allocated to mexico, and they were able to close the lordstown plant and the powertrain assembly plants as well. constance: i was wondering, what were the negotiation points around long-term compensation and pensions? kristin: nothing. they got nothing additional to pension, and those workers hired after 2007 have basically a defined contribution and not a
defined-benefit situation. they don't have postemployment health care as the pre-2007 workers do, so everything is pay-as-you-go for the current workers hired after 2007. alix: what we heard from the cfo is this still leaves them flex ability. in particular, we were talking about the transition into electric vehicles. these companies need a lot of money to put out cars that are not profitable yet. does this change the ability to do that, or does this crimp the road to profitability even more? kristin: we do think that labor costs will go up. i do not know exact lehigh much yet because it does depend on some demographics. there are some attrition programs to move higher seniority workers out of the workforce to replace them with lower-cost people. sorry, i'm losing my ear. they do have greater flex ability in where they make their investments and place their products, so there's no restrictions really on their continued investment in mexico,
canada, or elsewhere. they do have that flux ability going forward. alix: you guys weigh in on this, too, the u.s. labor share of output. obviously, the last 15 years, that has been falling. thing? a what does it mean that unions wind up having some power now? what does that say? constance: it is a reflection of the tight labor market. that is a good thing, i think. this is a real impact of demographics. that is why you've seen such a decline. you've also seen the globalization of the labor market, and that has eroded parking power for u.s. workers. one more thing that's come out in recent research is that an older workforce is much less likely to change jobs, so as we skew to an older workforce, it is that changing of jobs that often gets people there big bump in pay. there are a number of factors that play into this. think unionizing
certainly boosts workers' ability to negotiate for higher wage increases, so unionizing helps on the margin to reverse the trend of less of a share of gdp going to labor versus capital. but if you look at europe, for example, where they tend to have much stronger unions, they are facing the same decline, so this is a developed world problem. cannot solveone it, but it can help address it. alix: how do we come back to this issue again? when does this start to trickle up and become another problem for the auto companies, and for the economy? we are: well, i think forecasting a downturn in sales in the u.s. coming through 2021, 2022. we expect average hourly labor costs will increase during that time period because they are going to be laying off the
lower-cost workers. we are going to see labor costs tick up, but those corrections they made in 2007 on postemployment benefits are going to continue to pay dividends. there's no pension and no postemployment health care for the current workforce, so that is going to continue to be a benefit to general motors, that they are not building up a big legacy cost. alix: thank you so much. your earpiece, i feel your pain. kristin dziczek of center for automotive research, thank you. megan greene and constance hunter stay with me. we will get the trade and see how you can position into the treasury market. this is bloomberg. ♪
sales. insurance giant american international group swinging to a profit in the third quarter. it turnaround in the property-casualty business gained momentum. aig still felt the pain of natural disasters, among them, the hurricane that devastated the bahamas and a typhoon that hit japan. milepost along the comeback trail for jcpenney. today the retailer opens what it calls a brain defining store, a place to test ideas before rolling them out in the chain's outlets. ceo jill soltau spoke to emma chandra in an extrusive interview. jill: it has been an interesting decade at jcpenney. as i've been very overt on my earnings calls, there's a lot of fundamental problems to fix. we are marching down that path come about the same time, we are running a parallel path of transformation and innovation because we know we have to be more than just a department
store. saltau tookviviana: over at jc penney a year ago. that is your bloomberg business flash. alix: thank you. with me still are megan greene, constance hunter, and subadra rajappa. i want to get your thoughts into the job numbers. how do you play it? subadra: it's tough. yesterday we were close to the on thed of the range curve. twos-tens,ints in and always 50 on the three month-10 year. if we do get a weak number, i think we see more flattening of the twos-tens part of the curve, but we are kind of in a spot where it is really hard to know. it is going to be dependent on the data. but the front end is going to be paid to fed expectations. alix: are we set up for volatility?
can traders handle volatility anymore? subadra: it's been a very uncertain couple of months on the trade front. i think that volatility is here to stay until the end of the year. we not only have geopolitical risk, we also have political risks to contend with. i thing it is going to be an interesting year end. alix: what do you not touch? what is the one trade in the bond market globally that you are not touching with a 10 foot pole? subadra: i'm just not an uber -bear on bonds. the global macroeconomic environment is still very weak. environment, 10 year treasury yields get towards 2%, you see a lot of buying. you are going to see buying domestically as well. that is going to keep a lid on how high yields can go, so it is really hard to be a bond bear. longer-term, you have to be a bond bull. megan: do you think yields can never go negative in the u.s.?
subadra: i don't think so. that 10it is a myth year treasury yields have to go to zero the next recession. we've been through many recessions in the past. 10 year treasury yields are going to trade in line with fundamentals. even in europe, you are starting to see a pushback where investors are questioning the efficacy of global central bank policy, negative rates, and qe. yields are rising because of that. alix: in sweden is doing the same thing. you all are sticking with me. we are about four minutes away from the all important jobs numbers. we will have the immediate reaction to the numbers. this is bloomberg. ♪
is "bloomberg daybreak. the dollar selloff from october taking little bit of a break, the curve a little bit flatter in the u.s.. we want to head over to kevin's a really who is at the labor department. kevin? added to the0 jobs u.s. economy in october, smashing expectations. the unemployed and it rate little changed at 6.3%, despite the gm strike and census workers finishing up their work. the job growth was fueled by gains in food and services. financial activities added 16,000 jobs. let's look at manufacturing. revised by labor by 36,000 jobs. why? economistsof labor
looked at the gm strike. federal government unemployment census workers completed their work. hourly earnings rose 3% year-over-year, a .2% gain. the labor participation rate little changed and there were revisions that were notable. august revised up by 51,000 jobs in september revised up by 40,000 to 180,000. those gains combined, 95,000 unreported.sly the bottom line, 128,000 jobs the month of october, smashing expectations.
alix: kevin cirilli, thank you. i just want to point out i won my pool for the first time ever. yields are up on the two-year, up by four basis point. the dollar is greater on the higher of the session. up equity market, the p no 4%. , megan green of harvard, my guest. what happened? i don't get it. i thought it was terrible. >> you see the turnaround in details, financial services hiring, the revision to september and maybe powell will come up with
#missionaccomplished. >> we traditionally .nderestimate october manufacturing is one of those high wage, high our jobs. that things that, the average hourly earnings still grew by 2.2%. a little below consensus but still pretty good. this is a really strong report. i don't think the fed does anything differently other than that is up on the back. the jobs number did not disappoint. this was much better than expected. we saw provisions from 130 62 180,000. status quo fors the employment picture and it has always been the shining star of the economy and continues to be the shining star. .ou see that as constants pointed out -- con
stance pointed out, a pat on the back for chairman powell, who has suggested a pause at the upcoming meeting. alix: where did the gm effect not come through? if you look at average weekly hours, that might have then the place where he saw other trickle-down effects. but you have the labor participation rate up by 2%. do they offset each other? i don't get it. megan: it might have come through. can we repeat these numbers? do they get better? megan: i think it does. if you figure the gm workers will come back you will probably see some reversal in the manufacturing jobs and it will be interesting to see what happens to those wages and
hourly earnings in the november data. it is a big question. we have had a slowdown in payrolls. is it that everyone wants findrs, but they cannot .hem --suggests maybe demand consumers are carrying growth in the u.s. and there is the question if this can last. would say one of my favorite indicators is the diffusion index, the companies that are added -- adding versus attracting workers. it still positive, but you're are looking at 67.4 last year. if you look at manufacturing in particular we are in recession
-- 15.9. compared to there's a slowing in jobs growth for sure. i would say that this combined report is more positive. for the most part, the economy has been a one trick pony on the net consumer. the question is, will retail andinue to pull this up will the consumer continue to support the economy going or were. that will be the key driver for the market. also, we have a really weak number for the jobs component. maybe they will not be looking at the jobs piece of that.
alix: thank you. i really enjoyed having you all on. thank you. we will have more with larry kudlow. he will be joining bloomberg television in the next hour. we have earnings stripping out as well. we had exxon earlier and we have chevron. missingon ins up estimates. revenue a little over his 36 billion dollars. it will be what they say about the dividend. your production will eventually fall short and how the market and investors end up looking at that is key. 25% year on year.
earnings are missing as well. that stock is down 1%. we have headlines outside of the business world. viviana hurtado has first word news. viviana: in california, fires are raging, but blackouts coming to an end. major utilities restraint -- plan to restore power to virtually everyone. pg&e left out a record 3 million people in the golden state's. donald trump has become only the fourth history in u.s. history subject to a formal impeachment effort. the u.s. house making that official with the vote to proceed with the inquiry. televisedensure proceedings and it will ensure the president's ability to
produce a great and later proceedings. leader speak with house nancy pelosi on "bloomberg balance of power." warned war and that her build occasion of the rich is misguided. he says when it comes to the rich and what they contribute to society war and is working the facts to war and is pushing for a wealth task. day,l news 20 hours a powered by journalists in more than 120 countries. this is bloomberg. alix? thank you. overall thank you. overall we added 128,000 jobs in the month of october. inalso had strong revisions
september. all of this led to average weekly hours that state where it was, but you have a pickup in the labor force participation rates. good.mbers came in really you can imagine what that is doing to the market. up.two-year yield is the dollar is shooting higher as well. it's a risk on day. coming up, we will look at hiring in the trucking and transport industries. remember, bloomberg users can interact with all of the charts we use throughout the show at g go. this is bloomberg. ♪
watchingyou are bloomberg business flash. it was a difficult month for david einhorn. he's having a resurgence following his worst year ever. he remains commended to the -- committed to the strategy of shorting growth companies. wework falling. the ceo indicating that facebook is the source of the decline in orders. facebook and microsoft account for more than 20% of company revenue. and shares of the digital search and scrapbooking system posted revenue that fell short of estimates.
but less added users, than predicted in international markets. on viviana hurtado. that's your bloomberg business flash. alix: thank you. we had 128,000 jobs last month. we will look at hiring in the trucking industry. there's a shortage of drivers. joining us for more, we have michael mckee to dig through that data. mike? michael: it was not bad for trucking. the trend has not been good. if you look at payrolls, the blue line here, it took quite a while to recover from that many recession we saw a manufacturing in 2015. you see what has happened with average hourly earnings. it becomes harder to attract truckers. it's not a glamorous job.
a lot of time away from home. a did see a little bit of rise this past month, but in general it has been hard to attract workers to that industry. one reason? trade wars. shippinghe outbound containers. really bad. there's less stuff being shipped, which means if you are paid by the hour as a trucker you're not doing as well as you could do. you see that hours worked have declined. that is not good news if you are paid by the hour. alix: joining us, we have the transfixed ceo.
now, we have the trade on one hand and the shortage of workers. what are the trends you're seeing you go -- you are seeing? in 2018, that was a banner year for truckers from our perspective. what has happened in 2019, most of the trucking company owners purchased new equipment, which flooded the market with supply .nd lowered the use for mile as a result, not only the owners of the trucks, but their drivers , everyone is hurting right now and the last six months we have seen dozens of large trucking companies with pretty significant problems. do you have any sense -- is that being passed through to the
end user? >> there's 500,000 trucking companies. very small operators. it's not the most efficient market. historically the margins are very small. generally speaking, yes. it ultimately will flow through to the consumer picking this up off the shelf. it benefits or negatively impacts all of us depending on performance. do?: so what do you that is why we exist. 64 billion miles in the united states per year -- if you pull
back and stop doing things one at a time and use modern-day science and ai and on things like that to optimize the matches up truck and load, we find we are able to eliminate upwards of 70% of that weight. so you are making it more efficient. what about autonomous trucks? will that make it leaps and bounds more efficient? >> theoretically. if you have that level of a timing with there's no human involved, and asset that can not have to do worry about safety concerns, things like that -- yes, theoretically they can drive with significant efficiency, lower cost. i am not on the autonomous side. this technology is obviously very complex. most people are thinking of the use case of highway miles and
you can have a level 4. but if you need a human at the exit ramps, that is a reorganization of how trucking works for the entire trip. it's not impossible, obviously and the technology is a great opportunity there, but there's a lot of moving parts from a technology perspective and the --lic holocene perspective public policy perspective. alix: so, wages. where are you getting your labor will -- pool? >> we don't hire truck drivers. alix: we noticed. veterans, women have been a
smaller segment than men, but an increasing segment and frankly, historically and for the last several years it's very difficult to get truck drivers. the turnover is greater than 100%. are therivers lifeblood. isll be average income $160,000. if you look at the physicality and the danger of the work it's still not a highly compensated profession. notmost of these folks are paid on a salary basis. we have folks making more money
through utilization. alix: we had this conversation in the last hour about how you to do our jobs -- not necessarily a one-to-one replacement of jobs. when that happens, right, are those median wage workers, low-end, high-end? had is that change echo -- how does that change? would be a local truck driver which is a higher wage and lifestyle. they are home every night. long-haul drivers have to physically unload tens of thousands of businesses. in the local environment it works more like a swiss watch. those local relay drivers would have a better quality of life and they can drive the utilization route, make sure you get enough trips today to correctly -- theoretically of a higher income as well. upx: always good to catch with you.
meghan, great to have you per the hour. thanks for being here. meghan green of the harvard kenny school. the employment rate 3.6%, more people coming into the labor force. the participation rate picks up slightly. average hourly earnings strong. as you can imagine it is risk on in the market. we are off the highs of the session. index is still climbing higher. exxon on theu have downtrend. that's coming up. ,nd if you are heading out bloomberg radio is across the u.s. and the bloomberg business app. this is bloomberg.
speaking. bill maloney joins me every day it. you can check this out on your bloomberg terminal. were you looking at? -- what are you looking at? >> looking here at a five-year chart we have the trend up to 2016, the trading range, that trading range will be broken on the open. currently, 174. aroundhere is something 182 or so but this is clearly broken. alibaba. big revenue, big earnings. what you think, bill? at 175.trading that will be your first resistance level. the stock is in an uptrend from the lows. we will be above that at around
185, the september highs. alix: i am curious. earnings came in pretty solid with the earnings miss. we will see how the market is dealing with that. what do you see? >> the stock is in a clear long-term downtrend. you have support around 66 or so . the dividend is at five points. above 56 the stock is good. those are your earning trades. that wraps it up for me during jonng up on the open with ferro, we have an interview with the federal reserve vice chairman and stick around for nancy pelosi. nancy pelosi.
our viewers worldwide, i'm jonathan ferro and the countdown to the open starts now. ♪ [bell ringing] up, it iscoming payrolls friday, the u.s. economy delivering stronger than expected jobs growth as china and the u.s. push toward a trade war. hits theederal reserve post -- the fed speak begins again. good morning. equities higher. a massive lineup still to come on this program. we will be speaking to richard clarida, the vice chair of the fed and larry kudlow, and on this program in new york, we jpmorgan guests from and blackrock. we begin with these numbers. michael mckee can break it down. good morning to you, mike. michael: