We are very international. I want to start with germany. Manufacturing fell to 5. 7 . What a contrast between our unemployment going down to 5. 9 and their manufacturing falling the most since 2009. China, india, turkey, egypt, all closed for various holidays. Out thatt to point samsung reports tomorrow. Ahead of that report, samsung does it is building a new Million Dollars factory. But it is a semidoctor it is a semiconductor like factory, right . Trying to go up against apple. President obama has three Business Today session before, credit regulation, is conceived roundtable just 29 days till midterms. Session court his at a news fashion for the socket, samesex marriage at this point, anderson three different habits, and anderson to three different doctors. How they have only recently for an research, is from 1971 from dr. Okeefe, on how do we know where we are. Google maps, gps. Google maps within our bodies, and dr. Okeefe led the twoon this, and that the norwegians, a husband and wife, followed up in 2005. The human body is absolutely amazing. It is all chemicals and it somehow becomes emotions or whatever. It blows my mind. A sound off from adam johnson. I will not be winning a nobel prize in medicine. Bloomberg politics debuts tonight with all with all due respect with all due respect. Mitt romney will be the guest. That will be exciting stuff. There we go. Lets do a data check. One of our themes today, the 10year yield, two point 24 . 2. 24 . 2. 44 . Huge markets on friday. Gold is the story. An 11. 90 seven print. Pagewill set up the front nicely. The 1997 crisis. Lulathe lulu real real. There it is. Lets go to our front page this monday morning. Olivia sterns has it. Our top story. Hp planning to split into two separate companies, one business, personal computers and printers. The other will be corporate hardware and services. Hp planning to announce the move today, but it will take place next year. It will be a taxfree distribution of shares. Shifting away from traditional computing to molding to mobile devices. And any number of transaction as well. What is the chevron deal . Chevronstelling selling a 30 stake in shale. Can i point out on hewlettpackard, earnings have been shrinking for the past thee years, and this year forecast grows a mere 4 . They have to do something. And enterprise, they made up profit of they made a profit. Enterprise made a billion dollars more in profit. And ebay, we have looked at the 10year track record. It was miserable for ebay. Hewlett is better. With the whitman rally, we have seen 8. 2 over the past 10 years. That is not acceptable. We will have lots more with a harvard professor later this hour who is joining us. Our second front page story. This is the reason i thought you got out of bed. Gold plunging to its lowest level this year. It fell to as low as 1183 an ounce. Investors are shunning gold. You would think it would bring some buyers back in, but it comes amid signs that the u. S. Economy is strengthening. All you need to do is look at the chart of silver, a similar chart of gold. It broke 19 as gold has broken 1200. Old is now 1688 come keene said this morning, given the routing and commodities, there must be something abiding. You have mentioned this. The president ial election in brazil. The probusiness candidate, finishes in the primary. Runoff against rousseff. Marina silva, who looked like , pulling into a lead. We almost have a trifecta of international issues. Hong kong is calm her than it was. And headlines out of ukraine, moments ago on the bloomberg. The situation is calm, but bring us back over here. This is a big deal. The russian ruble, a few hours to 40. Nt you go back to the beginning september, now your blog now your dollar almost buys 40 rubles. That is in one month. A set of issues in international relations. Dollar strength being the one thread that weaves its way through all of that. It will make for interesting world bank and imf meetings. Very good. Introduce the client that is in hong kong. It looks like a return to normalcy after last weeks massive occupy central protests. I want to bring in our reporter live from admiralty, hong kong. Thank you so much for joining us, john. Is it back to business as usual in hong kong today . It really is, olivia. You have got, first of all i think we lost john. An unfortunate situation. We seem to have lost the linkage there. But the take away is that it is not as bad as it was. It is not as bad as it was. The industry is pretty empty. Last year there were last week there were tens of thousands of people out on the street. Jimmy metal joins us, as he has many times here. Zel joins us. There is a lot of pressure, and china has been nervous. Xi jinping and his group have been nervous. Now the students are pulling back. The students were never going to but inthe short term, the mediumterm issue, there is a whole generation of people in hong kong and maybe across china and maybe across china in the world who have woken up, and these students, china has said they have been backed by foreigners. This veryeally indigenous idea, and now the power of this idea of democracy is there, and they will not be able to pull back. Things are opening up. What is critical here is a generational shift. You and i studied jonathan spence, orville schell. Henry kissinger is one of them. Those days are over. This is a new generation. How new is it . It is no, meaningful, and very indigenous, which is what it is new, meaningful come in very indigenous, which is what frightens beijing. Moreears ago he became wellknown people in hong kong fought back, and the students got their first taste of what it means to be able to have control of your future. There is a set of rules that apply in china, and those rules do not right now fully apply in hong kong. What the protests are about is saying for the students and others who are with them that we are going to determine our own future and pick who our own leaders are. They have lost this round, you cannot put this idea of democracy back. Cannot put this idea of democracy back in the bottle. Government is opening, stores are opening. Lets fold this into the markets. I would characterize the strength of the u. S. Dollar, and that has meant that commodities go down. , juliano ask you manual, how strong is this link between the following doll the rising dollar, falling commodities, and how that translates into u. S. Corporate earnings. It is quite strong. I think you framed the argument very well this morning. It is all about, does the strong dollar actually me that we have problems globally that are going to feed into the u. S. , as has been the case in the past, or can this be a coupling that we have seen in the last couple of years or so, will they continue . What is the history of that decoupling . What we are observing with the great jobs report, all in all, is decoupling successful . It remains to be same. If you look at the equity markets over the last several months, the backandforth, the investors are still trying to there is success. But if you look back to the 1990s, it has been successful in the past. We have every reason to believe that it will be, what we would also like to see europe, for one, get back on a growth track. Emaulian emmanuel julian with us jamie metzl for the hour. We will discuss with a professor from Harvard Business school who will set us all straight on this issue. You are watching bloomberg , with tom keene, Olivia Sterns, and yours truly. It is our twitter question of the day there in what issue will be the game changer for the midterms. Backandforth, lots of pulling going on, and some interesting races among those six or seven key senate races. It is the midterm. You can find out if it will be a game changer tonight. With all due respect, 5 00 p. M. Their guest, the former governor of the commonwealth of massachusetts, mitt romney. I believe he was a president ial candidate long ago and far away. Mitt romney, with all due respect tonight. There it is. Cap onll due respect to hewlettpackard, what do we have . The headline that nobody saw coming. Ewlettpackard plans to split still, according to a person with knowledge of the matter, it is exactly what bill george has saying hpg each he should be doing for years. Phonens us live on the from boston. Good morning, professor. Thank you for joining us on surveillance. What did you see that meg whitman did not . These are two separate businesses, basically a hardware business, lowcost, where they have been struggling to can meet to compete. They have never been a lowcost company. They have tried to run it for cash and see if they can regain. On the other end, i think meg whitmans focus has always been on building enterprise systems and the services business. Both of them are about 55 billion, both have been declining in revenues, and this gives an opportunity for her to focus on the business where she is strongest, software and services businesses. I applaud her for doing this. I have to say that two years ago when i recommended this, the company was down on the bottom and she has restored it a lot, and out of taken out for you. But importantly, distort the confidence to the market. Have thought this through to and after getting where they are, twostock has tripled last years. Companies can regard is something that we should require caps on this is something that we should mention that meg whitmans predecessor should have been done. What changed . A purchasing patterns are very different. The main purchasing is going back and forth between the hardware side, hp, and the systems side. Withcan be resolved longterm purchase agreements between the two companies, so i do not think that is a big problem. What has changed is the confidence, that they are now back on their feet. They were on the bottom before. Today they are back up around 66 billion. The early indications are that it will probably go up around 6 this morning. This is what i think the market has wanted. So she is more confident. Stabilization has been critical, to give them credibility in the marketplace. I wonder if you could sort of help shine a light m a volume is up to the highest we have seen ever, and yet you have two bringing companies together, and yet we have two year two deals in two weeks. What do you make of that iron he . Know, ebay was under pressure earlier this year. I was surprised about the ebay situation. I am not sure why they are doing this, and i am not sure how strong the two remaining companies are to compete with ,eople like amazon and google and certainly alibaba. Somewhatd that perplexing that they made that were not undery immediate pressure. Carl icahn has pretty much gone away. I applaud the rethinking. I think the idea of the portfolio makes sense. At 55 billion each, that is plenty big enough to have a strong company. The old company as it existed is too big to manage. Bill, meg whitman is going to stay on and become the ceo, and she will also controversially stay chair of the printer and pc business. Can she lead effectively in both roles . I was surprised at that. Show that theg to two companies are still one. I hope that will not last long. I dont agree with that. They should have a completely different board, board governance. I was on the board wants of a 3m spinoff. It only works because you have an independent board on the hardware company. There is no need to have overlapping boards. They should find a strong outside chair for the hardware company. We will have to leave it there. Bill george, professor of management practice at harvard university. Coming up, Jeffrey Rosenberg is going to help us figure out what to do with all the money we want to put in bonds but actually do not really as they fed plans to end its zero Interest Rate policy. We will be right back. Good morning, everyone. Bloomberg surveillance. Im tom keene. Olivia sterns is in for scarlet fu today. Adam johnson is with us as well. This is from al hunt of bloomberg and Bloomberg View on georgia. The math is simple. Needs close to 30 of the white vote. Obama got 23 in 2012. She needs a turnout of lack voters only slightly smaller than the 30 represented in the 2012 president ial election. , a kansasl is with us city royals guy. Pretty exciting. I am a little bit younger than adam. That does not make me that young. I was up late last night. The last time the royals were in the playoffs was when i was a jr. In high school. When ially amazing was a junior in high school. Getting out of a wild card game, it looked like everything was over. Theissouri, tell me about oddity of a kansas race with no democratic candidate. Fromgrew up one block kansas, and it is unbelievable what happened because in the senate race, there was a democrat and an independent running against the longtime kansas senator. It is absolutely fair ball because the goal was to win control. Now greg norman, the independent , up by 10. Im confused. Watch all due respect tonight. Good morning, everyone. Bloomberg surveillance from new york city. Tom keene with adam johnson. Olivia sterns is in for scarlet fu. We are looking at china and a quieter hong kong. Let us go to john dawson. He is in hong kong. We have a bit of a delay. A major change here. What would you expect to hear from the government as you go into Tuesday Morning . Interesting tom interesting, tom. Government workers are back to work. Protests. F it is back to work for the workers, back to school for the students. The students have not left the area. Friday the students insisted that the leader resign. A bit of a stalemate going on. I will tell you one thing. A very peaceful protest. Overall, the complaints against police 275. That is pretty good when you consider a week or more of protests. Retailers are having a golden week right now. They are getting a little more vocal behind me right there. Shops were closed, and for rent,ers paying a large that has a big impact. John dawson, thank you. Wide series of headlines, including, olivia, the chairman and ceo announcements for these two new companies. There is some criticism over the weekend of that. Meg whitman to be president and chief executive officer of hewlettpackard enterprise, and i believe she is which is a corporate entity. She will serve on the board of hp enterprise. Dion weissler will be the president of hp incorporated. Which you and i both have on our iphones. You have a consumer business and a corporate business. Hewlettpackard the split those two up and trade in a taxfree spinoff of effectively two new companies. Julian emanuel is with us. This goes to and a day. It is a new kind of m a day. It is a new kind of m a. Impetus the strategic coming from to make these decisions . Is definitely come up from the shareholders. Where it is really coming from the fact that these companies have thrown off so much cash, that basically here is the man howeverk that cash accomplished. Is carl icahn and apple have lacksuggested is about a of phenomenal animal spirit, which is not a bank, making it easier to be one company. One company that is in a state of structural decline. The headline coming across, they have a lot of cash, probably well worth it. We forget that j. P. Morgan that j. P. Morgan has 162,000 employees. Hewlettpackard has doubled that. This dreaded word i hate so much, synergies comes in. We are going to be synergistic. And hopefully they were downsizing does not come in too much. That is the reality of some of these transformations, and part of the world we live in now. The key is unlocking it. As you said, in a world where topline growth is difficult to come by, we have to find different avenues. Is this effectively be you havef the markets, to actually rethink cash flows and try to generate value on your own. You have got to be synergistic. I just love saying it. Olivia, do you say synergistic, or do your parents beat it out of you . I just say disruptor. Whether it is computers that look like this or iron ore that looks like this or gold that looks like this, on and on we go how do you explain the difference in the rate of changes we are seeing in commodities . The strong it is dollar story. Perhaps people have not been focused as much in recent years on the correlation of a strong dollar to commodity prices. Certainly the management that survived commodity downturns in the 1990s who are here today understand that very well. Is there a possibility that as the dollar rallies in all these u. S. Corporations have profits trapped abroad, it is a double whammy to bring it back here so they actually start buying Companies Overseas . That is one of the reasons we have been so positive on m a this year, and despite the crackdown on tax inversions, we think it is going to be m a of a different stripe. But you have to put that cash to work. It is m a in search of topline growth. Lets bring in jamie metzl to the conversation. Kansas city royals fan. Our commodities going down because of china, or is china coming down because of commodities . Definitely commodities are going down because of china. We were talking about this in the green room before we came on. Is it actually green . It is actually green. We were talking about this. China keeps saying the growth didet at 7. 5 , while, we 7. 5 with these madeup numbers. When you look at commodity prices, growth is a lot slower. That is having ripple effects all the way down through the economy. And the likes of rio, hp that is the real story, and it brings us back to the hong kong story. The china entire growth model is at stake. They have had this first phase of Economic Growth, putting a lot of resources into lowend manufacturing, but they are having a tough time. To get there, they will need the kinds of reform that these patriotic hong kong students are calling for. They are having a tough time meshing economic and political reform. But any Technical Analyst would say that is a path to 900. Lot of a proxy for a other commodities. Where is that super cycle, or in jamies china, or is it over . It is definitely a question that it is over. It is not entirely clear, but for us we think at some point ,hen the dollar takes a pause that gold will will this be front and center at the imf meeting this week . It has got to be. 188 members absolutely. You will see what you typically see in commodities cycles. You will see mine closures. Jamie metzl, we have mao zedong, we go on to is this a sea change for china . Xi jinping . G economic problems in china that im injured, they are betting everything on economic reform. Professional between the constitutionalists, the students in hong kong, everything is secondary to economic reform. They are trying to do economic reform top down. Without political reform. Without the bottomup pressures that you can see balancing interest. They are saying we want more rights, and the communist party is saying forget that, you have to trust us. That gold chart is something. Thank you for telling me to buy it. Look at silver. Come on, nobody looks at silver. I just had a Joe Granville flashback. Going to keep the conversation going. Global m a surging this year. Will it continue to the end of the year, or will tax inversions regulation take it to the bubble . Hat is bloomberg surveillance on television, streaming to your phone. This is bloomberg surveillance. Im adam johnson with Olivia Sterns and tom keene. Hewlettpackard with much more clarity on their headlines than i expected. They have restructuring charges of 1 billion. That speaks volumes about what is wrong with this company. Plain english here is the plain english headline that came up seconds ago. Hewlettpackard sees return of at least 15 of at least 50 of 2015. You nailed this. This is a cash exercise, whether it is ibm or hewlettpackard. 12 billion. These are small companies, and invertingmerging to create free cash flow. As the u. S. Economy normalizes, the expectation is that as rates rise, this will continue. At some point you are going to go from buybacks and distributions to more day and actually capex. 36,000 bodies out the door so far . Out the door so far as of the third quarter. Meg whitman has been getting rid of workers, trying to cut costs. They are guiding lower on their 2015 numbers per share. Earnings per share are now going five dollarstween and 4. 30. Analystsen a lot of saying who is doing company news . Olivia. I thought i was. Tesla manning its foray into automated driving. Join luxuryr will rivals and offer hightech features, including one that keeps the car in its lane. Google employees to security guards. Be hired as0 will their own employees. They will be eligible for the ,ame benefits as other googlers including Health Insurance and retirement benefits. Yahoo nears an investment in snapshot. At 10will start up billion, according to a person with knowledge of the matter. Yahoo is said to be the lead investor in financing. That is her company news. Snapchat do you have snapchat . My crazy. 20 million. They are hoping to replicate the set the success that they had with alibaba. 20 million . That is nothing. Think about how much yahoo just got from monetizing alibaba. That was 10 billion right there bank that was 10 billion right there. Of the value of yahoo Julian Emanuel, this goes again to hp, ebay, paypal. You take a stock, everybody can do the analysis, and the answer is this is a essentially worthless. It is another exercise in strategy. But what that also represents butit is not only strategy, it also says a lot about the power of the chinese consumer. The value of that stock is coming from the value unlocked by alibaba. It really is a positive message. The winner of all this is alibaba with a successful share. Did you sell . No, im holding. Alibaba i am with peter feel on this. Peter thiele on this. The reason they have a 70 market share in china is because the government has kept everybody out and clear the lanes for alibaba. If those politics change, your alibaba stock will be worth a lot less. Think you are saying hold those shares. Right now the valuations are pretty high. Watch them, and at some point i would start transitioning some of that value into other things. That is the heart of the matter here. I have a lot of faith in the u. S. Economy. We have a lot of very positive headwind. Manufacturing is coming home. Our Energy Situation is great. China is a big, big risk. Europe is not going anywhere. Shares, bring it into the u. S. , pay taxes on it, and put it into u. S. Companies. I think china is a growth story, but there is a lot of risk in it. The oasis of prosperity. Four Chinese Companies have relocated because it is cheaper to manufacture here on shore and sell it to americans. Julian, please. The labor on arbitrage has closed up definitely over the past two years, dont question about it. But when we look at it, the Growth Engine for china Going Forward is the chinese consumer. I dont feel guilty for weight . A great discussion with many corporate stories today. Speaking of relations, how about and american political experiment and i fight with respect, probably, is political experiment, with all due respect to the property will be the guest. Be the game changer for the midterms . Good morning. This is bloomberg surveillance. Olivia sterns with tom keene and adam johnson. Adam johnson has top stories. The world pause biggest gambling hub, bigger than las vegas, bracing for the fallout from protesting in hong kong. The nba renews a parrot tv contracts. The deals with walt disney and time warner runs through 2025. The league will get twice as much money as in prior deals, and we should point out time warner and disney currently pay about 930 million annually. Sounds like that will up to about 2 billion. Bitcoin plunging to the lowest level in about a year. Ugh. Matt lunch . Popular amongains certain speculators. Despite a history of fluctuation. I have been wrong many times. Bring up the chart of bitcoin to show this foolishness. There it is. It is just like currency. I dont know what to say about this. Itability of 800, 700 got a lot of really nasty notes vers. That was the same day we had david will of Merrill Lynch on the show. He actually nailed it. I purposely stayed away from this thing. And it could rebound. I bought in a little. Not too happy about it this morning. Child. [laughter] a i understood it was neomarxist conspiracy. It has got to do with thermodynamics. Jamie metzl and Julian Emanuel here to help us out. Mr. Emanuel wrote about this. If you look at the chart that you just put up and compare it to the gold chart earlier, there are lots of similarities. Basically the message is that the world believes in the u. S. Dollar, so that is the currency that drives the world, and to the extent that that continues, and we think it is continuing next year, the coin is going nowhere. You have been good about careful questions about bitcoin. What have you heard recently . What do optimists they say to you . They say the currency is still up 300 since nobody has heard of it up to a few months ago. A lot of it is concerned about the security of it. The cyber hacks that we have seen about the retail industry, howle really do not know their banks, their storage vaults are holding onto the currency. Within this, jamie, i get a goes to china but really all of asia. Is there a need for bitcoin . Whether bitcoin does or does not do well, the fact of the matter is that additional currency not act by additional governments is part of the future. It is part of the barter economy, it will become part of our lives whether in this form or some other form. I think it is very real and it represents a shift in global economics. Why would something that is not backed by anything be real . Barteruse it is a global system, and in values whatever people have to trade without the intermediary of governments. Right now there are all kinds of questions about the u. S. Dollar. China is trying to position itself. This is just another way of thinking about currency. And it might not be bitcoin that wins the wars, it might be the corner ons how inefficient it is very expensive per why would you pay. 2 for western unit for Western Union . Day, your newial book is out next month . It is a thriller . It is a thriller about human genetic enhancement. The u. S. Government has learned that china has a secret genetic enhancement program. I am going to read the book. Not yet. Jamie metzl, thank you so much. And Julian Emanuel, thank you so much. Let me do the forex report. Brazil real gets my attention. A stronger one over the stunning election. Much more on bloomberg surveillance. This is bloomberg surveillance. Assigns a normalcy returns to hong kong. Students and government leaders negotiate. Basels probusiness candidate stuns. A runoff for Dilma Rousseff. Bill gross and orientation at capital. Bloomberg surveillance, live from new york. Monday, october 6. Im tom keene. Scarlet fu is out. Olivia sterns is in. Adam johnson as well. He has our morning brief. German manufacturing follows falls. What a difference between our situation in the u. S. China, india, turkey, and egypt are closed for holidays. Note earnings. Sampson will report tomorrow. It will release information about a 15 billion chip plant. Competing against apple. ,resident obama has ebola financial regulation, and a dnc roundtable. The Supreme Court begins its session. On the docket, samesex marriage and a list of issues. You had a beat on this comedy nobel prize season has begun. Medicine is going to go to three different doctors. One of whom is an american husband and wife. It will be a nobel prize in baseball. Okeefe, and a norwegian couple in 2005ish. People managed to get around before google maps. My gps is tsonga to the food court. Anthey showed is not and for hour the show does not and for an hour. Bloomberg is debuting its new political shell. It is a politics show. Every dayue respect, at 5 00. Mitt romney will be the first guest. 5 00 and it will rebroadcast. A data check. A follow on what we saw friday. Futures were up. 14. 55. Oil under 11. 90. Brazilian real stronger off the stunning results in brazil. Top headlines. A surprise in brazils president ial election. Pro business canada neves in second place. A runoff october 26 with the incumbent, Dilma Rousseff. Rousseff 3 received2 of the vote. Shares of brazils Biggest Oil Company rose by 10 in frankfurt. Calm returns to hong kong. Protests strength monday monday. Strengthrank crowds thinned at two other sites. Plans to split into two separate companies. One business will be personal computers and parentals, the other will be corporate ha rdware. At55,000 job cuts hewlettpackard. A few minutes ago. Is with bloomberg intelligence. He has looked at the train wreck of hewlettpackard. Hes here to give us perspective. From a strategic standpoint, what does this board face as they advise meg whitman and what to do. This is a darned if you do, darned if you dont situation for hp. Servers are becoming commoditized. On the pc side, it is becoming cheaper. Lenovo is a strong competitor. They have structurally very different kinds of challenges. What is the old guard facing within the new Technological Progress . Everybody seems to be scrambling ibm, ebay, online. This is more about Technological Progress. Technocrats are looking to the future. Sue is structural is the boxes have become irrelevant. So has the server. This engine of growth and profit if you are using a cloud for 90 of your computing, the cloud has to be stored on a server. As things become more cloudy, no pun intended, you start to become more efficient on how you things. As a result, you need less servers and less expensive servers. You can make do with commoditized boxes. I was stunned with the headlines talking about the future cash flow. We have a confidence in apples cash flow. Do i know what ibm, lenovo, or hewlettpackard, hp enterprises, do you have confidence in their future cash flow . Does our big challenges. Meg whitman has done a good job of turning things around. Theres a structural challenge. Jeff rosenberg with a perspective on the market reaction. I know you cannot comment directly on hewlettpackard. Everythings back but by free money. When does the party end that allows these transactions to occur . The Free Money Party is coming to an end. Are we talking to rosenberg more . Yeah. 0 we leave the era of Interest Rates. Globally, you get a different picture. Back to the currency conversation. It depends on where in the world does not disadvantage u. S. Companies . It does. That is the extent and times of currency appreciation. U. S. Exporters are losing relative to the rest of the roads exporters. That is what the weaker currency is designed to achieve for europe and japan. Do you think either of these new companies will go shopping for other assets to fill in the holes of the new Business Model . Will either of them become acquisition target . Softwareerprises portfolio is too small to matter. Area, potentially, where i think some beefing up might be on the books. It iside of things all about cost. How fast can you make this product cheap and competitive . Lenovo has a good game and lower margins. Expectations are lower. Are you concerned about the ceochairman sector. Raise concerns for investors. We will see how long it lasts. Anand on the drama. For those of us who are older, a huge deal. Adam and i have our hewlettpackard translators. If you buy it separately, it is 100. Calling for this split up for several years. There it is. Jeff rosenberg with us with blackrock. After the debris of the jobs report, what did you write this weekend . No wage growth. That is the only piece of the jobs market, the jobs report that is disappointing. Every other part was very strong. This is a very strong jobs economy. It has been lacking Wage Inflation. Wage inflation is the most lagging indicator of what is, in total, a lagging indicator. Wage growth is the last thing to turn in an economy. If we look at forwardlooking indicators, the survey based measures of Wage Inflation, we eee an anticipation of wage uptick six months to nine months from now. Validating the view that the fed needs to leave the era of 0 Interest Rates. The ceo of c. K. Restaurants in the wall street journal. Franchise earns 100,000 per year in pretax profit. At one company, upping the minimum wage and the wage pressure you talked about, not necessarily a good thing. It depends where you are talking about in terms of the value added. At the details inside the wage report, you see a bifurcation of where you have wage pressures, where there is productivity enhancement. Where it is not profit squeezing. Versus other areas of the economy. Professional and business services, up. Of potentialamount growth because you are seeing a compression and his lack in that area at the labor market. To 5. 9 . Oyment dips why would we think we would seek Wage Inflation before we get to full implement . Debate about what is inside those numbers and how much slack is there. That is where the debate will be settled. The hour. With us for time for our twitter question of the day. What issue will be the game changer for the midterm. bsurveillance. Good morning. Bloomberg surveillance. Mitt romney, 5 00 p. M. Beginsll due respect strong with the always interesting former governor of the commonwealth of massachusetts. No doubt, you recall, a president ial candidate. Lasts forever, not even quantitative easing. Stop buying rates will rise. Jeff rosenberg of blackrock. How do Bond Investors position ahead of the fact that there is an inevitable rate hike . This is going to play out different than what happened last year. You talked about the end of qualitative easing, that was last year story. Quantitative easing was about restraining longterm Interest Rates. That is what affects housing. This year and Going Forward, we are talking about the change in Interest Rates for short maturities. That is what the ending of zero Interest Rate policy is about. Where investors hold their maturity what is the perspective of their investments, becomes more important. Investors are concerned about a replay of last year. It is going to be shorter term Interest Rates that rise when the fed exits zero Interest Rates. So we are still safe and a five year to 10 year time frame but not shorter . The bigger increases in Interest Rates are going to happen and shorter maturity instruments. That is the opposite of what a lot of investors have been doing. They have been fleeing longer maturity investments, things like municipals, theyve been going to the front end of the current. That is coming out of the smoke and into the fire. Asthe Second Derivative convexity, acceleration. You are going down the street and you slam on the break. What is the acceleration going to be . Biggestccelerations rate of change is going to be in the front end. The long end of the long end of the curve, tenure interest basis points. When we look at where the fed is going to end, most of the impact 50will basis points in the 2 year. Oasis in prosperity. Great band. What about other Asset Classes . We have been more cautious on highyield and then bank loans. In the last couple years come we have emphasized those areas. Highyield has widened out and increased in attractiveness. Above 6 . That is a good relative value entry point now. In the meantime, protesters have allowed Civil Servants to return to work. We go to hong kong, next. Good morning. Washington, d. C. Gorgeous morning. Not theebrate, no, nationals, the baltimore orioles. Within a stones toss. Better than good. A most original American League divisional series. Better than watching the jets, that was painful. Giants won. Yes. All of washington waiting for tonight. This is bloomberg surveillance, tom keene with Olivia Sterns and adam johnson. Olivia, take us to hong kong. Day 10 and crowds are dwindling. Protesters vowing to ramp up its makeials do not concessions. Had they lost their ability to demand change . Director atthe asia eurasia group. He joins us live from washington, d. C. Thanks for joining us. Do you feel that the protests have petered out . Is this the calm in the eye of the storm. On for is going to go weeks. The turnout is not going to be as big as it has been. Youve got a core group of a couple thousand and up to 10,000 students and other individuals that are coming to this cause and will turn out in the streets. And will press the government collects how organized is the jacob they want the ability to choose candidates, not just the ability to choose candidates beijing has vetted. Will behink they effective and demanding change . That is one of the variables that is going to extend this further. There is no cohesive leadership of the movement. You have a couple protest leaders from the student groups. Couple from the more seasoned political groups. No one is really in charge. That means it is hard to coordinate any kind of lockdown or any kind of escalation. Its very grassroots. There seems to be a tension. Im asking you to help us define it. W chinas economy for the last 10 years with infrastructure. Its trying to change to a consumeroriented economy. It is the same consumers that want to vote. How does china walk that line . For hong kong, this is potentially the kind of future the Chinese Government on the mainland is facing. Clearly, beijing is facing a growing middle class. Expectations across the board. When you get into a situation like in hong kong where there is a and contention about his people are willing to press for policies conducive to addressing does. That is what we see. Help us understand what the conversation sounds like in the 25 Person Committee that rents china, the politburo. What does that sound like in beijing looking at hong kong . Theyve got a be feeling relatively satisfied and may be helpful that this is coming to some kind of a conclusion. I would caution them not to be to completion. Too complacent. There was concerned that there could be spread into the mainland, that is not going to happen. The whole world is watching how this plays out. The pressure is high and the need to find a way through is a cute. Funny at economic shifts driving the tension. I hear about resentment among people in hong kong because of rising living costs and the increasing affordability of housing. Help us understand what is fueling those tensions. That is been going on for years. It stems from a a lot of uncertainty among people in hong kong about the one country to systems set up in itself. A big increase in people from the mainland coming into the city. That has led into the conversation about the mainland control of the city. That has fueled resentment on both sides. Nicholas consonery with the eurasia group. Continue this with Jeffrey Rosenberg of blackrock. A look at the economic spirit of asia. Given a commodity relevant. This is getting seriuos relevant. Commodity this is getting serious. For the Economic Growth perspective. It came out in the earlier segment. Is transition, can china transition away from its old model to a new model and towards consumption . How will they manage that . Christine lagarde makes it clear we are the locomotive. Whether it is hong kong or iron ore prices. Can they come back over to our markets and caused some softness, if not gloom . Can cause feedback. Particularly when we think about global commodity prices. The feedback is ambiguous. Theres a benefit to lower commodity prices. Oil priceefit and the decline is an offset to the shargh or currency from the u. S. Perspective in terms of experts. Argue that the Energy Impact is more beneficial for the consumer than the export issue. What price do we need on oil where it begins to affect the gdp . 90. 22 on west texas. We are already there in terms of seeing the flow through. That will flow through as a tax cut to consumers. Do you have a number that that improves gdp by . 10 is worth. 2 on gdp. Above 3 . I think you will get above 3 in 2014 for other reasons. It is netted off against the impact of the export drag. 2jeff came up with that statistics while watching the new york jets. 2834 . They were not even speed of 60 minutes. The giants won. Coming up on bloomberg surveillance, we go to sao paulo for more on brazils president ial election. On bloomberg radio, tv, and bloomberg. Com. Morning. This is bloomberg surveillance. I am Olivia Sterns. Time for some company news. Some of facebooks best divers look to unionize. They are seeking representations from the teamsters union. The team has written Mark Zuckerberg asking him to press the social network shuttle bus contractor to bargain. 40 drivers shuttle facebook employees to work. Renews its deal with the National Basketball league. The nba renewed an agreement with time warner. The nba will get about twice as much money as in prior deals. Time warner and disney pay a combined a new film from 21st, gone girl debuted as the top weekend movie in the u. S. And canada. The David Fincher directed picture netted 38 million. Thats the latest company news. Jeff rosenberg with blackrock. Theres a divergence economies that is leading to a massive divergence of central bank policies. Janet yellen is very alone. I do not think i have seen it like this. The set is by itself. The side is dragging its feet. The economy and the data clearly shows that we need to end this area of zero Interest Rates. And the rest of the world, the data is going in the opposite direction. A divergence and Economic Performance leading to a divergence in financial markets. Fed get inis can the front of the story . Lets call it forward guidance. Ben bernanke, richard they all say thent fed cant get out in front. We will see how that plays out. I am more skeptical, as usual. The issue Going Forward here. In the next meeting, by december, will be said be responsive to the Economic Data . The friday numbers have shown this is not a Participation Rate. Oming back this is an issue where the economy is growing strongly. Strong enough for the fed to exit this error. Paul krugman talked about the zero bound challenges bill gross and others in fixed income had. When we get Interest Rates away from krugmans zero bounds, how much will the pain before gross, anybody else . We have to because his. A lot of fixed income Asset Classes have looked good in an era of zero Interest Rates. Relative value has been pushed downward. A lot exit that period, of the strategies are going to be more challenged. That is taking a longer perspective on tactical opportunities and high yields. We have to play more defense. Market have an equity that refuses to correct. A 10 year, 20year paul volcker bond market that refuses to correct. How ugly will it be when the two year yield goes from 0. 5 to 0. 3 retirees are going yes bond prices are going down. No one knows how bad. We have to look at where are risks are concentrated. I mention of avoiding concentration in the front end of the curve. Managing liquidity risks. Some sectors of fixed income are going to cost more to transition out of. How will janet yellen, stanley fischer, bill dudley, how would they communicate this . Do you expect a speech of a rubber chicken . A lot of ways in which they will lead into the change in communication could be through speeches. Priming the markets for the official communication. We have the fomc minutes. Sometimes the conversation that occurs in the minutes is a way of laying the groundwork for the markets on the change. Jeff rosenberg with blackrock. Out of jacob adam . Look at where the markets are trading. I got so excited. S p futures are up seven points, 1 3 of a percent. The 10 year is flat. The euro getting a bid, 1. 2560. , finally up. P . 56 this is bloomberg surveillance, im Olivia Sterns with tom keene adam johnson. Our guest hosts Jeffrey Rosenberg, chief investment strategist for fixed income at blackrock. Dilma rousseff clinches victory in the first round of elections. The battle is far from over. Plenty at stake. Willem marx is in sao paulo. He joins us with more. Good morning. It was really a very unexpected result. The incumbent walked away with around 42 percent of the countrys votes. In went to aecio neves, third place over the last month. Maria silva, 21 . Later thisthat month, in three weeks time, october twice six, we will have a runoff. The top two will be competing each other. Anduch a big run out brazilian stocks because everyone was hopeful that maria silva, the opposition to rousseff, was more probusiness. Here is someone who is even more probusiness. Talk about what the two remaining candidates are promising. One of the challenges that Dilma Rousseff is facing is controlling inflation. It is about targets. This is something that neves last night said he was going to focus on. The government under this president has been able to try as many options as have been available to it to control inflation. According to neves, it has not done a good job. There are issues over the central bank, the question of monetary policy. Something that Dilma Rousseff has said she will not be allowing. Likely to be more give optimism to the financial markets. High for an cost of business. That is something hes going to try to change. Talking about any finance a princeton trained economist. Cause for optimism for investors. Willem marx from the real to stocks, does this change the calculus for investors . We were looking at the effect that the dilma presidency has had on the brazilian stock market and currency. Weve seen a bit of a rally. Shares of Companies Like petrobras up 20 , a record gain in europe. According to a lot of the analysts, this is a cause for optimism. A nearterm rally, if neves not guarantee, something that a lot of share prices will benefit from. Willem marx joining us from sao paulo. He will be with us on the liver hethe throughout the day will be with us throughout the day on bloomberg tv. Is brazil still a bric nation . In the sense that potential gdp where is potential . Closer to 6 . An almost china gdp . Wow. Is it a bric versus developed market, a higher gdp. 6 is more cyclical. What gives emerging markets more attraction is growth rate. Of that 6 , how much is inflation . This is the issue. Theerms of the election, inflation outlook, if you do not manage that growth through monetary policy. This has been the bane of emerging markets. The political intervention into centralbank policy undermines the inflation fighting credibility. That is one of the rails of the election. The equity market rally, 15 years. R 5, 6, 7 any illusion of returning to that if mr. Neves upsets Dilma Rousseff . Get back towe can previous levels. The optimism we talked about in terms of petrobras stock, it raises the potential he will have a more probusiness candidate. Impact policyhe has in terms of economics. A shift is what investors are hoping for. Bloombergs new politics show debuts at 5 00. With all due respect. Is bloomberg surveillance. Come on adam johnson with tom keene and Olivia Sterns. Walt disney had time where doubling down on the committee to the nba on the commitment to the nba. Double what is being paid. 2 billion. Betty liu will be tackling this in 15 minutes. A lot of zeros. Sports to be owning a team, you knew you were going to lose money. It was like a vanity plate. Now, you are making tons of money. Given these deals that are being inked. Adam sulzer is expected to announce later this morning that the Television Rights deal with espn and with turner. Billion over the next 10 years. Almost 10 billion coming in. This is a big win for espn and turner. They get to keep those rights. I remember when espn signed the monday night football deal, 13 games for one point 1 billion. People thought that was crazy. The nfl sunday ticket, 1. 5 8llion over the next years for directv. 56 billion that the nfl rakes in. Former will pay 2 billion the clippers. Lebron james signing short term deals. You look at the success of the yes network. You have to wonder if the nba and nfl wish they had replicated their own media outlet. You have something. Of theave the founder yes now are the yankees baseball network. Im trying to wrap my head around football. The nba season is starting next month. You were at the rangers game saturday night. The hockey league, i interviewed gary. Shelling the other leagues how to stay. Hockey has been much more consistent. Well, the action. It is continuous motion. Very different from baseball and argue the football. They have not had any leaked tmz elevator tapes. Beating up on the ice. In the loop starts in 12 minutes. Hp splitting into two public companies. Meg whitman staying on as ceo of one and chair of the other. Next. Good morning bloomberg surveillance. 3439 is the death count from ebola. An important our monday morning, f columbiachs o university. The efficacy of giving lots of people that do not know what to do if it institutionally. Sachs, 7 00 a. M. , monday morning on bloomberg surveillance. Sterns with tom keene adam johnson. Our guest is Jeffrey Rosenberg, chief business charges for fixed income at blackrock. Adam . Macau casinos down for the fourth straight month. A fiveyear low. The worlds biggest gambling hub bracing for fallout from the protests in hong kong. Total revenue in september was 3. 2 going dollars, a decline of 12 . A toronto Asset Management firm a bankruptcy auction for the former rebel casino hotel in atlantic city. On the dollar. It cost 2. 4 billion to build, iting 110 million to buy out of dickerson. Heres one, bitcoin plunging to its lowest level. Im shocked. The price fell nearly 20 in the past couple days. Bitcoin remains popular among speculators and technology enthusiasts, despite its history of fluctuations. The smoke you saw out of blackrocks chimneys. No report of whether it was my are black. White or black. As if this were the vatican. Do you have a track record on bitcoin . There are not bonds in bitcoin. We did not have to worry about whether it was the right valuation. Which what you focus on . The periodical underpinnings of the experiment or on the technology and efficiencies of barter and. Transaction. Isthe interesting part really the issue on supply. When i look at it from a bond market perspective, when you look at currencies you think about Central Banks that control the supply. Bitcoin has a fixed supply. Who says . I dont believe it. Are a setry, there number of algorithms to be released over the next 20 years. The idea is there will be a fixed supply. No central bank. Tom is trying to keep a straight face. Minting them is a knee a marxist minting them is a neomarxist conspiracy. Is that what you want me to say . Wall to wall bitcoin on market makers. Hope the sedation clicks in. Matt miller on bitcoin. Lets move back to the fixed income markets. A ride for Bond Investors. With good in management and assumed capital gain, total return investing. It is over, thats what many think. Jeffrey rosenberg of blackrock and his good competitor William Klesse at Janus Capital his competitor William Gross at Janus Capital. Is a bond manager and you are a strategist. If you are to have a cup of coffee with someone like mr. Gross, what would be the advice . Here, i willtable not, specifically. He is moving to an unconstrained fun. We are talking about total return, style investing. That is the investing style he pioneered and that was a big part for the last 30 years. The underpinnings for what made aat work was paul volcker and large Interest Rate in government related security. That era is over. To see how that shifting to unconstrained investing. One of your heroes and one of bill gross heroes. Inbelieves in making bets sectors. Is that what your world becomes . A lot of what we talk about diffuse and differentiated exposures. Not necessarily one exposure. One of the benefits of being the Worlds Largest asset managemer, we have teams throughout the arena so that you can go everywhere and have understanding in this market. Ontario. W zealand or the John Templeton model, you buy regions. Nothing mark mobius would not buy. I read an interview with bill gross saying he likes mexico. My question, all week with the world bank and imf meetings. The divergence with the u. S. Economy reaching stable, europe is in the doldrums and concern about japan. The divergence creates lots of opportunity, but it depends how you play them. One of the themes is currency appreciation for the dollar. If i in foreign currency i had to havends, the flexibility. Back to the unconstrained idea to hedge out that currency. 9 dollar appreciation in 8 weeks. Non dollar bonds and nondollar areas of the fixed income market have been hurt. The Dollar Strength will put a cap on yields. It might put a cap on u. S. Yields. Relative yield attractiveness, that goes back to when we talked about the beginning of the show, the longer term and the longer maturity yields in the u. S. That helps restrain their rise. Relative yields around the world helped to hold down the longer end of the yield curve. I want to focus on agendas. I will tell you what is on mine. The Supreme Court beginning its session. Some very important businessrelated decisions. Cases they will be hearing. They relate to discrimination in the workplace. At ups, the concern was whether the Company Effectively discriminated against women by pregnant women by making them with heavy packages. At ever copy and such, did the company discriminate at our copy and fitch, did the company discriminate against a muslim woman who wanted to cover her hair. Am not touching that. The Supreme Court is. Hp splitting. They, the wont conversation has been going on for years. They will spin off the pcs and faster growinghe corporate services. Meg whitman will be ceo of the new enterprise. She will, controversially, stay on as chair of the printer and pc business. Headline. The im searching for it here. 55,000 bodies. 55,000 job cuts. 47,000 before. This is what she has been my agenda is Bloomberg Politics. Not just a tv show, a wonderful website. Mark halperin and John Heilemann will be joined by met ronnie tonight at 5 00 p. M. On all due respect. Was launched 30 minutes ago. We are thrilled to bring it to you. Bloomberg politics. Looking at jeb bush. A source of an insightful view. Short, sharp articles to get you your fixed towards the midterm election. The entirelate Bloomberg Politics team for their lunch. Looking forward to it. Une in . Going to t of course. Nice answer. How might the midterm elections impact the bond market . That is the big story. The big story is the senate and where you will see policy shifts that will occur and impact the second half of next year. Did you feel that fridays jobs report was a big win for obama . Political angle. Both sides are spinning it. There was something for everybody. Strong jobs, weak income growth. Labor force Participation Rate since 1978. We are turning your people we are counting fewer people. Much of that is demographic and structural. You can politically spin that either way. More for you on Bloomberg Television this morning. Stay with us. Good morning. You are in the loop. We have a busy show for you this morning. Hewlett packard is that in itself into. We are going to give you all the new strategy. That is breaking this morning. Espn and timed warner are renewing their contracts to renew nba contracts. We will give you the details on how much it is going to rake in over the next decade. Is grilling over the government takeover of aig during the financial crisis. Here is a look at the top headlines of this morning. Hewlettpackard has announced plans to split itself in two be personaless will computers and printers