Since may 17 was the last time we saw the s p 500 fall by at least 1 in the last time we saw drops of this magnitude in all of the major averages. To go look at the bloomberg g btv 912. Int is a chart of the moves the s p 500. Not seen e have again, this is another way to look at the move. Here is the oneday move and we have to find the drop. What is notable is that we havent had big moves in either direction really since that time. Theyve been relatively muted as we have seen volatility compressed and the daily moves compress and we have seen the range compressed. As scarlet mentioned, you do have the north korea rhetoric that was the spark and you also have the background of howard marks and people at pimco in t. Rowe price cautioning against being too bullish in this market. Averages,the major there are big declines. A lot of them tend to be quite volatile. ,he biotech index semiconductors around 2 . Is 1. 5 . Index the small cap outpacing the largecap stocks. Of the worst percentage performers individually in the s p 500, retail is a big part of the selloff. Macys, kohls, signature jewelers. Continuing concern over the future of department stores. Signet also taking a hit here. And stair recycle, that company a subpoena over the noncorruption acts of those shares are down 5 as a result of that subpoena. Julia and now the calls for caution are growing louder. The biggest Money Managers have a message for investors. Littleays prices leave room for error. T rowe price cut allocation in stock to the lowest level since 2000. The firm joined the mornings including billionaire howard marks. When behavior is risky and prices are high, and the market has been doing well. It is time to be shifting your portfolio towards caution. Julia founder and chief Investment Officer of the barnes in group that manages over 1 billion in client assets, great to have you on the show. We are desperately seeking a reason the selloff here. You agree now is the time to pare back at it . A bit . Theyt risk levels to where ought to be. I dont think theres a particular catalyst, but i think it is a good time for investors to consider the risk levels where they want them to be. What is the right allocation model right now . How much do you want to be in credit . Mr. Bahnsen on the equity side, we are a little bit out of consensus on this. We are 0 waiting on europe and japan. We believe there is ample room for those stocks to go higher. So we think we can get the same equity position without the same degree. A higher growth move with a much more attractive valuation. We dont cem as a currency play. That is our perspective. Julia talk to me about the Systemic Risk you see in europe. It you say we can get the bang for the buck in u. S. Securities, equally as we can see europe, but there are some many voices out there that say, on a valuation basis, europe is the place to be. It comes down to one basic line of reasoning. Need to endes they up at the same place. They wont and they dont. The u. S. Already did significant deal averaging. Their sovereign sector has been releveraging which is why they have been able to find a way to live to fight another day. Mario draghi has been doing and they havent solved for any of the real factors from italy, spain, france, and we think there is a systemic debt risk. They kicked the can very well so far, but for us, it is topdown. We think theres a lot of bottomup stories elsewhere. Talk to me about currencies and what impact that will have. This last earnings season, we see a dollar weakness kicking in. Aboutou are talking investing in u. S. Assets overall, where do you see the dollar going . Mr. Bahnsen i think it will weaken a bit further from here. Im not sure that ties into our and investment thesis much. We can see where a strong dollar is. Were alook at periods strong dollar has hurt earnings. Ight now, multinational it hurt quite a bit in 2015. We are here to find growing free cash flows that are growing the dividends, things of that nature. We believe it is bottomup value investors. Currency is not part of that. Julia you are not hedging. And its not that we dont care. We are aware of it and we need it to inform shortterm. Xpectations certainly, if we were going to take european exposure, theres no way we would be hedging the currency out. Scarlet money bring up a chart to ask you about your comfort level. This is from Tracy Alloway and what it shows is that investors are allocating more of their port olio corporate bonds. It is about 37 . Spreads are now so companies are taking advantage of this moment. Is that a good thing for investors or for companies . Thinghnsen its a good until it isnt. Thats a really tough answer. We know exactly why they are doing it. Many talk about Investment Grade corporates, they are talking very little basis points. Compensated for the risk. It is a retiring yield. That is what people are doing it. Shortterm investment is very up right now. Good thingnk its a in the sense that it becomes euphoric and it doesnt end well. Morgan stanley looking at european high yields and you cant have european yields this tight when 10 year bond yields are trading where they are. In line, effectively, by some metric. Do you think that has potential to shape the market . Do we see come some kind of spillover . At the same time, it even the lower quality and spreads are incredibly tight. Mr. Bahnsen i would say especially at the quality and. We are looking about 350 basis points. Not quite the 250 we saw in 2007, but on the Higher Quality of the highyield, they are tighter than they were higher higher to the financial crisis. I dont think its the cause of a problem to come, i think it indicates a problem to come. Complacency. Overall apathy. Are you going to take part in the tesla bond sale . Mr. Bahnsen absolutely not. Gritty t at exposure to tesla, by the equity. But no, we wouldnt be buying it. Julia the yield is 5. 25. Simply not enough pick up their . Mr. Bahnsen as a general rule, a company that loses 1 billion a order of cash flow, i would have to believe in it enough to buy the equity. Scarlet well said. Founder and chief Investment Officer of the bahnsen group. Lets check bloomberg first word news with mark crumpton. Japan areh korea and warning north korea not to fire missiles to were the u. S. Territory of guam. South korea says it will lead to a strong response from the u. S. South korea alliance. Japan says it would be legal for it to intercept the missiles. North korea warned it might fire for missiles that could land is close is 19 miles from guam. Days after the Trump Administration officially notified the United Nations of lands to exit the paris climate accord, the government is demonstrating Global Warming is real and getting worse. The show last years average Global Temperatures were the highest on record. There were more cyclones, longer droughts, and less snow. Trump has called Climate Change a hoax. The remnants of Hurricane Franklin are soaking central mexico. After the storm hit the countrys gulf coast overnight. The u. S. National Hurricane Center has downgraded the storm to a tropical depression as it broke up over the mountains of central mexico. Franklin became the first hurricane of the atlantic reason wednesday and hit north of veracruz city as a category one storm. There were no initial reports of death. Officials said the storm did less damage than feared as it rolled across the yucatan peninsula early in the week. British Prime Minister theresa may, her cabinet remains divided over a brexit transition plan. Chancellor,d by the philip hammond. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton, this is bloomberg. Scarlet coming up, we will hear from wall streets biggest bowl on facebook. A price target of 230. The stock currently trading at 168. This is bloomberg. Julia this is bloomberg markets. Im julia chatterley. Scarlet im scarlet fu. Julia facebook is stepping up videos with a section called watch. They can catch up on shows and discover new ones. Facebook coo Sheryl Sandberg spoke to emily chang about the companys video strategy. You tried to post a video, you couldnt. It was super annoying. Today, video is exploding because the technology is there. We are doing is making sure people can share and consume content in any way they want. Video is an important part of that. Lets talk more with wall streets biggest bowl on facebook. James we reinstated coverage with a buy rating and a price target of 230. Great to have you on the show, james. Talk to us about the call here because video in the pricing potential is actually critical. The video Business Model is not fully monetized. Theres a lot of pricing leverage. Ads and has done video performance advertising. A video ad, we click on the ad specifically in show you carousels. And when you click on the carousel, you can buy the advertiser. An upsidelysis, its scenario, five dollars of revenue per user which is a 20 upside versus the 26 revenue per user. And the biggest driver is pricing. It goes from six dollars today to 15 in the future. I want to ask you about the chat function within facebook. Instant messaging, essentially. What can facebook use learn from the chinese models . Is not something thats really been replicated here in the u. S. Bahnsen very interesting very interesting question. Each has more than one billion users in two ways. The he said, following asian Business Model is very interesting. Company isime a u. S. Following the asian companies. In asia, the mobile Business Model is a lot more sophisticated than in the u. S. What they have done very successfully, they were selling virtual items. Selling stickers, selling games, about four dollars of revenue per user. Business model could be coming from local search. Sheryl sandberg has said that there are more than 70 million snbs on facebook. Facebook essentially integrates a search function into messaging. And in asia specifically, we done a lot of studies on that. Messaging forile gathering. People may ask what do we do for dinner, specifically. At about five dollars revenue per user. We come up with an upside scenario, seven dollars per user. Thebout 30 upside versus 2019 estimate. It discounts on the asian Business Model and we take the full five dollars from yelp. Julia i want to talk about amazon as well because your super bullish on that. Whatyou have for 2019, specifically is it that you see a potential for amazon . I know china is also another area where they can monetize going forward. Mr. Lee china is very interesting, right . We saw the Chinese Consumer having increased demand for foreign products today. Kind of an interesting situation where, for the first time, amazon has a competitive advantage. They have global selection scale. Do lead in product selections. This point, at china ecommerce is very significant at 450 billion dollars per year. Crossborder trade selling and the china gets about 20 of the market share. Amazon gets 20 of the First Quarter market share. 10 ,ve the upside of about around 2019. You said about alibaba and the likes of jd. Com, why cant they absorb it . And what about the regulators . The Chinese Government going we dont want amazon to be bigger in the country them a are . Than they are . Is managing transition from an export economy to a consumer driven economy. Have demandr habits for certain products, governments focus is more on driving consumer demand to drive the economy more so than have it protect the policy against foreign companies. Thinking about the big picture here. A pretty bullish forecast from facebook or amazon. Another shakeup at uber as one of the longtime executives exit. , ryan graves stepping down from his management role. Julia and a quick check of the markets. We are seeing pressure on the u. S. Stocks. Europe also down. Marketsent the only that are underperforming. Is very much solid. Oil also down in the session today. From new york, this is bloomberg. Scarlet this is bloomberg markets. Another management shakeup at uber, the government the companies versed employee is now stepping down. Olivia, talk to us about who ryan graves is. Not only is he stepping down from his management role, he had a board seat and is going to stay on in his board capacity. You will continue to serve on ubers board but hes giving up his role as svp of operations. Hes been at uber since the very beginning. Hes actually the first employee they hired and hes in there right alongside with travis the very beginning. Of theken several rolls company and even served as uber ceo. Hes been a liaison between the board and now the senior at decade of Leadership Committee that is steering this company that is essentially without real leadership in the absence of travis. Talk to me about what was going on with the Sexual Harassment claims. He had been demoted twice and i believe the times those claims were made, he was head of operations and had hr under his a relative. People were saying that they had upblems in hes kind of tied in the Sexual Harassment claims. Havent been hearing that. My understanding is that he was really untouched by the recent controversies that happened at uber. He had taken sort of a lesser role in the past year. It understand that he was really on the outskirts of a lot of that controversy. Now that company right has many scandals and issues to deal with. So it is really unclear why hes stepping down at this point. We dont understand that that is the reason that he did leave. Julia i was looking at an article from recode talking about this a while back. I should make that point unsubstantiated. Scarlet we will wait to see how it all shakes out. Willit comes to what ryan be doing in his capacity as a board member, is he involved in any way . He is still so closely aligned to Travis Kalanick. Hes one of his closest allies and has been there on the board. We understand that he will be very involved as that search continues. They are down to three final candidates at this point. And i think there is still a lot turmoil and disconnect on the board that cant get quite a line on who they want to steer this company into the future. Bolivia, tech reporter from bloomberg news. And there is the question of Travis Kalanick maybe wanting to return to uber in some way, shape, or form. Julia still ahead, the commodities close. We will zero in on agriculture. It getting whacked today after showing big and unexpected yields on the way. From new york, this is bloomberg. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. World from bloomberg headquarters in midtown manhattan, this is bloomberg markets. Commodity markets are closing in new york, select to you a look at some of the big movers and the widespread selloff going on across agricultural futures. All getting hammered in the session today. The crop report came out earlier and higher than estimated crop yield. Its leading to oversupply concerns. Its also a story in the soft commodities. The usda outlook was particularly bearish on cotton. Potential he hitting their largest levels in a decade. Space, a to the energy tale of mixed messages. Opec raising demand and forecast. It is at the highest this year. Thanks for rising supply from libya. North korea proving to be quite a boon to the top safe haven asset. Was just said that investors should consider putting five to 10 of their assets in gold as a hedge against political and economic risk. Scarlet . Scarlet sticking with metals, a jump ineported earnings due to the gain in commodities. Glencore also pared down debt as it looks for a push. Almost 40 billion lost in 2014. Holgate, and analysts spoke with mark barton and vonnie quinn of bloomberg markets. Look at 12 months and sort of the narrative of the last year and a half or something, it has been the gear on the Balance Sheet that everybodys been talking about. The level of gear too high and ahead to do something about the asset sales. Cut and reduce that leverage. And now, of course, after the event, Commodity Prices cover. Should they pay out the dividend in 2017 . They have certainly spoken about the potential for what this could be next year in 2018. Once they have secured his current state of play. There is a signal of Companies Looking at deals. Its already been on the acquisition trail. This is a company that has always been opportunistic in its desire to find assets. If you look at what theyve done, theyve inquisitive. Its a commodity a lot of people have stayed away from. Assets there. Hed what is going on with rio tinto is another sort of example of that. I think that they will be know, as i say, valuations in that sector. And also if you look at the , its nose he grit theyve been looking there. I think the issue when you sort of look in the tradition of commodities for cool things like zinc and copper, theyre one of the Worlds Largest producers. There are a limited number of options that would move the needle from an m a per active. It is actually doable given the position they already have. Are minors undervalued in general at the moment . I think they are hugely undervalued. If you look at the cash flow potential these companies have when they decide to not go and spend it so much earnings on new pieces of kit, its hugely cash generative companies. The generate 50 greater markets as a whole. They have far less leverage now given the amount of debt that theyve paid out over the last 12 months. And they trade on valuations of almost half that. I struggle to understand why that disconnect exists. , it is ad we have seen commitment to capital discipline. That reevaluation and that disconnect will close over time. Glencore analyst and full seniorure, a nonexecutive director at glencore. Mark john mccain says america is addressed in afghanistan. Thatrizona senator made declaration today as he unveiled a war strategy that includes more u. S. Combat forces and increased counterterrorism efforts. Mccain explained that seven months into the new presidency, the Trump Administration did not have a game plan on afghanistan. The thousands of soldiers putting themselves on the line, in his words, deserve better. Fighters from the Syrian Democratic forces and syria Militia Group fighting the Islamic State has cleared more than 50 from the i. S. Fighters. The Defense Department spokesman as that Islamic State is under pressure because the coalition has been targeting revenue streams, including oil. It is a forced to cut the state by half. ,nd making steady progress theyve lost much of the revenue base. They are coming increasingly desperate and resorting to arbitrary extortion. The islamicted state has been fighting a losing battle and iraq as well. The crisis expanding beyond the netherlands and belgium. Announced today it imported bigs from belgium that contained the pesticide. At britains food safety watchdog confirmed it imported fromwere contaminated bigs affected farms than previously believed. And denmark says it sees patches of bad bigs from a local baker. Arresting two men on suspicion of involvement. On kenya, they are threatening to spark a crisis. The opposition claims hackers interfered. It releaseds initial results showing the incumbent president with a big lead but then said the vote count wasnt official. Global news 24 hours a day powered by 2700 journalists and s and analysts in over 120 countries. Im mark crumpton. Julia with nafta negotiations starting next week, what are canadas objectives . A live interview with canadas trade minister is next. This is bloomberg. Julia this is bloomberg markets, im julia chatterley scarlet . Chatterley. Scarlet time for sector spider reports. Julie hyman have the details. Hb,e lets look at the x the homebuilders etf down 1. 7 in one of the worst on the day performances of the etf that we track and down with the overall market. Its not the homeowners themselves that are down, its the suppliers of stuff you put in your home. Bed bath beyond down with Retail Stocks as well. And you have the mattress maker that is down. The worst performer by far having its worst day ever. Talking about a Company Called masonite. A 40 share. Itreally the provider is a really big provider. And missed the estimate as well. That for the big decline where the signatures come from. Julia is there recycling going on . Construction is so strong. Scarlet it is something of an acute and julie it is something of an at sicu shin issue. Issue. Ution today, certainly be in one of these exceptions. So the company putting to Foreign Exchange as part of the problem pointing to Foreign Exchange as part of the problem. And costs are going up. Talking about Wage Inflation in the united dates as an issue. Just a couple. Keep it in one direction. Open plan. No doors at all. Scarlet thats a really good point. Julia julie, great to have you on the show is always. Tray discussions between the United States, canada and mexico begins. The stakes are incredibly high. More than any other country. A majority of u. S. States, lets head to toronto. They are joined by canadas minister of international trade. You and i am with here with the minister, thank you for being here. Lets start with the wish list, if you will, for these nafta negotiations during next week. We have a list of demands from the u. S. We havent heard much from the canadian side. What should take priority . Which issues . We are going in with our eyes wide open. It would probably expect will come in due course with canadians to that. I want to give a i wont give this was an agreement negotiated more than two decades ago. It needs modernization. Example ofthe ecommerce that did not exist at the time. Its an agreement that has been in place. So we are going into the negotiation confident. And a sense, we are the largest customer in the united dates. We have to remind ourselves the trading relationship is unique. 400,000 people crossing the border. , welargest customer today are clearly going in these negotiations confident and very well prepared. Lily why havent we heard more from canada in terms of the list of demands . Is that a negotiating tactic or the u. S. Triggered these negotiations so the onus is on them. Mr. Champagne it is a difference and process. The fasttrack authority requires certain things be done in the United States. We have been consulting with canadians and we have prepared industry and stakeholders. We have been engaging with the u. S. Ands day one. Since day one. Cabinet members, premieres, mayors, Business People everyone has been engaged in the importance of this relationship. The nature of our integrated supply chain means that we make things together. Become more competitive together, build together, and sell to the world. Lily what are the canadian red lines . Topics they would be willing to walk away from the table on . You would not expect me to get into the details, but the one thing i can they is that free Market Access is clear. In this is an agreement that has been providing millions of good middleclass jobs. This is an agreement that for decades has been providing prosperity. Think because of the integrated nature of our supply chain, thats what makes it unique. When you look at that, you have to modernize. Lily i will throw one out there. What about the desire of the u. S. To remove the chapter 19 dispute settlement reckitt mechanism. It heavily favored canada and was a deal breaker during the original negotiations of the u. S. Canada freetrade deal. Is that a possible redline . Say ismpagne what i can that there are elements of the Free Trade Agreement that exist. Supply management. The number of rules that exist, which, you know, you have to get back to why we have this agreement in place. Has beenement favorable to both sides that provided millions of middleclass jobs. We need to preserve some of the components of that deal that would be beneficial and would help build our economy. When you have 2 billion in trade and Services Every day, you have to be very mindful before you take any measures that could disrupt that. How can we make more together, build together, and sell to the world . On the show yesterday, he was very complementary between his state and canada. When i asked about his concerns, dairy came up. This is something on the supply Management System that can do has maintained is important to protecting Domestic Energy industry. Is that a potential concession . Mr. Champagne that is important for canadians. That is how we provide stability in the markets. Try minister trudeau said it. We will defend supply management. This has worked well for canadians. We have been clear, consistent in our messaging. About ourt to talk system, we should look at subsidies and other jurisdictions. More. S. Exports five times than canada. There is nothing new there. Work to these issues, but i think we start from a very strong place. Want to ask about coordination between canada and mexico. Do we expect there to be relatively alignment between canada and mexico . Have mete two parties without the u. S. In the room going into these negotiations. I meet mygne counterparts internationally very often as well. Wet i would say to that is have been consistent saying this is a three Party Agreement so the three parties should be at the table. There will be issues that will probably be more relevant to the mexican side. Sugar was one of them. Soft is really a canadian issue. Its not included in nafta currently. Mr. Champagne those are matters which concern canadians. Within that umbrella, we need to put things on the table to modernize. This is a key opportunity for all three nations to modernize, make sure we bring disagreements to the 21st century, and that we build together and sell to the world. You so much, canadas minister of international trade. Scarlet President Trumps beginning in new jersey ahead of a security meeting. Trump north korea and other things, i think we are making tremendous headway. We will be spending quite a bit of time here. You know, weekend, as we go to manhattan where i have a lot of meetings scheduled. Any questions . [indiscernible] nonsense is the word that they used. Do you have any response . I dont thinkp they mean that. Its the first time theyve heard it like they heard it. People were questioning. Maybe it wasnt tough enough. You been doing this for many years and is about time that somebody stuck up for the people of this country and for the people of other countries. If anything, maybe that statement wasnt tough enough. We are back to 100 by our military, and by many other leaders. And i noticed many senators came out in favor of what i said. But if anything, that statement may not be tough enough. You will see. [indiscernible] President Trump we dont talk about that. I never do. The otherke administration that says were going to muzzle in four months. I will not talk about it. What theyve been doing and what theyve been getting away with is a tragedy. They have been negotiating now for 25 years. He folded on the negotiations. He was weekend and effective. At obama, he didnt even want to talk about it. But i talk. Somebody has to do it. Can you talk about your relationship with senator mcconnell . President trump i just want him to get repeal and replace done. Ive been hearing it for seven years. Ive only been doing this for two years and ive really only been doing this for six months. Its been two years and all i hear is repeal and replace. Where is the bill . I want to sign it, first day. They dont have it. Replace,ed repeal and but they never had a president dora senate that was going to do it. Didnt matter. I say simply, where is repeal and replace . Now i want tax reform and tax cuts. We will reduce taxes for the people. We pay more taxes than anybody in the world and we will reduce taxes. Tax cuts, tax reform, and i want to very big President Trump infrastructure bill. And i want a very big infrastructure bill. We may get bipartisan on infrastructure. Mitch, get to work and lets get it done. They should have had this last one done. They lost by one vote. For a thing like that to happen is a disgrace. Frankly, it shouldnt have happened. [indiscernible] President Trump if he doesnt get repeal and replace done, if he doesnt get taxes done, meaning cuts and reform, and if he doesnt have an easy way to get infrastructure done, you can ask me that question. You can ask me the question. Ask me that question. [indiscernible] President Trump the Opioid Crisis is an emergency and im saying officially right now, it is an emergency. It is a national emergency. We will spend a lot of time, effort, and a lot of money on the Opioid Crisis. Run up and make it a national security. It is a serious problem, the likes of which weve never had. When i was growing up, they had the lsd and certain generations of drugs. Nothing like weve had the last four or five years. This is a worldwide problem, not just a United States problem. This is happening worldwide. But this is a national emergency. We are drawing documents now. [indiscernible] President Trump there are no mixed messages. There are no mixed messages. Maye honest, general mattis have taken it a step beyond what i said. There are no mixed messages. Rex stated ast view. I said it yesterday. It may be tougher than i said, not less. How about one more. [indiscernible] President Trump the people of this country should be very comfortable. I will tell you this. If north korea does anything in terms of even thinking about anybody that we love or we represent, or our allies, or us, they can be very nervous. Ill tell you what. They should be very nervous. Things will happen to them like they never thought possible. Ok . Hes been pushing the world around for a long time. I have a Great Respect for what china and russia did. We had a 150 vote. Rate respect for china and russia, what they did on sanctions. I believe it will have an effect. I dont think it will have the kind of effect even though we were the ones that got it. We all did a great job. I had Great Respect for what they did. I had Great Respect for the 150. But it will probably not be as effective as a lot of people wanted to be, unfortunately. Chinaohnny can do can do a lot more. I think china will do a lot more. We have trade with china. We lose hundreds of billions of dollars a year on trade with china. They know how i feel. Its not going to continue like that. But if china helps us, ill feel a lot differently. A lot differently. Think the people of our country are saying it, our allies are saying it, and i will tell you this. North korea had better get their act together or they will be in trouble like few nations ever have been in trouble in this world. Thank you very much. Were going down to the other side and we will take a few more questions. Ok . Thank you. Julia President Donald Trump speaking there, and i think it was a 6040 split more on policy than issues like north korea. But he said his statement wasnt bold enough and they will be in trouble. They have been negotiating with north korea for 25 years. When talking about health care, talking about the fact that weve been listening to repeal and replace. In political reporter. Go to health care here and the ongoing shenanigans. Or do we go down the north korea route . Does he seem to be reiterating the same line here . Sahil this has been compounding over the last couple of days. We seen him go after senator mcconnell three times now and the way that the president said in the way that he said the president set expectations too high. Hes got a point. The republicans have been talking for seven years and theyve never had a viable plan. They cobbled something together at the last minute and they didnt work. And it didnt work. Another interesting thing is the way this is building on itself. He put out the one tweet yesterday going after mcconnell. It gets a lot of cable news coverage. Trump, as we know, is an avid watcher of cable news. He stews in it and gets riled up and decides to tweet another attack. Its a fascinating glimpse into the president s mind while hes away at his golf club in new jersey for some of this month. Scarlet its like hes trolling Mitch Mcconnell through twitter and News Conferences. To north korea. At the same time the president was speaking, the state department was holding a News Conference as well. In the last couple of days, they would come out with different messages. You could call it good cop bad cop. They are talking past one another and trying different strategies. What can you tell us about to what extent the messages are now coordinated . Sahil they are not coordinated. Ever since President Trump made that fire and fear he threat to north korea, many people have been trying to calm the waters, even going out of the way to tell reporters and the New York Times that the president s comment wasnt vetted and people should not read too much into it. A pretty extraordinary thing for the government to say, that the words of its leader should be discounted to a point. Say ift heard him anything, the fire and fury threat wasnt tough enough. Andy have Rex Tillerson james mattis trying to walk that down sayingm things that its not so much north koreas rhetoric, but their actions. They are not singing from the same song sheet. Is it a good cut bad cop strategy . I dont have the answer to that. But when there is doubt, i would not assume there is coordination going down here. Talking to different people here. Is he actually talking to the north koreans and Rex Tillerson is trying to appease china, south korea, japan . Violence and military responses and the way forward. Not only in north korea, but it could be catastrophic. That that is certainly plausible. They are going for the good cop, bad cop strategy. The government is trying to make sense of them. The United States government is suggesting different things, then it is open to interpretation, and people will make the decision to react on the basis. The lack of a reality lack of what wency, and it is are talking about, a Nuclear Standoff with someone like north koreas not necessarily going to be beneficial. Swatchd to have a vast of the u. S. Government and officials that want to call this down, despite what the president is saying. Julia you make a good point, and lentils clarity does lack of clarity does not help. Bloomberg news. Lets get a check on the markets. Julie hyman . Weie julia, thank you very did not see any further movement on the president s latest comments. The nasdaq Holding Steady with a decline of 1. 5 . The three major averages down at this point or at some point during the day, the most since may 17. We have the Third Straight day of the selloff that has been going on as well. We have seen money flowed into risk assess. When you got the vix catching the bid, certainly above where we have seen it, at 14. 29. Gold also, perhaps a surge of comfort for investors today. Treasurybuyin in the and the 10year as well. Finally, the dollar falling. Are doingaditionals well in todays session. Speaking about what is going on between the 10year and stocks, as you see, that rotation here, interesting comments from pimco, saying a return from owning stocks as follows of our. Far, if youn too look to the risk inflation, which is how they are measuring it, it is down since october 2008. Attractive,is not and of course over the last few days, we have seen money coming out of stocks and going into bonds. Some stocks being underperformance today in terms of the biggest drag because of the weight in the s p 500. You have apple coming off of the high. Amazon continuing to slide, to present. Facebook 2 . Facebook as well. Listi saw mobile makes the mobill that exxon makes the list as well. I want to get a check on oil byause oil is trading ,up nearly 2 third on the one hand, opec did raise its demand forecast today. However, the output was the highest this year. Up today, the latest at 50 a barrel. It was not able to hold that level. Scarlet that elusive 50 level for wiltshire julie, thank you very for oil. Julie, thank you very much. Fed officials are maintaining their dovish tone. We not mentally yearoveryear number of two 2 . Dropping out of the statistics, six months and months now, we need some time. Inflationurprised by coming to the downside, and not by a timid amount of really a compared to 2015 at 2016. Inflation has been coming up short, a little low relative to target, and that actually matters. It matters that investors believe the fed can achieve its goals. Moved off a really low level 2015, but the last couple of readings continue to run below the 2 . Scarlet takeaway is inflation is weak. Lets bring in bloomberg intelligences chief economist carl riccadonna. We have an unexpected decline on a month over month basis. Give us an indication of what it will look like. Set the tone. Carl pdi have a lot more volatile than the tpi. Tend to be dominated by services. Mess to gather the pdi into the cpi, it doesnt jessica biel and Downside Risk it seem to be a Downside Risk. 2. 2, headlines, were looking at. 1. We think this conflation crosscut will go on a little bit longer. Scarlet how much of a drug is that on cpi . Carl Energy Prices and on the terms are in positive territory, that is actually adding to inflation. However, it will only month on month change, it looks that Energy Prices are falling more than what they usually do, at least gasoline prices are falling more than they usually do in the month of. The margin energy will be a mild drag on the monthtomonth change. Fed saying we have to wait for the weaker readings to drop out of the year on year. , this is a month thing. You just expected to be by the end of the year. At what point do we see if the into the numbers . Carl the jets effect is not showing up. Jobs effect is not showing up. We certainly have not seen it yet. Thatu watch core cpi good, is where the dollar will have the transmission mechanism to your basically running of the lows for the years. The fed is not turning a corner just yet. All of these that speakers were waiting for the low ratings to drop out. If you read between the lines, they are basically telling us they continue to believe in the transitory impacts, such as the Prescription Drug stories, the cell phone contract stories. They do not believe in general prevention weakness and inflation data, that is a problem, even if you strip out the idiosyncratic items that refer to them, used to love core inflation to celery by about 40 decelerating by about 40 basis points. Scarlet everyone, there is a lot of idiosyncratic factor. If you add them all up carl there is a more pervasive problem and we should not wait for a few weak readings. Julia inflation flat lines at the end of the year, lets say carl until march, that is correct. The weaker it is, the further the mark will get pushed by the fact. I think in september, when we get the next update of the economic projections, we will see policymakers really back to conventional policy tightening, the rate hikes, while the hint or at least announce the unconventional policies through the Balance Sheet. Business they could have to pull back a lot more on those conventional interestrate hikes. Julia that will have to change pretty swiftly. Carl sure thing. Julia carl riccadonna, bloombergs u. S. Chief economist. Now is getting more and bloombergs first word news. Mark President Trump says is fire and fury morning is backed by everybody. He addressed reporters at his new jersey golf club. Pres. Trump i think the first time they heard it like they heard it, and frankly, the thate who are questioning maybe it was not tough enough. The president went on to say north korea had better get their act you or they will be in trouble like no nation has ever been in trouble. Trumpsses in president First Six Months of office that it has three president s. This is supported by analysis by the Environmental Integrity project. Say the dataicials suggest that epa officials shows thehe data suggest Trump Administration is not supporting the environment. We will be swimming in polluted air and water. In venezuela, the opposition mayor was removed in a continuing crackdown on president it was Maduro Nicolas maduros adversaries. He had said he had brought the country to the breaking point. Speaking on behalf of the association, a spokesperson says none of us is afraid of is fusion. Pakistan criticizing Supreme Court justices today. Sharif stepped down late last month since he was removed from embarked on an on the road rally from islamabad to this hometown to rally support. The socalled caravan of democracy initially had attendance from thousands but has since dwindled. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Scarlet thank you so much, mark. Coming up, we hear from the engineer at the center of gender diversity. He speaks to bloomberg and what Company Executives are smearing him. Shares of energy energy. Energy shares getting it off and now only up 1 . Global energy and Infrastructure Partners are at seven partners looking to purchase energys nrg energy. From new york, this is bloomberg. Julia this is bloomberg markets. I am julia shetterly with scarlet fu. Scarlet an ongoing conversation about determination in the workplace. A fire willd engineer asserted that a fired Google Engineer asserted that our emily chang caught up with him or exclusive interview, asking him if he has any regrets. It is hard to regret it just i have i do believe that trying to make mobile and the world in general a better i place by not combining us to ideological chambers where only one side of the story can be heard, and it is totally intolerant to other viewpoints and even Scientific Evidence. Emily what Scientific Evidence are you talking about . There have been plenty of discussions about this, and discussion about the fact that there is no research to support this idea that there are biological causes to the lack of positions. Adership i spoke to megan smith, who worked at google, who was a ceo in the United States comes as this is a myth. Mes my mom is a psychologist, and there is a consensus that it does affect a lot of personality ones, and in particular interest in people versus things. Ive nothing that all men are different than all women, just that there is a distribution of ande personality traits, that is a difference between men and women. There are many capable women at google, and im not trying to say that any of them are any worse than an average male engineer at google. I was trying to address why we do not have equal representation from the population, and it is largely because of the different interests in people versus things. Wrote a very impassioned response to this, and she said had your memo bit about black people or latinos or the lgbt community, that you would not have anyone defending you. How you respond to that . I think that is a false analogy and is trying to love me and otheracists vigorous commodes im not clear it im not a racist, and i think that is trying to smear my image rather than actually looking at it. Very little of the responses have been actually looking at the science. It has been just calling me mishits like, oh, the formatting was a little anyg, or it did not have citations, with my original document it. Scarlet that was james damore speaking exclusively to emily chang. Pichais decision to fire damore prior to the memo, bloomberg also caught up with Sheryl Sandberg. Ryl our numbers are so low, low for women, low for underrepresented minorities, and that is a problem. We are having success on the business side of the company. Our company is more than half women on the business side. And proud of economic excitement we continue to struggle. , and blacks and hispanics are not represented in Computer Science. Higre more, we have to persuade them into going into Computer Science. Early in the program, we created facebook university, trying to find women and underrepresented minorities who we thought could be good at Computer Science or were just starting in the field so we can get the early and invest in them and try to keep them. We have a very large Computer Science lean and program. Scarlet Sheryl Sandberg said gender inequality in tech is not due to gender differences but cultural processes that exist. Perceptions that exist. We all need to do more. Julia i do think men and women have different brands, the. We are required brains, though. We are wired differently. I think different roles ensued roles and can suit can suit women and can suit men. I think it starts early in the education. The sense of that it wasnt on topics very early on. I think you did change or education level is you want to change the perception that science or business scarlet that gets back to the cultural side of it. Yes, there are biological differences, but google has a company policy, and this guy seems to have highlighted parts of the policy, it is a result, your employment is that your employers discretion. Julia go to code promotes women getting into technology. Are on trackuates to phil 29 of those jobs. 29 those jobs. Women only 3 . Scarlet so it is a labor problem. Julia yes. 4. 3 billion. Measure will create the largest single rental in the United States. The ceo of starwood says it will leave the business. Chipotle has temporarily closed its dallas location after video emerged of a rodent in the feeling last month. Gapsompany says structural caused the problems in the 100yearold building. That is your business flash update. Muchix index fighting as as 40 today. Our traders take a look at how to play volatility. From new york, this is bloomberg. Julia this is bloomberg markets. I am julia chatterley. Scarlet i have scarlet fu. The chief operations start is that Interactive Brokers, and here we are, comingity is finally back. An interesting phenomenon is people are really short volatility right now. We have a chart of that on the bloomberg want to bring back. G btv 8279. Uvxy. Ws the vxn and the the uvxy is the. Short. Short interest has been going up. What is now going to have as a result of this . People like to follow trends, and certainly that trade has been to continue shorting the etfs as the volatility went down. The problem is, volatility does not going to zero, so i think we are actually finding that level now. Highly unit on the short side and expect the. Arkets to continue to do this that is largely explaining the moves from what we have seen the last couple of days, but the vix started to pick up yesterday over a twoday period after what i would consider a normalish for the market. I think that is a luck, the nervous shorts consider this is not really a give me here. Julie when youre short volatility, doesnt work the same way as when you are stock . G, for example, a when it starts to go higher, people get squeezed and have to give up their shorts, that exacerbates the move . Steve exactly. The short activity in the volatilityrelated products has contributed to the lack of volatility. As you sure it, somebody is on the other side of the trade. That was denvers on the market. If you are long that puts dampers on the markets. If youre long, your progress in the movement. On the other hand, it does not matter what you are short. If your shortcomings going up, is uncomfortable, you have got margin calls. You have got to cover at the higher price. Again, if you look at shorting the vix, which is more or less at 10 a historical low. Julie what trade than good offset this affect . Ve my feeling be if you are unlucky enough to continue to be short, do yourself a favor and buy some calls so at least you can sleep at night and put a limit on your losses. Julie all of that protection. Thank you so much, Steve Sosnick from Interactive Brokers group back to you. Julia thank you very much. Thendquarter results after bell. Growing pains are next. From new york, this is bloomberg. Mark i am mark crumpton. It is not over first word news it is now time for first word news. After criticizing Senate Majority leader Mitch Mcconnell on twitter, President Trump expresses disappointment about congress failure to reveal the Affordable Care act. Pres. Trump i wanted to get repeal and replace done. I have been hearing repeal and replace for seven years, but ive only been doing this for two years later have really only been doing this for six months but i have been running so now almost two years, italy here is revealed and replace. And then i get your command where is the bill, i want to sign it and then i get h ere, where is the bill, i want to sign it, they do not have it. Mark he also said he wants them to get back to work. Recent actions by the joint administration are triggering doubledigit premium increases on individual Health Insurance policies according to a nonpartisan study by the Kaiser Family association. In 15 cities across 20 states will see increases of 10 or more next year. It